Saturday, February 20, 2010

D.C. Metro Wants to Be Compensated for Costs of Not Running

CC photo from thisisbossi on Flickr.
From a WMATA press release:
The February 2010 snowstorms cost Metro an estimated $18 million---$8 million for snow removal efforts and $9.7 million in lost revenue. 
Metrorail service was limited to underground service on several days due to the blizzards, resulting in a tremendous loss of ridership. Also, Metro is also experiencing additional revenue losses from unusable parking spaces at parking lots throughout the system that are still covered in snow and ice. 
The $8 million in expenses for snow removal include labor costs such as overtime for employees; money paid to private contractors for snow removal services; deicer, salt and additional fuel needed for snow removal equipment. 
“Metro is currently working with the Commonwealth of Virginia, District of Columbia, and the State of Maryland to submit costs to the Federal Emergency Management Agency for potential reimbursement associated with the snow storms,” said Carol Kissal, Metro’s Chief Financial Officer. “We are aggressively pursuing recovery of the $8 million in snow removal costs and the $9.7 million in lost revenue” through federal disaster aid, she said. Metro will also pursue recovering other administrative costs, including equipment and damage to Metro property.
It's puzzling at first that Metro wants to be compensated for the revenue from the lost ridership during the recent snow storm, as it didn't have to run as many buses and trains. As with many things in economics, it's important to determine whether most of Metro's costs are fixed or variable.

When fewer lines were in service, Metro saved money on gas, electricity, and maintenance, among other things. However, as a government agency, it almost certainly still paid all of its employees, even those who were excused from work. It still had to pay for rent on its facilities and interest on its loans. It's possible that the majority of Metro's costs are fixed, and that running fewer trains isn't saving it much money.

Whether the District, Virginia, and Maryland should be footing this bill is another matter.

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