Metro outlines slimmer budget reflecting commuter losses to telework

Metro officials have been bracing for what some have called a “fiscal cliff,” when the reality of slow-returning ridership would catch up with the agency’s finances, possibly forcing it to consider cutting service or raising fares.

That day might not come as soon as initially expected, according to a snapshot Metro released Monday of the transit system’s financial information. The transit agency will need to bridge a roughly $185 million budget gap in the next fiscal year to continue operating at current service levels and — at some point in the coming months — pay for increased Metrorail train frequencies when its full fleet becomes available.

Transit officials say riders likely will not see significant service reductions or station closures in the fiscal year that begins in July, although that ultimately will be up to Metro’s board. The transit agency’s outlook provided a first glimpse at how Metro plans to navigate a pandemic-era future upended by commuter losses to telework as future federal aid starts to dry up.

The funding gap is smaller than the $500 million annual operating budget shortfall officials had predicted more than a year ago, a gap shrank with the help of federal leftover coronavirus relief money, funds from the infrastructure law, federal grants, reduced expenses and fare revenue that has outpaced Metro’s conservative projections.

The budget reprieve is likely to be temporary. Metro is projecting budget shortfalls of $527 million in fiscal year 2025 that could grow to $731 million in four years without significant increases in revenue or funding.

“I think we’ll have enough tools — or I’m hopeful we will have enough tools with the [Metro] board to be able to avoid things like a fare increase or service cuts,” Metro General Manager Randy Clarke said in an interview last month. “If we can do that, I think the following year is where we have to just get to a point where we have to do something. And that’s not just us. It’s big agencies all over the country. ”

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With the help of nearly $2.4 billion in federal coronavirus relief aid over three years, Metro has maintained an annual operating budget surpassing $2 billion despite historical losses of fare-paying riders that began early in the pandemic. While the Metrobus system is nearly back to pre-pandemic passenger levels,the number of trips taken by Metrorail passengers still has yet to reach half of the numbers seen before the pandemic.

On Wednesday, driven by commuters returning to offices more regularly, Metro recorded more than 290,000 trips — a pandemic-era high — although that’s 44 percent of its average daily weekday ridership compared to September 2019.

Decreasing fare revenue between 2020 and this fiscal year, which ends June 30, have been buffered by between $500 million and $700 million annually from three rounds of federal aid during the pandemic. Maryland, the District and jurisdictions served by Metro in Northern Virginia subsidize most of Metro’s operating expenses while also contributing to Metro’s separate annual capital budget, which the federal government also contributes to. That also totals more than $2 billion.

Offices have reopened. Persuading commuters to fill them isn’t so simple.

For the past two years, federal stimulus payouts saved Metro from making severe service cuts. Before the first stimulus was approved in December 2020, board members began offering employees buyouts and proposed laying off several thousand workers, shutting down some stations and eliminating weekend rail service.

Instead, the federal money allowed Metro to experiment and refocus its service and strategies away from a focus on office commuters — many of whom work for federal agencies — redirecting resources from weekday rush hours to times that better serve part-time and night-shift workers. At the same time, teleworkers are using transit for more nonwork-related trips throughout the day.

As part of that shift, the Metro board made weekend, one-way Metrorail fares a flat $2, hoping the change would persuade more families to ride. This summer, Metro expanded the flat fare to weekday trips after 9:30 p.m.

Metro effectively erased a $2 bus-rail transfer fee by discounting transfers to Metrobus, and transit officials began offering cheaper seven-day regional bus passes and monthly unlimited passes.

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Metro officials hope the fare cuts, discounts and service changes — including later rail service that went into effect this year — will attract fare-paying riders, but growth has been slow as federal money has begun to dwindle. The transit agency will carry over about $627 million of the remaining stimulus money starting next fiscal year, which begins in July.

Metro in March was awarded an extra $120 million in pandemic aid through a U.S. Department of Transportation grant for agencies affected by the pandemic. Revenue from fares, parking and other sources, meanwhile, is outpacing projections. The agency expects to bring in at least $380 million this fiscal year, increasing to $465 million in the next fiscal year.

Money from the infrastructure law is also expected to help Metro pay for preventive maintenance, which can cost the agency more than $650 million a year, transit officials said.

Metro will also take on additional expenses, consisting of about $120 million a year, to operate the six-station, 11.5-mile Silver Line extension that transit officials have tentatively pledged to open this year.

In the end, that leaves Metro with a $184.7 million gap to bridge next year.

Officials say that is achievable through employee attrition, position eliminations, selling or leasing unused Metro land for development, service changes and possible fare changes. Riders have been upset that Metro is charging peak fares during rush hours despite not having the same level of service. The agency has been running reduced service with long waits for nearly a year after its regulatory agency suspended more than half of Metro’s rail cars over a wheel safety concern.

Clarke said he plans to consider restructuring fares to erase or reduce peak-hour pricing.

“I think we have to have an honest conversation of fares,” he said. “We probably have the most complicated fare table in the history of time.”

Other ideas that could be discussed include phasing out distance-based charging, reducing bus fares to $1 to help low-income residents and encourage more riders, and lowering parking fees to encourage more rail riders.

Metro records show how transit use has shifted into the pandemic’s third year. The proportion of riders using Metrorail during peak periods has dropped 8 percent since 2019, while peak-hour fare revenue has fallen 5 percent — signs that office commuters have become a smaller part of Metro’s customer base. At the same time, the proportion of revenue from Metrorail trips of more than 10 miles has dropped by 5 percent, highlighting an increase in the number of suburban residents who are working from home.

Service shifts that Metro officials say they could consider to better fit new travel patterns include increasing service on core and southern segments of the system to serve fast-growing parts of the region, such as the Navy Yard neighborhood, around sports stadiums and airports. Metro leaders could also consider reducing service at some stations, opening the transit system earlier on weekends and closing later on Friday and Saturday.

Clarke is expected to release his proposed budget in November. Board members will then review the spending plan and hold public hearings early next year to get responses from residents. A final vote is planned for March.

However Metro makes up the annual funding difference, transit officials will likely take more than a single year into account. Ridership projections show slow passenger growth, reaching 75 percent of pre-pandemic levels between 2024 and 2025. Clarke has said it will be up to Metro’s board and regional leaders to help decide the type of service it wants from Metro and how to pay for it.

One thing the region has to acknowledge, Clarke said, is that fare revenue and ridership might never get back to pre-pandemic levels.

“The question of how best to fund Metro is an important one that requires thought leadership and extensive community input,” Clarke wrote in a Washington Post opinion piece published Friday. “It begins with ‘What do we want Metro to be?’ ”

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