Photo by Oran Viriyincy on Flickr.

A Maryland judge has upheld an arbitration award of 3% annual raises to Metro’s union employees, essentially finding that while the raises might force large fare hikes, that’s not legal grounds to overturn the arbitration.

The law requires that an arbitration award not harm the “public welfare.” WMATA argued that, with recent budget gaps, it couldn’t afford the raises. But in the decision, the judge found, in essence, that WMATA could afford it if it only hiked fares, and the law doesn’t allow him to consider the impact of fare hikes as part of the “public welfare.”

Under the WMATA compact, Metro is required to adhere to binding arbitration over collective bargaining agreements with its union labor force. In 40 USC 18301 et seq., Congress set arbitration rules with the purpose of “lower[ing] the operating costs for public transportation” and the growth rate of labor costs.

The finding included statements that public transportation should be affordable; that the use of mass transit is affected by the prices charged, and that those prices are affected by labor costs; that labor costs have increased at an “alarming rate”; that higher operating costs cannot be offset by increases in fares or by increases in subsidy payments; and that arbitration standards will ensure that wage increases are justified and don’t exceed the ability of transit patrons and taxpayers to pay them.

The statement of purpose and findings clearly include the cost to transit patrons at least four times. However, in the law the public welfare is defined as:

(1) the financial ability of the individual jurisdictions participating in the compact to pay for the costs of providing public transit services; and

(2) the average per capita tax burden, during the term of the collective bargaining agreement to which the arbitration relates, of the residents of the Washington metropolitan area, and the effect of an arbitration award rendered under that arbitration on the respective income or property tax rates of the jurisdictions that provide subsidy payments to the interstate compact agency established under the compact.

Anything missing? The definition excludes the fares transit riders pay. In fact, the arbitrators decided that the cost increases it awarded “could be funded … by fare increases … which would have no potential effect on the public welfare as defined by the Act.”

Fare increases were required to balance the budget in 2008, 2009 and 2010. Bus riders using SmarTrip had their fares increase about 20%, while rail customers with SmarTrip started paying 40% more if they ride maximum distances during peak of the peak, and nearly 45% more for those riding short distances. This came during a period in which consumer prices were relatively flat; the change in the CPI from mid-2007 to today is only about 8%.

This trend is not sustainable. Future labor agreement increases will continue to put pressure on fares, and the arbitration guidelines mention the cost to riders but do not require the arbitrators to take fare increases into account.

Unfortunately, the only remedy appears to be congressional action, to add a provision to the law requiring the cost to transit passengers be considered as part of the “general welfare” that must be considered when approving wage increases for labor.

Michael Perkins blogs about Metro operations and fares, performance parking, and any other government and economics information he finds on the Web. He lives with his wife and two children in Arlington, Virginia.