Operating Budget Stability Q1 FY17 Financial Update

Transcription

1 Operating Budget Stability Q1 FY17 Financial Update Report to Fiscal and Management Control Board

2 Without action, operating deficit was on track to reach $427M by FY20 STATUS QUO FY17 PRO FORMA Projected Structural Deficit Note: Structural deficit includes debt service and transferred capital employees annual expense, does not include Additional Assistance 2

3 Legislation requires that structural deficit is balanced by end of FY17; FY18 budget required to have zero structural deficit Under Section 5 of Chapter 46 of the Acts of 2015, the FMCB is directed to: Establish 1- and 5-year operating budgets under section 20 of chapter 161A, beginning in fiscal year 2017, which are balanced primarily through a combination of internal cost controls and increase in own-source revenues 3

4 EXPENSES REVENUES FY17 preliminary recast deficit is $126M due to lower sales tax receipts and higher forecast commuter rail expenses ($M) FY17 BUDGET APPROVED 4/11/16 FY17 RECAST 10/4/16 $ VARIANCE Notes RECAST Operating Revenues Non-Operating Revenues $722.7 $1,218.9 $722.7 $1, ($35.0) Total Revenues $1,941.6 $1,906.6 ($35.0) Sales tax est $1,027M vs. BRA of $992M Wages, Benefits and Payroll Taxes $784.2 $ Non-Wage $779.6 $790.6 $11.0 Operating Expenses Core Operating Expenses (excludes transferred capital employees) $1,563.8 $1,574.8 $11.0 $1,515.7 $1, Keolis contract amendments Debt Service $458.1 $ Total Expenses $2,021.9 $2,032.9 $11.0 Structural Deficit $80.3 $126.3 ($46.0) 4

5 FMCB FY17 BUDGET STRATEGY Budget is balanced only with infusion of Additional Assistance from Commonwealth; structural deficit remains Remaining $80M structural deficit must be closed by the end of FY17 in order to avoid ballooning deficits in FY18 and beyond. Five strategies have been identified thus far: Wages & Benefits: 74% of MBTA non-debt operating expenses (excluding Keolis/RIDE). MBTA operator wage rates highest in the U.S. To create a sustainable cost structure, we need to evaluate all aspects of wage structure including rates, progression, work rules, overtime triggers and pension contribution rates. Flexible contracting: In process. Short-term focus on corporate services including automated fare collection/cash management, warehouse management/logistics, human resources, marketing services. Medium-term focus on developing strategy for maintenance and operations. Vendor review: MBTA spends $280M annually on services, supplies and materials. Target reduction through a rapid process of engaging vendors (large and small) to provide discounts that can help close the FY17 deficit. Low ridership services: High subsidy, low ridership service lines (weekend commuter rail - $23.52 per trip; low ridership bus - $5.45 per trip) will be re-evaluated for adjustment, elimination or third party provisioning. Parking Strategy: While advertising / real estate revenues forecast to grow 25% in FY17, parking revenue growth lags. Develop growth strategy to accelerate revenues, public-private partnership potential. Management will be held accountable against targets for savings from all of these strategies 5

6 EXPENSES REVENUES Lower sales tax receipts offset by other non-operating revenues YTD FY17 PERFORMANCE AGAINST FY17 BUDGET ($M) YTD FY17 YTD BUDGET YTD FY17 YTD ACTUAL $ VARIANCE % VARIANCE Operating Revenues $182.3 $182.5 $ % Non-Operating Revenues $302.8 $302.0 ($0.8) -0.3% Total Revenues $485.1 $484.5 ($0.6) -0.1% Wages, Benefits and Payroll Taxes $194.8 $195.5 ($0.7) -0.4% Non-Wage $194.4 $196.4 ($2.0) -1.0% Operating Expenses $389.2 $392.0 ($2.7) -0.7% Debt Service $113.2 $105.9 $ % Total Expenses $502.4 $497.9 $ % Structural Deficit ($17.3) ($13.4) $ % Fare Recovery Ratio 43.4% 43.0% 6

7 Calculation MBTA to receive Base Revenue Amount of $992M for FY17 compared to budgeted Dedicated Sales Tax Revenue of $1,027M; due lower projected sales tax receipts Calculation of FY17 Dedicated Revenue FY17 Projected Dedicated Sales Tax Revenue (Sales Tax-Derived Revenue) Projected Sales and Use Tax Collections, Excluding Meals Tax FY17 $1,027M $5,419M Percentage due to MBTA x 16% $867M Additional dedicated revenue + $160M $1,027M A MBTA can not receive less than the Base Revenue Amount (B) FY17 Base Tax Revenue (Minimum Dedicated Revenue) $992M B Future Dedicated Revenue based on sales tax is subject to economic conditions 7

8 Weakness in sales tax receipts are forecast to continue throughout FY17 Other income is forecast to remain flat Total Note: Q1 true-up has not occurred; Base Revenue Amount for FY17, is $35M less than budgeted sales tax; Other income increased from budget by $12M for South Station payment from Equity Office, $1.6M from Massport (Silver Line) Source: MBTA Internal Data 8

9 Commuter rail revenue has grown 9.2% YTD in FY17 September monthly revenue was up 9.9% year-on-year FY17/FY16 YTD Growth: 9.2% Year-over-Year Growth by Month: Note: Chart above shows unallocated commuter rail revenue, prior to CTPS allocation for linked trips to other model Source: MBTA Internal Data 9

10 Subway, Bus, Ferry & RIDE revenue is up 2.9% YTD compared to prior year YTD FY17/FY16 Growth: 2.9% Note: Includes adjustments to total fare revenue Source: MBTA Internal Data Year-over-Year Growth by Month: 10

11 Operating expenses are over budget by 0.7% ($2.7M) $125M in FY16; excluding capital transfers core wage and OT yoy growth was 1.9% Total Note: Commuter rail fuel down $1.6M lower than budgeted, all other fuel (in materials, supplies & services) booked to budget Source: MBTA Internal Data 11