Metro is more than a little short on cash for maintenance and construction—to the tune of about $15.6 billion over the next 10 years.
Loudoun County supervisors have joined a chorus of voices opposing the idea of a regional sales tax to fill that gap, and the idea is considered mostly dead on arrival in Virginia politics. That still leaves the question of how to come up with upwards of $1.5 billion in capital costs every year to get Metro back to a state of good repair. But Loudoun’s leaders think they have a better idea for the various governments contributing to the system anyway.
“We, as jurisdictions, if we were to continue on the path that we are currently on, we would be contributing altogether about $900 million into Metro a year,” said Supervisor Matthew F. Letourneau (R-Dulles). “So the conversation has largely been, how do you fill that roughly $500-600 million gap?”
One of the problems is that, because of its funding structure, which depends on budget allocations from a great number of localities and doesn’t guarantee money from one year to the next, Metro cannot issue debt.
Most large government organizations issue bonds and other debt to spread out the cost of major infrastructure investments. For example, last year, Loudoun voters overwhelmingly approved issuing nearly $350 million in bonds for schools, parks, roads, fire stations, and other facilities.
But Metro would have to cough up that $1.5 billion a year up front. Localities have balked at pouring millions more into Metro.
The solution, say Letourneau and Loudoun County Administrator Tim Hemstreet: create an organization that can issue debt.
“What we’re trying to do is leverage a portion of those contributions and be able to issue debt off of those contributions, which then gets to the other $600 million that you need to get from $900 million to $1.5 billion,” Hemstreet said.
A service contract would be drawn up among all the governments that pay into Metro except the federal government: DC, Maryland, Virginia, and Northern Virginia’s rail counties. That organization would have a credit rating based on the ratings of its member jurisdictions, which Loudoun leaders say could be AA+. The federal government would be assumed to still pay as it goes.
The service contract would let Metro issue debt.
But while the service contract’s credit rating would be based on the jurisdictions’ credit ratings, as long as Loudoun meets its obligations, its credit rating is not expected to be impacted if Metro goes bankrupt or defaults on its debts. The debt Metro issues would not be considered indebtedness by the contributing jurisdictions.
Letourneau compared the service contract to a regional jail. He said it’s “something that’s been used before, albeit not quite at this scale.”
“The beauty of this approach is that it’s very elastic, so we would not disagree with those who would say that the state needs to contribute more money or the federal government needs to contribute more money,” he said. “If those things happen, then it would only reduce the amount that the jurisdictions would have to do.”
And unlike a sales tax—which would put about half the burden of the extra funding on Virginia alone—the service contract splits the burden about evenly among Virginia, Maryland, and DC, based on what they’re already contributing.
The county has already reviewed the strategy with a financial advisor and the county attorney.
The solution is short term. After 10 or 12 years, either localities have to start putting in more than they plan to right now, or another source of funding will have to be found.