WMATA GM selectee steps back from the job--another WMATA Board fiasco!

Press reports just coming in say that WMATA GM selectee, Neal Cohen, has decided not to accept the General Manager position.  Here is the latest report from the Washington Post's Paul Duggan, Michael Laris, and Lori Aratani:

Metro’s protracted search for a new general manager hit another major snag Monday as the transit agency and its top choice for the job, corporate financial expert Neal Cohen, ended their contract discussions.

Cohen, a highly compensated chief financial officer in the private sector who has no experience in public transportation, emerged as the board’s top pick for Metro chief executive last week. Officials familiar with the search said the executive committee of Metro’s board of directors were in contract discussions with Cohen.

But the Washington Metropolitan Area Transit Administration announced late Monday afternoon that board members and Cohen had called off their talks.

It is unclear what role the leaking of Cohen’s name mid-process had on the breakdown in talks, though a source said he was taken aback by the public scrutiny, which will be a constant for whoever ends up taking the job.

Reaction was swift and the disappointment in some quarters was deep. . . .

0WTOP reports Governor McAuliffe's reaction to the latest fiasco:

 “I am outraged by the latest setback in a process that would be comical if the need for new leadership at Metro were not so great,” McAuliffe said in a statement Monday.

“Identifying and hiring a qualified General Manager is the WMATA Board’s chief responsibility and the first step that must be taken in order to oversee the safety and operational changes that are essential to Metro’s long-term sustainability. The leaks and petty political sniping that have come to define the work of this board are harming the Metro system and the economy of the region it serves.”

We agree that hiring a qualified General Manager for WMATA is the Board's chief responsibility and the WMATA Board of Directors has failed miserably in carrying out this responsibility in a timely manner, identifying a highly qualified candidate suited to the severe challenges facing one of the largest public transit agencies in the country, negotiating a responsible contract, and keeping the fact and identity of a possible selection confidential.

We believe that it may be worthwhile for the leaders of all the WMATA jurisdictions to seriously consider replacing their representatives on the Board because the current Board membership is clearly unable to carry out its most important responsibility in a professionally responsible manner serving the interests of a better WMATA and regional transportation.

Gov. Terry McAuliffe gets a Silver Line update, Washington Post, April 22, 2014

Lori Aratani writes:

Officials at the Metropolitan Washington Airports Authority will announce Thursday whether the contractor building the Silver Line rail project has completed its work — or whether it will need additional time beyond the 15-day review period to make that determination.

MWAA president and chief executive Jack Potter made the announcement following a closed-door meetingTuesday with Virginia Gov. Terry McAuliffe. At the meeting, the governor was given a status update on the much-delayed $5.6 billion Silver Line rail project, according to MWAA spokesman Chris Paolino.

McAuliffe (D) had requested the briefing last week following repeated reports of project delays. Among his primary concerns: passenger safety on the rail line as well as ensuring taxpayer dollars are being spent wisely.

“The governor is comfortable about the status of the project and is encouraged that lessons were learned during Phase 1 that will better position the project as it moves into Phase 2,” said Rachel Thomas, a spokeswoman for the governor. . . .

Click here to read the rest of this article.

Will Governor announce "substantial completion" of Silver Line Phase 1--or NOT?

UPDATE:  Another alternative reason for the meeting with MWAA may be the signing of the final agreement between Virginia and MWAA to use the $300 million the state agreed to spend on Phase 2 of the Silver Line.  A lot of moving parts; stay tuned.  

WTOP reports that Virginia Governor Terry McAulliffe will meet with MWAA officials about the Silver line today.

WASHINGTON -- Gov. Terry McAuliffe is looking for more details about Northern Virginia's long-delayed Silver Line at a meeting with leaders of the Metropolitan Washington Airports Authority Tuesday.

The agency is responsible for building both phases of the rail project that will eventually connect downtown D.C., Tysons Corner and Dulles International Airport.

The meeting comes nearly three weeks after the contractor building the first phase of the project to Wiehle-Reston East Station said for a second time that Phase 1 is "substantially complete."

MWAA representatives rejected the initial claim of substantial completion in February after multiple problems were found, including flaws with a communication link and a potential fire hazard with hundreds of new speakers. . .

An announcement on whether DTP (Bechtel and sub-contractors) have actually achieved "substantial completion" as claimed by DTP is days overdue.  It is hard to tell whether the delay is due to lining up all the political ducks in a row so that a fancy public announcement can be made, which is likely the case with the Guv in the area, or the beginning of an inquisition of MWAA and DTP because they failed to meet basic benchmarks in building the line.

We strongly suspect that an announcement of "substantial completion" will be forthcoming today, complete with photo op and great stories about achieving this goal only nine months late.  On the other hand, we also suspect that the announcement will not include the number of caveats and conditions that underlie this announcementl,starting with the fact that it will take another 2 years and $2 million to get the RTUs to work right (maybe) and the speaker & wiring systems have not yet been replaced as required from the last failed "substantial completion" attempt.

We suspect that "substantial completion" is no longer about meeting basic engineering standards; it is about a political deal.  Do you want to ride on a rail line approved by politicians rather than engineers?

An End to the Gas Tax? Freakonomics, January 24, 2013

Eric Morris at Freakonomics takes a look at Governor McDonnell's transportation plan in, "An End to the Gas Tax?" and finds it, well, "daft."  Here are his final thoughts on the proposal:

Bob McDonnell, have pity. Please retract this proposal and stay away from the other governors at the annual Governor’s Association cookout. Let’s follow in the path of that well-known leftie communist sympathizer Ronald Reagan, who saw the gas tax not as a tax but as a user’s fee and signed an increase into law. And please free me to focus my patience on tolerating other daft proposals like crisscrossing our cities with networks of subterranean toll tunnels—oh wait, that’s my daft proposal, and it might not be as daft as it seems. More on it in another post.

Click here to see how Morris walks through the weaknesses and even some of the strengths in the governor's proposal.  

Va. lawmakers consider buying Greenway, backing Dulles Toll Road debt, Washington Examiner, January 13, 2013

By Liz Essley

Virginia lawmakers are considering creative and potentially expensive ways to keep tolls low on two roads they don't control: the Dulles Greenway and the Dulles Toll Road.

State leaders are now negotiating to buy the privately owned Greenway, a toll road west of Washington Dulles International Airport. And the General Assembly is considering legislation that would allow the state to borrow money through a bond issue to pay for the road's purchase and upkeep.

"I have to be able to negotiate an acceptable deal in terms of what we pay for it," said Del. Joe May, R-Leesburg, who is leading the push to buy the road. "I'm optimistic we're going to find a deal that works for both sides." . . .

It is far from clear how these proposals will be received by Republicans from beyond northern Virginia on the House of Delegates Transportation Committee that May chairs or more broadly in the House of Delegates.  It also appears to extend far beyond what Gov. McDonnell is willing to do for toll road relief in northern Virginia as well.

If nothing else, the two bills are an opportunity for the Republicans to better position their candidates in the General Assembly and statewide offices for election this November if we may be so cynical.  Nonetheless, we wish Republican delegates May and Minchew, both from Loudoun County, the best in moving forward with this proposal to relieve the tremendous financial burden Greenway and Dulles toll road users will face in the years ahead.

Click here for the full article. 

As Companies Seek Tax Deals, Governments Pay High Price, New York Times, December 1, 2012

As the Fairfax County Board of Supervisors takes on the issue of added taxes in Tysons early in the new year, it is useful to put the issue of corporate tax incentives in perspective.  In the Tysons case, the Board is reviewing a proposal by the the County's Reinvestment Board to create a Tysons transportation service tax district to cover the $5 billion needed over the next 40 years to pay for Silver-Line development-linked roads and public transit there.  The tax would add about a eight percent to the tax bills of Tysons homeowners and a similar amount to the bills of landowners/developers there. 

As Reston 2020 and the RCA Board of Directors have stated previously, it is unfair to force residential taxpayers to pay additional taxes from which they will garner no offsetting income while subsidizing corporations.  Developers/landowners can anticipate huge profit increases from tripling or more their development in Tysons--and passing on any added tax costs to their clients, renters, and buyers.  Residents have no such opportunity.    

And this does not include tax incentives routinely provided by Fairfax County and Virginia to induce companies to move to northern Virginia.   And, of course, every inducement given to a company to re-locate here--including Intelsat's recent decision to move to Tysons after receiving a $1.3 million grant from the Governor's Opportunity Fund--means that residents of those jurisdictions must dig more deeply to cover the costs of providing infrastructure and other services for their new corporate neighbors.

In this NYT article, Louise Story reveals the scope of those subsidies and how, in the end,  they are largely feckless on a larger-scale basis.  Here's how her story begins:

In the end, the money that towns across America gave General Motors did not matter.

When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.

For years, mayors and governors anxious about local jobs had agreed to G.M.’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. As late as 2007, the company was telling local officials that these sorts of incentives would “further G.M.’s strong relationship” with them and be a “win/win situation,” according to town council notes from one Michigan community.

Yet at least 50 properties on the 2009 liquidation list were in towns and states that had awarded incentives, adding up to billions in taxpayer dollars, according to data compiled by The New York Times. . . .

Later in her article, she notes the nationwide nature of this ill-advised and unfair tax subsidy policy:

 The Times analyzed more than 150,000 awards and created a searchable database of incentive spending. The survey was supplemented by interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.

A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors. . . .

 . . . For local governments, incentives have become the cost of doing business with almost every business. The Times found that the awards go to companies big and small, those gushing in profits and those sinking in losses, American companies and foreign companies, and every industry imaginable.

Workers are a vital ingredient in any business, yet companies and government officials increasingly view the creation of jobs as an expense that should be subsidized by taxpayers, private consultants and local officials said.

The bottom line:  Local governments give up $9.1 million EVERY HOUR in business incentives, an average of more than $80 billion per year.  

For the rest of this comprehensive article, click here.  

Then ask yourself--and your supervisor--if it's fair for Tysons residents to pay added taxes so the corporations there can make even greater profits. 

Letter: Gov. McDonnell to MWAA Board Chairman Curto on MWAA Issues & Cutting Metro Construction Costs, October 9, 2012

Gov McDonnell ltr to MWAA re MWAA Issues & Cutting Construction Costs

Agenda: RCA Board of Directors Meeting, 7:30PM, July 23, 2012, Sheraton Reston

DRAFT Agenda

RCA Board of Directors Meeting

July 23, 2012

Item	Time	Topic	Disposition	Presenters
1	7:30 PM	Adopt  Agenda	Action	Colin Mills, RCA Board
2	7:35 PM	Approve May 2012 Minutes	Action	Debra Eastham
3	7:40 PM	Treasurer’s Report	Action	Diane Lewis
4	7:45 PM	Election of 2012-13 RCA Officers	Action	RCA Board
5	7:55 PM	Priorities for New RCA Board Year	Discussion	Colin Mills, RCA Board
6	8:10 PM	RCA Bylaws Revision	Discussion, Action	Colin Mills, RCA Board
7	8:20 PM	Election Committee Review	Discussion	Gary Walker, Colin Mills
8	8:35 PM	2020 Update: RCA Letter to Gov. McDonnell, etc.	Discussion	Terry Maynard
9	8:50 PM	Education Committee: Next Steps	Discussion	RCA Board
10	9:00 PM	Outreach Committee Update: RCA Newsletter	Discussion	Hank Blakely, Colin Mills
11	9:05 PM	TechShop Update	Discussion	Gary Thomas
12	9:10 PM	Other Business	Discussion	RCA Board
13	9:15 PM	Location and Time of Next Meeting; Adjourn	Action	RCA Board

Explaining RCA's Letter on Metro Funding, Colin Mills, RCA President, Reston Patch, July 11, 2012

As you know if you're a regular Patch reader, yesterday I issued a letter to Governor McDonnell on the issue of Virginia's planned funding for Phase 2 of the Silver Line, and how it could best be applied. This may not be the easiest issue to understand, so I wanted to use this week's blog to explain RCA's position -- and why it matters how the state funds are spent.

It's definitely good news for the Silver Line and for the users of the Toll Road that the Commonwealth and MWAA were able to resolve their stand-off over the Project Labor Agreement.  MWAA agreed to drop its preferential treatment of PLAs in the bidding process, and the McDonnell administration agreed to provide the $150 million it had promised for Phase 2.  Although the $150 million is a small fraction of the overall cost of Phase 2, it's certainly better than nothing, and RCA is glad that the Commonwealth will be helping to finance the construction of Phase 2.

Our concern has to do with the way in which the state funds are applied.  RCA is proposing that the $150 million be used to buy down the capital costs of construction, rather than paying the interests on MWAA-issued revenue bonds used to finance the construction.  We believe that buying down capital provides Virginia and the project with much more bang for the buck.

At first glance, it may be hard to understand why we're making a big deal out of this.  After all, $150 million is $150 million no matter where it's spent, right?  In the end, shouldn't it all come off the bottom line the same?  Actually, no.  In order to understand why, let me use an analogy: buying a house.

Let's imagine that you've bought a house that cost, say, $300,000.  Unless you're fortunate enough to have that kind of cash on hand, you're going to finance your purchase by taking out a mortgage.  This allows you to pay off the cost of the house over 20 or 30 years, rather than needing to have the money upfront.

Of course, this comes at a cost.  Over the course of your mortgage, you're going to pay a lot more than $300,000, because of the interest.  When the bank loans you the money to buy your house, they demand a certain level of return to make it worth their while.  If you take out a 30-year mortgage at an interest rate of 5%, for example, you'll wind up paying about $575,000 over the life of the mortgage -- almost double the original cost.  As you can see, interest represents a significant cost when financing big-ticket items over an extended period of time.

MWAA faces the same situation when it comes to the Silver Line.  They don't have $3 billion on hand to pay for the project upfront, so they'll need issue revenue bonds (the equivalent of your home mortgage).  Depending on the interest yield they're able to get for the bonds, the overall financing cost for the Phase 2 could be as much as $15 billion.  Obviously, anything that can be done to deduce the finance cost of the project would be a boon.

Now, let's return to our analogy so I can explain RCA's position.  Imagine that you have a friend who's willing to pay $10,000 toward the cost of your house.  Would you be better off if he gave you the $10,000 as a down payment on the house, or if he applied the $10,000 on your mortgage payments?  If you're smart, you'll take the down payment, because it reduces the amount of money you'll have to finance, thus bringing down your interest costs.  Over the life of a 30-year mortgage, a $10,000 down payment will save you about $40,000 in total payments.  Same amount of money, different results.

The same is true for the Silver Line.  If Virginia's $150 million were used to pay for the capital cost of construction, it reduces the amount of bonding MWAA must do to pay for the project.  Again, depending on the interest yield on the bonds when they're issued, using Virginia's funds to pay for capital would produce approximately 3 to 5 times the total savings compared to using the funds to pay interest on the bonds.  More bang for our state-funding buck!

At this point, you may be thinking: the Commonwealth and MWAA surely have plenty of smart people who understand how finance works, so why would they even consider using the money for interest instead of capital?  The answer: The short-term toll rates.

As we all know, MWAA will be paying for its share of the project by raising tolls on the Dulles Toll Road.  How much those toll rates will need to rise obviously matters to everyone involved, but how fast they go up might matter just as much to some, especially for elected officials who might suffer near-term punishment at the voting booth if the tolls spike quickly.
If the state funds are used to pay the interest on MWAA's bonds, it allows MWAA to delay the proposed toll increases in the short term.  (Returning once more to our house analogy: If you used your friend's $10,000 to pay your mortgage instead of making a down payment, your total expenses in the first year of your mortgage would be lower, because your friend is paying most of the freight that year.)  Otherwise, MWAA contends, the only way they could reduce the short-term toll increases would be to issue a different type of bond that would require a higher yield.

But is it worth it to delay the pain of toll increases for a couple of years if it costs us more over the life of the project?  Short-term thinking has wreaked a lot of havoc in our economy in recent years.  We're going to be paying for Phase 2 for decades, so let's spend our money wisely.  I hope that MWAA and the Commonwealth will do the right thing, and make the smartest decision for the long term.

I want to thank RCA's research wizard, Terry Maynard, for being the first to point out this concern and for crunching the numbers that went into my letter.  Terry and RCA's Reston 2020 Committee are still working hard and remaining vigilant to ensure that the Silver Line brings greater benefits and fewer costs to the citizens of Reston.

RCA Urges Gov. McDonnell to Use State's $150MM to Pay Phase 2 Construction Costs, Resulting in a Half-Billion Dollar Savings in Tolls

In a letter sent to Virginia Governor Robert McDonnell today, RCA President Colin Mills urged the state to use the $150 million it has pledged to help pay for construction of Phase 2 of the Silver Line as a down payment on the capital construction costs rather than as payments against interest on MWAA revenue bonds needed to finance the rail line extension. 

The letter, prepared by RCA’s Reston 2020 Committee and approved by the RCA Board of Directors, notes, “. . . in using the $150 million to help pay down the interest payments on MWAA’s forthcoming revenue bonds for the Silver Line’s Phase 2, the payments will contribute much less than $50 million—maybe as little as $30 million--to Phase 2’s overall $3 billion capital cost.”

President Mills calls for the State of Virginia to use the $150 million dollars—payable in three annual $50 million increments—as capital payments for the construction while Phase 2 of the line is being built.  By reducing the debt needed on Phase 2 by $150 million, it would lower the total bond payment cost to Dulles Toll Road users by more than $500 million—more than $300 million after 3% inflation—over the next four decades in a far more cost-effective application of state transportation funds.   

Terry Maynard, Reston 2020 and Board of Directors member, notes, “Our concern is that the state and especially MWAA will prefer to use the $150 million to incrementally increase toll rates in the very short term without regard to the most cost-effective solution.  While the MWAA approach—which is being considered by its Board of Directors—has a great political optic in preventing tolls from doubling to $4.25 one-way next year, applying the $150 million as a down payment on Phase 2 could save toll road users hundreds of millions more over the longer term by applying them to pay construction costs.  Moreover, the MWAA stair step toll increase approach still means that toll rates will triple to $6.75 in 2018 as planned.  Why wouldn’t Virginia and MWAA want the scarce funds to have their maximum impact?  To do otherwise wastes taxpayer money and hurts toll road users more.”  

“We believe it is of the utmost importance that Virginia and MWAA do everything possible to reduce the huge toll increases Dulles Toll Road users face in the decades ahead,” said Tammi Petrine, Reston 2020’s co-chair.  “The place to start is to do the right thing now with state funding. That means taking a long-term view in maximizing any reduction in the projected nearly nine-fold increase in tolls on the 80,000 Northern Virginians who use the Dulles Toll Road daily.  Virginia and MWAA have to stop playing political games,” she added, “and use public funds in a responsible manner that will most ease the huge costs toll road users face.  Right now, toll road users are forecast to pay over half the line’s capital cost as well as revenue bond interest and operating costs totaling more than $17 billion by 2050.”

 RCA Ltr to Gov Re $150MM Aid to P2--FINAL

Dulles Rail and "The Highway of the One Percent," RCA Reston 2020 Committee, May 9, 2012

                                                                                          Reston 2020 Committee

Reston Citizens Association

Contact:  Terry Maynard

Reston.2020@yahoo.com

703-476-5376

May 9, 2012

RCA’s Reston 2020 Committee calls fair Silver Line construction

cost sharing, not PLAs, the critical issue in the line’s success

In a new white paper called “Rail to Dulles and “'The Highway of the One Percent,'” the Reston Citizens Association’s (RCA’s) Reston 2020 Committee calls the more than an 800% increase in highway tolls in the years ahead the most critical problem in the Silver Line’s success.  It says the political and media attention given the PLA dispute is misplaced and the issue is basically irrelevant.

Reston 2020 says the huge toll increases will cost regular Fairfax County toll road users almost half of any real income gains over the next four decades as tolls approach $20 one-way and take $17 billion out of the local economy.   Official forecasts indicate that, as a result, 30,000 or more vehicles per day will divert to congested local roads next year when tolls double.  By mid-century, high tolls will lead some 80,000-120,000 potential drivers to desert the toll road, turning it into a “Highway of the One Percent.” 

The exorbitant tolls proposed are also likely to force companies and families to re-think any plans to move to the Dulles Corridor, the white paper says.  In an era of extreme corporate cost-consciousness, companies will far be less likely to move to or pay premiums for space in an area where their customers and employees must pay a huge transportation premium just to get there.  Many families will avoid the more than $8,000 yearly cost that commuters and other regular toll road users would need to pay.

Consistent with its longstanding advocacy for the Silver Line, Reston 2020 calls for those who will benefit financially from its operation to be its principal investors.   It proposes that in addition to toll road users, station area landowners and the local funding jurisdictions—MWAA, Fairfax, and Loudoun counties—share equally in the cost of the line not yet funded by Washington or Richmond.  That means about $1.5 billion and a 26.5% share for each in this cost sharing arrangement to cover the unfunded portion of the line’s estimated $5.7 billion cost. 

 “The Silver Line is an investment in the future of Reston and the Dulles Corridor,” said RCA President Colin Mills.  “In order for it to succeed, everyone needs to step up to the plate and do their part.  We can't put the bulk of the burden on the toll road users' back.  That's not fair, and it's not good planning."

Tammi Petrine and John Hanley, Co-Chairs of Reston 2020, both urged US Transportation Secretary Ray LaHood to include Reston Citizens Association and other corridor citizens groups in his stakeholder discussions to help ensure a fair financing arrangement that would allow the Dulles Corridor to thrive.  “Reston needs Metrorail,” Petrine added, “but not at toll costs that would choke its growth and streets, and the Secretary’s intervention is our best chance to make that happen.”

“With the huge economic benefits others have forecast for the Silver Line, some $25 billion over 30 years in Loudoun County alone according Dr. Stephen Fuller of GMU’s Center for Regional Analysis,” the report’s drafter Terry Maynard commented, “it’s hard to believe that businesses along the corridor wouldn’t be willing to invest $1.5 billion to help ensure the line’s success.”

Rail to Dulles and "The Highway of the One Percent", RCA Reston 2020, May 9, 2012