METRO. BUSINESS PLAN & BUDGETS Fiscal Year 2008

Transcription

1 cal Year 2008 Year 2008 Fiscal Year Fiscal Year 2008 Fiscal Year 2008 Fiscal Year 2008 Fiscal Year 2008 Fiscal Yea cal Year 2008 Fiscal Fiscal Year 2008 Year Fiscal Year 2008 Fiscal Year 2008 Fiscal Year 2008 Fiscal Year 2008 Fiscal Year 2008 Fiscal Yea cal Year Concise 2008 Fiscal statement Year 2008 Fiscal of approved Year 2008 Fiscal and Year adopted 2008 Fiscal budgets Year 2008 issued Fiscal September Year 2008 Fiscal 28, Year Fiscal Yea

2 BUSINESS PLAN & BUDGETS Fiscal Year 2008

3 Index Transmittal Letter from President & CEO Section I: FY2008 Business Plan Initiatives Listing...1 Section II: Authority Level Operating Budgets Summary of Budgets...3 Operating Budget By Cost Category...4 Variance Summary...5 Authority Wide Service Plan...7 Fare Policy...11 Projected Ridership...12 Organizational Chart...13 Manpower Summary...14 Major Cost Drivers Fuel...15 Power...17 Labor Agreement...18 Purchased Transportation...19 Special Events...20 Health Care...21 Section III: Financial Proforma Projected Cash Flow...22 Sales Tax Projections...24 Sources and Uses of Funds (GAAP)...25 Balance Sheet (GAAP)...26 Section IV: General Mobility and Capital Budgets Capital Budget FY Proposed General Mobility Budget FY Proposed Capitalized Operating Expenses FY Section V: Resolution Resolution Adopted by the Board of Directors...42

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5 Section I: FY2008 Business Plan Initiatives

6 Business Plan Initiatives This section lists 44 new initiatives that have been reviewed and selected as part of the FY2008 Business Plan. The Operating Budget includes $6 million to fund these initiatives, including new service. Some of the initiatives require capital funds and funding for these is included in the capital budget.

7 RIDERSHIP DEVELOPMENT Bellaire Signature Airport Express Bush IAH Grand Parkway Pearland / TMC Park & Ride I-45 North Freeway Diamond / HOT Lane 290 Diamond Lane Eliminate Poor Performing Routes Business Plan Initiatives Listing OPERATIONS Transportation Management Intern Program New Mechanic Incentive Program Biennial Operator Refresher Program Bus Operator Recruitment Program Rail Restructuring Bus Shelters InfoPanels Program Alternate Part Sourcing Operations Department Technology Projects Additional Passenger Shelters Reorganize Central Shops PUBLIC SAFETY Alternative Self-Defense Program for Operators Part-Time Police Officer Police Plainclothes Bus Marshall Program Cameras on Buses Security / Terrorism Awareness Training Program Police Situation Room Houston TranStar Reconfiguration Congestion Management Safety Enforcement & Investigation INFORMATION TECHNOLOGY Upgrade / Replace Budget System Enhance Use of IVOMS as a Service Management Tool Facility Security Improvements Infrastructure Enhancements Core Application Upgrades / Replacement 1

8 Business Plan Initiatives Listing (Con t) HUMAN RESOURCES & DIVERSITY Comprehensive Salary & Compensation Analysis 2008 Labor Agreement Negotiations COMMUNICATIONS & MARKETING Marketing for Ridership Development Image Campaign Going Places EXECUTIVE Commuter Rail Project ADMINISTRATION Outsource Electronic Documents PLANNING, ENGINEERING & CONSTRUCTION Signal Preemption & Corridor Optimization FINANCE Establish New Revenue Division Enhance Risk Management Function Implement a Checkless Payroll System Refocus General Mobility Program Upgrade Office of Management & Budget Capability, Role and Impact PROCUREMENT & MATERIALS Establish a Supplier Depot (Inventory Consignment) 2

9 Section II: Authority Level Operating Budgets

10 Authority Level Summary of Budgets FY2007 FY2008 $ Change Operating Budget $ 288,117,000 $ 300,000,000 $ 11,883,000 General Mobility Budget $ 112,507,000 $ 185,328,000 $ 72,821,000 Capital Budget $ 363,330,000 $ 336,386,000 $ (26,944,000) Total $ 763,954,000 $ 821,714,000 $ 57,760,000 OPERATING EXPENSES Actuals FY FY2005 & Forcast FY2006 $350 Budget held constant at $273 million in FY04, FY05 & FY06 Dollars (millions) $250 $264.4 $262.7 $264.5 $275.0 $ Forecast 3

11 Authority Level Operating Budget by Cost Category FY2007 Current FY2008 Proposed Variance $ % Expense Category Year Budget Budget Wages 90,019,816 94,432,162 4,412, % Salaries 66,929,201 69,680,141 2,750, % Fringe Benefits 73,781,975 77,381,277 3,599, % Total Labor and Fringe Benefits 230,730, ,493,580 10,762, % Purchased Transportation 69,169,027 71,701,401 2,532, % Fuel & Utilities 49,617,680 41,840,227 (7,777,453) % Materials and Supplies 17,122,019 18,497,975 1,375, % Services 15,301,497 15,839, , % Casualty and Liability 3,568,487 3,963, , % Leases, Rentals and Miscellaneous 2,447,090 3,010, , % Total Non-Labor 157,225, ,853,731 (2,372,069) -1.51% Total Labor and Non-Labor 387,956, ,347,311 8,390, % New Service 0 2,000,000 2,000,000 New Initiatives 0 4,000,000 4,000,000 Cost Recovery (10,419,732) (10,738,661) (318,929) 3.06% Total Operating Expenses 377,537, ,608,650 14,071, % Allocation to Capital (89,420,060) (91,608,650) (2,188,590) 2.45% OPERATING BUDGET 288,117, ,000,000 11,883, % 4

12 Authority Level Operating Budget Variance Summary Wages increase by 4.90% reflecting increases in service related bus operator wages, and increases in the union labor agreement becoming effective August 1, Salaries and hourly non-union Wages increase by 4.11% primarily due to salary performance incentives earned. Fringe benefits increase by 4.88% reflecting the union labor agreement increases in healthcare cost from $640 to $670 per participant per month (4.7%), anticipated increases in union healthcare participation, increase in the number of retirees and benefit increases associated with salary and wage changes. Purchased transportation increases by 3.66%, reflecting the annualization of the contract awarded in FY2007 for the management of all METRO vanpool services, inflation and increases associated with annualization of service implemented in FY2007. Fuel and utilities decrease by 15.67% reflecting the savings achieved through METRO's program of hedging diesel fuel and the annualization of savings in METRO's contract for electric power (including propulsion power) that began in FY2007. Materials and supplies increase by 8.04% reflecting increased budget for bus parts offset by lower rail parts cost. Services increase by 3.51% reflecting a mix of increases and decreases in various contract services (such as advertising, repair and maintenance and landscaping contracts) throughout the Authority. Casualty and liability increase by 11.08% reflecting an anticipated increase in property insurance rates based on current market information. Leases, rentals and miscellaneous increase by 23.04% reflecting a rearrangement of the way Special Events costs are recognized in the budget (this is not a real cost increase). Adjusting for this change, Leases, Rentals and Miscellaneous decrease by 1.07%. The FY2008 budget allows $2.0 million for new service to be implemented in the next year. A list of new services contemplated are shown under "Ridership Development" in Section I - New Initiatives. The FY2008 Budget also allows $4.0 million for new initiatives. A list of new initiatives and details is shown in Section I - New Initiatives. 5

13 Authority Level Operating Budget Variance Summary (Con t) Cost recovery increases by 3.06% reflecting increased cost recovery from vanpool services. Allocation to capital increases by 2.45% reflecting increased levels of capital related activity. 6

14 Authority Level Service Plan METRO s FY2008 Operating Ratio Goal is 20.0%. The FY2008 Business Plan has as its underlying premise the goal of improving the operating ratio, improving service and increasing ridership. In FY2008, METRO proposes a service plan that will increase ridership through: simplification of route structures expansion of service to new markets implementation of new routes introduction of new Signature services discontinuation/redeployment and adjustment of unproductive services adding service to existing services provision of clear and useful customer information continuing efforts for cost effective schedules efficient integration with light rail/guided rapid transit (GRT) The Transit Plan provides an overview of proposed strategies to achieve these goals and objectives for fixed-route bus and rail, METROLift, Special Events and METROVan services. The results are reflected in the revenue hours of service summarized as follows: FY07 Budget Annual Revenue Hours of Service (000 omitted) FY07 Estimate FY08 Budget Difference FY07 Estimate vs. FY08 Budget FY2008* New Service Annualized Fixed Route: Bus 2,728 2,711 2, ,795 Fixed Route: Rail Fixed Route: Total 2,786 2,769 2, ,853 METROLift Special Events Total 3,605 3,585 3, ,671 *FY2008 includes new service The FY2008 Service Plan features the following enhancements resulting from the identification of market expansion opportunities to/new fixed route bus service: PROJECT GRID Project Grid seeks to re-design the existing fixed-route system starting for the ground up in an effort to re-create a fixed route bus system for Houston that will serve current and 7

15 Authority Level Service Plan (Con t) future needs rather than continuing to operate to meet past needs. By reviewing the current public transportation planning and programming practices within metropolitan, suburban and rural areas, the project aims to enhance service delivery, customer satisfaction, efficiency and effectiveness. These will be achieved by conducting and implementing market research techniques designed to target information sources. Such techniques will include: Examining latent demand by seeking an overview of aging-population issues i.e. density and employment locations to identify its implications to transportation system planning. Focus on regional transportation by taking a complete inventory of available data and resources to uncover different attitudes/preferences in concert with travel patterns and making improvements from a regional approach through the coordination of services. A final report will be generated to summarize the research and to provide recommendations to METRO in future planning and other assessments. New Park & Ride Facilities 1. Pearland / TMC (Brazoria County / South Freeway / SH288) Peak hour service is projected to operate from a facility on SH288 near Pearland and provide service the Texas Medical Center (TMC). The service is anticipated to operate under an interlocal agreement with Pearland or the Texas Medical Center. The service is to operate in express mode along SH288 to the TMC making limited stops within the TMC. Service implementation is targeted for January The service is expected to attract 725 boardings per day and will require seven buses. 2. Katy / Grand Parkway (West Harris County /Katy Freeway /IH10) METRO proposes to expand its peak hour operation in western Harris County due to increased demand in this area. METRO is anticipated to operate from an owned or joint use facility on IH10 near the Grand Parkway. The service is expected to begin operation in October It is estimated that the service will attract 545 boardings per day and will require nine buses. 8

16 Authority Level Service Plan (Con t ) Limited Stop Services New Limited Stop Service to George H. W. Bush Intercontinental Airport METRO proposes to operate weekday service between George H. W. Bush Airport and several downtown hotels using the Eastex Freeway Corridor (US59). Currently, METRO offers express/local service between the airport and downtown. This limited stop service is targeted at existing customers as well as a new potential market the business traveler. It is estimated that the new service will attract 100 boardings per day and will require seven buses. Signature Express Bus Service METRO SOLUTIONS Bellaire Signature Service - METRO proposes to implement a 9.6 mile long demonstration route on Bellaire Boulevard. Operating every 15 minutes during the morning and afternoon peak hour periods, the service will provide additional capacity within this highly utilized corridor. The travel time reduction over the existing scheduled service will be 10 minutes in each direction. The service is expected to begin operation in January It is estimated that the service will attract 1,475 boardings per day and will require seven buses. Improved Services The FY2008 Transit Plan proposes to address five additional bus routes with running time issues. Running time issues were identified on multiple bus routes during FY2006 by Transport Workers Union of America Local 260 and bus operating facility personnel. The reconciliation of schedules to traffic and travel time reality began in May 2007 and identified the top five routes with running time issues as: 33 Post Oak 46 Gessner 65 Bissonnet 163 Fondren Express 8 S.Main / Yale (NOTE: This route has since been unhooked separated for better utilization of resources) Service improvements are expected to begin in January 2008, and are projected to attract estimated 1,226 boardings per day which will require an additional three buses. Effective Technology Utilization Signal Pre-Emption in Congested Corridors The FY2008 Transit Plan addresses two congested corridors (Bellaire Boulevard and Bissonnet) served by 13 bus routes, with future projects involving Post Oak, Richmond and Westheimer. Utilization of the signal pre-emption feature will allow buses to adjust the traffic signals to minimize wait time at traffic signals and maximize the use of revenue time. Implementation of traffic signalization is expected to occur in January 2008 for Bellaire Boulevard and August 2008 for Bissonnet. This is expected to result in 645 boardings and will require no additional buses. 9

17 Authority Level Service Plan (Con t) Expansion of Bus Shelters The FY2008 Transit Service Plan proposes to add 100 bus shelters over the course FY2008. As of April 24, 2007 only 19% of the Authority s bus stops have shelters. A recent analysis indicates that in certain locations, the average daily passenger boardings are significantly higher in bus stops that have shelters when compared to those without. The addition of bus shelters is expected to cause an increase in ridership and could also minimize ridership losses during poor weather conditions. This initiative is expected to attract 625 boardings per day. Improved Passenger Information METRO has identified three primary campaigns to be conducted over the course of FY2008 to improve passenger information in an effort to increase ridership. By creating a positive public image that METRO is a safe, friendly and clean mode of transportation, and by increasing awareness of METRO services by providing accurate, comprehensive and easily accessible route / schedule and service information, METRO hopes to attract at least 1,307 boardings per day. The three campaigns include: The installation of InfoPanels at bus shelters on select routes Updating and printing multiple Transit System Maps Promoting METRORail ridership for special events Service Discontinuation / Redeployment Opportunities - Poorly Performing Routes METRO uses a comparative ranking model to identify fixed-route services with poor performance (e.g. high subsidy per passenger boarding, low operating ratio, low passenger boardings per revenue hour or low passenger boarding per revenue mile). Currently there are 3 services that have poor performance and have also failed to reach the ridership goal stated upon implementation. These include the weekday routes of the 39 Parker Road Circulator, 59 Aldine Mail and the 326 TMC Campus Circulator. In addition, there are 21 other services with subsidies per passenger boarding in excess of 100% above the average subsidy per boarding for their respective service category (Local, Express and Park & Ride). Currently, four services Routes 18 Kirby Saturday, 48 Navigation Sunday, 131 Memorial Saturday and 326 TMC Campus Circulator have been identified for discontinuation in January 2008 and are projected to cause a decrease in ridership of 404 boardings per day. Other routes may be proposed for discontinuation over the course of the fiscal year. 10

18 Authority Level Fare Policy METRO Board policy provides - - that the fare structure and fare rates will be reviewed annually and that fares will be increased as necessary to account for the effects of inflation on operating costs and to maintain or improve the revenue/operating expense ratio. (Resolution 85-18) In METRO s Regional Bus Plan (1992) METRO proposed to increase its fares on the fixed-route bus system annually, alternating between $0.05 and $0.10 increases until completion (original scheduled completion date: December 31, 2003). These proposed increases would have resulted in customers who rode the fixed-route system covering an increasing amount of the costs associated with operating the fixed-route system. On September 27, 2006 METRO s Board of Directors adopted Resolution Approving And Adopting A Fare Restructure; And Making Findings And Provisions Relative to the Subject. The resolution proposed retention of the existing base fares but with the discontinuation of a variety of fare media and discounts. The new structure is: More equitable for the average rider (ride more, save more through new loyalty program) Simpler (easier to understand, pay cash or use Smart Card); reduced number of instruments Quicker (less wait time, speed boarding, improve service reliability; touch Smart Card to validator and computers handle the rest.) Financially sound (help to insure the future health of the Authority) METRO will implement the fare restructure during FY2008 simultaneous with the distribution of the Q Card, METRO s new Smart Card technology. The Q Card will provide free transfers for a 2-hour window, an additional benefit of 5 free rides for every 50 rides taken, and eliminate more than 50 fare media types. It is expected that fare revenue will increase by $8.8 million after adjusting for a decline in ridership. Ridership forecasts included in the FY2008 Transit Plan assume an 11.0% decrease in fixed route ridership associated with full implementation of Q Card. 11

19 Authority Level Projected Ridership (000 s omitted) FY2007 FY2008 Change Service Category Estimate Target FY2007 vs. FY2008 Fixed Route Bus Local 70,977 64,200-6, % Express 5,994 5, % Park & Ride 8,468 6,381-2, % Total Fixed Route Bus 85,439 75,974-9, % METRORail 11,664 10,550-1, % Total Fixed Route Bus and Rail 97,104 86,524-10, % Special Bus Services METROLift 1,413 1, % Special Events % METROVan 2,245 2, % Total Special Bus Services 4,254 4, % Total All Bus and Rail Services 101,357 91,003-10, % HOV Carpools, Vanpools, and Non-METRO Buses 24,882 26,948 2, % TOTAL SYSTEM RIDERSHIP 126, ,951-8, % 12

20 Authority Level Organizational Chart BOARD OF DIRECTORS EXECUTIVE MANAGEMENT TEAM BOARD OF DIRECTORS President & Chief Executive Officer Frank J. Wilson Salaried (4) OPERATIONS Sr. Vice President David F. Feeley PUBLIC SAFETY Vice President/COP Thomas C. Lambert PLANNING, ENG & CONSTRUCTION Vice President Bryan N. Pennington PROCUREMENT & MATERIALS Vice President Paul L. Como COMMUNICATIONS & MARKETING Vice President George Smalley INFORMATION TECHNOLOGY Vice President/CIO L. Erik Oistad Authorized (2799) Authorized (275) Authorized (99) Authorized (114) Authorized (96) Authorized (53) HUMAN RESOURCES Vice President M. Helen Cavazos FINANCE Vice President/CFO Louise Richman ADMINISTRATION Vice President Deborah Richard LEGAL General Counsel Paula A. Alexander AUDIT** Vice President Arthur Smiley III OFFICE OF THE EXEC V.P. Executive V.P. John M. Sedlak Authorized (38) Authorized (107) Authorized (25) Authorized (13) Authorized (12) Authorized (14) Total Authorized: 3,650 ** Dual reporting position 13

21 Authority Level Manpower Summary FY2007 FY2008 Divisions Auth. FTE Auth. FTE Operations Operations Full-time 2,493 2, ,492 2,485.6 Operations Part-time Police & Traffic Management Planning, Engineering & Construction Real Estate Procurement & Materials Administration Government Affairs Communications & Marketing Information Technology Human Resources Finance Legal Audit Executive Office Total Full-Time 3,341 3, ,343 3,313.1 Total Part-Time Auth. = Number of authorized full-time and part-time positions at the end of the year. FTE = Full-time equivalent employees in person years for the total fiscal year. *Part-time personnel work varied hours up to 32 hours per week. Manpower Added/Deleted FY2008 Operations Salaried Full-time -1 Police & Traffic Management 4 Communications & Marketing -8 Human Resources 2 Finance 4 Legal 2 Audit -1 Total Net Change 2 14

22 Authority Level Major Cost Drivers - Fuel The market prices of diesel and gasoline have been extremely erratic over the past few years with a strong upward trend. This has put enormous pressure on METRO s fuel bill as illustrated in the following tables: Gallons Used (METRO & Contractors) FY02 FY03 FY04 FY05 FY06 FY07 Budget FY08 Budget Diesel 15,903,948 15,607,482 16,746,698 14,964,649 14,431,528 14,502,611 14,147,391 Gasoline 750, , , , , , ,028 Total 16,654,151 16,333,448 17,469,827 15,665,136 15,159,129 15,291,504 14,908,419 Expenditures (METRO & Contractors) FY02 FY03 FY04 FY05 FY06 FY07 Budget FY08 Budget Diesel $10,367,394 $13,722,561 $19,001,484 $22,834,852 $27,552,712 $37,021,780 $29,956,268 Gasoline $ 505,745 $ 663,324 $ 769,533 $ 1,093,547 $ 1,459,587 $ 2,083,807 $ 1,603,438 Total $10,873,139 $14,385,885 $19,771,017 $23,928,400 $29,012,299 $39,105,587 $31,559,706 *Does not include taxes In FY2005 and FY2006 METRO contracted for a bulk purchase with Valero, Citgo for fixed price future contracts, Motiva (Shell) for fixed price future contracts and Love s for storage fuel. This resulted in a $6.6 million total savings against buying at the current rack price. In February 2006, the METRO Board approved a Fuel Hedge Policy (Fuel Price Risk Management Policy). It called for FY2007 s diesel fuel to be hedged by July However, the price of a FY2007 hedge was not favorable and the budget was funded for increasing fuel costs. At the start of the fiscal year NYMEX based fixed price future delivery contracts were executed for October-June deliveries and storage fuel is to be utilized for July-September. The FY2007 total fuel cost is expected to be $6.0M less than budgeted. In January 2007, two financial hedges for diesel fuel were executed for FY2008. A total of 13.5M gallons or 95.6% of the required diesel for FY2008 has been hedged at an average market price (excluding $ additional for additives and transportation) per gallon of $1.83. The details of the hedges are listed in the following chart: 15

23 Vendor METRO Authority Level Major Cost Drivers Fuel (Con t) Gallons Date of Purchase Avg. Price per gallon Cost BP Products N. America, Inc. 7,014,000 1/10/07 $1.88 $13,179,466 Koch Supply & Trading, LP 6,510,000 1/17/07 $1.77 $11,516,148 Total 13,524,000 $1.83 $24,695,614 The FY2008 budget for fuel has been determined as follows: METRO & Contractors FY2007 FY2008 Difference Gallons of Diesel (millions) Gallons of Gasoline (millions) Total Gallons (millions) Price per Gallon* $ 2.56 $ 2.12 $ (0.44) Subtotal ($ millions) $ $ $ (7.546) Taxes ($ millions)** $ $ $ (0.077) Total Budget ($ millions) $ $ $ (7.624) * Purchase plus transport plus TxLED ** State of Texas Tax, Fees = cents/gallon for Diesel State of Texas Tax, Fees = cents/gallon for Gasoline METRO Staff proposes a $7.546 million decrease in the fuel budget from FY2007 to FY2008. This savings reflects the FY2008 financial hedges executed during FY

24 Authority Level Major Cost Drivers Power METRO has two major uses of electrical power: electricity for METRO facilities and electricity for rail propulsion power. In January 2004, METRO put in place a three year fixed price electricity contract with Reliant Energy which expired during FY2007. A new contract was negotiated during FY2007 with Suez Energy Resources which fixed the base contract rate at $ per kilowatt hour for the term of the contract while the Transmission and Distribution Service Provider (TDSP) portion floats. The contract hedges METRO s electricity requirements for 3 years, providing budget certainty on price in accord with the Board s Fuel Price Management Policy adopted February METRO has projected its FY2008 power requirements as follows: Quantities in millions of kwh FY2007 Budget FY2008 Budget Difference Facilities (1.0180) Propulsion Total (0.699) (1.294%) The increase in power requirements for propulsion is due to increased service in FY2008 associated with leap year and very heavy rider loads being carried on METRORail. The decrease for facilities reflects current usage and anticipated requirements for a full year of operation at the Cypress Park & Ride lot. The FY2008 Operating Budget has assumed the price will be $ as compared to $ budgeted in FY2007 for the new contract. ($ millions) F2007 Budget FY2008 Budget Difference Electricity (.533) (9.06%) 17

25 Authority Level Major Cost Drivers Labor Agreement METRO s current labor agreement approved in August 2005 covers three years August 1, 2005 July 31, The key terms of the agreement impacting FY2008 are as follows: Wages August 5, % increase to all classifications FY2008 Budget Increase = $3,036,521 Health Benefits METRO s contribution to Health & Welfare Trust August 1, 2007 increased to $670 per month per participant FY2008 Budget Increase = $839,756 Pension August 1, 2006, Benefit = $53 per month per year of service August 1, 2007, Benefit = $54 per month per year of service FY2008 Budget Increase = $145,753 During FY2008, METRO will negotiate a new labor agreement with Local 260 of the Transport Workers Union of America. Any additional costs associated with the new Agreement will be covered with existing resources in the FY2008 budget request and savings achieved during the fiscal year. 18

26 Authority Level Major Cost Drivers Purchased Transportation METRO has two service components run by private contractors: First Transit, Inc. operates the fixed route service based at Northwest BOF (one of the six BOFs) and the METROLift van service. Greater Houston Transportation Company operates the METROLift sedan service. During FY2006, METRO began providing diesel fuel to these contractors for the fixed route bus service and van paratransit service to better control volatile fuel costs. As this has been beneficial in reducing fuel cost and consumption during FY2007, METRO will continue this practice in FY2008. In FY2007, a new five-year contract for fixed route bus service operated out of the Northwest BOF was successfully negotiated. During the procurement process for this contract, METRO was able to have the current contract s service rate for ½ of FY2007 extended to the entire fiscal year which generated real savings, and also negotiated a favorable service rate for FY2008. In addition, METRO will be bidding a new METROLift sedan service multi-year contract. Based on FY2008 service levels and negotiated contract increases, an additional $1,799,363 has been incorporated into the FY2008 budget request to cover expected increased costs in these contracts. 19

27 Authority Level Major Cost Drivers Special Events METRO will operate transit service, using both METRO buses and contract buses, for approximately 20 special events in FY2008. The largest of these special events will be the Rodeo. These services are intended to reduce traffic congestion and to improve traffic flow for both event attendees and other regional travelers. However, two major factors have required METRO to reevaluate how special events service is provided. These are: Large increases in costs for fuel and private contractor purchased transportation, Proposed changes by the FTA regarding the use of federally-funded public transit agency resources instead of private contractors for providing charter bus service. During FY2007, METRO staff in cooperation with event sponsors restructured special events service delivery and cost recovery in order to ease the financial burden on both parties. This restructuring consisted of the following: Redesign special events service delivery and associated resource usage to match service levels and demand in the most efficient and cost-effective means possible. In this way, special events transportation needs could be met with far fewer resources needed. METRO operated special events service would be provided primarily through augmentation of existing fixed-route service. Utilization of private contractors for providing special events service would be done through the greatest extent possible based on their availability to provide required service. Furthermore, special event sponsors would be responsible for 100% of the expenses associated with the use of the private contractors. The use of this strategy dramatically reduced special event net expense during FY2007, thus representing real savings to METRO. The FY2008 proposed budget has been prepared using the same philosophy, which has resulted in a year-to-year budget reduction of $588,

28 Authority Level Major Cost Drivers Health Care Medical and dental benefits are budgeted in FY2008 at $ million, an increase of $2.31 million over FY2007, or 6.5%. These benefits are provided to the employees in the following two categories: Union - METRO s payment to the Trust is negotiated and changes from $640 per person per month to $670, an increase of $30 per month. Non-Union - METRO s decision to return to self-funding of its medical plans for FY2008 after almost five years of being fully-insured, allowed medical rates for salaried employees to remain the same as FY2007. This is a major accomplishment in a climate of rising healthcare costs. A small increase in staffing levels and allowance for new retirees provide the increase over FY2007. Overall, the salary employee health care plan provides more choice, features and flexibility. It is designed with wellness incentives that encourage employees to be more proactively engaged in their health management which contributes to the quality of life and to healthcare cost containment. The medical plan options will increase from two to four, a Health Maintenance Organization (HMO) equivalent, and three Preferred Provider Organization (PPO) plans. The PPOs differ primarily in their premiums, deductibles, copays, and out-of-network coverage which allows employees more choice based on their income levels and priorities. In addition, METRO has moved to the forefront as a preferred employer with some alternative medical therapies in the PPO plans such as acupuncture, nutrition counseling, compounded drugs, and herbal supplements (when prescribed by a licensed physician). Other new features include no copays for generic and formulary drugs used to treat common diseases such as hypertension and diabetes, and no deduction for insulin. This should encourage employees to maintain their health and contain health care cost. The dental PPO plan will have some added benefits as well, including no deductibles for diagnostic and preventive services. Employees will be encouraged to buy-in to their health through incentives for participating in a Wellness Program. By doing so, they will have the opportunity to maintain their premiums at current levels; the premiums will go up for those who do not participate in the wellness program. 21

29 Section III: Financial Proforma

30 Financial Proforma Projected Cash Flow Revenues $millions Fares Sales Tax Income (1) Interest Income Grants Income (2) Other Income Commercial Paper Total Revenue FY Beginning Fund Balance (3) Total Sources 1, Expenditures Operating Expenses Transit Operating Expenses Traffic Mgmt Capitalized Operating Expenses Special Events Expenses Allowance for New Service Allowance for New Initiatives Expensed Small Capital Total Operating Expenditures General Mobility Budget (4) Capital Budget Capital Contingency Subtotal Capital Expenditures Total Expenditures FY Ending Fund Balance (3) Total Uses 1,

31 Financial Proforma Projected Cash Flow (Con t) *Commercial paper in the amount of $ million is used in the cash flow to balance sources and uses. To the extent that the General Mobility carryover from FY ($ million = total $ less $ budgeted in FY2008) is spent by the City of Houston, Harris County and the Multi Cities, additional commercial paper would have to be issued to cover the expenditure. The Capital Budget assumes the use of up to $ million of commercial paper. For fiscal conservatism, this cash flow assumes a minimal holding in METRO s investment portfolio. Notes (1) (2) (3) (4) For fiscal conservatism, projected cash flow uses sales tax revenue of $ million which represents the FY2006 actual sales tax revenue of $ million less a one time audit collection of $ million. Barton Smith s projection for FY2008 is $ million. Includes capital projects and capitalized operating expenses. METRO Board approved Debt Policy adopted June 2005 sets minimum target fiscal year ending fund balance (cash and investment portfolio) at 25% of the forward 12 month operating expenditures which is $ million. To this is added the following: Board approved reserves $ million, which are not proposed to be used in FY2008; worker s compensation reserve of $ million; and vehicle liability reserve of $ million. Total minimum balance = $ million. METRO will fund the Multi Cities program of projects at the time they are ready for implementation regardless of projected funding availability within the program. 23

32 Financial Proforma Sales Tax Projections ($000's omitted) FY07 FY08 FY09 FY10 Sales Tax 481, , , ,451 Rate of Change from Prior Year 6.8% 1 5.9% 7.2% 7.8% For fiscal conservatism, METRO's sources and uses of funds and projected cash flow for FY2008 uses FY2006 adjusted sales tax revenue, which was $ million rounded to $ million NOTE: FY2006 sales tax revenue which excludes $ million one-time audit collection received in January 2006 for prior years was the basis for the FY2007 rate of change from FY2006. The sales tax projection for FY2008 is based on Barton Smith's June 2007 report to METRO. Barton believes the Houston economy will slow in FY2008 due to the slow down in the US economy from the declining housing market and the energy sector return to solid but not spectacular growth. FY2004 sales tax revenue actual = $ million FY2005 sales tax revenue actual = $ million FY2006 sales tax revenue actual = $ million FY2006 sales tax revenue adjusted for $ million one-time audit collection received January 2006 for prior years = $ million. The adjusted sales tax is used in calculating annual growth. 24

33 Financial Proforma Sources and Uses of Funds (Income Statement) Per GAAP Format FY2007 FY2008 Difference FY07 Budget Budget Projection vs. FY08 Proj. Revenues Fares 56,038 52,884-3,154 Sales Tax Income (Accrual Basis) 400, ,000 50,000 Interest Income 9,984 8,912-1,072 Grants Income 138, ,428-25,457 Other Income 1, Commercial Paper 0 255, ,563 TOTAL REVENUES 605, , ,490 Expenses Transit Operating 333, ,088 12,055 Traffic Management Operating 6,710 6, Other Operating 2,186 2, Subtotal Operating 341, ,812 11,883 General Mobility Street Projects 112, ,328 72,821 Transit Mobility Street Projects* 2,986 3, Subtotal Street Projects 115, ,452 72,959 TOTAL EXPENSES 457, ,264 84,842 Net before Depreciation 148, , ,648 Depreciation and Loss on Disposal of Fixed Assets 125, ,000 0 Net after Depreciation 23, , ,648 *Streets & RCTSS ($000 omitted) 25

34 Financial Proforma Balance Sheet (GAAP) Metropolitan Transit Authority of Harris County, Texas Estimated and Projected Statement of Net Assets For Years Ended September 30, 2007 and 2008 (in Thousands) Estimated Projected September 2007 September 2008 Assets Cash 1,862 2,862 Receivables 126, ,029 Inventory 23,220 23,779 Investments 221, ,747 Other Assets 23,663 15,373 Capital Assets Net of Depreciation 1,597,288 1,897,288 Total Assets 1,993,872 2,317,078 Liabilities Trade Payables 43,210 49,885 Accrued Payroll 19,305 21,035 Short-term Debt 143, ,000 Other Current Liabilities 25,779 29,259 Total Liabilities 231, ,179 Net Assets - Retained 1,762,578 1,816,899 Total Liabilities and Net Assets 1,993,872 2,317,078 Net Assets 1,607,701 1,762,578 Change in Net Assets 154,877 54,321 26

35 Section IV: Capital & General Mobility Budgets

36 Capital & General Mobility Budgets Capital Budget FY2008 Discussion The proposed capital budget for FY2008 is $ million. See following document for details of projected expenditures by individual project. In summary, the capital budget breaks down as follows: $millions Funding Sources Program FY08 Budget Grants Commercial Paper Local A. METRO Solutions B. Capital Improvement Program C. General Mobility D. Capitalized Operating Expenses* Total % 44.4% 35.9% * Local matching funds not included. The proposed capital budget contains $20 million in program contingency. This is to provide funding for the following possible events: 1. Unbudgeted carryover from FY2007, which is due to projects cash flow spilling over from FY2007 to FY2008. METRO s budget does not allow for automatic carryover of budget funds from year to year. There is always some spillover due to timing issues, so an allowance is needed. 2. Many of METRO s initiatives have not been fully planned. Therefore, cost estimates are not existent at this time. Some capital funds will be needed to support some of these initiatives. The contingency is a source of funding when plans have been completed, cost estimated, justified and approved. 3. Frequently during a fiscal year, a capital need, not previously identified, appears. The capital contingency provides funds for such unexpected events. The capital contingency, representing 5.9% of the proposed capital budget, is controlled by the President & CEO, who releases funding only when needs have been justified. 27

37 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing METRO Solutions DESCRIPTION FY2008 Budget GRT Corridors & Intermodal Terminal Phase 1 Development & Phase 2 Design/Build GRT Corridors Design, Construction, Systems & Vehicles North Corridor 8,661 Southeast Corridor 8,133 East End Corridor 5,326 Uptown Corridor 5,996 University Corridor 21,033 Subtotal - 49,149 ROW / Land Acquisition North Corridor 14,828 Southeast Corridor 17,922 East End Corridor 6,929 Uptown Corridor 16,060 University Corridor 3,576 Subtotal - 59,315 Subtotal - GRT Corridors 108,464 Intermodal Terminal Design / Construction 10,000 ROW / Land Acquisition 5,000 Subtotal - Intermodal Terminal 15,000 Total - Phase 1 Development & Phase 2 Design/Build 123,464 28

38 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Pre Phase 1 & Program Development FEIS / Environmental ( ) North Corridor 752 Southeast Corridor 748 University Corridor 2,200 East End Corridor 335 Uptown Corridor 335 Subtotal - 4,370 Pre Phase 1 Engineering University Corridor 3,127 Subtotal - 3,127 Misc. Transit Facilities - Development Projects Wheeler Intermodal Terminal (PE&C - Develop. Fund) 1,950 Transit Facilities Misc. Engineering Studies 300 Subtotal - 2,250 Program Development Program Initiation - Phase 2 2,500 Quality Assurance Prog (QAP) 165 Operations Development Support 242 Small Business / DBE 338 Subtotal - 3,245 Total - Pre Phase 1 & Program Development 12,992 29

39 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION Total - GRT Corridors and Intermodal Terminal FY2008 Budget 136,456 Other METRO Solutions Projects Signature Bus Service Program Development Future Corridor Development Fund 250 Subtotal Bellaire Corridor Bellaire Quickline: Vehicle Improvements 345 Bellaire Quickline: Capital Educ. Campaign 276 Bellaire Quickline: Transit Amenities 3,237 Subtotal - 3,858 Future Projects 4,725 Total - Signature Bus Service 8,833 HOT Lane Program HOT Lane Conversion Phase 1B - HOT Lane Conversion 10,171 Subtotal - 10,171 HOT Lane Expansion Phase 2A - HOT Lane Expansion 280 Subtotal Total - HOT Lane Program 10,451 30

40 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Commuter Rail Transit (CRT) Commuter Rail Transit (CRT) Studies 200 CRT 90A - Missouri City - Fannin South 2,000 CRT Fairfield to Intermodal 3,000 Total - Commuter Rail Transit (CRT) 5,200 Park & Ride Lots & Transit Centers Park & Ride Lots (Land, Design & Construction) SH 288 P&R 413 Katy Freeway P&R 338 Total - Park & Ride Lots & Transit Centers Main St. Corridor Enhancements Vehicle Expansion 188 Rail Operating Center (ROC) Expansion 100 In Pavement Lighting In Pavement Lighting - Phase Total - Main St. Corridor Enhancements 769 Total - Other METRO Solutions Projects 26,004 Total - METRO Solutions 162,460 Advanced Transit Plan ( ATP ) New Starts Advanced High Capacity Transit Katy Corridor Addicks Park & Ride Modifications 707 TxDOT Coordination Activities 113 Total - New Starts 820 Total - Advanced Transit Plan (ATP)

41 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Transitways Northwest Transitway - US 290 Diamond Lane 500 Subtotal - Transitway 500 Fixed Guideway Modernization Slip Ramp Closure Devices Slip Ramp In-Pavement Lighting & Delineators 564 Sign Standardization Sign Standardiization (98/99 Grant) 276 Facility Visibility 335 New Signage Initiative - Drum Sign Upgrades 147 TranStar Integration HOV Lane TranStar Control & Integration 1,425 Other Projects HOV Utilization Data Collection 225 Fixed Guideway Rehabilitation - Phase Fixed Guideway Rehabilitation - Phase Subtotal - Fixed Guideway Modernization 4,422 Total - Transitways & Related Facilities 4,922 Buses & Support Equipment Passenger Shelters Shelters & Lighting Passenger Shelters & Lighting 100 Shelter Initiative 1,027 Revenue Vehicles Bus Acquisitions Leases Purchase Transit & Suburban Bus Improvements (100/yr 7,474 Bus Improvements Bus Bike Racks 450 New Flyer AC Lines

42 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Fire Suppression System Upgrade 758 New Flyer Hydraulic Lines 586 Operators Seats 247 HVAC System 188 Axles 3,924 Engines 5,579 Transmissions 1,815 Replace Bus Floors 411 Non-Revenue Vehicle Capital Projects 609 Sub-Total Buses Improvements 14,974 Collection & Management Systems Implement Bus Smart Card System 20,450 Cubic Farebox Upgrade 335 Cubic Lawsuit - Seek Recovery of Funds 1,500 Sub-Total 22,285 Sub-Total Revenue Vehicles 44,733 Support Equipment & Systems Support Vehicles 4,532 Tools & Equipment 1,925 Police Support Equipment 100 System Support for Yard Supervisor Function&Fleet Mgt 1,500 Sub-total Support Equipment & Systems 8,057 Total Buses & Support Equipment 53,917 Operating Facilities & Upgrades Operating Facilities Administration Office Building/METRO Lift 100 Emergency Preparedness - Phase 2 (PE&C) 1,629 Purchase & Install Two Diesel Storage Tanks 2,500 Subtotal - Operating Facilities 4,229 33

43 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Facility Upgrades Main St. Corridor Enhancements Bar Signal Overrun system 2,301 IH-610 Frontage Rd High Load Detection 1,327 Station Platform PA Announcement Upgrades 375 Cable Support System in Traction Power Pull Boxes 1,237 ATMS Study, Recommendations and Implementation 439 Install SCADA Summary Alarms 810 Traction Power Alarms and Indications 912 ROC Shop Electrical 129 Central Control Systems Upgrade 737 Wayside Wireless Network System 1,788 Vehicles On-Board Wireless and Diagnostic System 913 Subtotal - 10,968 Park & Ride Lot Modifications Park & Ride Lots Visibility Improvements 405 Kuykendahl P&R Expansion 147 Southpoint P&R Expansion 158 Fuqua P&R Expansion 242 Subtotal Facility Upgrades Upgrade Security Main 720 Upgrade Restroom - Kingsland P&R 100 Upgrade Fall Protection - Pits 355 Upgrade Tactile Pavers - Rail Line 222 Upgrade Lighting Main 110 Upgrade Projects Engineering/Design 250 Sub-Total 1,757 Rail System Upgrades Tire Replacement Overhaul Schedule 390 Major Facility Rehabilitation Initiative 7,000 34

44 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Administration Services & Print Shop AOB Improvement 195 Furniture and Equipment 550 METRO Corporate Store 105 Sub-Total 850 Total Operating Facilities & Upgrades 26,146 Intelligent Transportation System Police Automation Program Regional Radios Regional Cad Dispatching & Records Mgmt 124 Police Radio Enhancements 238 Total - Intelligent Transportation Systems 362 Information Technology Safe Bus/Replace ARCS System (Radio) 22,373 End User Workstation 1,958 Fortify Network Communications 4,072 UNIX And Intel Servers 3,053 Core Applications 6,000 ERP Implementation 1,878 IVOMS Enhancements 1,400 Budget System Integration 690 SAP Upgrade & Deployment 2,500 Security Enhancements for Facilities 100 Police Command Center at Buffalo Bayou 379 Total - Information Technology 44,403 Homeland Security Video Surveillance of Bus Stops 150 Portable Video for P&R Ride Lots 150 Transit Security Planning 79 Transit Organizational Activities - Train 86 Equipment Acquisition 247 Training 46 35

45 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget Transit Organizational Activities - Bus 119 Transit Equipment Acquisition - Bus 101 Transit 1900 Main Radio Interoperability 133 NIMS Training 1,800 Sub-Total 2,911 Other Miscellaneous Projects Voice Analysis Software 6 OSHA And Environmental Compliance 1,000 Wireless Headset For Motorcycles 17 Police SORT Support Equipment 155 Records Management Office Upgrade 48 Surveillance Equipment for Investigations 12 Training Room Furniture 8 Wellness Program Equipment 55 Total Other Miscellaneous Projects 1,301 Total Homeland Security 4,212 Transit Mobility Program Bus Pads / Bus Lanes 225 Curb Cuts / Intersection Improvements 265 RCTSS - Outside Beltway 102 System Accessibility 100 Corridor Signal Preemption & Optimization 1,800 Total - Transit Mobility Program 2,492 Development Projects - PE&C Air Quality Transportation Conformity 75 Engineering Studies 225 Capital & Environmental Studies 200 Interagency Coordination 200 Travel Model Adapt HGAC (OD Survey)

46 Capital & General Mobility Budgets Capital Budget FY2008 (Con t) Project Listing DESCRIPTION FY2008 Budget System Planning/New Initiatives 750 GIS System Upgrade 212 Technology Program Support 0 High Speed Rail - Planning 100 Main Street Corridor RCTSS - O&M 1,270 Sub-Total 3,532 Development Projects - Real Estate Cypress P&R Joint Development (Construction) 300 Intermodal Terminal Joint Development 4,700 Wheeler Intermodal 2,500 Joint Development Studies 1,000 Transit Oriented Development Market Analysis 1,500 Fannin South TOD 3,000 Sub-Total 13,000 Other Development Projects Federal Small Business Program 120 Sub-Total 120 Total Development Projects 16,652 Allowance for Capital Replacements/Contingency 20,000 Total Development Fund, Land & Contingency 36,652 Total - Capital Improvement Program 173,926 Total - METRO Solutions & Capital Improvement Program 336,386 * INCLUDES FEDERAL GRANTS APPROPRIATED TROUGH FY2007 PLUS PROJECTED FY2008 GRANTS. ** USE COMMERCIAL PAPER TO FUND CURRENT EXPENDITURES, REDEEM WITH FORMULA GRANTS IN FY2009-FY

47 Capital & General Mobility Budgets General Mobility Budget FY2008 Discussion A. FY2007 Projected Expenditures versus Budget ($000 omitted) Budget FY2007 Estimate FY2007 Program Components Difference City of Houston Designated Projects 19,145 17,209-1,936 Future Designated 46,096 11,988-34,108 Carryover FY ,854 41,854 Total 65,241 71,051 5,810 Harris County Designated Projects 8, ,191 Future Designated 13, ,135 Carryover FY Total 21, ,326 Multi-Cities Designated Projects 16,853 14,602-2,251 Future Designated 3,315 12,943 9,628 Carryover FY Total 20,168 27,545 7,377 Areawide Designated Projects 5,772 5, Total Designated Projects 49,961 37,761-12,200 Future Designated 62,546 24,931-37,615 Carryover FY ,854 41,854 Total 112, ,546-7,961 During FY2007 it is estimated that the General Mobility Program will underspend the budget by $7.961 million, -7.1%. The category labeled Carryover FY is previously budgeted funds not expended and carried over into FY2007 per the 1999 Master Agreement. The Board did not include the carryover in the FY2007 General Mobility Budget. METRO does not control the expenditure of General Mobility Funds. This is driven by the implementation of projects by the City of Houston, Harris County, and the Multi- Cities. 38