AD HOC FINANCIAL STABILITY COMMITTEE WORKSHOP AGENDA

Transcription

1 AD HOC FINANCIAL STABILITY COMMITTEE Friday, June 8, :00 PM VTA Auditorium 3331 North First Street San Jose, CA WORKSHOP AGENDA CALL TO ORDER 1. ROLL CALL 2. Introductions 3. Orders of the Day 4. PUBLIC PRESENTATIONS This portion of the agenda is reserved for persons desiring to address the Committee on any matter not on the agenda. Speakers are limited to 2 minutes. The law does not permit Committee action or extended discussion on any item not on the agenda except under special circumstances. If Committee action is requested, the matter can be placed on a subsequent agenda. All statements that require a response will be referred to staff for reply in writing. 5. Discuss potential strategies and solutions to address VTA s budget/structural deficit. (Breakout Session) 6. ANNOUNCEMENTS 7. ADJOURN In accordance with the Americans with Disabilities Act (ADA) and Title VI of the Civil Rights Act of 1964, VTA will make reasonable arrangements to ensure meaningful access to its meetings for persons who have disabilities and for persons with limited English proficiency who need translation and interpretation services. Individuals requiring ADA accommodations should notify the Board Secretary s Office at least 48-hours prior to the meeting. Individuals requiring language assistance should notify the Board Secretary s Office at least 72-hours prior to the meeting. The Board Secretary may be contacted at (408) or board.secretary@vta.org or (408) (TTY only). VTA s home page is on the web at: or visit us on Facebook at: (408) : 中文 / Español / 日本語 / 한국어 / tiếng Việt / Tagalog.

2 Santa Clara Valley Transportation Authority Ad Hoc Financial Stability Committee May 11, 2018 All reports for items on the open meeting agenda are available for review in the Board Secretary s Office, 3331 North First Street, San Jose, California, (408) , at least 72 hours prior to the meeting. This information is available on VTA s website at and also at the meeting. Page 2

3 Agenda Item #5 Structural Deficit Mitigation Ad Hoc Financial Sustainability Committee-Workshop June 8, 2018

4 Structural Deficit Solution Requires a combination of: Reduction of expenses and/or increase in revenues Aligning of growth rates of revenues and expenses 2

5 Today s Goal Identify mitigation measures that have a short-term implementation schedule with both a short and long-term impact 3

6 Short-Term Defined Measures that can begin implementation within one year, with full impact achieved within three years 4

7 Millions VTA Transit Budget Forecast, FY18-FY22 $600 $550 Total $50M Total $56M Total $51M Total $53M $30M Total $56M $500 $450 $30M $20M $30M $26M $30M $31M $30M $23M $26M $400 $455 $475 $467 $493 $479 $509 $514 $491 $504 $531 $350 $300 FY18 Adopted FY19 Adopted FY20 Projected FY21 Projected FY22 Projected Revenues Expenses $30M annual local share of capital need 5

8 Target $50-$60 million per year at full impact 6

9 MEMORANDUM TO: FROM: Santa Clara Valley Transportation Authority Ad Hoc Financial Stability Committee Chief Financial Officer, Raj Srinath DATE: June 5, 2018 SUBJECT: Information Follow-up FOR INFORMATION ONLY During the May 11, 2018 Ad Hoc Financial Stability Committee meeting, the committee members and stakeholders requested various information. The attached matrix and attachments address these requests. Since several of the requests related to information provided in the Public Financial Management (PFM) May 11 th presentation, it is included for reference (Attachment B). There is also one follow-up item from the April 13, 2018 meeting still outstanding. In response to the Next Network Plan and Related Efforts presentation, it was suggested that the system redesign maps presented should better illustrate transit connections. An updated map showing the main connection points is included as Attachment J. Prepared By: Carol Lawson, Fiscal Resources Manager, Budget

10 Ad Hoc Financial Stability Committee Information Follow-up from 5/11/18 Meeting Attachment A Question/Comment 1 Requested similar cost comparison information for additional agencies (SamTrans, Muni, AC Transit, BART, Orange County) (5/11/18 PFM presentation slides #8-18) 2 Requested a breakout of Cost per Unlinked Passenger Trips by function for "Cost Efficiency Measure Comparison-Unlinked Passenger Trip (UPT)" (5/11/18 PFM presentation slide #16) 3 Requested a breakout by cost in addition to percentage of Operating Expenses by Function and by Type for "Cost Comparisons-Expenses Type" (5/11/18 PFM presentation slide #18) 4 Requested additional information on what is included in the Local Funds, Taxes and Fees Levied by Transit Agency, and Other Directly Generated Funds categories for "Revenue Comparisons-By Type of Revenue" (5/11/18 PFM presentation slide #11) See Attachment C See Attachment C (slides #7 & #8) See Attachment C (slides #11 & #13) Response "Local Funds" includes financial assistance from local governments that support the operation of the transit system including tax levies, general funds, specific contributions, donations, and other. 5 Requested cost of living data for Peer Agencies See Attachment D 6 Would like to know what year the Peers implemented their various strategies on 5/11/18 See Attachment E PFM presentation "What Other Agencies Have Done" slides (#25-30) 7 Requested the baseline deficit be added to "Budget Balancing Options" slides for easier See Attachment F comparison of impact (5/11/18 PFM presentation slides #33-44) 8 Requested annotation of assumptions used be added to "Budget Balancing Options" slides See Attachment F (5/11/18 PFM presentation slides #33-44) 9 Requested an Option slide with SB 1 funding included See Attachment G 10 Requested an Option slide with 2016 Measure B funding excluded See Attachment H "Taxes and Fees Levies by Transit Agency" includes revenues from taxes and fees imposed on the public by a transit agency that has its own taxing authority. "Other Directly Generated Funds" includes advertising revenues, donations, investment earnings, parking revenues, sale proceeds, etc. Note that the Sources of Revenue chart on slide #11 (on left side of page) in the 5/11/18 PFM presentation inadvertently excluded Passenger Revenues. The updated chart in Attachment C (slide #3) reports Passenger Revenues as part of "Directly Generated Funds". Slide #4 in Attachment C provides a further breakdown of "Directly Generated Funds". Page 1 of 2

11 Ad Hoc Financial Stability Committee Information Follow-up from 5/11/18 Meeting Attachment A Question/Comment 11 Requested a summary slide that shows key assumptions used for the "Budget Balancing Options" slides (5/11/18 PFM presentation slides #33-44) 12 What is the financial impact of a 80/20 split in health benefits (at the individual level) on "Workforce-Share Pension Costs" (5/11/18 PFM presentation slide #35) 13 Absenteeism presentation - pointed out need for further study on fluctuations related to absenteeism due to training and employee living situation See Attachment I Response Based on 2018 Kaiser Permanente HMO rates, a 20% share would be $156 per month for single coverage, $312 per month for employee + 1 coverage and $406 per month for employee + 2 or more coverage. A more in-depth analysis will be conducted to help identify root causes of absenteeism fluctuations in some areas. This effort is anticipated to begin in the next few months. 14 Requested information regarding what operating costs are covered by 2008 Measure B Distribution of operating costs to 2000 Measure B is dependent on outcome of Operations and Maintenance Agreement negotiations with BART which are still in progress. 15 Requested VTA Budget Book/link to VTA website, as well as links to 5 other Agencies' Links provided under separate cover. budgets 16 Are there any other sources of revenue that we can or should be considering? Staff has explored the feasibility of various additional revenue sources in the past and will continue to explore options. 17 Requested information on how AC Transit was able to get funds from a property/parcel tax General Counsel staff is researching this issue. 18 Requested evaluation of real estate transfer tax - legal/feasible? General Counsel staff is researching this issue. 19 Requested information on number of passes going to VTA from the Downtown Palo Alto Transportation Management Agency's pilot program to reduce congestion. The program purchases an average of 14 VTA Adult Monthly Passes per month using Clipper Direct. Page 2 of 2

12 Attachment B Santa Clara Valley Transportation Authority Independent Consultant s Review and Analysis Ad Hoc Financial Stability Committee Presented By: Russ Branson, Director May 11, 2018 PFM Group Consulting LLC 50 California Street Suite 2300 San Francisco, CA (415) pfm.com PFM 1 PFM Charge from Ad Hoc Committee The scope of work approved by the Ad Hoc Committee included the following elements: 1. Review VTA s budgeted and forecasted revenues and expenses 2. Review service delivery business models and financial structure in other similarly positioned transit agencies 3. Review revenue sources for ability to enhance or identify other sources of revenue 4. Review cost structure of providing service 5. Respond to other Ad Hoc Committee requests 6. Provide recommendations to close the structural deficit PFM 2 1

13 Attachment B Presentation Outline Peer Agency Comparisons Revenues Expenses VTA Budget Forecast Model How Other Agencies Have Addressed Budget Deficits Options to Address Structural Budget Deficit PFM 3 Peer Agency Comparisons PFM 4 2

14 Attachment B Industry Overview National Trends In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption. Increase in service operated transit agencies have increased the amount of time its vehicles are in operation, as measured by Vehicle Revenue Hours (VRH) Increase in service costs total Operating Expenses have risen sharply in the past decade, going from $29 billion in 2006 to $45.1 billion in Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series PFM 5 Industry Overview National Trends In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption. Increase in service consumed Unlinked passenger trips (UPT), a metric for transit ridership, on public transit passengers has steadily been flat for several years and took a dip in FY16 Additionally, the distance traveled by public transit passengers is also increasing, Passenger Miles Traveled (PMT) PFM Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series 6 3

15 Attachment B Trends in Trips for VTA Santa Clara VTA riders are taking fewer, but longer trips, with a dip in FY17 along with ridership The Average Trip Length is a service efficiency measure of the number of miles traveled per passenger trip. Graphs show annual totals for both transit bus, light rail, and ACE shuttle services--paratransit not included 50,000 40,000 30,000 20,000 10,000 VTA - Total # of Passenger Trips (UPT) 46,600 44,221 45,103 43,434 42,492 34,778 32,746 33,041 32,130 31,652 10,278 10,754 10,015 10,742 11,341 39,138 29,464 9, VTA - Average Trip Length, all modes (PMT per UPT) FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Bus, in thousands Light Rail, in thousands All Modes Average Trip Length, in miles Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series PFM 7 Peer Agencies VTA services the fourth largest population area among peer agencies 2016 Service Area Statistics LACMTA Agency Los Angeles County Metropolitan Transportation Authority Modes of Transportation (Directly Operated and Purchased Transit) Bus, Bus Rapid Transit, Light Rail, Heavy Rail, Vanpool Population Square Mileage 8,626,817 1,513 CTA Chicago Transit Authority Bus, Heavy Rail 3,272, KCDOT VTA UTA TriMet King County Department of Transportation Santa Clara Valley Transportation Authority Utah Transit Authority Tri-County Metropolitan Transportation, Oregon Bus, Trolleybus, Street Car Rail, Demand Response, Demand Response - Taxi, Ferryboat, Vanpool 2,117,125 2,134 Bus, Light Rail, Demand Response 1,927, Bus, Commuter Bus, Light Rail, Commuter Rail, Demand Response, Vanpool Bus, Light Rail, Hybrid Rail, Demand Response, Demand Response - Taxi 1,883, ,560, Sacramento Regional Transit Sacramento RT District Bus, Light Rail, Demand Response 1,031, Source: Federal Transit Authority National Transit Database (NTD), 2016 Annual Database Agency Information PFM 8 4

16 Attachment B Revenues PFM 9 VTA Transit Revenue Profile VTA revenues are dominated by sales-taxbased revenues collected across a number of different sales tax measures (some are only a portion of total sales taxes collected). This reliance on tax puts the VTA at revenue risk in the event of a recession STA 2% FY18 Budgeted Transit Revenues by Type Federal & State Grants 1% Fares 8% Other Revenue 6% Increases to taxes require a 2/3 rd vote of the electorate for approval of a special tax. It is highly unlikely for additional sales taxes to be approved to support VTA operations Sales Tax Based 83% Source: VTA budget Note: Sales taxes include TDA funds which are part of the base Statewide sales tax rate PFM 10 5

17 Attachment B Revenue Comparisons By Type of Revenue Sources of Operating Revenues Federal, State, Local, Directly Generated Funds Directly generated funds are any funds generated by, donated to or earned by the transit agency. Listed as Passenger Fares, Transit Agency Funds, Other Earnings, and Government Funds On average, passenger fare revenue accounts for less than 20% of operating revenues nationally. Note: TDA funds categorized as State Funds for NTD purposes PFM Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency 11 Revenue Comparisons Farebox Recovery Ratios The farebox recovery ratio is the proportion of fare revenues to operating costs Farebox recovery has been on the decline nationally; VTA has consistently had the lowest farebox recovery ratio among comparative agencies FY FY2017 Farebox Recovery Ratio Agency FY13 FY14 FY15 FY16 FY17* CTA 45.2% 44.2% 43.4% 41.7% N/A TriMet 30.2% 30.3% 31.5% 29.5% N/A LACMTA 26.9% 26.1% 26.2% 22.6% N/A Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A UTA 24.1% 21.9% 22.2% 18.8% N/A VTA 13.0% 12.4% 12.4% 11.2% 9.5% RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A *FY17 data available for VTA only PFM Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series; Agency Budget Documents 12 6

18 Attachment B VTA Farebox Recovery Experience Compared to VTA Expense Experience While fare revenues have been declining, expenses have continued to climb FY13 - FY17 Farebox Revenues FY13 - FY17 Transit Expenses Millions $40 $39 $38 $37 $38.3 $38.4 $39.1 $37.7 Millions $440 $420 $400 $386.1 $398.4 $426.1 $36 $35 $34 $33 $34.8 $380 $360 $340 $356.4 $371.1 $32 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 $320 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Source: VTA Historical Data PFM 13 Expenses PFM 14 7

19 Attachment B VTA Transit Budgeted Expense Profile FY18 Transit Budgeted Expenses by Type VTA budgeted expenses are dominated by wages and benefits at 62% of FY2018 transit expenditures Debt Service 4.5% Other Transit 8.9% Transfers 1.1% Benefit costs are dominated by: Pensions ATU and CalPERS programs Health insurance provided at full cost for Kaiser plans or lower Non-Labor 23.8% Wages 36.2% Benefits 25.5% Source: VTA budget PFM 15 Cost Efficiency Measure Comparison Unlinked Passenger Trip (UPT) The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services For both bus and light rail service, VTA has the highest costs per UPT over 200% over many lowcost comparisons Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics PFM 16 8

20 Attachment B Cost Efficiency Measure Comparison Cost Per Service Hour VTA spends more per hour on Vehicle Operations and Vehicle Maintenance than peer agencies for buses Light Rail operations are high, but in the middle of comparison agencies VTA s FY17 cost per service hour for light rail was $707 PFM Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics 17 Cost Comparisons Expenses Type Expenses for most comparative transit agencies follow similar patterns with Salaries and Benefits the dominant cost of service When categorized by function, Vehicle Operations represent more than 50% of most agency operating expenses. PFM Source: Federal Transit Authority National Transit Database (NTD), 2016 Operating Expenses 18 9

21 Attachment B VTA Budget and Forecast Model PFM 19 VTA Budget Forecast The VTA staff budget forecast for the FY18-FY22 time period shows significant annual deficits barring corrective action The resulting negative operating reserves of ($26M) by FY22 PFM 20 10

22 Attachment B Independent Baseline 10-Year Budget Forecast Baseline forecast with assuming no corrective action taken by VTA Board Millions $0 ($10) FY18 - FY28 Baseline Forecast FY Net Surplus/(Deficit) Assuming No Corrective Action ($20) ($30) ($20.5) ($26.4) ($29.5) ($22.9) ($27.7) ($32.4) ($40) ($37.0) ($50) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($267.1) million ($41.8) ($46.8) ($45.5) ($51.1) ($60) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 NOTE: Does not reflect $30M annual local share of capital need. Adding in this capital payment would increase the deficit by $330M to ($597.1) million by FY28 PFM 21 Business Cycle Current Expansion Phase The current expansion phases of the business cycle began nine years ago, after the recession bottomed out in June 2009 Current expansion 107 months and counting as of May 2018 Average expansion phase (11 cycles): 58.4 months Range: 12 to 120 months When will next downturn start? PFM 22 11

23 Attachment B Recessions Impact 1976 VTA Sales Tax The 1976 Half-Cent Sales Tax is VTA s largest source of revenue at 47% of total budgeted revenues in FY2018. Recessions impacts on sales taxes are increasing Annual % Change in VTA 1976 Sales Tax Collections, FY FY2017* 25% 20% 15% 10% 5% 0% (5%) '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 (10%) (15%) (20%) (25%) *Shaded areas indicate periods of recession PFM 23 How Other Agencies Have Addressed Budget Deficits PFM 24 12

24 Attachment B What Other Agencies Have Done TriMet Portland, OR Defined benefit to defined contribution pension No retiree health No free downtown routes New income tax PFM 25 What Other Agencies Have Done Los Angeles Metro Increased fares/changed fare collection Wage freezes, changes to health and retirement programs New transportation/mobility business model PFM 26 13

25 Attachment B What Other Agencies Have Done Sacramento Regional Transit Eliminated positions/reduced annual salary adjustment New business model Introduced SmaRT Ride-on-demand micro transit/100% accessible/similar to Uber Pool PFM 27 What Other Agencies Have Done Chicago Transit Authority Increased fares 25% Controlled electrical costs Increased advertising and concession revenues Cracked down on absenteeism PFM 28 14

26 Attachment B What Other Agencies Have Done King County Metro Seattle, WA New service model Seattle voters approved a sales tax increase and a vehicle license fee to raise an additional $45 million annually in 2014 Last year voters approved another $54 billion expansion of public transit systems by raising the sales tax another 0.5 percent and increasing the vehicle license fee again PFM 29 Innovative Programs First/Last Mile & Mobility King County Metro Pilot program offering riders (via an app) within a two-mile radius of four park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit DART (Dallas) Partnership with Uber to provide access to Uber for first mile/last mile via the system s GoPass app MARTA (Atlanta) Partnered with Uber when the I-85 bridge collapsed. Uber helped address issues with lack of parking as commuters switched to transit. This partnership is continuing, with Uber targeting major transit centers for first mile/last mile trips Bishop Ranch (San Ramon) First autonomous shuttle licensed by California to shuttle BART riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to BART LA Metro Bike Share program in downtown LA and key tourist areas connecting bus and light rail destinations with first mile/last mile accessibility Sacramento RT Microbus, on-demand transit accessed through an app on a customers smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass PFM 30 15

27 Attachment B Options to Address Structural Budget Deficit PFM 31 Budget Balancing Options Three Categories Workforce Control wage inflation Share benefit costs of health insurance and pension Outsource service, where feasible Services Right-size service levels limit/defer Next Network implementation Rationalized fleet type Fleet electrification Revenue Indexed fare Increases Additional Sales-Based Taxes or other taxes PFM 32 16

28 Attachment B Workforce Control Wage Inflation Reducing wage and non-medical benefits inflation Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching wage increases to ability-to-pay protects jobs Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues; 2) may create issues with labor union in contract negotiations VTA Budget Forecast Net Operating Revenue Millions $0 ($5) ($3.2) ($1.7) ($10) ($15) ($14.7) ($14.7) ($14.4) ($13.8) ($13.1) ($11.5) ($20) ($25) ($30) ($20.5) ($26.4) ($25.5) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($57.8 million) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 33 Millions Workforce Share Health Insurance Costs Negotiate cost sharing on health insurance premiums Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA s insurance costs Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing could cause some employees to opt for lower-cost, non-family benefits $0 ($5) ($10) VTA Budget Forecast Net Operating Revenue ($15) ($20) ($25) ($30) ($35) ($40) ($20.5) ($26.4) ($29.5) ($22.9) ($18.7) ($22.7) ($26.7) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($197.3 million) ($30.7) ($34.2) ($31.2) ($35.2) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 34 17

29 Attachment B Workforce Share Pension Costs Create across-the-board parity with employee contribution to pension costs Advantages: 1) equal participation in pension funding, 2) provides value to employees by strengthening total pension funding Downsides: 1) Any changes to pension contributions must be negotiated with labor unions Millions $0 ($5) VTA Budget Forecast Net Operating Revenue ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($20.5) ($26.4) ($28.2) ($19.7) ($22.1) ($26.3) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($221.2 million) ($30.5) ($34.8) ($38.5) ($35.8) ($40.1) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 35 Workforce Outsource Services, Where Feasible Increasing the amount of transit contracted out, could result in significant savings Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of training, capital, and innovation on contractor Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular employees VTA Budget Forecast Net Operating Revenue $0 Millions ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($20.5) ($26.4) ($25.6) ($18.9) ($23.2) ($27.5) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($226.6 million) ($31.7) ($36.0) ($39.8) ($37.1) ($41.5) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 36 18

30 Attachment B Services Rationalized Fleet Sizing and Electrification Rationalized fleet sizing could include use of smaller vehicles* on routes that don t demand fullsize buses or use of a micro-transit fleet (passenger vans or smaller vehicles) Savings: Requires additional study Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate reduction in pay Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-ofweek, 3) multiple license requirements increases complexity/flexibility in managing workforce Fleet Electrification of buses Savings: Requires additional study Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down, while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term, heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current market PFM * Note smaller vehicles would need to be fully accessible to meet needs of transit dependent 37 Services Right-Size Service Levels Implementation of the Next Network is included in the Current VTA budget. These service improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2) connect with the coming BART extension, and 3) provide more service in underserved and vulnerable communities No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1) Full pull-back of Next Network improvements, and 2) partial implementation of Next Network Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare increases Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2) reduces the need for other cost-savings measures Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in downward transit ridership trend, 3) abandons major effort by Board and staff to address transit service needs of the broader community, 4) survival of transit likely dependent on more service, not less PFM 38 19

31 Attachment B Services Next Network Implementation Impact to Budget Deficit Based on the savings discussed in the previous slide, elimination of the Next Network service has a large impact on the budget forecast Millions $10 $0 ($10) ($20) ($30) $0.5 VTA Budget Forecast Net Operating Revenue ($3.9) ($5.4) ($8.4) ($10.5) ($12.8) FY18 Ending Reserves: $102.2 million ($17.2) FY28 Ending Reserves: ($54.1 million) ($21.7) ($23.1) ($25.6) ($27.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) Only implementing half the program costs has a lower, but significant, impact on the budget deficits as well VTA Budget Forecast Net Operating Revenue $0 Millions ($10) ($20) ($30) ($40) ($10.0) ($13.4) ($15.9) ($17.9) ($20.0) ($22.3) FY18 Ending Reserves: $91.7 million ($26.7) FY28 Ending Reserves: ($160.6 million) ($31.2) ($32.6) ($35.1) ($37.1) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 39 Millions Revenue Indexed Fare Increases Index fares to CPI to keep up with service cost inflation Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with service delivery costs Downsides: 1) fare increases could have a negative impact on ridership $0 ($5) ($10) VTA Budget Forecast Net Operating Revenue ($15) ($20) ($25) ($30) ($35) ($40) ($20.5) ($26.4) ($26.2) ($19.5) ($21.9) ($26.2) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($196.8 million) ($28.2) ($32.4) ($33.8) ($31.0) ($32.5) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 40 20

32 Attachment B Revenue Increase 2000 Measure A Support Increase Measure A support Advantages: 1) reduces the need for other cost-savings measures Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects Millions $0 ($5) VTA Budget Forecast Net Operating Revenue ($10) ($15) ($20) ($25) ($30) ($35) ($20.5) ($26.4) ($25.7) ($19.0) ($19.7) ($23.9) ($24.4) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($170.4 million) ($28.6) ($29.8) ($26.9) ($27.4) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 41 Revenue Additional Sales Tax Revenue Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-toyear basis Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to extend transit service Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa Clara County already at limit. Exemption would require State legislative authorization Millions $30 $20 $10 VTA Budget Forecast Net Operating Revenue $23.3 $20.1 $15.5 $16.9 $13.9 $10.8 $8.2 $12.1 $9.1 $0 ($10) ($20) ($30) ($20.5) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($184.8 million) ($26.4) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 42 21

33 Attachment B Millions Scenario 1: Shared Sacrifice Between Employees, Riders, VTA Under this scenario, the VTA would work to spread the sacrifice of balancing the budget between as many constituents as possible. The changes modeled include: Slow wage growth Increase transit operating revenue from 2000 Measure A Index fares Contract out services Assume $12 million/year in additional State gas-tax revenue $15 $10 $5 $0 VTA Budget Forecast Net Operating Revenue $1.8 $4.0 $0.8 $3.6 $0.6 $3.0 $7.3 $10.8 ($5) ($10) ($15) ($20) ($25) ($20.5) ($14.4) ($5.8) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: $92.8 million FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 43 Scenario 2: Next Network, Fare Increases, and Employee Health Sharing Under this scenario, the VTA would work to balance the budget through: Implement a lower-cost (50%) Next Network solution Employees share in health care premiums Index fares Assume $12 million/year in additional State gas-tax revenue Millions $25 $20 $15 $10 $5 VTA Budget Forecast Net Operating Revenue $16.0 $14.6 $12.4 $13.0 $11.1 $6.0 $16.7 $19.6 $0 ($5) ($10) ($15) ($10.0) ($3.9) ($0.9) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: $196.3 million FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY Net Surplus/(Deficit) PFM 44 22

34 Attachment B QUESTIONS? PFM 45 23

35 Attachment C Peer Agencies Original Comparators VTA services the fourth largest population area among comparative agencies 2016 Service Area Statistics LACMTA Agency Los Angeles County Metropolitan Transportation Authority Modes of Transportation (Directly Operated and Purchased Transit) Bus, Bus Rapid Transit, Light Rail, Heavy Rail, Vanpool Population Square Mileage 8,626,817 1,513 CTA Chicago Transit Authority Bus, Heavy Rail 3,272, KCDOT VTA UTA TriMet King County Department of Transportation Santa Clara Valley Transportation Authority Utah Transit Authority Tri-County Metropolitan Transportation, Oregon Bus, Trolleybus, Street Car Rail, Demand Response, Demand Response - Taxi, Ferryboat, Vanpool 2,117,125 2,134 Bus, Light Rail, Demand Response 1,927, Bus, Commuter Bus, Light Rail, Commuter Rail, Demand Response, Vanpool Bus, Light Rail, Hybrid Rail, Demand Response, Demand Response - Taxi 1,883, ,560, Sacramento RT Sacramento Regional Transit District Bus, Light Rail, Demand Response 1,031, Source: Federal Transit Authority National Transit Database (NTD), 2016 Annual Database Agency Information PFM 1

36 Attachment C Peer Agencies Ad Hoc Committee Additional Comparators VTA services the second largest population area among additional comparators 2016 Service Area Statistics OCTA VTA AC Transit Agency Orange County Transportation Authority Santa Clara Valley Transportation Authority Alameda-Contra Costa Transit District Modes of Transportation (Directly Operated and Purchased Transit) Bus, Commuter Bus, Demand Response, Demand Response-Taxi, Vanpool Population Square Mileage 3,077, Bus, Light Rail, Demand Response 1,927, Bus, Demand Response, Commuter Bus 1,425, MUNI San Francisco Municipal Railway Bus, Trolleybus, Light Rail, Street Car Rail, Cable Car, Demand Response 866, BART San Francisco Bay Area Rapid Transit District Heavy Rail, Automated Guideway, Demand Response 833, SamTrans San Mateo County Transit District Bus, Demand Response, Demand Response-Taxi 737, Source: Federal Transit Authority National Transit Database (NTD), 2016 Annual Database Agency Information PFM 2

37 Attachment C Revenue Comparisons Sources of Operating Revenues All Agencies VTA receives most of its operating revenue from local sources reported by NTD as financial assistance from local governments including income taxes, sales taxes, property taxes, and other local funds that are not directly generated by the transit agency NTD reported Taxes and Fees Levied by Transit Agency includes sales taxes, property taxes, other taxes, and tolls that are imposed by transit agencies with their own taxing authority 100% FY2016 NTD Reported Sources of Operating Revenue 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% VTA BART SamTrans AC Transit MUNI OCTA Sacramento RT LACMTA CTA UTA TriMet KCDOT Local Funds State Funds Federal Funds Taxes and Fees Levied by Transit Agency Directly Generated Funds Note: TDA funds categorized as State Funds for NTD purposes PFM 3 Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency

38 Attachment C Revenue Comparisons Directly Generated Revenues All Agencies Directly Generated Revenues are funds generated by, donated to or earned by the transit agency, and are dominated by passenger fares Other Directly Generated Sources includes investment earnings, rentals, parking revenues, grants and donations, and the sale of maintenance services 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% FY2016 NTD Reported Directly Generated Revenues 0% VTA BART SamTrans AC Transit MUNI OCTA Sacramento RT LACMTA CTA UTA TriMet KCDOT Passenger Fares Park and Ride Advertising & Concessions Purchased Transportation Other Directly Generated Sources PFM Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency 4

39 Attachment C Revenue Comparisons Farebox Recovery Ratios Original Comparators The farebox recovery ratio is the proportion of fare revenues to operating costs Farebox recovery has been on the decline nationally VTA has consistently had the lowest farebox recovery ratio among comparative agencies FY13 - FY17 Farebox Recovery Ratio Agency FY13 FY14 FY15 FY16 FY17* 50% Farebox Recovery Ratio, FY13 - FY16 CTA 45.2% 44.2% 43.4% 41.7% N/A 40% TriMet 30.2% 30.3% 31.5% 29.5% N/A 30% LACMTA 26.9% 26.1% 26.2% 22.6% N/A 20% Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A 10% UTA 24.1% 21.9% 22.2% 18.8% N/A VTA 13.0% 12.4% 12.4% 11.2% 9.5% 0% CTA TriMet LACMTA Sacramento RT UTA VTA RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A FY13 FY14 FY15 FY16 *FY17 data available for VTA only PFM Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series; Agency Budget Documents 5

40 Attachment C Revenue Comparisons Farebox Recovery Ratios Additional Comparators VTA has consistently had the lowest farebox recovery ratio among the Bay Area and Orange County comparative agencies FY13 - FY17 Farebox Recovery Ratio Agency FY13 FY14 FY15 FY16 FY17* BART 77.4% 77.9% 79.9% 78.2% N/A MUNI 32.9% 29.8% 28.8% 25.7% N/A OCTA 23.0% 23.2% 21.9% 19.8% N/A AC Transit 18.5% 19.9% 19.5% 17.8% N/A SamTrans 16.9% 18.5% 15.5% 14.0% N/A VTA 13.0% 12.4% 12.4% 11.2% 9.5% RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A 100% 80% 60% 40% 20% 0% Farebox Recovery Ratio, FY13 - FY16 BART MUNI OCTA AC Transit SamTrans VTA FY13 FY14 FY15 FY16 *FY17 data available for VTA only PFM Source: Federal Transit Authority National Transit Database (NTD), Service Data Time Series; Agency Budget Documents 6

41 Attachment C Cost Efficiency Measure Cost Per Bus Trip All Agencies The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services VTA has the second highest costs per UPT for bus service when ranked against comparative agencies $10.00 $9.31 Cost per Unlinked Passenger Trip (UPT) - Bus, FY16 $8.00 $7.54 $6.82 $6.59 $6.55 $6.00 $4.00 $4.64 $4.36 $4.19 $3.45 $3.09 $3.06 $2.00 $0.00 SamTrans VTA AC Transit UTA Sacramento RT KCDOT OCTA TriMet LACMTA CTA MUNI Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics PFM 7

42 Attachment C Cost Efficiency Measure Cost Per Light Rail Trip All Agencies The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services VTA has the highest costs per UPT for light rail service over 200% greater than most comparators Cost per Unlinked Passenger Trip (UPT) - Light Rail, FY16 $10.00 $8.00 $8.62 $6.00 $4.00 $5.13 $4.82 $4.11 $3.50 $3.20 $2.00 $0.00 VTA LACMTA Sacramento RT MUNI UTA TriMet Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics PFM 8

43 Attachment C Cost Efficiency Measure Comparison Cost Per Service Hour Original Comparators VTA spends more per hour on Vehicle Operations and Vehicle Maintenance than the original peer agencies for buses, but less on General Administration than most comparators $200 $150 $100 $50 $0 $103.1 FY16 Operating Cost per Service Hour - Bus $126.3 $129.3 $134.0 UTA TriMet CTA Sacramento RT $142.3 $145.6 $166.7 KCDOT LACMTA VTA Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration Light Rail operations are high, but in the middle of comparison agencies $1,000 $800 FY16 Operating Cost per Service Hour - Light Rail $996.8 VTA s FY17 cost per service hour for light rail was $707 $600 $400 $409.6 $411.1 $610.9 $612.3 Note: Cost Per Service Hour information provided on slide #17 of the 5/11/18 PFM presentation inadvertently included data for modes other than Bus and Light Rail. These charts reflect the corrected information. $200 $0 UTA TriMet VTA Sacramento RT LACMTA Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration PFM 9 Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics

44 Attachment C Cost Efficiency Measure Comparison Cost Per Service Hour Additional Comparators VTA also spends more per hour on Vehicle Operations and Vehicle Maintenance than the new peer agencies for buses, but is lowest in general administration Light Rail operations for VTA are slightly higher than for MUNI; however, General Administration is 70% of MUNI s VTA s FY17 cost per service hour for light rail was $707 Note: Cost Per Service Hour information provided on slide #17 of the 5/11/18 PFM presentation inadvertently included data for modes other than Bus and Light Rail. These charts reflect the corrected information. $250 $200 $150 $100 $50 $125.0 FY16 Operating Cost per Service Hour - Bus $166.7 $171.7 PFM 10 $196.7 $223.6 $0 OCTA VTA MUNI AC Transit SamTrans Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration $700 $600 $500 $400 $300 $200 $100 $0 FY16 Operating Cost per Service Hour - Light Rail $594.1 $610.9 MUNI Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration VTA Source: Federal Transit Authority National Transit Database (NTD), 2016 Metrics

45 Attachment C Cost Comparisons Expenses by Type (Cost) All Agencies Expenses for most comparative transit agencies follow similar patterns with Salaries and Benefits as the dominant cost of service $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,574,418 $1,394,386 Total Operating Expenses by Type, FY16 (in thousands) $1,000,000 $800,000 $600,000 $400,000 $803,585 $625,985 $625,736 $426,093 $416,575 $359,996 $288,598 $268,970 $200,000 $- LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet Sacramento RT $139,513 $129,537 Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses SamTrans PFM 11 Source: Federal Transit Authority National Transit Database (NTD), 2016 Operating Expenses

46 Attachment C Cost Comparisons Expenses by Type (Percent of Total) All Agencies As a percent of total expenses, VTA is among the highest for salaries and benefits 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% % of Operating Expenses by Type, FY16 0% LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet Sacramento RT SamTrans Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses PFM 12 Source: Federal Transit Authority National Transit Database (NTD), 2016 Operating Expenses

47 Attachment C Cost Comparisons Expenses by Function (Cost) All Agencies When categorized by function, Vehicle Operations represent more than 50% of most agency operating expenses $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,574,418 $1,394,386 Total Operating Expenses by Function, FY16 (in thousands) $1,000,000 $800,000 $600,000 $803,585 $625,985 $625,736 $400,000 $426,093 $416,575 $359,996 $288,598 $268,970 $200,000 $- $139,513 $129,537 LACMTA CTA MUNI BART KCDOT TriMet AC Transit VTA OCTA UTA Sacramento RT Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration SamTrans PFM 13 Source: Federal Transit Authority National Transit Database (NTD), 2016 Operating Expenses

48 Attachment C Cost Comparisons Expenses by Function (Percent of Total) All Agencies When categorized by function, VTA s Vehicle Operations are the highest (at 56%), along with King County Vehicle maintenance is tied for second highest with MUNI General Administration is lowest, along with CTA 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% % of Operating Expenses by Function, FY16 0% VTA BART SamTrans AC Transit MUNI OCTA LACMTA CTA UTA KCDOT TriMet Sacramento RT Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration PFM 14 Source: Federal Transit Authority National Transit Database (NTD), 2016 Operating Expenses

49 Attachment D Cost of Living Comparisons BEA Regional Price Parities The cost of living for varies for comparator agencies. The data presented on the following two slides is based on Regional Price Parities Regional Price Parities (RPPs) are regional price levels expressed as a percentage of the overall national price level for a given year. The price level is determined by the average prices paid by consumers for the mix of goods and services consumed in each region. RPPs are expressed as a percentage of the overall national price level for each year, which is equal to For example, if the RPP for area A is 120 and for area B is 90, then on average, prices are 20% higher and 10% lower than the US average for A and B respectively PFM 1

50 Attachment D Cost of Living Comparisons BEA Regional Price Parities The 2016 RPP for all items in the San Jose Sunnyvale Santa Clara Metropolitan Statistical Area (MSA), which is served by VTA, is 27.1 percent higher than the national average As shown in the graph below, this difference is also higher than RPPs among peer agency MSAs 30% 25% 27.1% 2016 RPPs, All Items: % Difference from National Average 24.7% 20% 17.7% 15% 10% 10.5% 5% 3.8% 2.0% 1.7% 0% -5% San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Chicago MSA Sacramento MSA Portland MSA Salt Lake City MSA -0.6% PFM Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA 2

51 Attachment D Cost of Living Comparisons BEA Regional Price Parities The 2016 RPP for Rents in the San Jose Sunnyvale Santa Clara Metropolitan Statistical Area (MSA) is percent higher than the national average As shown in the graph below, this difference is also higher than 2016 Rent RPPs among peer agency MSAs 120% 113.3% 2016 RPPs, Rents: % Difference from National Average 100% 90.9% 80% 60% 65.4% 40% 34.0% 20% 17.7% 17.6% 14.8% 4.2% 0% San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Portland MSA Sacramento MSA Chicago MSA Salt Lake City MSA PFM Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA 3

52 Attachment E What Other Agencies Have Done TriMet Portland, OR Defined benefit to defined contribution pension (2003) No retiree health (In 2009, retiree medical benefits were closed to new nonunion employees) No free downtown routes (2009) Increased income tax rate (HB2017 Keep Oregon Moving, transit improvement bill increased the payroll and self-employment tax to %; effective January 1, 2018) PFM 1

53 Attachment E What Other Agencies Have Done Los Angeles Metro Increased fares in 2014 New transportation/mobility business model adopted the Risk Allocation matrix (RAM) in 2016 Introduced a new college student fare program that increased ridership in 2017 PFM 2

54 Attachment E What Other Agencies Have Done Sacramento Regional Transit Eliminated positions/reduced annual salary adjustment (2018) New business model introduced in recent years (first implemented in ) Introduced SmaRT Ride on-demand micro-transit/100% accessible/similar to Uber Pool in February 2018 PFM 3

55 Attachment E What Other Agencies Have Done Chicago Transit Authority FY18 Budget included the following cost saving measures: Increased fares 25%, took effect on January 7, 2018 first increase since 2009 Controlled electrical costs by locking in contractual pricing for fuel and power FY18 budget Expected increases in advertising and concession revenues Implemented new management strategies to crack down on absenteeism in 2012, which cost the agency $40 million in 2011 PFM 4

56 Attachment E What Other Agencies Have Done King County Metro Seattle, WA New service model in recent years Seattle voters approved a sales tax increase and a vehicle license fee to raise an additional $45 million annually in 2014 Last year voters approved another $54 billion expansion of public transit systems by raising the sales tax another 0.5 percent and increasing the vehicle license fee again PFM 5

57 Attachment E Innovative Programs First/Last Mile & Mobility King County Metro Pilot program offering riders (via an app) within a two-mile radius of four park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit (2018) DART (Dallas) Partnership with Uber to provide access to Uber for first mile/last mile via the system s GoPass app MARTA (Atlanta) Partnered with Uber when the I-85 bridge collapsed. Uber helped address issues with lack of parking as commuters switched to transit. This partnership is continuing, with Uber targeting major transit centers for first mile/last mile trips Bishop Ranch (San Ramon) First autonomous shuttle licensed by California to shuttle BART riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to BART (March 2018) LA Metro Bike Share program in downtown LA and key tourist areas connecting bus and light rail destinations with first mile/last mile accessibility Sacramento RT Microbus, on-demand transit accessed through an app on a customers smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass (2018) PFM 6

58 Attachment F Workforce Control Wage Inflation Reducing wage and non-medical benefits inflation Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching wage increases to ability-to-pay protects jobs Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues; 2) may create issues with labor union in contract negotiations Key assumptions Reduces wages and non-medical benefits inflation from 3.5% to 2% Millions $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($20.5) ($20.5) ($22.9) ($26.4) ($26.4) ($25.5) ($29.5) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($57.8 million) Baseline Ending Reserves: ($267.1 million) VTA Budget Forecast Net Operating Revenue ($14.7) ($14.7) ($14.4) ($27.4) ($31.8) ($36.2) ($13.8) ($13.1) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($40.7) ($44.6) ($11.5) ($42.1) ($3.2) ($46.6) ($1.7) Baseline Net Operating Results with Controlled Wage Infaltion PFM 1

59 Attachment F Workforce Share Health Insurance Costs Negotiate cost sharing on health insurance premiums Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA s insurance costs Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing could cause some employees to opt for lower-cost, non-family benefits Key Assumptions Assumes 80% employer / 20% employee health insurance premium cost sharing Millions $0 ($5) ($10) VTA Budget Forecast Net Operating Revenue ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($20.5) ($20.5) ($26.4) ($26.4) ($29.5) ($29.5) ($22.9) ($22.9) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($197.3 million) Baseline Ending Reserves: ($267.1 million) ($27.4) ($18.7) ($31.8) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($22.7) ($36.2) ($26.7) ($40.7) ($30.7) ($44.6) ($34.2) ($42.1) ($31.2) ($46.6) ($35.2) Baseline Net Operating Results with Shared Health Insurance Costs PFM 2

60 Attachment F Workforce Share Pension Costs Create across-the-board parity with employee contribution to pension costs Advantages: 1) equal participation in pension funding, 2) provides value to employees by strengthening total pension funding Downsides: 1) Any changes to pension contributions must be negotiated with labor unions Key assumptions Moves employee pension contributions to a 6% share over three years beginning in FY2020 Millions $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) VTA Budget Forecast Net Operating Revenue ($20.5) ($20.5) ($19.7) ($22.9) ($22.1) ($26.4) ($26.4) ($27.4) ($26.3) ($28.2) ($29.5) ($30.5) ($31.8) ($34.8) FY18 Ending Reserves: $81.2 million ($36.2) ($35.8) ($38.5) FY28 Ending Reserves: ($221.2 million) ($40.7) ($40.1) ($42.1) Baseline Ending Reserves: ($267.1 million) ($44.6) ($46.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline Net Operating Results with Shared Pension Costs PFM 3

61 Attachment F Millions Workforce Outsource Services, Where Feasible Increasing the amount of transit contracted out, could result in significant savings Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of training, capital, and innovation on contractor Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular employees Key Assumptions Assumes 25% savings can be achieved and 20% of current employee jobs are outsourced, resulting in a 5% reduction in personnel expenses $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($18.9) ($20.5) ($20.5) ($22.9) ($23.2) ($26.4) ($26.4) ($25.6) ($27.4) ($27.5) ($29.5) ($31.8) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($226.6 million) Baseline Ending Reserves: ($267.1 million) VTA Budget Forecast Net Operating Revenue ($36.2) ($36.0) ($37.1) ($40.7) ($39.8) ($42.1) ($41.5) ($44.6) ($46.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline PFM 4 ($31.7) Net Operating Results with Outsourced Services

62 Attachment F Services Rationalized Fleet Sizing and Electrification Rationalized fleet sizing could include use of smaller vehicles* on routes that don t demand fullsize buses or use of a micro-transit fleet (passenger vans or smaller vehicles) Savings: Requires additional study Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate reduction in pay Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-ofweek, 3) multiple license requirements increases complexity/flexibility in managing workforce Fleet Electrification of buses Savings: Requires additional study Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down, while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term, heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current market PFM * Note smaller vehicles would need to be fully accessible to meet needs of transit dependent 5

63 Attachment F Services Right-Size Service Levels Implementation of the Next Network is included in the Current VTA budget. These service improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2) connect with the coming BART extension, and 3) provide more service in underserved and vulnerable communities No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1) Full pull-back of Next Network improvements, and 2) partial implementation of Next Network Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare increases Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2) reduces the need for other cost-savings measures Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in downward transit ridership trend, 3) abandons major effort by Board and staff to address transit service needs of the broader community, 4) survival of transit likely dependent on more service, not less PFM 6

64 Attachment F Millions Millions Services Next Network Implementation Impact to Budget Deficit Based on the savings discussed in the previous slide, elimination of the Next Network service has a large impact on the budget forecast $10 $0 ($10) ($20) ($30) ($40) ($50) Only implementing half the program costs has a lower, but significant, impact on the budget deficits $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) $0.5 VTA Budget Forecast Net Operating Revenue ($5.4) ($3.9) ($8.4) ($10.5) ($12.8) ($17.2) ($20.5) ($22.9) ($21.7) ($23.1) ($26.4) ($29.5) ($27.4) ($25.6) ($27.6) ($31.8) FY18 Ending Reserves: $102.2 million ($36.2) FY28 Ending Reserves: ($54.1 million) ($40.7) ($42.1) Baseline Ending Reserves: ($267.1 million) ($44.6) ($46.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline Net Operating Results with No Next Network Implementation VTA Budget Forecast Net Operating Revenue ($10.0) ($13.4) ($15.9) ($17.9) ($20.5) ($20.0) ($22.9) ($22.3) ($26.4) ($27.4) ($26.7) ($29.5) ($31.8) ($31.2) ($32.6) FY18 Ending Reserves: $91.7 million ($36.2) ($35.1) ($37.1) FY28 Ending Reserves: ($160.6 million) ($40.7) ($42.1) Baseline Ending Reserves: ($267.1 million) ($44.6) ($46.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 PFM Baseline Net Operating Results with 50% Next Network Implementation 7

65 Attachment F Revenue Indexed Fare Increases Index fares to CPI to keep up with service cost inflation Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with service delivery costs Downsides: 1) fare increases could have a negative impact on ridership Key assumptions Assumes fares are increased by an inflationary rate every two-year budget cycle Millions $0 ($5) ($10) VTA Budget Forecast Net Operating Revenue ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($20.5) ($20.5) ($26.4) ($26.4) ($26.2) ($29.5) ($22.9) ($19.5) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($196.8 million) Baseline Ending Reserves: ($267.1 million) ($27.4) ($21.9) ($31.8) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($26.2) ($36.2) ($28.2) ($40.7) ($32.4) ($44.6) ($33.8) ($42.1) ($31.0) ($46.6) ($32.5) Baseline Net Operating Results with Indexed Fare Increases PFM 8

66 Attachment F Millions Revenue Increase 2000 Measure A Support Increase Measure A support $0 ($5) ($10) ($15) ($20) ($19.0) ($20.5) ($20.5) ($19.7) ($25) ($22.9) ($23.9) ($24.4) ($26.4) ($26.4) ($25.7) ($30) ($27.4) ($29.5) ($35) ($31.8) ($40) ($45) ($50) Advantages: 1) reduces the need for other cost-savings measures Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects Key assumptions Increases 2000 Measure A allocation to VTA Transit budget by 2.25 percent every two years in line with VTA s budgetary cycle FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($170.4 million) Baseline Ending Reserves: ($267.1 million) VTA Budget Forecast Net Operating Revenue PFM 9 ($36.2) ($40.7) ($28.6) ($44.6) ($29.8) ($42.1) ($26.9) ($27.4) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline Net Operating Results with Increased 2000 Measure A support ($46.6)

67 Attachment F Revenue Additional Sales Tax Revenue Millions Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-toyear basis Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to extend transit service Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa Clara County already at limit. Exemption would require State legislative authorization Key assumptions Assumes a $0.001 cent increase to the half-cent sales tax rate, resulting in a 20% rate increase $30 $20 $10 VTA Budget Forecast Net Operating Revenue $15.5 $23.3 $20.1 $16.9 $13.9 $10.8 $8.2 $12.1 $9.1 $0 ($10) ($20) ($30) ($40) ($50) ($60) ($20.5) ($20.5) ($26.4) ($26.4) ($29.5) ($22.9) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($184.8 million) Baseline Ending Reserves: ($267.1 million) ($27.4) ($31.8) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline Net Operating Results with Additional Sales Tax Revenue PFM 10 ($36.2) ($40.7) ($44.6) ($42.1) ($46.6)

68 Attachment F Millions Scenario 1: Shared Sacrifice Between Employees, Riders, VTA Under this scenario, the VTA would work to spread the sacrifice of balancing the budget between as many constituents as possible. The changes modeled include: $20 $10 $0 Slow wage growth Increase transit operating revenue from 2000 Measure A Index fares Contract out services Assume $12 million/year in additional State gas-tax revenue VTA Budget Forecast Net Operating Revenue $1.8 $4.0 $0.8 $3.6 $0.6 $3.0 $7.3 $10.8 ($10) ($20) ($30) ($40) ($50) ($20.5) ($20.5) ($26.4) ($14.4) ($29.5) ($5.8) ($22.9) ($27.4) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: $92.8 million Baseline Ending Reserves: ($267.1 million) ($31.8) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($36.2) ($40.7) ($44.6) ($42.1) ($46.6) Baseline Scenario 1 PFM 11

69 Attachment F Scenario 2: Next Network, Fare Increases, and Employee Health Sharing Under this scenario, the VTA would work to balance the budget through: Implement a lower-cost (50%) Next Network solution Employees share in health care premiums Index fares Assume $12 million/year in additional State gas-tax revenue Millions $30 $20 $10 VTA Budget Forecast Net Operating Revenue $16.0 $14.6 $12.4 $11.1 $6.0 $13.0 $16.7 $19.6 $0 ($10) ($10.0) ($3.9) ($0.9) ($20) ($30) ($40) ($50) ($20.5) ($22.9) ($26.4) ($27.4) ($29.5) ($31.8) FY18 Ending Reserves: $81.2 million ($36.2) FY28 Ending Reserves: $196.3 million ($40.7) ($42.1) Baseline Ending Reserves: ($267.1 million) ($44.6) ($46.6) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 Baseline Scenario 2 PFM 12

70 Attachment G Revenue SB 1 Revenue Included Including revenue from SB 1 at $12 million per year starting in FY2019 improves the baseline forecast Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to extend transit service Downsides: 1) revenue is subject to voter approval an initiative to repeal SB 1 is on the November 2018 ballot Millions $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($20.5) ($20.5) ($26.4) ($14.4) ($29.5) ($17.5) ($22.9) ($10.9) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($147.1 million) Baseline Ending Reserves: ($267.1 million) VTA Budget Forecast Net Operating Revenue ($27.4) ($15.4) ($31.8) ($19.8) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($36.2) ($24.2) ($40.7) ($28.7) ($44.6) ($32.6) ($42.1) ($30.1) ($46.6) ($34.6) Baseline Net Operating Results with SB1 Revenue Included PFM 1

71 Attachment H Revenue 2016 Measure B Revenue Excluded The graph below shows the impact of removing approximately $14 - $15 million in 2016 Measure B revenue from FY2018 FY2028 Measure B funds are currently tied up in an ongoing lawsuit that could take up to a year to resolve Millions $0 ($10) VTA Budget Forecast Net Operating Revenue ($20) ($30) ($40) ($50) ($60) ($70) ($20.5) ($20.5) ($26.4) ($26.4) ($29.5) ($44.4) ($22.9) ($38.2) FY18 Ending Reserves: $81.2 million FY28 Ending Reserves: ($416.3 million) Baseline Ending Reserves: ($267.1 million) ($27.4) ($43.1) ($31.8) ($47.9) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 ($36.2) ($52.7) ($40.7) ($57.7) ($44.6) ($62.1) ($42.1) ($60.0) ($46.6) ($65.0) Baseline Net Operating Results with 2016 Measure B Revenue Excluded PFM 1

72 Attachment I Summary Forecast Results Initiative/Scenario Key Assumptions FY2028 Ending Reserves ($ millions) Baseline Forecast No corrective action taken by Board ($267.1) Workforce Control Wage Inflation Reduces wage inflation from 3.5% to 2% ($57.8) Share Health Insurance Costs 80% employer / 20% employee cost sharing ($197.3) Share Pension Costs 6% employee share over 3 years ($221.2) Outsource Services, Where Feasible 5% reduction in personnel expenses ($226.6) Services Rationalized Fleet Sizing Requires additional study N/A Fleet Electrification of Buses Requires additional study N/A No Next Network Implementation $19 million savings per year from full pull-back ($54.1) 50% Next Network Implementation $9.5 million savings per year from partial implementation ($160.6) Revenue Indexed Fare Increases Increased fares by inflationary rate every two years ($196.8) Increase 2000 Measure A Support Increased allocation by 2.25% every two years ($170.4) Additional Sales Tax Revenue Assumes a one-tenth cent sales tax increase $184.8 SB 1 Revenue Included $12 million/year in additional revenue ($147.1) 2016 Measure B Revenue Excluded Removes around $14 million/year in revenue ($416.3) Scenarios Scenario 1 Scenario 2 Reduced wage growth, increased 2000 Measure A support, indexed fare increases, outsourced services, SB 1 revenue 50% Next Network Implementation, shared health care costs, indexed fares, SB 1 revenue $92.8 $196.3 PFM 1

73 Next Network Frequent Regional Connections Attachment J