Unnecessary Dedicated Tax for Washington Metro
Proposals to create dedicated taxes to support Washington’s Metro and bus service are both ill advised and unnecessary. It is likely that such a tax would simply increase the demand for future taxes, while providing the national capital area with little, if any new service. Worst of all, Congressman Tom Davis (R-VA) has introduced a bill to give $1.5 billion in federal taxes if local officials approve the same amount in additional funding (for a total of $3 billion). Taxpayers from Miami to Nome would be justified in throwing a Potomac Tea Party in protest against this taxation without representation.
Efforts are under way in the national capital region to establish a rich new funding source for the Washington Metropolitan Area Transit Authority (WMATA). WMATA operates the region’s subway (Metro) and most of its bus service. The problem is that WMATA’s present service level is not sustainable from revenue sources, because its costs are too high and rising. Further, it will not be long sustainable even if new revenues are made available. Officials have been talking about new “dedicated taxes” that would be levied in the state of Maryland and Virginia cities and counties and the District of Columbia.
It is hard to imagine a more unhealthy and unnecessary precedent. Washington, whose financial affairs are in disarray, would, if Congressman Davis has his way, spread its contagion to local governments. Further, dedicated taxes are the worst kind of taxes. Dedicated taxes send exactly the wrong message to the spending constituencies. Management spends more money on itself because there is no longer a competition for funding with other public services, such as education or social expenditures, The transit unions treat dedicated funding sources as “pots of gold” to fatten their wage and benefit packages (as only makes sense). In the end, little is left for more service, with the taxpayers left holding the bag. Inevitably, the transit agency calls for even higher taxes down the road.
I saw this as a member of the Los Angeles County Transportation Commission. In 1980, we drafted the "Proposition A" dedicated tax, which was approved by the voters. In just a few years, the new operations funding had disappeared into the transit black hole, as costs skyrocketed. Nothing was left over for the riders or the taxpayers. A second new tax was then established in 1990. Today, more than one-half of the transit system promised in the first tax initiative remains to be built and is not even on the map of future expansions any longer. Today, total ridership in Los Angeles remains below the levels of 20 years ago. Dedicated taxes send all the wrong messages.
However, the most important problem with the proposed dedicated tax is that it is not needed at all. For more than two decades, the option of reducing costs through competitive contracting (competitive tendering) of services has been well known to policy makers. Competitive contracting would involve using private operators to provide transit services, through a coordinated system that would look no different to users, have a unified fare structure and cost taxpayers less. The world’s largest public bus system, the famous double-deck red London Transport system is virtually all competitively contracted. Over the past 20 years, the costs have declined $15 billion (that's billion with a "B") relative to inflation --- more than the cost of Washington’s 100-mile Metro subway system.
However, such reforms are not just to be found overseas; they have been implemented in the Washington area. Suburban jurisdictions such as Montgomery County, Fairfax County, Prince William County and Prince George’s County have competitively contracted bus services, many of which were formerly operated by WMATA. More recently, WMATA itself competitively contracted two new circulator routes. Today, these bus systems provide operate more buses than Portland’s transit system.
The competitively contracted services are, on average, 40 percent less expensive than WMATA bus services. If WMATA bus services were competitively contracted, cost savings in bus services alone could amount to $175 million annually. Moreover, competitive tendering does not have to be limited to buses. Today, Stockholm’s Metro system is competitively contracted, saving considerable amounts of money and transporting nearly as many passengers annually than all of WMATA’s buses and trains. Competitively contracting Metro service would save even more.
What stands in the way? In a word, politics. WMATA is controlled by its unions that virtually forbid cost effective operation, not to mention its ponderous bureaucracy. It is inconceivable for the taxpayers to cough up enough money to both satisfy these interests and provide meaningful new value for the riders. A new paradigm is needed --- a paradigm that places the interests of riders and taxpayers above the demands of managers and employees.
Not a penny more should be granted to WMATA until the regional and national political structure takes the steps necessary to put the riders and taxpayers first. There is no reason for transit service to cost more than necessary, and its excessive cost represents a drain on the regional economy. Early in my transit board career, I learned that the answer to every question in transit is “more funding.” This needs to change. The means of reform have been on the table for a quarter century. That’s time enough.
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Note: For a description of the London competitive contracting system, see Wendell Cox, Jean Love and Nick Newton, Competition in Public Transport: International State of the Art. (Nick Newton administered the London Transport Competitive Tendering program for more than its first decade.)