Budget and Finance Subcommittee

Transcription

1 MEETING OF THE Budget and Finance Subcommittee MEETING DATE May 14, 2015 TIME LOCATION 12:00 p.m. Valley Metro 101 N. 1st Ave., 10th Floor Lake Mead Conference Room Phoenix, AZ VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

2 May 11, 2015 Budget and Finance Subcommittee Agenda Thursday, May 14, th Floor, Lake Mead Conference Room 101 N. 1st Avenue, 10th Floor 12:00 p.m. For those participating by telephone, please mute your phone when not speaking. Action Recommended 1. Public Comment For information An opportunity for general public comment on issues related to Valley Metro. Up to three (3) minutes will be provided for each speaker. 2. Minutes For action Minutes from the April 2, 2015 BFS meeting are presented for approval. 3. FY 2016 Operating and Capital Budget and Five Year Operating Forecast and Capital Program FY For action John McCormack will seek the BFS to recommend approval of the FY16 Budget and Five Year Operating Forecast and Capital Program (FY16 thru FY20). 4. Transit Life Cycle Program For information Paul Hodgins will present the draft 2015 TLCP update for information. This item will cover both the bus and rail programs within the TLCP. VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

3 5. Future BFS Agenda Items For information Chair Sherwood will request future BFS agenda items from members. October 2015 Policy review of operating and capital fund balance reserve minimums Review of health plan costs and employee / employer share FY15 year end review FY16 first quarter reports 6. Next Meeting For information The next meeting of the BFS is tentatively scheduled for Thursday, October 15, 2015 at 12:00 p.m. Qualified sign language interpreters are available with 72 hours notice. Materials in alternative formats (large print, audiocassette, or computer diskette) are available upon request. For further information, please call Rosalia Castro, Valley Metro at or TTY at To attend this meeting via teleconference, contact the receptionist at for the dialin-information. The supporting information for this agenda can be found on our web site at 2

4 DATE AGENDA ITEM 1 May 11, 2015 SUBJECT Public Comment PURPOSE For information BACKGROUND/DISCUSSION/CONSIDERATION An opportunity for general public comment on issues related to Valley Metro. Up to three (3) minutes will be provided to each speaker. COST AND BUDGET None COMMITTEE PROCESS None RECOMMENDATION For information only CONTACT John P. McCormack Chief Financial Officer jmccormack@valleymetro.org ATTACHMENTS None VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

5 DATE AGENDA ITEM 2 May 11, 2015 Summary Minutes of the Budget and Finance Subcommittee April 2, 2015 Lake Mead Conference Room Phoenix, AZ 12:00 p.m. Meeting Participants Councilmember, Gary Sherwood, City of Glendale Councilmember, Jenn Daniels, Town of Gilbert (via phone) Councilmember, Suzanne Klapp, City of Scottsdale (via phone) Councilmember, Thelda Williams, City of Phoenix Councilmember Sherwood called the meeting to order at 12:04 p.m. 1. Public Comment None 2. Summary Minutes IT WAS MOTIONED BY COUNCILMEMBER SHERWOOD, MOVED BY COUNCILMEMBER WILLIAMS, SECONDED BY COUNCILMEMBER DANIELS AND UNANIMOUSLY CARRIED TO APPROVE THE MARCH 5, 2015 BUDGET AND FINANCE SUBCOMMITTEE (BFS) SUMMARY MEETING MINUTES. VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

6 3. FY 2016 Preliminary Operating and Capital Budget and Five Year Valley Metro RPTA Preliminary FY16 Budget Overview Budget and Finance Subcommittee April 2, Councilmember Sherwood introduced John McCormack to review the RPTA Preliminary FY16 Budget Overview. Budget Schedule FY16 Jan 14 - Board approves Agency goals Feb 19 - Board approves service changes effective April 2015 Feb 20 - Prelim FY16 Budget delivered to Fin. Working Group Feb 27 - Executive Summary / 5 year Plan posted to website Mar day review period.member City Comments Mar 25 - Draft Budget delivered to TMC/RMC/BFS Apr 1 - Budget presented for information to TMC/RMC Apr 2 - Budget presented for information to BFS Apr 16 - Budget presented to Board of Directors for information May 21 - Board Meeting Budget Adoption 2 Mr. McCormack reviewed the budget schedule. It is developed with the cooperation of member city staff who provide regular inputs through the service planning and financial working groups as well as the RTAG. Valley Metro wishes to thank the city staff for their efforts to continuously improve the budget process. 2

7 FY16 Revenues $284.7M FY16 FY15 Valley Metro RPTA Sources of Funds FY16 vs FY15 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 Public Transportation Funds Transit Service Agreements Federal Grants METRO Rail Reimbursement Fixed Route Fare Revenues AZ Lottery Proceeds Regional Area Road Funds Other Revenues Carry forwards and Reserves 3 The primary sources of funding are shown with FY16 in purple and FY15 in green. Public Transportation Funds (PTF) sales tax receipts and PTF carry forwards represent 60% of the agency funding for the year. Transit Service agreements and federal grants represent 11% and 12% of the revenue respectively. Valley Metro Rail reimbursements for staff costs, fare revenues, and AZ Lottery funds. They total 15% of the overall revenues. 3

8 FY16 Revenues $284.7M Funding Sources FY16 FY15 Change $ Public Transportation Funds $133.9 $127.7 $6.2 Transit Service Agreements Federal Grants METRO Rail Reimbursement Fixed Route Fare Revenues AZ Lottery Proceeds Regional Area Road Funds Other Revenues Bond Proceeds Carry forwards and Reserves Total $284.7 $ $ This slide is a comparison of FY16 and FY15 funding sources. Public Transportation Fund sales tax receipts total $134 million, and are forecasted to grow by 5% over FY15. Transit Service Agreements are up 3%. This growth represents contractual rate increases and some growth forecasted in paratransit demand trips. Federal Grants are down $4.7 million as a result of reductions to CMAQ federal capital funding due to restructuring of the Scottsdale/Rural Road Corridor. Valley Metro Rail contributions for staff are higher in FY16 primarily due to new positions supporting an additional 3.1 miles of service (Central Mesa Extension) beginning in October Carryforwards and reserves, down $44 million, the largest single change. This is due to decreased amount of bond fund balance spending needed in FY16 versus FY15 for light rail transit capital construction for Northwest and Central Mesa Extensions. Questions and Answers Councilmember Williams asked where the Public Transportation Fund comes from. Mr. McCormack said the Public Transportation Fund comes from the Maricopa County Excise Tax. It is the transit component of the tax. Councilmember Pizzillo had asked at the last meeting what, if any, retail sales are excluded from that tax. We are working with the state treasurer to identify those items. Mr. McCormack said we will send out the table of ADOT forecasts and revenues to the subcommittee. 4

9 Councilmember Klapp asked what sources are used for the forecast. Mr. McCormack said a team of economists get together and analyze different aspects of economic factors. Each member rates those categories compiling averages. Mr. McCormack offered to provide a copy of their report. Councilmember Klapp declined. 5

10 FY16 Expenditures $284.7M FY 16 FY 15 Valley Metro RtTA Uses of Funds FY16 vs FY15 + tassenger Services Fixed Route.us Operations taratransit Operations Lead Agency Disbursements Regional Vanpool Service + Regional Transit Services Marketing and Outreach Call Center ADA Compliance Rideshare and Trip Reduction Service and Capital tlanning + Capital Activities.us Equipment taratransit Lead Agency Capital Vanpool Fleet Facilities and equipment + Fiscal & Administrative Services Valley Metro Rail Staffing Light Rail Lead Agency Capital Arizona Lottery Fund Disbursements Debt Service Valley Metro Administration (Millions) Comparative FY16 and FY15 expenditures are shown by major category (FY16 in purple and FY15 in green). Passenger Services include: fixed route bus, paratransit operations, and lead agency disbursements for ADA services and van pool. These represent about 40% of the overall budget. Regional Transit services include: marketing and outreach, call center, mobility center / ADA compliance, and service planning. These collectively total 5% of the overall budget. Capital Activities include: bus, vanpool, bus facilities and equipment. These expenditures comprise 13% of the overall budget. Rail Capital Lead Agency disbursements are 23% of the FY16 forecasted annual expenditures. Annual Debt Service is $24 million or 9% of the total expenditures. 6

11 Questions and Answers Councilmember Sherwood asked if over the course of the light rail program, the capital number would be fairly consistent over the years. What causes that fluctuation? Mr. McCormack said the timing of the construction. On a three-mile project there are a couple years of design and right-of-way when costs increase, and a couple of years of heavy construction. The billings peak out over a two year period. Councilmember Sherwood asked if we are talking about guide wires and rails. Mr. McCormack said it s the entire construction. Ms. McLaren said utilities and asphalt. Councilmember Sherwood said the cars are a big expense. Mr. McCormack said it is the timing of the actual heavy construction. You have to acquire the land, move utilities, and start guideway construction including street rebuilds. Councilmember Sherwood asked if we will get to the point of having several projects going. Mr. McCormack said the agency needs to be ready to ramp up using contractors to build lines as efficiently and as soon as we can. Our goal is to minimize the time the contractors are in the field. Councilmember Williams asked if there is enough equipment (trains) for lines to open. Mr. McCormack said yes, we do an annual fleet management plan that both Valley Metro and the federal government scrutinize to ensure adequate vehicle resources to run the system. 7

12 FY16 Expenditures $284.7M Uses of Funds FY16 FY15 Change $ Lead agency disbursements $67.7 $77.0 -$9.3 Transit service contracts & fuel Capital RPTA & METRO Personnel Costs Bond Principal & Interest Contractual Agreements AZ Lottery Disbursements Lead Agency Bond Disbursements Other Costs Carry forwards to Reserves Total $284.7 $ $ Total expenses are $285 million, a decrease of $40 million from last year. There is a decrease in Public Transit Fund lead agency disbursements due to major decrease in construction activity for light rail projects, offset by increases in ADA disbursements, and lead agency disbursements for regional bus fleet. Transit Service Contracts and Fuel are increasing 5%. Fixed Route has contractual increases. Paratransit has service levels increase by 10%, plus contractual increases. Capital Outlay is down $4.6 million, due to reductions in land acquisition and improvements of $14.0 million related to the Scottsdale/Rural Road Link project. This is offset by increases in regional fleet and equipment purchases of $9.4 million. Personnel Costs are at $26.4 million for the year. Lead agency bond disbursements are down to $25 million versus $56 million last year as the rail construction project expenditure levels peaked in FY15. 8

13 Baseline: Fixed Route Bus FY15 FY16 Change tassenger Boardings 17,552,346 17,727,822 1% Vehicle Revenue miles delivered 11,780,473 11,876,349 1% Number of Routes operated Number of Fleet (VOaS) Boardings per Revenue aile % Operating cost per passenger $4.04 $4.08 1% Operating Costs $70,829,656 $72,383,518 2% Fare Revenues $13,666,247 $14,408,604 5% Fare Recovery 19.3% 19.9% 7 Mr. McCormack reviewed the baseline information for fixed route bus. Fixed Route Bus Fuel Cost FY16 East Valley (Tempe Facility) Tempe Facility Fuel Mileage Gallons Cost/Gal. Total LNG to CNG* 7,412,151 1,906,410 $ 1.58 $ 3,014,034 Diesel 821, ,188 $ 2.50 $ 677,970 LNG* 466, ,498 $ 0.93 $ 341,773 Unleaded 174,175 76,853 $ 2.10 $ 161,391 Subtotal 8,874,297 2,621,949 $ 4,195,168 Contingency $ 315,376 Total $ 4,510,544 *LNG is converted to CNG in Tempe. Budget combines both as LNG. 8 Contingency amounts are based on future fuel forecasts; approximately 8% of the fuel budget is for Mesa and Tempe facilities. The gas pricing is higher in Tempe than in Mesa. In Tempe, we buy liquid natural gas that has to be converted. In Mesa, we are able to connect directly to their pipeline. We are experiencing savings in Tempe, due to the reduction of deadhead miles even though we have to convert the gas. 9

14 Paratransit Demand Service FY15 FY16 Change tassenger Boardings 476, ,844 10% Trips delivered 435, ,358 10% Operating cost per Trip $28.13 $ % Operating Costs (Dross troject Costs) $12,244,122 $13,949,699 14% Fare Revenues $1,540,711 $1,749,604 14% Fare Recovery 12.6% 12.5% 0% 9 Vanpool Program FY15 FY16 Change Passenger Boardings 1,166,424 1,239,326 6% Vehicle Revenue miles delivered 6,104,716 6,486,261 6% Number of Vanpools operated % Number of Fleet % Boardings per Revenue aile % Operating cost per passenger $0.87 $0.84-3% Operating Costs * $1,012,104 $1,045,350 3% Fare Revenues $1,045,388 $1,087,164 4% Fare Recovery 103% 104% 1% * Fuel costs are paid by passengers directly and not a part of operating costs shown 10 Mr. McCormack reviewed paratransit demand service data and the vanpool program. 10

15 Regional Services 11 Regional Marketing FY16 Initiative: Website Development 12 Mr. McCormack reviewed regional services and regional marketing initiatives. 11

16 FY16 Personnel Costs Personnel costs represent 9% of the overall FY16 Agency Budget 13 Mr. McCormack reviewed the personnel costs for FY16. Combined agency salary and fringe increase $1.5 million. Base salary and fringe increase $0.8 million, 3% increase over FY15 base Salary and fringe for new positions total $700 thousand 12

17 FY16 Personnel Costs Compensation change assumptions Salary merit increases based on performance 3% over FY15 base, with departmental control Fringe Benefits held to 3% increase over FY15 base Health Care plan design to hold costs within budget ASRS small decrease in rates 11.47% vs % Salary Ranges adjusted upward by 2% Ranges last adjusted in July 2007 Based on compensation study 15 peer employers Benchmarked more than 50 comparable positions 14 Questions and Answers Councilmember Williams asked what the employee employer share is. Mr. McCormack said the approximate employer / employee share is 80/20 for families and 90/10 for individual coverage. Mr. McCormack will report back the actual information to the subcommittee. Councilmember Williams asked who the peer employers were for the salary range study. Mr. McCormack said 4 5 member cities and other transit agencies. Councilmember Williams asked what the economic impact and recovery rate of the other transit agencies. Mr. McCormack said he will provide a list of peers. Councilmember Daniels asked how many miles are being served with the additional positions and the quantity of the increase. Are we providing more service with added personnel and added personnel costs versus miles served? Mr. McCormack said we will review the positions in an upcoming slide. Councilmember Sherwood asked if we get a healthcare contract each year or every three years. Mr. McCormack will report the answer to the subcommittee. Councilmember Sherwood suggested reducing amount of coverage employer pays each year over the course of the healthcare contract instead of all at once. 13

18 FY16 Personnel Costs Sixteen new agency positions: IT network systems and security (2 FTE) increased operations maintenance activities related to six new miles of Rail Operations service (14 FTE) 15 There are 16 positions total: 2 Admin (IT) IT Strategic Plan called for additional resources - network systems and security 14 for Operations for additional 6 miles (20 >26miles) o 9 Operations and Maintenance CME commencing October 2015 o 5 Operations and Maintenance NWX commencing July 2016 Light rail vehicle has increasing preventative maintenance in the following areas: Overhaul friction brakes Overhaul pantograph Additional six miles means more miles, increased regular preventative and corrective maintenance Maintenance of way will have expenses in the following areas: Increasing preventative maintenance for traction power catenary systems Power switch overhauls AC unit replacements communication cabinets Security camera replacements Additional six miles, more track, TVMs, switches, power substations More travel time for corrective maintenance 14

19 Valley Metro RPTA FIVE YEAR PLAN OVERVIEW FY 2016 THROUGH FY Revenue Forecast - PTF 17 The PTF revenue forecast is based on the ADOT forecast. It is anticipated to grow 4.5% over the next five years. Questions and Answers Councilmember Williams asked what this is based on, i.e., population growth. Mr. McCormack said this is sales tax revenue, based on ADOT forecast which considers population growth, levels of construction and other economic factors. 15

20 Five Year Operating Assumptions The Public Transportation Fund grows by approximately 4.5% annually Fares grow by 2% annually; with a fare increase assumed in FY17 Paratransit ridership drives an 8.6% increase in number of trips delivered Operating Contracts three percent (3%) general Fixed Route bus contract rates will rise Evaluating impacts of labor agreements Years FY17 and beyond will be updated Planning, Administration, and Regional Services costs annual inflated two percent (2%) 18 Forecast - Fixed Route Service and Funding Changes FY16 FY17 FY18 FY19 FY20 Enhance service on Route 72, Scottsdale/Rural Road Adjust service on the Main Street and Arizona LINKs due to the LRT extension No service changes Begin Route 104 Saturday service in Chandler Begin PTF funding of Route 50 in Scottsdale Begin PTF funding of the Avondale portion of Routes 562 and 563 vice Planning Working Group to bring proposed changes through ard Approval Process with Short Range Transit Plan 19 Mr. McCormack reviewed the operating assumptions and the forecast for fixed route service and funding changes. 16

21 Operations expenditures for the five year period are impacted by service contract increases and paratransit demand ridership. Due to the aging population, paratransit ridership is forecasted to grow significantly. Five Year Operating Forecast - Revenues (thousands) 5-Year Total Revenues Public Transportation Fund (ADOT) $ 733,932 PTF Bond Proceeds 61,257 Less: Debt Service Bus & Rail (149,124) Less: Rail Capital Funding (current) (253,861) Net PTF for Operations $ 392,204 Other Regional Funds $ 25,749 Federal Funds 41,119 Transit service reimbursements 165,486 Fare Revenues 96,527 Interest and other revenue 160 Total revenues $ 721, A $19.4 million operating surplus is projected, which will be used to fund bus capital purchases. 17

22 Bus Fleet Purchases by Member Fity Five Year Plan FY16-FY FY16 FY17 FY18 FY19 FY20 Glendale thoenix RtTA Scottsdale Tempe 22 A total of 483 bus units are planned. 465 for replacement, 18 expansion units $43 million local share is funded by PTF 18

23 Vanpool Purchases by Type Five Year Plan FY16-FY FY16 FY17 FY18 FY19 FY20 Replacement Expansion 23 A total of 448 purchases over the five years. These vans are purchased with federal funds. There are 323 for replacement and 125 for expansion. 19

24 Facilities and Equipment Five Year Plan FY16-FY20 $9.0 $ millions $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 FY16 Facilities and Equipment: Scottsdale/ Rural Road bus stop improvements and traffic signal priority teoria Transit Center & tnr 59th Avenue and Laveen tnr North Glendale tnr 51 Bus AtC installations Regional Communications Upgrade Fare Collection System Development State of Good Repair 34 Bus engine rebubilds/ 5 transmissions $2.0 $1.0 $0.0 FY16 FY17 FY18 FY19 FY20 Facilities Equipment 24 The expenditures are noted on the right-hand side of the bar chart. Questions and Answers Councilmember Sherwood asked when we will have the entire bus fleet equipped with automatic passenger counters. Mr. McCormack said he will get that information for the subcommittee at our next meeting. 20

25 Five Year Capital Program- Revenues 25 Mr. McCormack reviewed the capital program revenues. Questions and Answers Councilmember Sherwood asked at what percent do we keep the fund balance. Mr. McCormack would like to revisit the reserve policy which currently requires 12% of our annual operating revenue must be in reserve. Mr. McCormack would like to discuss and bring back recommendation to the BFS what the appropriate reserve amount for operating and bus capital and also to explore the need for a reserve for the rail capital piece. Five Year Capital Program- Expenditures 26 Mr. McCormack outlined the major expenses over the next five years. 21

26 Fund Balance Projection 27 The bus program is in green and the rail program is in purple. The data points are the year-end balances of funds. The red line is the minimum policy level (12%). Questions and Answers Councilmember Sherwood asked where the $19.5 million fund balance shows up in the revenues. Mr. McCormack said we are using $19.5 million of fund balance in the five year period. 22

27 Fund Balance Projection 28 The final slide shows more definition to the fund balance minimum. The yellow is the bus operating fund balance and the bus capital fund balance is shown in green. In FY20 we have approximately $23 million of fund balance versus our minimum fund balance of $15 million. Questions and Answers Councilmember Williams asked how long a bus and a rail car last. Mr. McCormack said buses last 12 years and rail cars last years. Councilmember Williams asked if we have had IT security threats. Mr. McCormack said we have had a threat; however, no damage was done. A large part of our IT budget is to protect our systems. Councilmember Williams asked if the Phoenix Card would be compatible for transit. Would it take new equipment? Mr. McCormack said if the chip in the card is compatible with our Scheidt Bachmann system it can be done. 23

28 4. FY15 Third Quarter Report Finance Division FY15 Q3 Report Valley Metro Budget and Finance Subcommittee April 2, 2015 Questions and Answers Councilmember Sherwood asked how we are able to have the third quarter report on April 2. Mr. McCormack said we make our best estimate of costs incurred based upon the current trend of expenses. 24

29 Valley Metro RPTA Operating Results Q3 RtTA Budget vs. Actual Report For the quarter ending aarch 31, rd Quarter $ aillions Year to Date Operations Expenditures Budget Actual Variance (Unfav.) Budget Actual Fixed Route Bus taratransit Vanpool Regional Services tlanning Administration aetro Rail (Salary, Fringe, OH) Total Operations Expenditures Variance (Unfav.) Agency FTE's Budget vs. Actual For the quarter ending aarch 31, rd Quarter Valley aetro Integrated Budget Actual Variance (Unfav.) Staff (Full Time Equivalents) Operations results for the third quarter are shown on the left side of the table, with the year to date (first 9 months) on the right side. Operations expenditures totaled $32.5 million, $3.2 million favorable versus the $35.7million budget Full time equivalents as of March are 264 versus the budgeted 296 full time equivalents. There are 32 open positions. 25

30 Open Positions Status Valley aetro Integrated Agency FY 2015 Adopted tositions - Status Update Division FY15 - Q2 December Open FY15 - Q3 aarch Open Operations and aaintenance Administrative & Organizational Development 3 4 tlanning & Development 3 3 Safety & Security 2 2 Communication & aarketing 0 0 Design & Construction 0 1 Finance 0 1 Total Open tositions % 11% Total Authorized tositions Here is a snapshot of the open positions by Division As of March 31, there are 32 open positions. The majority of open positions are in Operations and Maintenance, where we have 21 open of 32 total positions. We have a number of entry level positions that experience routine turnover. 26

31 Valley Metro RPTA Capital Results Q3 RtTA Budget vs. Actual Report Cor the quarter ending aarch 31, rd Quarter Capital Expenditures Budget Actual Year to Date Variance (Unfav.) Budget Actual $ aillions Variance (Unfav.) Bus turchases Valley aetro Lead Agency taratransit Vehicles Lead Agency Vanpool Vehicles Other Capital aetro Rail Total Capital Expenditures Capital Expenditures for the quarter were $22.5 million versus $28.4 million budget. 5. Future BFS Agenda Items Councilmember Sherwood called for any future agenda items. There were none. Mr. McCormack provided a handout of which cities operate circulators that do not collect fares. The handout will be ed to all subcommittee members. 6. Next Meeting The next meeting is scheduled for Thursday, May 14, 2015 at 12:00 p.m. COUNCILMEMBER SHERWOOD ADJOURNED THE MEETING. The meeting concluded at 1:40 p.m. 27

32 DATE AGENDA ITEM 3 May 11, 2015 SUBJECT Valley Metro Fiscal Year 2016 (FY16) Operating and Capital Budget and Five-Year Operating Forecast and Capital Program (FY16 thru FY20) PURPOSE To request Board approval of the FY16 Budget and Five-Year Operating Forecast Capital Program (FY16 thru FY20). Approval of the budget provides funding for Boardapproved TLCP projects and allows RPTA to implement capital and operating projects approved by voters in Proposition 400. Arizona State statutes require annual Board adoption of the budget. BACKGROUND/DISCUSSION/CONSIDERATION The Valley Metro Regional Public Transportation Authority (RPTA) FY16 combined operating and capital budget (the budget) is $286.9 million (M) and includes $133.9M in projects funded with Proposition 400 Public Transportation Fund (PTF) revenues. Of the $133.9M PTF revenues, $76.0M is for bus operating and bus capital and $57.9M is for light rail/high capacity transit capital. The preliminary FY16 operating and capital budget has been prepared with the goal of delivering a fiscally prudent, balanced budget using carry forwards, reserves and bond proceeds. The budget was developed in compliance with Board of Directors adopted budget, financial and Transit Life Cycle Program (TLCP) policies. The annual budget is prepared on an accrual basis and adopted by the Board of Directors each fiscal year. The legal level of budgetary control is the total annual appropriated budget. With respect to Capital Budgets, project contingency accounting is used to control expenditures within available project funding limits. With respect to Operating Budgets, encumbrance accounting is not used and all appropriations lapse at the end of the year. Prior to final adoption, a proposed budget is presented to the Board of Directors for review and public comment is received. Final adoption of the budget must be on or before June 30 of each year. The total operating budget of $160.9M represents a $7.3M (4.8%) increase from the previous year s operating budget of $153.6M. The total capital budget of $126.0M represents a $45.1M (26.4%) decrease from the previous year s capital budget of $171.1M. The major factor causing the decrease in the capital budget is a reduced level of LRT construction. Details and explanations of the major budget changes are discussed in the attached Budget Analysis and Overview document. With the agency integration, the RPTA and Valley Metro Rail (VMR) budgets are developed with a unified staff plan, with department managers planning the level of effort required to meet the bus and rail activities. Salary and overhead charges to bus VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

33 and rail projects are based on actual time worked on each project. For FY16 there are 312 employees budgeted in the integrated agency, with 129 FTE s budgeted to RPTA activities and 183 budgeted to VMR activities. Compensation budget based on 3% increase. For staff salary changes, merit increases are evaluated based on employee performance; division level control to manage total costs within budget. Valley Metro completed a comprehensive survey of positions and pay grades with regional governmental agencies as well as transit peer cities located in the Western US. Pay grades are increasing by 2% in response to inflation trends which have occurred since last changes to agency-wide pay grades in July COMMITTEE PROCESS Preliminary Budget Review: Financial Working Group: February 24, 2015 for information RTAG: March 17, 2015 for information TMC: April 1, 2015 for information Budget and Finance Subcommittee: April 2, 2015 for information Board of Directors: April 16, 2015 for information Proposed Budget Adoption: TMC: May 6, 2015 for action: recommended approval Budget and Finance Subcommittee: May 14, 2015 for action Board of Directors: May 21, 2015 for action RECOMMENDATION It is recommended that the BFS forward to the Board of Directors approval of the Valley Metro Proposed Fiscal Year 2016 Budget (July 1, 2015 thru June 30, 2016) and acceptance of the Five-Year Operating Forecast Capital Program (FY 2016 thru 2020). CONTACT John P. McCormack Chief Financial Officer jmccormack@valleymetro.org ATTACHMENT Valley Metro Fiscal Year 2016 (FY16) Operating and Capital Budget and Five-Year Operating Forecast and Capital Program (FY16 thru FY20) Executive Summary Schedule of Changes from Preliminary FY16 Budget and Five Year Plan A full copy of the Valley Metro Rail, Inc. Fiscal Year 2016 (FY16) Operating and Capital Budget and Five-Year Operating Forecast and Capital Program (FY 2016 thru 2020) can be found on our website. Doc_Prelim_4_16_RPTA_v2.pdf 2

34 Executive Summary - Fiscal Year 2016 Valley Metro Preliminary Annual Operating and Capital Budget Valley Metro provides public transportation services for Maricopa County located in the Phoenix, Arizona metropolitan area. The FY16 Preliminary Budget covers the 12 month period ending June 30, Services include fixed-route bus, paratransit, dial-a-ride, vanpool, regional planning, marketing, customer service, alternative transportation, trip reduction, and fiscal management of Regional Public Transportation Funds. FY16 Sources of Funds Total Sources of Funds for FY16 are $286.9M, a decrease of $37.8M or 12% from FY15. For FY16, PTF sales tax revenues are increasing by $6.2M or 5% above last year. Federal Grant revenues are decreasing by $4.7M (12%) primarily a reduction of CMAQ capital funding due to restructuring of the Scottsdale/Rural Road corridor. For budget purposes, funding sources include bond proceeds in the year of issuance. Consumption of those bond funds and cash reserves are down in FY16 to $38.0M due to construction level decreases for light rail capital projects which are nearing completion.

35 FY16 Uses of Funds Total Uses of Funds for FY16 are $286.9M, a decrease of $37.8M or 12% from FY15. Lead Agency Disbursements are decreasing by $7.5M due to decrease in construction activity for light rail projects, offset by increases in ADA disbursement and lead agency disbursements for regional bus fleet. Transit service contracts and fuel are increasing by $4.9M or 6% primarily due to programmed contract rate increases for bus services and paratransit ridership demand increases. Capital Expenditures are down $4.6M primarily due to reductions in land acquisition and improvements of $14.0M related to Scottsdale/Rural Road LINK project offset by increases in regional fleet and equipment purchases of $9.4M. Lead Agency Bond disbursements are decreasing by $31.0M due to decreased LRT capital construction activity on the Northwest Extension in Phoenix and Central Mesa Extension. In FY16, Carry forwards to Reserves include $0.4M in capital reserve increases. 2

36 Valley Metro FY16 Budget Baseline Service Assumptions: Fixed Route Bus Services East and West Valley routes operated by Valley Metro will continue FY15 service levels; Fleet of 268 units to deliver 11.9 million vehicle revenue miles serving 17.7 million passenger trips in the coming year. Combination of local bus, regional express and circulators. Dial-a-Ride and Paratransit Services Vanpool Services East and West Valley demand response ADA and Non-ADA services operated by Valley Metro will continue to serve portions of Maricopa County and the cities of El Mirage, Peoria, Sun City, Surprise and Youngtown in the West Valley and Chandler, Gilbert, Mesa, Scottsdale and Tempe in the East Valley. For eligible ADA passengers, level of service is based on passenger reservation demand within service areas and hours of operation covered by fixed route bus routes. For Non-ADA passengers, service levels are set by member cities. Services are provided by taxi-cab; estimated at 477,000 annual passenger trips. Service levels are anticipated to increase over FY15 with 425 vehicles delivering 1.2 million passenger trips Regional Call Center and ADA Compliance Center Capital Procurement Customer Service levels anticipated to remain similar to FY15 for fixed route bus and rail. ADA Certification and travel training levels anticipated to increase to 4,850 with aging population and greater emphasis of moving passengers to fully utilize fixed route services to complement dial a ride services. 96 standard bus replacements (86 lead agency units Phoenix, 8 units Scottsdale, 2 units Glendale) 15 expansion buses for RPTA, 3 for Scottsdale 30 lead agency paratransit fleet units for Phoenix 106 Vanpool units (81 replacement and 25 expansion vehicles) $5.3M in Park & Rides, bus stop amenities, and facilities $1.4M in vehicle communication systems, signal priority for Scottsdale/Rural Roads 3

37 Valley Metro FY16 Initiatives: Improving Passenger Services Year 3 East Valley Bus Services Unification In FY14, Valley Metro combined Tempe and Mesa based fixed route operations resulting in greater efficiency Savings to Region enables stretching our sales tax revenues to provide more service Projection of Costs $ millions East Valley Fixed Route Bus Service FY13 FY14 FY15 FY16 Costs before Unification $67.3 $69.3 $71.4 $73.5 (assumes 3% per year inflation) Costs after Unification N/A $60.6 $65.8 $67.1 Estimated cost savings $8.7 $5.5 $6.4 12% 8% 9% Year 4 East Valley Dial-a-Ride In FY13, Valley Metro instituted a taxi-based Dial-a-Ride System Passengers receive direct route trips getting to destination faster Savings enables passengers to receive more trips versus traditional Dial-a-Ride East Valley Dial-a-Ride Service FY12 FY13 FY14 FY15 Fcst FY16 Fcst Trips Delivered 203, , , , ,000 Net Program Cost after Fares $M $ $ $ $ $ Net Cost per Trip $ $ $ $ $ Regional Services Marketing Initiatives Improve passenger information systems o Upgrade the Valley Metro website providing simpler navigation, greater accessibility and further integration of fare purchasing tools and use by mobile devices. o Begin implementation of an improved rider alerts system to notify customers of service delays on multiple platforms including the website, trip planner, text message and mobile devices. o Evolve the Transit Book to better integrate new technologies and reduce waste. o Continue the roll-out of the new Ridekick mobile application, which provides riders with trip planning services, interactive maps and the ability to bookmark their favorite routes. o Continue wayfinding program improvements by implementing new signage at regional park-and-rides. 4

38 Planning Initiatives Implement three advertising campaigns targeting public/driver safety, attracting new riders and communicating the value of transit. Origins and Destinations Study Every three to four years Valley Metro undertakes an Origins and Destinations (O&D) Survey and involves an on-board and intercept survey of light rail and bus passengers on the region-wide transit system. The output of the survey is used to calibrate the regional travel model maintained by MAG as well as providing valuable passenger information to the agency as it undertakes optimization of service and capital planning. The O&D Survey results will be published in FY16. Transit Standards and Performance Measures The development of Transit Service Standards and Performance Measures allows Valley Metro to work collaboratively with member agencies to refine regional service and capital facilities and fleet standards and relevant performance measures. These standards and performance measures will serve as the basis for Valley Metro s evolution to an improved performance-based transit network. Developing Regional Standards for Facilities and fleet will be the focal point in FY16. Overall Agency Administration Information Systems Improvements Agency Staff Overview Implementation of I.T. long range plan to ensure systems reliably meet growing data volume and security challenges. Continuation of network equipment life cycle updates and upgrades to achieve 24-7 operations with zero down time. Advancing staff development to meet rapid rate of technology change in both network and business applications. Continuing vigilance to meet PCI data security standards including active penetration testing and ongoing remediation for technology hardware, software and user interface. Valley Metro RPTA and VMR budgets are developed with a unified staff plan; with department managers planning the level of effort required to meet the bus and rail activities. For FY16, there are 312 employees budgeted in the integrated agency; with 129 FTE s budgeted to RPTA activities and 183 budgeted to VMR activities. Staffing levels are reviewed on an annual basis with zero-base analysis of level of effort requirements to fulfill work requirements in the five year period commencing with the beginning of the new fiscal year (July 1). Salary and Fringe Benefit compensation levels are measured against comparable regional agencies, member cities and peer transit agencies located in the Western USA. 5

39 Compensation and fringe benefit assumptions for FY 16 include: Total compensation budget based on 3% increase. For staff salary changes, merit increases are based on employee performance; division level control to manage total salary and fringe costs within budget. Agency health care costs will increase. Program design adjustments to hold total agency fringe benefit cost increases to within 3% of FY 15 levels. Staffing cost analysis FY 16 FY 15 change pct change $ million FTE % Salaries % Fringe Benefits % Total Salary and Fringe Benefits % Analysis of changes Salary Fringe Total Base Compensation FY Base increase New Positions New Base Compensation FY FY16 Preliminary Budget vs. FY15 Adopted Budget 1.4 Sixteen new agency positions are planned to address increased operations maintenance activities and IT network security administration. (See table below) Title Division Scope of Work Sr. Network Engineer Sr. IT - Systems Engineer LRV Maintenance Technician I (4) LRV Maintenance Technician II LRV Inspector (3) Sig/Comm Maintainer (2) Traction Power (2) Track Maintainer (2) Administration Administration Operations - Rail Operations - Rail Operations - Rail Operations - Rail Operations - Rail Operations - Rail IT-Positions required to support planned IT expansion and additional responsibilities Additonal positions to support the opening of six miles additional Rail Service The Central Mesa and Northwest Extensions commence operations in October 2015 and July 2016 respectively State of good repair schedule increases number of rebuilds of major components for Light Rail Vehicles and Systems Components 6

40 Overall Financial Summary FY16 Preliminary Budget In the table below detailed Revenues and Expenses are shown with comparisons to the prior year Adopted Budget and Revised Budget. Amounts of Increase or (Decrease) are shown from the Adopted Budget. The Note column on the far right side indicates reference to explanations which are provided on pages following the tables. Valley Metro Regional Public Transportation Authority FY16 Prelim Operating & Capital Budget Comparison to FY15 Adopted Budget (In thousands) FY16 FY15 FY15 Amount Percent*** Prelim Adopted Revised Increase/ Increase/ ** Budget Budget Budget Decrease (Decrease) Note Sources of funds Revenues: Public transportation funds (PTF) $ 133,866 $ 127,672 $ 125,539 $ 6,194 5% (1) Transit service agreements 30,181 29,358 29, % (2) Federal grants 33,644 38,377 13,954 (4,733) -12% (3) VMR staff & administration reimbursement 16,889 15,274 15,274 1,615 11% (4) Regional area road funds (RARF) 4,782 4,711 4, % Interest & other revenues 1, % (5) Local participation (23) -10% State & local grants (120) -21% Fixed Route Fare Revenues 16,265 16,139 16, % AZ Lottery Proceeds 11,250 11,475 11,475 (225) -2% Total revenues 248, , ,314 4,253 2% Bond proceeds % Carryforwards & reserves 37,986 79,993 73,681 (42,007) -53% (6) Total revenues & other sources of funds $ 286,888 $ 324,642 $ 291,995 $ (37,754) -12% Uses of funds by category Expenses: Lead agency PTF disbursements $ 69,532 $ 77,031 $ 70,088 $ (7,499) -10% (7) Transit service contracts 89,150 84,257 84,830 4,893 6% (8) Capital outlay 25,882 30,476 5,892 (4,594) -15% (9) Salary & fringe benefits 26,342 24,873 24,799 1,469 6% (10) Bond principal & interest expense 24,235 24,239 24,239 (4) 0% Consultants & Maintenance contracts 3,992 5,631 4,631 (1,639) -29% (11) Contingency 1,668 1,601 1, % Rent & facility costs 5,063 4,854 4, % Advertising (174) -25% Transit book, outreach mat. & online serv (56) -7% Insurance & risk management % Safety & security (19) -100% Lead agency RARF disbursements % Other administrative costs 2,432 2,088 2, % (12) AZ lottery Disbursements 11,200 11,200 11,200-0% Lead agency bond disbursement 25,000 56,016 55,598 (31,016) -55% (13) Total expenses 286, , ,883 (37,992) -12% Carryforwards & contributions to reserves % Total expenses & other uses of funds $ 286,888 $ 324,642 $ 291,995 $ (37,754) -12% Unprogrammed PTF bus revenues $ 0 $ - $ - $ 0 100% Uses of funds by Division Operating: Operations $ 122,556 $ 115,622 $ 116,195 $ 6,933 6% (14) Communications & Marketing 5,020 4,831 4, % Finance, Administration & Org. Dev. 1,312 1,366 1,366 (54) -4% Planning & Development 2,184 3,654 3,654 (1,470) -40% (15) Chief Executive Officer's Division 1,230 1,120 1, % Non-Departmental 28,589 26,974 26,974 1,615 6% (16) Total Operating Budget 160, , ,141 7, % Capital: Design & Construction % Valley Metro Rail 64, , ,788 (45,162) -41% (17) Bus and other transit 61,828 61,767 28, % Total Capital Budget 125, , ,854 (45,077) -26% Total Operating & Capital Budget $ 286,888 $ 324,642 $ 291,995 $ (37,754) -12% 7

41 Sources of Funds Note 1 Valley Metro Regional Public Transportation Authority (RPTA) FY16 Prelim Operating & Capital Budget Overview Explanation Public Transportation Funds from the Maricopa County Transportation Excise Tax are forecasted to grow by 5%. Forecast is provided by ADOT. Adequate reserves are in place should collections fall short of ADOT forecast projections. 2 Service levels operated by Valley Metro have remained stable since the unification of fixed route bus services in the east valley commencing operation July 1, Transit service agreements primarily reflect contractual rate increases from service providers Federal Grants overall are down by $4.7M from $38.4M to $33.6M. Primary cause for change is reduction to CMAQ capital funding due to restructuring of Scottsdale/Rural Road corridor. Contributions from Valley Metro Rail for staff are higher in FY 15 due to new positions to support an additional 3.1 miles of service (Central Mesa Extension) beginning in October Revenues from vehicle disposals result in an increase by $0.3M in FY16. Vanpool farebox revenue is anticipated to increase by $0.2M in FY16. Carryforwards & reserves are down by $42.0M due to decreased amount of bond fund balance spending needed in FY16 for LRT capital construction activity for Northwest Extension and Central Mesa Extension. 8

42 Uses of Funds by Category Note 7 8 Valley Metro Regional Public Transportation Authority (RPTA) FY16 Prelim Operating & Capital Budget Overview Explanation Decrease in PTF Lead Agency Disbursements is primarily due to a major decrease in construction activity for light rail projects, offset by increases in ADA disbursements and lead agency disbursements for regional bus fleet. Fixed route bus service levels operated by Valley Metro have remained stable since the unification in the East Valley commencing operation July 1, Transit service contracts primarily reflect contractual rate increases from fixed route service providers. Paratransit service levels are forecasted to increase by 10% and contract rates are scheduled to increase by 3% Capital Outlay was reduced by $4.6M due to reductions in land acquisition and improvements of $14.0M related to the Scottsdale/Rural Road Link project offset by increases in regional fleet and equipment purchases of $9.4M. Overall staff cost in FY16 $26.3M is 9% of total budget. Salary and Fringe increase $1.4M, broken down as follows: base salary and fringe increase $0.7M, new positions $0.7M. Reductions to consulting contracts are primarily due to decreasing services resulting from the wrap up of the passenger Origins and Destination study conducted in Other administrative cost increases include employee development and training expenditures to improve agency performance and increasing data and telecommunication costs. Lead Agency Bond Disbursements are down by $31.0M from $56.0 to $25.0M due to decreased LRT capital construction activity on the Northwest Extension in Phoenix and Central Mesa Extension. 9

43 Valley Metro Regional Public Transportation Authority FY16 Prelim Operating & Capital Budget Comparison to FY15 Adopted Budget (In thousands) FY16 FY15 FY15 Amount Percent*** Prelim Adopted Revised Increase/ Increase/ ** Uses of funds by Division Operating: Operations $ 122,556 $ 115,622 $ 116,195 $ 6,933 6% (14) Communications & Marketing 5,020 4,831 4, % Finance, Administration & Org. Dev. 1,312 1,366 1,366 (54) -4% Planning & Development 2,184 3,654 3,654 (1,470) -40% (15) Chief Executive Officer's Division 1,230 1,120 1, % Non-Departmental 28,589 26,974 26,974 1,615 6% (16) Total Operating Budget 160, , ,141 7, % Capital: Design & Construction % Valley Metro Rail 64, , ,788 (45,162) -41% (17) Bus and other transit 61,828 61,767 28, % Total Capital Budget 125, , ,854 (45,077) -26% Total Operating & Capital Budget $ 286,888 $ 324,642 $ 291,995 $ (37,754) -12% Uses of Funds by Division Note 14 Valley Metro Regional Public Transportation Authority (RPTA) FY16 Prelim Operating & Capital Budget Overview Explanation Operations Division up $6.9M primarily due to programmed contractual increases for Fixed Route bus service of $1.5M (see project 2015 and 2017), increases in contract payments to City of Phoenix of $1.1M (see Project 2010 ) and increases for paratransit services of $1.2M (see projects 2030, 2047, 2048). ADA lead agency disbursements increase by $2.6M and regional vanpool, customer service, and contingency up by $0.5M Reductions to Planning and Development are primarily due to decreasing consulting services related to the wrap up of the passenger Origins and Destination study. Non-Departmental expenses are up by $1.6M primarily due to Valley Metro Rail staffing to support the additional 3 miles of rail operations commencing in October All Valley Metro Rail staff are employees of the RPTA whose costs are fully funded by Valley Metro Rail Inc. revenue sources. 17 Valley Metro Rail capital activities down $45.2M due to decreased lead agency disbursements to support LRT capital construction. 10

44 Summary of the Preliminary Five Year Operating Forecast and Capital Program FY FY 2020 The Regional Public Transportation Authority (RPTA) has the primary responsibility of implementing the operating and capital components of the transit element identified in the 20-year Regional Transportation Plan (RTP). The operating component includes the expansion of regional fixed route services, high-capacity transit alternatives, vanpools and paratransit services throughout the region. The capital component of the transit element of the RTP includes fleet replacement and expansion as well as the development of new park-and-rides, transit centers, passenger facilities, and maintenance and operations facilities over the life of the plan. Construction of the light rail RTP components has been designated to VMR by the RPTA and expenditures are shown as Rail Capital Funding in the Operating Forecast. For the Five-Year Operating Forecast, the Operations revenues and expenditures are based on current costs, as used for the development of the preliminary FY16 Operating budget, with an annual inflation escalation of three percent (3%) for the remaining four years. Other assumptions in the Five-Year Operating Forecast are as follows: The Public Transportation Fund grows by approximately 4.5% annually Fares grow by 2% annually; with a fare increase assumed in FY17 Paratransit ridership drives an 8.6% increase in number of trips delivered Planning, Administration, and Regional Services costs have been inflated two percent (2%) for the last four (4) years of the forecast The proposed service changes within the five-year time period that have been incorporated into the plan as proposed by the Transit Life Cycle Program are as follows: FY 2016: Enhance service on Route 72, Scottsdale/Rural Road Reduced service on the Main Street and Arizona LINKs due to the LRT extension FY 2017: No service changes FY 2018: Begin Route 104 Saturday service in Chandler FY 2019: Begin PTF funding of Route 50 in Scottsdale For FY 2020: Begin PTF funding of the Avondale portion of Routes 562 and 563

45 Summary of the Preliminary Five Year Operating Forecast and Capital Program FY FY 2020 Five-Year Operating Forecast FY16-FY20 Revenues (thousands) 5-Year Total Public Transportation Fund (ADOT) $ 733,932 PTF Bond Proceeds 61,257 Less: Debt Service Bus & Rail (149,124) Less: Rail Capital Funding (current) (253,861) Net PTF for Operations $ 392,204 Other Regional Funds $ 25,749 Federal Funds 41,023 Transit service reimbursements 165,559 Fare Revenues 96,651 Interest and other revenue 160 The Revenue Operating Forecast begins with the PTF sales tax funds, which are estimated by ADOT team of economists. Debt Service and Rail Capital Funding requirements are deducted to derive PTF available for operations. Total revenues $ 721,347 Expenditures Operations (thousands) 5-Year Total Fixed Route $ 447,655 Paratransit - EVDAR 51,398 Alternative Trans. Ridechoice, NWDAR, MS 20,217 Vanpool Service 5,545 ADA 110,801 Total operations expenditures $ 635,616 Transportation Demand Management $ 7,140 Planning & Administration 24,594 Regional Services 41,731 Safety & Security 1,835 Operations Contingency 1,150 Total expenditures $ 712,066 Excess/(deficiency) of revenues over expenditures - operations $ 9,281 Less: Bus Capital Funding $ (61,699) Undesignated fund balance, July 1, 2015 $ 77,512 Excess/(deficiency) (52,418) Undesignated fund balance, June 30, 2020 $ 25,094 Operations expenditures for the Five Year period are impacted by service contract increases and paratransit demand ridership. Due to aging population, paratransit ridership is forecasted to grow significantly. Regional Services, Planning and Admin. costs are forecasted to grow about 2% per year. A $9.3M operating surplus is projected, which will be used to fund bus capital purchases along with existing fund balance which has been built to accommodate the cyclical bus capital drawdown. 12

46 Five-Year Capital Program FY16-FY20 (thousands) 5-Year Total Revenues Public transportation funds $ 45,158 FTA - Section ,542 FTA - Section ,347 FTA - Section ,681 FTA - Section ,245 FHWA - CMAQ 1,741 FHWA - STP 18,322 Vehicle/parts proceeds 1,884 Capital assets reserve applied 570 Vanpool reserve applied 695 Undesig. Fund Balance Applied (PTF) 16,542 Total Revenues $ 201,726 Capital Program Funding Sources include new PTF sales tax and PTF fund balance that has been accumulated for cyclical bus fleet replacement. Total PTF funding over the five years is $61.7M or 31% of capital revenue. Federal Funding will provide $136.9M or 68% of capital revenue. (thousands) 5-Year Total Expenditures by Project IT Infrastructure $ 1,548 Standard Bus - Replacement 132,399 Standard Bus - Expansion 9,715 Express/BRT - Replacement 7,408 Rural Fleet - Replacement 1,584 Paratransit Fleet - Replacement 1,843 Vanpool Fleet - Replacement 13,707 Vanpool Fleet - Expansion 5,310 Fleet - Other 1,934 Bus/Paratransit O/M Facilities 285 Transit Centers (4-Bay) 2,471 Bus Stop Passenger Amenities 1,073 Park & Rides 9,732 Vehicle Management/Communications Systems 7,702 Fare Collection Systems 2,166 State of Good Repair - Fleet Rebuild 2,850 Total Expenditures $ 201,726 Capital Program expenditures for the upcoming five years are primarily for fleet replacement and expansion. A total of 465 bus units are planned for replacement and 18 bus units are planned for expansion. Vanpool fleet replacements total 323 units, with 125 expansion units planned. New Transit Center and Park and Ride facilities are planned in the West Valley, upgrades to Vehicle Communications Systems and Fare Collection Systems are planned. 13

47 Valley Metro RPTA Schedule of Changes from Preliminary to Final Budget Changes from Preliminary to Final Budget FY16 $ Millions FY16 Budget FY16-20 Five Year Plan RPTA Description of Change Preliminary Final Change Preliminary Final Change Operations Expenditures ADA Lead Agency Disbursements Fixed Route Services Operations Revenues PTF Operations Funding Fare Revenues Transit Service Reimbursements* (see below detail) PTF Reserves Funding Capital Expenditures Capital Revenues Transit Service Reimbursements* Detail of changes by Member Dollars $ Operations Revenues Changes to Transit Service Reimbursements Preliminary FY16 Budget Final Change TSR - Avondale $ 749,960 $ 683,713 $ (66,247) TSR - Goodyear $ - $ 66,248 $ 66,248 TSR - Surprise $ 651,263 $ 636,909 $ (14,354) TSR - Tolleson $ 214,144 $ 301,978 $ 87,834

48 Valley Metro RPTA Proposed FY16 Budget and Five Year Plan Budget and Finance Subcommittee May 14, Budget Schedule FY16 Jan 14 - Board approves Agency goals Feb 19 - Board approves service changes effective April 2015 Feb 27 - Executive Summary / 5 year Plan posted to website Feb 27 - Preliminary Budget / 5 year Plan delivered to Members March and April - Review and comment by Members Apr 1 - Budget presented for information to TMC/RMC Apr 2 - Budget presented for information to BFS Apr 16 - Budget presented to Board of Directors for information May 6 - TMC recommended approval of FY16 Budget & 5yr Plan May 14 - Budget presented to BFS for recommendation May 21 - Budget presented to Board for adoption 2

49 Changes from Preliminary to Final Budget $ Millions FY16 FY16-20 RPTA Description of Change Change Change Operations Expenditures ADA Lead Agency Disbursements Fixed Route Services Operations Revenues PTF Operations Funding - - Fare Revenues Transit Service Reimbursements* 0.1 (see below detail) PTF Reserves Funding Capital Expenditures - - Capital Revenues Changes from Preliminary to Final Budget (cont d) Transit Service Reimbursements* Detail of changes by Member Dollars $ Operations Revenues Changes to Transit Service Reimbursements FY16 Change TSR - Avondale $ (66,247) TSR - Goodyear $ 66,248 TSR - Surprise $ (14,354) TSR - Tolleson $ 87,834 73,481 4

50 FY16 Revenues $286.9M Funding Sources FY16 FY15 Change $ Public Transportation Funds $133.9 $127.7 $6.2 Transit Service Agreements $30.2 $29.4 $0.8 Federal Grants $33.6 $38.4 -$4.7 METRO Rail Reimbursement $16.9 $15.3 $1.6 Fixed Route Fare Revenues $16.3 $16.1 $0.1 AZ Lottery Proceeds $11.3 $11.5 -$0.2 Regional Area Road Funds $4.8 $4.7 $0.1 Other Revenues $2.0 $1.6 $0.4 Bond Proceeds $0.0 $0.0 $0.0 Carry forwards and Reserves $38.0 $80.0 -$42.0 Total $286.9 $ $ FY16 Expenditures $286.9M Uses of Funds FY16 FY15 Change $ Lead agency disbursements $69.5 $77.0 -$7.5 Transit service contracts & fuel Capital RPTA & METRO Personnel Costs Bond Principal & Interest Contractual Agreements AZ Lottery Disbursements Lead Agency Bond Disbursements Other Costs Carry forwards to Reserves Total $286.9 $ $37.7 5

51 Valley Metro RPTA FIVE YEAR PLAN OVERVIEW FY 2016 THROUGH FY Five Year Operating Forecast - Revenues (thousands) 5-Year Total Revenues Public Transportation Fund (ADOT) $ 733,932 PTF Bond Proceeds 61,257 Less: Debt Service Bus & Rail (149,124) Less: Rail Capital Funding (current) (253,861) Net PTF for Operations $ 392,204 Other Regional Funds $ 25,749 Federal Funds 41,023 Transit service reimbursements 165,559 Fare Revenues 96,651 Interest and other revenue 160 Total revenues $ 721,347 7

52 Five Year Operating Forecast - Expenditures (thousands) 5-Year Expenditures Total Operations Fixed Route $ 447,655 Paratransit - EVDAR 51,398 Alternative Trans. Ridechoice, NWDAR, MS 20,217 Vanpool Service 5,545 ADA 110,801 Total operations expenditures $ 635,616 Transportation Demand Management $ 7,140 Planning & Administration 24,594 Regional Services 41,731 Safety & Security 1,835 Operations Contingency 1,150 Total expenditures $ 712,066 8 Five Year Capital Program- Revenues (thousands) 5-Year Total Revenues Public transportation funds $ 45,158 FTA - Section ,542 FTA - Section ,347 FTA - Section ,681 FTA - Section ,245 FHWA - CMAQ 1,741 FHWA - STP 18,322 Vehicle/parts proceeds 1,884 Capital assets reserve applied 570 Vanpool reserve applied 695 Undesig. Fund Balance Applied (PTF) 16,542 Total Revenues $ 201,726 9

53 Five Year Capital Program- Expenditures (thousands) 5-Year Total Expenditures by Project IT Infrastructure $ 1,548 Standard Bus - Replacement 132,399 Standard Bus - Expansion 9,715 Express/BRT - Replacement 7,408 Rural Fleet - Replacement 1,584 Paratransit Fleet - Replacement 1,843 Vanpool Fleet - Replacement 13,707 Vanpool Fleet - Expansion 5,310 Fleet - Other 1,934 Bus/Paratransit O/M Facilities 285 Transit Centers (4-Bay) 2,471 Bus Stop Passenger Amenities 1,073 Park & Rides 9,732 Vehicle Management/Communications Systems 7,702 Fare Collection Systems 2,166 State of Good Repair - Fleet Rebuild 2,850 Total Expenditures $ 201, PTF Fund Balance Projection $120.0 Fund Balance Forecast $100.0 $80.0 $60.0 $40.0 $20.0 $ Bus trogram Rail trogram Bus trogram tolicy ainimum 11

54 Today s Action It is recommended that the BFS forward to the Board of Directors approval of the Valley Metro RPTA Proposed Fiscal Year 2016 Budget (July 1, 2015 thru June 30, 2016) and acceptance of the Five-Year Operating Forecast Capital Program (FY 2016 thru 2020). 12

55 DATE AGENDA ITEM 4 May 11, 2015 SUBJECT Transit Life Cycle Program (TLCP) Update PURPOSE To present the draft 2015 TLCP Update for information. The item will cover both the bus and rail programs within the TLCP. BACKGROUND/DISCUSSION/CONSIDERATION The TLCP was developed in 2005 to provide guidance for the implementation of the transit component of the Regional Transportation Plan. The TLCP includes guiding principles, policies, procedures and financial forecasts to ensure that the program can be balanced. The most recent update to the TLCP was in June Since that time, the official forecast has projected a slight decrease in revenues for the Transportation Excise Tax. In addition, the preliminary Short Range Transit Plan (SRTP) has identified some service and/or funding changes that are recommended to be incorporated into the TLCP. Bus Program Capital Program Since the 2014 TLCP update, there have been some minor adjustments to the fleet and facilities programs related to timing and federal funding. The SRTP has identified 11 buses that are required for expansion, which are included in the TLCP. In addition, some updates to the replacement schedules for regional fleet have been included. Operating Program One of the agency goals is to expand services through effective planning, design, and construction of rail and bus projects through the Regional Transportation Plan. To that end, Valley Metro developed Transit Standards and Performance Measures (TSPM) which provide guidance for future service expansion to meet this goal while adhering to JE policies. Valley Metro planning staff developed the SRTP to guide the implementation of new service improvements, including those funded with PTF. The SRTP used principles developed from the TSPM to guide recommendations. The SRTP includes some recommendations for changes in TLCP funded service. The proposed changes to TLCP funded service are listed below along with the estimated annualized cost impact. All of the changes are proposed for FY2016 unless noted otherwise. VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

56 Service changes Increased frequency on Route 50 Weekdays, Scottsdale $248,000 Increased frequency on Route 61 Sunday, Mesa $149,400 Increased frequency on Route 72 Weekdays, Scottsdale and $904,900 Tempe Extend two morning trips on Route 156, Gilbert $25,000 One additional round trip on Route 542 $79,900 Eliminate LINK service between Sycamore and Country Club ($307,600) when Central Mesa Light Rail opens Defer Scottsdale/Rural LINK beyond 2026 ($1,100,000) Sub-total Service Changes ($ 400) Funding changes Fund existing service on Route 81, Scottsdale and Tempe $1,843,900 Fund existing service on Route 562, Avondale $22,800 Fund existing service on Route 563, Avondale $81,100 Fund existing service on Route 30, Tempe beginning in FY2020 $696,400 Sub-total Funding Changes $2,644,200 The annualized impact for proposed service changes in FY2016 is nearly zero. The impact of funding changes is $1,947,800 in FY2016, with an additional $696,400 beginning in FY2020. The budget impact in FY2016 will be will be on the revenues, as there will be less city funding and more PTF for service. The funding changes will take effect on July 1, Since the 2014 TLCP update, costs for operations, including ADA reimbursements are up 2.4 percent. These costs assume continuation of the unified contract for service in the East Valley. The fund balance at the end of the program is anticipated to be about $35.2 million, down from $81.1 million in the 2014 update. The ending fund balance is down primarily due to changes in TLCP funded service recommended in the SRTP and the decrease in revenues from the latest ADOT forecast. The following table summarizes the changes in fund balance. Beginning fund balance $81.1 million Revenue Forecast -$22.0 Net cost of SRTP changes -$20.7 Other changes -$3.2 Ending fund balance $35.2 The TLCP Guiding Principles require that jurisdictional equity be maintained for the bus program. The policy allows that each sub-region can be within 2.5 percent above or below their policy allocation. In the current model, all of the sub-regions are within this policy allowance. Additionally, the policy allows that regardless of sub-regional percentages, no jurisdiction can be under-allocated by $7.5 million or more. In the current model one jurisdiction, Mesa, meets that condition. 2

57 Jurisdiction Equity Summary by Sub-Region (millions of dollars) April 27, 2015 Jurisdiction Total Calculated PTF Total Policy PTF Allocation JE Under (JE Over) Percent of JE Calculated Central $435.0 $438.1 $ % East $763.6 $782.5 $ % West $161.3 $159.9 ($1.4) -0.86% $1,359.9 $1,380.5 $ % Jurisdiction Equity Summary (millions of dollars) April 27, 2015 Jurisdiction Total Calculated PTF Total Policy PTF Allocation JE Under (JE Over) Avondale $19.8 $21.2 $1.5 Buckeye $4.8 $1.0 ($3.8) Chandler $130.1 $130.6 $0.6 County $16.5 $9.0 ($7.5) El Mirage $1.5 $3.1 $1.6 Fountain Hills $1.0 $1.2 $0.1 Gila Bend $0.0 $1.9 $1.9 Gilbert $81.8 $84.4 $2.7 Glendale $79.8 $78.4 ($1.4) Goodyear $3.2 $3.6 $0.4 Guadalupe $3.9 $0.1 ($3.8) Litchfield Park $0.0 $3.1 $3.1 Mesa $259.9 $268.4 $8.5 Paradise Valley $3.5 $7.4 $3.9 Peoria $25.4 $30.6 $5.2 Phoenix $435.0 $438.1 $3.1 Queen Creek $0.0 $0.8 $0.8 Salt River Reservation $0.7 $0.0 ($0.7) Scottsdale $137.1 $143.7 $6.6 Surprise $4.7 $3.2 ($1.5) Tempe $145.7 $145.8 $0.1 Tolleson $4.9 $4.3 ($0.7) Wickenburg $0.0 $0.3 $0.3 Youngtown $0.6 $0.2 ($0.4) $1,359.9 $1,380.5 $20.6 3

58 Rail/High Capacity Transit Program The baseline rail model has some significant changes from the adopted 2014 TLCP Update. The South Central corridor has been amended into the Regional Transportation Plan with a completion date of Therefore it has been added to the TLCP, although no capital costs are programmed through the TLCP sunset TLCP Open Year 2014 TLCP Open Year Central Mesa Northwest Phase I Tempe Streetcar Gilbert Road Capitol/I-10 West West Phoenix/Central Glendale Northwest Phase II Northeast Phoenix South Central 2034 NA Some changes in project costs have been included to reflect recent changes in alignments for two corridors. Additionally, it is recommended that eight expansion light rail vehicles be included in the TLCP. Below is a summary of the major changes. OMC Expansion - The build out of the current facility is estimated to cost $32 million, which is a reduction of $28 million from the approved TLCP. Assuming a 50 percent PTF share for the project, the savings equal $14 million. Tempe Streetcar - The cost of the project increased by $40 million as a result of the alignment change. The Small Starts request will be increased by $17 million to the maximum allowable of $75 million. The remaining funding shortfall of $23 million is tentatively assumed to be provided by local funds. Northwest Phase II - The estimated cost for this new alignment is $295 million, which is an increase of $119 million. Assuming that FTA will fund 40 percent of the project results in an additional $43 million in federal funds. The cost increase to the City of Phoenix for the local construction is $41 million. The cost increase for the regional elements is $35 million, which is tentatively assumed to be provided by local funds. Light Rail Vehicle Expansion - In anticipation of a future need, 8 regionally funded expansion vehicles are recommended to be included in the TLCP. It is estimated that the unit cost for the LRVs is $5 million. For the TLCP model, federal participation is assumed at 50 percent of the project cost. The regional impact of purchasing 8 LRVs would be $20 million. 4

59 Inflation rates assumed in the ADOT Forecast are in the range of 2.2% to 2.4% for the remainder of the program. Year of expenditure costs calculated in the rail model assume a slightly higher rate of 2.7% to 2.9% over the long term. Currently, the rail program baseline financial model is balanced, with a surplus of $23 million remaining. The rail program currently anticipates additional financings. An additional issue in FY17 is anticipated and expected to generate up to $62 million. In addition, in FY23 short term financing is needed to cover cash flow. The final financing needs are driven by the construction of three projects simultaneously and will likely change as those projects advance. COST AND BUDGET The TLCP model as presented includes funding for some services that are not in the preliminary budget. If the TLCP is adopted as presented, with the additional services and funding, the changes will be included in a mid-year budget adjustment and contracts and IGA schedules with affected cities will be amended. There will be little change to expenditures and an increase of PTF used for service of $1.95 million, with a corresponding decrease in transit service reimbursements. COMMITTEE PROCESS RTAG: April 15, 2015 for information RMC: May 6, 2015 for information BFS: May 14, 2015 for information Board of Directors: May 21, 2015 for information RECOMMENDATION This item is for information only. CONTACT Paul Hodgins Manager, Revenue Generation and Financial Planning phodgins@valleymetro.org ATTACHMENT None 5

60 Transit Life Cycle Program 2015 Model Update Budget and Finance Subcommittee May 14, 2015 Overview Financial models are balanced Bus surplus $35.2 million Rail surplus $23.1 million Bus operating program changes based on SRTP Rail capital program updated alignments for 2 projects 2

61 Revenues PTF down $38.8 million (-1.35%) $22.0 million bus, $16.8 million rail Fare increase Assumed in FY2017 then every 3 years New local funding for rail program Tempe Streetcar Northwest Extension Phase II 3 Transportation Excise tax $6.0 $5.0 $ Year Total (billions) $3.0 $2.0 $1.0 $ Forecast Year 4

62 Bus Program Summary 5 Program Changes Operating program changes Improved service Increased funding for current service Fleet plan changes Facilities changes 6

63 Operating Program Service changes Increased frequency on Route 50 Weekdays, Scottsdale Increased frequency on Route 61 Sunday, Mesa Increased frequency on Route 72 Weekdays, Scottsdale and Tempe Extend two morning trips on Route 156, Gilbert 7 Operating Program Service changes One additional round trip on Route 542 Eliminate LINK service between Sycamore and Country Club when Central Mesa Light Rail opens Defer Scottsdale/Rural LINK beyond

64 Operating Program Funding changes Fund existing service on Route 81, Scottsdale and Tempe Fund existing service on Route 562, Avondale Fund existing service on Route 563, Avondale Fund existing service on Route 30, Tempe (FY2020) 9 Capital Program Fleet changes Updated fleet replacement plan Tempe Orbit fleet Vanpool useful life Updated fleet expansion plan Based on SRTP improvements Communications upgrade Increased costs to upgrade radio/vms systems 10

65 Capital Program Project changes North Glendale Park-and-Ride, Transit Center Updated to current project location and estimate Baseline/24 th Street Park-and-Ride Updated costs Desert Sky Transit Center Updated costs Scottsdale/Rural LINK Scope reduced to include Traffic Signal Priority and Bus Stop improvements for Route Expenditures Bus Program 2015 Update 2014 Update Change % Change Operations Expenditure Fixed Route Operations $1,007.2 $972.9 $ % ADA & Alternatives $482.9 $482.8 $ % Regional Expenditures $246.1 $240.0 $ % Sub-Total Operations Expenditures $1,736.3 $1,695.7 $ % Capital Expenditure Debt Service $72.1 $72.1 ($0.0) 0.0% Fleet $938.3 $938.9 ($0.6) -0.1% Facilities $258.2 $274.4 ($16.2) -5.9% Sub-Total Capital Expenditures $1,268.6 $1,285.4 ($16.8) -1.3% Total Expenditures $3,004.9 $2,981.1 $ % 12

66 Revenues Bus Program 2015 Update 2014 Update Change % Change Revenue Operations PTF $1,613.4 $1,635.4 ($22.0) -1.35% RARF $86.5 $86.5 ($0.0) 0.00% Fares $243.6 $233.8 $ % Federal $71.3 $67.4 $ % Other revenues $20.5 $20.3 $ % Sub-Total Operations Revenue $2,035.2 $2,043.4 ($8.1) -0.40% Revenue Capital Federal - ARRA $35.8 $35.8 ($0.0) 0.00% Federal - Capital $889.9 $902.0 ($12.1) -1.35% Financed Revenue $58.3 $58.3 $ % Other revenues $20.9 $22.7 ($1.8) -7.95% Sub-Total Capital Revenue $1,004.9 $1,018.8 ($13.9) -1.37% Total Revenue $3,040.1 $3,062.2 ($22.1) -0.72% 13 Cash Flow Summary Bus Program TLCP Totals Cunding Surplus / Shortfall Total Program wevenues $2,990.1 Total hperating Costs ($1,736.3) Cunding surplus before capital and financing $1,253.9 Total Capital Costs ($1,195.6) Cinancing Needs anticipated: Proceeds Debt Service Series 2009 $50.0 ($73.0) Total Cinancing $50.0 ($73.0) ($23.0) Total Program Cost 2026 ($2,954.9) Net Cund Balance $

67 Available PTF for Jurisdictional Equity Revenue Forecast $1,613.4 Less: Customer service ($147.0) ADA certification ($29.8) tlanning and administration ($8.5) ITS ($8.4) Vanpool ($2.6) Debt service interest ($22.2) ainimum cash balance ($14.4) bet ttf available $1, JE Summary Calculated Policy Percent Sub-region Allocation Allocation Difference Difference Central $435.0 $438.1 $ % East $763.6 $782.5 $ % West $161.3 $159.9 ($1.4) -0.86% $1,359.9 $1,380.5 $ % 16

68 Rail Program Summary 17 High Capacity Transit 2014 TLCP 18

69 Capital Projects Tempe Streetcar updated alignment and cost estimate Northwest Phase II updated alignment and cost estimate South Central added with completion in 2034 LRV Acquisition: addition of 8 regional expansion vehicles OMC expansion: reduction in cost estimate 19 Capital Revenues Assumptions Tempe Streetcar Additional $17 million FTA Small Starts Tempe to provide $23 million Northwest Phase II Additional $43 million FTA New Starts Phoenix to provide $35 million for regional costs Phoenix to fund additional $41 million of local costs LRV Acquisition: minimum 50% federal participation before ordering 20

70 2015 Proposed Update Corridor Costs Base Utilities Total 2015 TLCP Open Year 2014 TLCP Open Year Northwest Phase I $298.5 $23.9 $ Central Mesa $190.8 $8.1 $ Tempe Streetcar $163.0 $13.7 $ Gilbert Road $147.1 $0.0 $ CapitolCI-10 West $926.9 $57.7 $ West PhoenixCCentral Glendale * $479.9 $28.7 $ Northwest Phase II * $265.5 $12.0 $ Northeast Phoenix $16.5 $0.0 $ South Central $0.0 $0.0 $ NA Sub-Total Corridor Extensions $2,488.0 $144.2 $2,632.2 * Local costs for these projects continue beyond the life of the TLCt, all regional funds included in TLCt Proposed Update Other Capital Costs Base Utilities Total 2015 TLCP Open Year 2014 TLCP Open Year LRV Acquisition $96.1 $0.0 $96.1 NA NA OMC Expansion $31.1 $0.0 $ CP/EV Regional Reimbursements $198.8 $74.3 $273.1 System-wide Support Infrastructure $83.0 $0.0 $83.0 Alternatives Analyses $53.3 $0.0 $53.3 Design Standards & System Planning $56.6 $0.0 $56.6 Capital Project Development Administration $25.6 $0.0 $25.6 Sub-Total Other Capital $544.4 $74.3 $618.7 Total Capital Expenditures $3,032.4 $218.5 $3,250.9 Cost of Financing $60.4 Total Capital Project Costs $3,

71 2015 Proposed Update Capital Revenues 2015 Update 2014 Update Change % Change ttc $1,265.7 $1,283.5 ($17.8) -1.4% CTA 5309 $971.0 $995.9 ($25.0) -2.5% CaAv $263.7 $263.7 $ % Other federal $61.0 $40.7 $ % thoenix T2000 $446.7 $385.5 $ % aesa $147.6 $153.2 ($5.6) -3.6% Glendale $100.1 $92.0 $ % New local $57.0 $0.0 $57.0 NA aag / RtTA $21.5 $20.3 $ % Sub-Total Capital Revenue $3,334.4 $3,235.0 $ % Proposed Update Cash Flow Summary wail program TLCt Totals Cunding Surplus / Shortfall Total trogram wevenues $3,334.4 Total Base trogram Cost ($3,032.4) Cunding surplus before ttc utility expenses and financing $302.0 Non trior wight Utility welocations ($218.5) ($218.5) Cinancing Needs anticipated: troceeds 5ebt Service Series 2009 $55.5 ($77.9) Series 2014 $135.4 ($156.9) Series 2017 $61.6 ($72.9) Term 2021 $0.0 $0.0 Term 2023 $25.0 ($28.7) Advance Cunds by thoenix $60.0 ($61.5) Total Cinancing $337.5 ($397.9) ($60.4) Total trogram Cost 2026 ($3,311.2) Net Cund Balance $

72 $120.0 Fund Balance Forecast $100.0 $80.0 $60.0 $40.0 $20.0 $ Bus Program Rail Program Policy Minimum 25 $120.0 Fund Balance Forecast $100.0 $80.0 $60.0 $40.0 $20.0 $ Bus Operating Program Bus Capital Program Rail Capital Program Policy Minimum 26

73 Timeline TMC - information May 6, 2015 Board - information May 21, 2015 RTAG May 19, 2015 TMC - action June 3, 2015 Board - action June 18, 2015 Note: METRO Board of Directors will take action on the light rail/high capacity program in May 27 Next Steps Bus Program Work with Mesa to identify service and/or capital improvements through SRTP process Rail Program Complete funding arrangement with Tempe for Streetcar project Develop Small Starts application for Tempe Streetcar for fall submittal to FTA LRV Procurement Secure federal funds for LRVs Develop procurement documents 28

74 DATE AGENDA ITEM 5 May 11, 2015 SUBJECT Future BFS Agenda Item Requests PURPOSE For information BACKGROUND/DISCUSSION/CONSIDERATION Councilmember Sherwood will request future BFS agenda items from members. October 2015 Tentative Agenda Policy review of operating and capital fund balance reserve minimums Review of health plan costs and employee / employer share FY15 year-end review FY16 first quarter reports COST AND BUDGET None COMMITTEE PROCESS None RECOMMENDATION For information only CONTACT John P. McCormack Chief Financial Officer jmccormack@valleymetro.org ATTACHMENTS None VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ

75 Valley Metro RPTA Follow up to April 2015 meeting Budget and Finance Subcommittee May 14, Bus Fleet Forecast Conversion to APC 2