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What Will Metro's Expected Fare Increase Pay For?

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A pair of WMATA escalator engineers work at the Waterfront SEU Metro station.
Elvert Barnes: http://www.flickr.com/photos/perspective/6882143741/
A pair of WMATA escalator engineers work at the Waterfront SEU Metro station.

Metro’s finance committee is expected today to finalize its budget proposal that includes a modest fare and parking increase designed to generate an additional $28 million in revenue for the transit authority’s $1.7 billion operating budget — a 6 percent budget increase — in the new fiscal year starting July 1. The expected arrival of the Silver Line, which will require more workers and propulsion fuel, is contributing to the increase.

Passenger and parking fares are expected to total $900 million in FY’15, covering more than half of all operating expenses. More than $1 billion of the operating expenses are absorbed by Metro’s payroll for its nearly 13,000 employees. With 45 percent of the payroll costs dedicated to the health insurance, pensions, and other benefits of Metro’s largely union workforce, critics contend that fare increases are the result of overly-generous union contracts at a time when both public and private sectors are being pressured to cut costs.

What your fares pay for

Fares are deposited into Metro’s operating budget to pay for personnel and maintenance. The massive rebuilding project behind the extensive weekend track work and escalator replacements — the most visible projects to improve the reliability of a long-neglected system — are funded by Metro’s capital budget.

Pension costs of $170 million are 10 percent of WMATA’s total operating budget and 15 percent of total payroll costs. For the first time in decades, the roughly 8,000 workers of the Amalgamated Transit Union (ATU) Local 689 will begin contributing part of their earnings (1 percent) toward their pensions, a concession management won when the current contract with the ATU was negotiated last year. The contribution increases to 3 percent in July 2015, which will reduce Metro’s future pension expenses by $44 million, according to a transit authority spokesman.

The contract, which gives Local 689 workers four percent pay raises in each of the next two fiscal years, expires in June 2016.

The employee pension contribution is long overdue, according to James Sherk, a labor policy analyst at the Heritage Foundation, a conservative think-tank that advocates private sector reforms in public agencies.

“Until recently, Metro employees didn't have to pay anything toward their pension. The taxpayers picked up the entire tab. It was only after the last round of fare increases when they found that ridership actually began to fall that the union began to give some concessions,” Sherk said. “The unions had been willing to maximize their fare extraction from the Metro riders."

Disagreement on unions' role in fare hikes

Sherk points to a 2011 court ruling on Metro’s appeal of an arbitrator’s award to Local 689 concerning the previous contract between WMATA and the ATU, which covered the years 2008-2012. The arbitrator granted the union modest wage increases but rejected management’s plea to require union employees contribute to their pensions. The arbitrator cited Metro’s ability to raise fares to fund escalating labor costs.

“The fare increases were being driven not by a need to provide for basic operating expenses but in order to satisfy the interests of the union contracts,” Sherk said. So while ATU workers will in fact begin contributing to the pensions in FY’15, previous contract disputes left Metro unable to change its “high-cost structure,” Sherk said.

ATU Local 689 president Jackie Jeter said it is unfair to fault the union for its benefits and wages package.

“The pension has gone through many different layers at many different times. This pension started in 1955 so we have a very old pension plan,” said Jeter, who said it is easy to forget that ATU’s pension was considered so healthy both Metro and its employees for years did not have to make annual payments.

The concessions made in the current contract, including the elimination of retiree health care for employees hired after January 1, 2010, demonstrate the union’s willingness to work with Metro to control labor costs, Jeter said.

“We say, oh my, WMATA! But WMATA was sitting at the same table with us. WMATA signed the same contract we have. Our contract says an agreement between WMATA and local 689,” Jeter said.

As for the other unions whose employees work for Metro, “Active employees in the Local 2 defined benefit plan make no contributions, but that represents only about 20 percent of the Local 2 workforce,” said Metro spokesman Dan Stessel. “That plan was closed in the late '90s and employees hired after that date participate in the 401K and 457 plans. Sworn officers in the Metro Transit Police contribute over 7 percent of earnings to their defined benefit plan.”

Metro OT costs still high

The maintenance and operation of a 106-mile rail system cannot be undertaken without overtime costs; sudden track or signal problems will need immediate repairs, escalators and elevators break down. Moreover, the system-wide rehabilitation program requires extensive weekend labor, driving up overtime costs that are paid out of both the operating and capital budgets.

Metro’s overtime wages fell from $70 million in 2012 to $51 million in 2014, but next year’s budget proposal estimates they will increase to $64 million, or 12 percent of base wages. One factor behind these high costs are union seniority rules.

“The distribution of overtime by seniority is a contractual requirement. Any change would have to be the result of collective bargaining or interest arbitration,” said Metro’s Stessel.

Local 689 president Jeter contends that management is responsible for regulating overtime, and that the union would prefer its workers not be required to work so many six- or seven-day weeks. But the nature of transportation agencies and the extensive track work demand overtime.

“We understand that it is necessary because of the amount of repairs that have to take place,” Jeter said. “Often times when people talk about overtime, you get this image of this greedy little person sitting there gobbling up all the hours that are available, but in our case that is not how it works. The only thing the union has to do with overtime is to determine how that overtime is paid on the person’s sixth day and seventh day.”

Jeter explained that union workers volunteer for overtime and their names are placed on a list for 30-day periods, with the most senior employees at the top. As overtime work is assigned, Metro exhausts the list before returning to the top.

“Management has more of a hand in controlling what kind of overtime or the waste of overtime than the union does,” Jeter added.

Final fare proposal expected today

Rail fares are expected to increase three percent on average, and no more than 15 percent for off-peak fares. Bus fares using SmarTrip would jump to $1.75 from $1.60.

Daily parking would increase $.25 at all Metro parking garages, with an additional $.50 tacked on at garages in Prince George’s County. MetroAccess for disabled riders would increase five percent with the maximum fare capped at $7.

If Metro’s finance committee approves these proposals, Metro’s full board of directors might give final approval today. The fare hikes would take effect July 1.

Metro officials partly blame the most recent fare increase two years ago for a slight drop in rail ridership.

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