Federal Share of WMATA's Bond Interest Costs Is Too Large

The National Capital Transportation Act of 1972 provided that the Federal Government, through the Secretary of Transportation, would guarantee the payment of the principal on Washington Metropolitan Area Transit Authority's (WMATA) bonds and reimburse WMATA for part of the bond's interest and related costs. Between 1972 and 1975, WMATA sold $997 million of 40-year revenue bonds and had earned $134 million on the invested proceeds as of June 30, 1978. For fiscal years 1977 through 1979, the total Federal contribution for WMATA's bond interest will be about $140 million. Starting in fiscal year 1980, the interest-set-aside funds will be used up, and the Federal share of matching payments will be 85 percent. WMATA projects that the Federal contribution to the bond interest payments will increase to $65 million annually and then gradually reduce until the bonds are paid off in the year 2015. Starting with the first interest payment due, the income earned from bond proceeds should have been applied to the interest due to derive the amount of net interest which the Federal Government would contribute. Although WMATA has already spent about $38 million of the income earned from bond proceeds, the $96.1 million of unspent income earned from the bond proceeds should be used to pay the interest when due. This would save the Federal Government about $81.7 million. The Secretary of Transportation should make sure that the amount of unspent income earned on the bond proceeds has been appropriately applied in determining the Federal Government's contribution to the interest payable on WMATA bonds.