Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Friday, December 05, 2014

"Let's Talk" -- What to do when your transit authority needs more money?: Washington region edition

WMATA farecard

Earlier this week, WMATA, the transit authority operating subway and trunkline bus service in the Washington DC metropolitan area, announced that they are seeking additional "subsidies" from the local jurisdictions--WMATA's revenue comes mostly from local governments and fares, along with some money from the federal government.

See "Metro wants more money; without it, officials say, rail service might be cut back" Washington Post. From the article:
Metro warns that unless Washington-area jurisdictions increase their subsidy to the transit agency by more than 10 percent for the next fiscal year, subway riders could see cutbacks in service. 
Metro officials have drafted a budget for the next fiscal year that includes a contribution of $892 million from the jurisdictions it serves — a 10.3 percent increase over the current subsidy — to help the transit system meet its operating costs.
Fares are already very high for Metrorail, which functions as a hybrid subway and commuter railroad system.  Fares are based on distance, and the maximum distance fare is $5.90.  And unlike many other metropolitan areas like New York City or San Francisco, WMATA doesn't offer a deeply discounted monthly pass.  Fares are reaching their maximum, especially compared to other cities across the country which tend to not charge distance-based fares for subway service.

Indirectly the federal government pays a big proportion of transit fare revenue, because the federal government provides free transit benefits of up to $130/month for employees, and many take advantage of this, WMATA is able to charge "high fares" because of this subsidy.

The reporting says that local governments are leery of increased subsidies because of tight budgets and other demands. Also see "Metro Is Ready to Take Trains Away If It Can't Get More Money" from In the Capital and "Metro receives backlash over new proposal" from WUSA-TV.

That's a cue that now would be a good time to begin a broader discussion of how transit (not just WMATA) could be funded in the Washington area.

Last year, I wrote about a study, Big Move Implementation Economics: Revenue Tool Profiles , done for Metrolinx, the regional transit authority in Greater Toronto, which identified 25 different types of funding sources:

• Auto Insurance Tax
• Car Rental Fee
• Carbon Tax
• Cordon Charge
• Corporate Income Tax
• Development Charges
• Driver’s License Tax
• Employer Payroll Tax
• Fare Increases
• Fuel Tax
• High Occupancy Tolls
• Highway Tolls
• Hotel & Accommodation Levy
• Income Tax
• Land Transfer Tax
• Land Value Capture
• New Vehicle Sales Tax
• Parking Sales Tax
• Parking Space Levy
• Property Tax
• Sales Tax
• Tax Increment Financing (Special Assessment Districts)
• Utility Levy
• Vehicles Kilometres Travelled Fee
• Vehicle Registration Fee
Transit toys
Employer Payroll Tax.  It happens that for years I have been enamored of the concept of  a transportation withholding tax as an element of payroll tax. They do this in Portland and Eugene, Oregon, which is where I first learned of this concept.  Post-recession, New York State passed a similar tax to fund transit in Greater New York City.

But it turns out that since the 1970s, France has imposed a similar tax, called versement transport.  It was first applied only in Greater Paris, and over the years has been extended across France and applied to other jurisdictions, and is a significant source of funding for local transit services.

In cities like Lyon or Paris, this tax generates upwards of 40% of the total revenue stream supporting transit provision (see "Lyon: Urban Planning Designed Around Public Transport," Mass Transit Magazine).

Note that the tax is not a fail-safe source of revenues as it is still subject to the impact of recession (as is sales tax).  The Tri-Met system cut services and ended the free "fareless square" service in Downtown Portland in response to revenue shortfalls as a result of the 2008 real estate crash and recession.

Federal exemption from the tax would make the tax less valuable.  In the US, these taxes have exempted local, state, and federal governments.  This would be problematic in the DC region, because the federal government is a major employer.  Key to the success of such a tax here is incumbent on the federal government agreeing to its assessment.

It also has the issue of being termed a "commuter tax," which DC is not allowed to assess.  However, if all of the jurisdictions in the area were to enact such a tax, maybe it could go through.

But by using the funding stream to fund transportation improvements beyond transit, perhaps such a tax would be more palatable.
Learn about WMATA budget flyer (English)
Conclusion.  Note that since 2009 I've argued that it is time to rebuild the metropolitan consensus concerning transit, which is all the more true given the recent decision by Arlington County to stop moving forward on implementing streetcar service, and the campaign platform of winning Maryland Gubernatorial candidate Larry Hogan, which called for not funding the Purple Line light rail program in Montgomery and Prince George's Counties.

The 40th anniversary of WMATA in 2016 is another hook on which to hang such a process.  See "WMATA 40th anniversary in 2016 as an opportunity for assessment."

That won't do so much for providing WMATA with more revenue for the next fiscal year, but longer term, it could make for a more stable funding stream.

Postscript.  Many years ago, I got an email from an activist positing that rather than increase fares, transit systems could just get more money from local jurisdictions, mentioning the fact that the transit system in Rochester, New York has done exactly that ("Creativity Helps Rochester's Transit System Turn a Profit," New York Times, 2008).

I replied that's certainly possible, but such relationships are constructed over long periods of time, it can't be done in a rush, and when other organizations are also financially pressed.

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At 6:41 PM, Anonymous charlie said...

My reading of the commuter tax ban is that it pretty strict. I don't think an employer tax would work.

That said, an modest tax on the federal goverment, DC employees, and local nonprofit entities -- in particular hospitals -- would probaby be enough to fund your blue line.

That said, I don't see how DC could do that to the feds. Rather like the water issues -- you can't tax the federal goverment without their consent.

At 8:28 PM, Blogger Richard Layman said...

Oh yes. That's an absolute certainty. The two places I know that have a similar tax--Oregon and New York--aren't able to charge it to the federal govt. workers in their jurisdictions.

And it won't happen in DC with a Republican Congress. (Even though we disagree about it) after all, this is a Congress that can't increase the federal gasoline excise tax, which hasn't been raised in 21 years.

Note that my thinking about the tax has changed. At first (2007), I thought of it as just a DC thing.

Now, ideally, all of the members of the WMATA Compact would participate. For one, then the suburbs can't use it as a way to recruit against DC for businesses. (This is a problem in Philadelphia, which has a wage tax, and the other jurisdictions don't.)

And I wouldn't argue that the jurisdictions would have to exclusively use the funds for transit. They could fund other transportation projects as well.

At 8:49 AM, Anonymous charlie said...

Well, people want a dedicated funding stream so they can raise bonds on that money.

And yes, DC w/o the federal goverment could not do that.

In a perfect world, the federal payment would include an addition that could correspond that a payroll tax on employers.

Unclear also whether you could hit the WB/IMF and international diplomats -- although they don't show up they are the 3rd largest class of employees in DC.

They bring a lot of benefits -- spending, property tax when they buy, and ambience -- but prevent the city-state from accessing their income and CRE.

At 10:14 AM, Anonymous Steve Strauss said...


You seem to take as a given that WMATA is operating as efficiently as possible. If you review the quarterly performance reports you can see that most lines fail to meet the Board-adopted minimum loading guidelines. This indicates that taxpayers and WMATA riders are paying extra to provide capacity that is underutilized at many times of the day.

At 10:31 AM, Anonymous Anonymous said...

FWIW WMATA was founded in 1967, not 1976, although the first subway segment was built in 1976.

@Steve Strauss That may be true however you can't separate fares and fare policy from demand. Some might argue that--especially with a declining federal tax benefit and low gas prices--that Metrorail fares are too high when compared with the cost of driving. In addition to the region having a conversation about how we pay for transit and transportation in general, it would be a good time for WMATA to take a long look at ways to strategically reduce costs over the long term. Future labor agreements, and other cost containment measures should all be on the table.

At 2:07 PM, Anonymous Richard Layman said...

Anon -- I meant "anniversary of the opening of Metrorail" which is what I said in the cited post.

Obviously, WMATA was created to construct and operate the Metrorail system, and operation followed construction.

At 2:08 PM, Anonymous Richard Layman said...

Charlie -- urgh. I absolutely forgot about the international organizations, which are likely exempted from all taxes, at least on non-nationals.

At 2:15 PM, Anonymous Richard Layman said...

Steve S. -- I don't presume that WMATA is fully efficient... but my blog entries tend to be overlong as it is.

In my "metropolitan mass transit planning" presentation, which I gave at U Delaware in 2010 (and is linked in the blog), I argued that (1) a metropolitan area, presumably the MPO, should be the mass transit planner, (2) not the operator, in our area, WMATA is the main transit planner by default and the MPO clearly is deficient*, (3) the mass transit plan should set standards/metrics for network breadth, depth, LOS, and LOQ and (4) contract with various operators to provide service on that basis.

As you know, that's not how we do it. The gaps in how we do it led me to come up with this alternative framework.

That being said, network breadth and depth parameters can justify some service being provided that is undercapacity.

Plus, another point in the presentation also is that if you set those 4 parameters as part of the metropolitan transit plan, then the transit operators are in the position of being able to ask for more money when revenues don't cover expenses for the desired service footprint.

Instead, now, WMATA continually satisfices the service footprint because of budget.

At 2:16 PM, Anonymous Richard Layman said...

anon -- of course I agree with your general point. I first laid out that scenario post-accident, and all of that is relevant wrt the budget situation. I like how you termed the various issues.

At 2:28 PM, Anonymous Richard Layman said...

* The problem we have now is that we have transit planning by mode. WMATA doesn't see itself as the primary transit provider, well it does, but it defines primary transit as subway plus trunkline bus service.

It isn't really interested in providing other forms of transit such as streetcar, lightrail, ferry, or even aerial gondola (the Georgetown BID's concept).

That doesn't even get at railroad service, which in our region is provided by VRE and MARC and to some extent, Amtrak.

VRE and MARC do their own thing presumably, and no one is really promoting integration (other than what I've been writing for about 9-10 years based on an idea first laid out by Dan Malouff/BeyondDC.

I have been meaning to write about this based on my recent sojourn (all too brief) to Hamburg and the big section that the Post did on the Union Station redevelopment plan, but I need to find a graphic designer to illustrate my main point about transit planning, and Union Station's place in an integrated transit system.

Anyway, in the early 1960s(!!!!) apparently Hamburg figured out it made sense to integrate transit scheduling, services, and fares, regardless of who provides the service, for the "metro" area which covers Hamburg, a city-state, and landkreis (departments) of two other states.

Today that system includes bus services throughout the region, subway in Hamburg, suburban railroad commuter service provided by Deutsche Bahn, ferry services in Hamburg, and two railroad services in the outskirts of the region, not provided by Deutsche Bahn.

We decidedly do not have a comparable system here, other than that for bus and subway (and eventually streetcar and light rail) we have an integrated fare media system, and it is reasonably impressive that the SmarTrip card system of the DC metro is interoperable with the CharmCard system of the MTA and Baltimore, which is a positive step, but still not the same thing when it comes to railroad service, and planning for the integration of railroad service into the transit framework in the way comparable to that in Hamburg, London, and Philadelphia.

In my planning framework I define different networks and subnetworks:

- regional (two or more metros)
- metropolitan primary and secondary
- suburban primary, secondary and tertiary
- center city primary, secondary and tertiary

Hamburg has something like 70+ total operators, although most of the service is provided by two providers, Hamburg Hochbahn (Hamburg underground and bus) and the S-Bahn (Deutsche Bahn) suburban commuter service.

At 2:29 PM, Anonymous Riichard Layman said...

In my ideal world that renewed regional consensus that I talk about goes beyond WMATA.

At 9:28 PM, Anonymous Anonymous said...

All your solutions are taxes? How about we cut employees salaries by 15%...have METRO employees pay 25% of health insurance costs and make merit a means of promotion. Then, increase Metro ad rates both in stations and on trains. But before that have METRO come clean on deferred maintenance which every one knows is the ticking time bomb for METRO which they have hidden or fudged for years. No new taxes until METRO can prove to be efficient. If that doesn't do it...cut services after cutting employees...if there is demand in the marketplace the service can resume...if won't and we all save money.

At 9:36 PM, Blogger Richard Layman said...

in the comment thread on GGW, I wrote that I have no problem with looking at costs and dealing with them.

I don't know how WMATA's wages and benefits compare to comparable systems.

At the same time, as I said in the GGW thread, I don't understand why the major systems in the US (other than BART) have such significantly lower fares (most also provide a free transfer from rail to bus) and I wonder if somehow the fact that the federal govt. pays so much of the fare revenue stream through the federal transit benefit somehow shapes a higher cost structure, and more importantly, a tolerance for higher costs.

That being said, I doubt that WMATA's cost structure is so out of line compared to other systems and it's clear that more funds are needed for system improvements, especially equipment.

At 9:41 PM, Blogger Richard Layman said...

ad revenue could be stoked, but isn't likely to be a very significant source of revenue, all told. Although again, it'd be interesting to compare WMATA's revenue to other systems. The fact is that our region is not NYC...

I know for a fact that they don't even bother to have a contract for bus shelter advertising on station sites that they control. (WMATA only controls bus shelters on WMATA property.)

I am also working on a broader kind of Lyft concept appropriate for WMATA. Hell, I should submit an unsolicited proposal for advertising in bus shelters myself.

.. and deferred maintenance isn't an indicator that they have lots of extra dough, but that they don't have enough.

At 9:43 PM, Blogger Richard Layman said...

f* cutting service. Service, at least on Metrorail, has declined precipitously, at least off peak. Weekends, because of the maintenance program, are total crap.

We use car sharing mostly on weekends. WMATA is just unreliable. Which is exactly the reputation you don't want.

Compare that to NYC subway. You know, pretty much (at least in the right places) that trains come every few minutes.

At 3:51 PM, Blogger Unknown said...

I listened to the WMATA Finance Committee Meeting last week in its entirety.

Things aren't going to turn out that bad and here's why. First, WMATA's budget assumes two tax deductions go away next year. The first is that the cap for tax deduction/subsidy for employer provided transit benefits stays at $130. A bill moving it's way through Congress will likely increase the cap back to $230 for the next calendar year. That will boost revenues for at least half the year (alas it could expire again).

2) Another tax deduction for CNG fuel, I believe expired a the beginning of this year and its included also in the package of tax deduction's working it's way through Congress

3) WMATA includes funding for future retiree health insurance costs in next year's budget. The Board is very likley to kick the can down the road and keep that contribution where it is this year

All these three combined will help make the budget not so tight. I think a modest fare increase could prevent the need for any service cuts.

At 3:55 PM, Blogger Richard Layman said...

how can a nonprofit benefit from a tax deduction? Can they syndicate the credit?

At 3:56 PM, Blogger Richard Layman said...

Oh, and thanks for taking one for the team and listening to the entire committee meeting record!


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