Proposed Metro Matters much better, but with a loophole?

Maryland has announced they will pay their share of capital money under Metro Matters for FY 2010 and support funding a new FY11-16 agreement at the $5 billion level.

The proposed new agreement also provides more assurance that jurisdictions will pay for projects, but there are still some questions about the details and whether a jurisdiction can back out too easily.

WMATA management has released some of the details of the current proposal, to be presented to the Board Thursday. It includes most of the provisions of the earlier option III that requires jurisdictions to match federal grants but calls for annual discussions regarding funding levels for “system performance,” additional local contributions over and above matches to federal grants.

Each year, WMATA would adopt an annual work plan containing nine broad categories and a specific list of projects. They would provide an estimate of required local funds for the succeeding fiscal year. Once the work plan is approved, jurisdictions would be required to pay for those projects, and keep the money coming as the projects proceed.

However, it’s still unclear how the annual review relates to the the six-year commitment to $5 billion. Could a jurisdictions simply push for a lower annual work plan one year, reducing their overall progress toward a state of good repair without making it up in the future?

Under the proposed agreement, WMATA would also need to secure a line of credit. This would cover any short-term cash flow issues between when WMATA has to pay for work on a project and when they bill jurisdictions. Jurisdictions will pay when WMATA expends the money rather than with a fixed, quarterly upfront payment. WMATA estimates a relatively low cost of $5 million over the FY 2011-16 time frame to cover this line of credit, since they will only need to draw on it for short periods of time.

This reduces jurisdictional capital payments in the near term, as expenditures lag obligation, and then increase them over the long term, as projects really get underway. Jurisdictions had previously criticized the fact that much of the Metro Matters money was sitting around unobligated.

As a result, WMATA will have to work harder to obligate and expend funds, which makes sense. GM Richard Sarles has proposed hiring additional staff to accelerate the contracting and compliance process.

It also means that rather than regular fixed amount payments that can be planned and budgeted for, jurisdictions will have to prepare for potentially widely varying payments based on actual expenditures.

The WMATA Chief Financial Officer can approve re-programming of projects within each category, but when the level reaches 50% of a category, they will have to notify the WMATA Jurisdictional Coordinating Committee and get approval from the Board is required. Unexpended funds from completed projects will be rolled into the following year.

Debt service and “state of good repair” projects have first claim on all funds for which they are eligible. Multi-year projects will have first call on available funding sources in the out years.

The crucial issue in this Metro Matters renewal will be whether the terms of the “annual review” will permit subversion of the six year plan. Except for that potential loophope, this agreement seems to be a good one. The six-year $5 billion funding level is likely the highest amount that jurisdictions can afford at this time. Provisions that require WMATA to obligate and spend its capital funds at a higher rate are welcome aspects of the proposed agreement.