Norton Informed that FTA Will Take Fresh Look at Its Financial Monitoring of WMATA, But Raises New Urgency In Light of WMATA Hiring Bankruptcy Expert and Accumulation of $500 Million Operational Deficit

WASHINGTON, D.C.—Congresswoman Eleanor Holmes Norton (D-DC) today released her letter to Federal Transit Administration (FTA) Acting Administrator Therese McMillan following up on her original request that FTA continue financial monitoring of the Washington Metropolitan Area Transit Authority (WMATA) while considering changes to the current paper method of monitoring to ease WMATA’s dependence on short-term borrowing for operational expenses. Norton thanked Administrator McMillan for agreeing to take a fresh look at FTA’s financial monitoring system, but said her concern about WMATA’s short-term borrowing had deepened because WMATA has since retained a bankruptcy expert.

In her letter, Norton said, “I have learned that WMATA’s short-term borrowing includes large lines of credit with banks that are being rolled over, bringing WMATA an operational deficit of approximately $500 million with costly interest payments. WMATA had never before engaged in short-term borrowing to cover day-to-day operating expenses until now. In light of this development, I am particularly concerned that the increase in WMATA funding that I was able to get as one of the four leaders of the recently-signed surface transportation bill may be used to pay debt rather than for efforts that relieve the pressure that has resulted in a five percent loss in ridership over the past five years.”

Since March 2014, FTA has required WMATA to submit all requested federal reimbursements through paper—rather than the electronic methods typically used—after FTA found serious weaknesses in WMATA’s financial controls.

Norton’s full letter is below.

Therese McMillan
Acting Administrator
Federal Transit Administration
1200 New Jersey Ave SE
Washington, DC 20590

Dear Acting Administrator McMillan:

I want to thank you for your responsive letter of January 28, 2016, indicating that the Federal Transit Administration (FTA) is taking a fresh look at the Washington Metropolitan Area Transit Authority’s (WMATA) financial situation, using a testing process for a validation plan to ensure that the agency’s financial systems are improved and will continue to function adequately now that WMATA has corrected all of the Financial Management Oversight Report’s “material weaknesses and significant deficiency findings.” Because FTA monitoring has been chiefly responsible for the improvement of WMATA’s financial practices, I believe that continuing monitoring by FTA at this time remains essential to avoid any return to financial difficulties, particularly considering WMATA’s fragile financial condition.

I write now because of press reports that WMATA has hired the bankruptcy lawyer who was Detroit’s state-appointed, full-time Emergency Manager, although making clear that WMATA does not envision such a role here in the District. In any case, WMATA is not entitled to seek bankruptcy. The expertise of the bankruptcy specialist may be prudent in light of WMATA’s shaky financial condition, but the need is still disquieting.

Bringing on such an expert speaks volumes about the seriousness of WMATA’s current financial condition. I have learned that WMATA’s short-term borrowing includes large lines of credit with banks that are being rolled over, bringing WMATA an operational deficit of approximately $500 million with costly interest payments. WMATA had never before engaged in short-term borrowing to cover day-to-day operating expenses until now. In light of this development, I am particularly concerned that the increase in WMATA funding that I was able to get as one of the four leaders of the recently-signed surface transportation bill may be used to pay debt rather than for efforts that relieve the pressure that has resulted in a five percent loss in ridership over the past five years. It will be more difficult to secure needed federal funding for WMATA if Congress believes that insufficient steps have been taken to avoid debt and especially high-interest short-term borrowing. I am so concerned about the need for a bankruptcy expert that I am requesting a regional congressional briefing with the WMATA executive board and its new general manager.

However, I am encouraged by your fresh look at WMATA’s finances to see if there is a more efficient way to monitor the agency than requiring it to use the snail-pace handwritten documentation of every expense to draw federal funds. It is impossible to separate the slowest way of getting the federal funds due to WMATA from a need for these funds, which has become so dire that WMATA must engage in costly short-term borrowing for its daily operations pending receipt of these federal funds. WMATA’s loss of five percent of its riders over the past five years also is a major factor in its current financial condition. Passenger decline has forced WMATA to consider rider incentives that will deprive the agency of funds in the short term. Whatever the causes of WMATA’s financial troubles, I urge you to use a close monitoring system of WMATA’s finances that will allow it to employ a more rapid way to draw down funds owed the agency. The unintended consequences of slow documentation by hand cannot be doubted. However, today’s technology, with close monitoring, should permit faster drawdown of funds.

Sincerely,

Eleanor Holmes Norton