B-141529 Hon. ROMANO L. MAZZOLI, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Subcommittee on Fiscal Affairs of the Committee on the District of Columbia, House of Representatives. DEAR MR. CHAIRMAN: This is in response to your letter of December 2, 1975, presenting several questions concerning activities of the Washington Metropolitan Area Transit Authority (WMATA). As requested by your staff, we are responding to your request for our opinion on the legal nature of the metrorail capital contribution and operating subsidy agreements in advance of our reply to the other questions. Enclosed is a copy of the legal analysis our staff prepared regarding the agreements between the local governments and WMATA for financing the metrorail system. We trust that it may be of some assistance, notwithstanding that we perceive no clear or even reasonably reliable legal answer to whether localities would be bound to contribute funds in accordance with revised estimates or construction costs or whether capital contributions must be refunded if the system is not completed. Sincerely yours, PAUL G. DEMBLING, (For the Comptroller General of the United States). Enclosure. LEGAL ANALYSIS Question. Submit for the record an opinion from your legal staff on the binding or non-binding nature of the agreements local governments have entered to make capital contributions and payments for operating subsidies. Also include comments on any obligations for refunding capital contributions if the entire adopted regional system is not completed. Answer. The only formal agreement providing for payment by the various localities to the Washington Metropolitan Area Transit Authority (WMATA) for rapid rail transit is the Capital Contributions Agreement (CCA). It was signed by the City of Falls Church on March 29, 1969, and subsequently signed by the other Virginia jurisdictions, the District of Columbia, the Washington Suburban Transit District for Montgomery County and Prince George's County, and WMATA. A guaranty by the Maryland counties of the obligations of the Washington Suburban Transit District, which had no independent revenues, was attached. (The Transit District's outstanding capital obligations have been assumed by the State of Maryland. See, Md. Code Ann. art. 94A. § 11A (Supp. 1975).) At the time the CCA was signed, WMATA and the localities also entered into a Transit Service Agreement providing for metrorail operating subsidies to be paid in accordance with a prescribed formula. We understand that this agreement was intended to provide necessary support for WMATA to issue gross revenue bonds. The Virginia Supreme Court of Appeals in effect held the Service Agreement in violation of sections of the Virginia Constitution designed to control indebtedness. Board of Supervisors of Fairfax County v. Massey, 210 Va. 253, 169 S.E.2d 556 (1969). A revised agreement was held to be constitutional, and if it had been signed by all parties it presumably would have been legally binding. Board of Supervisors of Fairfax County v. Massey, 210 Va. 680, 173 S.E. 2d 869 (1970). However, at that time the Service Agreement was no longer thought to be important for bond issue purposes, and there was some concern that the allocation formula was unrealistic. (The governing bodies of each locality have adopted resolutions in various forms agreeing to operating subsidies and efforts in general to assure the viability of the financial plan in order for WMATA to obtain Federal bond guarantees.) On January 8, 1976, the WMATA Committee on Development of Metrorail Deficit Allocation Formula recommended an allocation formula for Phases I and II (17.6 miles in operation, primarily within the District of Columbia), which is presently under consideration by the localities. The CCA requires WMATA to construct and acquire the regional transit system substantially in accordance with the Adopted Regional System-1968 (Revised) as it may be amended. (Sec. 2.1) There is no obligation to construct facilities specified in an amendment until WMATA is sufficiently assured of the availability of adequate funds. Also, no amendment of the plan which will reduce facilities within or serving any local jurisdiction can be adopted without consent of the jurisdiction. (Sec. 2.1) By requiring consent of the local jurisdiction concerned, WMATA has limited the authority contained in the Washington Area Transit Authority Compact, Pub. L. No. 89-774, 80 Stat. 1324, allowing amendment of the mass transit plan by unanimous vote of the directors representing any two signatories. By its terms the CCA binds the localities to contribute allocated shares of the original esimated costs of construction and acquisition of the metrorail system in accordance with a periodic receipts schedule. In response to requests of WMATA, all localities except the City of Fairfax have accelerated payments under the schedules so that only a small portion of their obligations based on the original cost estimates remains. WMATA is required to recompute the necessary capital contributions baseċ on revised cost estimates and a specified allocation formula within 5 years of the start of construction (December 9, 1969) or July 1, 1974, whichever is later, and every two years thereafter. (Sec. 3.3(d)) The allocation formula involves four factors: estimated 1990 ridership, population, train miles and stations, and estimated construction costs Section 3.3 (h) provides in part as follows: In the case of the allocation of any excess *** to one or more Political Subdivisions, each such Political Subdivision hereby pledges to each other Poltical Subdivision and to the Authority its faithful cooperation and best efforts to obtain all authorizations required by law to provide the increase in its Capital Contributions resulting from such allocation. Representatives of the localities with whom we discussed the CCA contend that the "best effort" requirement of section 3.3(h) is essentially a political or practical requirement and not a legal one. For example, with the exception of Alexandria, the Virginia juridictions are required to obtain referendum approval for proposed bond issues. Some officials have maintained that one city or county council cannot legally bind subsequent council members to recommend a bond referendum, and thus there is some question whether the "best effort" provision legally requires passage of council resolutions authorizing bond referendums. (To the extent a bond issue referendum authorization is a "governmental" rather than a "business" function, this contention may be meritorious. See 56 Am. Jr. 2d, Municipal Corporations, Etc., $154 (1971). We are not aware of any consideration of this issue by Virginia courts.) It is also contended that state constitutional separation of powers provisions might prevent a court from ordering a bond referendum to be held. Assuming that a bond issue proposal is presented to the voters, passage may require a considerable effort in the current fiscally conservative atmosphere. Assessing whether a council made its "best efforts" in such a context would be exceedingly difficult. Also, since Virginia cities may not constitutionally exceed certain debt limits, Alexandria's city council may not be legally bound to approve additional bond issues even though no referendum would be required there. See Board of Supervisors, supra; Button v. Day, 139 S.E.2d 91, 205 Va. 629 (1964) Scofield Engineering Company v. City of Danville, 35 F. Supp. 668 (W.D.Va. 1940), aff'd, 126 F. 2d 942 (1942). Voter approval is not required for District of Columbia bond issues. However, Congress has ultimate authority over the District's bond issue authority, making the District's "best effort" commitment of little strictly legal effect. District of Columbia Self-Government and Governmenal Reorganizaion Act, Pub. L. No. 93-198, title VI, 87 Stat. 813. Another reservation cited by local representatives is WMATA's present breach of the CCA. The failure to recompute capital contributions as required by section 3.3 (d) is said to suspend the localities' obligations under the contract, including on the original estimates. Some localities feel that this breach could excuse their performance altogether, requiring a new contract. A similar argument is based on WMATA's failure to provide the financial plan required by section 17(a), title III, of the Washington Area Transit Authority Compact, Pub. L. No. 89-774, 80 Stat. 1324. Some localities believe that they are sufficiently unsure of WMATA's ability to complete the system that they could legally suspend payments until given reasonable assurances that WMATA's obligation will be met. Should the "best effort" provision require judicial construction, the court will be faced with a myriad of considerations and arguments requiring close scrutiny of the laws applicable to each jurisdiction. Any attempt abstractly to predict the outcome at present would be more speculation than legal analysis. Moreover, we believe that political and practical considerations, as well as the moral duty to deal fairly with the other localities by acting in accordance with promises made, may be more important to the binding nature of section 3.3 (h) than legal considerations. If a recomputation of necessary capital contributions establishes that a locality has paid more than its share, no adjustment of its commitment will be made, and the locality will not be required to pay in excess of its recomputed allocable share. (Sec. 3.3(f)). However, there are no provisions specifying that upon completion of the system excess contributions will be refunded to the locality concerned. (WMATA has recently proposed a revision of the CCA to require such refunds.) An overpayment would mean that another locality had not fully paid its share or that a surplus existed. In either case there would not appear to be significant problems in refunding the overpayment. The City of Fairfax has expressed considerable concern over the absence of an express requirement for overpayment refunds since by some projections it has already paid more than its share even under the latest $4.8 billion estimate. Before accelerating any of its payments, the City required WMATA to contract to repay the accelerated amounts with interest unless the recomputation required by December 9, 1974 was completed on or before June 30, 1975. WMATA failed to complete the recomputation and refunded the payments. A more serious problem would be presented should the regional system not be substantially completed as planned. No cutbacks can be made without approval of the jurisdiction to be affected by the cutback. We presume that a jurisdiction would be reluctant to approve a substantial cutback of services to its citizens without repayment of that portion of the jurisdiction's contribution allocable to the incompleted section. (A jurisdiction's response will of course depend on the reasons for amending the regional system plan.) Absent approval by the affected jurisdiction, WMATA could be held in breach of the contract and the locality could presumably claim its overpayment. The CCA was not drafted in contemplation of such an eventuality, and presents no answer. The only realistic source of funds for repayment might be the other parties to the agreement. However, any major reallocation based on a reduced system might be objected to on grounds that consideration for any locality's agreement was the other signatories' agreement to contribute capital for a system "substantially in accordance with the Adopted Regional System1968 (Revised)." This would appear to be a realistic contention in view of the disproportionately increased burden a reduced system could impose on some localities. The respective rights and liabilities of WMATA and the localities and possible judicial remedies for a reduced regional system will depend on the particular factual context of the litigation. As with the question of whether localities are legally bound to contribute funds in accordance with revised construction cost estimates, there is presently no clear or even reasonably reliable legal answer to whether capital contributions must be refunded if the system is not completed. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Washington, D.C., April 23, 1976. Mr. T. MICHAEL NEVENS, DEAR MR. NEVENS: Enclosed is response to question 11 of your November 18, 1975 request. This will complete all questions that you have requested. Sincerely, ECKHARD BENNEWITZ, I QUESTION 11: PROVIDE A DESCRIPTION OF THE FY 1775 RAIL CONSTRUCTION PROGRAM GOALS AND YOUR PROGRESS AGAINST THESE The Fiscal Year 1975 Rail Capital Program of the Authority as originally submitted in its funding request in Fiscal 1973 was based on the design and con struction schedule developed in November 1972 shortly after approval of the revised estimate of system cost which had been developed in November 1970. The goals of that design and construction schedule called for extension of design activities from Metro Center Station in the District of Columbia as follows: 1. Along the "A" route to the Rockville Station in Montgomery County, Md. 2. Along the "B" route to the yard at Glenmont in Montgomery County. 3. Along the entire length of the "C" route to Huntington, Va. 4. Along the entire length of the "D" route to New Carrollton in Prince George's County. 5. Along the "E" route to the station in Greenbelt, Md. 6. Along the entire length of the Branch route (F), Addison route (G), Vienna route (K), and L'Enfant Plaza/Pentagon route (L). 7. Along the Springfield route to the junction with the Franconia route. Construction was scheduled to extend from Metro Center in the District as follows: 1. Along the Rockville route (A) to the station in Rockville. 2. Along the Glenmont route (B) to the Silver Spring Station. 3. Along the Huntington route (C) to Huntington, Va. 4. Along the "D" route to New Carrollton. 5. Along the "E" route to just past the Georgia Avenue Station. 6. Along the "F" route (Branch) to just beyond the Anacostia River. 7. Along the "G" route to the Addison Station. 8. Along the entire length of the "K" route (Vienna). 9. Along the entire length of the "L" route (L'Enfant Plaza/Pentagon). Even as the scheduled program was being proposed in 1973 and during the interim period between then and Fiscal Year 1975, factors and events were taking place that made this program virtually impossible to achieve. A court decision which enabled the requirement for environmental impact studies and accompanying public hearings seriously delayed the award of contracts on project units not yet under construction (“E”-Greenbelt route). Changes in alignment, problems in approving alignment, and delays in decisions affecting the design and construction of project units seriously impacted the progress on many routes such as the Vienna (K), Greenbelt (E), Glenmont (B), Addison (G), and Branch (F) routes. Other delays caused by strikes and floods impeded progress yet more. And while this was going on, the hungry jaws of inflation and cost escalation were ravaging the funds appropriated for this period so that even if the delay factors had not been present, not all of the contracts programmed for this period could have been let. Accordingly, by the end of Fiscal Year 1975, the following extensions of final design effort had been achieved: 1. "A"-Rockville route-to the Grosvenor Station in Montgomery County. 2. "B" Glenmont route to the Silver Spring Station in Montgomery County. 3. "C"--Huntington route-the entire length of the route to Huntington, Va. 4. "D"-New Carrollton route-the entire route to New Carrollton Station. 5. "E"-Greenbelt route-to a point just before the Columbia Heights Station. 6. "F"--Branch route-to just beyond the Navy Yard Station to the Anacostia River. 7. "G"-Addison route-to the end of the line at Addison Road. 8. "J"-Springfield route--to just beyond the Storage and Inspection Yard. 9. "K"-Vienna-to the end of the entire route of Vienna. 10. "L"-L'Enfant Plaza/Pentagon Line the entire length of the route. However, construction progress seriously lagged and by the end of Fiscal Year 1975, construction activities had been extended as follows: 1. "A"-Rockvill gomery County. te just before the Bethesda Station in Mont 2. "B"-Glenmont route-to just beyond the Silver Spring Station in Montgomery County. 3. "C"-Huntington route-to just beyond the National Airport. 4. "D"-New Carrollton route-to the end of the line at New Carrollton. 5. "F"-Branch route-to the Waterfront Station. 6. "K"-Vienna route-to just beyond the Glebe Road Station. 7. "L"-L'Enfant Plaza/Pentagon route from the junction with the "C" route at the Pentagon to a portal structure adjacent to the freeway ramp in Potomac Park. The scheduled construction program called for about two-thirds of the system to be under construction by the close of Fiscal Year 1975. Actually, only approximately 39 percent of total miles of line and 45 percent of the total number of stations were underway. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Washington, D.C., March 30, 1976. Mr. T. MICHAEL NEVENS, ECKHARD BENNEWITZ, Enclosure as stated. 1974 NET INCOME ANALYSIS Question 1. The volume of "technical papers" and the "computer data on one particular fare system" need to be forwarded. If the latter item is too voluminous, an appropriate summary would be acceptable. The computer data consist of at least 25 tabulations and require three 14inch storage boxes. No summary exists since the data are in themselves summaries of such things like volumes, made of access/egress volumes, etc. The appropriate (and the only) summary of this data is the supplied Final Report of which a draft copy has been supplied. The "volume" of technical reports is, in reality, eight separate, independnt papers dealing with different technical aspects of the study. At one time, a particular paper existed as a series of letters, agreements, sections of progress reports, and computer models. These have been assembled into individual reports-some of which remain to be completed. We intend to reproduce all of these reports, when completed, into one voluminous "volume" and reproduce copies for technical oriented personnel. In the interim, we will meet with you and your staff to answer any technical type questions. О |