In 2018, the Virginia General Assembly imposed a 3% cap on growth on Virginia’s annual operating subsidy to WMATA as a part of its commitment to a dedicated source of capital funding.In any year where the annual increase in the approved WMATA budget exceeds 3% (apart from legislative exemptions), the legislation directs the Commonwealth Transportation Board (CTB) to withhold 35% of the funding allocated to NVTC as capital and operating assistance to help its local jurisdictions meet their financial obligations to WMATA from the Commonwealth Mass Transit Fund. In 2020, the Virginia General Assembly directed the formation of NVTC’s 3% Cap Working Group to examine the 3% cap and assess its usefulness and whether additional exemptions to the cap should be considered.

NVTC’s 3% Cap Working Group found that Virginia’s 3% cap appears to be a useful tool to manage the growth in Virginia’s operating subsidy. With only two years of WMATA budget development since the passage and implementation of the 3% cap, the Working Group recommends:

• No changes be made to the existing 3% cap legislation at this time;
• No additional exclusions should be considered;
• NVTC work with the Department of Rail and Public Transportation to clarify existing state policy guidance regarding the current legislative exclusions to the cap; and,
• NVTC continue to explore potential modifications to Virginia’s 3% cap legislation, with the scope and timing of such an effort to be determined by the Commission.

The Working Group, made up of representatives from NVTC jurisdictions, private sector stakeholders and the Director of the Department of Rail and Public Transportation, found that the cap provides some predictability in subsidy growth and does appear to provide fiscal controls that help WMATA with cost containment. The Working Group also determined it is too soon to recommend changes to Virginia’s 3% cap legislation since the cap has only been in place for two WMATA budget cycles.

The Working Group did not identify any new exemptions, also referred to as exclusions, to the cap. Instead, the Working Group recommends that NVTC work with DRPT to clarify existing Commonwealth Transportation Board (CTB) policy guidance regarding the current legislative exclusions to the cap. The Working Group also recommends that NVTC continue to explore the 3% cap, with the scope and timing of such an effort to be determined by the Commission.

To support the Working Group’s deliberations, NVTC staff solicited input on the impact of the cap from additional stakeholders in the region, including staff from the State of Maryland, the District of Columbia and WMATA.

NVTC staff also examined the historical jurisdictional operating subsidies to identify the actual drivers of Virginia’s operating subsidy increases. Accordingly, this report presents the historical operating subsidies and other factors that impact year to year fluctuations in the overall operating subsidy.