Dallas Area Rapid Transit. FY 2007 Business Plan (Including FY 2007 Annual Budget and Twenty-Year Financial Plan)

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2 Dallas Area Rapid Transit FY 2007 Business Plan (Including FY 2007 Annual Budget and Twenty-Year Financial Plan)

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5 Proposed FY 2007 Business Plan (08/16/06) Dallas Area Rapid Transit Board of Directors Officers Mark Enoch, Chair Cities of Farmers Branch, Garland & Rowlett Joyce Foreman, Vice Chair City of Dallas Angie Chen Button, Secretary City of Garland Lynn Flint Shaw, Assistant Secretary City of Dallas City of Dallas Terri Adkisson Jerry Allen Scott Carlson Huelon Harrison Beatrice Alba Martinez William M. Velasco City of Irving John Danish City of Plano Robert Pope Cities of Addison, Highland Park, Richardson & University Park Raymond Noah Cities of Carrollton & Irving Randall Chrisman Cities of Dallas, Plano, Glenn Heights & Cockrell Hill Faye Wilkins

6 Table of Contents TABLE OF CONTENTS FY 2007 BUSINESS PLAN Section 1 Introduction/Strategic Alignment Purpose of Business Plan... INT-1 Board and Policy Direction... INT-1 Overview of DART s Leadership System. INT-5 Management Action Plans and Performance Measurements INT-6 Employee Performance.. INT-10 Business Planning Process. INT-10 Budget and Financial Plan Approval and Amendments INT-12 Budget Basis and Presentation of Amounts and Years. INT-12 Related Reports.. INT-13 Acronyms... INT-13 Section 2 Executive Summary Background... EX-1 Business Plan Format EX-2 DART-Key Performance Indicators.. EX-2 Focus on the Customer DART s First Priority... EX-3 Section 3 Customer Bus Overview... BUS-1 Bus Scorecard-Key Performance Indicators..... BUS-1 Bus Ridership Trends.... BUS-2 Ridership Development Action Plan. BUS-4 Subsidy Per Passenger... BUS-8 DART On-Call Service.... BUS-9 Activity Center Shuttles.... BUS-9 Bus Cost Model..... BUS-10 Section 4 Customer LRT Overview... LRT-1 Light Rail Scorecard-Key Performance Indicators... LRT-1 LRT Ridership... LRT-2 LRT Expansion.. LRT-3 LRT Costs and Subsidy Per Passenger.. LRT-7 LRT Cost Model.... LRT-8 Section 5 Customer Commuter Rail & Railroad Management Overview... CR-1 Commuter Rail-TRE Scorecard-Key Performance Indicators.. CR-2 TRE Ridership CR-3 Commuter Rail-TRE Costs and Subsidy Per Passenger... CR-5 Commuter Rail and Railroad Management Cost Model.. CR-6 Section 6 Customer Paratransit Services Overview... PAR-1 Paratransit Services Scorecard-Key Performance Indicators PAR-1 Scheduling/Control Center Service Levels... PAR-2 Paratransit Ridership.. PAR-2 Paratransit s Productivity.. PAR-4 Purchased Transportation Contract... PAR-5 Paratransit Costs and Subsidy Per Passenger PAR-5 Paratransit Cost Model.. PAR-6 -i-

7 Table of Contents TABLE OF CONTENTS FY 2007 BUSINESS PLAN Section 7 Customer HOV/General Mobility HOV Overview.... HOV-1 HOV Scorecard-Key Performance Indicators HOV-2 HOV Projects HOV-2 Ensure I-30 HOV Lane Opens on Time. HOV-6 Stemmons HOV Gates to Improve Safety. HOV-6 HOV Service has Lowest Subsidy Per Passenger.. HOV-6 General Mobility Overview... HOV-7 Vanpool Scorecard..... HOV-7 General Mobility-Road Improvement Programs HOV-9 Section 8 Agency-Wide Overview... AW-1 Provide a Safe/Secure Service... AW-1 DART Safe Work Practices Policy... AW-3 Provide Customer-Driven Service AW-3 Use Surveys to Understand Needs of Customers, Employees, and Stakeholders.... AW-4 Improving Business Processes and Information AW-6 Major Technology Projects to Improve Quality and Efficiency... AW-8 Satisfied Employees Contribute to Satisfied Customers... AW-11 Promote Employee Development and Alignment. AW-11 Promote Excellence Through Workforce Diversity.. AW-14 Stakeholders Perceptions are Critical... AW-15 Section 9 FY 2007 Budget Overview... BUD-1 Sources and Uses of Funds... BUD-1 Revenues... BUD-2 FY 2007 Operating Budget... BUD-4 FY 2007 Capital Budget BUD-11 FY 2007 Net Debt Service Budget BUD-12 Position Summary.. BUD-13 Activity-Based Budget.. BUD-14 Section 10 FY 2007 Twenty-Year Financial Plan Overview... FP-1 Sources of Funds... FP-3 Uses of Funds FP-10 Operating Expenses.... FP-10 Capital and Non-Operating.... FP-14 Debt Program.. FP-23 Supplemental Financial Information. FP-25 Major Financial Plan Assumptions FP-28 Potential Risks and Opportunities. FP-30 Section 11 Appendix -ii-

8 Section 1 Introduction/Strategic Plan Index of Exhibits Exhibit 1.1 Exhibit 1.2 Exhibit 1.3 Exhibit 1.4 Exhibit 1.5 Exhibit 1.6 Exhibit 1.7 Map DART System Plan (Current & Future Services).. INT-3 Interrelationship of System Plan with Other Documents... INT-4 Relationship of Financial Standards to Sources and Uses of Cash. INT-5 DART s Leadership System and Strategic Alignment... INT-6 DART s Strategic Plan... INT-8 Strategic Performance Measurements. INT-9 Standard Business Plan Development Schedule. INT-10

9 Introduction/Strategic Alignment Purpose of Business Plan Introduction/Strategic Alignment The FY 2007 Business Plan provides the Board of Directors, taxpayers, and elected officials of our region with a comprehensive summary of the Agency's plans and commitments to improve regional mobility, enhance the quality of life, and stimulate economic development. This document consolidates the key elements of the proposed FY 2007 Annual Budget, the proposed FY 2007 Twenty-Year Financial Plan, the Transit System Plan, the Five-Year Action Plan, and the Agency's Strategic Plan. The resolutions shown at Exhibit APX.1 approve the funding levels for the FY 2007 Annual Budget and the FY 2007 Twenty-Year Financial Plan as required by DART's enabling legislation. Board and Policy Direction DART History Dallas Area Rapid Transit (DART) is a regional transportation authority of the State of Texas. DART was created by a voting majority of the citizens on August 13, 1983, to organize and provide regional public transportation to its member jurisdictions pursuant to Article 1118y of Vernon's Annotated Texas Civil Statutes, as amended, and recodified into Chapter 452 of the Texas Transportation Code effective September 1, The enabling legislation allows DART to collect a one-percent sales and use tax on certain transactions. DART currently consists of the following member jurisdictions: Addison, Carrollton, Cockrell Hill, Dallas, Farmers Branch, Garland, Glenn Heights, Highland Park, Irving, Plano, Richardson, Rowlett, and University Park. The DART Service Area is approximately 700 square miles and includes approximately 2.1 million people. Mission Statement DART s mission statement defines the purpose for which the Agency was created: To build, establish, and operate a safe, efficient, and effective transportation system that, within the DART Service Area, provides mobility, improves the quality of life, and stimulates economic development. Board Goals To achieve this mission, the Board has developed five goals which have been consolidated into three focus areas or target groups for purposes of strategic planning. Customer Focus Provide DART's customers with services that are ever-increasing in quality, effectiveness, and efficiency. Establish a common vision for transportation that is regionally accepted, progressively implemented through a comprehensive system plan, and periodically revisited. INT-1

10 Introduction/Strategic Alignment Internal Focus (Employee) Foster an internal environment that promotes teamwork, empowerment, accountability, and positive self-image. External Focus (Stakeholder) Sustain a multi-faceted outreach effort to promote dialogue with the public on DART's goals, services, and accomplishments; and Develop and enhance coalitions with all organizations that have a vested interest in regional transportation issues. Service Plan/Transit System Plan DART has a Service Plan and a Transit System Plan. The Service Plan is required by DART s legislation. It describes, in legal terms, where DART's facilities and rail alignments are physically located. DART s Transit System Plan is a longrange planning tool that identifies and prioritizes major capital projects needed to improve regional mobility. The Transit System Plan is closely coordinated with development of the North Central Texas Council of Government s Regional Mobility Plan and is revised every five to six years. The next revision is scheduled for completion in FY 2007 and focuses on transit needs and opportunities within the context of a 2030 horizon. The current Transit System Plan map is located at Exhibit 1.1. The affordability of the Transit System Plan and the timing of service and capital expansion projects are determined by the Twenty-Year Financial Plan, which is approved annually by the Board. Exhibit 1.2 highlights the interrelationships of the Transit System Plan with other key Agency documents. Financial Standards DART s Financial Standards (Exhibit APX.2) are divided into three sections: General (FS-G), Business Planning Parameters (FS-B), and Debt Service (FS-D). The purpose of the general standards is to ensure that DART prudently manages its financial affairs and establishes appropriate cash reserves. The Business Planning Parameters (BPPs) provide management with a framework for developing the following year's budget and Twenty-Year Financial Plan and establish future business targets for management to achieve. The purpose of the Debt Service standards is to limit the level of debt that may be incurred and to ensure that debt assumptions are based on financial parameters similar to (or more conservative than) those that would be placed on DART by the financial marketplace. The combination of these policy documents provides a framework within which management can formulate strategy and action plans to maximize return on investment (i.e., increase ridership and improve subsidy per passenger). Exhibit 1.3 highlights which Financial Standards correlate with the major sources and uses of cash included in the Annual Budget and Twenty-Year Financial Plan. INT-2

11 Introduction/Strategic Alignment Exhibit 1.1 Current & Future Services INT-3

12 Introduction/Strategic Alignment Exhibit 1.2 Interrelationship of System Plan with Other Documents TRANSIT ELEMENT Transit System Plan Revised June 30, 1995 June 1995 REGIONAL MOBILITY PLAN PROJECT DEFINITION TRANSIT SYSTEM PLAN LONG-RANGE ELEMENT FINANCIAL CONSTRAINTS LOCATION SPECIFIC OTHER STUDIES SERVICE PLAN LONG-RANGE FINANCIAL PLAN INTERRELATIONSHIP IMPLEMENT COMMITMENT FUNDING DART DART DART/City of Dallas LINE SECTION NW-1A LINE SECTION NW-1A 30% DESIGN SUBMITTAL 30% DESIGN SUBMITTAL Inter-Local Agreement Including: Supplement # 1 Planning & Zoning Supplement # 2 Design & Construction Council Resolution # CBD Stations FINAL DESIGN INTERLOCAL AGREEMENT BUSINESS PLAN INT-4

13 Introduction/Strategic Alignment Exhibit 1.3 Relationship of Financial Standards to Sources and Uses of Cash Description Where Covered Sources of Cash Sales Taxes FS-B1 Operating Revenue FS-B2 Federal Funding FS-B10 Debt FS-D1 to D7 Uses of Cash Operating Budget Fixed Route Service FS-B3 & B4 Administrative Costs FS-B6 Total Expenses FS-B5 Capital Budget Gen. Mobility-Road Improvements FS-B7 Start-up/Capital Planning Costs FS-B8 Capital Projects FS-B8, FS-B9 Net Debt Service Budget FS-D1 to D7 Cash Reserves FS-G5 & G7 Ending Cash FS-G6 Board Policies The Board has a number of policies that provide direction to management for implementation. For example, the Board has policies for real estate purchases, advertising on buses, and fare structure. DART's enabling legislation requires the Board to adopt an annual budget prior to the commencement of a fiscal year. It also requires the Board to have a Financial Plan. The Financial Plan details the projected sources and uses of cash for twenty years and reviews the affordability of DART's currently approved Transit System Plan. The Board's Bylaws require a two-thirds vote of the appointed and qualified Board Members to approve or amend the Financial Plan. Budget and Financial Plan amendments are required for new operating programs or an increase to an existing operating program in excess of $500,000 per year and for new capital programs in excess of $1 million. Overview of DART's Leadership System DART's leadership system is based on the concept of strategic alignment. This is the process used to ensure that DART employees understand how their jobs and performance are linked to the Board's mission, direction, and goals. The leadership process is shown in Exhibit 1.4. Performance measurements are critical and are incorporated into "scorecards" at different levels of the Agency. The major components of the leadership system are described in more detail in the remainder of this section. INT-5

14 Introduction/Strategic Alignment Management Action Plans and Performance Measurements Vision Statement To help achieve the Board's mission and goals, a vision statement was developed in FY 1997 to address the Agency's three focus groups (customers, employees, and stakeholders). The vision describes what the Agency is trying to achieve. The key statements are incorporated into the Agency's Strategic Plan (see Exhibit 1.5). DART's vision follows: DART is a welcomed, integral part of our region. We provide quality service. Our innovative accomplishments benchmark DART as a transportation leader which is supported by a thriving internal environment. DART Organizational Values As an adjunct to the vision statement, six core values were developed in FY 1998 for DART's management and employees. These values demonstrate where focus and emphasis need to be placed on a daily basis. At DART, employees value being: Focused on Our Customers We are dedicated to meeting our customers needs We strive for continuous improvement We deliver quality Committed to Safety We expect safety to be the responsibility of every employee We are committed to ensuring the safety of our passengers INT-6

15 Introduction/Strategic Alignment Professional We demonstrate a high regard for each other We take pride in our accomplishments We congratulate each other for our successes We honor integrity and honesty Dedicated to Quality Performance We strive for excellence We have high expectations We hold ourselves accountable for results We coach, reinforce, and recognize our employees Team Players We are committed and dedicated to DART We support each other We value our diversity Good Stewards of the Public Funds We responsibly use public funds and property Other Strategic Input The Business Plan is reviewed annually, and the Strategic Plan is reviewed every three years. They are modified based on an analysis of business results; the results of employee, customer, and climate surveys; external events (such as issues being considered by the Texas State Legislature); and benchmark comparisons with other transit agencies and private sector companies. The Strategic Plan was reviewed and updated in Strategic Plan The Board's mission, goals, and policy direction are integrated with the other feedback discussed above to develop and update the Strategic Plan and Business Plan. The Strategic Plan is shown in Exhibit 1.5. The Strategic Plan identifies the key initiatives that must be completed to achieve the Board's goals and the Agency's vision of success. Management developed a leadership system whereby strategy and performance measurement drive the achievement of results and are the basis for the creation of the Business Plan. The Strategic Plan identifies what needs to be accomplished; the Business Plan defines how management intends to achieve it. The key to success is the development of performance indicators or "scorecards" that inform management how well the initiatives are working. Exhibit 1.6 highlights DART's major strategic performance measurements that are used in the Agency-wide, modal, and departmental scorecards. The leading indicators are the key financial, operational, and employee performance drivers that, if achieved, will yield improved Agencywide performance. Measurement definitions are included in Exhibit APX.6. Management's goal is to develop business and information systems that provide critical information regarding the leading indicators to key personnel so corrective or preventive action can be taken as soon as possible. The lagging indicators are more traditional in nature and typically are not available until after month-end. They measure results but do not drive performance. INT-7

16 Introduction/Strategic Alignment INT-8

17 Introduction/Strategic Alignment Exhibit 1.6 Strategic Performance Measurements Management Objectives Key Leading Indicators Key Lagging Indicators Customer Focus C1 - Customer Satisfaction * On-time performance * Ridership * Accidents per 100k miles * Passengers per mile/hour * Complaints per 100k passengers * Customer satisfaction surveys * Call abandonment rates/service levels * Response time * Miles between road calls * Missed trips C2 - Manage System Growth * Revenue miles/hours * Ridership * Actual schedule vs. plan for * Passengers per mile/hour system expansion * Customer satisfaction surveys C3 - Improve Efficiency * Operator lost time claims * Subsidy per passenger * Unscheduled absences * Administrative ratio * Pay-to-platform ratio * Sales taxes for operations * Average system speed * Unused financing capacity * Deadhead ratio * Timely replacement of assets C4 - Improve Business Processes * Cycle time/process measurements * Sales taxes for operations and Information * Project implementation vs. plan * Administrative ratio * Benchmark comparisons Internal Focus - Employee E1 - Promote Employee * Employee verbal feedback * Employee satisfaction survey Development and Alignment * Number of grievances * Corrective disciplinary actions * Retention/absenteeism External Focus - Stakeholder S1 - Build Relationships with * Complaint/commendations * Climate satisfaction survey Stakeholders * Press clippings * Completion of TSP commitments * Joint development created Business Plan The Business Plan is the Agency's written document that outlines DART's performance projections and commitments for each mode of service and the Agency as a whole. The Plan includes five-year "scorecards" showing two past years, the current budget year, and forecasts for the next two years. The scorecards address key operating, financial, and quality measures and identify the work program (i.e., initiatives) necessary to improve performance and scorecards of projected passenger and subsidy per passenger targets. The Strategic Plan and Business Plan are the basis for the FY 2007 Annual Budget and the FY 2007 Twenty-Year Financial Plan and for measuring management and employee performance. Executive management monitors key scorecard elements and work program initiatives on a monthly and quarterly basis. Exception reporting for key scorecard elements is provided to the Board on a quarterly basis in a green, yellow, and red format. For more information on performance reporting, readers should obtain a copy of DART's Quarterly Operating and Financial Performance Report. INT-9

18 Introduction/Strategic Alignment Employee Performance A critical part of DART's leadership system is the link between the Business Plan and employee performance. DART's Senior Management Team (assistant vice-presidents and above) is held accountable for achieving or exceeding the operating, financial, and quality targets established in the Business Plan at the Agency-wide and modal levels. Scorecards and work programs are developed and cascaded down from the Agency-wide and modal levels to the department and division levels. Scorecards at the department and division levels tend to focus more on internal process measurement since continuous process improvement is one of the Agency's core values and therefore a major theme for management. The work program elements necessary to improve performance at all levels are then incorporated into individual employee Performance Management Plans (PMPs). Some PMPs may be homogeneous for an entire group and will focus on achieving the expected business results for that section (such as claims processing). Other PMPs will be project specific (or work program specific) and linked directly back to the specific initiatives in the Strategic Plan. Salaried employees review their performance with their supervisors at least two times per year to ensure that schedules are being maintained and targets are being achieved. Exceptions are noted and adjustments are made to schedules. Management places a significant amount of weight on achieving the performance expectations shown in the scorecard. The Agency uses pay-forperformance merit increases, a lump-sum bonus plan, and other incentive programs to reward employees (or groups of employees) who achieve their objectives. See the Agency-Wide section for more detail on these processes. Business Planning Process Exhibit 1.7 highlights the standard business planning compilation and approval process used at DART. Date Dec Feb Feb Mar May Jul Jul Aug Sep Sep Exhibit 1.7 Standard Business Plan Development Schedule Description Management reviews Strategic Plan every three years Management reviews and makes recommendations for changes to Financial Standards Board reviews and approves Financial Standards Staff develops Business Plan (which includes the Annual Budget and Twenty-Year Financial Plan) for following year Staff presents proposed Budget and Twenty-Year Financial Plan to Board Board approves issuance of Budget and Twenty-Year Financial Plan to Member Cities Member Cities provide input Board approves Budget and Twenty-Year Financial Plan INT-10

19 Introduction/Strategic Alignment DART takes a top-down approach to business planning. It begins with the Board's Financial Standards which establish parameters within which management must operate. Targets are established, maintained, and highlighted throughout the document. Annually, management reviews the Strategic Plan, performs an environmental scan, determines projected funding levels, and establishes expected performance levels for the next several years. Next, the Board reviews the Financial Standards to determine that the business objectives are appropriate based on input from management. Typically, the Board reviews projected business and financial results, including proposed new operating and capital programs beginning in May and June. Departmental targets are set based on projections from the Twenty-Year Financial Plan and other known factors or programs (e.g., increase in health care costs or fuel). Based on the direction of senior management, departments prepare detailed budgets for each of their cost centers within those targets. Budget reviews are held with the Finance Department, the department s leadership team, and President/Executive Director. The hearing provides an opportunity for the department head, the Executive Vice President, the President/Executive Director, and the Budget Office to discuss the respective budgets as well as any changes. All new proposed programs are evaluated for effectiveness and efficiency. The Finance Department then compiles the numbers, coordinates work programs to achieve strategies, and publishes the Business Plan, including the Annual Budget and Twenty-Year Financial Plan, for the legislatively-required 30-day comment period by DART's member cities. The Board performs additional reviews in August and September, as necessary, before it approves the Budget and Twenty-Year Financial Plan in late September. DART's legislation does not require public hearings. Capital Budgeting A new process was developed in 2005 which is focused on ensuring that DART spends its available capital dollars on projects that provide the most benefit to the Service Area and are done in the most cost-effective manner possible. Capital projects are prioritized based on the following criteria aligned to the Strategic Plan: Compliance with government regulations; Safety-related; Interlocal Agreement (ILA) or other prior commitment; Required to maintain existing infrastructure; Cost effectiveness. INT-11

20 Introduction/Strategic Alignment Many dimensions of each project must be submitted with the project request, including: Consequences of not doing the project; Effect of the project on Customers, Stakeholders, and Employees; Compliance with long-range plans of the Agency, such as the Strategic Plan, Transit System Plan, Twenty-Year Financial Plan, Information Technology Plan, etc. Time criticality; Life-cycle cost including capital expenditures, operating and maintenance expenses, and revenue generation in comparison with current operations; Other potential alternatives to the proposed project and associated life-cycle costs of each alternative; and Concurrence from all affected departments. For certain classes of expenditures (primarily infrastructure maintenance), discrete projects cannot be specifically identified or the timing of equipment replacement cannot be accurately determined (run-to-failure equipment). In these cases, reserves are established in the Twenty- Year Financial Plan for each major capital category based on historic spending patterns and projected levels of new work (see Financial Plan section). Once a specific project is identified that relates to a particular reserve, that project is given its own unique code and the reserve is reduced accordingly. Budget and Financial Plan Approval and Amendments The Board generally approves two resolutions prior to the start of each new fiscal year (see APX.1). The Board approves Operating Expense, Capital, and Debt Service budgets in one resolution. The Board approves a Twenty-Year Financial Plan in the second resolution. Any major change to the Twenty-Year Financial Plan that occurs outside of the normal approval schedule requires a Financial Plan Amendment. A major change is defined as an increase of $1 million for capital programs and $500,000 per year for operating programs (see APX.2, FS-G9) and requires the affirmative vote of two-thirds of the number of appointed and qualified members of the Board. Budget Basis and Presentation of Amounts and Years DART's Annual Budget and Twenty-Year Financial Plan are presented in the same format as our audited financial statements, but do not include depreciation, amortization of Federal grants, or the interest income and interest expense from leveraged lease transactions. Each of these noncash transactions, however, is incorporated into the projected balance sheet included in APX.5. INT-12

21 Introduction/Strategic Alignment Schedules are presented and rounded to millions and/or thousands (as indicated), but are based on actual raw numbers. Consequently, certain schedules may not tie exactly or add due to rounding. In some cases, prior years' numbers have been restated to conform to the current year's format. All schedules are in fiscal years unless otherwise stated. Related Reports Several related reports are referenced in this document. Readers may wish to refer to these for a more comprehensive understanding of DART's plans and operations. These documents may be obtained from DART's Finance or Planning Departments. Transit System Plan provides detailed discussions of light rail, commuter rail, and HOV construction and service schedules, Intelligent Transportation Systems, and General Mobility commitments and time phasing. Five-Year Action Plan provides detailed discussions of DART's plan to increase bus and rail ridership through service improvements for a five-year period. Quarterly Operating and Financial Performance Reports provide updates on management's progress against financial and operating projections for the current year and provide status reports on ridership, planning, and capital projects in progress. Acronyms Exhibit APX.7 in the Appendix is a description of acronyms used in this report. INT-13

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23 Section 2 Executive Summary Index of Exhibits Exhibit 2.1 Exhibit 2.2 Exhibit 2.3 Exhibit 2.4 Exhibit 2.5 Exhibit 2.6 Exhibit 2.7 Exhibit 2.8 DART Scorecard of Key Performance Indicators... EX-2 Fixed-Route Ridership.... EX-3 Total System Ridership All Modes.. EX-4 Strategic Initiatives to Increase Ridership... EX-4 Subsidy Per Passenger Fixed-Route. EX-5 Subsidy Per Passenger All Modes.... EX-6 Strategies to Improve Subsidy Per Passenger.. EX-6 Subsidy Per Passenger Comparison EX-7

24 Executive Summary Executive Summary Background Over the last few years, DART has dealt with a variety of challenges: A recession between 2000 and 2003, resulting in a 17% decline in sales tax receipts and a 6.1% decline in fixed-route ridership corresponding to a drop in Service Area jobs; Rapidly increasing health care costs; Skyrocketing energy prices in the wake of instability in the Middle East and Hurricanes Katrina and Rita that wracked the Gulf Coast last summer. Through these difficult times, DART has continued to provide high quality transportation services while still moving forward with the next phase of DART Rail expansion. FY 2006 has been a year of rewards and challenges. After several years of declining sales tax receipts followed by two years of relatively modest increases, revenue growth has been robust this fiscal year. Through August, revenues are up 8.5% over the same period last year and 5.0% over budget. That positive news comes with the counterbalance of knowing that much of this growth was due to higher than anticipated inflation. This inflationary component also has had a negative impact on DART s Operating and Capital Costs, driving them upwards. DART also has seen a strong increase in ridership. Driven by sharply higher gas prices, various customer service initiatives, and low regional unemployment, fixed-route ridership for the first three quarters of FY 2006 was 9.7% higher than the same period of 2005, including gains of over 11% on Bus and Commuter Rail. Based on the improving economic outlook and management s initiatives to focus on DART s core business, the FY 2007 Business Plan provides for: Bus system service enhancements: schedule adherence, core service in transit dependent areas, and route adjustments in the Northwest (NW) and Southeast (SE) corridors to improve current service and prepare for the transition to light rail service in those corridors in 2009 and Award of a $700 million Full Funding Grant Agreement by the Federal Transit Administration to provide funding for the construction costs for the NW and SE corridors and allowing DART to begin construction on these lines. LRT service enhancements to the Blue Line to address peak and mid-day capacity issues. 35 miles of additional HOV Lanes (I-635, I-30, and US 75) opening in the summer of Over $50 million in additional capital expenditures designed to better maintain DART s infrastructure, provide additional security, and improve customer service. Improving key performance indicators: Ridership, Subsidy Per Passenger, and Sales Taxes for Operations. Addressing overall employee compensation and satisfaction. EX-1

25 Executive Summary Business Plan Format The Agency's goals and Strategic Plan are based on satisfying the needs of three key groups: DART's customers, employees, and stakeholders (i.e., taxpayers and elected officials). The FY 2007 Business Plan ("FY 2007 Plan") has been organized in a similar format. Sections 3-7 cover DART's strategic business units or modes (bus, light rail transit, commuter rail, paratransit services, and HOV/general mobility). These sections address DART's plans to become more effective and efficient and to provide higher quality services. Section 8 addresses improvements in meeting our customers needs, internal business processes and technology, and the Agency's plans to meet its employees' and stakeholders' needs. Section 9 includes variance explanations between the FY 2007 Budget and the prior year, while Section 10 covers the FY 2007 Twenty- Year Financial Plan and affordability of long-range System Plan commitments. DART Key Performance Indicators Exhibit 2.1 is the DART Scorecard of Key Performance Indicators (KPIs). Fiscal Years 2004 and 2005 are the actual values while Fiscal Years 2006 through 2008 are the budget and projected values. FY06 Q3 is a four-quarter rolling average ending June 30, Each of these indicators is discussed in more detail in this report. Exhibit DART Scorecard of Key Performance Indicators Strategic Priority - Agency QTR 3 KPI Measure FY04A FY05A FY06 FY06B FY07B FY08P Ridership Total System (M) Fixed Route (M) Efficiency Subsidy Per Passenger - Total System $2.61 $2.69 $2.68 $2.84 $2.77 $2.77 Fixed Route Subsidy Per Passenger $3.72 $3.88 $3.73 $4.00 $3.76 $3.75 Administrative Ratio 10.0% 8.9% 8.5% 8.2% 8.4% 8.5% Service Quality On-Time Performance - Bus 91.8% 93.0% 91.3% 92.0% 92.0% 93.0% On-Time Performance - LRT 97.1% 97.4% 97.1% 97.0% 97.0% 97.0% On-Time Performance - TRE 98.1% 98.3% 98.1% 97.0% 97.0% 97.0% Customer Satisfaction Complaints Per 100k Passengers - Fixed Route Complaints Per 100k Passengers - Bus Complaints Per 100k Passengers - Light Rail Complaints Per 100k Passengers - TRE Managed Growth Sales Tax for Operations 69.2% 74.1% 66.9% 73.1% 68.9% 64.3% EX-2

26 Executive Summary Focus on the Customer DART s First Priority The Board's first goal is to improve the quality, effectiveness, and efficiency of the system. Effectiveness is achieved by increasing ridership and the number of passengers carried for each mile operated. Efficiency is achieved by minimizing the net cost to move those passengers (i.e., subsidy per passenger). Effectiveness: Total System Ridership Projected to be Million in FY 2007 Exhibit 2.2 illustrates the ridership projections for fixed-route service. Fixed-route service includes bus, light rail, and commuter rail. Ridership information is based on unlinked passenger trips (i.e., each time a person boards a vehicle). Exhibit 2.2 Fixed-Route Ridership FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 As the economy continued to improve in the last year, bus ridership began to rebound. Late in 2005, the sharp increase in the price of gasoline led to even more ridership gains, which have been sustained during FY Light Rail ridership has rebounded even faster in 2005 and 2006, reaching annualized rates of over 18 million passenger trips, and is expected to grow higher in FY EX-3

27 Executive Summary Total system ridership (Exhibit 2.3) includes the fixed-route ridership previously discussed, as well as paratransit services, vanpool, and HOV ridership. Exhibit 2.3 Total System Ridership All Modes FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 Exhibit 2.4 is the section of DART's Strategic Plan that highlights the two management objectives and ten strategic initiatives related to increasing ridership. Exhibit 2.4 Strategic Initiatives to Increase Ridership Increase Effectiveness Optimize Ridership Improve Customer Satisfaction (C1.) Manage System Growth (C2.) 1. Improve service reliability 1. Market services to optimize ridership 2. Provide a customer friendly environment 2. Develop a convenient, seamless, fully 3. Provide a safe/secure service accessible multimodal system 4. Provide effective customer communication 3. Integrate new transit services 4. Optimize fare structure 5. Improve passenger amenities and facilities 6. Optimize service opportunities EX-4

28 Executive Summary Base fixed-route ridership (which excludes ridership from the openings of additional LRT line segments) is projected to increase approximately 1.5% per year over the next 10 years due to regional population growth, higher employment densities around stations, and management's focus on strategies C2.1, C2.4, and C2.5. These strategies provide for a convenient, seamless, fully accessible multimodal system, concentrated marketing efforts, and improved passenger amenities and facilities. Additionally, management will focus on strategic initiatives C1.1 through C1.4, stressing service quality to retain new riders once they try the system. DART's quality improvement initiatives are discussed in the modal sections. The next phase of rail openings is expected to add another 25 million fixed-route passenger trips per year by Efficiency: Subsidy per Passenger Subsidy per passenger is defined as operating expenses less operating revenues divided by passenger trips. Exhibits 2.5 and 2.6 compare the projections for fixed-route and system-wide subsidy per passenger. The changes are more fully discussed in the modal sections. Exhibit 2.5 Subsidy per Passenger Fixed-Route $4.05 $4.00 $3.95 $3.90 $3.85 $3.80 $3.75 $3.70 $3.65 $3.60 $3.55 $3.72 $3.88 $3.73 FY04A FY05A QTR 3 FY06 $4.00 $3.76 $3.75 FY06B FY07B FY08P EX-5

29 Executive Summary Exhibit 2.6 Subsidy per Passenger All Modes $2.90 $2.85 $2.80 $2.75 $2.70 $2.65 $2.60 $2.55 $2.50 $2.45 $2.61 $2.69 $2.68 FY04A FY05A QTR 3 FY06 $2.84 $2.77 $2.77 FY06B FY07B FY08P Exhibit 2.7 highlights the two management objectives and eleven strategic initiatives designed to improve subsidy per passenger. Management's focus over the next year will be to increase ridership, contain costs, and maximize DART s revenue sources. These strategies are discussed in more detail in the modal sections. Exhibit 2.7 Strategies to Improve Subsidy per Passenger Increase Efficiency Improve Subsidy Per Passenger Manage System Growth (C2.) Improve Efficiency (C3) 1. Market services to optimize ridership 1. Reduce unproductive service/ 2. Develop a convenient, seamless, fully improve productivity accessible multimodal system 2. Improve employee productivity 3. Integrate new transit services 3. Manage costs 4. Optimize fare structure 4. Maintain assets and improve asset 5. Improve passenger amenities and facilities Management 6. Optimize service opportunities 5. Maximize resources EX-6

30 Executive Summary Exhibit 2.8 compares subsidy per passenger by mode. Related discussions may be found in the modal sections. Exhibit 2.8 Subsidy Per Passenger Comparison Mode FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Bus $3.92 $4.04 $3.96 $4.22 $3.84 $3.82 LRT TRE Total Fixed Route $3.72 $3.88 $3.73 $4.00 $3.76 $3.75 HOV $0.16 $0.13 $0.14 $0.16 $0.19 $0.22 Paratransit Vanpool Total System $2.61 $2.69 $2.68 $2.84 $2.77 $2.77 EX-7

31 Executive Summary BLANK PAGE EX-8

32 Section 3 Customer Focus Bus Index of Exhibits Exhibit 3.1 Exhibit 3.2 Exhibit 3.3 Exhibit 3.4 Exhibit 3.5 Exhibit 3.6 Exhibit 3.7 Exhibit 3.8 Bus Scorecard-Key Performance Indicators... BUS-1 Dallas Area Employment BUS-2 Bus Ridership.. BUS-3 Average Weekday Bus and LRT Ridership and Texas Gasoline Prices... BUS-3 Eight-Year Bus Replacement Schedule BUS-7 Bus Subsidy Per Passenger..... BUS-8 FY 2007 Bus Cost Model... BUS-10 FY 2007 DART Bus Transportation Cost Model-Bus Operations Only. BUS-11

33 Customer Focus Bus Customer Focus Bus Overview This section examines DART's strategic initiatives to improve the quality, efficiency, and effectiveness of the bus system. Each initiative is linked to the Strategic Plan (Exhibit 1.5). A more detailed description of long-term strategies for improving bus service is contained in DART s Five Year Action Plan (Action Plan). In August 2006, DART will consolidate its fixed-route bus service to operate from three DARTowned facilities: East Dallas, Northwest, and South Oak Cliff. DART operates a total of 674 buses and maintains a contingency fleet of 66 buses. In addition to buses, DART maintains extensive passenger amenity and facility infrastructure including: 11,961 bus stops, 742 bus shelters, 1,369 benches, 15 transit centers, 2 passenger transfer locations, 22 enhanced shelters, 35 rail platforms, 5 commuter rail stations, 97 information pylons, and all operating divisions, for a total of approximately 29 million square feet. Bus Scorecard Key Performance Indicators Exhibit 3.1 highlights the Bus Key Performance Indicators (KPIs) presented in scorecard format. Fiscal years 2004 through 2005 indicate actual values, while figures for fiscal years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 quarter 3 is a fourquarter rolling average ending June 30, Exhibit 3.1 Bus Scorecard - Key Performance Indicators Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Customer/Quality Indicators Fixed Route Bus Ridership (M) Charter Ridership (M) Revenue Miles (M) Passengers per Mile Complaints per 100k passengers On Time Performance 91.8% 93.0% 91.3% 92.0% 92.0% 93.0% Mean Distance Between Service Calls 4,566 4,682 5,060 4,400 4,400 4,400 Veh. Accidents Per 100k Miles Financial/Efficiency Indicators Revenues (M) $26.6 $27.8 $29.6 $28.6 $31.3 $37.2 Expenses - Fully Allocated (M) $177.2 $189.7 $198.8 $196.0 $207.3 $214.8 Net Subsidy (M) $150.6 $162.0 $169.2 $167.4 $176.0 $177.6 Subsidy Per Passenger $3.92 $4.04 $3.83 $4.22 $3.85 $3.82 Cost per Revenue Mile $6.29 $6.78 $7.20 $7.17 $7.60 $7.88 Pay-to-Platform - Dollars $1.40 $1.40 $1.38 $1.39 $1.43 BUS-1

34 Customer Focus Bus Bus Ridership Trends Bus system ridership trended downward between mid-year 2001 and January Much of this trend was attributable to the economic downturn that began in 2001 and continued through Other contributing factors included changing customer travel patterns, ridership response to service changes, as well as customer perceptions of service quality. Consistent increases in bus ridership began in January 2005 and have continued through FY The upward trend was initiated in response to DART s five-year, cross-departmental ridership development program. It was given a strong upward push by the surge in fuel prices that began in August 2005 and continued throughout FY Economic Climate: Employment trends also significantly impact transit ridership because an average of 73% of all trips are taken for work commute purposes. Employment levels decreased most significantly after September 2001 and remained at lower levels into early 2003, as seen on Exhibit 3.2. Area employment levels have been slowly improving since early Employment at the end of the second quarter of FY 2006 has returned to the mid-fy 2001 level. Employment levels in the City of Dallas are at the FY 2001 level while suburban employment continues to lag behind FY 2001 levels. Exhibit 3.2 provides a look at Dallas area employment trends since January Exhibit 3.2 Dallas Area Employment % 97.0% 96.0% 95.0% 94.0% 93.0% 92.0% 91.0% 90.0% Jan 1994 Apr 1994 Jul 1994 Oct 1994 Jan 1995 Apr 1995 Jul 1995 Oct 1995 Jan 1996 Apr 1996 Jul 1996 Oct 1996 Jan 1997 Apr 1997 Jul 1997 Oct 1997 Jan 1998 Apr 1998 Jul 1998 Oct 1998 Jan 1999 Apr 1999 Jul 1999 Oct 1999 Jan 2000 Apr 2000 Jul 2000 Oct 2000 Jan 2001 Apr 2001 Jul 2001 Oct 2001 Jan 2002 Apr 2002 Jul 2002 Oct 2002 Jan 2003 Apr 2003 Jul 2003 Oct 2003 Jan 2004 Apr 2004 Jul 2004 Oct 2004 Jan 2005 Apr 2005 Jul 2005 Oct 2005 Jan 2006 Apr 2006 BUS-2

35 Customer Focus Bus Exhibit 3.3 shows the trend in bus ridership (including special events) over the latter half of the period for which employment levels are shown in Exhibit 3.2 and compares the projections from the FY 2006 Business Plan to the FY 2007 Business Plan. Exhibit 3.3 Bus Ridership FY04A FY05A FY06B FY07P FY08P FY07 Plan FY06 Plan QTR 3 FY06 Gasoline price levels continue to significantly impact DART ridership in late FY On average, gasoline prices have been 28 percent higher in FY 2006 than they were in FY This has increased bus ridership levels by 10.5 percent. Exhibit 3.4 provides an overview of the relationship of DART average weekday bus ridership to the average price of regular gasoline in Texas since the beginning of FY Seasonal variations in ridership account for some of the peaks and valleys in the trend line, but the correlation with the surge in gasoline prices is readily apparent. Other factors contributing to ridership growth include a stronger economy with lower unemployment rates and improvements in the quality and reliability of service. Exhibit 3.4 DART Average Weekday Bus and LRT Ridership and Texas Gasoline Prices $ ,000 $ ,000 $3.00 $2.50 $2.00 $1.50 $ , , ,000 80,000 $ ,000 $ ,000 Apr 04, 2005 May 02, 2005 Jun 06, 2005 Jul 04, 2005 Aug 01, 2005 Sep 05, 2005 Oct 03, 2005 Nov 07, 2005 Dec 05, 2005 Jan 02, 2006 Feb 06, 2006 Mar 06, 2006 Apr 03, 2006 Texas Average Price Riders BUS-3

36 Customer Focus Bus Ridership Development Action Plan Strategies (C1.1, C2.1, C2.5, C2.6) Ridership development continues to be a major area of focus in FY Strategies to increase ridership on the Bus Mode are strongly oriented toward retaining current riders. DART s market research has demonstrated a significant level of turnover in the composition of our bus ridership on an annual basis. As new riders are attracted to the System, we also experience attrition among existing riders. This attrition is tied to a number of factors, including changes in residence, changes in employer or employment location, changes to the transit network, or dissatisfaction with service levels or service quality. Strategies that reduce the level of rider attrition within the system will result in overall ridership increases. FY 2007 Strategies for Ridership Development fall into four major categories: Service Quality Initiatives Customer Satisfaction Initiatives New Marketing and Promotion Initiatives New Equipment and Facilities Service Quality Initiatives (Strategies C1.2, C2.2, C2.6, C3.2, C4.1) Bus service levels have generally been reduced over the past several years, reflecting lagging ridership and route performance levels. The increases in ridership experienced in FY 2005 and FY 2006, together with the aforementioned tightening of service levels, have begun to negatively impact the quality of service in terms of bus overcrowding and decreased schedule reliability. Additions of service resources have been targeted to a number of routes throughout the bus network based on detailed analysis and input from operating staff. In addition, route modifications and improvements are proposed for Core Service Routes, which serve areas of lower income and lower automobile ownership, where reliance on transit services indicate the need for greater frequency or days/hours of service coverage. Finally, a number of enhancements to the bus route network will be implemented within the Southeast and Northwest Rail Corridors, in preparation for the implementation of DART Rail service beginning in September These additional resources will be deployed in FY A restructuring of Field Supervisor deployment will be implemented in FY 2007 to improve supervisor response times to incidents, resulting in an overall improvement in the timeliness and quality of service provided to customers. Transportation management is investigating implementation of a 15-minute standard for field supervisors responding to a priority call from a bus operator, which is reflective of transit industry practices according to benchmarking research. In coordination with the deployment restructuring, field supervisor vehicles will be equipped with mobile data terminals (MDTs) that will reduce unproductive office time and increase the amount of time in the field for each employee. The MDT equipment will provide the supervisor with up-to-date information from DART s Trapeze Operating Software. BUS-4

37 Customer Focus Bus Two significant training and development programs will be implemented in FY 2007 that focus on enhancing the current and future capabilities of DART s Transportation supervisory staff. A two-day supervisor training program will be provided to all bus and rail supervisors as well as dispatchers/controllers in cooperation with the National Transit Institute (NTI). This training will focus on role definition, the development of coaching skills, the development of service management skills, and enhancement of computer skills. A second program will focus on preparing bus operators to succeed to the position of transportation supervisor. This program will ensure a pool of qualified internal candidates for vacancies within Transportation s supervisory ranks. Currently, 20% of Transportation s supervisory staff is approaching retirement age within the next 5 to 10 years. Customer Satisfaction Initiatives (Strategies C1.1, C1.3, C3.2, E1.3) There are two related efforts underway: Two customer input sources (customer satisfaction surveys and customer complaints) have been used to identify the most critical customer satisfaction issues from a ridership viewpoint: service reliability and the perception of personal security. A detailed set of strategies for improving performance in each of these areas is being developed by crossdepartmental teams and then tracked through implementation. Specific and measurable objectives are being detailed at the strategy level to assure clear evaluation of the effectiveness of individual strategies as well as of the overall program. An operating division level measurement, reporting, and improvement system has been developed and implemented throughout all three bus operating divisions, the Materials Management Division, Central Support Division, and the Transit Center Operations Division. This initiative provides feedback to all team members about how their division is performing in key areas which they have some ability to impact and increases employee ownership of organizational goals (Key Performance Indicators [KPIs]). Through the Division Level Measurement Program, scorecards tailored to each operating division are posted monthly to provide feedback on performance to front-line staff. Targeted performance levels are established at the division level and a formal recognition program celebrates success in achieving established performance targets. Problemsolving teams that include front-line employees, division management, and support personnel from other DART departments focus on developing and implementing strategies to improve division performance while managing incremental costs. BUS-5

38 Customer Focus Bus Marketing and Promotion Initiatives (Strategies C1.2; C2.4) The Route Promotion Program will continue in FY The Program utilizes route performance metrics to target those routes with the most opportunities for ridership growth. Targeted routes are grouped geographically so that promotional efforts can focus on the benefits of a service network rather than a single route and provide an improved return on investment. Detailed research is conducted on each route in the route group, including riding on the route and talking with bus operators to identify specific marketing opportunities. Promotional strategies are then customized based on the detail route level information. The goal for route promotions is a 10% ridership increase on the targeted routes. The service rebranding campaign will continue into FY The campaign focuses on key benefits of riding DART as highlighted in a common theme. The media buy will include television, radio, billboards, newspaper, and Internet advertising. Other marketing and promotion initiatives will include special event marketing including participation in more than 125 events in FY 2007 including the Texas State Fair, Big 12 Basketball Tournament, and Mavericks and Stars games, to name a few. Another major initiative that will continue in FY 2007 targets diversity/segment marketing to the African American, Hispanic, Asian, and seniors markets. Elements include targeted monthly advertising to specific segments, partnering with key media on promotional opportunities, roundtable discussions, educational outreach, and targeted collateral/web pages in various languages. Promotion of DART s employer programs will continue as well in FY Specific programs will be improved and expanded. In addition, DART will introduce several new pass programs and continue its partnership with the North Texas Clean Air Coalition by participating in the Ozone Season Incentive Program. New Equipment and Facilities (Strategy C2.5) Automated Vehicle Locators (AVL) System Upgrade DART will continue to upgrade the AVL system during FY 2007 to provide more frequent and reliable reporting of vehicle location to Central Dispatch. This will allow staff to provide improved on-time service to bus riders. This upgrade, which will be completed during the first quarter of FY 2008, also will provide location information to the newly deployed fare collection system for more precise reporting of customer boarding locations. Park-and-Ride Enhancement A comprehensive evaluation of parking demand has been completed at all of DART s park-and-ride facilities. Near-term and long-term strategies for addressing areas where parking demand exceeds current capacity are being developed and implemented. BUS-6

39 Customer Focus Bus On-Street Bus Facilities Program (Strategy C2.5) The on-street bus facilities program, formerly called the amenities program, includes installation of the following improvements: 234 new bench installations each year for the next five years, the majority of which will be new style metal benches with back, arm rests, and lumbar support. Replacement of 250, 20-year old brown shelters with new blue standard shelters the first year and the addition of 115 new standard blue shelters each year thereafter. Addition of 31 new double/modular shelters over the next five years. Six additional enhanced and special design/cbd bus shelters annually at locations like Parkland Hospital and other on-street locations with over 1,000 daily boardings (an example of a special design CBD shelter is 912 Commerce, a cooperative project of Belo Corporation, DART, and McDonald s). Completion of the Elm/Lamar Patron Plaza in FY Land has been purchased, and design is 95% complete. A $374,000 federal grant has been secured, as well as capital contributions from the City of Dallas ($50,000), the Downtown Improvement District (DID) ($10,000), and Cushman-Wakefield ($10,000). Upon completion, maintenance will be provided daily from 8 a.m. to 7 p.m. by the DID. Capital improvements associated with Bus Corridor and Bus Rapid Transit (BRT) programs. Bus Replacement Schedule (Strategy C3.4) Mechanical failures during operating hours can significantly impact on-time performance. This is measured by "Mean Distance Between Service Calls" (see Exhibit 3.1). To minimize mechanical failures, DART continually strives to maintain an average fleet age of no greater than six to seven years while attempting to balance the remaining capital program commitments. The average age of the bus fleet is seven years in FY Management Strategy C3.4 (Replace assets on a timely basis) is important from both a cost and quality standpoint. Exhibit 3.5 is the current bus replacement schedule for the next few years. Exhibit 3.5 Eight-Year Bus Replacement Schedule FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY The total active bus fleet is projected to grow slightly to approximately 695 buses to coincide with the increase in the peak pullout requirement of 579 buses throughout the term of this Plan. BUS-7

40 Customer Focus Bus Subsidy Per Passenger Exhibit 3.6 is a comparison of projected bus subsidy per passenger between the FY 2006 and FY 2007 Financial Plans. The decrease in subsidy per passenger between the two plans is related to the projected increases in bus passengers. Exhibit 3.6 Bus Subsidy Per Passenger $4.40 $4.30 $4.20 $4.22 $4.21 $4.30 $4.10 $4.00 $3.90 $3.80 $3.92 $4.04 $3.83 $3.85 $3.82 $3.70 $3.60 $3.50 FY04A FY05A FY06B FY07P FY08P FY07 Plan FY06 Plan QTR 3 FY06 Fuel/Energy Costs Energy costs are a major cost driver in the delivery of DART services. DART continues to focus on stabilizing the cost for the different types of fuels used in delivering our services. DART has secured continued favorable pricing of both its liquefied natural gas and electricity through multi-year fixed-price contracts. This concept has and will continue to result in more favorable pricing and cost savings over that assumed in the Twenty-Year Financial Plan in FY 2008 and FY DART executed hedging instruments for diesel fuel which caps exposure to future market volatility through FY 2007, and staff will continue to monitor available options for longer term price stabilization into FY 2008 and beyond. Service Efficiencies As a result of recent revenue service modifications and analysis, it has been determined that DART could operate our planned August 2006 level of bus service out of three operating garages rather than the current four locations. By consolidating the bus operation into three garages, DART gains improvements in our bus deadhead mileage ratio while reducing overhead costs associated with the daily operating expenses of one garage. On August 21, 2006 DART will no longer operate bus service out of the Oak Cliff facility located on Jefferson Street. We are still exploring alternative uses for this facility in support of future expansion of other services such as our HOV operations. BUS-8

41 Customer Focus Bus Another service efficiency strategy is the continued use of the Trapeze Blockbuster software utilized by the Planning and Scheduling staff to prepare more efficient operator assignment packages. The software utilizes sophisticated algorithms to identify the most efficient operator work assignments. This software also has the ability to generate many alternative packages of runcuts in a short amount of time, allowing Management to select the package that achieves the best operational and efficiency outcomes. DART On-Call Service (Strategy C3.1) DART On-Call service is provided in areas that do not meet service-planning, ridership, and efficiency standards for traditional fixed-route service. Use of demand response vans instead of larger buses operating on a defined schedule saves the Agency more than $2 million annually. DART currently has nine On-Call zones throughout the Service Area. Seven zones currently are operated by ATC/Connex (now Veolia Transportation) under the oversight of the Paratransit Services staff. These are: East Plano, Farmers Branch, Glenn Heights, Lakewood, Lake Highlands, North Dallas, and Richardson. Two additional zones -- North Central Plano and Rowlett -- are operated through agreements with rural transit providers for Collin County and Hunt County. Expansions of some of these zones are being considered for FY Activity Center Shuttles (Strategy C3.1) Shuttle services developed in partnership with employers and major activity centers are another cost-reducing way for DART to provide access to the transit network. Under the Board s Site Specific Shuttle Policy, DART provides up to 50% funding for these shuttle services with employers or major activity centers funding the remainder of the service cost. DART has existing shuttle agreements with Southern Methodist University, UT Southwestern Medical Center, DFW International Airport, McKinney Avenue Trolley Authority, Texas Instruments, Medical City of Dallas, Campbell Center, and Crescent Real Estate (Galatyn Shuttle). The success of these shuttles has generated strong interest from other activity centers. Service Planning staff will work to develop appropriate new shuttles for FY 2007 and beyond. BUS-9

42 Customer Focus Bus Bus Cost Model Exhibit 3.7 is the cost model for the bus system. Transportation cost is the most significant element of the bus mode. The majority of this cost element is directly related to bus operator pay and benefits. Consequently, many of the strategies to reduce costs revolve around efficient use of bus operators. Exhibit 3.7 FY 2007 Bus Cost Model Bus $207.3 million* Transportation Vehicle Maintenance Facility Maintenance Allocated Costs Cost Drivers - Number of hours - Average hourly rate - Number of operators - Number of supervisors - Work rules - Scheduled/Unscheduled Work - Workers' compensation/benefits Cost Drivers - Number of miles - Number of vehicles - Fuel Costs - Quality Standards - Age of fleet - Timely asset replacement $90.4 million $80.0 million $7.7 million 43.6% of total cost 38.6% of total cost 3.7% of total cost *Total FY07 Bus costs include $17.9 million for administrative overhead allocation. Cost Drivers Cost Drivers - Facility type/age - Customer Service - Number of facilities - Marketing Services - Customers served - Retail Sales - Quality standards - Materials Management - Timely asset replacement - DART Police - Revenue Systems - Scheduling - Real Estate - Safety/Risk $29.3 million 14.1% of total cost BUS-10

43 Customer Focus Bus Exhibit 3.8 is a further refinement of the bus model for Transportation only. Management closely monitors the key indicators shown in the blue boxes (shaded). The deadhead ratio (Strategy C3.1) measures the percentage of revenue miles to non-revenue miles scheduled. Scheduled miles per hour measures the average speed of the vehicle. By nature, these measures require long periods of time to adjust. Service Planning attempts to optimize these ratios with each change in service. Pay-to-platform compares the total pay hours to the hours actually operating the vehicle (i.e., "time behind the wheel" or platform time). Total pay hours include platform time, scheduled and unscheduled overtime, absences, and administrative and training time. Average pay rate is total operator pay (including overtime pay) divided by total pay hours. The benefits ratio includes all paid benefits, including workers' compensation, health, and retirement plans, but excludes paid absences (since these are already included in the pay-to-platform ratio). The overall goal is to improve efficiency. Exhibit 3.8 FY 2007 Transportation Department Cost Model Bus Operations Only Revenue Total Platform Total Pay Total Pay Total Pay Miles Miles Hours Hours Dollars w/benefits Deadhead Ratio Scheduled Miles per Hour Pay-to-Platform Ratio Average Pay Rate Benefits Ratio - Peak to base ratio - Route planning - Absences - No. of employees - Workers' comp - Facility location - Recovery time - No. of employees - Turnover - Light Duty - Route planning - Layover time - Work rules - Training - Health Benefits - Bus type/location - HOV lanes - Avg run time - Retirement Plans - Training/admin Deadhead ratio 17.5% MPH System Avg. Speed $1.39 PTP Dollars (Bus Only) 1,330 FT Operators & 30 PT Operators Avg weekday run time: 9 hours 20 mins Avg Saturday run time: 9 hours 38 mins Avg Sunday run Time: 9 hours 48 mins $17.12 Avg Pay Rate 7.1 % Turnover Rate 46.2% Benefits Ratio BUS-11

44 Customer Focus Bus BLANK PAGE BUS-12

45 Section 4 Customer Focus LRT Index of Exhibits Exhibit 4.1 Exhibit 4.2 Exhibit 4.3 Exhibit 4.4 Exhibit 4.5 Exhibit 4.6 Exhibit 4.7 Exhibit 4.8 LRT Scorecard-Key Performance Indicators.. LRT-1 Map LRT Service.... LRT-2 LRT Ridership LRT-3 Map NW and SE Corridors.. LRT-3 LRT Revenue Service Date Comparison LRT-4 LRT Construction Schedule LRT-5 LRT Subsidy Per Passenger.... LRT-8 FY 2007 Light Rail Cost Model..... LRT-9

46 Customer Focus Light Rail Transit Customer Focus Light Rail Transit Overview The purpose of this section is to provide information on DART's strategic initiatives to improve the quality, efficiency, and effectiveness of the Light Rail Transit (LRT) system known as DART Rail. References to DART's Strategic Plan are included throughout this section. A 1.5-mile extension from the West End Historic District to Victory Station (NW-1A) opened in November 2004, bringing the LRT system to 45 miles. DART is in various stages of planning or preliminary design for the Phase II Build-out which includes 48 additional miles of LRT, extending southeast from the Dallas Central Business District (CBD) through Deep Ellum and Fair Park to the Buckner Station; and northwest from Victory Station to Farmers Branch, Carrollton, Irving, and DFW Airport; as well as extensions from Downtown Garland Station to Rowlett and from Ledbetter Station to the University of North Texas campus near I-20 in South Oak Cliff. The Agency currently is operating and maintaining 35 rail stations and a fleet of 115 vehicles. A map of the current LRT system is included at Exhibit 4.2. DART s Service & Inspection Facility is currently undergoing expansion to support and operate the additional fleet required for the new line sections. It is expected that construction will be completed in December A new rail operating facility, located along the Northwest alignment, currently is under design to support future vehicle requirements for the Phase II build-out. LRT Scorecard Key Performance Indicators Exhibit 4.1 highlights LRT's Key Performance Indicators (KPIs) presented in scorecard format. Fiscal years 2004 through 2005 indicate actual values, while figures for fiscal years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 quarter 3 is a fourquarter rolling average ending June 30, Exhibit 4.1 Light Rail Scorecard - Key Performance Indicators Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Customer/Quality Indicators Ridership (M) Revenue Car Miles (M) Passengers per Car Mile On Time Performance 97.1% 97.4% 97.1% 97.0% 97.0% 97.0% Complaints per 100k passengers Mean Distance Between Service Calls (000s) Accidents per 100k Miles Financial/Efficiency Indicators Revenues (M) $12.5 $11.8 $12.5 $12.9 $12.8 $15.1 Expenses - Fully Allocated (M) $61.6 $68.4 $70.3 $69.3 $73.0 $76.2 Net Subsidy (M) $49.2 $56.6 $57.8 $56.4 $60.2 $61.1 Subsidy Per Passenger $2.98 $3.24 $3.19 $3.11 $3.18 $3.17 Subsidy Per Passenger Mile $0.37 $0.40 $0.40 $0.47 $0.40 $0.39 Cost per Revenue Car Mile $12.17 $13.17 $13.79 $13.92 $13.76 $14.37 Pay- to- Platform - Dollars $1.49 $1.50 $1.43 $1.46 $1.51 LRT-1

47 Customer Focus Light Rail Transit Exhibit 4.2 LRT Service Map LRT Ridership (Strategies C1.1, C2.1, C2.6) Exhibit 4.3 reflects actual and projected LRT ridership from FY 2004 through FY FY 2005 ridership increased as the economy improved and unemployment levels lowered. Overall, LRT ridership in FY 2005 increased by more than six percent over FY LRT ridership in FY 2006 has increased as fuel prices remained at higher levels. While there has been some constraint in LRT ridership growth as parking lots at some stations are filled beyond capacity, it is anticipated that FY 2006 ridership will be 3.8 percent higher than FY 2005 levels. The restoration of weekday midday capacity on the Blue Line and the addition of a third car to heavily-used peak period Blue Line trips will result in further increases in LRT ridership in FY FY 2007 ridership is projected to increase by 4.4 percent over FY LRT-2

48 Customer Focus Light Rail Transit Exhibit 4.3 LRT Ridership Millions FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 LRT Expansion (Strategy C2.3) The next major expansion of LRT to the Northwest (NW) is planned for Dallas, Carrollton, Farmers Branch, Irving, and Southeast (SE) to Deep Ellum, Fair Park, and Pleasant Grove (see Exhibit 4.4). Exhibit 4.4 NW and SE Corridors LRT-3

49 Customer Focus Light Rail Transit Exhibit 4.5 provides a comparison of the revenue service dates for these two extensions as well as the extension of the NE line from downtown Garland to Rowlett. Ridership forecasts project approximately 60,000 combined daily riders in Year 2030 for the NW and SE corridor extensions. DART Rail Corridor Exhibit 4.5 LRT Revenue Service Date Comparison Corridor Length (in miles) FY06 Financial Plan Revenue Service FY07 Financial Plan Revenue Service Phase II Southeast Corridor Downtown to Pleasant Grove 10.1 Downtown to Fair Park (SE-1A) 2.7 Sep 2009 Sep 2009 Fair Park to Hatcher (SE-1B) 1.4 May 2010 May 2010 Hatcher to Buckner Blvd. (Pleasant Grove Transit Center) (SE-2) 6.0 Dec 2010 Dec 2010 Northwest Corridor Victory Station to Carrollton 17.6 Victory Station to Inwood Station (NW-1B) 2.8 Oct 2010 Oct 2010 Inwood Station to Northwest Highway (NW-2) 3.2 Dec 2010 Dec 2010 Northwest Highway to Valley View (Farmers Branch) (NW-3) 4.9 Dec 2010 Dec 2010 Valley View to Frankford Rd. (North Carrollton) (NW-4) 5.5 Dec 2010 Dec 2010 Northwest Corridor Northwest Hwy to DFW Airport 13.2 Northwest Hwy. To Las Colinas Urban Center (I-1) 4.7 Dec 2011 Dec 2011 Las Colinas Urban Center to State Hwy. 161 (I-2) 3.4 Dec 2012 Dec 2012 State Hwy. 161 to DFW Airport (I-3) 5.1 Dec 2013 Dec 2013 Northwest Rail Operating Facility --- Jun 2010 Jun 2010 Northeast Downtown Garland to Rowlett Park & Ride (R-1) 5.3 Dec 2012 Dec 2012 Phase III Central Business District New line through Downtown Dallas --- Aug 2014 Aug 2014 South Oak Cliff Loop 12 to LBJ Freeway (I-20) (SOC-3) 3.0 Oct 2018 Oct 2018 The opening dates above are predicated on assumptions that are detailed in the Financial Plan Section. Exhibit 4.6 provides the construction schedule for the Phase II LRT Build-out. LRT-4

50 Customer Focus Light Rail Transit Exhibit 4.6 LRT Construction Schedule Design/ROW/Utilities Construction Revenue Service FFGA Approval FFGA Preparation SE-1 SE-2 NW-1B NW-2 NW-3 NW-4 NWROF I-1 I-2 I-3 R-1 FFGA Interim Service to Fair Park by September 2009 September 1, 2005 A number of interim improvements are scheduled in FY 2007 relative to light rail vehicles, facilities, and operations. Level Boarding Initiative The process of converting existing light rail vehicles to super light rail vehicles (SLRVs) through the addition of a low-floor middle section began in FY Design and engineering activity related to implementation of level boarding at existing and new stations will also be ongoing throughout FY Level boarding will eliminate the use of highblocks for boarding and alighting of passengers using wheelchairs or strollers and will facilitate the operation of closer headway service along the CBD Transitway Mall that will be required for the Phase II LRT Expansion. Transit Signal Priority Study for LRT in Dallas CBD DART is working with the City of Dallas to improve LRT operations in the CBD area without significantly degrading vehicular traffic flow. DART s desire is to prevent accumulation of trains at downtown Dallas stations and have LRT travel between stations without stops. Project recommendations to improve performance of DART LRT operations are underway. Implementation of Transit Signal Priority is expected to be completed in FY LRT-5

51 Customer Focus Light Rail Transit Light Rail Vehicle Business Systems (VBS) (Strategy C4.1) This initiative includes outfitting the light rail vehicles with GPS, automatic passenger counters, automatic voice announcements, mobile data terminals, wireless LAN, and real-time wireless communications. The VBS will be the infrastructure for providing real-time information to customers and rail operations. Other proposed features of the system include interfaces to the Supervisory Control and Data Acquisition (SCADA) system and the Passenger Announcement Visual Message Boards (PA/VMB) at the rail platforms to display next train information. The first VBS implementation was in Paratransit Services vehicles in Light rail VBS is the next deployment of on-board intelligent information systems and will be accomplished as a part of the conversion of the fleet to super light rail vehicles. Light Rail Vehicle (LRV) Door Timing (Strategy C4.1) LRV door timing will be accelerated to reduce dwell times at stations and improve the overall speed and efficiency of the LRT service. This improved operational efficiency will be critical to the implementation of Phase II operations along the transitway mall. Park-and-Ride Enhancements (Strategy 2.5) A comprehensive evaluation of parking demand has been completed at all of DART s park-and-ride facilities. Near-term and long-term strategies for addressing areas where parking demand exceeds current capacity are being developed and implemented. Strategies include improved communication to customers on locations with available parking, implementation of carpool parking spaces at park-and-ride facilities, negotiation of interim parking agreements with retail or other private property owners, and identification of capital projects to purchase property and construct additional parking spaces. Expansion projects have been identified at both the Bush Turnpike Station and the Parker Road Station in response to overcrowding of parking at those locations. Division Level Measurement Program (Strategies C1, C2, C3) A division-level measurement, reporting, and improvement system has been developed and implemented in the Rail Transportation, Rail Fleet Maintenance, and Ways, Structures, and Amenities operating groups. This initiative provides feedback to all team members about how their groups measure up to KPIs which they have some ability to impact and has increased employee ownership of organizational goals. Marketing Initiatives (Strategies C1.2; C1.3) The effort to promote the Green Line Build-out and safety around DART construction sites will be introduced in FY Elements in the campaign target community groups, businesses, schools, and diverse communities, to name a few. LRT-6

52 Customer Focus Light Rail Transit Transit System Plan (Strategy 2.3) DART s Transit System Plan is a long-range planning tool that identifies and prioritizes major capital projects needed to improve regional mobility. The Transit System Plan is closely coordinated with development of the North Central Texas Council of Government s Metropolitan Transportation Plan. The Board of Directors adopted the current Transit System Plan in November The 1995 Plan was an update of the 1989 Plan, both of which were oriented toward a horizon year of The Plan was updated in 1997 to allow for the acceleration of the DART North Central and Northeast rail extensions and again in August 2000 following a public vote authorizing long-term financing to accelerate the Northwest and Southeast Corridor extensions. The current update effort focuses on transit needs and opportunities within the context of a 2030 horizon. The Technical Report for the Draft 2030 Transit System Plan was distributed in late July 2006 for public and member city review. Following a round of public meetings throughout the DART Service Area, the Final 2030 Transit System Plan will be presented to the DART Board for approval in early FY The 2030 Plan includes recommendations for DART's core services (bus, rail, HOV) and includes a discussion of issues such as land use and economic development, system accessibility, bicycle and pedestrian integration, and policies relative to DART's role in regional transit initiatives. LRT Costs and Subsidy Per Passenger Adjust LRT Service Schedules to Match Ridership Demand (Strategy C3.1) LRT service schedules will be modified in FY 2007 to respond to increasing ridership levels. Counts of maximum on-board loads on trains are used to identify the appropriate number of cars for each train. The FY 2007 adjustments will include adding cars to selected Blue Line trains to accommodate increased levels of passenger demand. Blue Line midday train consists will be restored to two-car operation on all trains to provide capacity for growing ridership. Develop and Refine LRT Preventive Maintenance Programs (Strategy C3.4) DART has extensive vehicle and facility preventive maintenance campaigns in place. Preventive maintenance is an essential component of a strategy, which has allowed the Agency to achieve an average of 43,600 or more car miles without a failure through the third quarter of FY The FY 2007 Budget includes work programs for light rail vehicle (LRV) brakes, suspension systems, and pantographs. In addition, consistent with the Maintenance Department s five-year business plan, the Capital Budget includes schedules for Original Equipment Manufacturer (OEM) required rebuild and overhaul work programs for the entire LRV fleet of 115 vehicles. Develop Strategic Partnerships with Suppliers (fuel, parts, services) (Strategy C4.3) Consistent with the philosophy of stabilizing operating costs, DART continues to enjoy favorable rates for a majority of our traction power and facility electrical costs as a result of the deregulation of electrical service providers in Texas. DART was able to secure a fixed-rate cost, saving in excess of $12 million in the first three years of the program, over the comparable price-to-beat rate. DART continued this trend by entering into an Interlocal Contract during FY 2005 with the Texas General Land Office (GLO) to be the provider of our future electricity needs. The agreement with the GLO secured the best balance of price and risk for our electrical energy needs through FY LRT-7

53 Customer Focus Light Rail Transit In addition, DART continues to seek alternative qualified sources of many of the unique components used in support of the LRT systems maintenance efforts. Such sourcing efforts increase competition and ensure DART is paying market rates for materials and supplies. Exhibit 4.7 compares subsidy per passenger for LRT for FY 2004 through FY The decreases shown from the FY 2006 Twenty-Year Financial Plan to the FY 2007 Plan are due to anticipated overall growth in LRT ridership Exhibit 4.7 LRT Subsidy Per Passenger $3.50 $3.25 $3.00 $2.98 $3.24 $3.11 $3.19 $3.35 $3.18 $3.45 $3.17 $2.75 FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 LRT Cost Model Exhibit 4.8 highlights the cost structure for LRT. Although LRT and Bus have very different cost structures, the cost drivers for each cost category (transportation, vehicle maintenance, and facility maintenance) are similar. LRT is more expensive per mile due to higher fixed costs for facilities, but less expensive per passenger due to the higher capacity of LRT vehicles versus buses. On a relative basis, facility maintenance costs are more significant, while transportation costs are less significant. For example, rail facility maintenance costs represent 37.1% of the total LRT cost structure versus only 3.7% for bus. Transportation costs, on the other hand, represent only 17.2% of the total LRT cost structure versus 43.6% for bus. For a full comparison, contrast the bus cost model from Exhibit 3.7 with the LRT cost model (Exhibit 4.8). LRT-8

54 Customer Focus Light Rail Transit Exhibit 4.8 FY 2007 Light Rail Cost Model Light Rail $73.0 million * Transportation Vehicle Maintenance ROW & Facility Maintenance Cost Drivers Cost Drivers Cost Drivers - Number of hours - Number of miles - Facility type/age - Average hourly rate - Number of vehicles - Number of facilities - Number of operators/supv - Quality standards - Customers served - Work rules - Timely asset replacement - Quality standards - Pay-to-platform - Traction power - Miles/type of track - Unscheduled absences - Paratransit Services $13.7 million $6.8 million $31.7 million 18.8% of total cost 9.4% of total cost 43.5% of total cost Allocated Costs Major Allocations - Customer Service - Information Technology Svcs - Retail Sales - Revenue Systems - Marketing Services - Safety/Risk Management - Materials Management - Scheduling - Operations Technology - Real Estate - DART Police and Fare Inspection $20.7 million 28.4% of total cost * Total FY 2007 LRT costs include $6.3 million for administrative overhead allocation. - Timely asset replacement LRT-9

55 Customer Focus Light Rail Transit BLANK PAGE LRT-10

56 Section 5 Customer Focus Commuter Rail Index of Exhibits Exhibit 5.1 Exhibit 5.2 Exhibit 5.3 Exhibit 5.4 Exhibit 5.5 Map TRE Corridor.. CR-1 Commuter Rail-TRE Scorecard-Key Performance Indicators... CR-2 TRE Ridership CR-3 TRE Subsidy Per Passenger... CR-5 FY 2007 Commuter Rail and Railroad Management Cost Model. CR-6

57 Customer Focus Commuter Rail Overview Customer Focus Commuter Rail & Railroad Management The purpose of this section is to highlight the Commuter Rail & Railroad Management business plan for the next five years, including the key indicators and strategic initiatives. References to DART's Strategic Plan are included throughout this section. Passenger service is provided jointly with the Fort Worth Transportation Authority ("the T") pursuant to an Interlocal Agreement (ILA) which was restated by the two transit authorities in September The Trinity Railway Express (TRE) is operated on a rail line that was formerly owned by the Cities of Dallas and Fort Worth (the Cities) and transferred to DART and the T in December Exhibit 5.1 is a map of the TRE corridor. Pursuant to trackage rights agreements, the Burlington Northern Santa Fe (BNSF) railroad, the Union Pacific (UP) railroad, and the Dallas, Garland, and Northeastern (DGNO) railroad pay a fee for operating freight services on the corridor. DART, on behalf of the T, and acting as the TRE, has contracted with Herzog Transit Services, Inc. (Herzog) to maintain the commuter rail rolling stock and right-of-way, provide dispatching services for the corridor, and operate the commuter rail service on the corridor. The Department s Railroad Management Division has responsibility for management of all DART-owned active freight rail lines, as well as the property management responsibilities for the TRE corridor, which includes the collection of land and signboard rental income, license fees, and trackage rights fees. The Division is also responsible for administering trackage rights agreements with freight railroads, and coordination with, and oversight of, those freight railroads that are fulfilling DART s common carrier obligations in DART-owned corridors. The Regional Rail Right-of-Way Company, a wholly owned subsidiary of DART, holds the common carrier authority, and manages the trackage rights agreements for the DART-owned active freight rail corridors. The Division undertakes management of the trackage rights agreements, and collects the associated fees for these corridors on behalf of the Regional Rail Right-of-Way Company. Exhibit 5.1 Trinity Railway Express Corridor CR-1

58 Customer Focus Commuter Rail Commuter Rail Infrastructure The TRE operates between downtown Dallas and downtown Fort Worth, a distance of 34 miles, with a total of 10 stations, 5 of which are maintained by DART. The vehicle fleet consists of 13 rail diesel cars, 6 locomotives, 10 bi-level coaches, and 7 bi-level cab cars. Commuter Rail TRE Scorecard Key Performance Indicators Exhibit 5.2 highlights Commuter Rail TRE s Key Performance Indicators (KPIs) presented in scorecard format. Fiscal years 2004 and 2005 indicate the actual values, while figures for fiscal years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 quarter 3 is a four-quarter rolling average ending March 31, To more accurately depict the true operating costs of TRE, the FY 2005 actual and FY 2006 through FY 2008 columns include all budgeted revenue and expenses for DART and the T. The TRE Revenues line includes the T s passenger revenues allocated to the TRE ($953,000); and the TRE Expenses line includes all direct and indirect costs allocated to TRE, including the T s allocated costs of $1.2 million for FY By including all revenues and expenses, the information presented will provide the reader with data comparable to all other modes. Currently, ridership is collected and reported for the TRE system; therefore, KPIs associated with ridership will be calculated as TRE totals and not only DART s totals. The decrease in revenues projected in FY 2006 from FY 2005 is due to the termination of capital payments from BNSF in FY 2005 as per the trackage rights agreement, and the identification of TRE Corridor rental income only, as opposed to prior years when all rental income generated by the department was shown. Exhibit 5.2 Commuter Rail - TRE Scorecard Systemwide - Key Performance Indicators Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Customer/Quality Indicators Ridership (M) Revenue Car Miles (M) Passengers per Car Mile Scheduled Train Hours (000s) On Time Performance 98.1% 98.3% 98.1% 97.0% 97.0% 97.0% Complaints per 100k passengers Veh. Accidents Per 100k Miles Financial/Efficiency Indicators TRE Revenues (M)* $5.7 $6.3 $4.5 $4.9 $5.2 $5.7 TRE Expenses Fully Allocated (M)** $17.9 $19.9 $20.2 $21.6 $21.9 $23.7 TRE Net Subsidy (M) $12.2 $13.6 $15.7 $16.7 $16.8 $18.0 TRE Subsidy Per Passenger $5.49 $6.34 $6.67 $7.31 $6.90 $7.31 TRE Subsidy Per Passenger Mile $0.34 $0.36 $0.36 $0.42 $0.40 $0.42 TRE Cost per Revenue Car Mile $13.77 $14.48 $14.67 $12.70 $12.72 $13.76 *includes the T's passenger revenues starting in FY05 ** includes the T's expenses starting in FY05 CR-2

59 Customer Focus Commuter Rail TRE Ridership Exhibit 5.3 reflects actual and projected TRE ridership from FY 2004 through FY Exhibit 5.3 TRE Ridership Millions FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 TRE ridership has continued to grow due to excellent service quality with a special focus on the customer. Service cuts for cost containment and special event reductions during 2005 resulted in declines to approximately 7,500 passengers per weekday and 3,000 passengers on Saturday in the third quarter of FY Incremental service was added in FY 2005 and FY 2006, particularly on the Tarrant County side of the corridor. In addition to this added service, the increase in ridership during FY 2006 over FY 2005 is attributable to two factors: the rise in gasoline prices and an increase in the number of events at the American Airlines Center (AAC) served by DART and TRE, including a full season of Dallas Stars National Hockey League (NHL) games at the AAC after the cancellation of the entire 2005 NHL season. TRE currently operates Monday through Saturday from Fort Worth s Texas & Pacific (T&P) Station to Dallas' Union Station with seven intermediate stops. TRE also serves an additional special-events station (Victory Station) jointly with DART Rail at the AAC. Service at this location is on event-days only, and results in ridership increases of approximately 1,000 passengers per event-day. Operating efficiencies and acceptable long-term performance will come with the development of a true bi-directional commuter rail service (both Dallas and Fort Worth as destinations), which includes access to the mid-cities market and adequate service to DFW International Airport, commensurate with service requirements of airport users and employees. CR-3

60 Customer Focus Commuter Rail Weekend Service (Strategy C1.1) A limited-schedule Saturday service operates between Dallas and Fort Worth. Sunday service cannot be implemented until more double tracking is added. The majority of these double-tracking projects are not in the Twenty-Year Financial Plan, as the costs will be incurred by the T. Sundays are currently utilized for required maintenance activities within the right-of-way. Ensure Service Quality with Fort Worth Service Expansion (Strategies 1.3; C3.4) With the expansion to Fort Worth, the number of railroad on-line "meets" has increased dramatically and presents a much greater challenge to maintain on-time service. TRE attained on-time performance of 98.3% in FY 2005 and has attained an on-time performance of 98.1% as of the third quarter of FY TRE has generated an enthusiastic and loyal ridership base with the current 49-train weekday and 22-train Saturday TRE schedule. DART has a commitment to its freight customers utilizing the corridor to move as much freight traffic as can be done in a safe manner without disrupting TRE passenger service. There are currently 20 to 30 freight train movements per day along the corridor despite this being a predominantly single-track railroad. This is accomplished through careful coordination with the freight railroads and the dispatching skills of the contractor. In FY 2006 through FY 2008, on-time performance is targeted at 97%, a slight reduction from current experience, due to heavy construction activities planned for the corridor. Constant monitoring of the track and signal systems is the first step to ensure safe and continued operation of a railroad; but eventually, more sidings and double tracking will be required to maintain service reliability and support any service expansion. The major capital projects proposed over the next few years for track upgrades, and other items necessary to maintain and improve service quality on the east side of the TRE are listed in the Financial Plan section. Continued service reliability and expansion capability will require similar or greater investments in Tarrant County. Reserves have been established to provide for projects that have not been specifically identified at this time. These reserves will ensure the timely replacement of TRE assets as well as allow for a certain amount of unanticipated future capital requirements. A TRE Strategic Plan was completed in FY 2006, with significant policy input from the DART and T boards as well as appropriate DART, T, and TRE staff members. Once approved, this plan will provide policy direction for the current service as well as how to address service growth. CR-4

61 Customer Focus Commuter Rail Commuter Rail TRE Costs and Subsidy Per Passenger Exhibit 5.4 graphically depicts subsidy per passenger trending and projections. The increases shown from FY 2005 and FY 2006 are due to the increase in fuel prices and a decrease in revenues due to contract agreements along the corridor. Exhibit 5.4 TRE Subsidy Per Passenger Dollars $8.00 $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 $7.31 $7.31 $6.90 $6.34 $6.67 $6.93 $6.78 $5.49 FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 TRE Fare Structure (Strategy 2.4) The DART and T boards have adopted a zone fare system for TRE with base fares of $1.25 and $2.25 for one and two zones, respectively. A one-zone fare exists for rides between downtown Dallas and West Irving or between Fort Worth and CentrePort; a two-zone fare is charged for customers traveling across the zone boundary, located at the Dallas/Tarrant County line (between CentrePort and West Irving stations). Cost-Sharing Arrangement with the T Based on Revenue Seat Miles (Strategy S1.6) DART s ILA with the T specifies that revenues arising from operation of the TRE commuter rail service are joint revenues and shall be applied against TRE operating costs. Net costs are allocated to DART and the T based on revenue seat miles operated in each county. For example, if the shared cost to operate TRE is $100 and TRE collects $25 in fares and $10 from other sources, the remaining $65 would be split based on the number of revenue seat miles operated in Dallas County (the responsibility of DART) and in Tarrant County (the responsibility of the T). Except for employees dedicated 100% to TRE, DART and the T separately absorb their own staff, administrative, and station maintenance costs. DART s share of the subsidy in FY 2006 is approximately 47.9%. In FY 2002, the cities of Arlington, Bedford, Colleyville, Euless, Grand Prairie, Grapevine, Haltom City, Hurst, and North Richland Hills (the Mid-Cities) agreed through an ILA with the North Central Texas Council of Governments (NCTCOG) to contribute $775,000 per year for three years, which began in FY 2002, for services that their citizens utilize. None of the Mid-Cities currently belong to either DART or the T. A new Mid-Cities ILA has been negotiated by the NCTCOG and approved by the boards of DART and the T, and will remain in effect until September Under this new ILA, TRE will realize $4.5M in additional federal capital funding. CR-5

62 Customer Focus Commuter Rail Increase TRE Ridership (Strategy C2.1) During FY 2003, the boards of directors for DART and the T approved a fare increase and TRE service reductions, as cost containment measures. Incremental, strategic increases in the service began in FY 2005, and were continued in FY These improvements are aimed at recapturing the lost ridership that was experienced as a result of earlier service reductions. Working together and through the TRE Coordinating Committee, staff from DART and the T are focused on communicating the improved levels of service to potential customers. The two agencies will continue to place priority on implementing cost- effective joint marketing and public information campaigns to not only retain existing ridership but also to attract new riders to TRE service, as well as the connecting DART and T transit services. A key element of this effort will be marketing products that focus on rebranding TRE, and reducing or eliminating any customer confusion related to the jointlyfunded/operated nature of the service. Commuter Rail and Railroad Management Department Cost Model Exhibit 5.5 is the Commuter Rail and Railroad Management Cost Model. Costs are divided between TRE, railroad management, and railroad corridor management divisions of the Department. Total revenues associated with TRE corridor management for FY 2007 are budgeted at $2.8 million and $1.3 million for the DART-owned active freight rail lines. The portion of the total corridor management revenues and property management costs associated with the TRE corridor management are factored into the Commuter Rail-TRE subsidy per passenger calculations. Total expenses below include $1.2 million of indirect costs from the T. Exhibit 5.5 FY 2007 Commuter Rail and Railroad Management Cost Model Commuter Rail $22.9 m illion * Trinity Railway Railroad Railroad Corridor Express (TRE) Management Management $21.9 m illion $0.74 million $0.23 m illion Contract Service & Insurance Allocated Costs DART Management Revenue Generated $1.3 m illion Cost Drivers ** Allocations Cost Drivers Cost Drivers - Contract rates - Number of employees - Number of employees - Quality standards - DART/T rev seat miles/train hours - DART Police - ROW owned - Number of work shifts - Revenue Collection - Number of employees - Insurance requirements - Marketing and Customer service - Level of freight operations - Quality standards - Passenger Amenities $18.8 million $3.1 million $0.74 million $0.23 million 85.67% of TRE costs 14.33% of TRE costs 82.04% of total costs 13.72% of total costs 3.23% of total costs 1.01% of total costs * Total FY 2007 Commuter Rail costs include $1.8 million for administrative overhead allocation. ** inherent in some of these cost drivers is compliance with FRA requirements. CR-6

63 Section 6 Customer Focus Paratransit Index of Exhibits Exhibit 6.1 Exhibit 6.2 Exhibit 6.3 Exhibit 6.4 Exhibit 6.5 Paratransit Scorecard-Key Performance Indicators PAR-1 Paratransit Ridership... PAR-3 Paratransit Passengers Per Hour-Actual. PAR-4 Paratransit Cost and Subsidy per Passenger... PAR-5 FY 2007 Paratransit Cost Model.... PAR-6

64 Customer Focus Paratransit Services Customer Focus Paratransit Services Overview Paratransit Services is responsible for providing accessible, curb-to-curb public transportation in accordance with the Board-approved Accessible Services Policy No. III.14, which complies with the Americans with Disabilities Act of 1990 (ADA). The department is responsible for planning/ scheduling, dispatching, field supervision, contract compliance, rider eligibility, outreach, travel training, and other administrative functions. Additionally, the department oversees the Fixed- Route Reduced Fare Program for People with Disabilities and operates DART On-Call services. Service is currently contracted with ATC/Connex (now Veolia Transportation), which operates and maintains a total of 99 Paratransit vans, 76 Paratransit sedans, and 8 On-Call vans. Approximately 9,300 certified eligible riders are registered for Paratransit Services as of June 30, The purpose of this section is to explain Paratransit Services Business Plan, including strategic initiatives. References to DART's Strategic Plan are included throughout this section. Paratransit Services Scorecard Key Performance Indicators Exhibit 6.1 highlights Paratransit Services Key Performance Indicators (KPIs). Fiscal years 2004 and 2005 indicate actual values, while figures for fiscal years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 quarter 3 is a four-quarter rolling average ending June 30, Exhibit 6.1 Paratransit Scorecard - Key Performance Indicators Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Customer/Quality Indicators Actual Ridership (000s) Scheduled Ridership (000s) Revenue Hours (000s) Paratransit Passengers per Hour - Scheduled Paratransit Passengers per Hour - Actual On-Time Performance 87.5% 89.8% 89.0% 86.0% 86.0% 86.0% Accidents per 100K Percentage of Trips Completed 100.0% 100.0% 99.0% 98.0% 98.0% 98.0% Passenger Canceled Trips Ratio 10.5% 9.5% 10.7% 12.0% 10.0% 10.0% Passenger No Shows Ratio 3.3% 3.2% 3.5% 4.0% 4.0% 4.0% Service Level - Scheduling (3 minutes) 95% 95.3% 89.0% 93% 90.0% 90.0% Service Level - Where's My Ride (2 minutes) 92% 96.7% 94.5% 92% 92.0% 92.0% Complaints per 1k Passengers Certified Riders 7,680 8,738 9,327 8,700 9,400 9,400 Financial/Efficiency Indicators Revenues (M) $1.4 $1.6 $1.7 $1.6 $1.5 $1.8 Expenses - Fully Allocated (M) $26.3 $28.2 $30.2 $31.0 $32.1 $32.2 Net Subsidy (M) $24.8 $26.6 $28.5 $29.5 $30.6 $30.4 Subsidy Per Passenger $42.14 $41.83 $43.41 $47.46 $47.07 $46.23 PAR-1

65 Customer Focus Paratransit Services Scheduling/Control Center Service Levels (Strategy C1.1) The Scheduling Center s primary function is to schedule trips for riders. Planning/Scheduling Representatives take live calls Monday through Friday, 8 a.m. to 5 p.m. During weekends and holidays, Scheduling calls are taken through an automated voic system, which is available from 8 a.m. to 5 p.m. on Saturdays, Sundays, and Holidays. X-Press Booking (XPB), an automated scheduling feature, is available when the Scheduling Center is closed or when there is no need to speak to a Planning/Scheduling Representative. X-Press Booking is available 24 hours a day, 7 days a week. The Control Center staff is responsible for dispatching Paratransit vehicles, answering Where s-my-ride calls, monitoring on-time performance, handling passenger incidents/accidents, field supervision, and Parkland Hospital Shuttle operations. The Control Center operates 21 hours a day, 7 days a week. The KPIs for the Scheduling and Control Center functions are referred to as call service levels the percentage of calls handled (answered or abandoned) within an established time period. The FY 2007 target of 90% for the Scheduling call service level is lower than the FY 2006 target of 93% due to higher call volume. The FY 2007 target of 90% for the Control Center call service level remains the same as the FY 2006 target. The Paratransit Access Advisory Group, the Board-appointed paratransit customer focus group, helped DART establish these targets. Setting standards helps management to meet service level requirements. Paratransit Ridership (Strategies C2.2, C2.6) In accordance with the spirit and intent of the ADA, and due to the high cost of demand responsive service, DART works to transition Paratransit customers to fixed-route bus and rail services based on assessments of individual mobility skills. More details on transitioning riders can be found under Paratransit Eligibility and Travel Training Program on Page PAR-3. FY 2005 ridership exceeded budget by approximately 8.6%. Several factors, such as more people applying for and being certified to use Paratransit and an increase in the number of people using mobility devices, contributed to higher demand. Also, the number of personal care attendants increased in FY 2005 by 3.5%. As of the third quarter of FY 2006, this number has increased to 4.0%. These factors are straining system capacity and having impacts on service availability and passenger ride times. Management continues to monitor the situation and has made changes to the scheduling system parameters and added revenue hours in FY 2007 to help mitigate these issues. PAR-2

66 Customer Focus Paratransit Services Exhibit 6.2 compares actual and projected ridership from FY 2004 through FY Exhibit 6.2 Paratransit Ridership Thousands FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 Paratransit Eligibility and Travel Training Program (Strategy C2.2) The current eligibility program requires paratransit applicants to be certified in person rather than by mail. Assessments are conducted on actual buses and trains instead of in a controlled environment. The in-person process reduced the number of registered Paratransit riders from 18,000 in FY 1999 to approximately 7,200 in FY 2003, a 60% decrease. Due to the increasing age of the population, as well as the influx of evacuees from Hurricanes Katrina and Rita, the number of registered riders has steadily increased over the last three years to approximately 9,300, an increase of 29%. The eligibility process is critical in that it determines whether a person is eligible, in whole or in part, to take trips on the more costly Paratransit mode in lieu of less costly fixed-route services. Funding for contract services for a Certified Orientation & Mobility Specialist has been included in FY 2007 to assess and travel-train persons who are blind or have other visual impairments. The primary focus of the eligibility assessment and travel training functions is to conduct eligibility assessments. Travel training enables DART to train and transition individuals from Paratransit to less costly fixed-route service; however, time available for travel training is limited. For a client to transition to fixed-route services, staff must perform route checks to ensure there are no environmental barriers that would impede the client s travel. Between October 1, 2005 and June 30, 2006, approximately 1,560 trips normally provided by Paratransit Services have been transitioned to fixed-route service. This equates to approximately $61,400 in cost avoidance. PAR-3

67 Customer Focus Paratransit Services Paratransit's Productivity Productivity (Strategy C3.1) Passengers per hour is one method of measuring Paratransit s efficiency. Exhibit 6.3 provides the actual and projected paratransit passengers per hour for FY 2004 through FY Compliance with the ADA s zero denial mandate impacts Paratransit s efficiency and lowers productivity. The improvement shown in productivity is due to a more efficient service; however, vehicle capacity issues are being encountered, and clients are riding for longer periods of time. Paratransit s Trapeze scheduling system is designed to schedule trips as efficiently as possible. Exhibit 6.3 Paratransit Passengers Per Hour - Actual FY04A FY05A FY06B FY07B FY08P FY07 Plan FY06 Plan QTR 3 FY06 Manage No-Shows and Cancellations (Strategy C3.1) DART s second challenge for improving efficiency concerns cancellations and no-shows. As of March 31, 2006, DART scheduled 1.75 passengers per hour; however, after cancellations and no-shows were factored in, actual productivity levels dropped to DART has strictly enforced the No-Show Policy since 2005, resulting in the no-show rate dropping from 5.2% to 3.5% as of March After the most recent cancellation policy went into effect in September 2003, the cancellation rate has continued to drop from 12.6% to 10.7% as of March Management estimates the KPI ratio for no-shows will remain in the 4% range, and the KPI ratio for cancellations will remain in the 12% range, which is consistent throughout the transit industry. Vehicle Business System (Strategy C4.1) A Vehicle Business System (VBS) is installed in all Paratransit vehicles. The wireless communication system allows better utilization of revenue vehicles. An approved capital project allows for an automatic call-out feature enhancement to the system. This feature will be Operator-initiated, and will notify the client when the vehicle is a certain distance or time from the pick-up location. This feature may help reduce no-shows and dwell time of the vehicles, further improving productivity and on-time performance. PAR-4

68 Customer Focus Paratransit Services Purchased Transportation Contract (Strategy C4.4) A purchased transportation contract with ATC/Connex (now Veolia Transportation) was implemented in January 2001, and is scheduled to end on May 31, A new contract effective June 1, 2007 through September 30, 2011 was awarded by the Board to Veolia in late summer DART will purchase the facility occupied by the current Paratransit contractor to eliminate the ongoing lease costs paid through each contract. This resulted in lower fixed costs under the new contract approved in summer FY Additionally, the new contract will consist of an all-van fleet, instead of the current van/sedan mix. This will enable a more efficient utilization of the fleet and better Service Area coverage. DART On-Call is provided through the Veolia Transportation contract. There are currently nine DART On-Call zones in operation throughout the Service Area, with seven zones operated by Veolia Transportation. Two additional zones are operated through agreements with rural transit providers for Collin County and Hunt County. The North Central Plano zone is operated by Collin County Area Rural Transportation, and the Rowlett zone is operated by Hunt County Committee on Aging. See the Bus Section for more detail on this service. With the new contract, effective June 1, 2007, additional DART On-Call zones, as well as late night/weekend, shuttle, and flex-route services will be implemented as non-performing bus routes are identified for replacement. Paratransit Costs and Subsidy Per Passenger (Strategy 3.3) Exhibit 6.4 compares paratransit cost and net subsidy actual results for FY 2004 and FY 2005 with budget and projections through FY Due to favorable contract rate decreases, the subsidy per passenger is projected to decrease in FY 2007 and FY 2008, and fuel continues to have a major impact on the number in both years. Exhibit 6.4 Paratransit Cost & Subsidy per Passenger Millions $40.0 $30.0 $20.0 $10.0 $0.0 FY04A FY05A FY06B FY07B FY08P $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Dollars Total Costs Net Subsidy Subsidy per Passenger PAR-5

69 Customer Focus Paratransit Services Paratransit Cost Model Exhibit 6.5 is the Paratransit Cost Model. Exhibit 6.5 FY 2007 Paratransit Cost Model Paratransit $32.1 million* Contract In House Allocated Service Costs Costs Cost Drivers Cost Drivers Allocations - Passenger demand - Oversight and Administration - Customer Service - Service effectiveness of contract - Retail Sales (passengers per hour) - Number of employees - Operations Technology Support - Contract rate per hour - Certification program - Information Technology Support - Quality standards - Dispatching - DART Police Support - Fleet age - Scheduling - Technical Services - Vehicle requirements - Non-revenue vehicle Services $26.5 million $3.9 million $1.8 million 82.4% of total cost 12.2% of total cost 5.4% of total cost * Total FY07 Paratransit costs include $2.8 million for administrative overhead allocation. PAR-6

70 Section 7 HOV and General Mobility Index of Exhibits Exhibit 7.1 Exhibit 7.2 Exhibit 7.3 Exhibit 7.4 Exhibit 7.5 Exhibit 7.6 Exhibit 7.7 HOV-Scorecard-Key Performance Indicators HOV-2 Map 2007 HOV/Managed Lane Facilities HOV-2 Map Permanent HOV Lanes.... HOV-4 General Mobility Scorecard-Key Performance Indicators. HOV-7 Operating Vanpools.... HOV-8 General Mobility/Road Improvement Program HOV-9 Projected LAP/CMS Program. HOV-9

71 Customer Focus HOV and General Mobility Customer Focus - HOV Overview The purpose of this section is to discuss business performance expectations and major initiatives for DART's High Occupancy Vehicle (HOV) Transitway services. References to DART's Strategic Plan are included throughout this section. DART s Transit System Plan calls for an HOV Transitway program that includes five Interim or Immediate Action Transitways, as well as more than 110 miles of Permanent HOV Transitways. The Board-approved HOV Transitway Policy guides the program s development by establishing funding commitment and the necessary framework to advance the projects through different stages of project development, construction, operations, enforcement, and maintenance. Currently, DART operates, enforces, and maintains four Interim/Immediate facilities totaling 34 miles of HOV lanes. The East R.L. Thornton (I-30) contraflow HOV lane utilizes movable barriers and operates during weekday peak periods from 6 a.m. to 9 a.m. and 3:30 p.m. to 7 p.m. The Stemmons (I-35E), LBJ (I-635), and Marvin D. Love (US 67) concurrent flow HOV lanes are buffer-separated facilities that are open 24-hours a day in both directions. DART also operates reversible HOV lanes along South R.L. Thornton (I-35E)/Marvin D. Love (US 67) from 6 a.m. to 10 a.m. and 2:30 p.m. to 7 p.m., and at the Stemmons/LBJ interchange (the S-Ramp) with operating hours similar to the I-30 facility. Changes to operating hours of the HOV lanes to match travel and ridership patterns are implemented as needed. A map showing the HOV/Managed lanes that will be operational in 2007 is included as Exhibit 7.2. Interim HOV projects are funded by the Texas Department of Transportation (TxDOT), DART, the Federal Transit Administration (FTA), and the Federal Highway Administration (FHWA) Congestion Mitigation/Air Quality (CMAQ) Program, which is administered by the Regional Transportation Council (RTC) of the North Central Texas Council of Governments (NCTCOG). All facilities are jointly planned and designed by DART and TxDOT, and each agency contributes 16.7% of the construction cost. Federal funds provide the remaining 66.6%. Once the facilities are built, DART is responsible for 100% of the operation, enforcement, and management of the HOV lanes, while maintenance is the joint responsibility of DART and TxDOT. In response to increasing air-quality concerns in the region, plans to extend the operating limits of the existing I-635 and I-30 HOV lanes are complete and construction is underway. Also, design activities for the region s first managed HOV lane facility along I-30 (west of Downtown Dallas) are ongoing. Initial phases of these projects are scheduled to be operational by July HOV-1

72 Customer Focus HOV and General Mobility HOV Scorecard Key Performance Indicators Exhibit 7.1 highlights HOV Key Performance Indicators (KPIs) presented in scorecard format. Fiscal Years 2004 and 2005 indicate the actual values, while figures for Fiscal Years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 Quarter 3 is a fourquarter rolling average ending June 30, Customer/Quality Indicators HOV Projects Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Ridership (M) Avg. Weekday Ridership (000s) Lane Availability 100.0% 99.9% 99.9% 99.9% 99.9% Operating Speed Ratio Financial/Efficiency Indicators Exhibit 7.1 HOV Scorecard - Key Performance Indicators Revenues (M) $0.8 $1.5 Expenses - Fully Allocated (M) $5.7 $4.9 $5.1 $5.8 $7.7 $9.7 Subsidy Per Passenger $0.16 $0.13 $0.14 $0.16 $0.19 $0.22 This section highlights the major capital projects included in the Financial Plan. Exhibit 7.2 is a map of the Interim/Immediate HOV lanes. Exhibit 7.2 HOV-2

73 Customer Focus HOV and General Mobility North Central (Interim/Immediate) HOV Lane (Strategies C2.2, C2.3) Plans have been completed and construction is scheduled to start in summer 2006 on the 14-mile concurrent-flow HOV lane facility from I-635 to Exchange Parkway in Allen. The facility will have delineator posts in the buffer zone between the two white lines to separate HOV lane traffic from the main lane users. Access and egress locations will be at both ends of the facility as well as around Park Boulevard. During the operations phase, NCTCOG will reimburse DART for all funds spent outside the DART Service Area. Transit Partnership Program (Strategies S1.6; S1.8) As part of the Transit Partnership Program offered by the NCTCOG, studies were conducted to identify potential locations for additional and/or expanded interim/immediate action HOV lanes. This program was initiated to help the region meet federal air-quality standards by July Several potential candidate projects have been identified, and the following projects were chosen for implementation in 2007: I-635 Eastern Extension: The eastern end of the I-635 HOV facility will be extended for another nine miles to I-30. The extended section will be a reversible lane facility. I-30 Eastern Extension: The limits of the I-30 HOV facility will be extended another six miles to I-635. Like the current facility, the extension will be a contraflow facility. Regional Value Pricing (Strategy S1.6) A regional value or Congestion Pricing study was completed to evaluate the feasibility of charging single-occupant vehicles to use the existing and future HOV lanes throughout the region. This federally-funded project was led by the NCTCOG, and DART and TxDOT are among the project partners. Federal rules mandate that a study of this type be conducted prior to testing and/or implementation. The study was completed during FY 2005, and an application to implement the concept in the selected corridor was advanced to the FHWA for funding. The application was approved and the I-30 (Old Turnpike) corridor will be the region s first Managed Lane project. Permanent HOV Transitways (Strategies C2.2, C2.3, S1.6) DART's Transit System Plan calls for over 110 miles of permanent HOV transitways. DART's share of the construction costs of these facilities is 10%. A map of the permanent HOV/Managed Lane projects is included at Exhibit 7.3. Per the Board-approved HOV Transitway Policy and consistent with the Metropolitan Transportation Plan by NCTCOG, all Permanent HOV Transitways will be evaluated for Congestion Pricing. HOV-3

74 Customer Focus HOV and General Mobility Exhibit 7.3 Notice of Board Commitment The Board s current HOV Policy commits DART to fund up to 100% of the construction cost of the permanent LBJ, Stemmons, and North Central Expressway HOV transitways, if Federal funding is not available. This funding is not included in the FY 2007 Twenty-Year Financial Plan. If DART is required to provide additional funding for these HOV projects, it will have a significant impact on the capital expansion and financing assumptions included in the Twenty-Year Financial Plan. Major Investment Studies (Strategy C2.6) In 2001, DART initiated a Major Investment Study (MIS) for the I-30 Freeway Corridor east of Downtown Dallas. All alternatives and alignments within the corridor were studied and evaluated to determine a Locally Preferred Investment Strategy (LPIS) for the corridor. The East Corridor MIS was completed in January This transportation corridor is roughly bounded by Garland Road/Santa Fe Railroad/Ferguson Road in the north, Dallas County Line in the east, Scyene Road/Military Parkway in the south, and Downtown Dallas in the west. The study s recommendations included: 1) managed and general-purpose lanes for I-30 and US 80; 2) commuter rail and light rail investigation; and 3) Bus Rapid Transit (BRT) on Ferguson Road. Each of these objectives is being advanced by the respective implementing agencies. Specifically, TxDOT has begun schematic design and the environmental process for managed lanes on I-30 and US 80. Project completion is expected in HOV-4

75 Customer Focus HOV and General Mobility DART will be advancing BRT on Ferguson Road. The City of Dallas, in support of that effort, has designated Ferguson Road as a BRT Corridor in its Transportation Plan and in its Vision Plan. SH 114 Permanent HOV Transitways With the completion of the Northwest Corridor Major Investment Study, DART is advancing the permanent, barrier-separated Managed HOV lanes along SH 114 from SH 183 to the Dallas County Line as identified by the Locally Preferred Alternative. Advanced planning activities including schematic designs and environmental studies were substantially completed during FY 2006 and will be completed in FY The western end of the project terminus was redrawn to conform to recently identified demand volumes. Preliminary Engineering/Plan Specifications & Estimates for the remainder of the SH 114 Corridor will be underway during FY 2008 through FY 2011, and utilities relocation/ coordination and right-of-way acquisition will be advanced concurrently. The construction phase, pending funding, is expected to occur between FY 2012 and FY As a result of changes to Loop 12 schematics, final revised schematics have been developed and submitted to TxDOT in Austin. These define the limits of the Loop 12 and SH 114 interchange for early project implementation to accommodate construction of the DART Light Rail underpass along a section of SH 114 into Irving by the end of FY I-30 (Old Turnpike) Managed HOV Lane Development of the first Managed HOV Lane project in Dallas is underway. The Managed HOV Lanes facility will be implemented in the median of I-30 from the Dallas/Tarrant County Line to Downtown Dallas. Ultimately, the reversible HOV lanes will operate 20 hours a day, and will comprise a two-lane Managed HOV facility from the Dallas/Tarrant County Line to Downtown Dallas. The Managed HOV lanes project will be implemented in phases. Phase I of this project is scheduled for completion by July Limits of the initial phase of the project will be from Dallas/Tarrant County Line to Sylvan Avenue. This six-mile project will be limited to two reversible HOV lanes from Dallas/Tarrant County Line to Mountain Creek, and a single reversible HOV lane from Mountain Creek to Chalk Hill Road. For westbound traffic only, the single HOV lane will extend beyond Chalk Hill Road to Sylvan Avenue. In the eastbound (inbound) direction, the facility is entered at the Dallas/Tarrant County Line with an exit available at Mountain Creek (to allow access to the Loop 12 and Cockrell Hill Rd. exits). The facility terminates into an additional general-purpose lane at Chalk Hill Road (to allow access to the Westmoreland exit, and all other exits east). In the westbound (outbound) direction, the facility is entered at Sylvan Avenue (for traffic coming from Downtown Dallas) and Mountain Creek (to allow access from Loop 12 and all other roadways east) with termination into two additional general-purpose lanes at the Dallas/Tarrant County Line. The facility will typically have three general-purpose lanes in each direction from Tarrant County Line to Chalk Hill and four general-purpose lanes in each direction from Chalk Hill to Sylvan. Future phases will be initiated upon availability of regional funds. HOV-5

76 Customer Focus HOV and General Mobility High-Five Reconstruction of the I-635/US 75 Interchange (High-Five) is complete and all freeway elements of the interchange were opened to traffic in The fifth level of the interchange will be a reversible HOV lane connecting the I-635 and US 75 HOV lanes and will be operational when the US 75 HOV lanes are implemented. The project includes an HOV T- ramp at TI Boulevard along with main lanes and frontage road construction. LBJ Corridor This project is a joint effort between TxDOT, DART, and other partners in the region. The LBJ Corridor project is comprised of two sections: the east section, which includes the Mesquite section (US 75 to US 80), and the west section (from US 75 to Luna Road west of I-35E). The west section includes a tunnel from west of Midway to east of Preston. This project will be designed and constructed in various phases. Target completion is FY DART will not participate in funding the Mesquite section which is outside the DART Service Area. Ensure I-30 HOV Lane Opens on Time (Strategy C1.1) This HOV lane is open an average of at least 99% of the time. The purpose of this indicator is to determine if the facility is open as scheduled for the morning and evening operating hours. To date, we have been able to meet the set target. Operating Speed Ratio (OSR) This efficiency ratio measures the average operating speed of vehicles using the HOV lane versus the speed of vehicles on the main freeway lanes. The target has been set at 50%; that is, HOV traffic traveling an average of 1.5 times the speed of main lane traffic. To date, we have been able to exceed this target. Barrier Moving Machines Improving Quality and Efficiency DART procured two new barrier transfer vehicles in 2003 which have had a positive impact on the I-30 HOV lanes operations. Two additional barrier transfer vehicles (BTVs) will be procured in 2007 for the extension of the I-30 HOV lane. Stemmons HOV Gates to Improve Safety (Strategy C1.3) This $2.4 million project, which is scheduled to open in 2007, will fund the installation of an automatic gate system for opening and closing each of the three ramps on the Stemmons Reversible HOV Lane. Engineering schematics and Environment Assessment (EA) documents for the project have been completed and approved by the Federal Highway Administration (FHWA) and TxDOT. Final design is underway. Installation of these gates will eliminate the current procedure of manually placing pylons next to high-speed freeway traffic. This project will be 60% funded by the Federal Transit Administration (FTA) through the Fixed Guideway Modernization program. HOV Service has Lowest Subsidy Per Passenger (Strategy C3.3) HOV is DART s most cost-effective mode of transit with a subsidy per passenger of $0.14 for the third quarter of FY 2006 and a budgeted subsidy per passenger $0.19 for FY HOV-6

77 Customer Focus HOV and General Mobility Customer Focus General Mobility Overview DART's General Mobility programs include carpool matching, vanpool operations, and support for local Transportation Management Associations (TMAs). General Mobility also includes road improvement programs such as the Local Assistance Program/Congestion Management System (LAP/CMS), the Transit Principal Arterial Street System program (Transit PASS), the Transportation System Management (TSM) program, and the Intelligent Transportation Systems (ITS) program. DART and the NCTCOG have worked together to identify strategies for reducing emissions in the Metroplex. The vanpool program has been identified as a critical component of the State Implementation Plan for improving air quality. Employers in the Metroplex have also discovered vanpools as a viable transportation alternative for their employees and are subsidizing passenger fares to help with escalating fuel costs. Vanpool Scorecard Exhibit 7.4 highlights Vanpool Key Performance Indicators (KPIs) presented in scorecard format. Exhibit 7.4 General Mobility (Vanpool) - Key Performance Indicators Indicators FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Customer/Quality Indicators Ridership (000s) Number Of Vanpools Financial/Efficiency Indicators Revenues (M) $0.8 $0.7 $0.8 $1.1 $1.2 $1.1 Expenses - Fully Allocated (M) $1.1 $1.0 $1.1 $1.2 $1.5 $1.4 Subsidy Per Passenger $0.78 $0.64 $0.59 $0.20 $0.47 $0.61 DART currently offers 7- to 15-person vans through a third-party contractor (Enterprise Rent-a- Car DFW). This program is partially funded by the NCTCOG through a Congestion Mitigation/Air Quality grant. NCTCOG provides funding to DART that covers up to 40% of the total cost of operations. Vanpool customers pay a flat $500 per month per vanpool to DART to cover 50% of the lease fees. The NCTCOG contribution is based on the total cost of operations excluding Agency general administrative costs, and DART recovers approximately 90% of the total cost of operations, with the bulk of DART s expenses being in-kind services such as program management. Management s objective is to increase the number of vanpools. HOV-7

78 Customer Focus HOV and General Mobility In FY 2006, the number of vanpools surpassed the FY 2005 vanpool operating numbers (see Exhibit 7.5) by 27.7%. Record high gasoline prices have resulted in unprecedented interest in the vanpool program. The 83 vanpools programmed for FY 2006 were fully subscribed by the end of the year and additional requests continue to be received. In response to the high interest levels, the program will be expanded to 133 vanpools (140 programmed with a 5% transition factor) in FY Demand resulting from high gasoline prices is expected to result in full subscription of the added vanpool capacity by the end of the year. Grant funding provided through NCTCOG will be used to offer a coordinated program of incentives to retain participants in new vanpools. The program will include gift cards for individual vanpool participants, a month of free fares, subsidized fuel, and additional incentives over the critical first four months after a new vanpool s formation. 100 Exhibit 7.5 Operating Vanpools Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep FY FY FY05 FY06 HOV-8

79 Customer Focus HOV and General Mobility General Mobility Road Improvement Programs (Strategies C2.5, S1.6) The Road Improvement Programs shown in Exhibit 7.6 represent all of the Board-approved road programs with member cities and state agencies. Road improvement programs are recorded as non-operating expenses in the Budget and Twenty-Year Financial Plan because DART does not take an ownership interest in most of these mobility improvements. Exhibit 7.6 General Mobility / Road Improvement Program (in millions) FY04A FY05A FY06 Q3 FY07B FY08P LAP/CMS $8.7 $5.2 $2.9 $0.0 $0.0 Transit PASS TSM (includes street repair) ITS Total $10.7 $5.8 $4.2 $5.0 $8.3 Note: For FY07 and beyond, the budgeted column reflects new allocations. Actual expenditures may also include unspent program allocations from prior years. Local Assistance Program/Congestion Management System (LAP/CMS) (Strategy S1.6) This agreement returned 15% of DART sales taxes collected in a member city to that city until a contract was awarded for rail construction in that city. Irving was included at a 7.5% funding level because it is served by commuter rail. Additional allocations to the program ended for all member cities in FY Member cities with remaining balances may request the programming of LAP/CMS funds, as necessary, for projects that enhance transit. Exhibit 7.7 reflects the current LAP/CMS payable to each member city. Exhibit 7.7 Projected LAP/CMS Program (000s) 06/30/06 LAP/CMS Member City Unspent 06/30/06 LAP/CMS Committed Amount Balance Addison $307 $307 Buckingham Carrollton 5,517 1,323 Cockrell Hill Dallas County * 27 4 Farmers Branch 2,452 2,410 Garland 1, Glenn Heights 85 0 Irving 13,193 5,402 Plano Richardson Rowlett University Park * 5 0 TOTAL $24,006 * Balance remaining from original LAP Program. $10,980 HOV-9

80 Customer Focus HOV and General Mobility Transit Principal Arterial Street System (PASS) (Strategy S1.6) The Transit PASS program is a $115 million program originally funded by DART ($30 million), TxDOT/FHWA ($55 million), and member cities and counties ($30 million). No new money is being allocated to this program; however, approximately $8.6 million of DART's portion of this program remains unspent from prior years and will be rolled forward. Transportation System Management (TSM) Total TSM funding has been established at approximately $20.3 million over the next five years. TSM funding is available to repair streets damaged by buses and for minor enhancements such as intersection modifications, bus pads, and traffic studies/signal modifications. The Board authorized funding for the street repair component in FY Intelligent Transportation Systems (ITS) (Strategy C4.1) is an element of DART's Transit System Plan. It includes Smart Vehicle, Smart Traveler, and Smart Intermodal Systems. DART is working with other regional transportation providers, cities, counties, airports, and national organizations to develop a Regional Comprehensive ITS Program for the Dallas/Fort Worth Region. The program s purpose is to review and, if necessary, update the completed and inprogress ITS Plans for compliance with the ITS national architecture for interoperability and funding purposes. The program is aimed at prioritized implementation of projects to improve transportation throughout the region. It focuses on providing metropolitan areas ITS elements including: Advanced Traveler Information Systems (ATIS), Advanced Public Transportation Systems (APTS), and Advanced Traffic Management Systems (ATMS). The goal of this project is to facilitate information exchange between the various ITS systems and to create a seamless intermodal transportation infrastructure across jurisdictional boundaries. As part of the ITS program, DART continues to develop the Vehicle Business System (i.e., Smart Vehicle). This effort will be rolled into the overall DART ITS program, but will be funded by DART and the FTA. Please refer to the Agency-Wide section for more information on this program. Regional Comprehensive ITS Program (Strategy C4.1) This program will include the planning, design, construction, implementation, and operation of real-time traveler and transportation system information. This will allow partners in the region to share and provide transit users with traffic information. This much needed exchange will also aid the region in dealing with major incidents. High-level design is underway for both video and data exchange between multiple agencies in the region. Also, the regional effort is directed toward designing a regional database to share traffic-related information among the agencies. NCTCOG will host the database and provide support to all regional partners with data storing and sharing needs. HOV-10

81 Customer Focus HOV and General Mobility DART ITS Plan (Strategy C4.1) DART s ITS Program will include Smart Vehicles, Smart Travelers, and Smart Intermodal Systems. Ongoing work for Smart Vehicles was incorporated in the DART ITS Plan, while the entire ITS effort will be coordinated with the 2030 Transit System Plan. The ITS Plan focuses on the existing transportation facilities, infrastructures, and operations of DART. It identifies the current status of ITS deployment within and outside the Agency; defines near-term ITS initiatives to meet current Agency needs; identifies system deployment costs; presents an internal ITS Architecture consistent with the National ITS Architecture; and incorporates an implementation phasing plan to guide the deployment of recommended near-term initiatives. These initiatives also position DART as the dominant public transportation services provider to support regional ITS initiatives that involve multiple transportation providers and inter-modal initiatives. Transit Signal Priority for LRT in Dallas CBD (Strategy C4.1) DART is working with the City of Dallas to improve LRT operations in the CBD area without significantly degrading vehicular traffic flow. This project will help DART prevent accumulation of trains at Downtown Dallas stations and have LRT travel between stations with minimum stops. The project will implement LRT study recommendations to improve performance of DART LRT operations. Implementation of Transit Signal Priority is expected in FY HOV-11

82 Customer Focus HOV and General Mobility BLANK PAGE HOV-12

83 Section 8 Agency-Wide Index of Exhibits Exhibit 8.1 Exhibit 8.2 Exhibit 8.3 Exhibit 8.4 Exhibit 8.5 Exhibit 8.6 Exhibit 8.7 Exhibit 8.8 Exhibit 8.9 Bus Rider Survey... AW-4 LRT Rider Survey... AW-5 TRE Rider Survey... AW-5 Strategic Initiatives to Improve Business Processes... AW-6 Scorecard-Improve Business Processes and Information... AW-7 Sales Taxes for Operations. AW-7 Administrative Ratio... AW-8 Strategic Initiatives to Increase Employee Satisfaction.. AW-11 Strategic Initiatives to Increase Stakeholder Satisfaction... AW-15

84 Agency-Wide Agency-Wide Customer, Employee, and Stakeholder Strategies Overview DART's "balanced scorecard" approach to strategic planning focuses on the three constituency groups identified by the DART Board of Directors as key to the Agency s success: the customer, the employee, and the stakeholder. Strategic initiatives identified within each core group center on continuously improving processes, technology, and communication to achieve DART s goals of increasing ridership, reducing subsidy per passenger, and increasing customer and employee satisfaction. The purpose of this section is to address Agency-wide issues and outline DART's strategies, key performance measurements, and major initiatives for the management objectives: (C1) Improve Customer Satisfaction; (C2) Manage System Growth; (C4) Improve Business Processes and Information; (E1) Promote Employee Development and Alignment; and (S1) Build and Maintain Relationships with Stakeholders. In 2005, the President/Executive Director made Customer and Employee Satisfaction the top two priorities. The following addresses some of the projects and initiatives completed in FY 2006 and those planned for FY Customer Focus It is DART s goal to provide safe, secure, efficient, and effective services to our customers. DART works toward continuous improvement in these areas through the use of customer surveys, division-level scorecards, Key Performance Indicators (KPIs), station monitors, systematic review of police deployment, fare inspectors, and agency committees such as Service Planning and Customer Satisfaction. Customer surveys are conducted every six months to monitor the effectiveness of DART s programs and services. Provide a Safe/Secure Service (Strategy C1.3) DART Police The DART Police Department -- consisting of 227 positions including sworn peace officers, telecommunications personnel, support staff, and fare enforcement officers -- services transit operations and facilities in 13 member cities covering a 700-square mile area. The department is made up of two divisions: Operations and Administrative Services. Operations personnel patrol DART bus stops and shelters, bus routes, transit centers, transfer centers, rail stations in Dallas County, the transitway mall in downtown Dallas, tunnel, bridges, HOV lanes, bus/rail operations, and maintenance and administrative facilities. Administrative Services personnel support records management, citation processing, internal affairs investigations, intelligence information, case filings, evidence management, facilities and equipment, hiring processes, planning and research, procurements, and special projects. This section also includes police telecommunications and security guard services. AW-1

85 Agency-Wide Strategic Plan The initiatives of the DART Police Department are updated annually and aligned with the Agency s vision, mission, goals, and Strategic Plan. Mission Statement The mission of the DART Police Department is to maintain a safe and peaceful environment for DART customers and employees and to ensure the security of property. Statement of Commitment To provide safety and security for the transit community and to reduce the perception of crime, the DART Police Department will use best practices, technology, and collaborative enforcement strategies to encourage ridership on the DART System. Goals To accomplish its mission and vision, the DART Police Department has established the following goals: Increase effectiveness for the customer Increase efficiency for the customer Increase stakeholder satisfaction Increase employee satisfaction Objectives To accomplish each of the goals, the DART Police Department defined six objectives for FY 2007: 1. Enhance emergency preparedness initiatives 2. Allocate and deploy resources 3. Enhance DART Police performance 4. Improve DART Police employee morale 5. Research and develop best practices 6. Support effective external communications Key Performance Indicators DART Police use the following metrics to measure deployment effectiveness and efficiency: Response Time to Crimes Against Persons No more than 7 minutes average response time to calls for service. Measuring officer response time assists management in monitoring patrons perception of safety on the transit system. These statistics are gathered by measuring the elapsed time between an initial call for service and the officer s arrival time at the scene of an incident. Crimes Against Persons per 100,000 Passengers by Mode Monitoring Crimes Against Persons per capita provides an overview of patron safety by detailing the frequency of crimes on the DART System over each of the modes. Crimes Against Property per 100,000 Passengers by Mode Examining Crimes Against Property per capita provides an overview of the safety of our customer s property over each of the modes. AW-2

86 Agency-Wide DART Safe Work Practices Policy (Strategy E1.6) In FY 2001, 13 standard operating procedures (SOPs) were implemented on an Agency-wide basis as part of the DART Safe Work Practices Policy. Four more SOPs are being written to expand this program and should be completed in FY The DART Safe Work Practices Policy voluntarily adopts the OSHA standard as the minimum standard for safe work practice. Audits covering at least 2 of the 13 original SOPs are conducted each year to measure and record improvement with respect to the findings and mitigation implementations. To further support the Safe Work Practices Policy, DART has initiated a program to improve the investigation and enforcement process for injury accidents. The Maintenance Department is piloting the program, which began in FY 2006 with train-the-trainer classes. In early FY 2007, all Maintenance supervision and management staff will be trained on procedures for monitoring safety performance in the shops as well as accident investigation. As part of the pilot, Maintenance has implemented an efficiency testing SOP for all personnel, and an employee safety and health program has been incorporated into the System Safety Program Plan. Program effectiveness will be evaluated in FY 2007 with the intent to fully implement the program in FY Provide Customer-Driven Service Enhance Customer Satisfaction and Rider Retention (Strategies C1.4; E1.3) This Customer Service strategic initiative is a two-pronged approach to increase customer satisfaction and ridership. The two prongs are: 1) employee motivation/satisfaction; and, 2) positive customer experiences. Surveys indicate that one-quarter to one-third of customers describe themselves as new riders on the system. This proportion of new riders has been steadily increasing as a result of recent high fuel prices. A customer s first experience with DART service is a significant factor in building long-term ridership, and employee motivation/satisfaction impacts the degree to which employees focus on creating a positive first-time customer experience. The Division Level Measurement Program is described in the Bus and LRT sections of the Business Plan. It is targeted at increasing front-line employee ownership in the goals of the Agency, with the ultimate objective of increasing employee motivation and satisfaction. The Division Level Measurement Program also targets improvements in service quality through enhanced data analysis, communications, and problem solving. The Customer Satisfaction Priorities Initiative focuses on two key elements affecting an individual s decision to try transit for the first time -- service reliability and the perception of personal security. This initiative brings together management staff from across the organization to formulate and implement strategies for improvements in these two areas. Strategies may include improving communication with employees and customers, improving processes, implementing new technologies and/or improving coordination among DART and its member cities or other agencies. The Customer Satisfaction Priorities and the Division Level Measurement initiatives are cornerstones of the Agency-wide goal of enhancing customer satisfaction and building ridership. AW-3

87 Agency-Wide Market services to optimize ridership (Strategy C2.1) As in FY 2006, DART s FY 2007 marketing program will continue rebranding DART s services while building greater public awareness of the DART Rail expansion in the Northwest and Southeast corridors. To build ridership, staff will continue promoting specially targeted low-performing bus routes. Marketing initiatives also will focus on building ridership in the Hispanic, senior, African- American, and Asian markets. Marketing programs will promote ridership to key destinations and more than 150 community events. In addition, Marketing will provide support and materials/advertising needed to communicate anticipated changes in DART s fare structure. DART s Transit Solutions group will continue major marketing and outreach efforts to increase ridership through the development of enhanced employer pass programs including the new Monthly PassPlus program. Efforts will also include the rollout of a new regional rideshare database and new incentives to offer employees who use transportation alternatives. USE SURVEYS TO UNDERSTAND NEEDS OF CUSTOMERS, EMPLOYEES, AND STAKEHOLDERS (Strategy C4.5) A benchmark was established in April 2002 to evaluate and monitor customer satisfaction in five areas: service, operations, maintenance, communications, and safety. Following are the results of DART s June 2005 Rider Survey. Exhibits 8.1 (Bus), 8.2 (LRT), and 8.3 (TRE) show the results of service evaluation on a scale of 1 to 5, with 1 being least favorable and 5 being most favorable. Exhibit 8.1 Bus Rider Survey Response Category Scale Response Closeness of bus stop to final destination 4.08 Transit agents knowledge about the service 3.98 Closeness of bus stop to home 3.88 Cost of riding DART 3.87 Station staff s knowledge of the service 3.82 Walking time/distance to stop/stations 3.81 Drivers knowledge about the service 3.79 Number of transfers 3.73 Length of trip 3.73 Bus driver courtesy 3.65 On-time performance 3.56 Reliability of transfer connections 3.52 Availability of bicycle amenities 3.35 Frequency of buses 3.34 Cleanliness of interior of the bus 3.30 Security at Transit Centers 3.20 Availability of evening service (after 6 p.m.) 3.20 Security on the bus 3.05 Availability of benches/shelters 2.95 Security at bus stops 2.91 AW-4

88 Agency-Wide Exhibit 8.2 LRT Rider Survey Response Category Scale Response On-time performance 4.31 Cost of riding DART 4.27 Number of transfers 4.08 Transit agents knowledge about the service 4.00 Frequency of the train 3.98 Length of trip 3.97 Reliability of transfer connections 3.90 Walking time/distance to stop/station 3.83 Availability of bicycle amenities 3.64 Announcement of stations 3.63 Availability of seating 3.57 Cleanliness of train interior 3.44 Security on platforms 3.02 Security at Park & Rides 2.91 Security on the train 2.88 Transit police visibility on train 2.79 Exhibit 8.3 TRE Rider Survey Response Category Scale Response Cost of riding DART 4.42 On-time performance 4.37 Transit agents knowledge about the service 4.37 Number of transfers 4.32 Announcement of stations 4.16 Walking time/distance to stop/station 4.15 Length of trip 4.10 Cleanliness of train interior 4.09 Reliability of transfer connections 4.08 Availability of bicycle amenities 4.02 Availability of seating 3.82 Security on the train 3.54 Frequency of the train 3.32 Transit police visibility on train 3.27 Security on platforms 3.18 Security at bus stops 3.01 Security at Park & Rides 2.96 As the survey reflects, DART riders identify safety and security as the two areas most needing improvement. To further evaluate customer feedback regarding DART services, a Customer Satisfaction Survey was conducted during the fourth quarter of FY 2006, and will be finalized in early FY This will allow Management to monitor these indicators and address these and other performance issues over time. AW-5

89 Agency-Wide During FY 2007, Marketing will conduct a major Climate Survey of member-city stakeholders, a fresh Rider Survey, and a special survey measuring the effectiveness of the DART Customer Information Call Center and Customer Response service. Lastly, a new survey is planned to assess perception of DART and its services among targeted minority markets including Hispanics, Asians, and seniors. Using Baldrige criteria to create a customer-focused culture (Strategies C4.1; E1.1) In 1996, DART launched its Quality in Motion initiative, utilizing the Malcolm Baldrige criteria. The criteria are designed to help organizations enhance performance through focus on dual, resultsoriented goals: delivery of ever-improving value to customers, resulting in marketplace success; and improvement of overall organizational effectiveness and capabilities. Using these criteria, DART began to establish systematic processes for operating the Agency. In 2000, DART participated in the Texas Award for Performance Excellence process which is equivalent to the national Malcolm Baldrige Award and filed a Level III application. DART received a site visit, a privilege given only to those organizations that are strong contenders to receive the award. After receiving the feedback report from the Quality Texas Foundation, DART management prioritized some of the areas identified for improvement, established teams to address those areas, and developed and implemented processes that are consistent with the criteria. Today, DART has a customer-focused culture and has institutionalized the team-based continuous improvement philosophy and process to increase efficiencies within the organization. Business Processes and Technology Improving Business Processes and Information (Strategy C4.1) The Agency's vision states, "Our innovative accomplishments benchmark DART as a transportation leader." Management and staff have worked diligently to accomplish this vision, and DART has been recognized in the industry as a transportation leader. The Agency-wide commitment to performance excellence and continuous process improvement is kept on track through the development of efficient processes comparable to best practices used in the private sector. Exhibit 8.4 from DART's Strategic Plan highlights the key strategies for this management objective: Exhibit 8.4 Strategic Initiatives to Improve Business Processes Improve Business Processes and Information (C4) 1. Continuously improve business processes and supporting technology 2. Provide critical business information on a timely basis 3. Assess and manage key business risks 4. Develop strategic partnerships with suppliers (fuel, parts, services) 5. Use surveys to understand customers, employees, and stakeholders needs 6. Benchmark performance inside and outside of transit AW-6

90 Agency-Wide Exhibit 8.5 is a scorecard of the Key Performance Indicators (KPIs) for key business processes in scorecard format. Exhibit 8.5 Scorecard - Improve Business Processes and Information Key Performance Measurements - Lagging Indicators QTR 3 Measurement FY04A FY05A FY06 FY06B FY07B FY08P Sales Taxes for Operations 69.2% 74.1% 66.9% 73.1% 68.9% 64.3% Administrative Ratio 10.0% 8.9% 8.5% 8.2% 8.4% 8.5% Manage the Percentage of Sales Taxes Used for Operating Expenses (Strategy C3.3) Sales taxes are DART s primary source of funding. The sales-tax-for-operations calculation measures the percentage of sales tax required to cover operating costs not covered by other sources (i.e., operating revenues and interest income). Management strives to keep this measure as low as possible. This measure tends to fluctuate depending on the opening of new services. As new service comes online, and there is a corresponding increase in operating expenses, the percentage increases. As the growth of sales tax revenue outpaces the growth of operating expenses during a relatively static service level time period, this ratio declines. Exhibit 8.6 compares the percentage of sales tax used for Fiscal Years 2004 and 2005, while figures for Fiscal Years 2006 through 2008 represent the budget and projected values. Fiscal Year 2006 Quarter 3 is a four-quarter rolling average ending June 30, Exhibit 8.6 Sales Taxes for Operations 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 69.2% 74.1% FY04A FY05A QTR 3 FY % 73.1% 68.9% FY06B FY07B FY08P 64.3% Minimize Administrative Costs (Strategy C3.3) Exhibit 8.7 compares the administrative ratio for the period FY 2004 to FY The administrative ratio measures administrative costs less administrative revenues (primarily advertising income) as a percentage of direct costs. As DART becomes more efficient with its administrative processes and as service levels rise, this ratio will improve (i.e., decrease). The objective is for the percentage change in administrative costs to be smaller than the percentage change in direct costs. AW-7

91 Agency-Wide In FY 2004, the Administrative Ratio was dramatically improved through significant across-theboard cost reductions responding to the national economic downturn and a corresponding drop in DART sales tax revenues. DART has been able to maintain this more efficient level. It is important to note that each year DART Management goes through an allocation process during which estimates are made as to how much of each functional division s time and effort will be spent in support of each mode, how much will be spent in general and administrative responsibilities, and how much effort will be spent in support of DART s capital programs. This can lead to some minor fluctuations in this ratio from year to year, but the trending points towards increased efficiency in DART s administrative areas. Exhibit 8.7 Administrative Ratio 12.0% 10.5% 10.0% 9.0% 8.9% 8.5% 8.5% 8.2% 8.4% 7.5% FY04A FY05A QTR 3 FY06 FY06B FY07B FY08P Improve Procurement Processes (Strategies C4.1, C4.5, C4.6, E1.2, S1.2, S1.6) The Procurement Department s strategic initiative for FY 2007 is to improve its procurement processes by: 1) benchmarking against procurement leaders, both public and private sector; 2) providing Procurement Department employees with training in the concepts of best value procurements; 3) building strong vendor relationships; 4) obtaining maximum flexibility in the applicable procurement laws of the State of Texas and the federal government by building strategic relationships with other transit properties and DART s State Government Affairs staff; and, 5) surveying internal clients and external customers and stakeholders. Major Technology Projects to Improve Quality and Efficiency (Strategy C4.1) Surveillance Cameras In FY 2007, DART will implement a surveillance pilot project on 20 buses, 5 DART Rail vehicles, and at the Downtown Garland and Ledbetter stations. The purpose of the pilot is to evaluate the benefits, determine the operational impact of using and maintaining surveillance equipment, and determine which technology solution best meets DART s needs. The pilot will be completed in Spring AW-8

92 Agency-Wide Commuter Alerts DART and the Trinity Railway Express (TRE) are implementing a real-time customer notification service. The primary purpose is to notify customers of service disruptions in a timely manner. This value-added communication service should improve customer satisfaction and reduce customer complaints. Customers also will be able to subscribe to important information on the DART and TRE web pages and receive automatic notifications when information changes. Ticket Vending Machine (TVM) Networking Currently, more than 50 TVMs originally installed as part of DART's light rail start-up in 1996 are not networked. This requires Finance s Revenue personnel and guards to visit each machine periodically to obtain transactional data, replenish ticket stock, and remove cash. Networking will provide daily transactional data, as well as service status, enabling DART to schedule Revenue personnel on an as needed-basis. Maintenance personnel also will be provided with information regarding the type of service a machine requires and arrive prepared with the proper tools. This project is scheduled to be completed by the end of Transportation Uniformity Committee The purpose of this committee is to standardize and reengineer (if necessary) transit operations internal data processes within the bus and rail divisions (East Dallas, South Oak Cliff, Northwest, and S&I). The processes to be addressed in FY 2007 are: Phase 3 of Employee Administration, Accident/ Incident Process, and Grievance Process. During FY 2006, the committee addressed the Complaint Process and Operator Assignment Process. The complaint process was improved by providing the operating departments with the same information gathered by Customer Service during the complaint-filing process. Due to enhancement in the management software, Customer Service can now tie a complaint to a particular operator, based on information provided by the complainant. The operating departments can then conduct more efficient investigations to determine if the complaint should be charged or dismissed. The operator assignment process was improved by providing an automated system for operator work assignment sign-in. Operators are now given sign-in cards to get their daily work and vehicle assignments. Automating this process eliminates confusion regarding operator sign-in time and also allows for automatic absence and tardiness tracking. Mobile Data Terminals (MDTs) In January 2006, DART Police implemented a Computer- Aided Dispatch and Records Management System (CAD/RMS) which: 1) improves dispatching resource assignment efficiency; 2) improves call data capturing and data availability; 3) increases ability to monitor and assess the entire DART Service Area; 4) provides instantaneous access to Texas Department of Public Safety information; 5) increases report accuracy detail, including providing the ability to do criminal trend analyses; 6) decreases officer report preparation time; and 7) and is the infrastructure for the next ITS deployment of on-board applications the MDTs. The MDTs will run an application that seamlessly interfaces to CAD and RMS, making the officers reporting more efficient. The mobile application includes GPS and real-time communications. These features will enhance the dispatcher s CAD application with real-time officer location, thereby enhancing officer safety. The application also provides real-time access to the Texas Law Enforcement Telecommunications System (TLETS). AW-9

93 Agency-Wide Field Supervisor Mobile Data Terminals (MDT) Laptop computers were installed on two bus field supervisor vehicles and two rail field supervisor vehicles in May The pilot application provides the field supervisors with real-time wireless communications as well as wireless local area network access at the East Dallas Transportation facility. It includes templates of all commonly used forms and provides access to DART , Trapeze, electronic Mapsco, route and schedule information, pull-in and pull-out reports, and operator information. It also includes a printer and digital camera for recording and archiving digital images of accidents. The MDT application will continue to be enhanced and the effectiveness monitored to determine if it should be deployed throughout the system. Enterprise Technology Services and Infrastructure Management Systems upgrades and upgrade planning initiated in previous fiscal years will be continued in FY A major upgrade to the core data network for all of DART s facilities will be completed; and upgrade activities for the main telecommunications switch, located at DART Headquarters at 1401 Pacific Avenue, will be completed during FY These two upgrade projects will update and replace aging equipment no longer manufactured and/or supported by the supplying vendors. The selection of a secondary data center disaster recovery site will be made and the second phase of the disaster recovery project will begin in FY The second phase covers the development of the site to include installation of necessary equipment and data/telecommunications connectivity to DART s facilities. The completion of the secondary data center is planned for the first quarter of FY During FY 2007, the Information Technology Division will plan for a significant computing platform upgrade to support changes in DART s enterprise software applications. It is anticipated that these major changes will occur in FY A technology resources study designed to analyze how best to organize and utilize technology resources throughout DART will be completed in FY Recommendations from the study will be presented as part of the FY 2008 budget process. Web Application Development DART s Intranet, known as DARTnet, has proven to be a trusted tool for business and a valuable resource for employees. The Web Development and Business Quality employees, along with their clients, have developed several processes in FY 2006 that have improved efficiencies and streamlined agency-wide processes. Those processes include: Safety efficiency testing workflow Conversion to FTA Standard Cost Code reporting AW-10

94 Agency-Wide Key processes that are to be deployed over DARTnet within the next 12 months include: Automated travel requests, advance, and reimbursement Applicant selection and hiring Automated Lost-Time Programs workflow Prepaid discounted pass sales Automated Accrual Process Recurring journal entries Performance management plan Ticket Vending Machine (TVM) 5000 file parser New document library for the Office of Board Support EMPLOYEE FOCUS Satisfied Employees Contribute to Satisfied Customers Exhibit 8.8 from DART s Strategic Plan highlights the major strategic initiatives for this management objective. Exhibit 8.8 Strategic Initiatives to Increase Employee Satisfaction Increase Employee Satisfaction DART has a thriving internal environment Promote Employee Development and Alignment (E1) 1. Align Board goals, strategic plan, and employee performance 2. Support personal and professional growth & leadership through training and development 3. Compensate, reward, and recognize excellent performance 4. Demonstrate a high regard and respect for each other 5. Communicate continuously with employees 6. Promote a healthy and safe work environment and practices for all employees 7. Promote excellence through workforce diversity Promote Employee Development and Alignment (Strategies C4.2; E1.3, E1.5) In FY 2007, DART is refreshing its commitment to employees by implementing programs/initiatives focused on increasing employee engagement. These initiatives are premised on the Guiding Principles established by executive leadership regarding the relationship with employees. The principles, which also undergird the Agency s total compensation philosophy, are outlined below: AW-11

95 Agency-Wide We value and reward individual performance. We commit to planning for and investing wisely in our people. We communicate constantly and effectively the information employees need to achieve the Agency s mission. We recognize employees desire for stability and predictability in decisions that impact the individual. In addition to guiding principles, the Executive Leadership Team has provided strategic direction in four critical areas: commitment to employees, performance-based measurements for both individuals and teams, effective people practices, and enhanced communication. Commitment to Employees (Strategy E1.1) This refreshed commitment shall begin with leadership review of Agency vision and values and potentially recommending a revised mission statement. Other revisions may be appropriate given system expansion opportunities, evolving security emphasis, and requirements of customers and employees. Individual & Team Performance (Strategy E1.3) The Agency s efforts in enhancing performance are geared toward transitioning to a performance-based organization (PBO). Under this concept, DART will implement the following in FY 2007 and beyond: The individual performance management tool is being modified to ensure a clear line of sight between employees day-to-day work efforts and Agency goals. Additionally, the automated features provide greater efficiency and department accountability for process results. Tie rewards to delivery on expectations for individuals, teams, and the organization. The division level measures will continue to be the standards for team performance in the operating units where emphasis is placed on meeting on-time performance goals and decreasing absenteeism, accidents, and customer complaints. Plan, design, and budget for employee development as a strategic foundation for both individual and Agency success. Create cross-functional teams that allow employees to take responsibility for their jobs and for improving processes that are an integral part of our mission. Effective People Practices (Strategies E1.2 and E1.3) In FY 2007, the Agency will continue its focus on people practices that attract, retain, and motivate current and future employees. The Total Compensation teams established in 2006 are addressing three major areas of total compensation: direct compensation, health and welfare benefits, and ancillary benefits. These cross-functional teams, led by senior leaders in the organization and supported by Human Resource professionals, are responsible for recommending short-term and long-term strategies to stabilize the total compensation process and package while balancing DART s need to accomplish its Mission. AW-12

96 Agency-Wide Team recommendations must support the executive leadership direction by defining DART s market for talent and reviewing its current compensation structure to ensure market competitiveness; differentially rewarding high performers, both individually and through teams; and allowing for different compensation package designs among work groups to address variable recruitment and retention challenges. Additionally, the Agency will address leadership development and succession planning as a means of managing talent to ensure adequate resources to fill critical positions both now and in the future. Enhanced Communication (Strategy E1.5) The Employee Satisfaction Committee continues its focus on communicating with employees through two employee surveys. The first survey, conducted in February 2006, focused on gauging employee satisfaction regarding pay and benefits and is being used by the Total Compensation Team in formulating short and long-term recommendations for the Agency. The second survey, scheduled for release in summer 2006, is designed to gain feedback from employees on intangible matters such as the effectiveness of the employee/supervisor relationship, opportunities for growth and development, DART s culture, and more. Additionally, the Agency will create an inclusive Employee Communication Committee to develop and oversee an ongoing communication plan. The team is expected to be in place beginning in FY The Communications Division of the Marketing Department will assist Agency leadership in the rollout of any program changes, as well as the implementation of a new management vision for DART s internal culture. Tactics will include researching and benchmarking DART s ongoing employee communications activities, increasing face-to-face communications between management and employees at all levels, and making employee-driven updates to DART s employee newsletter program and intranet. Prioritizing Wellness (Strategy E1.6) Recognizing that healthy employees are more productive, motivated, and committed to the Agency, focus continues on personal wellness. In FY 2006, the Agency expanded and provided additional incentives for walking club programs, sponsored weight management competitions, and initiated various onsite screenings. In FY 2007, two new pilot initiatives will address specific health conditions that are prevalent in the employee population. Downshift is a blood pressure monitoring program endorsed and supported by the American Public Transit Association and the Department of Transportation (DOT) that provides tools, information, and resources to employees to better manage their blood pressure. Clinical staff will be available periodically at the Northwest Division to introduce the program and provide medical services. The goal is to ensure that operators can successfully pass DOT physicals that are required to maintain commercial driver s license privileges. AW-13

97 Agency-Wide Obesity Management Human Resources will partner with DART Police to roll out an obesity management program. The goal of the program is to introduce employees to other ways of managing their weight without surgical intervention. Program components and a solicitation for medical services will be under development in the first quarter of FY 2007 for implementation beginning in January Promote Excellence Through Workforce Diversity (Strategy E1.7) DART s workforce consists of more than 30 different ethnic groups, and the Agency maintains a strategic advantage by encouraging a culture of inclusiveness and respect for all people. Management's strong belief that diversity is a catalyst for future organizational success has resulted in a more positive climate and a heightened commitment to foster an environment that acknowledges and values the uniqueness of each individual. The Department of Diversity and Economic Opportunity (DEO) serves as the "change agent" and promoter of diversity throughout the Agency. DEO is charged with the responsibility of developing, implementing, and monitoring aggressive Equal Employment Opportunity, Affirmative Action, and Diversity programs for the Agency which recognize, respect, and advocate utilization of the full spectrum of diverse knowledge, skills, and abilities of people and businesses in the community and service area. DART will continue to implement, monitor, and carry out the legislative, executive, and operational mandates for equal employment opportunity. DART s Diversity Council, appointed in 2004, continues to achieve its mission to encourage a positive work environment free from discrimination based on race, color, religion, national origin, sex, age, disability, veteran's status, or sexual orientation. The primary objectives of the Council are to: Increase employee awareness of the value of diversity in general and individual strengths, abilities and personalities in particular. Help DART adhere to a "zero tolerance" policy for unlawful discrimination. Continuously develop and adopt processes that leverage individual employees' unique characteristics as a way to increase productivity, morale, efficiency and service quality. AW-14

98 Agency-Wide STAKEHOLDER FOCUS This section addresses DART s Stakeholders and how management is working to meet their needs. Stakeholders' Perceptions are Critical Exhibit 8.9 from DART's Strategic Plan highlights the key strategies for this management objective. Exhibit 8.9 Strategic Initiatives to Increase Stakeholder Satisfaction Increase Stakeholder Satisfaction DART is a welcomed integral part of the community Build and Maintain Relationships with Stakeholders (S1) 1. Obtain timely public input on DART s current and proposed projects 2. Effectively communicate with stakeholders 3. Maximize Federal and other governmental funding 4. Address requirements of Bond Holders 5. Leverage Federal and State legislative resources 6. Identify and develop strategic partnerships 7. Pursue transit-oriented development opportunities 8. Maintain legal and regulatory compliance 9. Create and maintain D/M/WBE economic development opportunity 10. Expand Service Area Federal, State, and Local Government Relations (Strategies S1.2; S1.3; S1.5, and S1.10) Government relations encompasses all interactions between DART and its external political environment. DART s Government Relations staff plans and implements the Agency s advocacy efforts and ensures that the exchange of information between DART and its 13 member cities, the U.S. Congress, the U.S. Department of Transportation, and the Texas Legislature is accurate, consistent, and timely. In addition to providing tours and briefings to elected officials and their staffs, Government Relations also actively participates in transportation-related organizations such as the Texas Transit Association, Partners in Mobility, Dallas Regional Mobility Coalition, and TEX-21. Government Relations staff also oversees the day-to-day administration of DART s contracted legislative consultants in Washington, D.C., and Austin, Texas; working with these consultants to develop appropriate advocacy strategies for securing Agency objectives both operationally and for capital projects. AW-15

99 Agency-Wide In FY 2007, DART will work with the Dallas area congressional delegation to submit an $80 million request for the FY 2008 appropriation cycle. Staff will continue to work actively with the Austin team to monitor the 80 th Texas Legislature for legislation that could impact DART s mission and operations, as well as pursue passage of the Agency s legislative agenda for the session. In addition, staff will closely monitor legislation filed relating to the recommendations of the Regional Transit Review Committee that was created during the last regular session, and has been meeting during the interim. Government Relations also continues to maintain a strong presence in local government activities through regular attendance at council meetings and work sessions, and continues strong relationships with the staffs of DART s member cities, ensuring timely resolution of DART issues. Community Affairs (Strategies S1.1, S1.2, and S1.8) The Community Affairs Section of the Marketing and Communications Department serves as the liaison between DART and the community during the planning, construction, design, and operational phase of a project. By facilitating community meetings and public hearings, Community Affairs ensures that DART meets legal and/or government regulations, while developing and maintaining long-standing relationships with diverse communities throughout the DART Service Area. Staff works to promote public participation in DART Capital Planning & Development and DART Project Management projects as well as major and minor bus service modifications. Community Affairs also works to implement corridor safety initiatives as part of the Agency s system expansion. During FY 2007, Community Affairs staff will be working closely with impacted and potentially affected residents, businesses, and stakeholders as construction for capital expansion in the Southeast and Northwest Corridors will be underway through FY Continue to Build Strong Relationships with Chambers and Business (Strategies S1.2, S1.6, and S1.8) External Outreach develops, implements, and markets community outreach programs. Designed to educate and inform customers and stakeholders throughout DART s diverse Service Area, staff interfaces with both public and private educational entities, senior citizens, membercity organizations, and special and civic interest groups. Staff conducts tours, briefings, presentations, and utilizes various methods to promote the DART message including corridor safety. Strengthening relationships with chambers of commerce throughout the DART Service Area is included in this effort. The chambers of commerce have proven to be great business partners and have been very supportive of DART. DART will continue its strong communications with area businesses and chambers, contractor associations, and community organizations and will continue to promote DART s employer programs, especially in transit or major investment study corridors. AW-16

100 Agency-Wide Enhance Economic Development (Strategy S1.7) Two of the objectives of the Agency, as stated in the DART mission statement, are to improve the quality of life and to stimulate economic development through the implementation of the Transit System Plan. Since the opening of DART Rail, it has been both surprising and gratifying to see how quickly transitoriented developments have been constructed along the rail lines. With the opening of rail service to Plano and Garland in late 2002, the impact of our joint development efforts now exceeds $3.3 billion, per a study by the University of North Texas. Management continues to be proactive in using DART s transit facilities as a catalyst to create transit oriented development opportunities which result in vibrant, livable communities, increasing transit ridership and generating new sources of revenue. Create D/M/WBE Economic Development Opportunity (Strategy S1.9) DART s D/M/WBE program is designed to involve disadvantaged, minority, small and emerging, and women-owned businesses to the maximum extent possible in all facets of DART's contracting and purchasing activities. The Department of Diversity and Economic Opportunity (DEO) positions itself as a bridge between DART and disadvantaged, minority, small and emerging, and women-owned businesses. To increase access to DART procurement opportunities, DEO offers and conducts various modes of technical assistance, outreach, seminars, educational training, and counseling in the understanding of federal and Agency procurement regulations. DEO aggressively seeks integration of D/M/WBEs in all DART procurement and contracting opportunities, and ensures that DART is in compliance with all appropriate federal and state laws, regulations, and executive orders. AW-17

101 Agency-Wide BLANK PAGE AW-18

102 Section 9 FY 2007 Budget Index of Exhibits Exhibit 9.1 Exhibit 9.2 Exhibit 9.3 Exhibit 9.4 Exhibit 9.5 Exhibit 9.6 Exhibit 9.7 Exhibit 9.8 Exhibit 9.9 FY 2007 Budget, as Amended.... BUD-1 FY 2007 Sources and Uses of Funds.. BUD-2 FY 2005-FY 2007 Revenue Comparison... BUD-2 Sales Tax History BUD-3 FY 2007 Net Operating Budget BUD-4 Operating Expense Budget by Category..... BUD-5 Capital and Non-Operating..... BUD-11 Net Debt Service Budget BUD-12 Full-Time Position Summary-By Department.... BUD-13

103 FY 2007 Budget FY 2007 Budget Overview The FY 2007 Budget of just over $1.0 billion, as shown in Exhibit 9.1, is divided into three categories: Operating Expense Budget, Capital and Non-Operating Budget, and Net Debt Service Budget. On September 26, 2006, the DART Board adopted the FY 2007 Budget and FY 2007 Twenty- Year Financial Plan. Based on further action that night, the Budget and Financial Plan were amended to incorporate the expenditures and revenues related to the repair, pre-development, and sale of the Monroe Shops property. This increased the FY 2007 Capital Budget from $637.3 million to the current value of $639.6 million. Sources and Uses of Funds Exhibit 9.1 FY 2007 Budget - As Amended (In Millions) Description Operating Expense Budget Capital and Non-Operating Budget Net Debt Service FY07 Budget $ $1,023.5 The purpose of this section is to provide a detailed review of sources and uses of funds and variances between the FY 2006 Budget and the FY 2007 Budget. As shown in Exhibit 9.2, total funding for FY 2007 is projected at $1.2 billion, $357.7 million (42.5%) higher than the FY 2006 Budget, due to an increase in Sales Taxes, Debt Issuances, and Federal Funds. More information can be found in the Financial Plan section, subsection Sources of Funds. Also included in Exhibit 9.2 is a review of the Uses of Funds. The operating budget increased by $18.3 million (5.6%) over FY Details can be found on pages BUD-5 through BUD-10. The FY 2007 Capital Budget increased $242.1 million (60.9%) over FY 2006 primarily due to the increase in activity related to the Phase II LRT Build-out. More details are located in the Financial Plan section. The Net Debt Service Budget increase of $8.4 million (25.1%) is due to the planned issuance of $500 million in long-term debt during the first half of FY See Exhibit 9.8 for more detail. BUD-1

104 FY 2007 Budget Exhibit 9.2 FY 2007 Sources and Uses of Funds (In Millions) Description FY06 Budget FY07 Budget $ Variance Sales Tax Revenues $352.9 $384.5 $31.5 Debt Issuances Federal Funds Operating Revenues Interest Income Other Sources Total Sources of Funds $842.1 $1,200.7 $358.6 Operating Expense Budget $323.9 $342.1 $18.3 Capital and Non-Operating Budget Net Debt Service Total Uses of Funds $754.8 $1,021.3 $266.5 Revenues The combined revenue budget ($478.5 million) is shown in Exhibit 9.3 and excludes Federal Funds and Debt Issuances. The changes to each category are discussed in more detail following the chart. Exhibit 9.3 FY FY 2007 Revenue Comparison (in Thousands) FY05 Actuals Category FY06 Budget FY07 Budget $ Inc/(Dec) % Variance Operating Revenues $35,162 Fixed Route Passenger Revenue $37,634 $40,357 $2, % 1,615 Paratransit Passenger Revenue 1,552 1,542 (10) -0.6% 295 Vanpool Passenger Revenue % $37,071 Total Passenger Revenues $39,685 $42,523 $2, % $4,271 Rental Income - TRE $3,775 $4,087 $ % 3,078 Advertising Revenue 3,184 3, % 1,062 Rental Income - LRT 1,283 1,259 (24) -1.8% 453 Miscellaneous % 133 Concession/Vending Revenue (62) -35.2% $1,647 Advertising /Rental Income/Other Revenues $1,650 $8,984 ($86) -5.2% $202 Grant Revenue (other) $110 $935 $ % 436 Vanpool Grant Revenue % 552 Grant Revenue (COPS) (148) -44.8% $989 Grant Revenue Total $905 $1,702 ($138) -15.2% $39,707 Total Operating Revenue $42,240 $53,209 $2, % $342,670 Sales Tax Revenue $352,909 $384,454 $31, % 9,595 Interest Income 16,406 24,207 7, % 6,829 Contributions for TRE Operations 8,893 7,591 (1,303) -14.6% 3,441 Other Non-Operating revenues 0 9,052 9, % $362,535 Total Other Non-Operating $378,208 $425,303 $38, % $402,242 Total Revenues $420,447 $478,512 $40, % BUD-2

105 FY 2007 Budget Sales Tax Revenues ($384.5 million) are the largest source of revenue for the Agency. Of the eight years shown in Exhibit 9.4, receipts were lowest in FY Receipts increased 7.8% in FY 2004 and 2.8% in FY 2005; and, through May 2006, actual sales tax receipts were $242.0 million (8.73%) better than the same period in FY 2005 and 5.06% better than the FY 2006 budget. Exhibit 9.4 Sales Tax History ($ in millions) $ $357.9 $325.5 $309.1 $333.3 $342.7 $352.9 $366.0 $ A 2002A 2003A 2004A 2005A 2006B 2006P 2007B 2008P * FY 2003 includes a $3.7 million adjustment and FY04-FY05 actuals include a $912k adjustment as a result of a Comptroller audit in FY The Board-approved payback will continue until FY Operating Revenues ($53.2 million) consist of passenger revenue ($42.5 million), advertising/ rental income/other income ($9.0 million), and grant revenue ($1.7 million). Within this category, passenger revenues are 79.9% of total operating revenues. Passenger revenues are based on ridership and average fare (projected as $0.59) for fixed route. Revenues are estimated to increase due to the projected increase in ridership. Interest Income constitutes 5.1% of DART s revenues for FY Interest income is expected to rise nearly 47.5% from the FY 2006 budget due to higher cash balances throughout the year and higher short-term interest rates. Other Non-Operating Revenues ($16.6 million) includes funding from the Fort Worth T towards Trinity Railway Express (TRE) operations ($7.6 million) and capital projects ($2.6 million). Also included are capital contributions for the Irving Beltline Road project ($3.1 million), Southside at Lamar project ($2.7 million), $0.6 million for the External Bicycle Rack project. BUD-3

106 FY 2007 Budget FY 2007 Operating Budget The following assumptions were used to develop the operating budget: $2.3 million new or expanded programs, including such items as: Operations training programs; Operator relief shuttles; adjustments to DART Police pay structure; and enhanced Wellness programs $1.4 million new services, including improvements to both bus and rail services $5.1 million 3% salary and wage increase (including salary-driven benefits) $4.0 million contingency for a maximum price of $2.65 per gallon for diesel fuel, to be paid from DART s Financial Reserve $1.9 million annualization of positions hired during FY 2006 $1.6 million rate increases to purchased transportation contracts; Paratransit service hours increase; new HOV Lane openings; and 50 additional vanpools $904k Hourly wage progression $500k inventory obsolescence $450k petroleum-based products other than fuel (such as motor oil, non-revenue vehicle fuel, lubricants, etc.) Exhibit 9.5 shows the total FY 2007 Budget (Operating, P&D, and Start-up) and subtracts the revenues and other contributions (including contributions from the T for TRE operations and the NCTCOG for HOV and Vanpool operations), resulting in a net operating budget. This exhibit represents the net dollars incurred by DART and the number that affects the Twenty-Year Financial Plan. Exhibit 9.5 FY 2007 Net Operating Budget (In Millions) Description FY07 Budget Operating Expense Budget $342.1 Less: Revenues and other Contributions (60.8) Net Operating Budget $281.3 Operating Expense Budget $312.4 Less: Other Operating Revenues (47.1) Commuter Rail & RROW Services* 20.5 Less: FWTA Contributions (7.6) Less: Rental Income (4.1) Vanpool Services 1.5 Less: NCTCOG contributions (0.6) Less: Passenger Revenues (0.6) HOV Services 7.7 Less: NCTCOG contributions (0.8) *DART allocated expenses only does not include $1.2m allocated costs for the T BUD-4

107 FY 2007 Budget Exhibit 9.6 breaks down the Operating Expense Budget by category and compares the FY 2006 Budget to the FY 2007 Budget. A brief commentary follows the chart providing details about the various categories and the changes. Exhibit 9.6 Operating Expense Budget by Category (in Thousands) FY05 Actuals Category FY06 Budget FY07 Budget $ Inc/(Dec) % Variance $48,836.7 Operator Wages $46,843.1 $49,549.2 $2, % 9,285.1 Operator Leave Wages 8, , % $58,121.8 S&W - Operators Payroll $55,652.0 $59,019.9 $3, % $30,187.3 Non Operator Hourly Wages $30,731.6 $32,753.6 $2, % 2,042.7 Overtime - Hourly 1, , % $32,230.0 S&W - Non-Operator Payroll $32,350.7 $34,424.8 $2, % $57,900.8 Salaries $60,518.5 $64,713.0 $4, % 1,977.1 Overtime - Salaried 1, , % Part-Time/Temporary (40.4) -7.2% $60,640.8 S & W - Salaried $62,702.4 $67,075.0 $4, % $150,992.6 Total Salaries & Wages $150,705.2 $160,519.6 $9, % $21,722.5 Health & Life & Disability Insurance $23,773.9 $23,909.7 $ % 16,689.4 Pension & 401K Plans 16, , , % 12,345.6 FICA 11, , % 5,705.4 Workers Compensation 8, , % 2,137.5 Paid Absences Liability 1, , % 1,736.5 Service Incentive Pay 1, , % 1,561.4 Retiree Benefits (352.0) -36.0% Unemployment & Other Benefits (39.9) -8.9% $62,324.9 Total Benefits $64,762.6 $67,530.8 $2, % $8,867.0 Contract Services $9,797.5 $11,015.5 $1, % 3,593.8 Advertising, Marketing & Public Information 3, ,468.6 (104.4) -2.9% 2,807.7 Financial, Legal & Governmental 3, , % 2,710.4 Computer & Communications 2, , % 2,538.2 Administration, Human Resources & MBE 3, , % 1,332.0 Vehicle & Equip Maintenance 1, ,534.0 (170.1) -10.0% Engineering & Real Estate Acquisition % $22,264.8 Total Services $25,420.0 $26,710.4 $1, % BUD-5

108 FY 2007 Budget Exhibit 9.6 (cont'd) Operating Expense Budget by Category (in Thousands) FY05 Actuals Category FY06 Budget FY07 Budget $ Inc/(Dec) % Variance $16,263.5 Diesel, NRV and LNG Fuel & Lube $20,219.7 $18,413.4 ($1,806.3) -8.9% 15,138.2 Motor Vehicle Parts & Supplies - Bus 13, , , % 4,212.8 Light Rail Parts 3, ,265.6 (61.2) -1.8% 1,775.0 Facilities Operations - Material & Supplies 1, , % 1,615.8 Office Equipment & Supplies 1, , % 1,107.3 Uniforms, Tools & Shoes 1, ,309.4 (9.3) -0.7% $40,112.5 Total Materials & Supplies $41,348.3 $42,164.7 $ % $4,974.2 Power & Light LRT - Vehicle $5,082.9 $5,360.5 $ % 3,968.6 Utilities - Facilities 4, , % Communications 1, ,005.7 (70.1) -6.5% $9,799.3 Total Utilities and Communications $10,330.3 $10,814.1 $ % $2,181.5 Liability & Property Insurance $2,212.6 $2,272.3 $ % 7,372.2 Liability Claims 1, , % $9,553.7 Total Claims & Insurance $3,572.9 $3,848.9 $ % $19,683.9 Paratransit Services $21,703.7 $22,131.3 $ % 14,825.0 Trinity Railway Express 15, , % 1,035.5 DART-on-Call Services 1, , % 1,167.2 DART Shuttle Services 1, , % TDM - Vanpool , % HOV Services , % $38,071.1 Total Purchased Transportation $40,860.7 $42,504.3 $1, % $1,531.2 Fuel & Lube/ Other Taxes $1,425.3 $1,530.5 $ % 1,406.9 Training/Travel 1, , % 1,232.0 Facilities & Equip - Leases (45.0) -4.7% Employee Programs, Dues & Subscriptions % Public Information % $5,392.5 Total Taxes, Leases & Other $4,567.0 $5,044.3 $ % $338,511.3 Sub-total $341,566.9 $359,137.2 $17, % ($20,708.4) Capitalized P&D ($19,770.5) ($20,889.0) ($1,118.5) 5.7% (524.5) Start-Up Costs 0.0 (567.3) (567.3) 100.0% 0.0 Fuel Reserves 1, , , % 0.0 Management Reserve % 0.0 Other Expense Budget Changes (121.5) % ($21,232.9) Total Other ($17,704.4) ($17,023.1) $ % $317,278.5 Total Expenses $323,862.6 $342,114.0 $18, % BUD-6

109 FY 2007 Budget Variance Analysis FY 2007 Operating Expense Budget Salaries & Wages This category increased $9.8 million from the FY 2006 Budget. Variances in this category include: $4.3M 3% Merit Pool (excluding salary-driven benefits, included in benefits below) $1.9M Annualization of positions hired during FY 2006 o Due to the drastic market fluctuations of fuel during the last quarter of FY 2005, management delayed hiring select open positions to offset increased future fuel costs in FY $1.0M New training programs (Operations) and Operator relief shuttles $1.1M New positions for service enhancements o A majority of these new personnel are for the operation and maintenance of the new and extended HOV lanes planned for FY 2007 $904k Wage Progression (Hourly Employees) $526k Pay structure changes (DART Police) For details regarding position additions and eliminations by department, see the position summary at Exhibit 9.9. Benefits increased $2.8 million and account for 19.7% of the Agency s total operating budget; 31.3% of which are benefits required by law. $2.0M Benefits for new positions and programs, reinstatement of deferred positions, wage progression, and merit increases $600k The Paid Absences Liability line item is to fund the liability associated with accrued sick, vacation, and Paid Time Off (PTO) balances. o Salaried employees are allowed to accrue up to 320 hours (40 days) of PTO; any amount over 320 hours will be transferred to a Short-Term Disability/Family Medical Leave Administration (STD/FMLA) bank. However, the maximum that can be transferred into the STD/FMLA bank is 50% of the amount posted to the PTO bank at the beginning of the year. As employee salaries and banked hours grow and wages increase, the amount needed to fund the liability is greater. PTO is paid out upon termination or retirement according to an approved vesting schedule. o Hourly employees are eligible to accrue up to 1,392 hours (174 days) of sick time, although the Agency is only liable for up to 720 hours (90 days), when an employee retires or is terminated with at least 20 years of service. An employee who terminates with less than 20 years of service is not entitled to payment for unused sick leave. The liability continues to grow with pay increases and longevity. BUD-7

110 FY 2007 Budget o Vacation benefits are provided to hourly employees only. Vacation leave accrual is based on years of service; a minimum of 80 hours (10 days) to a maximum of 224 hours (28 days) is eligible for accrual per calendar year. Unused vacation leave in excess of 448 hours as of December 31 of each year is forfeited. Any vacation time in an employee s bank is paid upon termination. $224k Workers compensation increased $224,000 (2.7%) based on actuarial projections provided by an outside consultant. The number of workers compensation claims has continued to decline over the past few years due to the return to work programs implemented throughout the Agency. $120k The Service Incentive Pay (SIP) program pays qualified employees for longevity. The program has undergone changes over the past several years. In FY 2004 the amount paid to eligible employees was frozen at then-vested amounts, eliminating any cost growth of the program. The program was reviewed again during preparation of the FY 2006 Budget, and Management has chosen to change the program to pay a flat rate of $6 per month up to 25 years of service for a maximum payout of $1,800 for each eligible employee. While this change decreased the total payouts of the program, it did reincorporate a small growth component. The slight increase of $120,300 is due to the increase in years of service of eligible employees. $(536k) Savings on retiree benefits due to changes incorporated in FY Health Insurance remains the major cost driver of all DART benefits and increased by $34,000 to $22.8 million (.001%) in FY The primary drivers of this change were several plan modifications made during the FY 2006 budget process including the elimination of coverage for Bariatric surgery and the inclusion of a deductible ($250 for individuals and $500 for families). DART is self-insured and pays all administrative fees and all claims costs. The FY 2007 Budget includes a modest growth in participation of approximately 100 employees who will elect DART as their health benefit provider. Also, included is no change to employee contributions/premiums at an estimated cost to DART of $328,000. Services The FY 2007 Budget increased $1.3 million (5.1%) from FY Significant changes were made in several categories: Contract Services increased by 12.4% due to increases in vendor rates for systemwide janitorial services. This increase was partially offset by a decrease in vehicle and equipment maintenance due to the cancellation of the Oak Cliff Division busservicing contract. Additional funding is required for operations and maintenance for new facilities and increased service coverage. An external contractor provides these services. Another component to this category involves the striping of HOV lanes. Existing HOV lanes are to be restriped every two years. Interstate Highways 635 and 30 (combined 31 miles) are scheduled for restriping during FY Management is working with TxDOT to consolidate this activity. BUD-8

111 FY 2007 Budget Increases in the cost of printing books for employee wellness programs coupled with an increase in benefits consulting costs ($250k) contribute to the increase in Administration, Human Resources, and MBE. The Computer and Communications line item shows an increase in rates for software maintenance agreements and license fees for providing technical assistance and continued end-user support. Materials & Supplies increased $0.8 million (2.0%), as detailed below: Motor Vehicle Parts & Supplies Bus category includes the costs associated with keeping the buses clean and in operational condition for pull out everyday. This category increased by 17.3% ($2.3 million) due to an increase in engine, transmission, and emission-related component repairs and an increase in parts costs. Diesel, NRV, and LNG Fuel & Lube decreased by 8.9% and is a combination of several factors. The primary component of the decrease involves a reserve funding mechanism for diesel fuel. Last year, the Board agreed to fund all costs for diesel fuel over $2.02 per gallon out of the Financial Reserve. To properly display that in the budget, the difference between the average actual fuel price per gallon paid by DART during 2006 ($2.23) and this baseline ($2.02) has been removed from this line item and placed into a fuel reserve line item. This results in the appearance of a decrease in this line item for budget purposes only. The savings from this budgetary device was partially offset by increases in prices for petroleum-based products (engine oil, transmission fluid, antifreeze), fuel for non-revenue vehicles, and new service miles. Utilities and Communications increase of $483,700 (4.7%) is attributed to: An increase in Garland Power and Light rates and the new service increases for midday and peak trains. Utilities costs related to facilities increased by 6.6% due to higher than anticipated electrical usage and increased rates for water and sewer. A decrease of $70,000 (6.5%) is due to discounts taken from phone service providers after a phone line audit was performed. Claims and Insurance reflects an increase of 7.7% due to additional liability coverage for the Board of Directors and a downward trend in property damage recoveries. Purchased Transportation represents costs associated with Paratransit, Commuter Rail, Vanpool, Shuttle services, and HOV services provided by outside vendors. The increase of $1.6 million is attributed to: An increase in service hours for Paratransit and additional fuel for the all van fleet for one-fourth of the year Contract rate increases for TRE Commuter Rail along with additional services for special events DART On-Call and other shuttle services incurred increased contract rates BUD-9

112 FY 2007 Budget New HOV lane projects coupled with expansions to existing HOV lanes have necessitated an increase of $289,100 to keep DART-managed HOV operations at optimal performance levels. Taxes, Leases & Other increased $477,300 (10.5% higher than FY 2006). Morale and overall wellness is an important factor when contemplating employee satisfaction. Funding has been increased for DART s Wellness initiative, training for employees, and the annual Bus and Rail roadeos in support of a continued motivated, health conscious transit agency. Capital P&D and Startup increased $1.7 million due to increased support of capital projects and HOV lane expansions. Fuel Reserves include fuel for paratransit, bus, and TRE services. The Materials & Supplies category on the previous page is budgeted at a base rate of $2.02 per gallon per the Financial Plan. The fuel reserves are based on a rate of $2.65 per gallon. All expenditures for fuel above $2.02 per gallon will be funded on a quarterly basis from the Sales Tax Reserve. These reserved funds will not be used for any other purpose. Other Expense Budget Changes is a placeholder for savings such as: contractual savings, delay in the start of programs, and delay in hiring positions. This line item is monitored by the President/Executive Director and may be used for other programs or projects as needed or deemed necessary to the Agency. This line is not a budgeted line item. Management Reserve is for unforeseen expenses such as contractual increases, additional service, etc. which may arise during the year. The President/Executive Director manages this reserve. BUD-10

113 FY 2007 Budget FY 2007 Capital Budget Shown in Exhibit 9.7 is a summary of the FY 2007 Capital and Non-Operating Budget which includes such things as: Light Rail Transit (LRT) expansion, HOV lanes, TRE track work, vehicle and facility capital maintenance programs, scheduled replacement of vehicles, facility, infrastructure, etc. A current funding level for FY 2007, as amended, has been established at $639.5 million for capital and non-operating activities. A list of major capital projects recommended for inclusion in the FY 2007 Budget is located in the Financial Plan section. Exhibit 9.7 Capital & Non-Operating (In Thousands) FY 2006 Category FY 2007 Budget Budget Variance $371,943 Total Capital Projects $608,332 $236,389 19,771 Capital Planning & Development 20,889 1,118 0 Start-up ,624 Non-Operating 4,762 1,139 Road Improvements / ITS Programs 0 LAP/CMS Program* PASS Program* 0 0 2,100 TSM (General & Street Repair Program) 5,000 2,900 0 Regional ITS* DART/TxDOT ITS* 0 0 $2,100 Total Road Improvements/ITS $5,000 $2,900 $397,437 Total Capital & Non-Operating $639,551 $242,114 * Please note that although no further funds are being allocated to these programs in FY 2007, previously unspent fund balances may be spent down. BUD-11

114 FY 2007 Budget FY 2007 Net Debt Service Budget The FY 2007 Budget shown in Exhibit 9.8 includes the assumption that DART will issue $540 million of Commercial Paper in FY It is projected that DART will have $456 million in outstanding Commercial Paper at the end of FY It is projected that DART will have $968 million in outstanding long-term bonds at the end of FY More details can be found in the Financial Plan section under Debt Program. FY 2006 Budget Exhibit 9.8 Net Debt Service Budget (In Thousands) Category FY 2007 Budget $ Variance $14,649 Commerical Paper Program Interest & Fees $13,906 ($743) 24,172 Long-Term Debt Program Interest 40,349 16, Amortization of Issuance Costs Financial Advisor and Other Fees ,645 Defeased Lease Expense 23,138 (1,507) $64,122 Total Expenses $78,399 $14,277 $10,470 Principal Repayments $10,820 $350 $74,592 Total Debt Service Budget $89,219 $14,627 ($24,645) Less: Defeased Lease Income ($23,138) $1,507 (16,406) Less: Interest Income* (24,207) (7,801) $33,541 Total Net Debt Service Budget $41,874 $8,333 * Interest income is shown here because of the interest rate link between interest income and interest expense BUD-12

115 FY 2007 Budget Position Summary Exhibit 9.9 summarizes position changes by department. The FY 2007 Operating Expense Budget includes 15 new salaried positions (9 for HOV operations, 2 for DART Rail operations, 1 for coordination of DART On-Call services, 1 for revenue count room, 1 wellness coordinator, and an additional web-developer for continued support of efficiencies throughout the Agency). Two yard controller positions in the Finance Department were eliminated due to the closure of the Oak Cliff Division, bringing the total new salaried positions to 13. An additional 37 hourly positions are requested in FY 2007 for support of HOV extensions, new bus services, and additional bus servicers required by the closure of the Oak Cliff division and the reassignment of those buses to the three other bus-operating facilities. Exhibit 9.9 FY 2007 Budget Full-Time Salaried Position Summary - By Department BUD-13 FY06 Total FY06 Mods FY06 Total FY07 New / (Eliminated) FY07 Total Commuter Rail DART Police DEO EVP Administration EVP Operations EVP Program Development Finance Human Resources Internal Audit Legal Maintenance Marketing & Communications Office of Board Support Office of the President Paratransit Planning & Development Procurement Project Management Transportation Total Salaried Positions 1, , ,156 Full-Time Hourly Position Summary - By Department EVP Operations - Hourly Maintenance - Hourly Marketing - Hourly Paratransit - Hourly Planning - Hourly Transportation - Hourly 1,398 1,398 1,398 Total Hourly Positions 2,144-2, ,181 Grand Total 3, , ,337

116 FY 2007 Budget Activity-Based Budget (ABB) During FY 2006, DART started the implementation of Activity-Based Budgeting (ABB). This process is a new way of looking at budget, with costs being associated with activities, not just departments and line items. This type of approach: Provides context information for the budget. Currently, within the operating budget, there is no association of cost with outputs. DART does not know how much it costs every time a specific activity is performed. An ABB will provide that valuable perspective and will help substantially during the budgeting process. With a known cost per output or unit of work, as the outputs or units of work that are required go up or down, the proper level of resources can be allocated to that activity. Helps prioritize activities. During the budget process, there is competition for available resources. With the information supplied from the ABB, resources can be allocated to more essential and highly effective activities and away from more discretionary or less effective activities when funds are tight. Helps identify areas for efficiency improvements. The data gained from this process will shed light on activities that may not be as efficient as they should be, and help provide the roadmap toward continuous process improvement. Activity-Based Budgeting is a multi-year, agency-wide initiative. DART is using a top-down, rapid prototype implementation. This type of approach involves first creating summary level data for both activities and cost-per-activity, which forms the skeleton of the more detailed system that is to come. This shell is called Model Zero. Model Zero is expected to be complete in FY In the next few years, DART will increase the detail and complexity of this model, resolve some of the issues and inconsistencies that are inherent in the creation of Model Zero, and create time and expenditure tracking systems so that activity costs can be captured based on actual data, not just estimates. BUD-14

117 Section 10 FY 2007 Twenty-Year Financial Plan Index of Exhibits Exhibit 10.1 Exhibit 10.2 Exhibit 10.3 Exhibit 10.4 Exhibit 10.5 Exhibit 10.6 Exhibit 10.7 Exhibit 10.8 Exhibit 10.9 Exhibit Exhibit10.11 Exhibit Exhibit10.13 Exhibit10.14 Exhibit FY07-11 Sources and Uses of Funds Comparison..... FP-2 FY07-11 Sources of Funds Comparison.... FP-3 Annual Sales Tax Growth Rates..... FP-5 Cumulative 20-year Sales Tax Receipts. FP-5 FY 2007 Financial Plan Cash Availability Profile. FP-6 Comparison of 20-year Estimated Sales Tax Receipts by Financial Plan..... FP-7 Projected Fixed Route Average Fare FP-8 Anticipated Capital Grant Funding..... FP-9 Operating Expenses FY07-FY11... FP-11 Historic Growth vs. Projected Growth-Operating Expenses.. FP-12 Capital Expenditure Categories FY07-FY11.. FP-15 Capital & Non-Operating Project Listing... FP-17 Projected Net Debt Issuances by Fiscal Year. FP-24 FY07 Financial Plan Debt Assumptions.... FP-25 Cash Expenditure/ Cash Availability Profile.. FP-27

118 FY 2007 Twenty-Year Financial Plan FY 2007 Twenty-Year Financial Plan Overview The purpose of this section is to provide an overview of the FY 2007 Twenty-Year Financial Plan (the "FY07 Plan" or the Plan ). The first year of the FY07 Plan corresponds with the FY 2007 Budget, and the first five years of the Financial Plan comprise the FY 2007 Business Plan. The purpose of the final 15 years of the Twenty-Year Financial Plan (through 2026) is to validate the affordability of DART's long-range Transit System Plan, which includes the Agency's commitments for future system expansion and the issuance and repayment of debt. The FY07 Plan demonstrates that DART has the financial capacity to meet the Agency's Transit System Plan commitments and to continue current levels of bus and expanded rail service. Each section of the FY 2007 Twenty-Year Financial Plan is described in detail: 1. Sources of Funds a. Sales Taxes b. Operating Revenues c. Interest Income d. Federal Funding e. Debt Issuance f. Other Sources 2. Uses of Funds a. Operating Expenses (by mode) b. Capital and Non-Operating Expenditures c. Debt Program 3. Supplemental Financial Information This section also provides definitions of terms, outlines the major assumptions used to develop the FY07 Plan, discusses changes from prior plans, and illustrates some potential risks and some areas for potential financial improvement. References are made throughout this section to DART s Financial Standards. See the Introduction section for more discussion of Financial Standards and see Exhibit APX.2 for DART s approved Financial Standards. On September 20, 2005, the DART Board adopted the FY 2006 Budget and voted to incorporate those budget numbers into the FY 2005 Plan and adopt that as the FY 2006 Twenty-Year Financial Plan. On October 25, 2005, the Board voted to amend that Plan to incorporate all other assumption changes that were made during the year. On July 11, 2006, the Board voted to further amend the Plan to incorporate the inclusion of the Walnut Hill Parking Lot Project. This amended Plan is hereafter referred to as the FY06 Plan and is included as Exhibit APX.3. FP-1

119 FY 2007 Twenty-Year Financial Plan On September 26, 2006, the DART Board adopted the FY 2007 Budget and FY 2007 Twenty- Year Financial Plan. Based on further action that night, the Budget and Financial Plan were amended to incorporate the expenditures and revenues related to the repair, pre-development, and sale of the Monroe Shops property. This amended Plan is hereafter referred to as the FY07 Plan and is shown at APX-1. Exhibit 10.1 is a summary of the changes in the sources and uses of cash between the FY06 Plan and the FY07 Plan, for the period FY 2007 through FY Line Description Exhibit 10.1 DART FY 2007 FY 2011 Sources and Uses of Funds Comparison (In Millions) SOURCES OF FUNDS 1 Sales Tax Revenues $2,052.8 $2,124.8 $ % 2 Operating Revenues % 3 Interest Income (4.0) (2.7%) 4 Formula Federal Funding % 5 Discretionary Federal Funding % 6 Debt Issuances 1, , % 7 Other Sources % 8 Total Sources of Funds $5,211.4 $5,556.6 $ % USES OF FUNDS Operating Expenses: 9 Bus 1, ,095.4 $ % 10 Light Rail Transit % 11 Commuter Rail/RR Management (2.2) (2.0%) 12 Paratransit (11.7) (6.6%) 13 HOV Transitways % 14 General Mobility - TDM % 15 Total Operating Expenses $1,832.7 $1,869.6 $ % Capital and Non-Operating: 16 Agency-wide $46.3 $61.7 $ % 17 Bus (7.9) (4.3%) 18 Light Rail Transit 2, , % 19 Commuter Rail/RR Management % 20 Paratransit % 21 HOV Transitways % 22 Capital P & D, Start-Up, Non-Operating % 23 General Mobility - Road Impr./ITS % 24 Total Capital and Non-Operating $2,795.3 $3,088.1 $ % Debt Service 25 Principal - LT/ST Debt $104.0 $107.8 $ % 26 Interest and Fees - LT/ST Debt $ % 27 Total Debt Service $597.3 $627.2 $ % 28 Total Uses of Funds $5,225.4 $5,585.0 $ % * Numbers may not foot properly due to rounding. FP-2 FY06 As Amended FY07 Draft Variance Percentage

120 FY 2007 Twenty-Year Financial Plan SOURCES OF FUNDS Total sources of cash for the period FY 2007 through FY 2011 have increased by $345 million (6.6%) from the FY06 Plan due to: 1) the compound effect of higher than budgeted sales tax revenues in FY06; 2) increased operating revenues from increased fixed route ridership; 3) additional Federal Formula and Discretionary Funding; 4) contributions from the North Central Texas Council of Governments (NCTCOG) for operating HOV lanes outside of DART s Service Area; and 5) an adjustment in the timing of debt issuances related to the Phase II LRT Build-out and the remainder of the capital program. Exhibit 10.2 details the sources of funds in the FY07 Plan for the period FY 2007 through FY Exhibit 10.2 FY Sources of Funds Comparison Other Sources 2.4% Debt Issuances 36.2% Sales Tax Revenues 38.2% Federal Funding 14.7% Operating Revenues 5.9% Interest Income 2.6% Sales Tax Revenues (line 1 of the Financial Plan) Sales tax revenues comprise 38% of DART s total projected sources of funds through FY 2011 and 78% of DART s sources excluding debt issuances and federal funding. FP-3

121 FY 2007 Twenty-Year Financial Plan DART currently uses the forecast of an independent economist for its sales tax projections M. Ray Perryman, PhD. DART has used Dr. Perryman s models (Perryman Model) for many years, and he was reasonably accurate over the long term prior to the economic downturn between 2000 and However, the primary drivers of the Perryman Model are personal income in Dallas and Collin counties, the consumer price index for the Dallas Metropolitan Statistical Area, and retail sales for the State of Texas, and these drivers can be slow to respond to significant short-term changes. The method for estimating sales tax revenue for financial planning purposes is discussed in Financial Standard B1 (FS-B1), which states: Sales tax revenue forecasts shall be based on a sales tax model developed specifically for the DART Service Area by an independent economist, except for the most current year, which may be based on management s best estimate. To ensure a conservative sales tax estimate, the model s projections may be reduced by 1% for years 6-10 and by 2% thereafter, dependent on current economic trends. DART management has chosen to take a different approach in reducing the Perryman sales tax growth assumptions in the FY07 Plan for three reasons: 1) Small changes in the near-term can have much larger long-term ramifications than more substantial changes in later years of the Plan; and 2) The use of the Business Planning Parameter as stated would result in an additional $325 million in available cash during years of minimum financial capacity ( ), and Management feels this is overly optimistic. 3) Reducing sales tax growth rates by 2% in the out years of the Plan would reduce real growth (growth above inflation) below 1% in some cases, which is unrealistic. Therefore, in an effort to be conservative, DART has used the following assumptions in building the Plan: 1) 7.1% growth for FY06 substantially less than the 8.3% growth year-to-date through July. 2) A flat 5% for the life of the Plan instead of the Perryman Model which projects growth in the range of 5.75% 5.85% for the next decade and then slight annual declines for the following 10 years. Management plans to revisit this Business Planning Parameter during the next planning cycle to ensure that it better meets DART s needs. Exhibits 10.3 and 10.4 provide actual and projected annual sales tax growth rates from 1998 through 2026, and 20-year cumulative sales tax using different assumptions (the Perryman Model, the Business Planning Parameter, and the current Plan), respectively. FP-4

122 FY 2007 Twenty-Year Financial Plan Exhibit 10.5 shows the effect of working each of the different sales tax assumptions detailed in Exhibit 10.4 into DART s affordability analysis. 15.0% Exhibit 10.3 Annual Sales Tax Growth Rates (In Millions) 10.0% 5.0% 0.0% FY98 FY03 FY08 FY13 FY18 FY23-5.0% -10.0% Perryman Perryman + FS-B1 FY07 Plan Exhibit 10.4 Cumulative 20-year Sales Tax Receipts (In Billions) $14.0 $13.0 $12.0 $11.0 $10.0 Perryman Perryman + FS-B1 FY07 Plan FP-5

123 FY 2007 Twenty-Year Financial Plan Exhibit 10.5 FY 2007 Financial Plan Cash Availability Profile (In Millions) $3,500 $3,000 $2,500 Minimum Financial Capacity In the Critical Year of 2017 FY07 Plan: $206 million Perryman: $647 million BPP-B1: $541 million $2,000 $1,500 $1,000 $500 $0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Operating Exp. Capital P&D,SU,Non-Op Phase II Non-Phase II Capital Debt Service Total Available - FY07 Plan Total Available - Perryman Total Available - Perryman + FS-B1 As Exhibits show, this is a conservative sales tax forecast, pulling more than $1 billion in revenues out of the 20-year plan as compared to using the growth rates supplied by the Perryman Model. The projected growth rate assumptions also provide the most conservative value for financial capacity during the years of minimum financial capacity in the late 2010s. Affordability is discussed in more detail under the Net Available Cash Line on Page FP-23. As a point of historical reference, Exhibit 10.6 compares the total sales tax receipts from past financial plans. The FY02 Plan was completed just prior to the decline in sales tax revenues. The Original FY04 Plan was completed as the economy bottomed out. While the economy has recovered and sales taxes have exceeded budget each of the last three years, the economic decline during the early 2000s still cost DART nearly one-third of its primary source of revenue ($5.7 billion) over the 20-year window of the FY07 Plan. FP-6

124 FY 2007 Twenty-Year Financial Plan Exhibit 10.6 Comparison of 20-Year Estimated Sales Tax Receipts by Financial Plan (In Billions) $25 $20 $18.4 $15 $10 $11.7 $12.7 $5 $0 FY02 Approved Plan Original FY04 Plan FY07 Plan One other point relevant to sales taxes is that these revenues include both an inflationary component and a real growth component. Because both expenses and revenues are affected in similar fashion by inflation, the key portion of the sales tax growth rate is the real growth component. Based on the Perryman Model, this component averages over 3% for the life of the Plan. Using DART s more conservative sales tax growth approach, real growth is reduced to a more modest 2.5%. This component includes regional population growth and employment growth as well as productivity gains from current businesses in the region. Sales Tax Repayment The Texas State Comptroller s Office periodically conducts audits of organizations responsible for the payment of state and local sales taxes. As a result of a recently concluded audit, the Comptroller has determined that DART received an overpayment of sales taxes of approximately $13.2 million over the course of several years. In an effort to mitigate the effects of this repayment on DART s stakeholders, the Comptroller has agreed to a 16-year repayment schedule, which has been incorporated into the Plan. FP-7

125 FY 2007 Twenty-Year Financial Plan Operating Revenues (line 2) Operating revenues include passenger revenue, advertising revenue, rental income, CMAQ vanpool contribution, and DART police positions (Community Oriented Policing Services [COPS] grant). Operating revenues are projected to contribute nearly $328 million (5.9%) of DART's sources of funds through FY This is a 7.9% increase from the FY06 Plan driven by the recent increases in bus ridership and contributions from NCTCOG for the operation of HOV lanes outside of DART s Service Area. Passenger revenues are the primary component of operating revenues (79%) between FY 2007 and FY Business Planning Parameter FS-B2 states, "the Board will consider fare modifications from time to time to achieve Service Plan, ridership, and subsidy per passenger targets and to maintain DART's financial viability." The Financial Plan assumes that a fare increase will be implemented every five years of approximately a $0.25 increase to base fares as well as changes to the structures of other fare programs. The last fare increase was in The next programmed fare increase is in 2008; however, the DART Board must approve all proposed fare modifications. Exhibit 10.7 details the effect of the programmed fare changes. Interest Income (line 3) Exhibit 10.7 Projected Fixed Route Average Fare Interest income is projected to contribute $143 million, or 2.6% of total sources of funds for the next five years. This is essentially the same amount that was contained in the F06 Plan. Interest income rates are estimated at 100 basis points (1%) above the rate that DART pays when it issues short-term debt (Commercial Paper [CP]) between FY07 and FY09. This differential increases to 125 basis points (1.25%) as CP interest rates rise above 4.5% in FY Federal Funding (lines 4 and 5) Year Avg. Fare 2007 $ $ $ $ $1.14 Federal funds are included in the following line items of the Plan: Formula Federal Funding (line 4) and Discretionary Federal Funding (line 5). Formula funds include dollars received under 49 U.S.C. 5307, Fixed Guideway Modernization funds, and Congestion Mitigation/Air Quality (CMAQ) projects approved by the North Central Texas Council of Governments (NCTCOG). Discretionary funds are authorized under 49 U.S.C and appropriated by Congress annually. Discretionary funding is provided primarily for New Start bus and rail projects. FP-8

126 FY 2007 Twenty-Year Financial Plan Formula Federal Funding (line 4) Formula funds are $351 million, or 6.3% of total sources of funds through FY This represents a $42 million (13.7%) increase in accordance with allocations made available by the Safe, Accountable, Flexible and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) for Congestion Mitigation and Air Quality (CMAQ) funds. Under SAFETEA- LU it is anticipated that DART will receive Federal appropriations of $46.3 million per year for Section 5307, fixed guideway funding and transit enhancement funding. In accordance with FS- B10, these formula funds have been programmed at the same amount each year of the Plan and not adjusted for inflation. Projected formula funds through FY 2011 also include $120 million of other formula funding, predominantly CMAQ funds. Discretionary Federal Funding (line 5) Discretionary funding comprises $468 million, or 8.4% of total sources through FY 2011, which is a 4.3% increase from the FY06 Plan. The key driver of this increase was the finalization of a $700 million Full Funding Grant Agreement (FFGA) for the Northwest and Southeast corridors. The final agreement includes slightly higher annual levels of funding than was assumed in the FY06 Plan. The Plan also includes some discretionary funding for bus replacements (30%), more than $11 million toward new passenger facilities, and other smaller amounts, including Homeland Security Grants. Exhibit 10.8 details the anticipated receipt of Formula and Discretionary Funds over the life of the Plan. $200 Exhibit 10.8 Anticipated Capital Grant Funding (In Millions) $175 $150 $125 $100 $75 $50 $25 $0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Formula Funding Discretionary Funding FP-9

127 FY 2007 Twenty-Year Financial Plan Debt Issuance (line 6) DART has a Commercial Paper (CP) Program which is the initial funding mechanism to support DART s capital programs up to a maximum authorized amount of $600 million. When market conditions and cash flows dictate, DART will then issue long-term debt to replace the outstanding CP. This will be a repetitive cycle initial funding of capital programs with commercial paper to be taken out later with long-term debt. Approximately $1.8 billion in longterm debt will be issued through FY 2011, which is essentially the same as what was contained in the FY06 Plan. Other Sources (line 7) Other sources of funds total $133 million between FY 2007 and FY 2011 and represent 2.4% of total sources of funds for that same period. This line item is predominantly composed of nongrant contributions from other public entities, such as the Fort Worth T's contribution toward its share of the operating and capital costs for the Trinity Railway Express (TRE) ($41 million and $13 million, respectively); $63 million from the City of Irving s contribution toward the Phase II LRT Build-out; and $16 million in other miscellaneous contributions. USES OF FUNDS Operating Expenses (lines 9 through 15) Total operating expenses for the period FY 2007 through FY 2011 are projected to be nearly $1.87 billion, which is a 2.0% increase from the FY06 Plan over the same period of time. The rate of inflation that was projected and built into the Plan during the FY05-FY06 timeframe was substantially less than the actual rate of inflation. Adjusting for that differential, coupled with additional bus, light rail, shuttle, and vanpool service levels approved this year accounts for the increase. These increases were partially mitigated by lower than expected rates on the renewal of the Paratransit/Innovative Services contract. Exhibit 10.9 shows the modal distribution of total operating expenses for the period FY07 through FY11. FP-10

128 FY 2007 Twenty-Year Financial Plan Exhibit 10.9 Operating Expenses FY07-FY11 (In Millions) $165.9 $47.7 $9.7 $112.9 $438.0 $1,095.4 Bus Commuter Rail/RR Management HOV Transitways Light Rail Transit Paratransit General Mobility - TDM Changes in operating expenses that are built into the Financial Plan for future years are controlled from a policy perspective, by Financial Standards B3, B4, and B5 (see Exhibit APX.2). FS-B3 and FS-B4 relate to fixed route service, which accounts for over 88% of projected operating costs over the next five years. The primary cost drivers for the variable expenses of fixed route service are the number of miles, hours, and vehicles in service, contract rates for purchased transportation, and fuel prices. The key efficiency measurement for DART is subsidy per passenger. Service levels and subsidy per passenger are discussed in detail in the Executive Summary and modal sections of this report. Exhibit compares the historical and projected future operating budget as well as annual operating expense growth. FP-11

129 FY 2007 Twenty-Year Financial Plan Exhibit Historic Growth vs. Projected Growth Operating Expenses $500 20% Operating Expenses (Millions) $400 $300 $ % $304.5 $305.9 $ % $294.2 $381.0 $367.8 $356.2 $342.1 $323.9 $ % 5.6% 4.1% 4.1% 3.2% 3.6% $ % 15% 10% 5% Annual Growth Rate $ % 0% $0-3.8% FY01A FY02A FY03A FY04A FY05A FY06B FY07P FY08P FY09P FY10P FY11P -5% Operating Expenses Growth Rates This perspective shows the budget growth for the past five years and the next five years both in absolute dollars and as a percentage increase. The increases in the first two years (FY01 FY02) show the growth related to opening of the Phase I Build-out. The next two years (FY03 FY04) show DART s cost-cutting measures, adjusting to the reduced sales tax receipts. The future growth rates include normal inflationary growth and increases for system expansion such as: Phase II LRT Build-out, additional passenger facilities maintenance, new HOV lanes, etc. In future years of the Plan, operating expenses for each modal line item are projected using FS- B5, which places a limit on the total increase in operating expenses (for financial planning purposes) to 90% of inflation plus service changes and new programs. This does not necessarily mean the following years budgets will be limited by that parameter or match what is included in the Financial Plan. The DART Board has discretion to increase or decrease the budget as they deem necessary. FP-12

130 FY 2007 Twenty-Year Financial Plan Modal Expenses In the modal expense line details that follow (lines 9-14), there are several factors that are common to all modes: 1) As previously discussed, the difference between actual inflation and projected inflation has had a significant impact on all modes. 2) Each year, DART Management goes through an allocation process during which estimates are made as to how much of each functional division s time and effort will be spent in support of each mode, how much spent in general and administrative responsibilities, and how much effort will be spent in support of DART s capital programs. That can lead to some minor fluctuations among the categories from year to year. 3) For a more detailed explanation of specific programs and information on the cost drivers for each mode, please see the respective modal section of this Business Plan. Bus Expenses (line 9) Bus operating expenses for the five-year period ending in FY 2011 are $1.1 billion, $39 million (3.7%) higher than in the FY06 Plan for the same period. As fuel prices have risen over the last several years, the largest effect of that increase has been felt in the bus mode. DART is also introducing some new service enhancements during late FY 2006 and early FY 2007 which are contributing to higher costs. DART Light Rail Transit Expenses (line 10) This line includes the projected annual cost to operate and maintain DART's 45-mile light rail system. DART Rail operating expenses are $73 million in FY07 and $438 million between FY 2007 and FY 2011, $5 million (1.2%) higher than the FY06 Plan, mostly attributable to increased service levels. Because DART has secured favorable fixed pricing for approximately 90% of its traction power costs, the LRT mode has been largely immune from the rising cost of fuel. These favorable rates are in place through December 31, Commuter Rail and Railroad Management (CR&RRM) Expenses (line 11) This line includes the consolidated cost to operate the Trinity Railway Express (TRE) and railroad corridor management costs for DART-owned active freight rail lines. DART and the T contract with a private contractor to provide the TRE commuter rail service. Projected TRE operating expenses for the next five years are approximately $113 million, $2.2 million (2.0%) lower than for the same period in the FY06 Plan. FP-13

131 FY 2007 Twenty-Year Financial Plan Paratransit Expenses (line 12) Paratransit expenses are budgeted at $32 million for FY07 and $166 million over the next five years. This is a decrease of $11.7 million (6.6%) from the FY06 Plan. The recent solicitation for Paratransit and Innovative Services yielded favorable pricing which is the driver of this change. High Occupancy Vehicle (HOV) Transitway Expenses (line 13) HOV costs are projected to be nearly $48 million between FY 2007 and FY 2011, $3 million (7.3%) higher than the FY06 Plan due to the openings of two new HOV lanes in the summer of A portion of these operating costs is offset by payments from the NCTCOG for DART s cost for the lanes that will be in operation outside the Service Area. General Mobility (GM) Transportation Demand Management (TDM) Expenses (line 14) General Mobility programs consist mainly of vanpool services and, at $1.5 million for FY07, represent less than half of 1% of the total operating budget. Projected costs are $9.7 million over the next five years, a $3.0 million increase from the FY06 Plan as DART will be increasing the vanpool program from a maximum of 83 in FY 2006 to 133 by the end of FY As with HOV lanes, DART receives payment from the NCTCOG for vanpools. In the case of vanpools, the NCTCOG subsidizes approximately 40% of the cost of the program. Capital and Non-Operating Expenditures (lines 16 through 24) FS-B9 requires that "Timely replacement of assets shall be the highest priority to ensure a safe system, and that reserve levels shall be based on an independent assessment of asset condition (to be completed at least once every five years)." Such a study was completed in FY 2002 and is the basis for much of the capital program. The next such study will occur in Capital and Non-Operating expenditures are budgeted at $640 million for FY 2007 and nearly $3.1 billion through FY This is an increase of $293 million (10.5%) over the same period from the FY06 Plan primarily due to revised cash flows for the Phase II LRT Build-out. Because DART received the FFGA approximately six months later than was projected in the FY06 Plan, much of the expenditures planned for FY06 did not occur, and have been rolled forward into the next several years. Another driver of this increase was the work done by Commuter Rail & Railroad Management this year to create a 5-year plan looking at its longer-term capital needs for rights-of-way, vehicles, and facilities. Capital projects are organized into four categories: 1) Expansion 2) Replacement 3) Maintenance 4) Other FP-14

132 FY 2007 Twenty-Year Financial Plan Expansion projects include the addition of new facilities and/or passenger amenities (e.g., transit centers), infrastructure for new services (e.g., light rail/hov/commuter rail) and the addition of new operating facilities. Replacement projects include like-kind asset replacements for vehicles, equipment, and infrastructure. Maintenance projects include major maintenance programs and vehicle and facility rehabilitations that are scheduled at regular intervals. Other projects are for those items that do not fit into any other category, such as planning studies, emission reduction programs, safety equipment, enhanced signage, etc. Exhibit details the modal and categorical distribution of capital projects over the next five years. Exhibit Capital Expenditure Categories FY07-FY11 (In Millions) Mode Expansion Maintenance Replacement Other Total Agency-wide $0.0 $2.6 $56.0 $3.0 $61.7 Bus LRT 2, ,502.7 Commuter Rail Paratransit HOV GM, SU, Non-Ops and P&D Total $2,701.3 $106.5 $250.4 $29.8 $3,088.1 Please Note: This table does not include any dollars that are unspent as of September 30, 2006 that were allocated to approved FY06 projects, which will be rolled into the FY07 Budget. Capital Planning, Start-up Costs, and Non-Operating (line 22) Capital planning and start-up costs are predominantly internal staff and consulting services costs associated with planning, designing, managing, constructing, and opening new capital projects such as the light rail system. FS-B8 limits capital planning costs to no more than 7% of the total operating budget and start-up costs to no more than 60% of the first year's operating cost. This category of costs has increased by $3.8 million (3%) from the FY06 Plan, to $128 million for the five-year period ending in FY This was affected by the increase in inflation as well as an increase based on the modal allocation process. Non-operating costs relate to projects/programs that are not accounted for as operating costs or capitalized as an asset. These costs are charged through the income statement as a non-operating expense. Examples of non-operating costs are: consulting costs for the Transit System Plan revision, the Love Field Alternatives study, and various other capital planning studies. Total non-operating costs through FY 2011 have increased by $3.6 million (to $11.4 million), by the inclusion of a variety of new non-operating projects including $1.85 million in projects supported by a Homeland Security Grant. FP-15

133 FY 2007 Twenty-Year Financial Plan General Mobility Road Improvement Programs (line 23) FS-B7 limits General Mobility Road Improvement Programs to funding allowed under the terms of the approved Interlocal Agreements (ILA). Road improvement programs include the Local Assistance Program/Congestion Management System (LAP/CMS), Principal Arterial Street System (PASS), Transportation System Management (TSM), and Intelligent Transportation System (ITS) projects. DART has accelerated money from later years in the Plan and added approximately $2 million in additional funding in order to keep project commitments to the City of Dallas. These programs are discussed in more detail in the HOV/General Mobility section. Capital Reserves With the capital program are a variety of capital reserves. Reserves represent placeholders within the Financial Plan for either known asset replacement cycles or for funds that are set aside to fund projects of a specific type, the exact nature, timing, and amount of which is unknown at the present time. When a project is requested and approved which applies to a specific reserve, the new project is given its own specific line in the capital program and the balance of the reserve is reduced by the budgeted cost of the new project. Reserve balances are reviewed on an annual basis to ensure that they are adequate to cover future needs for each respective expenditure type. Capital Projects Listing Exhibit lists all approved capital projects for the 20-year life of the Financial Plan, including projected expenditures in FY07, five-year totals ( ), 20-year totals ( ), and external funding related to each project. Projects highlighted in green are either reserves or new projects for FY07 that are funded from those reserves. Projects highlighted in blue are new additions to this year s Plan, and projects highlighted in yellow are projects that were included in the FY06 Plan, but have had approved increases in funding. FP-16

134 FY 2007 Twenty-Year Financial Plan Exhibit Capital & Non-Operating Project Listing (In Thousands) AGENCY - WIDE FY07 5-Yr Total 20-Yr Total DART External Funds Administrative Facility Maintenance $41 $890 $5,575 $5,575 $ New Addressable Fire Panel and Devices Escalators Code Violations Modifications IT Reserves 198 5,467 5,467 Sedans/Vans/Lt. Trucks-class1 1,026 4,801 21,602 21,602 Sedans / Lt. Trucks- equipped-class2 1,102 8,360 8,360 Heavy Trucks-class ,633 4,633 Equipment registered -class Equipment/non registered -class ,507 2,507 Police Sedan/Vans- class ,258 5,839 5,839 Commuter Alert System Repair Slab Cracks, Curtain Walls Replace (3) Federal St. Elevators GFI Switches to Service Entrance Power Replacement of Penthouse Switchboard & Chiller Starters CAD Automation 275 1,278 1,278 Real Estate Inventory System Replace Portable Radios Radio Systems Replacement 6,743 44, , ,464 Police Mobile Data Computers (MDCs) 1,126 1,126 5,698 5,698 Six Currency Counters with Printers Commuter Alert System Bus Fare Collection Equipment Surveillance Syetem Three Encoding Machines for Piloting DART's Weekly Pass Enterprise Server Upgrade Agency WAN/LAN Upgrade 1,291 1,291 1,291 1,291 Replacement of Copiers with Multifunction Printers 1,140 1,140 Disaster Recovery Implementation 1,425 1,425 1,425 1,425 Scheduled Replacement - Color Plotter for Planning Enterprise Archive and Retrieval Software Scheduled Replacement - Police Sky watch Towers Scheduled Replacement - Motorcycle Trailer HQ Emergency Generators for Fire/Life Safety Systems Back-Up Digital Telecommunications Recorder Network infrastructure Cabling ,822 1,822 NRV for Customer Information Distribution Six Econoline 10-Passenger Vans HVAC - EMS System Upgrade Cognos Version 8 Upgrade Consulting Service Telephone System Upgrade ,771 1,771 Upgrade of Windows to New Vista and MSO Suite to New Version 690 3,492 3,492 TOTAL AGENCY-WIDE $15,576 $61,670 $184,509 $184,509 $ Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-17

135 FY 2007 Twenty-Year Financial Plan Exhibit (cont.) Capital & Non-Operating Project Listing (In Thousands) BUS FY07 5-Yr Total 20-Yr Total DART External Funds Maintenance Equipment Reserve $ $1,682 $4,839 $4,839 $ A/C package Units Front Side Replacement (2 ea.) 4209 Main Install 1000 gal. Air Receiving Tank for Shop Air (4209 Main) Install A/C unit for Dispatch 2nd floor (101 Peak) Magnus Hot Vat Parts Washer Replacement Main Chiller System Replacement (4209 Main) Replace the Shop Evaporative Coolers/HVAC Replace Two HVAC Units on the Transportation Building Tornado Parts Washer replacement Wheel Paint Machine Replacement (4127 Elm) Vehicle Maint Prog.(w/out body program) Reserve 3,364 7,284 31,970 31,970 Bus Operating Facility Maintenance Reserve 27 6,156 30,468 30,468 Asbestos Abatement & Repaint/Re-carpet/Retile 101 2nd Floor Bus Washer Front Brushes Modification and CPU Replacement Rebuild Facility Main Electric Switch Gear Repaint the Bus Parking Canopy Repair Service Station Drain Replace Lane Two of the Bus Washer Replace Sanitary Drain Lines in Service Station Replace Transportation Front Doors Reseal Bldg Expansion Joints Roof Replacement/Repair (101 Peak) Roof Replacement/Repair (201Peak) Roof Replacement/Repair SOC FleetWatch Hardware and Software Upgrade Bus Purchase Program 135, , , ,809 Bus Vehicle Maintenance - Champion Fixed Scheduled Program ,832 1,832 Portable Lift Sets High Temp. Oven/kiln filter cleaning Bus Seat Replacement Amerex System (fire Suppression) Shore Power - Electric A/C Bus NOVA Bus Floor Replacement Install New Drive On In-ground Bus Lift (steam bay) Replace bus lot light standards and fixtures Concrete Repair Seal Bus Lot Replace Front Inground Lift C Channels Upgrade Rear Lift Post Structural Integrity Upgrade OC Restrooms Facilities Oak Cliff Floor Repair Southern Sector Modifications On Street Passenger Facilities 2,066 10,329 14,460 2,892 11,568 Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-18

136 FY 2007 Twenty-Year Financial Plan Exhibit (cont.) Capital & Non-Operating Project Listing (In Thousands) BUS (Continued) FY07 5-Yr Total 20-Yr Total DART External Funds BRT Elm and Commerce Bus Lanes Reconstruction 7,000 7,000 7,000 Bus Station and Parking Lot Upgrade / Overhaul ,373 3,373 Low Emission Bus 1,019 1,019 1,019 1,019 Bus Purchase (70) On-Call Van Replacement 1,072 1,072 5,706 5,706 Facility Upgrade South Irving & Redbird TC Bus Station & Parkng Lot Upgrade/Overhaul FY' ,110 2,110 External Bicycle Racks for Bus Fleet Build Welding Laboratory Purchase & Install Engine Exhaust Vent System (MT Lab) FY-07 Safety Lights Innovative Service Vehicles ,994 3,994 TOTAL BUS $14,398 $177,418 $945,134 $683,161 $261,973 LRT FY07 5-Yr Total 20-Yr Total DART External Fund WSA Maintenance Equipment Reserve $108 $717 $4,186 $4,186 $ Huckbolt Fastening System Portable Hand Tamper Spot Tamper (Self-Propelled) LRT Operating Facility Maintenance Reserve ,471 15,471 Replacement of Current LRV Fleet (95) 223, ,235 LRV/ROW Systems Reserve 2,319 10,646 10,646 LRT Passenger Amenities Reserve 468 1,132 2,354 2,354 Communications Reserve 2,179 6,613 6,613 High Rail Equipment (Vehicles) 1,000 1,762 6,620 6,620 LRV Maintenance Prog (w/o Body) Reserve 2,127 9,381 50,196 50,196 LRV Program Addition - 8 Year Fixed Scheduled Program S&I Expansion - Phase II 4,400 4,400 4,400 4, Bryan Street Bridge Ramp Replacement at US 75 16,550 25,942 25,942 14,262 11,680 Hawkins St. Rail Junction 9,287 17,160 17,160 7,175 9,986 LRT Vehicle Business Systems (VBS) 3,821 14,641 38,465 38,465 LRT Phase II Build-out 410,058 2,202,406 2,358,449 1,542, ,735 CBD 8, , , ,841 SOC-3 6,441 28, , ,106 Love Field 1,347 31,363 31,363 LRT Build-Out Program-Wide Girder Rail Replacement Study/Design (TGS) Mig-Welder Light Rail Vehicle Door Timing S&I Phase II -S6 Ventilation S&I Chiller Replacement Starter System Communications House Repair Replace Shop Air Compressors and Dryers S&I Body Shop Replacement of ACCU-C1, C Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-19

137 FY 2007 Twenty-Year Financial Plan Exhibit (cont.) Capital & Non-Operating Project Listing (In Thousands) LRT (Continued) FY07 5-Yr Total 20-Yr Total DART External Funds Repair of Tower 18 Comm./Signal House Cedars/Lamar Landuse JV 2,725 2,725 2,725 2,725 LRT Station and Parking Lot Upgrade / Overhaul (Starter System) ,786 1,786 Hwy/Rail Grade Crossing LED Flashing Lights TC Facility Enhancements 2,700 3,000 3,000 3,000 Tunnel Delamination Study/Project 2,348 2,481 2, ,450 Track Six Car and Body Hoist ( In Floor Jack ) TPSS Battery Charger Replacement Portable Generator (Passenger Amenities) Messenger Saddle Insulator Portable Generator (TES) Insulation Tester Replace Water Pumps in Tunnel Passenger Emergency Call (PEC) Signal Generator (Life Cycle Replacement) Interlocking Event Recorders Replacement Hydraulic Hanger Equipment Insulation Tester Portable Generator (TES) Protective Relay Tester Kinkisharyo Parts Manuals Computer System Upgrades at Santa Fe Junction Interlockings TPSS Sectionalizing Switches (SS) 1,467 1,467 Tunnel Software Upgrade Downtown Dallas LRT/ Traffic Signal Priority (TSP) Improvement 2,947 8,649 6,532 2,117 Monroe Shops - Pre-Development, Repair 2,300 2,300 2,300 2,300 LRT Station& Pkng Lot Upgrade/Overhaul FY'07(LC10) ,992 1,992 Modify/Upgrade Ventilation System in Room S225 (S&I) Vapor Test Equipment Replacements(SS) Electronic System Diagnostic Equipment YM2000 Yard Switch Machine Replacement(SS) Additional of PA/VMB Signs at CBD Stations 2,500 2,500 6,395 6,395 Passenger Emergency Call (PEC) Unit Procurement for LRT Phase II S & I Supplemental Lighting Fixture - Service Platform and Guardrail TVM 5000 Model Replacement 4,919 4,919 12,583 12,583 K-Street Interlocking and Yard Lead Modifications Starter System Frequency Converters Starter System Genesis Microprocessor Replacement Tunnel Uninterruptible Power Supply (UPS) for Emergency Lighting LRT Wayside HVAC Security Cages Resolution of SPEAR Configuration Issues for WSA Division SCADA System Security Tunnel Lights Upgrade of City Place CCTV Security System Modifications to 115 LRVs for C-Cars 3,652 3,652 3,652 TOTAL LRT $486,646 $2,502,743 $3,354,298 $2,509,404 $844,894 Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-20

138 FY 2007 Twenty-Year Financial Plan Exhibit (cont.) Capital & Non-Operating Project Listing (In Thousands) TRE FY07 5-Yr Total 20-Yr Total DART External Fund TRE Vehicle Maintenance Programs $ $1,999 $10,082 $5,921 $4,161 Bi-Level Coach Side Bearings Bi-Level HVAC Coil Bi-Level LCD to LED Signs Bi-Level Wheels ,259 1,130 1,130 Locomotive Injectors Locomotive Wheel/Axle Assembly , Purchase F59PH Turbocharger Purchase HEP Engine for Locomotive 259 1, RDC Transmission Rebuild RDC Wheel/Axle Assemblies ,229 1, Rebuild Locomotive Traction Motors ,787 1,394 1,394 Horn Tester Facility HVAC Compressor TRE ROW Maintenance Programs 234 1,267 6,967 3,612 3,356 Locomotive Overhaul 2,000 2,000 4,688 3,019 1,669 Bi-Level Fleet Overhaul 3,000 6,250 14,649 9,825 4,825 Commuter Rail Station and Parking Lot Upgrade Lisa to Perkins Double Track 4,167 4,913 4,913 2,913 2,000 Beltline Grade Separation 25,000 39,610 39,610 6,236 33,374 CentrePort/DFW Station Double Tracking (Dorothy Sink) 2,000 4,100 4,100 4,100 Valley View to W.Irving Double Tracking 2,000 4,000 4, ,200 TRE Track Upgrade Medical & Market Ctr Area 4,000 4,000 4,000 4,000 TRE Station Enhancements 500 2,000 2, ,591 Brookhollow "B" Lead TRE Train Set Phase I 9,960 12,450 12,450 1,245 11,205 TRE Train Set Phase II 1,000 10,000 10,000 1,000 9,000 Fall Protection Ballast Deck Bridge Tie & Rail Replacement - DFW , Curve Rail Replacement 759 3,576 8,381 4,190 4,190 Grade Crossing Improvements - DFW Joint Elimination (Thermite Welding) Main Line Grinding - DFW 345 2,064 1,032 1,032 Purina Junction 1,093 1,093 2,563 1,281 1,281 Tie Renewal / Replacement - DFW 553 3,533 8,281 4,141 4,141 Turnout Replacement - DFW Undercutting - DFW 2,161 5,064 2,532 2,532 Upgrade Road Crossing Controls - DFW , Bridge Track Panel Replacement - Madill Grade Crossing Improvements - Madill Replace Aging Battery Banks - Madill Replace Crossing Mechanisms - Madill Replace Rail - Madill 2,571 2,571 2,571 Replace Rotating Cantilevers - Madill Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-21

139 FY 2007 Twenty-Year Financial Plan Exhibit (cont.) Capital & Non-Operating Project Listing (In Thousands) TRE (Continued) FY07 5-Yr Total 20-Yr Total DART External Funds Tie Renewal / Replacement - Madill 564 3,932 9,217 9,217 Turnout Replacement - Madill 222 1,968 4,613 4,613 Upgrade Road Crossing Controls - Madill Replace Aging Battery Banks - DFW Replace Crossing Mechanisms - DFW Replace Rotating Cantilevers - DFW Switch Machine Replacement , Upgrade Signal to LEDs TOTAL TRE $59,378 $120,987 $185,803 $87,958 $97,845 HOV FY07 5-Yr Total 20-Yr Total DART External Fund HOV Maintenance Reserve $ $50 $50 $50 $ Stemmons Central (Immediate) 2,855 2,855 2,855 2,855 SH ,202 12,966 12,966 I-635 HOV West I-635 HOV East I-30 HOV Extension East to I-635 1,500 3,000 3,000 3,000 IH 635 (LBJ) 27,724 60,787 60,787 IH30 (Turnpike) 1,792 4,619 4,619 4,619 HOV Stemmons Reversible Gates 2,486 2,486 2,486 1,043 1,442 Police Motorcycle Replacements 633 3,892 3,892 In Car Camera System Operating Vehicles for Proposed HOV lane Extentions in ,218 3,185 3,185 TOTAL HOV $10,918 $51,223 $95,368 $93,926 $1,442 PARATRANSIT FY07 5-Yr Total 20-Yr Total DART External Fund IVR Call Back Feature $38 $38 $38 $38 IVR Call Out Feature Paratransit VBS Equipment Replacement ,040 4,040 Paratransit Facility Purchase 1,800 1,800 1,800 1,800 Digital Recorder Upgrade Trapeze PASS (4.471)/Ontira (IVR) Upgrade Van Replacements 18,173 18,173 96,722 96,722 Facility Related Fixed Costs TOTAL PARATRANSIT $21,416 $21,472 $103,527 $103,527 $ CAPITAL P&D, START-UP, AND NON-OPERATING FY07 5-Yr Total 20-Yr Total DART External Fund Capital P&D $20,889 $107,193 $383,191 $383,191 Road Improvements 5,000 13,328 13,328 13,328 Start-Up ,700 34,684 34,684 Non-Operating 4,762 11,415 20,527 18,677 1,850 TOTAL CAPITAL P&D, START-UP AND NON-OPERATING $31,219 $152,635 $451,730 $449,880 $1,850 GRAND TOTAL $639,552 $3,088,146 $5,320,369 $4,112,365 $1,208,004 Existing projects New recommended projects Existing, approved projects where additional funding has been requested Reserves & new projects to be funded from existing reserves FP-22

140 FY 2007 Twenty-Year Financial Plan Debt Program (lines 6, 24-26, and 36-39) With the passage of a bond referendum on August 12, 2000, DART received voter authorization to issue up to $2.9 billion of sales tax-backed long-term debt. DART has established a twotiered debt structure: 1) commercial paper as the initial financing tool; and 2) long-term bonds. Each of these is discussed below: Commercial Paper Program On January 23, 2001, the Board approved a Master Debt Resolution, which authorized DART to pledge its sales tax revenues, on a senior subordinated basis, for the issuance of Senior Subordinate Lien Sales Tax Revenue Commercial Paper Notes. On the same day, the Board authorized the issuance of up to $650 million in Commercial Paper to be issued to: a) fund its capital acquisition program; b) refund $150 million in outstanding North Central Light Rail Project Notes; and c) fund its self-insurance program. The Commercial Paper program is backed by a liquidity facility supplied by WestLB AG, Bayerische Landesbank, Landesbank Baden-Württemberg, and State Street Bank and Trust. This facility was increased to an authorized amount of $600 million in FY06. The FY07 Plan includes the assumption that DART will retire its current CP with long-term bonds during 2007 and then begin to re-issue CP as the initial funding vehicle for FY07 capital expenditures. It is projected that DART will have approximately $456 million in outstanding Commercial Paper at the end of FY Long-Term Bonds On January 23, 2001, the Board approved a Master Debt Resolution, which authorized DART to pledge its sales tax revenues, on a senior lien basis, for the issuance of up to $2.9 billion in long-term bonds. The long-term bonds may be issued to fund DART s capital program or refund commercial paper. As previously mentioned, DART anticipates issuing $500 million in long-term bonds during FY It is projected that DART will have $968 million in outstanding Long-Term Bonds at the end of FY This is a combined total of the FY07 issuance and the remaining principal balance of the nearly $498.7 million in bonds that were issued in Exhibit shows projected issuances of short-term and long-term debt, and debt outstanding over the twenty-year life of the Plan. FP-23

141 FY 2007 Twenty-Year Financial Plan Exhibit Projected Net Debt Issuances by Fiscal Year (In Millions) Net CP Issuance* LT Debt Issuance Total LT Debt Issued EOY Debt Outstanding FY 2007 $40 $500 $999 $1,424 FY ,328 1,880 FY ,669 2,200 FY ,081 2,584 FY ,324 2,796 FY ,518 2,739 FY ,593 2,771 FY ,635 2,766 FY ,671 2,751 FY ,737 2,764 FY ,778 2,747 FY ,778 2,686 FY ,778 2,621 FY ,778 2,553 FY ,778 2,481 FY ,778 2,405 FY ,778 2,324 FY ,778 2,240 FY ,778 2,150 FY ,778 2,056 * Excludes repayments and refundings Coverage Ratios (Lines 38-39) Financial Standard FS-D7 requires that DART maintain a debt coverage ratio (the External Coverage Ratio) such that Gross Sales Tax Revenues must be at least two times the amount of annual Debt Service. This is the standard that DART is held to by the financial marketplace and in its own external debt documents. In those documents, DART agrees that it will not issue additional debt when it does not comply with this standard. DART is easily in compliance with the standard throughout the life of the Plan. The lowest value for this coverage ratio in the FY07 Financial Plan is 2.50, occurring in 2013, which is a slight improvement from the FY06 Plan when the minimum value was DART also has a goal stated in FS-D7 to maintain another coverage ratio the Internal Coverage Ratio. This ratio states that the sum of Sales Taxes, Operating Revenues (and the T s contribution to operating expenses), Interest Income, and Formula Funding exceeds Total Annual Debt Service Requirements by a factor of 1.25 for the first five years of the Plan and by a factor of 1.5 for the remainder of the Plan. FP-24

142 FY 2007 Twenty-Year Financial Plan DART s FY 2007 Financial Plan does not comply with this standard between 2011 and 2020, dropping to a low value of 1.05 in This is a slight improvement over last year s Plan when the minimum value was Complying with this standard would result in a substantial delay to the LRT Phase II Build-out. So, while the Internal Coverage Ratio is a goal, it is self-imposed and not a legal or contractual requirement. The DART Board has chosen an accelerated buildout schedule to better serve our customers and stakeholders as the priority over compliance with this standard. Exhibit summarizes the major commercial paper and long-term debt assumptions. For purposes of the Financial Plan, 30-year bonds are assumed; however, shorter-term notes may be sold depending on interest rates and other considerations, as determined at the time of issuance. Exhibit FY07 Financial Plan Debt Assumptions Commercial Paper (CP) Long-Term Debt (LTD) Description FY 2007 Future FY 2007 Future Term <5 years <5 years Up to 30 years Up to 30 years Interest rates + fees 4.50% 4.5%-5.0% 5.25% 5.5%-6% Credit enhancement? n/a n/a Yes Yes Principal and interest repayment Refund w/ltd Refund w/ltd Level Debt Level Debt Net CP / Total LTD issued * $40M $144M $500M $1.8B Maximum debt outstanding $536M $600M $968M $2.2B Year of maximum debt outstanding n/a FY n/a FY 2013 Cash reserves required? No No No No Issuance costs n/a n/a 1.15% 2% Uninsured Debt Rating assumed A1+/P1 A1+/P1 AA- AA- * The amounts shown on this line related to commercial paper issuance are net numbers and do not include retirement and re-issuance. The amounts shown on this line item related to long-term debt issuance are gross issuances. SUPPLEMENTAL FINANCIAL INFORMATION Net Increase (Decrease) in Cash and Change in Balance Sheet Accounts (lines 29-30) Based on each year s projected sources and uses of cash, DART has projected its Balance Sheet for each year of the Plan. These line items reflect the net change in cash and non-cash working capital balance sheet accounts. The Change in Balance Sheet Accounts line item is used as a compensating factor for the lag between the occurrence of an accounting transaction, which affects the balance sheet and the actual receipt or disbursement of cash. DART's projected Balance Sheet for each of the first five years of the Financial Plan is included in Exhibit APX.5. FP-25

143 FY 2007 Twenty-Year Financial Plan Cash Reserves (line 33) DART maintains several cash reserves. FS-G5 requires a Master Insurance Reserve for claims and Board liability exposure ($12.9 million balance as of August 31, 2006). FS-G7 requires that sales tax collections that exceed budget during a fiscal year be placed in a "Financial Reserve" account ($29.6 million balance as of August 31, 2006). The Financial Reserve may be used for any purpose, subject to an affirmative vote of two-thirds of the appointed and qualified Board members. This line item represents the projected end-of-year value. Working Cash Requirements (line 34) This line is included in the Financial Plan because of FS-G6, which states "since sales taxes are received on a monthly basis, the unrestricted cash balance at the end of the year shall not be less than one-twelfth of the difference between the subsequent year's total sources of cash (excluding sales taxes) and total uses of cash as projected in the Financial Plan." The combination of the Financial Reserve and this working cash balance ensures that DART always has a minimum of approximately three months of net expenditures on-hand. This line item represents the projected end-of-year value. Net Available Cash (line 35) This line item represents the projected end-of-year value and is the bottom-line check regarding the long-term affordability of DART s programs. As long as this value is positive, the Plan is affordable. In the FY 2007 Financial Plan, the minimum amount of Net Available Cash is $70 million in This amount is in addition to the reserves in lines 33 and 34 and as such, represents DART s unprogrammed cash balance. In discussing DART s Financial Capacity, we include authorized but unissued long-term debt. The lowest Financial Capacity (Net Available Cash plus unissued debt at the end of the year) is $201 million in This year of minimum financial capacity is referred to as the Critical Year. Every decision that is made, every change to a Financial Plan assumption or estimate is made with an eye toward that Critical Year. At this time, it is projected that DART will have $79 million in Net Available Cash and $122 million in available long-term debt capacity at the end of Because of the timing of debt issuances and capital project schedules, sometimes the year of lowest cash availability and minimum financial capacity occur in the same year and sometimes they don t. In this year s Plan, they occur in different years lowest unrestricted cash occurs in 2016 and minimum financial capacity occurs in Exhibit graphically depicts DART s Financial Plan. Each bar on the chart represents total expenditures by fiscal year with each color representing a different type of expenditure. The red line above the expenditure bars shows DART s total financial capacity including the unrestricted cash balance as of the end of the year and unissued long-term debt ($2.9 billion authorized minus total issued to date). FP-26

144 FY 2007 Twenty-Year Financial Plan FP-27

145 FY 2007 Twenty-Year Financial Plan MAJOR FINANCIAL PLAN ASSUMPTIONS Sources of Funds o FY06 Sales Taxes grow by 7.1% from FY05 (3.7% over budget); up 5% per year thereafter; o Fare increases programmed every 5 years; the next increase is programmed in FY 2008; o Fare revenue increases are also based on the following ridership projections: FY07 Bus ridership increases by 15% over the FY06 Budget based on the sharp increase in gas prices since last summer and the bus service enhancements to be implemented next year. For the future, ridership is projected to increase by 1.5% per year through FY10, and then begins to taper down to 0.5% growth per year in FY18 and beyond. These are base growth rates. As new light rail segments are opened, Bus ridership will decline at a rate of one bus rider lost per five new LRT riders gained; LRT base ridership is projected to grow by nearly 5% in FY07 again, based on service enhancements and gas price increases. For the future, increases of 1.5% per year through FY14 (plus new ridership associated with new line segment openings), then begins to taper down to 0.5% in FY24 and beyond; TRE commuter rail ridership increases 6% in FY07 (due to increased gas prices), then grows by 1.5% for each year of the Plan; HOV ridership grows by 1.5% (plus new openings) for each year of the Plan; Paratransit ridership increases by 1% per year through 2010 and then begins to taper down to 0.1% in FY13 and beyond; o Advertising and other miscellaneous operating revenues grow by inflation each year; o Investment portfolio yields remain at 1.0% 1.25% above the commercial paper rates through the life of the Plan; o DART receives $46.3 million in Federal Formula money for Capital Preventive Maintenance, Fixed Guideway Modernization, and Transit Enhancement funding every year for the life of the Plan; o Future Bus revenue vehicle procurements receive 30% Federal Funding; o DART will receive $80 million of its recently executed $700 million Full Funding Grant Agreement (FFGA) for the NW/SE portion of the Phase II LRT Build-out in FY07. The remainder of the FFGA will be received in annual installments of approximately $86.3 million until the $700 million limit is reached; o $45.2 million in CMAQ funds will be received in 2007 and $100.2 million over the first five years of the Plan. As additional funds become available and projects are identified to access these funds, additional CMAQ funds will be programmed into the Plan; o $91.5 million in other external capital contributions will be received between 2007 and 2011, and $150.9 million over the 20-year life of the Plan, including the T's contribution to TRE capital programs, member city contributions, Homeland Security Grants, etc. FP-28

146 FY 2007 Twenty-Year Financial Plan Uses of Funds o Operating Expenses Operating budget of $342.1 million in FY07; Annual inflation of 2.7% in 2007, tapering down to 2.4% by the end of the Plan; Operating expense growth by 90% of inflation plus new service and other new programs; Bus service levels remain constant beyond FY07; LRT service levels remain constant beyond FY07, except for Phase II line segment openings; TRE service levels remain constant beyond FY07, and contract costs are programmed at known contract rates, and at 4% annual growth after the current contract expires; Paratransit contract costs are programmed at known contract rates, and by 5% per year after that, including both growth in service demand and contract rate increases; The number of Vanpools is capped at the FY07 level (140) for the life of the Plan; $5 million per year is included in the Plan beginning in FY08 to fund post-retiree health benefits. o Capital & Non-Operating Annual inflation rate of 4% for Capital Construction Costs, 3% for all other capital costs; Capital Planning & Development budget of $20.9 million in FY07. This grows by 90% of inflation each year and then begins to taper down after major Phase II construction is completed (beginning in FY11); The next bus purchase is scheduled in buses will be replaced between 2010 and All future buses are replaced with ultra low-emission vehicles (ULEVs) every 12 years. o Debt Service A maximum of $600 million in Commercial Paper (CP) will be issued and outstanding at any one time; $2.9 billion in long-term debt (up to 30-year) capacity, with $2.78 billion issued through 2017; Long-term debt issued at interest rates of 5.25% in FY07, 5.5% in FY08, 5.75% in FY09, and 6% thereafter; The amount, type, and timing of debt issuance will depend on DART s financial needs and market conditions. FP-29

147 FY 2007 Twenty-Year Financial Plan POTENTIAL RISKS AND OPPORTUNITIES Sales tax receipts are unquestionably the most important estimate in the DART Twenty-Year Financial Plan, and therefore are the largest single area of risk to DART s ability to meet its goals and objectives. DART is projecting long-term growth rates of 5% per year after FY07. DART s economic consultant, Dr. M. Ray Perryman is still forecasting growth rates that exceed this rate for the next 25 years. Use of the Perryman Model projections as given, without Management s adjustments, would yield over $1.5 billion dollars more in cash than is reflected in the Plan. This conservative approach should help insulate DART against normal economic cycles. However, severe economic downturns such as the one experienced in would still have a significant financial impact. If gasoline prices continue to rise significantly, projected fixed route ridership growth rates of 1%-1.5% for the next few years may be too low. If ridership increases faster than projected and if that increase is highly peak intensive, DART may need to expand services. This might require substantial additional unbudgeted capital and operating expenditures. We are currently experiencing some parking capacity limits at several rail stations that may partially constrain some of that potential ridership growth. Analysis of alternatives to alleviate these capacity constraints are currently underway. Future bus purchases are currently programmed to be federally subsidized at a 30% rate. While this is substantially less than we have historically received for bus purchases (80%- 83%), this assumption depends on discretionary funding being available. If that funding is not available, DART could receive less funding than programmed. However, as an offset to possibly receiving less federal money than anticipated on future bus purchases, there are other, unprogrammed opportunities in the arena of federal funding. Currently, the Financial Plan projects DART will receive $46.3 million each year in Formula, Fixed Guideway Modernization and Transit Enhancement Funds. And, in accordance with FS-B10, this value is not inflated in future years. Assuming that these allocations increase at the rate of inflation would add over $450 million to the Plan, more than offsetting the potential bus-funding shortfall. Even allowing for inflationary growth, this a very conservative estimate, as these allocations have averaged an increase of nearly 10% per year over the last ten years. It is possible that DART will receive federal funds for some of the Phase II LRT Build-out line segments currently scheduled for no federal funding (such as Irving-3 or CBD), as well as CMAQ funding for other projects not currently included in the Plan. DART is constrained by FS-B5 to grow operating expenses by no more than 90% of the projected inflation rate, plus new programs and service. This operating expense target is very difficult to achieve year-after-year. Approximately two-thirds of DART's FY07 Budget is composed of salaries, wages, and benefits. In the long term, these costs must at least grow by inflation, or DART s ability to attract and retain quality employees may be adversely impacted. Considering the highly volatile energy market and the annual double-digit increases in health care costs, this presents a major challenge for DART. FP-30

148 FY 2007 Twenty-Year Financial Plan DART has attempted to identify all capital projects that can be foreseen, but every year additional new projects are requested. Significant additions to the capital program (and associated operating costs) without concurrent increases in revenues or the deletions of offsetting capital projects, could adversely affect the Financial Plan. Also, in the next few months, DART will complete its 2030 Transit System Plan Update. This update may identify additional required capital expenditures or service requirements which will impact this Plan. Based on the Perryman Model (and supported by the last 20 years of experience), inflation is estimated to average approximately 2.5% per year for the life of the Plan. Because inflation affects sales tax revenues and both operating and capital expenditures, it has many risks and many potential opportunities associated with it. For example, DART is at risk if capital inflation is substantially greater than general inflation, as this will generally impact our construction costs while not providing a corresponding boost to sales tax revenues. Conversely, DART stands to benefit if inflation increases substantially after the majority of the LRT Phase II Build-out dollars have been spent and debt has been issued. This would allow DART to repay its fixed long-term debt obligations with deflated dollars. Current long-term debt interest rates are approximately 5%. They are programmed into the Plan at 5.25% in FY07, rising to 6% in FY10 and beyond. DART is at risk if long-term rates rise more quickly than anticipated or rise above 6%. Conversely, if interest rates remain at or near their current levels, DART stands to benefit. Clarifying a possible point of misconception, the current and projected future increases in the Federal Funds rate has minimal impact on rates that DART expects to pay on its long-term debt. Short-term rates are far more volatile than long-term rates, and a major upward move in short-term interest rates would be required to substantially affect long-term rates. The most recent indications from the Federal Reserve seem to indicate that increases to short-term rates are at or near their end. We have entered into five economically defeased financing transactions. In general, such transactions involve our lease and leaseback of specified, depreciable property to a trustee, acting on behalf of a private investor. Although we retain legal title to the leased property and have the option to purchase the trustee s interest on or before the end of the sublease term, these transactions were structured so as to result in a sale of the subject property to the private investor for federal income tax purposes. The rent due for the full term of the leases was prepaid to us. In order to fund the sublease rental payments owed by us over the life of the leases and the purchase option price, we used a portion of the advance rental payments paid to us either: (i) to purchase contractual undertakings from financial institutions pursuant to which the financial institutions assumed or agreed to pay the sublease payments due and owing by us and the purchase option price; or (ii) to make deposits with custodians instructed to purchase direct obligations of the United States Government that mature on dates and in amounts required to pay our sublease rental payments and the purchase option price. For a more detailed description of these transactions, please refer to the section of our Annual Disclosure Statement titled DART S FINANCIAL PRACTICES AND RESOURCES-- Lease/Leaseback Transactions and to Note 10 of the Independent Auditor s Report attached as Exhibit A to our Annual Disclosure Statement. FP-31

149 FY 2007 Twenty-Year Financial Plan When we entered into the above-described economically defeased financing transactions, such transactions were authorized under state and federal law. The United States Treasury Department has since added these types of transactions to its list of prohibited tax shelter transactions, and we have not undertaken any defeased lease transactions since that time. On May 17, 2006, the President signed into law the Tax Increase Prevention and Reconciliation Act of Pursuant to such Act, a new Section 4965 was added to the Code. Section 4965 imposes a federal excise tax (the New Excise Tax ) on any state, local government, or other tax-exempt organization that is a party to a prohibited tax shelter transaction, herein referred to as a Listed Transaction. The New Excise Tax is imposed in taxable years that end after August 16, The New Excise Tax applies to transactions entered into by political subdivisions prior to the enactment of the New Excise Tax and also to transactions that were not Listed Transactions when undertaken. Consequently, the New Excise Tax applies to all of the defeased financing transactions we have undertaken. In general, the amount of the New Excise Tax is determined by applying a 35% tax rate to the greater of (i) the political subdivision s net income for the taxable year in question that is attributable to the transaction and (ii) 75% of the proceeds received by the political subdivision for the taxable year that are attributable to the transaction. As part of the new law, the Treasury Department is instructed to publish guidance regarding the New Excise Tax by August 16, Due to the complexity of the tax and the fact that the Treasury Department has not yet provided any guidance, we are unable at this time to estimate with any certainty our potential future tax liability; however, our rough preliminary estimates indicate that our future tax liability may equal or exceed $38 million dollars, with payments ranging from $800,000 to $3,800,000 per year for the next 20 years. The New Excise Tax affects a large number of transit agencies and other political subdivisions throughout the United States. We are currently coordinating with other transit agencies and our trade association, the American Public Transportation Association ( APTA ), in pursuing the repeal of the New Excise Tax or an exemption for transactions entered into prior to the enactment of the New Excise Tax; however, we can make no predictions or assurances about the likelihood of achieving success in such efforts. In the future, we may also consider pursuing legal challenges with regard to the New Excise Tax. DART may be able to build its sales tax revenue base through the addition of new cities to the Service Area or through the pursuit of other legislative changes. Preliminary discussions are underway in the Metroplex for a Regional Transit Authority to fulfill the transportation needs of the region for the gaps between DART, the T, and the Denton County Transit Authority (DCTA). This is a highly complex issue that could either have a positive or negative impact on DART. Any such authority might require a tax restructuring which might benefit DART. It also might provide DART with increased ridership (and therefore revenue) as other areas currently without transit connect with our services. It also creates a risk that DART will receive less federal money that is allocated to this region because the money will need to be spread among more entities. FP-32

150 Section 11 Appendix Index of Exhibits Exhibit APX.1 Resolutions Approving FY 2007 Budget and FY 2007 Twenty-Year Financial Plan... APX-1 Exhibit APX.2 Exhibit APX.3 Exhibit APX.4 Exhibit APX.5 Exhibit APX.6 Exhibit APX.7 Exhibit APX.8 FY 2007 Financial Standards..... APX-7 FY 2006 Financial Plan, As Amended APX-13 FY07-FY11 Changes in Sources & Uses of Cash... APX-14 Five-Year Balance Sheet..... APX-15 Glossary of Terms/Definitions APX-16 Acronyms.... APX-20 DART Management Organization Chart.... APX-22

151 Appendix Exhibit APX.1 On September 26, 2006, the DART Board adopted the FY 2007 Budget and FY 2007 Twenty-Year Financial Plan. Based on further action that night, the Budget and Financial Plan were amended to incorporate the expenditures and revenues related to the repair, pre-development, and sale of the Monroe Shops property. This increased the FY 2007 Capital Budget from $637.3 million to the current value of $639.6 million. APX-1

152 Appendix On September 26, 2006, the DART Board adopted the FY 2007 Budget and FY 2007 Twenty-Year Financial Plan. Based on further action that night, the Budget and Financial Plan were amended to incorporate the expenditures and revenues related to the repair, pre-development, and sale of the Monroe Shops property. This increased the FY 2007 Capital Budget from $637.3 million to the current value of $639.6 million. The Amended FY 2007 Twenty-Year Financial Plan Resolution and spreadsheet are shown on Pages APX-4 through APX-6. APX-2

153 Appendix APX-3

154 Appendix APX-4

155 Appendix APX-5

156 Exhibit 2 Appendix APX-6

157 Appendix Exhibit APX.2 FY 2007 Financial Standards Resolution No The Financial Standards are divided into three sections: General, Debt Service, and Business Planning Parameters. The purpose of the general standards is to ensure that DART prudently manages its financial affairs and establishes appropriate cash reserves. The purpose of the debt service standards is to limit the level of debt that may be incurred and to ensure that debt assumptions are based on financial parameters similar to (or more conservative than) those that would be placed on DART by the financial marketplace. Actual debt covenants may differ from these standards. Where this occurs, the Financial Plan will reflect the actual covenants in the Board-approved debt instrument. The Business Planning Parameters provide management with a framework for developing the following year's budget and the twenty-year Financial Plan and establishing future business targets for management to achieve. Since DART's enabling legislation requires a two-thirds vote on debt and the Financial Plan, approval or amendment of DART's Financial Standards will require an affirmative vote of two-thirds of the appointed and qualified Board members. Financial Standards - General G1. Complete and accurate accounting records shall be maintained in accordance with Generally Accepted Accounting Principles as promulgated by the Government Accounting Standards Board. DART's fiscal year-end for financial reporting purposes shall be September 30. G2. Funds of the Authority shall be invested within the guidelines of the Board's approved Investment Policy and Investment Strategy, and in compliance with applicable State law, including Section of the Texas Transportation Code, Article 717q V.T.C.S., the Texas Public Funds Investment Act, and applicable Federal law. The Board shall approve the signatories for all Agency checking and savings accounts. G3. An independent accounting firm shall perform an examination of DART's consolidated financial statements (including Single Audit requirements) and DART's retirement plan financial statements on an annual basis. The Agency's goal is to receive an unqualified opinion on the financial statements and an opinion that DART is in compliance with Federal Single Audit requirements in all material respects. G4. An annual actuarial analysis shall be performed on the Defined Benefit Plan. This Plan shall be funded in an amount sufficient to meet current actuarial requirements and to reduce the actuarially determined unfunded liability to zero by APX-7

158 Appendix Exhibit APX.2 (cont.) FY 2007 Financial Standards G5. Appropriate insurance coverage shall be maintained to mitigate the risk of material loss. For self-insured retentions, a separately funded Master Insurance Reserve shall be maintained in an amount equal to the estimated liability for incurred losses and a reasonable allowance for claims incurred but not filed. An actuarial review of selfinsured retentions will be made at least once every three years to ensure adequacy of the Master Insurance Reserve. G6. Since sales taxes are received on a monthly basis, the unrestricted cash balance at the end of the year shall not be less than one-twelfth of the difference between the subsequent year's total sources of cash (excluding sales taxes) and total uses of cash as projected in the Twenty-Year Financial Plan. This reserve will be invested in accordance with the investment strategy for the Operating Fund. G7. In order to provide a buffer against an unanticipated shortfall in sales tax collections, DART will maintain a Financial Reserve. The goal of this reserve is to maintain a balance of at least 10% of the current year s sales tax budget. During periods in which sales taxes exceed the budget, the excess collections will be deposited into the Reserve by January 1 of the following year, up to a maximum fund balance of $50 million. Authorization to spend Reserve funds requires the affirmative vote of two-thirds of the appointed and qualified members of the Board. G8. The fiscal year of DART shall end on September 30 of each year. Two months before the Business Plan is distributed to the Board, the Board should review and approve a set of Financial Standards that can be used by management as a framework for developing the following year's Budget, Business Plan, and Twenty-Year Financial Plan. The Board shall approve the Budget and Twenty-Year Financial Plan by September 30 of each fiscal year. The Annual Budget shall be the first year of the Twenty-Year Financial Plan. G9. Twenty-Year Financial Plan amendments shall require a two-thirds vote of the number of appointed and qualified Board members. An amendment is necessary when the addition of a new capital project or the cumulative modification of an existing capital project is in excess of $1 million or the addition of a new operating program or increase in an existing operating program is in excess of $500,000. APX-8

159 Appendix Exhibit APX.2 (cont.) FY 2007 Financial Standards Financial Standards Business Planning Parameters B1. Sales tax revenue forecasts shall be based on a sales tax model developed specifically for the DART Service Area by an independent economist, except for the most current year which may be based on management's best estimate. In order to ensure a conservative sales tax estimate, the model s projections may be reduced by 1% for years 6-10 and by 2% thereafter, dependent on current economic trends. B2. Passenger revenue forecasts shall be derived from ridership and average fare forecasts based on the Board's approved fare policy and fare structure. The Board will consider, from time to time, fare modifications to achieve Service Plan, ridership, and subsidy per passenger targets (see B4) and to maintain DART's financial viability. B3. The Board shall approve annual fixed route service levels by mode for each of the next five years. Fixed route service levels shall be based on the Five Year Action Plan prepared by the Planning and Development Department. Cost of service will be developed jointly by Finance and Planning. B4. The Board desires to steadily improve service efficiency over time. Subsidy per passenger will continue to be monitored and managed. Management will continue to report the subsidy per passenger in the Quarterly Operating and Financial Performance Report. Items that impact subsidy per passenger will be reported in the Financial Considerations section of Agenda Reports. B5. For financial planning purposes, total operating expenses may not increase by more than 90% of the projected rate of inflation for the Dallas area, plus the incremental costs associated with the addition of new services, programs, and/or facilities as approved by the Board. The projected incremental cost impact of new services, programs, and/or facilities shall be presented to the Board for approval as part of the Twenty-Year Financial Plan assumption process each year. B6. Management shall use a consistent methodology for computing net administrative costs and direct costs. The administrative ratio (administrative costs minus administrative revenues divided by direct costs) may not increase for two consecutive years and shall not be higher than 14.0%. B7. General Mobility programs for road improvement programs such as the Local Assistance Program (LAP), Principal Arterial Street System (PASS), and Transportation System Management (TSM) and Intelligent Transportation System projects shall be funded according to the terms of the approved Interlocal Agreements and recorded as nonoperating expenses in the Twenty-Year Financial Plan. APX-9

160 Appendix Exhibit APX.2 (cont.) FY 2007 Financial Standards B8. Capital planning and development costs and start-up costs are the internal staff costs associated with planning, designing, constructing, and opening new capital projects such as the light rail system. Management shall use a consistent methodology for allocating costs between operating and capital planning. Capital planning and development costs shall not exceed 7% of total operating costs. Cumulative start-up costs for a line section shall not exceed 60% of the first year operating costs of that line section or HOV lane. B9. The Twenty-Year Financial Plan shall include funding for asset replacement and expansion projects. Capital projects in excess of $1 million shall be approved by the Board. Timely replacement of assets shall be the highest priority to ensure a safe system. Accordingly, the Twenty-Year Financial Plan shall include replacement reserves by major asset category to ensure adequate future funding. The reserve levels shall be based on an independent assessment of asset condition (to be completed at least once every five years). Expansion projects shall be prioritized based on the project's cost, impact on ridership, return on investment, available funds, and other relevant factors. An inflation rate of 4% shall be used for capital construction projects. Non-construction capital projects will be increased at the rate of inflation. B10. DART receives formula and discretionary Federal funding. Formula funding shall be programmed primarily for bus replacement, capital maintenance (if available), vehicles, and passenger facility construction. Formula funding for future years shall be forecast at the current year's funding level or at the minimum levels included in Federal authorizations to ensure a conservative forecast. Discretionary funding shall be programmed primarily for major system expansion projects (e.g., LRT or new bus maintenance facilities). Discretionary funding levels shall be estimated by project based on Federal criteria and the likelihood of obtaining congressional appropriations and require Board approval during the Budget/Twenty-Year Financial Plan process. APX-10

161 Appendix Exhibit APX.2 (cont.) FY 2007 Financial Standards Financial Standards Debt Service D1. DART may not enter into a debt or financing arrangement unless the transaction is in full compliance with all applicable provisions of the Texas Transportation Code and other applicable state and federal laws. D2. Long-term debt may be included in the Twenty-Year Financial Plan; however, no debt secured by a pledge of sales and use tax revenues and that has a maturity longer than five years from the date of issuance shall be incurred without the approval by the voters of the Service Area. D3. Debt shall be issued for approved capital projects and insurance reserves. Any project included in the Budget or Twenty-Year Financial Plan that requires funding by any debt shall be clearly identified therein. D4. Sinking funds shall be established to ensure that cash is available to make timely debt service payments on fixed-rate debt issuances that have maturities of one year or more and have periodic semi-annual interest payments. DART shall deposit on a monthly basis a prorated amount sufficient to fund the next principal and interest payment. D5. Reserve fund(s) that may be required by the financial markets for each debt issuance shall be maintained. These reserves may be funded by cash and securities, insurance, or surety bonds, but shall not be accessed unless the sinking funds have insufficient money to make the principal and interest payments as due. For financial planning purposes, reserve projections shall be based on the actual requirement on existing debt, plus the lower of maximum annual debt service, 125% of average annual debt service, or 10% of principal outstanding on projected debt. D6. DART shall establish a legal security structure of liens, agreements, pledged revenues, and other covenants which will be sufficient to (1) secure a rating of "A" or better on sales tax securities; (2) a MIG1 or SP1 rating on short-term notes; or (3) secure A1 or P1 rating on other short-term debt, or if necessary, secure a credit enhancement from a financial institution with a rating of "AA" or better. APX-11

162 Appendix Exhibit APX.2 (cont.) FY 2007 Financial Standards D7. Certain debt service coverage ratios are required to access the financial markets. For financial planning purposes, annual sales tax revenues must exceed DART s current year debt service obligations by a factor of at least two (External Coverage Ratio). It is a goal of DART that for financial planning purposes, for long-term debt, sales tax revenues plus operating revenues, plus interest income, less operating expenses (excluding debt service and depreciation), for any twelve consecutive months of the prior eighteen months, must be sufficient to cover maximum annual debt service and financing lease payments by 1.0 to 1.25 times (Internal Coverage Ratio). The same calculation for future years must be sufficient to cover maximum annual debt service and lease payments, including payments on any debt to be issued, by 1.0 to 1.25 times for the first five years and 1.0 to 1.5 times thereafter. However, the DART Board may choose to grant exceptions to this standard in the interest of expediting the completion of the System Plan. APX-12

163 Appendix APX-13

164 Appendix APX-14

165 Appendix APX-15