The West Falls Church Subway Station site will include over one million square feet of office, retail and residential space. (WMATA render)
The Washington Metro unveiled an ambitious 10-year plan on April 7 to build housing and commercial space on 20 properties owned by the transit system, whose transit agency projects will bring thousands of customers and millions of dollars in rent and tariffs.
The commuter line serves the District of Columbia, Maryland and northern Virginia.
The Washington Post reported that by diversifying various sources of revenue, the Metro is trying to provide a hedge against the prospect of impending financial problems due to the loss of paid commuters to telecommuting. Additionally, a bloated construction budget has also prompted Maryland lawmakers to propose increasing annual grants as part of a plan conditional on Virginia doing the same.
Metro hopes to soften a financial hit it expects this summer, when more than $2 billion in federal coronavirus aid will begin to evaporate. The proposals are the latest ideas from transit officials and lawmakers as the region recovers from a pandemic that has altered commutes and crushed Metro’s finances.
At the heart of the effort, the agency has a detailed plan to develop Metro’s remaining properties and aims to coordinate with local governments to create development that helps the transit system.
The plan’s goals are to increase subway ridership, generate new revenue from fares and leases, and help the area develop businesses and housing that generate tax revenue. The increased development would ultimately help Metro in the form of annual grants provided by jurisdictions.
According to the agency’s estimates, new transit users resulting from the developments proposed in the plan are expected to make between 5 and 9 million new subway rides each year and pay between $20 and $40 million in fares.
Additional revenue from leases would generate $50 million for Metro each year, and the development would bring about $340 million in annual tax revenue to local and state jurisdictions, Metro officials said.
The influx of revenue, though still years away, would bring more balance to the transit line’s revenue streams, according to the Post.
The transit system’s biggest money-maker, Metrorail, has lost about 80% of its ridership during the pandemic, though ridership has recently rebounded alongside the reopening of other downtown office buildings. . Daily weekday train journeys at the end of March were still 65% lower, on average, than before the pandemic.
Developers hungry for buildable area in Metro
Land prices are rising in an area that needs more housing, prompting developers to increasingly try to partner with Metro, which owns more than 550 buildable acres near 40 train stations and with development potential of 31 million square feet and 26,000 homes. More than half of the sites are in Maryland, six in northern Virginia, and the rest in the District of Columbia.
Locations are also coveted by developers due to their access to public transit, which tends to drive higher prices.
Since 1975, Metro has built 55 projects and 17 million square feet in 30 stations through public-private development agreements, generating $194 million each year in state and local tax revenue.
“As we emerge from the pandemic, the joint development presents a real win-win opportunity for Metro and the region,” Liz Price, Metro’s vice president for real estate, said in a statement.
Angie Rogers, deputy chief executive of Maryland’s Prince George’s Economic Development Corporation (EDC), said her office is working on plans to increase development along the Blue Line corridor from DC to downtown Largo. It also partners with Metro to preserve and develop housing, commercial stores and offices at Blue, Orange and Green Line stations.
Funding shortfalls and budget shortfalls pose problems for Metro
Congress saved Metro from drastic service cuts over the past two years with three rounds of federal stimulus funds, a $2.4 billion injection that offset lost revenue. Metro, with an annual operating budget of about $2 billion, projects that $151 million in federal assistance will remain for the fiscal year that begins July 1, 2023, leaving the rest to the agency.
The Post reported that the transit system projects a mid-2023 funding shortfall of more than $300 million.
Metro also faces a looming shortfall in its capital budget, which funds construction, renovation, new train and bus projects.
For years, the transit system had lagged on repairs and upgrades, contributing to lane fires, outages and delays, but that had started to change recently, spurred by Maryland, DC and Virginia deciding in 2018 to devote dedicated funding to Metro’s needs, amounting to $500 million per year.
The money helped Metro catch up on repairs, including the replacement of 20 worn and weathered exterior platforms and an overhaul of the station’s escalators, the Washington newspaper reported. The shortage of passengers during the pandemic has also allowed Metro to accelerate projects. Metro’s annual 10-year capital construction program has grown from $700 million a year to more than $1.8 billion this year.
The transit system issues bonds to get money up front, using dedicated jurisdictional revenue to pay for them.
The Post has learned that in 2023, the transit system’s proposed capital budget is $2.4 billion, which is funded using the same bond method. But in a few years, Metro will no longer be able to issue new bonds because its dedicated funding will only be enough to pay off outstanding bonds.
MD, VA and DC Leaders working on solutions
Aware of Metro’s lack of funding, elected leaders in the region — aided by the Metropolitan Washington Council of Governments — discussed funding increases.
The Maryland legislature recently passed a provision that would automatically increase annual state funding to Metro by three percent, provided Virginia does the same. The District of Columbia has already pledged to increase, the Post has learned.
Congressman Marc A. Korman (D-Montgomery), who sponsored the Maryland House version of the bill, said the measure would allow Metro to use bonds for capital projects in the future. He is chairman of his state’s House Appropriations Subcommittee on Transportation and the Environment.
The bill is also supported by the Washington Suburban Transit Commission (WSTC), which represents Prince George and Montgomery counties.
“Without adequate funding, [Metro] will not be able to fill its backlog of projects, let alone make the improvements requested by users and jurisdictions in the National Capital Region,” the commission wrote in a letter of support to the subcommittee of the House in March.
Across the Potomac, however, Virginia has yet to try to pass a similar bill.
Sen. George L. Barker (D-Fairfax), who is leading the state’s efforts, said he wants to drum up support for any proposal from the administration of Republican Gov. Glenn Youngkin, who took office less than two months before the end of the Virginia legislative session. .
“There was no time to really work with the new transportation secretary,” Barker told the Washington newspaper. “So, I’m going to work on that next year.”
A 3% annual increase in dedicated Metro funding would generate an additional $15 million bondable in year one, $30 million in year two, and $46 million in year three. That amount still represents a fraction of what Metro’s capital needs will be, according to the WSTC.
DC, Maryland and Virginia already provide annual funding that supports Metro’s operations, although that money cannot be used for capital projects.