A 1% sales tax (or other dedicated funding) would save Metro, says report

If officials in the Washington region have any hope of fixing Metro, they must find dedicated funding for it, and soon, according to a new report presented today to the Metropolitan Washington Council of Governments — $650 million a year worth.

If the local jurisdictions could come up with a $650 million dedicated source of revenue; if the federal government extends the money it's been kicking in for capital maintenance for the long run (both big ifs); and if DC, Maryland, and Virginia continued to fund WMATA at the level they have been plus a 3% annual increase… WMATA's operating budget could stay in balance, and it could issue bonds against the future revenue to pay for needed repairs now.

The report comes from a panel of regional managers and led by DC CFO Jeff DeWitt. It is the latest in a string of studies that all reach the same conclusion: Metro's faces at least a $6 billion financial need over the next 10 years, and can't fill it using WMATA's existing cobbled-together funding sources. The agency needs a direct source of money, or it will fall deeper into a spiral of service cuts and fare hikes.

What kind of tax?

DeWitt has been proposing a 1% sales tax, evenly applied across the entire region to everything. Other jurisdictions have not yet endorsed the 1% sales tax idea, and others have proposed alternative revenue sources like an assessment on property near Metro. The report suggests four ways to get the money:

• A 1% regional sales tax
• 8¢ per $100 of value property tax on all property in the region
• 43¢ per $100 of value property tax for property within ½ mile of a Metrorail station
• a 16.3% increase in the gas tax in DC, Maryland, and Virginia

The advantages of the sales tax, according to DeWitt's presentation, are that it's simpler, affects everyone equally, and is easier to explain to investors when selling bonds against it. It is also the source most larger transit systems use.

But adopting any new taxes is hard; getting Maryland, Virginia, and DC to all adopt the same new taxes at the same time is going to be monumentally difficult. Virginia, for instance, is likely to pay more than DC and Maryland under a sales tax plan. Meanwhile, groups representing property owners in dense urban and commercial centers are likely to resist the assessment plan. And so forth.

Mixing and matching different types of taxes could work, as long the end result is the right level of dedicated, sustainable money; on the other hand, it's more complex and could exacerbate the differences between taxes that already swing economic activity between jurisdictions.

The big problem is political will

The Council of Governments (COG) doesn't have any power to apply any such a tax. But with representatives from every major jurisdiction in the region, COG is one place to try and build a consensus. If COG endorses a plan, which it could do as early as next month, it will be a powerful signal to legislators in Annapolis and Richmond to act.

The onus to actually exact taxes will be on those state legislators, as well as those in the District. The Maryland and Virginia legislatures only meet once a year at the start of the calendar year. As Paul Wiedefeld has said, there's no time to waste—WMATA might not be able to keep up its maintenance efforts if the dedicated source doesn't happen in 2018, the next time the legislatures meet.