King County Metro's financials have been at the center of a major policy debate between members of the King County Council, led by Democrat Rod Dembowski, who argue that Metro is on firm financial footing, and transit advocates, including County Executive Dow Constantine, who argue that the agency needs more revenue to avoid a potential future shortfall and increase service that has been falling short of demand. 

The basic question is twofold: Is the transit agency really at financial risk if there's another recession, and should voters in Seattle approve more funding for the transit agency's in-city service in November? 

The second question hinges, in part, on the answer to the first. Skeptics, including the county council, argue that Metro needs only to dig a little deeper, cut a few more corners, and put less money toward replacing Metro's aging fleet.

The council has put Metro's money where its mouth is. After voters rejected a tax package that would have preserved Metro service countywide back in April, council members voted unanimously to forestall cuts planned for February, arguing that an improved financial forecast and a closer look at Metro's budget made the cuts unnecessary and would more than replenish the agency's depleted rainy-day fund.

Critics, including County Executive Dow Constantine, retorted that the county's revenue projections are too optimistic because they assume that there will be no financial downturn for the next ten years, and that agency's rainy-day fund will grow indefinitely at an unrealistically high rate of nearly five percent a year. 

Complicating matters further, Seattle has separately proposed its own fee and sales-tax increase that was originally planned to forestall cuts but will now be reallocated for service improvements if the measure, known as Proposition 1, passes in November. 

We asked Metro general manager Kevin Desmond why, if the county's own budget experts (a group that work for both the executive and the county council) believe there won't be another recession in the next decade, the agency and Constantine are asking the council for more cuts (and why Seattle is asking voters for more money).

His answer, in short, is that 1) If Metro doesn't set money aside now, it will overpromise service, underdeliver in response to the next recession, and provoke a crisis of confidence among the very voters who agreed to increase their own taxes for better service in the first place.

And 2) Because Metro has, thanks in part to that very scenario, underdelivered on its promises in the past, the agency is now at least 15 percent shy of the service hours it should be providing just to keep up with increased demand since 2006, when voters passed the "Transit Now" measure to increase bus service across the county. 

Here's Desmond on Metro's past promises and shortfalls... 

When the dot-com recession came [in the early 2000s], Metro had promised it could add 400,000 hours of service [from a 0.2-cent sales tax increase to partly restore a shortfall brought on by Tim Eyman's I-695, which eliminated most of Metro's state funding] relatively quickly. Instead, with the dot-come recession, Metro could only add about 166,000 hours.

In 2006, Transit Now said we'd add 590,000 hours. Shortly after that, the Great Recession fell upon us. Transit Now was supposed to raise between $50 million and $55 million a year in 2007 dollars. By 2009, we had actually lost more than $100 million in sales tax revenues, so we could not move forward with much of the Transit Now program.

In the 2007-2008 period, Metro had been growing its ridership faster than most large bus transit agencies in the U.S.—between 6 and 7 percent growth in each of three years, faster than vehicle miles traveled and population growth—so Transit Now was clearly needed to help deal with the demand.

On the need for more investments in Metro service... 

You’ll remember that in 2011, the county council adopted our new strategic plan, which included our new service guidelines [which include factors such as cost, ridership, and social equity]. The genesis, and really the catalyst, for all of that was the looming potential for service reductions—how would we create some kind of objective approach to even considering some fairly large reductions in the system? The guidelines also were to be used to evaluate where we should be adding service to relieve overcrowding, improve schedule reliability, and increase service on corridors that are below the target service level.

The guidelines report we expect to issue this month shows that the system could use 547,000 hours in investments throughout the county, with 22,200 of those to relieve overcrowding on 27 routes throughout the county, 38,650 to improve schedule reliability on 89 routes, and 486,500 hours for underserved routes in 58 corridors. That’s about 15 percent of the system. 

And on what he calls the "conservatism" of Metro's budget process: 

There’s this ongoing debate now, some of which is playing out in the Seattle Times editorial page and elsewhere. The announcement that [King County budget director] Dwight Dively and I made three weeks ago that we would save 150,000 hours was premised on beginning to deposit future forecasted revenue, which is not money that we have today, based on a sales tax forecast that never goes down. It assumes 10 consecutive years of economic growth, and that is very unlikely. No one ever forecasts a recession, because recessions aren't predictable. If recessions could be predicted, some people would get really rich.

That forecast—and this often gets lost in the political debate—does not forecast a recession. The rainy-day fund was created by the council in 2011 explicitly in response to the impact of the Great Recession and the dot-com recession, where we made promises that we weren't able to fulfill because those promises were premised on ever- growing sales tax revenue. We've been severely criticized for mismanaging our money [in the previous two recessions] by many of the same critics who are now saying, hey, you're loaded, spend that money now. 

Let’s say there was a modest recession around 2018. Assuming the money that could come in under a recession forecast, we tell the public we are confident that we can support this level of service going forward even if there’s an economic downturn—that we can withstand that recession and keep the service on the road without going back to the public crying the blues and saying, "whoops, we have a problem again."

That is what Dow is trying to accomplish with the budget.

We’ve taken a very conservative approach. If in fact the eoncomy stays strong and it’s sustained, and in 2017, 2018, the money’s still there we would have a greater deal of confidence at that point to say, "Let’s start investing again."

We also asked Desmond about the possibility of future fare increases; between 2008 and March of next year, Metro will have increased fares five times. Desmond told PubliCola: "Our financial plan assumes that the next fare increase will be in 2018. The county executive has not proposed any new change to the fares. That's something the council might want to consider."

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