How jurisdictions share the cost of Metro, and what it means for riders

With limited budgets, DC, Maryland, and the various jurisdictions in Virginia will probably not be contributing more to Metro next year than they did this year. If that’s true, bus service in Maryland is likely to suffer.

That conclusion stems from the funding formula, which divides operating contributions among each jurisdiction. Individual jurisdictions have the most flexibility in adjusting bus service level to meet their budget constraints, with less flexibility in rail service levels and paratransit.

At the same time, rising paratransit costs have hit Prince George’s, Montgomery, and DC more than the Virginia jurisdictions. DC’s overall Metro contribution is large, so as a percentage of their contribution, the Maryland counties pay the most for paratransit, particular Prince George’s County. Since the funding formula gives each jurisdiction few ways to reduce its own costs outside of bus service, the Maryland counties may end up stuck cutting bus alone, while revenue increases and other measures take care of more of the gap for DC and Virginia.

Metro operates three modes of service: Metrorail, Metrobus and MetroAccess. Each mode has one or two formulas for allocating its required subsidy. Let’s look each modes in order of how much flexibility it gives the local jurisdiction to control costs.

The least flexible and simplest subsidy formula is MetroAccess. Jurisdictions pay for their own riders, after subtracting fares (overhead costs are shared proportional to direct costs). Since this service is required by federal law, and current policy regarding eligibility is fixed in the short term, jurisdictions cannot really change how much they pay for MetroAccess service. For this mode, Prince George’s County (actually the state of Maryland on its behalf) pays the most, at over $31.5M out of $79M for FY 2010.

Metrorail subsidy is slightly more complicated and slightly more flexible. It’s got two parts, the base fare subsidy and the maximum fare subsidy.

The base fare subsidy is allocated based on a formula that gives equal weight to three things:

• Density-weighted population (so more dense and populous areas like the District pay more than sparse and low-population areas like the City of Fairfax);
• Number of Metrorail stations (some stations are shared, like Friendship Heights or Van Dorn Street); and
• Average daily ridership based on survey data.

It’s important to note that two of the categories cannot be changed by Board action in the short term. You can’t build or close Metrorail stations year-to-year, and you can’t directly change how many people live in your jurisdiction or the land area they take up. Average ridership could be indirectly changed by offering less service, but compared to the bus formula, jurisdictions do not have as much control over their part of base fare Metrorail funding.

The other part of Metrorail funding affects mainly the outer counties. While most Metrorail fares are based on trip length (the average of the distance you actually travel on the rails, and the “crow flies” distance), after a certain number of miles the fare decreases at a slower rate and then stops increasing (currently at $4.50 each way). The jurisdiction of residence pays for half of this difference between this reduced or capped fare on the one hand, and the fare Metro would have collected under the normal short distance formula on the other hand. The rest is paid under the normal formula. Bottom line: If the outer counties agree to an increase in the maximum fare, their contribution could go down more than the inner jurisdictions. DC pays very little of this portion (about 5%), while Montgomery County pays 58%. This is a small portion of Metrorail funding (about 5% of the total).

In short, the Metrorail formula contains an inherent bias against Metrorail cuts. All partners must agree to cut service for them to save money. Service cannot easily be cut to only one jurisdiction, as trains generally should run end-to-end for efficient operation, and even if it’s possible, cutting service in one jurisdiction doesn’t directly affect the subsidy level from that jurisdiction; at most, it may end up decreasing average ridership, which is less than 1/3 of the funding formula. Metrorail runs closer to break-even, meaning that service cuts end up removing a lot of revenue as well.

So what’s left? Metrobus service. Metrobus subsidy has two types: Regional routes and non-regional routes.

Non-regional routes are simple. Jurisdictions pay an hourly fee for bus service, and get reimbursed by whatever fares are collected. In FY 2010, Metro charged $102.41 per hour. The District bought the most non-regional bus service, paying over $31M for routes like the U8 or most of the D routes. Jurisdictions looking to decrease their subsidy could request less non-regional bus service from Metro, which is what was originally proposed for public hearing during last year’s budget sessions. It’s simple and requires little negotiation between jurisdictions.

Regional bus routes use a four-part formula. Like rail, it uses density-weighted population (25%) and ridership (15%). But bus subsidy is heavily dependent on the amount of service offered. Revenue miles (35%) and revenue hours (25%) make up more than half the subsidy formula. Similar to non-regional bus, jurisdictions can directly cut back on their subsidy by deciding to run less bus service in their jurisdictions. For example, Fairfax County proposed a cut in the portion of 11Y service that runs in Fairfax.

The way Metro costs are shared between jurisdictions effectively pushes those in Prince George’s situation, that of high cost growth and a desire for relatively constant fares and subsidy levels, to consider cuts in non-regional bus routes as a first measure, and cuts in their portion of regional bus routes as a second best choice. Their third option may be to push for regional cuts in Metrorail service, but if another jurisdiction does not face the same funding constraints, the other jurisdiction may be reluctant to cut rail service.

Even if Metro can raise additional revenue, all jurisdictions would benefit. Fare increases would hit all riders in all jurisdictions at least somewhat evenly. Therefore, a jurisdiction like Arlington could end up having its part of the Metro budget much closer to balance after a fare increase than Maryland. Unless those jurisdictions want to increase their contribution to Metro from general revenue, their bus riders are likely to bear the brunt of the budget impact.