Washington's Metro Grows More Reliant on Taxpayer SubsidiesBy
System will depend upon subsidies for over 50% of 2018 budget
Ratings agencies split about agency’s creditworthiness
The Washington Metropolitan Area Transit Authority’s board approved a budget Thursday that draws more heavily on taxpayer subsidies after ridership plunged as portions of the subway system in the nation’s capital were shut down for maintenance.
The spending plan for the fiscal year that begins July 1 relies on $374.2 million from Maryland, $251.3 million from Virginia, and $375.2 million from the District of Columbia.
That’s about 55 percent of its budget, marking the first time in more than a decade that fares charged to riders covered less than half of its operating costs, according to documents from the agency and Maryland’s transportation department.
The 2018 budget also authorizes raising peak rail fares by 10 cents, along with other increases, to increase revenue by an estimated $21 million.
Moody’s Investors Service and S&P Global Ratings have issued differing assessments of the transit system’s credit worthiness. Moody’s downgraded the agency to A2 in May 2016 on declining ridership, deferred maintenance, unfunded pensions that total $1.8 billion and an over-reliance on subsidies.
S&P Analyst Paul Dyson believes, however, that the agency’s operating budget poses little risk to bondholders and said it remains less dependent on subsidies than most, despite next year’s increase.
"This is a highly essential system. Their debt burden is under control. Generally, revenue streams demonstrate stability and consistency. Without the subsidies, the cost of a bus ride would be four times as much. Working people would not be able to ride the trains without them," Dyson said.
While the system posted a 10 percent drop in ridership during the three months through September, that was partly the result of shutdowns related to the agency’s maintenance program begun in June 2016.
The maintenance program is the largest to the subway system in the agency’s history, compressing what would ordinarily be a three-year task into one year.
The transit system is likely to remain heavily dependent on subsidies for the foreseeable future. Aaron Ampaw, an analyst for Moody’s, looks for “future expenditure growth to exceed operating revenue growth by an average of 5%, creating a structural deficit of $2 billion by fiscal 2027.”
The current financial and regulatory challenges of the metro agency prompted Virginia Governor Terry McAuliffe to order a review that will be conducted by former U.S. Department of Transportation Secretary Ray LaHood, who will make recommendations by November 17.
"It is a review that will benchmark WMATA’s performance and condition relative to its peers to help identify potential reforms that will improve WMATA," McAuliffe said in a statement Thursday. "Everything will be looked at, including operating, governance, and financial conditions."