Erie Metropolitan Transit Authority. Financial Statements and Supplementary Information June 30, 2016

Transcription

1 Financial Statements and Supplementary Information

2 Table of Contents Page INDEPENDENT AUDITOR'S REPORT 1 to 3 MANAGEMENT'S DISCUSSION AND ANALYSIS 4 to 17 FINANCIAL STATEMENTS Statement of Net Position 18 and 19 Statement of Revenues, Expenses, and Changes in Net Position 20 and 21 Statement of Cash Flows 22 and 23 Notes to Financial Statements 24 to 47 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios Employees Retirement Plan 48 Schedule of Changes in Net Pension Liability and Related Ratios NonBargained Employees Supplemental Retirement Plan 49 Schedule of Pension Contributions Employees Retirement Plan 50 Schedule of Pension Contributions NonBargained Employees Supplemental Retirement Plan 51 SUPPLEMENTARY INFORMATION Statement of Net Position, by Division 52 and 53 Statement of Revenues, Expenses, and Changes in Net Position, by Division 54 and 55 Schedule of LEG Fixed Route Urban Expenses FY Schedule of LEG Fixed Route Rural Expenses FY Schedule of LEG NonFixed Route ADA Paratransit Expenses Urban FY Schedule of LEG NonFixed Route ADA Paratransit Expenses Rural FY Schedule of LEG NonFixed Route Shared Ride Expenses Urban Standard FY Schedule of LEG NonPublic Expenses Other Transportation FY

3 Table of Contents (continued) Page SUPPLEMENTARY INFORMATION (continued) Reconciliation of Operating Expenses to Financial Statements Prepared under Accounting Principles Generally Accepted in the United States of America 62 Schedule of LEG Fixed Route Revenues FY Schedule of LEG NonFixed Route Revenues Urban FY Schedule of LEG NonFixed Route Revenues Rural FY Schedule of LEG NonPublic Revenues Other Transportation FY Reconciliation of Operating Revenues to Financial Statements Prepared under Accounting Principles Generally Accepted in the United States of America 67 Schedule of LEG Fixed Route Subsidies FY Schedule of LEG NonFixed Route Subsidies Urban FY Schedule of LEG NonFixed Route Subsidies Rural FY Reconciliation of Operating Revenues to Financial Statements Prepared under Accounting Principles Generally Accepted in the United States of America 71 Schedule of LEG Budget Summary FY Schedule S1 Local Match Provided FY and 74 Schedule S2 Local Match Carryover FY Schedule S3 Urban PTAF/BSG/ASG Carryover FY Schedule S5 Section 1513 Program Carryover FY Schedule S6 Shared Ride Expense Allocation Worksheet 78 Shared Ride Retained Earnings 79 Capital Report #1 Fiscal Year InceptiontoDate Capital Project Spending 80 Capital Report #2 Use of Working Capital 81 Capital Report #3 Request to Finance Capital Projects and Final Financing Data 82

4 Independent Auditor s Report To the Board of Directors Erie Metropolitan Transit Authority Erie, Pennsylvania Report on the Financial Statements We have audited the accompanying financial statements of the Erie Metropolitan Transit Authority (the Authority) as of and for the year ended, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the audit requirements of the Pennsylvania Department of Transportation. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion Fruitville Pike, P.O. Box 8408, Lancaster, PA Main: Fax: RKLcpa.com

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Erie Metropolitan Transit Authority as of, and the changes in financial position and its cash flows for the year ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 21 to the financial statements, the 2015 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 to 17 and other required supplementary information on pages 48 to 51 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority's basic financial statements. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 2

6 Other Reporting Required by Government Auditing Standards and the Pennsylvania Department of Transportation In accordance with Government Auditing Standards and the audit requirements of the Pennsylvania Department of Transportation, we have also issued our report dated December 19, 2016 on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and the audit requirements of the Pennsylvania Department of Transportation in considering the Authority's internal control over financial reporting and compliance. December 19, 2016 Lancaster, Pennsylvania 3

7 Management s Discussion and Analysis The following discussion and analysis of the Erie Metropolitan Transit Authority s (the Authority or EMTA) activities financial performance provides an introduction and overview to the Authority's basic financial statements for the year ended. Please read it in conjunction with the Authority's financial statements, which begin on page 18. Fixed Route and LIFT Services The Erie Metropolitan Transit Authority provides 23 public fixedroutes that operate in Erie County. Of those routes, 18 are in the City of Erie (the City) and five are in the Erie County (the County). Route 20 service, located in the City, is Bay Liner service that has one bus providing shuttle service. The fixed route division receives subsidies from the Federal Transit Administration, Pennsylvania Department of Transportation, and local sources. LIFT service is an advance request shared ride transportation program. It is available to all residents of Erie County who live beyond the bus routes or are unable to utilize regular bus service. An application must be completed and approved. All service requires a oneday advance reservation. The following subsidies are available for LIFT service: The Pennsylvania Lottery Program will pay 85% of the cost of authorized trips for persons age 65 or over. The Area Agency on Aging will pay the remaining 15% for qualified persons age 65 and over for trips to medical appointments and the GECAC sponsored Senior Center nearest to the customer s home. The Medical Assistance Transportation Program will pay 100% of the fare to medical appointments for eligible recipients with a valid Medicaid card. The Erie Metropolitan Transit Authority provides ADA Complimentary Paratransit Service. This program enables anyone in Erie County that lives within ¾ of a mile of a bus route, but due to a disability is unable to take the bus, transportation on LIFT at the rate of $2.70 per one way trip. There are no trip type restrictions. The Rural Transportation Program for Persons with Disabilities (PwD Program) is available for persons with disabilities who are age 18 to 64 and who either live outside of the ADA service area or whose destination is outside of the ADA service area. The customer has a 15% copay to participate in this program. Authority Activities and Highlights New Erie Metropolitan Transit Authority Facility A new state of the art facility is completed for the Erie Metropolitan Transit Authority. The site contains the Maintenance Department for the Fixed Route and the Paratransit Division. The site also contains the Paratransit Bus Storage. 4

8 Management s Discussion and Analysis Authority Activities and Highlights (continued) New Erie Metropolitan Transit Authority Facility (continued) Phase I was completed in December A ribbon cutting ceremony was held on October 14, Attendees included officials from the Federal Transit Administration, PA State Representatives, Mayor of Erie, Erie County Executive, City and Council Members, and EMTA s Board of Directors. Below are the prime contractors on the project: General Construction E.E. Austin & Son, Inc. Electrical Newco Electric Co., Inc. HVAC Wm. T. Spader Co., Inc. Plumbing Scobell Company, Inc. The remainder of the project will be completed in Phase II. This Phase consists of diesel and CNG fueling station including a station for the public, the Fixed Route Bus Storage, a parking garage, and an administration/operations building. The purpose of the new facility is to help accommodate growth in the coming years. With the fixed and shared routes housed in one location with the expansion, duplicate services will also be consolidated. The design of Phase II was completed in June The project went out to bid in July Contracts are expected to be awarded in the fall of Total project costs for Phase II are estimated at $36,400,000. Marketing Highlights Travel Training Program The Travel Training bus was unveiled in September 2010 and has since been flourishing within the Erie community. The mobile classroom has aided in the ability to reach potential riders and allow us to provide proper training to new and existing customers. The training program, which is free, has been utilized in training hundreds of new riders in Erie County. A number of local organizations including the St. Benedict Education Center, Erie Mental Health Department, the Gertrude Barber Center, Lakeshore Community Services, H.A.N.D.S., and Stairways Behavioral Health utilize the service as a vital tool in their efforts in aiding clients in becoming vital members of the Erie community. 5

9 Management s Discussion and Analysis Marketing Highlights (continued) Travel Training Program (continued) In addition, the training program has been widely utilized throughout the Erie school district's life skills programs in order to create an independent lifestyle for students with mental and physical disabilities. LIFT Program Awareness of the LIFT program and its application process has been made available through the use of an informational video. The video highlights the benefits of the LIFT and allows potential applicants to see firsthand just how the LIFT operates. In addition, LIFT users are showcased in the video as they explain how the LIFT has changed their lives in a positive way. The video is a vital asset in training seminars held throughout the year at senior centers, assisted living homes, and throughout the disabled community in Erie. Transit Tracking Technology Summer 2015, EMTA launched the new transit tracking system, mystop. mystop allows riders to receive real time answers by accessing mystop by smartphone or desktop. mystop consists of four main features; Routes, Stops, Trips, and Alerts. The Routes and Stops feature allows riders to track their bus via GPS technology. Alerts notify riders regarding arrival times, detours, and general EMTA updates. An online trip planner, powered by Google Transit, will be available starting fall Realtime information is now available in two prominent locations around Erie, no smart phone needed. LCD screens, located at the Intermodal Transportation Center and the Erie International Airport displays, exact locations of buses and realtime departure times. The Intermodal Transportation Center also has a LED screen which displays upcoming departures. 6

10 Management s Discussion and Analysis Marketing Highlights (continued) Transit Tracking Technology (continued) In 2016, EMTA launched a Track Me campaign that promotes the app outside all EMTA buses. EMTA also held promotions for Stop ID technology targeting riders without smart phones. Stop ID s are located in bus shelters, bus stop signs, and all EMTA schedules. By texting your Stop ID number to riders are able to retrieve realtime arrivals. New Technology Five APC s (Automated Passenger Counters) and AVA s (Automated Voice Announcers) have launched to the streets of Erie. The newly added technology improves the accuracy of EMTA s ridership reports as well as the overall rider experience. Automated Passenger Counters track boarding and alighting information based upon bus stop. The technology uses infrared beams which are triggered when riders enter or exit the vehicle. APC s will improve the accuracy and reliability of EMTA s ridership reports as well as track ridership patterns. These patterns will allow EMTA to make operational adjustments based upon ridership volume. Automated Voice Announcers, which are powered by satellite based position information, provides passengers automated bus configuration announcements. As a requirement from the Americans for Disabilities Act, all bus operators are to announce major intersections, transfer points, and places of major interest. AVA s allow drivers to focus on driving while announcing bus configuration automatically. EMTA offered a short demonstration of the newly added technologies at the Intermodal Transportation Center on June 20 th at 10am. Higher Education EMTA has dedicated university route service for Gannon University, Mercyhurst University, Mercyhurst North East, Penn State Behrend, and Edinboro University. All current students ride the university service and EMTA public service for free. Each university has several fixed route buses that access their campus and allow them to travel throughout Erie County. EMTA also offers fixed route service to Great Lakes Institute, Fortis Institute, and Erie Institute of Technology. 7

11 Management s Discussion and Analysis Marketing Highlights (continued) Higher Education (continued) EMTA frequently participates in campus events and orientations to promote the free transit options for students. In 2015, EMTA raffled gift baskets to students who utilized the new mystop app. Ridership continues to remain consistent over the years, with a slight increase during the winter months. Community Outreach The Erie Metropolitan Transit Authority continues to offer service to community events such as Frostbite Open, the Diabetes Expo, Autism Society Education Awareness Day, Swim the Bay, Erie Arts Festival, Housing Authority Senior Day at Waldameer, St. Paul's Festival, Zabawa, Erie Historical Society Heritage Days, 8 Great Tuesdays, Celebrate Erie, American Cancer Society, Girl Scout Cookie Bus, and Inner City Neighborhood Art House. The EMTA frequently partners with local organizations, including Erie Downtown Partnership and Erie Arts and Culture, to develop free city trolley service to promote public transit for downtown events. EMTA also partners with large employers like Erie Insurance and UPMC Hamot to promote employees to commute via public transit or utilize EMTA parknride options. EMTA also regularly attends Senior Fairs, Disability Fairs, Veterans Fairs, and other community events to promote programs and services offered by the Authority. Service Additions EMTA added service on the Cultural Loop. The Cultural Loop, a partnership between Erie Metropolitan Transit Authority, Erie Arts & Culture, Erie Downtown Partnership, and Erie County Convention Center Authority, is a FREE trolley parknride service providing Saturday evening service to popular events and activities in Erie s downtown area. Other service expansions include; Route 105 Corry Loop was developed to service the students who live in areas without transportation. Routes 14, 25, and 30 were developed to service major points of interest at more frequent intervals. 8

12 Management s Discussion and Analysis Marketing Highlights (continued) Print Media EMTA completely redesigned all program brochures and bus schedules during the fiscal year. EMTA s project goal is to give the Authority a more modernized look while also concentrating on content devolpment. 9

13 Management s Discussion and Analysis Marketing Highlights (continued) Print Media (continued) 10

14 Management s Discussion and Analysis Authority Financial Highlights The Authority s net position at was $50.2 million. This is an increase of $2.6 million over last year s 47.7 million, as restated. See notes to financial statements Note 21. The Authority s operating revenues for the fiscal year were $6.8 million, compared to last year s $7.1 million. The Authority s operating expenses for the fiscal year were $22.6 million, compared to last year s $21.0 million. The Authority s Operating Grants increased from $11.9 million last year to $12.3 million in this fiscal year. The Authority received Capital grants totaling $6 million in this fiscal year, compared to last year s $21 million. Most of these capital funds were used for construction costs of the facility project. Effective October 1, 2014, the base fare increased from $1.10 to $1.25. The cost for all discount fare products were also increased accordingly. The base fare will increase $.10 each October 1 through Overview of the Financial Statements The Authority s basic financials are comprised of a statement of net position; statement of revenues, expenses, and changes in net position; statement of cash flows; and notes to financial statements. This report also includes other supplementary information in addition to the basic financial statements themselves. The Authority s financial statements are prepared on the accrual basis in accordance with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB). Statement of Net Position. The statement of net position presents the financial position of the Authority. It presents information on assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. Statement of Revenues, Expenses, and Changes in Net Position. The statement of revenues, expenses, and changes in net position presents information showing how the Authority s net positon changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Revenues are recognized when earned, not when they are received. Expenses are recognized when incurred, not when they are paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned, but unused vacation and sick leave). 11

15 Management s Discussion and Analysis Overview of the Financial Statements (continued) Statement of Cash Flows. The statement of cash flows presents changes in cash and equivalents from operating, noncapital financing, capital and financing, and investing activities. The Authority presents cash flows from operating activities using the direct method, as required by GASB. Using the direct method, the Authority presents cash flows from operating activities directly by showing major classes of operating cash receipts and payments, such as receipts from services provided, payments to suppliers, and payments for employee s compensation and benefits. A reconciliation of the operating loss to net cash used in operations is also presented. Notes to Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the Authority s financial statements. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Authority s progress in funding its obligation to provide pension benefits to its employees. The required supplementary information can be found on pages 48 to 51 of this report. Also, presented in this report is information regarding the financial performance of the Authority by division. The Authority has two operating divisions: the Fixed Route Division, which provides scheduled bus service on fixed routes and the LIFT Division, which provides demand response transportation services in specially equipped vehicles. The statements by division can be found on pages 52 to 55 of this report. Financial Analysis Net Position. As noted earlier, net position may serve over time as a useful indicator of government s financial position. In the case of Erie Metropolitan Transit Authority, assets exceed liabilities by $50.2 million at the close of the most recent fiscal year. 12

16 Management s Discussion and Analysis Financial Analysis (continued) A condensed summary of the Authority s statement of net position is presented below at June 30: Assets Unrestricted current assets $ 5,142,610 $ 6,132,638 Restricted current assets 5,718,373 4,922,139 Capital assets, net 53,741,785 51,207,527 Total Assets 64,602,768 62,262,304 Deferred Outflow of Resources 904, ,400 Liabilities Current liabilities 2,574,848 4,042,744 Current liabilities payable from restricted assets 5,718,373 4,922,139 Noncurrent liabilities 6,411,545 5,064,132 Total Liabilities 14,704,766 14,029,015 Deferred Inflows of Resources 572, ,086 Net Position Investment in capital assets 53,741,785 51,207,527 Restricted 324,801 Unrestricted (3,836,716) (3,554,924) Total Net Position $ 50,229,870 $ 47,652,603 By far the largest portion of the Authority s net position is its investment in capital assets (e.g., land, buildings, buses, vans, and equipment). The Authority receives capital grant funding from the federal, state, and local governments to acquire these capital assets. Therefore, certain restrictions are placed on their disposal. Erie Metropolitan Transit Authority uses these capital assets to provide services to citizens. For this reason, and due to the restrictions placed on the disposal of these capital assets, these assets are not available for current or future spending. An additional portion of the Authority s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of net position is unrestricted. 13

17 Management s Discussion and Analysis Financial Analysis (continued) Changes in Net Position. A condensed summary of Erie Metropolitan Transit Authority s statement of revenues, expense, and changes in net position is presented below for the years ended June 30: Operating Revenues Passenger fares and government programs $ 4,932,726 $ 5,280,582 Route guarantee and contracts 1,536,730 1,448,422 Advertising and miscellaneous 333, ,204 Total Operating Revenues 6,803,418 7,066,208 Operating Expenses Salaries and benefits 14,915,066 13,663,951 Services 581, ,829 Fuel, lubricants, tires, and tubes 1,133,020 1,782,592 Materials and supplies 1,392,449 1,151,303 Casualty and liability 565, ,968 Depreciation 3,218,966 2,807,914 Other operating expense 767, ,778 Total Operating Expenses 22,574,217 20,997,335 Nonoperating Revenues Operating and planning grants Federal government 3,427,832 3,295,830 Commonwealth of Pennsylvania 7,937,794 7,779,115 Local governments 904, ,872 Interest income Loss on disposal of capital assets (317,111) Total Nonoperating Revenues 11,952,928 11,938,202 Loss Before Capital Grant Funding and Special Item (3,817,871) (1,992,925) Capital Grant Funding 6,395,138 20,980,695 Special Item Contribution from ErieWestern Pennsylvania Port Authority, as Restated 970,000 Increase in Net Position $ 2,577,267 $ 19,957,770 14

18 Management s Discussion and Analysis Financial Analysis (continued) Total operating revenues were $6.8 million in 2016 compared to $7.1 in ,000,000 Revenues by Type ,000,000 10,000,000 8,000,000 6,000,000 4,000, ,000,000 Passenger Fares & Gov. Programs Route Guarantee & Contracts Advertising & Misc Nonoperating Revenues Erie Metropolitan Transit Authority is dependent on federal, state, and local sources to fund its operating deficits. The funding assistance received from these entities is included in nonoperating revenues. Total nonoperating revenues were $11.9 million in 2016 compared to $11.9 in Passenger fare revenue was generated from the following ridership categories: Passengers Cash 625,095 17,628 Senior Citizens 176, ,661 School Passes 637, ,468 Discounted Passes 861, ,860 Transfers 136, ,269 Lottery (Seniors) 65,496 67,017 ADA/PWD 70,605 70,620 Medical Assistance 70,765 84,364 Others 575, ,726 Total Passengers 3,220,376 3,518,613 Total Mileage 2,973,072 3,117,459 15

19 Management s Discussion and Analysis Financial Analysis (continued) Total operating expenses were $22.5 million in 2016 compared to $21.0 million in ,000,000 Expenses by Type ,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000, ,000,000 0 Salaries and benefits Services Fuel, Materials and lubricants, tires, supplies and tubes Casualty and liability Depreciation Other operating expense The Authority is very labor intense with well over half of expenses going towards wages and fringes. Capital Asset and Debt Administration Capital Asset Activity The Authority s investment in capital assets represents the cost, net of accumulated depreciation, of a broad range of capital assets including buildings, buses and paratransit vehicles, maintenance and office equipment, service vehicles, and the AVL system. At June 30, 2016, the net cost of this investment amounted to $53.7 million. This represents a net increase (including additions, deletions, and depreciation) of $2.5 million or a 4.9% increase from the previous year. Capital Assets at June 30 (at Cost) Land $ 2,667,640 $ 2,769,239 Construction in progress 12,010,531 28,951,924 Land improvements 235, ,833 Buildings and improvements 37,249,481 15,708,815 Revenue vehicles and equipment 27,505,194 28,742,568 Service vehicles and equipment 594, ,622 Shop and garage equipment 1,828,969 1,633,932 Furniture and office equipment 574, ,800 Miscellaneous revenue equipment 3,088,413 3,050,662 $ 85,754,786 $ 82,159,395 16

20 Management s Discussion and Analysis Capital Asset and Debt Administration (continued) Capital Asset Activity (continued) During the fiscal year ended, the Authority expended $6 million on capital improvements, with the majority of the funds being used for the facility project. Additional information can be found in Note 10 of the financial statements. Debt Administration The Authority has a $100,000 unsecured line of credit. The balance at was $0. Additional information can be found in Note 11 of the financial statements. Contacting the Authority s Financial Management This financial report is designed to provide a general overview of Erie Metropolitan Transit Authority s finances. Any questions about this report or needs for additional financial information should be addressed to the Controller at Erie Metropolitan Transit Authority, 127 East 14 th Street, Erie, PA

21 Statement of Net Position Assets Current Assets Cash and cash equivalents $ 1,871,059 Cash restricted 5,718,373 Accounts receivable 159,303 Inventory 302,366 Prepaid expense 338,880 Operating assistance, planning, and other grants receivable 982,027 Capital grants receivable 1,488,975 Total Current Assets 10,860,983 Capital Assets Capital assets not being depreciated 14,678,171 Capital assets being depreciated 71,076,615 85,754,786 Accumulated depreciation (32,013,001) Capital Assets, Net 53,741,785 Deferred Outflow of Resources Employees' retirement plan 714,348 Nonbargained employees' supplemental retirement plan 190, ,588 Total Assets and Deferred Outflows of Resources 65,507,356 See accompanying notes. 18

22 Statement of Net Position (continued) Liabilities Current Liabilities Accounts payable $ 608,528 Accrued payroll and payroll taxes 313,105 Accrued compensated absences 945,770 Unearned operating revenue 596,307 Unearned revenue Commonwealth of Pennsylvania Act 44 funds 3,867,235 Unearned revenue Commonwealth of Pennsylvania Act 26 funds 146,822 Unearned revenue Act 26 local match 3,721 Unearned revenue Commonwealth of Pennsylvania Act 3 funds 321,132 Unearned revenue Act 3 local match 63,822 Unearned local and private operating and capital grants 1,315,641 Unredeemed tokens, tickets, and passes 111,138 Total Current Liabilities 8,293,221 LongTerm Liabilities Post employment benefit liability 3,873,596 Net pension liability Employees' retirement plan 1,878,267 Nonbargained employees' supplemental retirement plan 659,682 Total LongTerm Liabilities 6,411,545 Total Liabilities 14,704,766 Deferred Inflows of Resources Nonbargained employees retirement plan Employees' retirement plan 544,689 Nonbargained employees' supplemental retirement plan 28,031 Net Position 572,720 Net Position Investment in capital assets 53,741,785 Restricted proceeds from sale of capital assets 324,801 Unrestricted deficit (3,836,716) Total Net Position $ 50,229,870 See accompanying notes. 19

23 Statement of Revenues, Expenses, and Changes in Net Position Year Ended Operating Revenues Passenger fares $ 1,795,202 Route guarantees 1,257,606 Stated Shared Ride Program 958,338 State Medical Assistance Transportation Program 1,999,420 State Persons with Disabilities Program Grant 79,425 Area on Agency on Aging 100,341 Other contract revenue 279,124 Advertising 97,003 Miscellaneous income 236,959 Total Operating Revenues 6,803,418 Operating Expenses Salaries and wages 9,179,497 Fringe benefits 5,735,569 Services 581,963 Fuel and lubricants 943,560 Tires and tubes 189,460 Other materials and supplies 1,392,449 Utilities 334,636 Casualty and liability 565,200 Purchased transportation 310,717 Miscellaneous expenses 112,854 Depreciation 3,218,966 Taxes 9,346 Total Operating Expenses 22,574,217 Loss from Operations (15,770,799) Nonoperating Revenues (Expenses) Operating and planning grants Federal government 3,384,056 Commonwealth of Pennsylvania Act 44 funds 7,937,794 Local governments Act 44 matching funds 904,101 Planning grants Federal 43,776 Total Nonoperating and Planning Grants 12,269,727 Interest income 312 Loss on disposal of capital assets (317,111) Total Nonoperating Revenues (Expenses) 11,952,928 Loss Before Capital Grant Funding (3,817,871) See accompanying notes. 20

24 Statement of Revenues, Expenses, and Changes in Net Position (continued) Year Ended Capital Grant Funding Federal government 5,061,224 State government 1,169,273 Local government and other 164,641 Total Capital Grant Funding 6,395,138 Increase in Net Position 2,577,267 Net Position at Beginning of Year, as Previously Reported 48,843,003 Prior period adjustment (1,190,400) Net Position, Beginning of Year, as Restated 47,652,603 Net Position, End of Year $ 50,229,870 See accompanying notes. 21

25 Statement of Cash Flows Year Ended Cash Flows from Operating Activities Cash received from customers $ 5,646,487 Cash payments to suppliers for goods and services (11,225,597) Cash payments to employees for services (9,687,406) Other operating cash receipts 1,494,565 Net Cash Used in Operating Activities (13,771,951) Cash Flows Provided by Noncapital Financing Activities Receipts from operating and planning grants 12,208,221 Cash Flows from Capital and Related Financing Activities Purchase of capital assets (6,395,136) Proceeds from sale of capital assets 324,801 Receipts from capital grants 6,928,079 Net Cash Provided by Capital and Related Financing Activities 857,744 Cash Flows Provided by Investing Activities Interest income received 312 Net Decrease in Cash and Cash Equivalents (705,674) Cash and Cash Equivalent at Beginning of Year 8,295,106 Cash and Cash Equivalents at End of Year $ 7,589,432 Cash is Comprised of the Following on the Statement of Net Position Cash and cash equivalents $ 1,871,059 Cash restricted 5,718,373 $ 7,589,432 See accompanying notes. 22

26 Statement of Cash Flows (continued) Year Ended Reconciliation of Loss from Operations to Net Cash Used in Operating Activities Loss from operations $ (15,770,799) Adjustments to reconcile loss from operations to net cash used in operating activities Depreciation 3,218,966 (Increase) decrease in assets Accounts receivable 10,900 Inventories (25,392) Prepaids (172,588) Decrease in deferred outflow of resources (745,188) Increase (decrease) in liabilities Accounts payable and accrued expenses (1,804,771) Accrued compensated absences 10,140 Net pension liability 769,316 Post employment benefit liability 578,097 Unearned revenue 326,734 Increase in deferred inflow of resources (167,366) Net Cash Used in Operating Activities $ (13,771,951) See accompanying notes. 23

27 Notes to Financial Statements Note 1 Nature of Activity The Erie Metropolitan Transit Authority (the Authority) was incorporated in 1966 by the City of Erie and the County of Erie under the laws of the Commonwealth of Pennsylvania, in compliance with the Pennsylvania Municipality Authorities Act, for the purpose of providing public transportation within the County of Erie, including the City of Erie. The Authority is governed by a ninemember Board of Directors appointed by its sponsoring municipalities. The Authority has two operating divisions, the fixed route division, which provides scheduled bus service on fixed routes and the shared ride division, or LIFT, which provides doortodoor demand responsive transportation services in specially equipped vehicles to the general public and qualifying elderly and handicapped persons. The Authority is funded by a combination of passenger fares, other operating revenues, and federal, state, and local operating, planning, and capital grants. Note 2 Summary of Significant Accounting Policies The accompanying financial statements are in accordance with accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summary of the more significant accounting policies used by the Authority. The Financial Reporting Entity Accounting principles generally accepted in the United States of America require that the reporting entity consists of the primary government and organizations for which the primary government is financially accountable. In addition, the primary government may determine through the exercise of management's professional judgment, that the inclusion of an organization that does not meet the financial accountability criteria is necessary in order to prevent the reporting entity's financial statements from being misleading. In such instances, that organization should be included as a component unit if the nature and significance of their relationship with the primary government or other component units are such that exclusion from the financial reporting entity would render the financial reporting entity's financial statements to be incomplete or misleading. In evaluating how to define the reporting entity, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made based upon the above criteria. There are no agencies or entities which should be presented with the Authority. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of timing of related cash flows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. 24

28 Notes to Financial Statements Note 2 Summary of Significant Accounting Policies (continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) Operating revenues and expenses are distinguished from nonoperating items in the statement of revenues, expenses, and changes in net position. Operating revenues and expenses generally result from providing services in connection with the Authority's principal ongoing operations. The principal operating revenues of the Authority are charges to customers for transportation services. Operating expenses include the cost of providing transportation services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The principal nonoperating revenues of the Authority are operating, planning, and capital grants from the federal, state, and local governments and interest income. The principal nonoperating expense of the Authority is the loss on disposal of capital assets. When restricted and unrestricted resources are available for its use, it is the Authority s policy to use unrestricted resources for current operating purposes first. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets, Liabilities, Net Position, Revenues, and Expenses Cash and Cash Equivalents For purposes of reporting cash flows, the Authority considers all cash and cash equivalent accounts, which are not subject to withdrawal restrictions or penalties, and all highlyliquid debt investments purchased with a maturity of three months or less to be cash and cash equivalents. Restricted Assets Certain proceeds from the Authority s state and local grants are classified as restricted assets on the statement of net position because their use is limited by the grantor. Accounts Receivable All accounts receivable are shown net of an allowance for uncollectible, as applicable. Accounts receivable in excess of 90 days are evaluated for collectability and an allowance is established, as deemed necessary, based on the best information available and in an amount that management believes is adequate. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The allowance was $0 at. 25

29 Notes to Financial Statements Note 2 Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues, and Expenses (continued) Investments The Board of Directors is permitted to invest the Authority s funds as defined in the Pennsylvania Municipality Authorities Act. Authorized types of investments include the following: 1. U.S. Treasury bills 2. Shortterm obligations of the U.S. Government and Federal agencies 3. Insured savings and checking accounts and certificates of deposit in banks, savings and loan associations, and credit unions 4. General obligation bonds of the federal government, the Commonwealth of Pennsylvania or any state agency, or of any Pennsylvania political subdivision 5. Shares of mutual funds whose investments are restricted to the above categories When making investments, the Board of Directors can combine monies from more than one fund under the Authority s control for the purchase of a single investment and join with other political subdivisions and municipal authorities in the purchase of a single investment. Investments are stated at fair value. Inventory and Prepaid Expenses Inventory is valued at the lower of cost or market on a firstin, firstout basis method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses. Capital Assets Capital assets are those assets purchased under capital grant agreements with an estimated useful life greater than one year. Capital assets are recorded at historical cost and depreciated utilizing the straightline method over their estimated useful lives as follows: Land improvements Buildings and improvements Revenue vehicles and equipment Service vehicles and equipment Shop and garage equipment Furniture and office equipment Miscellaneous revenue equipment 10 to 15 years 5 to 40 years 5 to 12 years 4 to 7 years 5 to 12 years 4 to 10 years 5 to 12 years Maintenance and repairs of capital assets are expensed when incurred. Upon retirement, sale, or other disposition of capital assets, the cost and accumulated depreciation are eliminated from the accounts. 26

30 Notes to Financial Statements Note 2 Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues, and Expenses (continued) Capital Assets (continued) Upon the sale of capital assets, the proceeds, net of disposal costs, may be required to be returned to the various funding sources that initially funded the acquisition of these items. LongLived Assets Longlived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. An asset is considered to be impaired when the undiscounted estimated net cash flows to be generated by the asset are less than the carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair value of the impaired asset. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and discount rates reflecting varying degrees of perceived risk. Management has concluded that no impairment adjustments were required during the year ended. Compensated Absences The Authority records its obligation to compensate employees for vacation and sick time as the liability is incurred. The liability has been determined according to personnel policies of the Authority. Unearned Revenues Unearned revenues are those where asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Such amounts are measurable, but are not available. Deferred Outflows of Resources and Deferred Inflows of Resources A deferred outflow of resources represents a consumption of net position that applies to a future period not recognized as an outflow of resources until that future period. A deferred inflow of resources represents an acquisition of net position that applies to a future period not recognized as an inflow of resources until that future period. Net Position Net position is classified into three categories as follows: Investment in capital assets consist of capital assets, net of accumulated depreciation. Restricted net position are amounts that have externally imposed restrictions on how the funds can be spent. Unrestricted net position are amounts that do not meet the definitions of "investment in capital assets" or "restricted" and are available for Authority operations. 27

31 Notes to Financial Statements Note 2 Summary of Significant Accounting Policies (continued) Assets, Liabilities, Net Position, Revenues, and Expenses (continued) Capital Grants Capital grants are recorded for amounts restricted to capital acquisition. The Authority recognizes capital grants when earned (generally when the related capital expenditure is incurred). Capital grants are reported in the statement of revenues, expenses, and changes in net position, after nonoperating revenues. Advertising Costs Advertising costs are expensed as incurred. Employee Benefits The Authority participates in two pension plans covering substantially all employees. Pension plan expense is determined as specified in each plan. The Authority s policy is to fund all pension costs accrued. Recent Accounting Pronouncements In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pensions. This statement requires governments to report a liability on the face of the financial statements for the net OPEB liability. This guidance also requires governments to present more extensive note disclosures and supplementary information for OPEB plans. Statement No. 75 is effective for periods beginning after June 15, The Authority is current evaluating what effect, if any, the adoption of this guidance will have on the Authority s financial statements. In March 2016, the GASB issued Statement No. 81, Irrevocable SplitInterest Agreements. This statement amends financial accounting and disclosure requirements for governments receiving resources or beneficial interest in irrevocable splitinterest agreements. Statement No. 81 is effective for periods beginning after December 15, In March 2016, the GASB issued Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73. This statement amends and clarifies certain pension disclosures promulgated by Statements No. 67, 68, and 73. Statement No. 82 is effective for periods beginning after June 15, The Authority is currently evaluating what effect the adoption of these GASB statements will have on its financial statements. Note 3 Budget Matters The Authority has an annual budget, however, the Pennsylvania Municipal Authorities Act does not require it. 28

32 Notes to Financial Statements Note 4 Stewardship, Compliance, and Accountability Compliance with FinanceRelated Legal and Contractual Provisions The Authority had no material violations of financerelated legal and contractual provisions. Note 5 Cash and Cash Equivalents Cash Deposits The Authority has custodial credit risk on cash deposits. This is the risk that in the event of a bank failure, the Authority's deposits may not be returned. The Authority has a deposit policy for custodial risk that requires depository institutions to pledge securities as collateral for deposits that exceed depository insurance. As of, the carrying amount of the Authority's bank deposits was $7,589,182 and the corresponding bank balances were $7,675,447, of which $6,925,447 were exposed to custodial risk because they were uninsured, but collateralized with securities held by the pledging financial institution's trust department or agent, but not in the Authority's name. The Authority also maintains $250 in petty cash as of. Investments As of, the Authority held investments in the Pennsylvania INVEST Program (PA Invest) with a fair value of $299,557. These investments have maturities of less than one year and were rated AAAm by Standard & Poor s. The Authority does not have a formal investment policy, and does not have a policy that would further limit its investment choices. The Authority is authorized by statutes to invest its funds in certain governmental obligations. The investments held are consistent with these limitations. Note 6 Restricted Cash Cash, whose use is limited to a specific purpose, has been classified as "restricted" in the financial statements. Restricted assets consist of the following at : Unearned Act 44 revenue $ 3,867,235 Unearned Act 26 state funds 146,822 Unearned Act 26 local funds 3,721 Unearned Act 3 state funds 321,132 Unearned Act 3 local funds 63,822 Unearned local and private operating and capital grants 1,315,641 $ 5,718,373 29