For its new leader, Metro appears focused on shoring up its bottom line
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Version 0 of 1. Fixing the Washington area’s failure-prone subway system is more than just an engineering job. Revitalizing Metro to the satisfaction of its many critics, including hundreds of thousands of exasperated commuters and numerous government watchdogs, also demands a strong bookkeeper because the cash-strapped transit agency can’t be overhauled unless someone figures out how to pay for it. That appears to be Metro’s thinking as it negotiates a contract with a prospective general manager: Neal S. Cohen, a career corporate executive with no technical or administrative experience in public transportation. Instead, he has a long résumé as a private-sector chief financial officer, notably in the airline business in the early and mid-2000s, at the nadir of the industry’s struggle to remain viable. As members of Metro’s governing board apparently see it, the agency can’t fully improve its rail lines without first shoring up its bottom line. And the board’s choice for the job is Cohen, 55, even though his portfolio as general manager would not be limited to the agency’s fiscal issues, his professional comfort zone. Metro also is under intense scrutiny from federal safety officials because of an array of dangerous infrastructure and operational problems that have come to light involving subway electrical equipment, ventilation systems, computer software and other technical issues. And there are numerous problems with Metro’s rail-control center, where trains are monitored in real time. None of that falls within Cohen’s expertise. But Cohen knows budgets. In Metro’s overall $3 billion spending plan this fiscal year, $1.8 billion is for day-to-day operations. As usual, nearly half the money, $866 million, will come from Washington-area jurisdictions that are served by the transit system. After chronic disruptions in subway service, some of them calamitous, and revelations about infrastructure woes, the jurisdictions have balked at chipping in more money to help Metro pay its mounting bills, at least until the agency improves rail safety and reliability. That would be Cohen’s first major challenge. “You need someone who’s a good politician in being able to deal with all these different jurisdictions and all these interest groups,” said Paul Schonfeld, a civil engineer and transportation specialist at the University of Maryland. “Someone who’s relatively good at dealing with people, including many people who are hard to satisfy.” [Metro’s top choice for general manager was well paid in the private sector.] Metro’s largest in-house source of revenue — rail fares — provides no relief. Subway ridership, measured in passenger trips, is steadily declining, with last year’s total down 5 percent from 225 million in 2009. The agency blames the popularity of biking, car-sharing and telecommuting; federal job reductions; a lowered tax benefit for using public transit; and frustration with Metrorail’s balky service. “They can talk all they want about safety upgrades and 10-year capital plans, enhancing infrastructure, enhancing service, but they desperately need to put their financial house in order,” one Washington-area public official said Friday. “And in that respect, I’m afraid they still have a lot of very serious issues.” The official, speaking on the condition of anonymity because of the ongoing contract talks with Cohen, said, “I’m sure he knows what he’d be getting into, and I’m sure he knows it won’t be easy.” If the Metro board meets its self-imposed deadline and hires a chief executive in early November after a protracted search, the new boss would arrive just as the board begins debating a spending plan for the next fiscal year. And that difficult process of formulating a balanced budget will underscore the agency’s money woes, rooted in declining rail ridership, rising costs and past financial mismanagement. Coping with the revenue squeeze in the last budget cycle, the board instructed Metro’s financial staff to drastically reduce non-safety-related spending, and members are almost certain to do the same this year. Cutting costs is a Cohen speciality. In helping guide US Airways and then Northwest Airlines through bankruptcies, he acquired a reputation as a financial “cleanup artist” who wields “a big old machete,” as one former colleague put it. Metro’s additional, deeper financial problems present another challenge. A 2014 audit by the Federal Transit Administration found that Metro had been mismanaging federal grant money for years by violating procurement and spending rules and keeping shoddy, confusing records. The FTA ordered Metro to rectify numerous problems related to its handling of grant funds, a “corrective action” process that has been going on for months and is expected to continue into next year. In the meantime, the FTA has greatly restricted Metro’s access to grant money, creating a severe cash-flow crunch that has forced Metro into a cycle of short-term borrowing, repayments and more borrowing. One financial official outside the agency likened the situation to “someone living paycheck to paycheck.” To end that heavy reliance on short-term loans — and the interest payments that go with them — the next general manager will have to work to return Metro to the FTA’s good graces and persuade the federal agency to reopen the grant money spigot. [A long list of problems, financial and operation, afflicts Metro.] While Cohen’s expertise might benefit Metro as its tries to regain its financial footing, some officials who closely monitor the agency, including on Capitol Hill, wonder whether a corporate executive with no transit-related technical or administrative background would be equipped to deal with Metro’s operational problems. A raft of subway safety problems have come to light since Jan. 12, when an electrical malfunction on tracks near the L’Enfant Plaza station filled a rail tunnel with smoke, engulfing a stalled train and sickening scores of riders, one of whom died of respiratory failure. The National Transportation Safety Board, which is investigating the incident, has issued several “urgent” bulletins about Metrorail safety shortcomings. The NTSB’s final report on the calamity, due to be issued early next year, could list even more safety problems for the next general manager to address. “My position has consistently been that we need somebody who has operational experience and management expertise,” said Rep. Gerald E. Connolly (D-Va.), one of the transit agency’s biggest supporters and strongest critics. “That marriage is what Metro needs. And I remain skeptical that a financial-turnaround artist fits that bill.” Saying that “we have to understand this is a public entity, not a private-sector company,” Connolly added: “We’ve had derailments, delays, near-accidents. It’s now almost a weekly occurrence that we have some serious incident on Metro. . . . The skill sets you need to turn around a giant corporation are all about enhancing shareholder value.” In addition to the expensive, safety-related infrastructure upgrades that the NTSB has called for, the FTA conducted a months-long review this year of Metro safety-management processes and issued a list of more than 90 “corrective actions” that Metro is required to complete. Those will all be on the next general manager’s plate. Referring to Cohen, Connolly said: “He may prove to be just what we need, and we have to give him that chance.” But considering his lack of transit experience and technical expertise, “the concern remains and I’m not alone,” Connolly said. “The Metro board is also going to have to address these concerns and do their best to allay them.” Cohen most recently worked in the aerospace industry, as chief financial officer of a company that manufactures major components for satellites and rockets. After the company merged with another this year, Cohen departed. In his next job, if he signs on with Metro, he’ll have plenty of scrutiny and help. Because of its persistent operational problems, Metro recently became the only urban subway system in the country to be placed under the FTA’s direct safety oversight. Meanwhile, the Metro board has hired two major consulting firms — McKinsey & Co. and Ernst & Young — to assist in overhauling the transit agency. A third consultant, to be hired soon, will join in the effort. “He probably should be a good learner,” Schonfeld said, referring to a Metro general manager from a business background. “He should be able to try to learn some of the technical things he doesn’t already know and be able to communicate intelligently with specialists or with experts who do know those areas.” Schonfeld added: “Look at who is usually leading various government organizations, or various companies. They may be lawyers, they may be accountants, they may be non-technical people. But hopefully they, or at least their immediate advisers, can also communicate with the many other technical persons they need to deal with.” |