Mass Transit: Information on the Federal Role in Funding the	 
Washington Metropolitan Area Transit Authority (18-FEB-05,	 
GAO-05-358T).							 
                                                                 
In recent years, the Washington Metropolitan Area Transit	 
Authority (WMATA) has faced serious financial and budgetary	 
problems as well as continuing challenges related to the safety  
and reliability of its transit services. At the same time,	 
ridership is at an alltime high, and WMATA continues to provide  
critical services and considerable benefits to the Washington	 
region's economic well-being and to the federal government. This 
statement is based on preliminary results of our work on WMATA	 
that GAO is performing at the request of the Chairman, House	 
Committee on Government Reform, as well as on GAO's previous	 
review of WMATA and other studies of WMATA's financial condition.
It discusses (1) the extent to which WMATA relied on federal	 
funding to build its Metrorail subway system and the federal	 
government's rationale for providing that funding, (2) the extent
to which WMATA has relied on other federal funding for capital	 
improvements in recent years, and (3) the current funding	 
challenges that WMATA faces and options that have been proposed  
to address those challenges.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-358T					        
    ACCNO:   A18017						        
  TITLE:     Mass Transit: Information on the Federal Role in Funding 
the Washington Metropolitan Area Transit Authority		 
     DATE:   02/18/2005 
  SUBJECT:   Appropriated funds 				 
	     Budgeting						 
	     Federal funds					 
	     Mass transit funding				 
	     Mass transit operations				 
	     Program evaluation 				 
	     Strategic planning 				 
	     Subway construction				 
	     Transportation costs				 
	     Federal aid for transportation			 
	     Future budget projections				 
	     District of Columbia				 
	     Maryland						 
	     Virginia						 
	     WMATA Capital Improvement Program			 
	     WMATA Infrastructure Renewal Program		 
	     WMATA System Access and Capacity Program		 
	     WMATA System Expansion Program			 

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GAO-05-358T

United States Government Accountability Office

GAO Testimony

Before the Committee on Government Reform, House of Representatives

For Release on Delivery Expected at 10:00 a.m. EST Friday, February 18,
2005

MASS TRANSIT

  Information on the Federal Role in Funding the Washington Metropolitan Area
                               Transit Authority

Statement for the Record by Katherine Siggerud, Director Physical Infrastructure
Issues

GAO-05- 358T

[IMG]

February 18, 2005

MASS TRANSIT

Information on the Federal Role in Funding the Washington Metropolitan Area
Transit Authority

What GAO Found

WMATA relied on federal funding to pay for over 60 percent of the costs to
build its Metrorail subway system. From 1969 through 1999, the federal
government provided about $6.2 billion of the approximately $10 billion
that WMATA spent to construct the original 103-mile system. About
two-thirds of this federal funding, or $4.1 billion, came from direct
appropriations. The remaining federal funding, about $2.1 billion, came
from unused federal Interstate highway funds. In addition, nonfederal
entities provided about $2.1 billion for Metrorail's construction, and
about $1.7 billion came from revenue bonds, and other sources. Beginning
in the 1960s, Congress and the Executive Branch supported federal funding
for building the Metrorail system, citing several reasons including (1)
the federal government's large presence in the area, (2) the attraction of
the nation's capital for tourists, (3) the overlapping needs of adjacent
jurisdictions, and (4) the limitations faced in raising other revenue for
transit needs.

WMATA has relied on other federal funding to cover over 40 percent of its
capital improvement costs over the last 10 fiscal years. Of about $3.5
billion in total funding that WMATA received from all sources for capital
improvements from fiscal year 1995 through fiscal year 2005, about $1.5
billion, or about 43 percent, came from the federal government, and about
$2.0 billion, or about 57 percent, came from the state and local
jurisdictions that WMATA serves and from other sources. Most of the
federal funding has come through grants administered by the Federal
Transit Administration. Over the last 10 fiscal years, the federal grant
funding has generally increased, but the nonfederal funding has varied.
WMATA has combined and used its federal grant and nonfederal funds for
eligible rail modernization, new construction and extensions, and bus
rehabilitation programs and projects. WMATA also received and used about
$49.9 million for congressionally designated projects during fiscal years
1995 through 2005.

Over the years, WMATA has faced funding challenges, and options have been
proposed to address them. Although WMATA has taken steps to improve its
management, such as prioritizing its planned capital improvements, it
lacks a dedicated funding source and must rely on contributions from
local, regional, and federal organizations. These contributions can vary
and have not been sufficient in recent years to fully fund WMATA's planned
capital improvements. Proposed options would provide a dedicated funding
source, such as a regional sales tax, and would include federal funding,
particularly for capital maintenance and enhancement. This federal funding
would be in addition to the federal grant funding that WMATA currently
receives.

                 United States Government Accountability Office

Mr. Chairman and Members of the Committee:

We are pleased to have the opportunity to provide information on the
federal government's role in funding the Washington Metropolitan Area
Transit Authority (WMATA). In recent years, WMATA has faced serious
financial and budgetary problems as well as continuing challenges related
to the safety and reliability of its transit services. At the same time,
WMATA's ridership is at an all-time high, and the agency continues to
provide critical services and considerable benefits to the National
Capital Region's economic well-being and to the federal government.

Our statement today is based on preliminary results of our work on WMATA.
We will discuss (1) the extent to which WMATA relied on federal funding to
build its Metrorail subway system and the federal government's rationale
for providing that funding, (2) the extent to which WMATA has relied on
other federal funding for capital improvements over the past 10 fiscal
years, and (3) the current funding challenges that WMATA faces and options
that have been proposed to address those challenges. Our work is based on
a review of the laws and regulations that have governed WMATA since its
inception, an analysis of WMATA's budgetary and program data, a review of
reports on WMATA's financial problems that we and others have issued, and
interviews with officials in WMATA and in the Department of
Transportation. This statement relies on data provided by WMATA; we did
not have an opportunity to review the reliability of that data.

In summary:

o  	WMATA relied on federal funding to pay for over 60 percent of the
costs to build its Metrorail subway system. Since the 1960s, Congress and
the executive branch have supported federal funding for WMATA. From 1969
through 1999, the federal government provided about $6.2 billion of the
approximately $10 billion that WMATA spent to construct the original
103-mile system. About two-thirds of this federal funding, or $4.1
billion, came from direct appropriations authorized under three acts-the
National Capital Transportation Act of 1969 ($1.1 billion), the National
Capital Transportation Amendments of 1979 ($1.7 billion), and the National
Capital Transportation Amendments of 1990 ($1.3 billion).1 The remaining
federal funding, about $2.1 billion, came from unused federal interstate
highway funds that the District of Columbia was authorized to provide to
WMATA to supplement the direct appropriations for Metrorail construction.
(See app. I, table 1.) In addition, nonfederal entities provided about
$2.1 billion for Metrorail construction, and about $1.7 billion came from
other sources, including revenue bonds. Several factors contributed to the
federal government's rationale for providing funding to construct a
transit system in the District of Columbia. These included (1) the large
presence of the federal government in the area with its attendant
property, buildings, and workforce; (2) the attraction of the nation's

1 Congress authorized appropriations over a period of years for the
construction of the Washington Metropolitan Area transit system in 1969,
1979, and 1990. The appropriations that were authorized in 1969 went
directly to WMATA, while the appropriations that were authorized in 1979
and 1990 were directed to WMATA via the Department of Transportation.
Subsequently, Congress appropriated funds in annual appropriation acts in
accordance with these authorizing acts.

capital as a tourist destination; (3) the overlapping needs of adjacent
jurisdictions; and (4) the limitations faced by the District of Columbia
and by adjacent jurisdictions in raising revenue for transit needs.

o  	WMATA has relied on other federal funding to cover over 40 percent of
its capital improvement costs over the last 10 fiscal years. Of about $3.5
billion in total funding that WMATA received from all sources for capital
improvements from fiscal year 1995 through fiscal year 2005, about $1.5
billion, or about 43 percent, came from the federal government, and about
$2.0 billion, or about 57 percent, came from the state and local
jurisdictions that WMATA serves and from other sources. Most of the
federal funding has come through grants administered by the Federal
Transit Administration. Over the last 10 fiscal years, the federal grant
funding has generally increased, but the nonfederal funding has varied.
WMATA has combined and used its federal grant and nonfederal funds for
eligible rail modernization, new construction and extension, and bus
rehabilitation programs and projects. Finally, WMATA received and used
about $49.9 million for congressionally designated projects, including a
new Metrorail station at New York Avenue in the District of Columbia,
during fiscal years 1995 through 2005. (See app. I, table 2.)

o  	Over the years, WMATA has faced funding challenges, and options have
been proposed to address them. In 2001, we reported that WMATA anticipated
funding shortfalls through 2025,2 and we recommended that, to improve its
management, it document and prioritize its planned capital improvements.
WMATA has taken these steps, but its funding challenges have grown as the
Metrorail system has aged. WMATA lacks a dedicated source of funds to pay
for its planned capital improvements and must rely on local, regional, and
federal organizations for financial support. Their support can vary and
has not been sufficient in recent years for WMATA to fully fund its
planned capital improvements. Options proposed to address WMATA's funding
challenges would provide a dedicated source of funds, such as a regional
sales tax, and would include federal funding, particularly for capital
maintenance and enhancement. This federal funding would be in addition to
the grants that WMATA currently receives.

Background

WMATA was created in 1967 by an interstate compact that resulted from the
enactment of identical legislation by Virginia, Maryland, and the District
of Columbia, with the concurrence of the U.S. Congress.3 WMATA began
building its Metrorail system in 1969, acquired four regional bus systems
in 1973, and began the first phase of Metrorail operations in 1976. In
January 2001, WMATA completed the originally planned 103-mile Metrorail
system, which included 83 rail stations on five

2 See Mass Transit: Many Management Successes at WMATA, but Capital
Planning Could Be Enhanced, GAO-01-744 (Washington, D.C: July 3, 2001) and
Mass Transit: WMATA Is Addressing Many Challenges, but Capital Planning
Could Be Improved, GAO-01-1161T (Washington, D.C.: Sept. 21, 2001). 3
Washington Metropolitan Area Transit Authority Compact, Pub. L. No. 89-774
(1966).

4

rail lines. Currently, WMATA operates a massive transit system that serves
a population of 3.5 million within a 1,500-square-mile service area
covering numerous jurisdictions within Virginia, Maryland, and the
District of Columbia.5 The transit system encompasses (1) the Metrorail
system, which now has 86 Metrorail stations on five rail lines and a fleet
of about 900 rail cars; (2) the Metrobus system, which has a fleet of
about 1,400 buses serving 350 routes; and (3) the MetroAccess ADA6
complementary paratransit system, which provides specialized
transportation services, as required by law, to persons with disabilities
who are certified as being unable to access WMATA's fixed-route transit
system.

WMATA operates in a complex environment, with many organizations
influencing its decision-making and funding and providing oversight. WMATA
is governed by a Board of Directors, which sets policies and oversees all
of WMATA's activities, including budgeting, operations, development and
expansion, safety, procurement, and other activities. In addition, a
number of local, regional, and federal organizations affect WMATA's
decision-making, including (1) state and local governments, which subject
WMATA to a range of laws and requirements; (2) the Tri-State Oversight
Committee, which oversees WMATA's safety activities and conducts safety
reviews; (3) the National Capital Region Transportation Planning Board
(TPB) of the Metropolitan Washington Council of Governments (COG), which
develops the short- and long-range plans and programs that guide WMATA's
capital investments; (4) the Federal Transit Administration (FTA), which
provides oversight of WMATA's compliance with federal requirements; and
(5) the National Transportation Safety Board, which investigates accidents
on transit systems as well as other transportation modes.

WMATA estimates that its combined rail and bus ridership will total about
342 million passenger trips in fiscal year 2005, making it the second
largest heavy rail rapid transit system and the fifth largest bus system
in the United States, according to WMATA officials. WMATA's proposed
fiscal year 2005 budget totals nearly $1.3 billion. Of the total amount,
about 76 percent, or $977.9 million, is for operations and maintenance
activities, including debt service, and the remaining 24 percent, or
$314.1 million, is for capital improvements. WMATA obtains its funding
from a variety of sources, including the federal, state (Maryland and
Virginia), District of Columbia, and local governments; passenger fares;
and other sources. In general, WMATA relies on passenger fares and
subsidies from its member jurisdictions to cover its operating costs, and
it obtains its capital funds from the sources discussed in this statement.

WMATA Relied on Federal Funding to Cover over 60 Percent of Metrorail
Construction Costs

Over about 30 years, from 1969 through 1999, the federal government
provided funding for Metrorail construction, through direct appropriations
and unused highway funds.

4 WMATA operates five rail lines: red, blue, orange, green, and yellow.
5 The WMATA service area consists of the northern Virginia counties of
Arlington, Fairfax, and Loudoun
and the cities of Alexandria, Fairfax, and Falls Church; the suburban
Maryland counties of Montgomery
and Prince George's; and the District of Columbia.
6 The ADA is the Americans with Disabilities Act of 1990.

This funding covered about 62 percent of the transit system's construction
costs. The remaining construction funds came from nonfederal entities and
other sources. The federal contribution reflected the federal government's
interest in and responsibility for a regional transit system.

Federal funding accounted for about $6.2 billion of the approximately
$10.0 billion that WMATA spent to build the original 103-mile system.
About two-thirds of this federal funding, or over $4 billion, came from
direct appropriations authorized in legislation enacted in 1969, 1979, and
1990.7

o  	The National Transportation Act of 19698 authorized $1.1 billion for
Metrorail construction.

o  	The National Capital Transportation Amendments of 19799 (also known as
the Stark Harris bill) authorized $1.7 billion for Metrorail construction.

o  	The National Capital Transportation Amendments of 199010 authorized
$1.3 billion for Metrorail construction.

Fiscal year 1999 was the last year WMATA received direct federal
appropriations for Metrorail construction. For fiscal years 1995 through
1998, it was appropriated $200 million a year, and for fiscal year 1999,
it was appropriated $50 million, for a total of $850 million. The
remaining federal funding, about $2.1 billion, came from unused federal
interstate highway funds that the District of Columbia was authorized to
provide to

11

WMATA to supplement the direct appropriations for Metrorail construction.
In addition, nonfederal entities provided about $2.1 billion for Metrorail
construction, and about $1.7 billion came from other sources, including
revenue bonds.

WMATA used the federal and other funding provided for construction to
build the 103mile Metrorail system, including 83 rail stations on five
rail lines. More specifically, it used the funds to plan and design the
rail system, dig tunnels, purchase rail cars, lay rails, construct
stations, and establish a communication system.

The rationale of Congress and the executive branch for providing funding
to construct a transit system in the District of Columbia dates back to
the 1950s. According to this rationale, several factors related to the
unique status of the District of Columbia as the nation's capital call for
close federal involvement in planning for and funding a transit

7 Subsequently, Congress appropriated these authorized funds in annual
appropriation acts.
8 Pub. L. No. 91-143, 83 Stat. 320 (1969).
9 Pub. L. No. 96-184, 93 Stat. 1320 (1980).
10 Pub. L. No. 101-551, 104 Stat. 2733 (1990).
11 The Federal Aid Highway Act of 1973 gave states the ability to use
highway funds on transit projects.
Beginning in 1975, WMATA began receiving interstate highway funds from the
District of Columbia, which
totaled $2.1 billion as of 2004. Under the Intermodal Surface
Transportation Efficiency Act of 1991 (ISTEA)
and the Transportation Equity Act for the 21st Century (TEA-21) the
federal Highway Trust Fund continues
to be used as the mechanism to account for federal highway user-tax
receipts that fund various highway
and transit programs.

system for the District and adjacent jurisdictions. These factors include
(1) the large presence of the federal government in the area with its
attendant property, buildings, and workforce; (2) the attraction of the
nation's capital as a tourist destination; (3) the overlapping needs of
adjacent jurisdictions; and (4) the limitations faced by the District of
Columbia and by the adjacent jurisdictions in raising revenue for transit
needs. Congress and the administration identified and considered these
factors in legislation requiring the planning of mass transportation for
the area and establishing WMATA, as well as in the three previously
discussed acts that authorized direct appropriations for planning and
constructing the Metrorail system. Highlights of this legislation follow;
for a more detailed discussion, see appendix II.

o  	In 1952, Congress enacted and President Truman signed the National
Capital Planning Act of 195212 (1952 Act), which provided for
comprehensive planning for the physical development of the National
Capital Region.13 Congress created the National Capital Planning
Commission as the central planning agency for the region's development and
made it responsible for preparing a comprehensive regional transportation
plan that would serve federal and the District of Columbia's needs for
highways and mass transit.

o  	In 1960, Congress enacted and President Eisenhower signed the National
Capital Transportation Act of 196014 (1960 Act) to promote the development
of a transit system for the National Capital Region. This legislation
found that an improved transportation system for the National Capital
Region was essential for the federal government to perform its functions
effectively and recognized that the District and local regional
governments lacked the capacity to fund such a system. The 1960 Act
established the National Capital Transportation Agency and made it
responsible for preparing and periodically revising a Transit Development
Program, as well as for submitting recommendations for organizational and
financial arrangements for regional transportation, in consultation with
local governments of the National Capital Region and interested federal
agencies. These recommendations were to provide that users pay as much as
possible of the regional transportation system's costs and that the
federal, state, and local governments equitably share any remaining costs.
Finally, the 1960 Act authorized Maryland, Virginia, and the District of
Columbia to negotiate a compact15 for the establishment of a regional
planning and administrative organization whose functions would include the
provision of regional transportation facilities.

o  	In 1965, Congress and President Johnson reaffirmed the federal
government's role in developing a transit system for the National Capital
Region in the National Capital Transportation Act of 1965 (1965 Act).16
This legislation reiterated the

12 Pub. L. 592, Chapter 949, 60 Stat. 781, July 19, 1952.
13 The National Capital Region includes the District of Columbia and
various counties in Maryland and
Virginia. 1952 Act, section 1(b). It is also referred to as the Washington
Metropolitan Area.
14 Pub. L. No. 86-669, 74 Stat. 537 (1960).
15 Article I, Section 10, of the U.S. Constitution provides that no state
shall enter into any agreement or
compact with another state without the consent of Congress.
16 Pub. L. No. 89-173, 79 Stat. 663 (1965).

importance of a coordinated regional transportation system to the
effective performance of the federal functions located within the region
and provided, as did the 1960 Act, for intergovernmental cooperation and
financing by users, the federal government, and others.

o  	In 1966, at President Johnson's request, Congress authorized and
approved a compact negotiated between the District of Columbia, Maryland,
and Virginia that, among other things, proposed the creation of the
Washington Metropolitan Area Transit Authority (WMATA),17 and in 1967,
WMATA was created. The preamble to the compact again emphasized the
federal interest in a coordinated regional transportation system and again
provided for intergovernmental cooperation and financing by users, the
federal government, and others.

WMATA Has Relied on Federal Grants for over 40 Percent of Its Capital
Improvement Program Funding

In addition to relying on federal funding to construct Metrorail, WMATA
has relied on other federal funding for capital improvements. Federal
funding accounts for about $1.5 billion, or about 43 percent, of the
approximately $3.5 billion that WMATA has received from all sources for
its Capital Improvement Program from fiscal year 1995 through fiscal year
2005, and about $2.0 billion, or about 57 percent, has come from the state
and local jurisdictions that WMATA serves and from other sources. Most of
this federal funding has come through formula and discretionary grants
administered by FTA.18 FTA's grant programs provide states, local and
regional transportation providers, and others with funds for the
construction, acquisition, improvement, and operation of transit systems
and projects. These grants cover up to 80 percent of the costs for
eligible capital projects, but, as we have reported, FTA has favored grant
proposals for projects in at least one program that provide more than the
minimum 20 percent from nonfederal

19

sources.

For fiscal years 1995 through 2005, WMATA has received $778.0 million in
urbanized area formula grants (title 5307 funds20). This figure is
equivalent to $824.8 million in fiscal year 2004 inflation-adjusted
dollars. These grants, which are apportioned on the basis of legislative
formulas,21 are available to urbanized areas with populations of 50,000 or
more for transit capital and transportation-related planning activities.
Such activities include engineering design and other planning activities
and capital assistance for buses, crime prevention; and security
equipment; the construction of maintenance and passenger

17 President Johnson's letter of June 9, 1966, and attachments. Weekly
Compilation of Presidential
Documents, Monday June 13, 1966.
18 Formula grants are allocated to eligible entities on the basis of a
statutory formula; discretionary grants
are awarded to eligible entities through a process that may involve
competition.
19 See Mass Transit: FTA Needs to Provide Clear Information and Additional
Guidance on the New
Starts Ratings Process, GAO-03-701 (Washington, D.C.: June 23, 2003).
20 49 U.S.C. S: 5307.
21 The formulas take into consideration a combination of factors,
including bus revenue vehicle miles, bus
passenger miles, rail revenue vehicle miles, rail route miles, population,
population density, and other
factors.

facilities; and rolling stock, track, signals, communication equipment,
and other types of equipment. As figure 1 shows, WMATA's federal urbanized
area formula grant funding has generally increased over the last 10 fiscal
years.22 For fiscal year 2005, this grant funding accounts for 45 percent
of the federal funds that WMATA will receive.

Figure 1: Federal Urbanized Area Formula Grants Provided to WMATA, Fiscal
Years 1995 through 2005

Source: GAO presentation of data provided by WMATA.

Note: Data are in nominal dollars (not adjusted for inflation).

For fiscal years 1995 through 2005, WMATA has received $621.0 million
through federal Capital Investment grants (title 5309 funds23).24 This
figure is equivalent to $642.6 million in fiscal year 2004
inflation-adjusted dollars. These grants are available to states,
municipalities, and public entities such as transit agencies through three
programs:

o  	The rail and fixed guideway modernization program provides formula
grants for fixed guideway modernization projects, such as heavy rail,
commuter rail, light rail, automated guideway transit, and the portion of
motor bus service operated on busways or high-occupancy-vehicle lanes.

o  	The major capital investments in transit (New Starts) program provides
discretionary grants for constructing new fixed guideway systems or
extensions of existing fixed guideway systems such as those identified
under the fixed guideway modernization program.

o  	The bus and bus facilities program provides discretionary grants for
bus and busrelated capital projects.

22 Even after adjustments for inflation, this funding generally has
increased over the last 10 fiscal years.
23 49 U.S.C. S: 5309.
24 See GAO Transit Grants, GAO/RCED-00-260, pp. 1, 3, and appendix I; and
Benefits and Costs of
Transportation Investments, GAO-05-172, p. 8.

As figure 2 shows, WMATA's funding from the federal Capital Investment
grant programs has generally increased over the past 10 fiscal years.25
For fiscal year 2005, this grant funding accounts for 55 percent of the
federal funds WMATA will receive.

Figure 2: Federal Capital Investment Grants Provided to WMATA, Fiscal
Years 1995 through 2005

Source: GAO presentation of data provided by WMATA.

Note: Data in nominal dollars (not adjusted for inflation).

According to WMATA officials, over the past 10 fiscal years, WMATA has
used 100 percent of its federal urbanized area formula grant funding for
rehabilitating and replacing its existing rail system and bus assets.
During the same 10-year period, the officials said, it has used 63 percent
of its federal Capital Investment grants for rehabilitating and replacing
rail system assets and 37 percent for system expansion and growth.

While WMATA's federal formula and discretionary grant funding has
generally increased over the past 10 fiscal years, its nonfederal funding
for capital improvements has varied over the same period, as shown in
figure 3. Notably, in fiscal year 2001, the nonfederal funding level
increased dramatically compared with the previous and subsequent years'
funding levels. As part of our ongoing work, we plan to examine changes in
WMATA's nonfederal funding levels in greater detail.

25 Even after adjustments for inflation, this funding generally has
increased over the last 10 fiscal years.

Figure 3: Federal and Nonfederal Contributions to WMATA's Capital
Improvement Program, Fiscal Years 1995 through 2005

Source: GAO presentation of data provided by WMATA.

Note: Data are in nominal dollars (not adjusted for inflation).

WMATA combines its federal grant funds with its nonfederal funds and uses
them for eligible projects in its own Capital Improvement Program. WMATA
established this program in 2002 in response to recommendations that we
and others made that WMATA document and prioritize its capital funding
needs. For fiscal year 2005, the Capital Improvement Program consists of
three major elements26 that are designed to address all aspects of the
agency's capital investments:

o  	The Infrastructure Renewal Program (IRP) uses funds to rehabilitate or
replace WMATA's existing assets, including rail cars, buses, maintenance
facilities, tracks and other structures and systems. This program
accounted for the largest share, or about 92 percent, of the total funding
for WMATA's Capital Improvement Program funding in fiscal year 2005.

o  	The System Access and Capacity Program (SAP) uses funds to improve
access to and increase the capacity of the transit system by providing
additional rail cars and buses, parking facilities, and support activities
to accommodate growth in ridership.

o  	The System Expansion Program (SEP) uses funds to expand fixed guideway
services, selectively add stations and entrances to the existing Metrorail
system,

26 In its proposed fiscal year 2006 budget, WMATA has expanded the Capital
Improvement Program to include a number of other capital
activities-including purchases of new rail cars and buses and the
construction of new security and credit facilities-that were proposed as
part of an initiative entitled "Metro Matters." This initiative is
discussed in detail later in this statement.

and improve bus service levels and expand service areas.

In addition to its federal grant funds, WMATA received about $49.9 million
for congressionally designated projects during fiscal years 1995 through
2005. It used these funds for capital projects, including about $25
million for a station located at New York Avenue in the District of
Columbia.27

Options for Addressing WMATA's Funding Challenges Would Generally
Establish a Dedicated Revenue Source and Include a Federal Contribution

Over the years, WMATA has faced funding challenges, and options have been
proposed to address them. Although WMATA has taken steps to improve its
management, such as prioritizing its planned capital improvements, it
lacks a dedicated funding source and must rely on variable, sometimes
insufficient contributions from local, regional, and federal organizations
to pay for its planned capital improvements. Proposed options would
provide a dedicated funding source, such as a regional sales tax, and
would increase federal funding for capital improvements.

WMATA and Others Project Continuing Shortfalls in Its Capital and
Operating Budgets

In 2001, we reported and testified that WMATA faced uncertainties in
obtaining the funding for its planned capital spending for the
Infrastructure Renewal and System Access Programs.28 At that time, WMATA
anticipated a shortfall of $3.7 billion in the funding for these programs
over the 25-year period from fiscal year 2001 through fiscal year 2025.

Since that time, in response to recommendations that we and others made,
WMATA has spent considerable time documenting and prioritizing its planned
capital funding requirements, and in November 2002, its Board of Directors
adopted a comprehensive 10-year Capital Improvement Plan calling for $12.2
billion. Then, in September 2003, WMATA launched a campaign, called "Metro
Matters," to obtain $1.5 billion in capital funding over a 6-year period
to avert what WMATA believed was a crisis in its ability to sustain
service levels and system reliability and to meet future demands for
service. In response, WMATA's Board of Directors approved a $3.3 billion
funding plan for fiscal years 2005 through 2010 to help pay for WMATA's
most pressing short-term capital investment priorities.29 This plan calls
for an additional $403 million in federal assistance over the 6-year
period, to be used for rail cars and security improvements. WMATA
officials told us that the agency has requested this additional funding
from the federal government, which has not yet acted on the request.

27 District of Columbia Appropriations Act for Fiscal Year 2001, Pub.L.
No. 106-522, 114 Stat. 2440 (2000). 28 See GAO, Mass Transit: Many
Management Successes at WMATA, but Capital Planning Could Be Enhanced,
GAO-01-744 (Washington, D.C: July 3, 2001) and Mass Transit: WMATA Is
Addressing Many Challenges, but Capital Planning Could Be Improved ,
GAO-01-1161T (Washington, D.C.: Sept. 21, 2001). 29 The $3.3 billion
included $1.8 billion in previously pledged funding and $1.5 billion in
new commitments called for in "Metro Matters."

As concerns about WMATA's funding grew, a regional panel-cosponsored by
the Washington Metropolitan Council of Governments, the Greater Washington
Board of Trade, and the Federal City Council30-was formed in September
2004 to research funding options for the public transit system. This
panel, known as the Metro Funding Panel, reported in January 2005 that
during fiscal years 2005 through 2015, WMATA will continue to experience
substantial capital and operating funding shortfalls totaling about $2.4
billion-including a $0.5 billion shortfall in the operating budgets and a
$1.9 billion shortfall in the capital budgets for those years. 31 In
addition, the panel estimated that WMATA's MetroAccess paratransit program
would have a $1.1 billion shortfall in its budgets for fiscal years 2005
through 2015. The panel noted that it did not incorporate the funding
needs of the MetroAccess paratransit program in its calculations of
WMATA's overall budgetary shortfalls because it believes that paratransit
services, which are important to the well-being of residents in the
Washington region, are "of a different nature from the basic WMATA
mission" and should be funded through creative packaging of the revenue
sources that flow into the region from social service, medical, and other
nontransportation resources. Although we have not had an opportunity to
review the assumptions underlying the Metro Funding Panel's estimates of
WMATA's budgetary shortfalls, we note that WMATA is required by the
Americans with Disabilities Act (ADA) of 199032 to provide
ADA-complementary paratransit services to those who are unable to use the
agency's fixed-route transit system.

Proposed Options Could Address Concerns about WMATA's Lack of a Dedicated
Revenue Source

In our 2001 report and testimony,33 we noted that WMATA's funding comes
from a variety of federal, state, and local sources, but that unlike most
other major transit systems, WMATA does not have a dedicated source of
revenues, such as local sales tax revenues, that are automatically
directed to the transit authority. As far back as April 1979, we reported
on the need for a revenue source dedicated to pay the costs of mass
transportation in the Washington region.34 In that report, we outlined
reasons why the cost estimates for building the Metrorail system had
escalated and pointed out that the Department of Transportation (DOT), as
well as WMATA, agreed that a dedicated revenue source was needed to
address the increasing deficits in WMATA's capital construction and
operating budgets.

In January 1983, we again raised concerns about the level of funding
available to operate the Metrorail system and recommended that DOT issue
guidance requiring periodic reevaluations of the stability and reliability
of the revenue sources, associated with

30 The Federal City Council is a non-profit organization-composed of 170
of the Washington region's
business, professional, educational, and civic leaders-that addresses
major issues through a variety of
projects involving the private sector, the federal government, and the
District of Columbia government.
31 The formal name of the panel is "Panel on the Analysis of and Potential
for Alternate Dedicated Revenue
Sources for WMATA". See PB Consult Inc., Report of the Metro Funding Panel
(Washington, D.C.: Jan. 6,
2005).
32 Pub. L. 101-336.
33 GAO-01-744 and GAO-01-1161T.
34 GAO, Issues Being Faced by the Washington Metropolitan Area Transit
Authority, CED-79-52
(Washington, D.C.: Apr. 10, 1979).

WMATA's member jurisdictions, which are used to fund the operation of
WMATA's transit system.35 In making this recommendation, we noted that the
National Capital Transportation Amendments of 1979 (Stark Harris) required
that WMATA's member jurisdictions demonstrate that they have "stable and
reliable" revenue sources available to fund WMATA's operating costs,
including debt service. Although DOT had told Congress in 1982 that
WMATA's jurisdictions had established such revenue sources, our report
raised a number of concerns. Specifically, it noted that (1) WMATA's
operating deficits had risen faster than the rate of inflation and were
expected to continue to rise so that future local government revenue
sources could become inadequate, (2) local jurisdictions considered
WMATA's costs burdensome, and (3) WMATA's estimates for its 1990 operating
deficit had proved to be optimistic-that is, the deficit had proved to be
larger than expected. Consequently, we recommended that DOT issue criteria
on what constitutes a "stable and reliable" funding source and
periodically reevaluate those revenue sources.

The concerns about WMATA's lack of dedicated revenues surfaced again in
reports issued by the Brookings Institution in June 200436and by the Metro
Funding Panel in January 2005.37 According to the Brookings report,
WMATA's lack of dedicated revenues makes WMATA's core funding uniquely
vulnerable and at risk as its member jurisdictions struggle with their own
fiscal difficulties. The report further stated that the Washington region
needs to develop a dedicated source of revenue, and it evaluated the
advantages and disadvantages of a menu of revenue options that could
support the dedicated revenue source, including gasoline taxes, sales
taxes, congestion charges, parking taxes, land-value capture, and payroll
taxes. Similarly, the report of the Metro Funding Panel concluded that
although WMATA has provided numerous benefits to both the Washington
region and the federal government over the years, it will require a
commitment of new revenue sources to continue that progress. Accordingly,
the Panel made the following recommendations:

o  	The compact jurisdictions of Maryland, Virginia, and the District of
Columbia should mutually create and implement a single regional dedicated
revenue source to address WMATA's budgetary shortfalls.

o  	The most viable dedicated revenue source that could be implemented on
a regional basis is a sales tax.

o  	The federal government should participate "significantly" in
addressing WMATA's budgetary shortfalls, particularly for capital
maintenance and system enhancement.

o  	Federal and regional authorities should consider alternate methods for
funding the paratransit needs of the region.

35 GAO, Applying DOT's Rail Policy to Washington, D.C.'s Metrorail System
Could Save Federal Funds,
GAO/RCED-83-24 (Washington, D.C.: Jan. 12, 1983).
36Robert Puentes, Washington's Metro: Deficits by Design (Washington,
D.C.: Brookings Institution Series
on Transportation Reform, June 2004).
37 Report of the Metro Funding Panel (2005).

WMATA and the Metro Funding Panel's cosponsoring organizations have
endorsed the panel's report and recommendations. At the Chairman's request
of February 9, 2005, we plan to address WMATA's funding issues in more
detail, as well as concerns about the agency's overall operations and
management, in a comprehensive study of WMATA. In that study, we plan to
address

o  	WMATA's unique responsibilities for serving the interests of the
federal government-including the agency's role in transporting federal
employees and supporting homeland security for the Washington metropolitan
region-and the extent to which the federal government has provided WMATA
with financial support over the years in recognition of its responsibility
for a regional transit system;

o  	the extent to which WMATA is still experiencing the types of
challenges laid out in our 2001 report and the actions WMATA has taken to
implement our recommendations for improving its capital planning
practices; and

o  	the current funding challenges that WMATA faces and the pros and cons
of various options proposed by the Metro Funding Panel and others for
addressing these challenges.

In summary, WMATA has relied on federal funding to a great extent, first
to construct the Metrorail system and then to rehabilitate its existing
assets and to purchase new capital. As the original rail system ages,
WMATA will probably request more federal funds for rehabilitation, but as
its ridership grows, it will also need to purchase new capital to
accommodate the increased demands on the system. Because WMATA lacks a
dedicated revenue source, it relies on federal and nonfederal
contributions, which can vary and may not be sufficient, making capital
planning difficult.

Contacts and Acknowledgments

For information on this testimony, please contact Katherine Siggerud at
(202) 512-2834 or siggerudk@gao.gov. Individuals making key contributions
to this testimony include Elizabeth Eisenstadt, Edda Emmanuelli-Perez,
Rita Grieco, Suzanne Sapp, and Kelly Slade.

Appendix I

 Federal Funding Provided to the Washington Metropolitan Area Transit Authority
            for Metrorail Construction and for Capital Improvements

Table 1: Federal Funding Provided for Metrorail Construction

Dollars in billions

       Federal funding           Authorizing legislation      Amount provided 
        Appropriations                                        
                             National Transportation Act of              $1.1 
                                          1969                
                                  The National Capital                        
                            Transportation Act Amendments of              1.7
                                          1979                
                                  The National Capital                   1.3a 
                               Transportation Act of 1990     
           Subtotal                                                      $4.1 
Interstate highway funds  Federal Aid Highway Act of 1973             $2.1 
            Total                                                        $6.2 

Source: GAO presentation of data provided by the Washington Metropolitan
Area Transit Authority (WMATA).

aOf this amount, $850 million was appropriated during fiscal years 1995
through 1999-$200 million in each fiscal year from 1995 through 1998 and
$50 million in fiscal year 1999.

Table 2: Grants and Other Federal Funding Provided for WMATA's Capital
Improvements

Dollars in millions

                       Urbanized                                          
                       area                                      
                       formula                                   
       Congressionally grants                                    
Fiscal designated      (Title    Capital investment grants       
 year  projects        5307)     (Title 5309)a                         Total
                                 Rail           New   Busrelated                   
                                 modernization Starts             Nominal Adjusted
 1995                0     $45.8         $17.3      0          0    $63.1    $74.1 
 1996                0      48.0          17.2      0          0    $65.2    $75.1 
 1997                0      44.3          14.0      0          0    $58.3    $66.0 
 1998                0      47.7          18.3      0          0    $66.0    $73.8 
 1999            $25.0      61.6          20.5      0          0   $107.1   $118.3 
 2000                0      68.3          33.4      0          0   $101.7   $110.1 
 2001                0      78.8          44.7  $32.0       $2.6   $158.1   $167.2 
 2002             24.9      88.1          48.7    7.4        1.4   $170.5   $177.0 
 2003                0      96.2          58.2   54.5        4.5   $213.4   $217.6 
 2004                0      99.0          62.5   59.0        1.9   $222.4   $222.4 
 2005                0     100.2          59.2   64.0          0   $223.4   $219.0 
Total            $49.9    $778.0        $394.0 $216.9      $10.4 $1,449.2 $1,520.6 

Source: GAO presentation of data provided by WMATA.
aThese are a mixture of formula (rail modernization) and discretionary
(New Starts and bus-related) grants.

Appendix II

Legislation Establishing the Washington Metropolitan Area Transit Authority and
                           Authorizing Funding for It

From the early 1950s, Congress and the executive branch recognized several
factors related to the District of Columbia's unique status as the
nation's capital that led them to determine that the federal government
needed to be closely involved in the planning and funding for a transit
system for the District of Columbia and adjacent jurisdictions. These
factors include the large presence of the federal government in the area
with its attendant property, buildings and workforce; the attraction of
the nation's capital as a tourist destination; the overlapping needs of
adjacent jurisdictions; and the limitations faced by the District of
Columbia and the adjacent jurisdictions in raising revenue for transit
needs. Congress and the executive branch identified and considered these
factors in legislation requiring the planning of mass transportation for
the area, establishing the Washington Metropolitan Area Transit Authority
(WMATA), directly appropriating funds for the planning and construction of
the transit system, and providing grant funds through Federal Transit
Administration (FTA) programs.

Federal Involvement in Determining the Need for and Planning of a Transit
System for the District of Columbia

Congress determined over 50 years ago that comprehensive transportation
planning for the District of Columbia and the adjoining metropolitan area
was an important priority for the federal government's operations. In
1952, Congress enacted and President Truman signed the National Capital
Planning Act of 195238 (1952 Act), which provided for

39

comprehensive planning for the physical development of the National
Capital Region. Congress made several findings in the 1952 Act, including
the following:

o  	The location of the seat of the federal government in the District of
Columbia brought about the development of a metropolitan region extending
into Maryland and Virginia, and comprehensive planning was necessary on a
regional basis and of continuing importance to the federal government.40

o  	The distribution of federal installations throughout the region had
been and would continue to be a major influence in determining the extent
and character of the region's development.41

o  	There was a need for a central planning agency for the National
Capital Region to coordinate the developmental activities of the many
different agencies in the federal and District of Columbia governments,
and there was "an increasing mutuality of interest and responsibility
between the various levels of government

38 Pub. L. 592, Chapter 949, 60 Stat. 781, July 19, 1952.
39 The National Capital Region includes the District of Columbia and
various counties in Maryland and
Virginia. 1952 Act, section 1(b). It is also referred to as the Washington
Metropolitan Area.
40 1952 Act, section 1(a).
41 1952 Act, section 1(a).

that calls for coordinate and unified policies in planning both Federal
and local development in the interest of order and economy . . . the
planning of which requires collaboration between Federal, State and local
governments in the interest of equity and constructive action."42

Congress created the National Capital Planning Commission as the central
planning agency for development of the National Capital Region, with
responsibility for:

o  	planning for the major movements of people and goods throughout the
region including "the general location, arrangement, character, and extent
of highways . . . subways, major thoroughfares, and other facilities for
the handling of traffic," and plans for mass transportation,43 and

o  	preparing a comprehensive plan that included a major thoroughfare and
mass 44

  transportation plan that would serve federal and District of Columbia needs.

In 1960, Congress further developed its findings that the federal
government's interests and functioning would be served by the development
of a transit system for the National Capital Region. Congress enacted and
President Eisenhower signed the National Capital Transportation Act of
196045 (1960 Act) to promote the development of a transit system for the
National Capital Region. Congress made several findings in the 1960 Act,
including the following:

o  	An improved transportation system for the National Capital Region was
"essential for the continued and effective performance of the functions of
the Government of the United States."46

o  	Planning for a transportation system would be needed on a regional
basis and required cooperation among the federal, state, and local
governments of the region.

o  	The financial participation of the federal government would be
required because the creation of certain major transportation facilities
would be beyond the financial capacity or borrowing power of the public
carriers, the District of Columbia, and the local governments of the
region.

o  	Finally, "it is the continuing policy and responsibility of the
Federal Government, in cooperation with the State and local governments of
the National Capital Region, and making full use of private enterprise
whenever appropriate, to

42 1952 Act, section 1 (a).
43 1952 Act, section 4(b) and (c).
44 1952 Act, section 6(a) and (b). Congress appropriated $200,000 for
fiscal year 1956 to the National
Capital Planning Commission to conduct a survey of the present and future
mass transportation needs of
the National Capital Region. Pub. L. 24, 84th Cong., ch. 6, 69 Stat. 33
(1955).
45 Pub. L. No. 86-669, 74 Stat. 537 (1960).
46 1960 Act, section 102.

encourage and aid in the planning and development of a unified and
coordinated transportation system for the National Capital Region."47

As part of the 1960 Act, Congress took several steps to provide for direct
executive branch involvement and continued federal interest and
responsibilities for the planning and financing of a transit system,
including

o  	establishing the National Capital Transportation Agency, subject to
the direction and supervision of the President and headed by an
Administrator appointed by the President subject to Senate confirmation;48

o  	making the National Capital Transportation Agency responsible for
preparing and periodically revising a Transit Development Program
consisting of plans for the general location of transportation facilities,
a timetable for the provision of such facilities, and comprehensive
financial reports including costs, revenues and benefits;49

o  	requiring the National Capital Transportation Agency to submit
recommendations for organization and financial arrangements for
transportation in the region to the President for transmittal to
Congress;50

o  	requiring the National Capital Transportation Agency to consult with
local governments of the National Capital Region and the federal agencies
having an interest in transportation in that region;51

o  	ensuring that the agency's recommendations provide that payment of all
costs be borne as much as possible by persons using or benefiting from
regional transportation facilities and services, and that any remaining
costs be shared equitably among the federal, state and local
governments.52

o  	authorizing the states of Maryland and Virginia and the District of
Columbia to negotiate a compact53 for the establishment of an organization
to serve as the means of consultation and cooperation among the federal,
state, and local governments in the National Capital Region; to plan for
the development of the region; and to perform governmental functions
including the provision of regional

54

transportation facilities.

47 1960 Act, section 102.
48 1960 Act, section 201(a).
49 1960 Act, section 204(a).
50 1960 Act, section 204(g).
51 1960 Act, section 204(g).
52 1960 Act, section 204(g).
53 Article I, Section 10, of the U.S. Constitution provides that no state
shall enter into any agreement or
compact with another state without the consent of Congress.
54 1960 Act, section 301(a).

In 1965, Congress and President Johnson reaffirmed the federal
government's role in developing a transit system for the National Capital
Region in the National Capital Transportation Act of 1965 (1965 Act).55 As
part of its findings and purposes, Congress stated the following:

o  	A coordinated system of rail transit, bus transportation, and highways
is essential in the National Capital Region for several reasons, including
"the effective performance of the functions of the United States
Government located within the Region."

o  	This transportation system should be developed cooperatively by the
federal, state, and local governments of the National Capital Region,
"with the costs of the necessary facilities financed, as far as possible,
by persons using or benefiting from such facilities and the remaining
costs shared equitably among the Federal, State, and local governments."

The Washington Metropolitan Area Transit Authority Compact

On June 9, 1966, President Johnson transmitted to Congress a request for
the authorization and approval of the compact that had been negotiated
between the District of Columbia, Maryland, and Virginia, which among
other things proposed the creation of the Washington Metropolitan Area
Transit Authority (WMATA).56 President Johnson noted that the proposed
bill would adequately provide for the protection of the federal interest
and that the proposed Transit Authority would be reviewed by the President
and Congress before federal contributions are appropriated to ensure that
the plans adequately protect the interests of the federal government.

Congress granted its consent57 for the compact in the Washington
Metropolitan Area Transit Authority Compact,58 and WMATA was created in
1967. In the preamble to the compact, Congress reaffirmed findings from
the legislation it had enacted throughout the 1950s and 1960s, including
the following:

o  	A coordinated system of rail transit, bus transportation, and highways
is essential in the National Capital Region for several reasons, including
"the effective performance of the functions of the United States
Government located within the Region."

o  	This transportation system should be developed cooperatively by the
federal, state, and local governments of the National Capital Region,
"with the costs of the necessary facilities financed, as far as possible,
by persons using or benefiting

55 Pub. L. No. 89-173, 79 Stat. 663 (1965).
56 President Johnson's letter of June 9, 1966 and attachments. Weekly
Compilation of Presidential
Documents, Monday June 13, 1966.
57 Pub. L. No. 89-774, 80 Stat. 1324 (1966).
58 Pub. L. No. 89-774, 80 Stat. 1324 (1966).

from such facilities and the remaining costs shared equitably among the
Federal, State, and local governments."59

(542057)
59 The compact provides further details on policy and plans for financing
and budgets.

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