METRO. FY2007 Quarterly Financial & Management Report. Second Quarter Ending March 31, 2007 INDEX

Transcription

1 METRO FY2007 Quarterly Financial & Management Report INDEX Page Highlights METRORail Ridership Climbs to New Heights 1 U.S. 290 Receives METRO Park & Ride - Yields Record Ridership 1 METRO and Public Private Partnerships - New Developments 1 Environmental Impact Study for University Corridor 2 Important Step in the HOT Lane Project 2 Small Business Outreach Activity in Full Swing 2 Surplus Real Estate Nets $4.8 million 3 Breathe Easier - New Hybrid Electric Buses Offer Lower Emissions 3 Emergency Preparedness Workshop Attracts Regional Attendance 3 METRO Board Welcomes New Member 4 Bus and Rail Rodeo - Best of the Best Compete 4 METRO Launches Transit Blog 5 Management Discussion and Analysis Ridership Trends 6 Financial Performance Revenues 10 Operating Expenses 12 General Mobility Expenditures 15 Capital Expenditures 16 Key Performance Indicators 19 Composite Operating and Capital Statement 26 Balance Sheet 27 0

2 Highlights METRORail Ridership Climbs to New Heights On Thursday, March 15, 2007, METRORail set a new weekday ridership record of 64,448 passenger boardings. The ridership on this date surpassed the previous single-day record of 61,005 boardings on Sunday, February 1, 2004 when Houston hosted Super Bowl XXXVIII. METRORail also set a weekly ridership record with 322,571 boardings between Monday, March 5 and Sunday, March 11, A third record was set as Rail ridership for the Month of March, 2007 achieved the highest monthly ridership in METRORail history. The 1,267,375 passenger boardings were 12.4% higher than March 2006, the previous record-breaking month. In addition, another record was set during the 2007 Houston Livestock Show & Rodeo. Rodeo-related Rail ridership from February 22 March 18, 2007 was 334,124 passenger boardings, a 30.8% increase from the previous record for the Rodeo last year. In fact, the large number of passengers attending the Houston Livestock Show and Rodeo contributed to the achievement of daily, weekly and monthly ridership records as well. U.S. 290 Receives METRO Park & Ride Yields Record Ridership METRO recently added a new Park & Ride (Cypress P&R) with 623 parking spaces on the Northwest Freeway corridor near Skinner Road. This temporary facility is located in the Hewlett Packard parking lot on the westbound feeder of U.S On the first day of operation, January 22, 2007, more than 200 customers used the service, representing the highest first-day ridership on a Park & Ride route in 15 years. The second day saw a 17 percent increase in ridership, and currently, more than 300 customers use the service on a daily basis (600+ customer boardings). Since the inaugural week, METRO has more buses than planned to accommodate the increased demand and now offers service at 15 minute intervals during the AM peak. A permanent facility is under construction nearby, and completion is anticipated in June METRO and Public Private Partnerships New Developments METRO has submitted an application to the Federal Transit Administration (FTA) proposing the METRO Solutions Program as a candidate for its new Public Private Partnership Pilot Program. METRO Solutions, to our knowledge, is the first federal transit design-build-financeoperate-maintain program in the United States. It is ideally suited to demonstrate the new entrepreneurial government approach of FTA and the specific goals of the Private Public Partnership Pilot Program, while protecting the federal interest. The METRO Solutions program is specifically designed to exploit key advantages of public-private partnerships such as fast-track design and construction and private sector performance guarantees In addition, this comprehensive approach to a public private partnership presents many benefits including expedited project delivery, transfer of risk to the private sector, reduced costs/reduced claims, and shared liability. Under this scenario, the public sector can deliver more improvements faster, without giving up quality, control or public protections. 1

3 Highlights Also, in mid February, METRO President & CEO Frank Wilson was invited to speak before the Congressional Subcommittee on Highways and Transit on Public Private Partnerships: Innovative Financing and Protecting the Public Interest, and he emphasized the benefits of such programs to transit. Environmental Impact Study for University Corridor METRO completed a detailed Environmental Analysis on a short list of alternative routings that the Board previously approved. The Environmental Analysis will become a part of the Draft Environmental Impact Study (DEIS) scheduled to be submitted to FTA in April. Community Outreach continued with four Open Houses and Planning Workshops held in late March. Important Step in the HOT Lane Project At the February meeting, the Board of Directors took an important step in advancing the conversion of the High Occupancy Vehicle (HOV) Lanes to High Occupancy Toll (HOT) Lanes by approving Carter and Burgess, an engineering company, to serve as Program Manager. The firm will support METRO s Planning, Engineering & Construction Department by providing strategic planning and development expertise, assistance in interagency coordination, and construction and operations acceptance oversight. A Request for Qualifications for a Toll System Provider was circulated in January and four responses are currently being evaluated. Presently, the first HOT lane is scheduled to be operational during FY2008 in the US290 corridor with each of the remaining to come on stream over three months thereafter until the program completes five HOT lanes. The concept of HOT Lanes is based on efficiency. METRO wants to move more people and vehicles in the managed lanes in order to maximize their use. Although some HOV Lanes are currently congested at the peak of rush hour, the lanes are underutilized the rest of the day. A HOT Lane is a designated lane for high occupancy vehicles as well as for toll-paying vehicles that do not meet the required high occupancy requirements. At peak hours, the toll would be based on the level of congestion. At the height of the peak hour, this dynamic toll would gradually discourage paying vehicles from entering the lane and encourage commuters to travel by bus or higher occupancy vehicles, ensuring the HOT lane keeps flowing even when main lanes are congested. Small Business Outreach Activity in Full Swing METRO hosted an Open House for Small Business Outreach at 1900 Main as part of an ongoing effort to educate small and disadvantaged businesses and encourage increased participation. METRO s Board Room and second floor lobby were filled to capacity with about 400 eager small business owners wanting to learn how to do business with METRO, the City of Houston, and the Port of Houston Authority. Hosted by METRO and co-sponsored by Mayor Pro Tem Michael Berry and Council Member Peter Brown, the meeting agenda included a panel discussion by small and disadvantaged businesses that had been successful with one 2

4 Highlights or more of these agencies. Representatives from METRO, the City and the Port detailed upcoming procurements and contracts at each agency. The information session also included instructions on how to do business with each agency, the benefits of certification, and various networking and training opportunities. In addition, an Optimum Opportunity Match-up for FY2007 was also held in early March. The purpose of the Optimum Opportunity Match-up was to provide an opportunity for contract administrators/buyers and project managers to meet face-to-face with METRO certified small business owners. Forty small businesses attended the event. Each small business was individually interviewed by METRO buyers, contract administrators and project managers in 30 minute sessions. Surplus Real Estate Nets $4.8 million Approximately 47 acres of surplus land on South Main near Hiram Clark was sold, realizing $4.8 million to be used for other projects. The property was declared surplus in 1988, but remained in inventory until real estate market conditions improved. In 2006, when it was determined that this parcel of land would not be useful toward any future transit purpose, the property was put up for public sale. Breathe Easier - New Hybrid Electric Buses Offer Lower Emissions The first 16 of an order for 40 new 40-foot transit low-floor hybrid-electric drive (HEV) buses METRO has contracted to buy were received during the second quarter of FY2007. Manufactured by New Flyer Industries, Inc., the buses have a diesel fuel engine combined with an electric motor powered by batteries. This combination results in buses which are 20 to 30 percent more fuel efficient, and which have significantly lower exhaust emissions (nitrogen oxide and carbon dioxide) than buses with standard propulsion systems. Buses with an HEV drive are also more reliable to operate than buses with standard propulsion systems. In addition to the benefits to the environment, the buses which replace older buses already retired have been redesigned to give them a sleek, modern look, both inside and out. The redesigned exterior is similar to European-style buses. The interior features stainless steel seats and new flooring material. The HEV buses are also quieter and will run more smoothly than buses with standard propulsion systems. Of the 40 buses ordered, the last 10 to be delivered will be specifically designed for METRO s Signature Bus Service. In other new bus news, METRO has placed 25 new MCI 45-foot buses into Park & Ride service during the 2 nd quarter to accommodate new service (see Cypress Park & Ride Highlight). Emergency Preparedness Workshop Attracts Regional Attendance METRO hosted a two-day public transportation emergency preparedness workshop on March 26-27, 2007, at the Fallbrook facility. The program, which was free to all attendees, was sponsored by the National Transit Institute, in collaboration with the Federal Transportation Authority and the Office of Grants and Training of the US Department of Homeland Security. The ultimate goal of the workshop was to improve coordination and response among all agencies and resources during an incident. Participants worked in small groups to tackle the 3

5 Highlights challenges posed by fictional, yet very real emergency scenarios that were presented during the session by workshop facilitators. More than 40 people participated, representing not only a cross-section of METRO, but also such regional organizations as TranStar, FBI, the Galveston Fire Marshal s Office, Greyhound Lines, Houston Galveston Area Council, Burlington Northern Santa Fe Railroad Police, US Department of Transportation, Harris County Office of Homeland Security and Emergency Management, Houston Fire Department, and the Fort Bend County Public Transportation Authority. METRO Board Welcomes New Member Mr. Burt Ballanfant, former West University mayor, became the latest addition to METRO s Board to replace Ms. Louise Richman who left the Board to become the Authority s CFO. Ballanfant, who will represent the 14 Multi-cities in METRO s service area, is an attorney for Shell Oil Company. He served six years on the West University City Council, the last four as Mayor, and also served during that time as President of the Harris County Mayors and Councils Association. He has also served on the Metro Citizen Advisory Board and has been a 30-year mass transit user in Houston. Bus and Rail Rodeo Best of the Best Compete On Saturday, March 24, 2007 approximately 1,500 METRO employees, their family and friends gathered to watch the best of the best compete in METRO s annual Bus and Rail Rodeo competition. Bus operators, METROLift operators and cleaners navigated an obstacle course, mechanics diagnosed and repaired defective (purposely rigged) buses, and rail operators and mechanics competed in various events. To make the day more of a family occasion, the event had a variety of activities including a rock wall, mechanical bull, a giant slide, a basketball competition and bingo. Teams competed in Barbeque Brisket and Chili Cook-offs and a miniature train ran throughout the grounds. In addition to the adult competitions, Small Fry and Electric Cart competitions were available to children from 6 to 16 years of age. Bus operator Darrel Willis and the bus maintenance team of David Tat, Van Ho and Khanh Nguyen won their competitions and will go on to represent METRO at the International Bus Roadeo in Nashville, Tennessee in May. Additionally, contract bus operators representing First Transit will compete in the Nashville competition. Light Rail train operator Ron Williams and a rail maintenance team made up of Carlos Santa Cruz, Kim Do and Michael Collins are the winners to go to the APTA International Rail Rodeo that will be held in Toronto in June. 4

6 Highlights METRO Launches Transit Blog METRO has put in place a new communication tool, a Transit Blog, to give a daily snapshot of what s going on at the Authority and in the transportation industry. From inception in January through March 2007, 266 users have registered and there were 38,267 views and 730 comments on the blog. The goal was to open a dialogue with the public, put a human voice to the agency and be more accessible and transparent to riders. From the comments that have been received, it s evident that METRO has started lively discussions from both critics and supporters. Blog topics have ranged from the serious to the humorous, including the Q Card, new Cypress Park & Ride lot, HOV lanes, hybrid buses, cell phone use on buses, and rubber sidewalks. The top three postings that generated the most comments were: Using Cameras to Keep Park & Ride Lots Secure; From Where They Sit: Bus Drivers Sound Off; and Countdown to the Q Card Launch Date. 5

7 Ridership Trends Ridership Total system ridership year-to-date including fixed route bus and METRORail, METROLift, Special Events, METROVan, and HOV Vanpools/Carpools is 63.0 million boardings, up 0.4% from last year on a calendar adjusted basis. Factors that contribute to the increase are discussed in the next three pages. YTD Total System Ridership Ridership in Millions YTD Total Fixed Route Ridership Ridership in Millions FY06 FY07 40 FY06 FY07 Total System Ridership FY2006 FY2007 Change Fixed Route Bus Service 43,606,014 42,691, % METRORail Service 5,607,536 5,757, % Subtotal Fixed Route Service 49,213,550 48,449, % Special Bus Service 2,395,534 2,310, % Subtotal Bus & Rail Services 51,609,084 50,759, % HOV Carpools, Vanpools & Non-METRO Buses 11,120,338 12,233, % TOTAL RIDERSHIP 62,729,422 62,993, % 6

8 Fixed Route Service Fixed-route ridership through the second quarter, comprised of METRORail, Local and Express Bus, and Park & Ride services, is 48.4 million, down 1.6% from FY2006 ridership of 49.2 million. METRORail ridership year-to-date is up 2.7% to 5.8 million. Local and Express Bus service is 38.5 million, down from 39.4 million in FY2006, a decrease of 2.1%. Park & Ride service ridership is down 1.6%, to 4.2 million. Factors contributing to the fixed route ridership changes are discussed on the following page. 10 Fixed Route Bus and Rail Service Ridership in Millions OCT NOV DEC JAN FEB MAR FY06 FY07 7

9 Fixed Route Service (continued) Many factors contributed to the ridership changes: The majority of the METRORail ridership increase can be attributed to the Houston Livestock Show & Rodeo. Rodeo ridership increased by nearly 140,000 in FY2007 as compared to FY2006. Very bad weather conditions in January 2007 contributed to a sizeable reduction of close to 750,000 boardings in local fixed route service. In general, local service has longer scheduled wait times between buses, and has a lower percentage of passenger shelters than commuter services. Several days in January 2007 were significantly colder and rainier than in January This contributed toward a decrease in customers willingness to be exposed to inclement weather if there was another option for their trip, and translated into a decrease in local ridership. Adjusting for the weather related impact on ridership in January, the local and express fixed route ridership would have decreased by only 0.2%. The majority of the Park & Ride decrease can be attributed to the merging of all former Park & Ride trips serving the North Shepherd Park & Ride lot with the 108 Veterans Memorial Express route. Over 83,000 boardings for the period were shifted from the Park & Ride to the Express category of ridership. Adjusting for this, Park & Ride ridership would have increased by 0.5% from the first half of FY2006. Also, some of the Hurricane Katrina affected people who were in Houston last fiscal year have left. This contributed to a loss in ridership METRORail Service Ridership in Millions OCT NOV DEC JAN FEB MAR FY06 Fixed Route Bus Service Ridership in Millions OCT NOV DEC JAN FEB MAR FY06 FY07 Local & Express Bus Service Ridership in Millions OCT NOV DEC JAN FEB MAR FY06 FY07 Park & Ride Service Ridership in Millions OCT NOV DEC JAN FEB MAR FY06 FY07 FY07 8

10 Special Bus Services Special bus services have three components: METROLift (service on-demand), METROVan (special bus service utilizing non-metro operated vans), and Special Events bus service including Charter service. These services do not have fixed routes or a set schedule. The total ridership for Special bus Services for the Second Quarter is million, a decrease of 3.6% from last year. METROLift (0.697 million boardings year-todate in FY2007) demand has decreased, down 4.7% from last year, the result of more efficient scheduling and the effects of the Houston City Council increase of taxi rates in September METROVan services (1.133 million boardings in FY2007) experienced increased demand, up 30.9% from the same period in FY2006. This increase was due to the addition of the minipool program. In May 2006, METRO took over operation of minipool from the Houston-Galveston Area Council. The demonstration project is geared to support vanpools with five to eight persons travelling through major construction corridors. Special Event Bus Service including charters forms only a very small percentage of METRO's total boardings (less than 0.1%) and fluctuates depending on the occurance of special events like the Houston Livestock Show & Rodeo, Shell Houston Open, and Wings Over Houston Airshow. 1, Special Bus Services Ridership in Thousands Oct Nov Dec Jan Feb Mar FY06 METROLift Service Ridership in Thousands Oct Nov Dec Jan Feb Mar FY06 FY07 FY07 METROVan Service Ridership in Thousands Oct Nov Dec Jan Feb Mar FY06 FY07 9

11 Fares FY2007 Quarterly Financial & Management Report Financial Performance METRO Revenues FY2007 YTD ($millions) Budget Actual Differences Fares % Sales Tax (Cash Basis) % Interest & Miscellaneous % Subtotal % Grants % TOTAL % Compared to the YTD budget, actual fares are $2.3 million or 8.6% below budget. However, the FY2007 Budget included approximately $1.0 million per month of increased fare revenue, beginning in January, from fare restructuring which has not yet occurred. When adjusted for this, fare revenue is in fact approximately $700,000 or 3% above budget YTD. Compared to the same period in FY2006, fares are down $1.3 million or 5.1%. This decrease in actual fare revenue against last year is due to a combination of factors. The decline in Fixed Route ridership yields a proportional fare revenue decrease for the cash portion of fares. There is also a disproportionate decrease in fares as a result of a shift in different types of fare media used by customers. With the pending implementation of Q Card and fare restructuring, METRO stopped selling full fare 365 day passes in November As a result, we have seen increased use of 7 and 30 day passes as well as Stored Value Cards. This has temporarily skewed the stream of revenue. (365 day passes are of a higher denomination and deeper discount than 7 and 30 day passes; so when fewer of the higher denomination passes are sold, less revenue is recognized in a given month.) FY2007 Fare Revenue by Month ($millions) FY2007 YTD Fares ($millions) $6 $28 $5 $26 $26.2 $4 $24 $23.9 $3 Oct Nov Dec Jan Feb Mar Budget Actual $22 FY2007 Budget FY2007 Actual 10

12 Sales Tax Revenue Sales tax revenue (cash basis) for FY2007 is $237.6 million: $36.1 million or 17.9% above budget. The increase is being driven by employment and population growth. With sales tax growth running higher than inflation, METRO is experiencing real growth. Grant Revenue Grant revenue through the second quarter is $25.0 million, $7.8 million or 23.7% below projection. Under FTA policy, METRO only receives grant funds after paying for the funded projects. Year to date, including METRO Solutions, Capital spending is 28.6% below budget. This is consistent with the Grants shortfall. $60 Actual Sales Tax Revenue by Month - Cash Basis ($millions) $12 FY2007 Grant Revenue by Month ($millions) $50 $9 $40 $6 $30 $3 $20 Oct Nov Dec Jan Feb M ar $0 Oct Nov Dec Jan Feb M ar FY06 FY07 Budget Actual YTD Actual Sales Tax Revenue Cash Basis ($millions) FY2007 YTD Grant Revenue ($millions) $240 $220 $232.6 $237.6 $35 $32 $29 $26 $32.8 $23 $25.0 $200 FY06 FY07 $20 Budget Actual Interest and Miscellaneous Revenues in this category were $7.2 million, or 18.2% over projection mainly due to increases resulting from a larger investment portfolio size. 11

13 Operating Budget FY2007 OPERATING BUDGET, EXPENSES, AND VARIANCE Expense Category Year-to-Date Budget Year-to-Date Expenses $ Variance % Variance Wages 44,960,810 45,042,466 81, % Fringe Benefits Union 21,713,809 21,293,511 (420,298) -1.94% Total Union Labor 66,674,619 66,335,977 (338,642) -0.51% Hourly Wages NonUnion 542, , , % Salaries 33,256,703 31,837,843 (1,418,860) -4.27% Fringe Benefits Non-Union 14,692,622 14,502,120 (190,502) -1.30% Total Non-Union Labor 48,491,628 47,000,850 (1,490,778) -3.07% Total Labor and Fringe Benefits 115,166, ,336,827 (1,829,420) -1.59% Services 7,459,556 4,531,514 (2,928,042) % Materials and Supplies 8,685,161 8,532,870 (152,291) -1.75% Utilities & Fuel 21,407,014 19,991,363 (1,415,651) -6.61% Casualty and Liability 1,749,328 1,701,958 (47,370) -2.71% Purchased Transportation 35,050,924 33,579,740 (1,471,184) -4.20% Leases, Rentals and Miscellaneous 613,187 1,025, , % Total Non-Labor 74,965,170 69,363,424 (5,601,746) -7.47% Total Labor and Non Labor 190,131, ,700,251 (7,431,166) -3.91% Cost Recovery (3,501,443) (3,185,531) 315, % Total Operating Expenses 186,629, ,514,720 (7,115,254) -3.81% Capitalized Operating Expenses (24,905,970) (24,904,350) 1, % Allocation to Capital & GMP (18,374,864) (17,617,289) 757, % Total Allocation to Capital (43,280,834) (42,521,639) 759, % OPERATING BUDGET 143,349, ,993,081 (6,356,059) -4.43% 12

14 Operating Expenses Operating expenses through the end of the second quarter are $ million compared to $ million budgeted, $6.356 million or 4.4% below budget. This underrun in the operating budget is due to the following: $160 $140 $120 FY2007 YTD Operating Expenses ($millions) $143.3 $137.0 Wages are over budget by $82,000 or 0.2%. Bus operator wages are over budget due to the use of more overtime than planned due to a shortage of operators (accelerated recruitment is underway). However, the bus operator wage overrun is largely offset by underruns in Bus Maintenance and Facilities Maintenance due to an average of more than 50 vacant mechanic and cleaner positions over the period. Union Fringe Benefits are $420,000 or 1.9% under budget mainly due to reduced union healthcare expenses and other fringe benefit underruns resulting from the vacancies in mechanics and cleaners. Non-Union Wages and Salaries are under budget by $1.3 million or 3.8% due to vacancies throughout the Authority. As of the end of March, 57 salaried positions were vacant after adjusting for salaried employees on short term disability (METRO does not hire against those positions). Non-Union fringe benefit expenses are under budget by $191,000 or 1.3% due to lower benefit costs primarily resulting from the vacancies discussed above. $100 $50 $40 $30 $20 $10 $0 Wages $22 $20 $18 $16 Budget Actual FY2007 YTD Operating Expenses by Category ($millions) Salaries Fringe Benefits Purchased Trans. Budget Services Materials & Supplies FY2007 Labor and Fringe Benefits by Month ($millions) Oct Nov Dec Jan Feb Mar Budget Actual Actual Utilities & Fuel Casualty & Liab. Misc. 13

15 Services expenses are under budget by $2.928 million or 39.3%. The slow start of contractual service activity accounts for the large timing variance. Significant components of the underrun include: $1.2 million in Communications & Marketing (a slow start delayed spending in advertising and promotion expenses) $763,000 in Operations (primarily the delayed start in facility maintenance work) $244,000 in Human Resources & Diversity (slower start of DOT physicals and employee communication initiative as well as lower than planned usage of recruitment advertising and training/consulting services) $142,000 in Finance (underruns in banking related services due to lower transaction fees than anticipated) $150,000 in Legal (primarily delayed billing from outside counsel contract work) $124,000 in IT (underspending in router, radio system and storage system maintenance due to invoice delays and deferral of some work). Materials & Supplies are under budget by $152,000 or 1.8%. In Operations, Bus Parts cost is $919,000 over budget, partially offset by underruns in Rail and Facilities Maintenance. The bus parts overrun is the result of higher parts usage than budgeted. Rail savings result primarily from reduced failure rates, as well as unplanned warranty recovery and reduced accident costs. In other areas of the Authority, there are some timing underruns due to fewer magnetic fare media being purchased in anticipation of Q Card, delays in receiving invoices for traffic control and accident investigation equipment and overall reduced expenses in most other areas in the Authority. Fuel & Utilities are under budget by $1.416 million or 6.6%. Diesel fuel Is under budget by $504,000 primarily due to savings from better fuel economy than budgeted (First Transit NW Bus Operating Facility). Natural gas cost is under budget, a combination of a lower unit price than budgeted, partially offset by increased usage. Gasoline savings result primarily from lower prices than budgeted. The balance is primarily in two areas: electric and propulsion power, due to a mismatch between budget and actual expenses; and telephone expenses, the result of delays in the receipt of invoices. $16 $14 $12 $10 FY2007 Materials & Services by Month ($millions) Oct Nov Dec Jan Feb Mar Budget Actual Casualty & Liability expenses are $47,000 or 2.7% under budget and result from higher than anticipated subrogation recoveries. Purchased Transportation expenses are $1.471 million or 4.2% under budget. Of this, METROLift represents $294,000 and is the result of more efficient scheduling and lower demand. Delayed billing and lower contract costs in the vanpool program represent $257,000. The balance is in Special Events and primarily reflects a more cost effective plan for scheduling and providing service for the Houston Livestock Show & Rodeo. Leases, Rentals & Miscellaneous expenses are $413,000 or 67.3% over budget, but this is totally offset (resulting in a net zero balance) by a corresponding reduction in labor and materials expenses. (These accounts are used together for booking METROoperated special events service provided for the Houston Livestock Show & Rodeo. When a lower level of service is provided, as happened this year, the accounts reflect the difference.) Cost Recovery is $316,000 or 9.0% less than budget. This is primarily due to delayed billing and reduced cost recovery of vanpool expense, partially offset by unplanned recovery of some special event costs from the prior year. Capitalized Operating Expenses are on budget. Allocation to Capital and GMP is $758,000 or 4.1% lower than projected and is mostly driven by capitalrelated vacancies in the Planning Engineering & Construction, Real Estate and Government Affairs departments. 14

16 FY2007 YTD GMP Expenditures ($millions) General Mobility Expenditures $60 FY2007 Second Quarter General Mobility Program expenditures are $49.9 million compared to $51.6 million budgeted, $1.7 million or 3.2% lower than projected. $50 $40 $51.6 $49.9 $30 Budget Actual FY2007 YTD FY2007 YTD Variance Budget Actuals ($millions) ($millions) ($millions) City of Houston Harris County Multi-Cities Area-wide Total General Mobility Program Expenditures for City of Houston projects are $3.826 million more than budgeted through the second quarter of FY2007 due to expenditures on pre-fy2007 projects/programs and represent 111.9% of planned expenses. Year to date expenditures for Harris County projects are $6.568 million less than budget due to slow progress on Future Designated Projects handled by the County. Expenditures for Multi-Cities projects are $1.252 million more than budgeted through the second quarter of FY2007 due to the acceleration of funding for the Future Designated Projects Program. Expenditures represent 112.5% of projected expenses. Area-Wide Programs are $0.181 million less than budgeted due to less than anticipated issuance of commercial paper to fund Harris County Future Designated Projects (interest on commercial paper is included in this category). 15

17 Capital Expenditures FY2007 year-to-date capital expenditures are $98.1 million compared to $137.3 million budgeted; $39.25 million, or 28.6% lower than projected. Major variances in the Capital Budget are identified below. $140 $120 $100 FY2007 YTD Capital Expenditures ($millions) $137.3 $98.1 $80 Budget Actual FY2007 YTD Budget FY2007 YTD Actuals Variance ($millions) ($millions) ($millions) METRO Solutions Capital Improvement Program Total Capital Budget METRO SOLUTIONS - Variance Due to Schedule Slippage: Property Acquisitions that were scheduled to begin as early as December 2006 have been delayed due to the following reasons: delay in receipt of the Final Environmental Impact Statement (FEIS) and the "Record of Decision" for the North and Southeast corridors, and a delay in receipt of the Finding of No Significant Impact (FONSI) decision for the Intermodal Terminal. In addition, protracted negotiations and delayed award of full contract authority to the selected Facility Provider has affected the performance of continued engineering. The complexity of the Intermodal Facility design has also delayed commencement of the next stage of design and property acquisition. -$38.4 million 16

18 CAPITAL IMPROVEMENT PROGRAM Variance Due to Schedule Slippage: Implement Bus Smart Card Technology The implementation date and schedule for the Q Card has been modified to allow time for "stress testing" the new hardware and software and for phased implementation. Information Technology The underrun is primarily due to a delay in the Police Mobile Data Terminal System Enhancement, METRONet and ARCS System Radio Replacement projects. The Police Mobile Data Terminal project was delayed to allow bidding by Small Business, instead of using the State of Texas Department of Information Resources (DIR) for the procurement. It is now underway. The CMAQ (Congestion Mitigation Air Quality) addition to the METRONet project got delayed waiting for City approval of design plans and equipment specifications. Installation of the CMAQ equipment is underway and will be completed in the third quarter. The ARCS System Radio Replacement project has been delayed while the pilot is being tested. The major expenditures for this project will not occur until the 3rd quarter. Major Facility Rehabilitation Initiative The MFRI program has an annual budget of $7 million for FY2007 out of which approximately $1 million has been spent through the 2nd QTR (not including the invoices being processed). However, there are also $2 million of work authorizations that have been issued and an additional $1 million under review for a total committed of $4 million. It is anticipated that the MFRI program will be completed by the end of the fiscal year with minimal underruns. Transitway & Related Facilities Execution of Fixed Guideway Modernization (FGM) Projects which includes: Sign Standardization, Transtar Integration and HOV Utilization Data Collection projects have been slower than planned due to the need to coordinate with the HOT Lane program. Design work for Sign Standarization will be completed under the FGM program, while construction will be done under the HOT Lane project. The T-Ramp Control Signal project is complete and under budget. Total Schedule Slippage Other Projects -$13.0 million -$6.7 million -$2.9 million -$1.2 million -$23.8 million 17

19 Variance Due to Other Issues: Bus and Support Equipment The approved budget allowed for a capital lease of 25 MCI buses and 40 New Flyer Hybrid buses. All the MCI buses and 12 (to date) of the New Flyer buses have been purchased on full cash outlay basis. The master lease program has not been submitted to the Board for approval as yet pending negotiations for the Facility Provider contract. Purchase Diesel Storage Tanks Capital lease of the storage tanks is on hold due to concern about the Contractor's viability. METRO will continue on month to month rental until a viable option has been identified. Homeland Security Program was delayed for additional review that took longer than anticipated. All projects are now approved and currently being executed. Other Miscellaneous Variances Total Schedule Variance Due to Other Issues GRAND TOTAL CAPITAL BUDGET & METRO SOLUTIONS $25.9 million -$2.5 million -$1.0 million $0.5 million $22.9 million -$39.3 million 18

20 Operating Ratio Key Performance Indicators FY2007 Operating Ratio 20% 19% 18% 19.0% 17% 16% FY07 Goal 17.1% YTD Actual The Operating Ratio through the second quarter of FY2007 year to date is 17.1%, 10.0% below the FY2007 annual goal of 19.0%. Increased revenue after the implementation of fare restructuring will be a key element in achieving the 19.0% target. 19

21 Key Performance Indicators Mean Distance Between Failures (MDBF) The bus fleet continued to perform well in the second quarter. Actual performance was 47% better in January than the FY2007 MDBF minimum of 5,000 miles, 50% better in February and 46% better in March. Operations continues implementing new policies and procedures which are improving the reliability of the bus fleet. For example, a classification process is being established for all buses to ensure that the condition of each bus is appropriately maintained. The 40 new hybrid-electric buses, which are in the process of being delivered, will be classified as Level 1 quality buses. This classification means that these buses will receive priority treatment to ensure that they stay in new condition. A second tier of buses is being identified. These are buses which have a reasonable amount of wear and tear due to their age and usage. Each Bus Operating Facility will select a group of buses which, while in good and safe operating condition, could benefit from preventive action now. This will help to avoid more extensive, as well as costly, repairs in the future. Additional classification tiers will be developed. Operations will also assign the new hybrid-electric buses to specific operators and trips every day. This will help to build relationships between the operators and the mechanics, will allow operators to become familiar with their bus and will allow mechanics to take pride in their job performance. Bus Maintenance and Control Center personnel are working together to triage information on buses which develop a mechanical issue when in service. This is leading to better diagnostics of mechanical problems. Operations is also working to identity buses which may be susceptible to transmission failure due to water migrating into the transmission or its electrical harness. Personnel in the Bus Operating Facilities and in technical support are working together to find a solution. In other actions, Operations and Information Technology are partnering to develop reports that provide up-to-the minute information on the mechanical status of buses. Mean Distance Between Failures by Month (miles) 9,000 6,000 5,000 3,000 0 OCT NOV DEC JAN FEB MAR FY07 Actual FY07 Goal 20

22 Accidents FY2007 Quarterly Financial & Management Report Key Performance Indicators Bus Accidents by Month FY2007 Bus Accidents OCT NOV DEC JAN FEB MAR 200 FY07 YTD Goal 236 FY07 YTD Actual FY06 FY07 FY07 Goal Rail Accidents by Month FY2007 Rail Accidents OCT NOV DEC JAN FEB MAR FY06 FY07 FY07 Goal FY07 YTD Goal 16 FY07 YTD Actual In the second quarter, accidents for the bus system are 236, or 50.8% better than the YTD goal of 480. Rail system accidents are 16, or 33.3% better than the YTD goal of 24. The reduction in the accident rate continues to be attributable to the overall good performance of our Bus and Train Operators. The accident goal was somewhat lowered this year to accommodate over 250 new part time bus operators. But the results show that we are doing far better than we projected as the new operators are experiencing fewer accidents than anticipated. Efforts towards accident reduction included safety blitzes at the facilities, observation rides, radar checks, hazard analysis of bus routes, safety contacts being made in the field and safety awareness being promoted at the Bus Operating Facilities. The System Safety Division conducted over four hundred ride checks and over 36 hazard analysis of bus routes which help produce a positive safety attitude among the operators. 21

23 Key Performance Indicators COMPLAINTS Complaints through the second quarter are 66.3% better than the year-to-date goal. METROLift complaints have decreased 18.3% compared to the same period in FY2006. This is due to a decrease in the number of complaints regarding late trips. The Operations Department is continuing to implement initiatives to reduce the number of complaints. For example, it has started to focus on where and when complaints regarding pass ups are generated. (A pass up is categorized as an Operator Behavior complaint.) The Department is analyzing trends on where and when these events happen and using the results of the analysis in order to avoid future occurrences. It is also continuing the new incentive program and the customer service refresher training for operators. Through the end of the 2nd Quarter, 55 percent of the eligible operators had received the refresher training. 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Complaints by Month 6,400 OCT NOV DEC JAN FEB MAR FY06 FY07 Monthly Maximum FY2006 FY2007 Change % Operator Behavior 4,206 4, % Timeliness & Reliability 2,181 2, % Driving Safety 1,416 1, % METROLift 1, % Equipment Problems % Crowded Bus % Other 1,446 1, % FY2006 complaints have been restated to reflect the current methodology which counts all complaints in a call individually. 5,000 Complaints by Category 4,000 3,000 2,000 1,000 0 Operator Behavior Timeliness & Reliability Driving Safety METROLift Equipment Problems Crow ded Bus Other FY2006 FY

24 Major Security Incidents Key Performance Indicators 140 Major Security Incidents by Category Major Security Incidents by Month Larc/Theft Robbery Auto Theft Agg. Assault Burglary Arson Forc. Rape Homicide 0 OCT NOV DEC JAN FEB MAR FY06 FY07 FY07 Goal Major Security Incidents are those categories that are listed in the FBI Part 1 Crimes used in national crime reporting requirements. Year-to-date numbers represent a 41 incident a month average and a grand total 246 Part I crimes, 25.5% better than the annual goal. The most significant crime that occurred during the quarter was a homicide on March 28, The homicide occurred on a bus as an argument escalated between two patrons. The suspect was arrested at the scene and has been charged with murder. There has been a significant reduction in Class I crimes occurring at bus stops and Transit Centers. Crime at Transit Centers dropped by 50% from the previous quarter. There was also significant decline in crimes at bus stops which reported 30% fewer incidents than the first quarter of FY2007. Although difficult to quantify, we believe we. can attribute this reduction in part to the high visibility enforcement initiative implemented this year. METRO Police also continued to promote the Adopt a Stop / Adopt a Shelter program at civic clubs and neighborhood association meetings. The program has proven to be effective as citizens adopting shelters are reporting crime. During this quarter, one adoptor provided information to police which resulted in several subjects being arrested in possession of crack / cocaine. The suspects were distributing the narcotics directly out of the shelter. Fifty-five shelters have now been adopted. YTD Part I Crime OCT NOV DEC JAN FEB MAR TOTAL Larc/Theft Robbery Auto Theft Agg. Assault Burglary Arson Forc. Rape Homicide TOTAL

25 Key Performance Indicators METRO Police Attacking Crime Trends (MPACT) focused initiatives and pro-active policing efforts will continue to attack crime trends affecting the system and changing conditions that impact community and system reported crime. 24

26 Customer Service Center Key Performance Indicators The combination of METRO's Interactive Voice Response system (IVR) and enhanced productivity in the Customer Information Center continues to yield good results. The automated system handles many routine customer inquiries for bus and rail schedule times automatically, allowing representatives to focus on more detailed inquiries. New systems and practices for trip planning, workforce management, real time communications and quality assurance have improved the productivity of our representatives in handling the calls that are routed to them. The IVR provided automated bus and rail times to 51% more callers in the second quarter of FY2007 than were provided in the second quarter of FY2006. Telephone representatives answered 50% more calls in the second quarter of FY2007 than were answered in the second quarter of FY2006. The average answer delay for this quarter was 0:54 as compared to 1:08 in the same quarter of last year, with 51% more customer calls received. Customer Information Center Key Indicators Calls Received (000's) Service Level (%) % 91% 87% 85% 77% 80% 79% 79% 85% 85% 88% 88% Average Wait Time (min) 0 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar Service Level (%) Average Wait Time (min) Calls Received and Routed to Customer Service (000's) Total Calls 25

27 COMPOSITE OPERATING AND CAPITAL STATEMENT ($000 OMITTED) FY2007 YTD Budget Actual Variance Gross Income Fares 26,179 23,927 (2,252) Sales tax income 201, ,810 38,526 Interest Income 6,000 6, Other operating income Total 233, ,900 37,377 Operating Expenses Transit: department & support expenditures 139, ,882 (8,092) Traffic Management: department & support expenditures 3,375 5,027 1,652 Expensed Small Capital Purchases Total 143, ,993 (6,356) Gross Income Less Total Operating Expenses 90, ,907 43,733 + Federal/State Capital Grants Collected 32,810 25,032 (7,778) Current Year Cashflow Available for Capital Expenditures 122, ,939 35,955 - Capital expenditures made 188, ,008 (40,921) Current Year Cashflow for Future Capital Expenditures Including Replacements and Operating Expenses (65,945) 10,931 76,876 All data in year-of-expenditure dollars. Sales Tax is reported on an accrual basis. 26

28 BALANCE SHEET March 2007 March 2006 March 2007 Change ($) Assets Cash 2,360,458 2,415,412 54,954 Receivables 102,837, ,691,432 12,853,948 Inventory 25,705,335 29,723,418 4,018,083 Investments 173,670, ,893, ,223,128 Other Current Assets 16,396,540 24,800,520 8,403,980 Property Net of Depreciation 1,178,868,134 1,253,227,401 74,359,267 Land & Improvements 303,481, ,344,173 (11,137,696) Rounding 1 (1) -2 Total Assets and Other 1,803,319,961 2,004,095, ,775,662 Liabilities Trade Payables 37,021,722 61,333,832 24,312,110 Accrued Payroll 18,752,669 17,919,438 (833,231) Short-term Debt 64,000, ,000,000 79,000,000 Other Current Liabilities 21,816,192 25,066,945 3,250,753 Rounding Total Liabilities 141,590, ,320, ,729,632 Net Assets - Retained (1) 1,661,729,378 1,756,775,408 95,046,030 Total Liabilities and Net Assets 1,803,319,961 2,004,095, ,775,662 (1) On a year to year basis, net assets increased by 5.7% or $95 million. 27