Quarterly Financial & Management Report

Transcription

1 Third Quarter FY2009 Quarterly Financial & Management Report

2 Table of Contents Highlights... 1 METRO Solutions: Construction on the North & Southeast Begins... 1 Historic Facility Provider Contract Signed... 2 Financial Strategy on Target... 3 Quadrennial Performance Audit Recognizes Achievements... 3 Local Interest in Public Transit Hits an All-Time High... 4 Major Service Enhancements Rolled Out... 5 Vanpool Program is Now METRO STAR Rebranding Unveiled... 6 Image Campaign Wins 1st Place AMA Award... 6 METRO makes TV Debut... 7 Riders get Perks with Area Partners... 8 Hunters Creek Village Project Breaks Ground... 9 More Flashing Markers at Rail Crossings... 9 Kingwood P&R Case Cracked Intern Program Goes into Action METRO Rallies to End Birth Defects FTA Triennial Review Completed Ridership Trends Financial Performance Revenues Fares Sales Tax Revenue Grant Revenue FY2009 YTD Operating Budget, Expenses, and Variance General Mobility Expenditures Capital Expenditures Debt Service Composite Operating & Capital Statement Balance Sheet Operating Ratio Key Performance Indicators August 7, 2009

3 Highlights METRO Solutions: Construction on the North & Southeast Begins July 13 th, 2009 marked another momentous milestone in the implementation of the METRO Solutions program the groundbreaking for the North and Southeast Corridors held at Union Station in Minute Maid Park. Attendees included key political leaders and proponents of the new rail lines: Senator Kay Bailey Hutchinson, Rep. Sheila Jackson Lee, Rep. Gene Green, Rep. Al Green, and Mayor Bill White. This historic groundbreaking represents the commencement of the construction phase on the 2 nd & 3 rd corridors of METRO s voter-mandated 5-corridor light rail expansion plan as outlined in Phase II of the METRO Solutions Referendum. The 1 st corridor of Phase II, the East End light rail line, is currently in the early construction phase that includes the relocation of utilities and civil related construction work. The 4 th & 5 th corridors, the University and the Uptown, are continuing with the Engineering Design effort with the University line awaiting its Record of Decision (ROD) on the Final Environmental Impact Statement. During the months prior to this event, there were a series of important developments which created great momentum, putting both the North and Southeast rail lines in the local and national spotlight. In May, METRO s Board Chairman and METRO s President & CEO outlined at a news conference the status and next major steps in the delivery of Houston s light-rail system, citing the imminent construction of the North and Southeast lines as well as METRO s plan to use the $150 million included in the Obama Administration s FY2010 budget for their build-out. This budget inclusion announced earlier in the month confirmed the FTA s intent to enter into the Full Funding Grant Agreements (FFGA) for the two corridors. An FFGA commits the FTA to fund transit projects over a period of several years. In March, the FTA approved four Letters of No Prejudice (LONP s) for METRO Solutions Phase II. These LONP s gave authorization for the METRO to begin spending its own funds, totaling $135.7 million, on both the North and Southeast corridors for advanced design work, early materials procurement, utility relocation and rail car purchases. 1

4 Historic Facility Provider Contract Signed A contract with Parsons Transportation Group for $1.46 billion to design, build, operate, and maintain four new rail lines (East End, Southeast, North and Uptown) under the METRO Solutions Phase II program was officially signed in April. This contract for $1.46 billion, the largest in the Authority s history, was unanimously approved by the METRO Board of Directors earlier at a special Board meeting in March. The four new light rail lines will add 20 miles to the existing 7.5 mile Main Street line at an average cost of $68 million per mile. A fifth rail line, the University line, and an intermodal terminal near downtown are also planned but were not included in this contract. After almost a year of negotiations this contract has lowered the total cost 7% from a $1.57 billion estimate the Authority presented to the Federal Transit Administration the previous year. In addition, the contract will also stimulate the local economy by creating an estimated 60,000 jobs while at the same time maintaining a minority and small business subcontracting goal for eligible work of 35%, valued at approximately $335 million. The agreement also gives Parsons and the other contractors the opportunity to earn $50 million in performance incentives based on input from the community and METRO staff for early completion as well as adequately maintaining sufficient physical access to the area neighborhoods and businesses during the various phases of construction. Phase I calls for the spending of $632 million, which will include $390 million for the East End line (including an overpass at Harrisburg) as well as a rail vehicle service & inspection facility in the corridor. The initial outlay will also include $118 million to buy 29 new light rail cars (19 for the existing Main Street line and 10 for the East End line) from manufacturer CAF USA Inc., plus another $93 million on utility work in the Southeast, North and Uptown corridors. Implementation of the initial phase of the contract is expected to create 25,000 jobs. The selected contractor, Parson Transportation Group, has worked on similar projects in Dallas, Minneapolis, Los Angeles and Kuala Lumpur. For the design and construction of these new rail lines, Parsons has entered into a joint venture, HRT (Houston Rail Transit), made up of Granite Construction Co., Kiewit Texas Construction and Stacy and Witbeck Inc. For operations and maintenance, Parsons and Veolia Transportation, which operate systems in over one hundred cities across the United States and Canada, will team up as the lead contractors under the entity Houston Operations and Maintenance, LLC. Because they will initially operate the lines, Parsons will be responsible for overall system performance and maintenance for five years after construction is complete. 2

5 Financial Strategy on Target FY2009 Quarterly Financial & Management Report In May, METRO, with the help of its underwriters Merrill Lynch, Goldman Sachs, Loop Capital, Kipling Jones, Rice Financial, and Ramirez & Co., raised $219M through the sale of a combination of tax exempt bonds and Build America Bonds (BABs). METRO, whose credit is currently rated at AA 3 /AA by C&P and Moody s, will use the proceeds for the North & Southeast lines as well as vehicle purchases. The success of this bond sale will minimize the exposure of METRO s long-term projects from risks of short-term markets. In addition, during its May meeting, the METRO Board of Directors approved a Surety Bond program for the Authority as it acquires Right Of Way (ROW) properties in areas of condemnation for METRO Solutions Phase II. The program allows METRO to maintain a better cash position during ROW transactions, which normally can freeze up cash at twice the value of the properties in the acquisition process. However, through the use of surety bonds, the cash outlays for the Authority are only a portion (roughly 50%) of the required amounts. Quadrennial Performance Audit Recognizes Achievements In March, METRO completed the State Performance Audit as required by the Texas Transportation Code the scorecard was impressive. This quadrennial audit, which began in November 2008, was performed by a team of consultants lead by Booz Allen Hamilton and assessed METRO s performance with respect to data collection and measurement of key performance indicators, compliance with applicable state laws, and efficiency and effectiveness of bus and light rail maintenance functions over the 4-year span between October 2004 and September The results of the Performance Audit show that METRO has complied with all data and performance indicator reporting requirements as well as all essential legislative requirements. In addition, the audit praised METRO for its success in growing ridership, controlling costs and implementing long-term cost reductions, especially at a time of increasing health, pension and fuel costs. The Authority also received positive feedback for its performance & safety monitoring (e.g., Quarterly Management Reports, dashboard reports, weekly cost variance reports, and regular management oversight), key initiatives in strategic planning with METRO Solutions, and technological improvements like METRO Q and IVOMS. The auditors were most impressed with the major positive developments made when comparing these audit results against those set by the previous State-required audit between FY2001-FY2004. In the FY2004 audit, METRO s system-wide ridership was down 5%, farebox recovery down 29%, and operating costs and cost per passenger 3

6 both increased over 25% while CPI (Consumer Price Index) grew only 10%; in the FY2008 audit, system-wide ridership was up 3%, farebox recovery up 8%, and costs increased well below the CPI. Although METRO was in compliance with the vast majority of over 125 regulations, the audit pointed out that adherence to a few procedural requirements should be strengthened and that METRO needs to continually seek improvement as it expands its service in the near future under the METRO Solutions program. METRO has already taken steps to address those issues identified in the audit. On April 23rd, 2009, METRO S Board of Directors was presented with these audit findings by Booz Allen Hamilton as well as the Management Responses to the Audit Recommendations from METRO staff. A Public Hearing on May 11, 2009 was also held in order to communicate all audit findings to the general public. Local Interest in Public Transit Hits an All-Time High Public surveys are bringing more good news for public transportation in Houston. Echoing the positive results from METRO s 2008 Customer Satisfaction Survey, the results of an annual Houston area survey by Dr. Stephen L. Klineberg, a professor of sociology at Rice University, show that the local interest in public transportation have hit an all-time high. Produced early this quarter, the survey yielded the following results: 50% said making improvements in public transportation, such as trains, buses and light rail is the best long-term solution to the city s traffic problems, up from 42% in 2007; 62% said the development of a much-improved mass transit system will be very important for the future success of Houston, up from 45% in 1993; 41.5% (up from 38% in 2004) disagreed with the suggestion that even if public transportation were much more efficient than it is today, I would still drive my car to work. The study conducted every year since tracks how the region s demographic and economic patterns impact public perception on a variety of topics, including transit. Klineberg, who is featured in Houston: The Road Ahead, the 1 st installment of METRO s new documentary-style TV series, says the paradigm shift on the public s perception of light-rail is an important component to improving the region s public transportation. 4

7 Major Service Enhancements Rolled Out In early June, METRO rolled out two new services: the 402 Bellaire Quickline and the 32 Renwick Crosstown. The Bellaire Quickline is one of several Signature Bus Services planned in the METRO Solutions Phase II to be introduced in the next few years. The new route provide more efficient travel along the Bellaire corridor and provides an innovative solution to the transportation challenges of those moving to, from and around the Texas Medical Center. The Quickline operates every 15 minutes from 6 a.m. to 9 a.m. and from 3 p.m. to 6 p.m. with a total of 26 westbound and 27 eastbound trips. Compared to the 2 Bellaire, the limited-stop service saves passengers 15 minutes over the 9-mile distance. The Quickline is unique in that it uses ultra-quiet hybrid buses with padded seating, security cameras, and custom exterior wraps colored in blue for easy identification. The Quickline bus stations are also unique in that they feature up-to-the-minute automated announcements for the next-bus arrival and improved lighting and benches. On top of all these amenities, this premium service is priced the same as the other local service: $1.25 per trip. METRO launched its Bellaire Quickline signature bus service at a special event celebration on May 27 th, 2009 at Sharpstown Mall. The event included a dance performance by students from the nearby Pat Neff Elementary School and featured a speech by the chair of the City Council Transportation, Infrastructure and Aviation (TIA) committee, Sue Lovell. The councilwoman thanked METRO for giving everyone a preview of the route a service she described as first-class. In line with the Quickline s marketing campaign which likens the route s features of speed and quick jumps to those of a rabbit, this event for the bunny line also featured an appearance from METRO s human-sized bunny mascot who interacted with the crowd. The service averaged 543 boardings during its first month of operation, more than half its first year ridership goal of 1,000 boardings per day. At maturity, the service is expected to carry 360,000 boardings per year. Interestingly, this METRO Solutions initiative did not take riders away from the popular 2 Bellaire route which it mirrors as ridership on that service remained constant. The 32 Renwick Crosstown is part of the METRO Solutions plan to add new bus routes to the METRO system. By connecting with seven of METRO s top 20 bus routes plus four other routes, the Renwick Crosstown serves 111 multi-family residential developments, 69 retail/supermarket locations, 17 religious gathering places, and 15 educational institutions, as well as key medical and health care locations. Among the route connections it offers, the Renwick Crosstown provides riders easy access to 5

8 Sharpstown Mall, the Houston Community College Gulfton Branch, Memorial Park, the Texas Medical Center, Discovery Green, and the Houston Zoo. To introduce this new route, METRO held an event at the Sellers Bros. grocery store at 5900 Renwick on May 30 th, The event also highlighted Abuelita, the new face behind METRO s Hispanic marketing campaign, who was on-hand to promote the new route and assist with helping riders set-up their METRO Q fare cards. The service averaged 549 boardings during it first month of operation, with ridership increasing by 150% relative to its initial day of operation. The service is well on its way to its first year ridership goal of 1,250 boarding per day. In addition to launching two new routes, on June 1 st, METRO also implemented multiple changes to its fixed-bus routes in order to raise schedule reliability and efficiency. Vanpool Program is Now METRO STAR Rebranding Unveiled METRO s vanpool program is now rebranded as METRO STAR in an effort to increase awareness, grow ridership, and make METRO's ownership of this service and market identity readily visible throughout the region. The title, METRO STAR, represents a far-reaching public-private partnership which combines most of the regional vanpool programs under one brand. This repositioning is the result of a multi-year process that included development of the name, sales and promotional materials, media campaign, and vehicle markings. The new vehicle markings are expected to generate wide consumer impressions of METRO STAR through the visibility of several hundred vehicles in the region. Much of the program s marketing is targeted to surrounding suburban areas where vanpool activity is significant. METRO STAR currently has 750 vans in the program with an estimated annual boarding of over 2.6 million in FY2009. Image Campaign Wins 1st Place AMA Award METRO recently won the American Marketing Association s 2009 AMA Crystal Award for its I Ride image campaign which took home the top honors in the business-to-consumer category and defeated highly competitive private firms presenting campaigns for Bank of America, Centerpoint Energy and Wal-Mart. In this competition not only were the contestants judged on the quality of the ad, but the 6

9 results from the campaign counted for twice as much as the aesthetics. Through surveys of service area residents both before and after the campaign, METRO was shown to have met or exceeded nearly all of its proposed campaign goals. The I Ride campaign was a multimedia effort (TV commercials, on-board advertisements, etc.) to create a rider-friendly market perception of METRO s service offerings while spreading a message that everybody and anybody can ride and should ride public transit when one needs it. The campaign hit the airwaves and print last year, featuring local celebrities encouraging Houstonians to try METRO. The celebrities included heavyweight boxing champion George Foreman, fashion designer Chloe Dao and Astros outfielder Carlos Lee. METRO makes TV Debut METRO is providing its customers and non-transit users another communication channel to learn more about the Authority, get the latest transit news, and find out about future transit plans for the region with the launch of its official cable access programming. Starting Monday, June 6 th, METRO began airing its 6-part documentary-style series, hosted by former Channel 13 news reporter Laura Whitley, covering key aspects of the Authority. Every Monday through July 13, a new METRO program will air on the HCCTV network (Comcast channel 19) at 6 p.m. covering a variety of topics and then the episode will be rebroadcast every weekday at 6 p.m. through Friday. Each episode will also be shown in streaming real-time video on HCCTV s web site as well as posted for future viewing on METRO s web site The first episode, entitled Houston: The Road Ahead, traces METRO s humble beginnings, the middle years before the 2003 referendum was passed and the current state of affairs from the modern, hybrid-electric bus fleet to the plans of building five light-rail lines. The episode includes interviews with Howard Horne, METRO s first chairman of the board, Dr. Carol Lewis of Texas Southern University, who recounts the unfolding of the METRO Solutions referendum, and Dr. Stephen Klineberg of Rice University, who highlights how the public perceptions are changing towards the use of mass transit in solving Houston s traffic and future growth. The second episode, Precious Cargo, highlights the transformation METRO s bus fleet has undergone over the years -from buses without radios or air conditioning to buses equipped with innovative, state-of-the-art technology. It also showcases the different men and women behind-the-scenes who work hard to make sure METRO's buses are safe, clean and reliable. 7

10 The third episode, I Ride, features riders from all walks of life who have one thing in common METRO. These public transit aficionados talk about their easy fix to avoiding Houston s bottlenecks, where they travel and why, as well as discussions on the benefits of the down time they can enjoy by letting METRO do the driving. Riders get Perks with Area Partners Several initiatives were put in place during the 3 rd quarter for METRO to partner with various local sports and entertainment organizations to promote the reality that METRO isn t just a means to get to and from work, but it s also a great ride to events happening around town. On April 22 nd, METRO teamed up with the Houston Astros to celebrate Earth Day by offering fans a discount if they rode METRO to the Houston vs. Los Angeles game at Minute Maid Park. Any METRO riders showing their Wednesday fare item at the Minute Maid Park Box Office before the game would get their ticket discounted at half-price. METRO representatives were also on-site handing out materials promoting a greener Houston. On April 24 th, METRO participated in the Miller Outdoor Theater 2009 Season Kick- Off held at Hermann Park. Despite the rain, many showed up for the Golden Dragon Acrobatic Show which opened up the theater season. METRO plans to have information booths setup at select Miller Outdoor Theater shows throughout the summer. From April 30 th to May 3 rd, METRO partnered with the Museum of Fine Arts by offering attendees of its Latin Wave Film festival a $1 discount off the ticket price when they present their METRORail pass at the ticket box office. METRORail conveniently delivers museum patrons right to the MFAH doorstep via the Museum District Station on Fannin Street, located between the MFA Visitors Center and Audrey Jones Beck Building. Be on the lookout for Terra Cotta Warriors: Guardians of China s First Emperor exhibit brochures on METRO buses and trains there will be a coupon inside for a $10 discount off an adult ticket. The brochures are expected to be distributed July FY

11 Hunters Creek Village Project Breaks Ground The city of Hunters Creek Village recognized METRO for funding its Inwood Oaks Drive and April Way paving and drainage construction projects at a groundbreaking ceremony on May 12th The ceremony was conducted at the intersection of Hedwig and Inwood Oaks and was attended by the mayor of Hunters Creek Village and two members of the METRO Board of Directors. These METRO-funded projects, representing $577K, will replace deteriorated roadways and improve drainage capacity throughout Hunter s Creek Village. The expected completion date for this project is mid-october. The Hunters Creek Village project is one of many road improvement projects that METRO has funded through its General Mobility Program. Since the General Mobility Program was established in 1987, it has funded over $1.8 billion in road, beautification, and infrastructure projects in Harris County, Houston and the Multi- City Area by use of one quarter of METRO s one cent sales tax. In a 2003 referendum, METRO s comprehensive transit system plan extended the General Mobility Program through 2014 in order to improve major multimodal transit across the region. More Flashing Markers at Rail Crossings In April, the Federal Highway Administration (FHWA), the agency responsible for setting the standards for traffic signs, signals, designs and safety features, gave METRO permission to expand its experimental lighted pavement marking system (LPMS) at more intersections along the Main Street Rail line s 7.5 mile stretch. The LPMS safety program pioneered by METRO was established to increase visibility at the train crossing, and reduce red-light-running violations and crashes. The flashing markers light up when the traffic signal turns red not just when the train passes to help condition drivers to be aware of the fact that these are atypical intersections. A recent study covering periods both before and after the project show that the illuminated pavement markers have caught drivers attention, reducing the number accidents caused by red-light-running by as much as 50% at some intersections. The pavement markers have also helped curb right-turn-on-red violations an illegal maneuver along the Main Street Line. The program remains in the experimental development phase. METRO s goal is to get the technology approved by the FHWA as a standard traffic signal device, opening the door for other cities to adopt the safety tool. 9

12 METRO maintains and operates 70 traffic signals along the rail line. With the four new intersections on board, the total number of intersections equipped with this technology stands at 20. Kingwood P&R Case Cracked In April, METRO Police made an arrest in connection with a series of burglaries which occurred at the Kingwood Park & Ride during earlier in the month as well as the month prior. The suspect was taken into custody and has been charged with two counts of burglary of a motor vehicle in regards to one set of incidents which occurred on April 20th. The suspect has also confessed to the vehicle burglaries that occurred in the same lot on February 19 th and April 22 nd, for a total of 13. METRO Police were able to make this arrest thanks to the images captured by its security cameras at the Park & Ride lot, assistance from the Houston Police Department, as well as help from the community in identifying the suspect. Overall, crimes at Park & Ride lots have decreased. METRO credits its system of security cameras and remote access gates in having reduced the number of Park & Ride crimes by nearly 55% since Intern Program Goes into Action As part of a new volunteer internship program 7 students from various undergraduate and graduate schools, representing a diverse range of universities including Princeton, University of Houston, Rice and Texas A&M, started work in June. The program is designed to reach out to the community and share real-world work experience in addition to providing extra assistance to the METRO departments sponsoring them. The unpaid interns will be working approximately 10 weeks through mid-august in several areas including Stakeholder Affairs, Operations, Transportation Programs, Human Resources, Finance, and Community Outreach. METRO Rallies to End Birth Defects METRO officially kicked off a fundraising campaign in March for the March of Dimes by asking employees to help end birth defects. This volunteer, grass-roots effort to raise money was deployed through a series of events and campaigns throughout the 10

13 3 rd quarter of FY2009, among them: a carnival day, a funniest video contest, and a collection drive. In total, METRO employees raised approximately $5,000. The March of Dimes is dedicated to preventing pre-term birth and other threats to infant health. Money raised is used for research, education, advocacy and community services. FTA Triennial Review Completed The on-site portion of the Triennial Review (TR), a congressionally-mandated audit of the Authority s compliance with required federal laws, rules, and regulations, was completed in March. This audit is conducted every third year by Federal Transit Administration (FTA) staff and its consultants. Of the twenty areas examined for compliance with federal regulations, the reviewers found only two instances of non-compliance, where scheduled paratransit service was inconsistent with the bus fixed route hours of operation and where Preventative Maintenance Inspections (PMIs) did not meet FTA standards. Paratransit hours of operation were adjusted immediately and a revised PMI tracking system has now been implemented in order to meet FTA standards. The reviewers also complimented METRO on its compliance in the areas of procurement, safety and security, drug free workplace, drug and alcohol program, grants management, and ADA programs. 11

14 System Ridership Ridership Trends At the end of the 3 rd quarter of FY2009, the year-to-date total system ridership, which includes fixed route bus, METRORail, Special Bus, and HOV Vanpools/Carpools, was 81.6 million. 100 YTD System Ridership 75 M i l l i o n s F Y A c t u a l s F Y A c t u a l s M i l l i o n s YTD Monthly System Ridership O c t N o v Dec J a n Feb M a r A p r M a y J u n F Y A c t u a l s F Y A c t u a l s YTD Total System Ridership FY2008 YTD FY2009 YTD Change Fixed Route Bus Service 59,389,475 51,841, % METRORail Service 8,991,101 8,710, % Subtotal Fixed Route Service 68,380,576 60,551, % Special Bus Service 2,992,971 3,081, % Subtotal Bus & Rail Services 71,373,547 63,633, % H O V C a r p o o l s, V a n p o o l s & N o n - M E T R O B u s e s 19,210,780 17,940, % TOTAL RIDERSHIP 90,584,327 81,574, % Fixed route ridership data reported are the unadjusted and unedited Automatic Passenger Counter (APC) registrations. 12

15 Fixed Route Service M i l l i o n s Fixed Route Bus & Rail Service O c t N o v Dec J a n Feb M a r A p r M a y J u n F Y A c t u a l s F Y A c t u a l s YTD Fixed Route Ridership FY2008 YTD FY2009 YTD Change Local Bus Service 53,096,761 46,081, % P a r k & R i d e B u s S e r v i c e 6,292,714 5,759, % Subtotal Fixed Route Service 59,389,475 51,841, % METRORail Service 8,991,101 8,710, % Total Fixed Route Service 68,380,576 60,551, % Note: Beginning in July 2008, fixed route ridership data reported are the unadjusted and unedited Automatic Passenger Counter (APC) registrations. Prior to July 2008, APC data was incomplete and have been adjusted to bring these to the same basis as the data after July The decrease in year-to-date ridership of 11.4% from the previous year shown above is due to both the FY2008 fare restructuring and the November 2008 fare increase, but this loss is lower than expected. The fare restructuring, coinciding with the introduction of METRO Q, eliminated free transfers for cash fare payments, effectively reducing the number of trips. The resulting decrease is in transfer ridership and had minimal impact on revenue. METRO s original estimate for the loss in ridership associated with the fare restructuring and the fare increase was 19.7% (11.7% for the fare restructuring and 8.2% for the fare increase). The actual ridership losses in April, May, and June (12%, 11%, and 12% respectively) were less than the forecast ridership losses. 13

16 Fixed Route Bus Service Other factors that had an impact on the comparison of year-to-year fixed-route ridership are as follows: The introduction of new services such as the Grand Parkway P&R (January 2008) and most recently Airport Direct (August 2008), 245 Pasadena (April 2009), Bellaire Quickline (June 2009), and the Renwick Crosstown (June 2009) has led to increased boardings and brought new customers to METRO. M i l l i o n s O c t N o v D e c J a n Feb M a r A p r M a y J u n FY2008 Actuals FY2009 Actuals METRORail Service Year-to-date, there were three less weekdays (approximately a million less boardings) plus the timing of holidays (primarily in the 1 st quarter) that reduced ridership relative to the previous year. M i l l i o n s O c t N o v D e c J a n Feb M a r A p r M a y J u n The cumulative effect of the FY2008 fare restructuring and the November 2, 2008 fare increase resulted in fewer boardings. Although the ridership loss has been less than originally forecast, it is significant nonetheless FY2008 Actuals FY2009 Actuals Local Bus Service Gasoline prices and unemployment have also depressed ridership. From June 2008, gas prices have fallen almost $1.50 per gallon, while unemployment in Houston has risen to 6.9% as of May (preliminary) and is at its highest level since August M i l l i o n s O c t N o v D e c J a n Feb M a r A p r M a y J u n FY2008 Actuals FY2009 Actuals In April, weather was responsible for decreased ridership. During the month, rainfall was 7 times that of the previous April and was noted as the third highest on record. Also, on April 28 th METRO operated only 70% of its scheduled trips due to the weather. M i l l i o n s Park & Ride Bus Service O c t N o v D e c J a n Feb M a r A p r M a y J u n FY2008 Actuals FY2009 Actuals 14

17 Special Bus Services Special Bus Services Special Bus Services have two components: METROLift (service ondemand) and METRO STAR Vanpool Service (special bus service utilizing non- METRO operated vans). These services do not have fixed routes or set schedules. T h o u s a n d s O c t N o v D e c J a n Feb M a r A p r M a y J u n Total ridership for Special Bus Services for FY2009 year-to-date was 3.08 million. METROLift ridership was 376,000 boardings in the 3 rd quarter of FY2009. This represented a 2.3% increase from the 3 rd quarter of FY2008. Year-to-date METRO Lift ridership is 0.9% above the same period in FY2008. T h o u s a n d s FY2008 Actuals FY2009 Actuals METROLift Service O c t N o v De c J a n Feb M a r A p r M a y J u n STAR Vanpool Service continued to grow in the 3 rd quarter of the fiscal year, posting a 0.2% growth in ridership from the 3 rd quarter last year. Currently there are just over 750 vanpools in the program. Year-todate ridership is 8.1% higher than the same period last year. T h o u s a n d s FY2008 Actuals FY2009 Actuals METRO STAR Van pool O c t N o v D e c J a n Feb M a r A p r M a y J u n FY2008 Actuals FY2009 Actuals 15

18 Financial Performance Revenues Fares METRO Revenues FY2009 YTD ($ millions) Budget Actual Differences Fares % S a l e s T a x ( C a s h B a s i s ) % Interest & Miscellaneous % Subtotal % G r a n t s % T O T A L % M i l l i o n s $ $ $ FY2009 YTD Fares $49.5 $ Year-to-date fares at the end of the 3 rd quarter of FY2009 are essentially on budget. $ B u d g e t A c t u a l The actual fares, compared to the same period in FY2008, are up $10.0 million or 25.3% due to the effect of the fare restructuring and the fare increase that was implemented on November 2 nd, $ 6. 0 FY2009 Monthly Fare Revenue M illions $ 4. 0 $ 2. 0 $ 0. 0 O c t N o v Dec J a n Feb M a r A p r M a y J u n F Y A c t u a l s F Y A c t u a l s 16

19 Sales Tax Revenue FY2009 Quarterly Financial & Management Report Sales tax revenue (cash basis) for FY2009 year-to-date is $399.3 million, a $45.7 million or 12.9% increase over budget; and $15.8 million or 4.1% higher than the actual for the same period in FY2008. Millions $ $ $ $ YTD Sales Tax Revenue (Cash Basis) $ Budget $ A ctu al The Houston economy has so far felt the recessionary pressures to a lesser extent than other urban areas of the country. Also, during the 2 nd quarter of the year, METRO received additional sales tax revenues as a result of rebuilding activities after Hurricane Ike. This has begun to change though as sales tax revenue for the 3 rd quarter is $3.2 million below that of the 3 rd quarter last year. $ 7 5 FY2009 Monthly Sales Tax Revenue (Cash Basis) M illions $ 5 0 $ 2 5 $- O c t N o v D e c J a n Feb M a r A p r M a y J u n FY 2008 Actuals FY 2009 Actuals 17

20 Grant Revenue Grant revenue through the 3 rd quarter of FY2009 is $22.1 million below budget. Millions $ $ $ $ $ 6. 0 Y T D G r a n t R e v e n u e $ $ B u d g e t Act ual Under FTA policy, METRO receives grant funds only once the expenditures are incurred. As a result, when project expenditures are running under budget, due to rescheduling, etc., grant revenue is also under budget. $ F Y M o n t h l y G r a n t R e v e n u e $ 8. 0 Millions $ 4. 0 $ 0. 0 O c t N o v Dec J a n Feb M a r Apr M a y J u n Budget A c t u a l 18

21 FY2009 YTD Operating Budget, Expenses, and Variance FY2009 YTD FY2009 YTD $ Variance % Variance Expense Category Budget ($) Expenses ($) (favorable)/unfavorable Wages 71,381,051 70,886,594 (494,457) -0.7% Fringe Benefits Union 32,719,631 32,230,610 (489,021) -1.5% Total Union Labor 104,100, ,117,204 (983,478) -0.9% Salaries and NonUnion Wages 56,804,011 53,839,800 (2,964,211) -5.2% Fringe Benefits Non-Union 23,325,327 21,963,113 (1,362,214) -5.8% Total Non-Union Labor 80,129,338 75,802,913 (4,326,425) -5.4% Total Labor and Fringe Benefits 184,230, ,920,117 (5,309,903) -2.9% Services 13,463,558 7,850,825 (5,612,733) -41.7% Materials and Supplies 14,789,669 13,091,475 (1,698,194) -11.5% Fuel & Utilities 47,286,413 46,386,388 (900,025) -1.9% Casualty and Liability 2,876,169 2,512,273 (363,896) -12.7% Purchased Transportation 53,429,547 50,973,381 (2,456,166) -4.6% Leases, Rentals and Miscellaneous 2,209,818 1,568,128 (641,690) -29.0% Total Non-Labor 134,055, ,382,470 (11,672,704) -8.7% Total Labor and Non Labor 318,285, ,302,587 (16,982,607) -5.3% Cost Recovery (6,026,033) (5,149,790) 876, % Total Operating Expenses 312,259, ,152,797 (16,106,364) -5.2% Capitalized Operating Expenses (40,358,952) (40,358,952) - 0.0% Allocation to Capital & GMP (31,560,911) (29,114,431) 2,446, % Total Allocation to Capital (71,919,863) (69,473,383) 2,446, % OPERATING BUDGET 240,339, ,679,414 (13,659,884) -5.7% 19

22 Operating Expenses FY2009 Quarterly Financial & Management Report FY2009 YTD Operating Expenses 255 Millions $240.3 $ B u d g e t A c t u a l Operating expenses through the 3 rd quarter FY2009 are $ million compared to $ million budgeted, $13.66 million or 5.7% under budget. FY2009 YTD Operating Expense by Category $75 $60 M i l l i o n s $45 $30 $15 $- Budget A c t u a l 20

23 Millions $25 $20 $15 $10 $5 $- FY2009 Monthly Labor & Fringe Benefits Oct Nov Dec Jan Feb M a r A p r M a y Jun FY 2009 Budget FY 2009 Actuals Millions $18 $14 $9 $5 $- FY2009 Monthly Non-Labor Expenses Oct Nov D ec Jan Feb M a r A p r M a y Jun FY 2009 Budget FY 2009 Actuals Wages are under budget by $494,000 or 1%. Authority-wide, a 2.1% increase in the union wage rate, together with an adjustment to the Tier 2 Bus Operator wage rates resulting from the recently adopted union agreement, represents approximately $1.48 million of additional wage cost (January - June). Even after absorbing the extra cost, wages are still under budget although previous underruns in Bus Operator overtime and sick leave cash out have been fully absorbed. Year-to-date, Bus Operator wages are over budget. Bus and Facility Maintenance wages are $420,000 below budget, the result of vacancies (averaging 26 full-time mechanics/cleaners and 6 part-time mechanics), and reduced sick leave cash out. Rail wages are $182,000 under budget and reflect lower sick leave cash out and a LRT servicer vacancy. The sick leave cash out component of the underrun in all of the items above is $185,000 and is due to an advanced payment of just over $100,000 made in September 2008 (prior fiscal year) to accommodate employees impacted by Hurricane Ike as well as lower than budgeted usage. 21

24 Union Fringe Benefits are $489,000 or 2% under budget. Benefit Trust Contribution is under budget by $539,000 primarily due to fewer active employees enrolled in healthcare than budgeted. FICA is under budget reflecting the overall wage underrun and Workers Compensation expense is $167,000 under budget, resulting from a lower level of overall claims throughout the fiscal year and the closing of more claims than opened. The effect of the union contract on fringe benefits is approximately $681,000. The major component of this is $569,000 in longevity pay. Salaries and Non-Union Wages are under budget by $2.964 million or 5%. Salaries are under budget by approximately $2.6 million resulting from salaried vacancies throughout the Authority. Salaried overtime is $331,000 under budget reflecting efficiencies in Service Supervision and in managing the Bus Marshall program. Non-Union Fringe Benefit are under budget by $1.362 million or 6% resulting from the vacancies discussed above. In addition, lower wellness plan participation resulted in higher health care premiums to the non-participating employees and lower costs to METRO. Services expenses are under budget by $5.613 million or 42%. The slow start of contractual services as well as lagging invoices throughout the Authority account for a large timing variance in items such as contract delays in Facilities Maintenance ($1.165 million), advertising expenses in Marketing ($520,000), IT services such as those to maintain and repair existing systems ($419,000), marketing surveys ($127,000), and less Human Resources service contracts (background checks, preemployment physical exams, etc.) and job advertising ($190,000). A delay in the implementation of the contract for METRO Q transaction processing as well as favorable pricing has resulted in an underrun of just over $300,000. Tight monitoring of temporary help, education & training fees and savings in courier services due to lower unit costs than budgeted has resulted in underruns of $268,000, $252,000 and $227,000 respectively. Materials & Supplies are under budget by $1.698 million or 12%. Bus Parts are $786,000 under budget primarily reflecting tight control of parts cost. The balance of the underrun is a result of lower usage in Support Vehicle, Rail and Facilities Maintenance and usage throughout the Authority (e.g., office supplies). Fuel & Utilities are under budget by $900,000 or 2%. Diesel fuel is $21,000 above budget, primarily reflecting the use of higher cost off-site storage fuel offset by decreased usage as a result of improved fuel efficiency. Power expenses are $340,000 below budget due to lower than anticipated transmission charges. Gasoline is $346,000 below budget primarily reflecting lower market prices. Casualty & Liability expenses are $364,000 or 13% under budget. Aggressive recovery of physical damage subrogation, including two significant Rail recoveries, has resulted in the majority of the savings. 22

25 Purchased Transportation expense is $2.456 million or 5% under budget. METROLift expenses are under budget by $1.405 million primarily due to lower fuel cost associated with the minivan contract and more efficient scheduling. Vanpool contractor expenses continue to be under budget by $1.165 million resulting from delays in the program earlier in the fiscal year. Leases, Rentals & Miscellaneous expenses are $642,000 or 29% under budget. Of this, approximately $221,000 reflects a delay in payment of IT system maintenance agreement charges. The rest of the variance is primarily timing related to travel ($279,000), subscriptions and memberships ($102,000). Cost Recoveries are $876,000 or 15% less than budget. This is due to reduced vanpool recovery resulting from the underrun in vanpool purchased transportation expenses discussed above. Capitalized Operating Expenses are on budget. Allocation to Capital and GMP is $2.447 million or 8% lower than budget reflecting vacancies in capitalized positions. 23

26 General Mobility Expenditures M i l l i o n s $ $ $ $ $ $ FY2009 YTD GMP Expenditures $111.3 $6 7.0 FY2009 General Mobility Program expenditures through the 3 rd quarter were $ million compared to $ million budgeted, $ million or 39.8% less than budgeted. $ 0. 0 B u d g e t A c t u a l Y T D G e n e r a l M o b i l i t y B u d g e t R e s u l t s FY2009 YTD FY2009 YTD Budget Actual Variance Variance ( $ millions ) ( $ millions ) ( $ millions ) ( % ) C i t y o f H o u s t o n % Harris County % M u l t i - C i t i e s % A r e a - W i d e % Total General M o b i l i t y P r o g r a m % City of Houston expenditures through the 3 rd quarter were $ million, 52.0% less than the $ million budgeted. Invoices totaling approximately $19 million anticipated to be received and paid during the 1 st quarter of FY2009 were received earlier and were accrued as FY2008 expenses. Additionally, City of Houston project invoicing has been less than anticipated. Harris County expenditures through the 3 rd quarter were $ million, 54.6% less than the $ million budgeted. This was due to county invoicing being less than anticipated. Multi-Cities expenditures through the 3 rd quarter were $ million, 50.6% more than the $ million budgeted. Two City of Bellaire projects which were anticipated to have been funded in FY2008 were not funded until FY2009. Area-Wide expenditures through the 3 rd quarter were $3.494 million, 1.8% more than budgeted. 24

27 Capital Expenditures FY2009 Quarterly Financial & Management Report Millions $ $ $ $ 0. 0 FY2009 YTD Capital Budget Expenditures $307.8 Budget A c t u a l $119.2 Capital expenditures through the 3 rd quarter of FY2009 were $119.2 million, and are 61.3% or $188.6 million below budget. Major variances in the Capital Budget are identified and discussed below. Y T D C a p i t a l B u d g e t FY2009 YTD FY2009 YTD Budget Actual Variance Variance ( $ millions ) ( $ millions ) ( $ millions ) ( % ) M E T R O S o l u t i o n s % C a p i t a l Improvement % Program T o t a l C a p i t a l Budget % The primary reason for the under run is due to the delay in approval of the Full Funding Grant Agreement (FFGA), the constrained financial markets, and the complex negotiations with the Facility Provider. METRO Solutions is $143.9 million under budget due to slower than anticipated land acquisitions. The Uptown Corridor is responsible for $65 million of the under run as land acquisition has been postponed awaiting University Corridor Record of Decision from the FTA. The remaining under run is a result of the conservative spending efforts in the CIP and the postponement of Commuter Rail beyond FY2009. Other areas such as HOT Lane expansion, Park & Ride expansions, development projects, and IT projects were also under budget as METRO remains conservative in its execution of the CIP in these difficult economic conditions. 25

28 Debt Service FY2009 Debt Service expenditures through the 3rd quarter were $2.217 million compared to $5.473 million budgeted, $3.256 million or 59.5% less than projected. $ 6. 0 FY2009 YTD Debt Service Millions $ 4. 0 $ 2. 0 $ 5. 5 $ 2. 2 $ 0. 0 Budget A c t u a l T o t a l D e b t Service Y T D D e b t S e r v i c e FY2009 YTD FY2009 YTD Budget Actual Variance Variance ( $ millions ) ( $ millions ) ( $ millions ) ( % ) % The underrun is a result of less debt service paid for commercial paper. METRO has not issued as much commercial paper as planned due to capital program delays and borrowing rates have been lower than anticipated averaging %. 26

29 Composite Operating & Capital Statement FY2009 YTD ($000's OMITTED) B u d g e t A c t u a l V a r i a n c e G r o s s I n c o m e F a re s 49,519 49,460 ( 5 8 ) S a l e s T a x I n c o m e 353, ,881 54,279 Interest Income 1,645 1, O t h e r O p e r a t i n g I n c o m e T o t a l 405, ,079 54,765 Operating Expenses T r a n s i t : Department & Support Expenditures 236, ,859 (15,723 ) Traffic Management : Department & Support E x p e d i t u r e s Expensed Small Capital Purchases 3,757-5, , T o t a l 240, ,679 ( 1 3, ) G r o s s I n c o m e - T o t a l O p e r a t i n g E x p e n s e s 164, ,399 68,425 +Federal / State Capital Grants Collected 36,534 14,418 ( 2 2, ) Current Year Cashflow Available for Capital Expenditures 201, ,817 46,309 - Capital Expenditures Made 419, ,141 (232,983) A l l d a t a i n y e a r - o f - e x p e n d i t u r e d o l l a r s. Sales Tax is reported on an accrual basis. ($000 OMITTED) C u r r e n t Y e a r C a s h f l o w f o r F u t u r e C a p i t a l E x p e n d i t u r e s I n c l u d i n g R e p l a c e m e n t s a n d O p e r a t i n g E x p e n s e s (217,616) 61, ,292 27

30 Balance Sheet As of June 2009 June 2008 ($) June 2009 ($) Change ($) A s s e t s C a s h 8,528,182 8,321,804 (206,378) Receivables 138,726, ,433,900 (2,292,437) Inventory 22,048,681 28,907,711 6,859,030 Investments 150,209, ,367, ,158,331 O t h e r C u r r e n t A s s e t s 35,332,834 36,028, ,937 Property Net of Depreciation 1,336,215,632 1,442,971, ,755,740 Land & Improvements 362,592, ,463,472 92,870,834 Total Assets and Other 2,053,653,521 2,438,494, ,841,057 L i a b i l i t i e s T ra d e P a ya bles 48,664,729 36,621,946 (12,042,783) Accrued Payroll 23,472,598 22,342,651 (1,129,947) Short - Term Debt 143,000, ,000,000 - O t h e r C u r r e n t L i a b i l i t i e s 30,254, ,516, ,262,285 Total Liabilities 245,391, ,481, ,089,555 N e t A s s e t s - R e t a i n e d (1) 1,808,262,052 1,847,013,554 38,751,502 Total Liabilities and Net Assets 2,053,653,521 2,438,494, ,841,057 (1) On a year to year basis, net assets increased by 2.1% or $38.8 million. 28

31 Operating Ratio 22% 20% 18% 19% FY2009 Goal 21% FY2009 Actual Through the end of the 3 rd quarter of, the Operating Ratio is 21%, a 9% improvement over the FY2009 annual goal of 19%. The major factors in producing the strong operating ratio are the fare revenue which is essentially on budget and the operating expenses which are decreasing. 29

32 Key Performance Indicators Mean Distance Between Failures (MDBF) 1 0, , ,000 Miles 5, , O c t N o v Dec J a n Feb M a r A p r M a y J u n J u l A u g Sept FY2009 Actual FY2009 Minimum Goal In the 3 rd quarter, the bus fleet performed above the FY2009 minimum performance standard of 6,000 MDBF with the exception of June. Actual performance was 30% better in April than the MDBF minimum, 14% better in May and 10% unfavorable in June. The Operations Department attributes the performance of the bus fleet to its continuing focus on positive repairs and good preventative maintenance practices. However, the fleet experienced a higher volume of A/C and engine failures related to above average temperatures in the month of June. On-Time Performance (Service Reliability) 8 0 % 6 0 % FY2009 Local Bus On-Time Performance (Service Reliability) 61% 4 0 % O c t N o v Dec J a n Feb M a r A p r M a y J u n J u l A u g S e p t Local Bus OTP (Service Reliability ) Goal 30