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2 TABLE OF CONTENTS 1. Executive Summary Financial and Operating Summary... 6 Operating Indicators... 8 Key Drivers Assumptions and Sensitivity Analysis Consolidated Statement of Operations Analysis Consolidated Revenues Consolidated Expenses by Segment Consolidated Expenses by Category Investment in Capital Assets Capital Program Active and Approval in Principle (AIP) Projects Underway Changes in Financial Position Financial Assets Liabilities Liquidity and Capital Resources Cash Flows and Liquidity Debt Funded Statement of Operations Appendix I Consolidated Financial Statements Consolidated Statement of Financial Position Consolidated Statement of Operations Consolidated Statement of Changes in Net Financial Liabilities Consolidated Statement of Cash Flows Appendix II Allocated Costs between Divisions Page 1

3 Caution Regarding Forward-Looking Statements From time to time, TransLink makes written and/or oral forward looking statements, including in this document, and in other communications, in addition, representatives of TransLink may make forwardlooking statements orally to analysts, investors, the media and others. Forward-looking statements, by their nature, require TransLink to make assumptions and are subject to inherent risk and uncertainties. In light of the uncertainty related to the financial, economic, and regulatory environments, such risks and uncertainties, many of which are beyond TransLink s control, and the effects of which can be difficult to predict, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Page 2

4 1. Executive Summary TransLink was created in 1999 to plan, finance and operate the integrated transportation network for Metro Vancouver to benefit all businesses and residents within the region including cyclists, transit users, drivers, and people and businesses transporting goods and services. Fulfilling this mandate is the core of TransLink s business; in 2015, TransLink will deliver the day-to-day transportation services that the people of this region rely on. Using only existing revenue sources and by efficiently managing costs, TransLink will continue to provide reliable and safe transit services; co-fund the Major Road Network with municipalities; invest in the technologies that enable us to plan and operate the transportation system more effectively; and maintain our assets and infrastructure in a state of good repair. Key Priorities for 2015 While we plan and operate the day-to-day services at the core of our mandate, Translink must also look forward to prepare and maintain the transportation network for the future. To that end, TransLink will focus efforts on three key priorities in 2015: 1. Metro Vancouver Transportation and Transit Plebiscite - Support the Mayors Council efforts to achieve a positive outcome ( Yes vote) in the upcoming Plebiscite. In 2014, TransLink supported the Mayors Council to deliver their long-term transportation vision. The mayors vision (Transportation and Transit Plan) calls for a 0.5 per cent regional sales tax as a new transportation funding mechanism. Metro Vancouver residents will vote on this in a plebiscite slated for spring If approved, the new funding will enable the vision to be implemented through TransLink s 10-year Investment Plan. In 2015, TransLink will provide financial and in-kind staff support to the Referendum (Plebiscite) Secretariat for the purposes of achieving a positive outcome ( Yes vote) in the upcoming Plebiscite. The Secretariat will be co-sponsored by representatives of the Mayors Council and TransLink Board. It will undertake awareness building of the Transit and Transportation Plan and support for the Mayors Council s related advocacy activities. These activities include public and stakeholder engagement, market research, advertising, voter identification and get-outthe-vote activities. 2. Compass Card - Continue to launch the program with a phased approach throughout In 2015, we will deliver on our promise to move forward with the roll out of Compass in a phased manner so that customers can experience a smooth transition to this new product. Through the implementation period, we will communicate extensively with our customers and stakeholders, and provide education and training for all TransLink employees as we align business process and practices to the new Compass Card. Initiatives relating to the roll-out of Compass and the performance of Compass subsystems, will contribute directly to the convenience, safety and security of new and existing customers as well as providing long awaited transit information that will allow for better transit planning on routes and schedules. Page 3

5 3. Operations Continue to enhance the resiliency and reliability of the transportation network. SkyTrain: Operations is at the core of our mandate; in 2015 TransLink will make it a priority to improve our resilience so that we can improve the customer experience and sustain ridership. For the Expo and Millennium SkyTrain lines, we will move forward with implementing the recommendations in the independent review of the two major SkyTrain disruptions in In particular, we will look to improve our capacity to prevent, manage, and mitigate disruptions, and speed up system recovery. Evergreen integration: TransLink will also prepare to integrate the Evergreen extension into SkyTrain operations in TransLink will develop a system and service integration plan to ensure we can operate existing SkyTrain services and mitigate customer impacts, while bringing Evergreen into service. This is a major undertaking, as the Evergreen extension will increase the size of the rail system by 11 km and 6 stations. Pattullo Bridge: As one of the oldest bridges in the region, the aging Pattullo Bridge needs major capital investment. Funding for a replacement is yet to be secured; however, when funding is secured, the design and construction of a new bridge is expected to take approximately seven to 10 years. In the meantime, TransLink will move ahead with necessary work such as design work to mitigate seismic risk and address the condition of the bridge deck to keep the bridge safe for users until the long-term solution is in place Budget: Sustaining Efficiencies and Delivering Transportation Service In the 2015 budget, TransLink will use existing revenue sources to operate and maintain the significant transportation investments made over TransLink s first decade. TransLink today serves significantly more people and operates a much larger system, expanded to include the Millennium Line and Canada Line, an additional 60 SkyTrain cars, more than 1,500 new and replacement buses, introduction of the Access Transit program, the Golden Ears Bridge, a new SeaBus, and an investment of $390 million for the Major Road Network. Overall bus and rail service hours grew 47 per cent in those 10 years, while revenue passenger ridership grew 68 per cent. After this first decade of significant expansion, there was no new funding established which shifted TransLink s focus from rapid expansion to maintaining existing service, keeping capital assets in a state of good repair, and ensuring we do this as efficiently as possible. Over the last five years, TransLink has cut costs and eliminated waste, and added innovative ways to generate non-taxation revenue. A total savings of over $70 million per year is reflected in this budget. Examples of these savings include: Improving buying practices by centralizing the procurement process and introducing new purchasing methodologies such as category management and leveraging our purchasing power. Reducing operating and maintenance costs by implementing scheduling efficiencies and rightsizing fleets. Reducing overtime and labour costs. Optimizing bus services. Generating non-taxation revenue through Adjacent and Integrated Development (AID) projects, park and rides, and bus service optimization. TransLink s 2015 budget forecasts a $2.0 million surplus for Continuing operations revenues are forecast to grow by $39.2 million with growth in all revenue areas, except for fuel sales which remains flat. Page 4

6 Expenses for continuing operations are projected to increase by $60.8 million compared to the 2014 forecast. The increase reflects contractual labour increases ($20.5 million), amortization of capital assets ($11.1 million), capital infrastructure contributions to municipalities ($9.9 million), significant investments in maintenance, resiliency and reliability of the SkyTrain ($4.6 million), reallocation of credit card fees which were previously recorded in revenue ($2.2 million), Compass operating and maintenance and network costs ($6.3 million), Canada Line contractual increase $1.9 million and Board and Mayors increase $0.4 million. The remaining $3.9 million is for miscellaneous and inflationary increases. The 2015 budget does not include any new funding sources, and therefore service levels are maintained (with ongoing service optimization) using current funding levels. Page 5

7 Financial and Operating Summary CONSOLIDATED REVENUES AND EXPENSES Twelve months ending December VARIANCE ($ thousands) ACTUAL FORECAST* BUDGET Fav/(Unfav) Revenue Taxation 741, , ,456 10,927 Transit 495, , ,214 17,457 Transfers from Government 84,558 90,164 98,992 8,828 Golden Ears Bridge tolls 39,421 41,500 43,580 2,080 Interest Income 34,208 33,922 33,353 (569) Amortization of Deferred Concessionaire Credit 23,273 23,337 23,337 0 Miscellaneous 5,771 3,031 3, Sub Total Continuing Operations 1,424,115 1,439,239 1,478,421 39,182 Emissions Testing 19,619 12,486 0 (12,486) Gain on Disposal (167) 6,638 9,388 2,750 Total Revenue 1,443,567 1,458,363 1,487,809 29,446 Expenditures Bus Division 618, , ,590 (18,590) Corporate operations 61,906 68,053 76,931 (8,878) Rail Division 239, , ,563 (11,535) Roads & Bridges 93,466 74,339 87,940 (13,601) Transit Police 30,600 31,805 33,263 (1,458) Amortization of Capital Assets** 167, , ,321 (11,121) Interest** 172, , ,546 4,362 Sub Total Continuing Operations 1,385,127 1,395,335 1,456,154 (60,820) AirCare 16,163 15, ,648 Corporate - onetime 5,511 4,758 29,672 (24,914) Total Expenditures 1,406,801 1,415,741 1,485,826 (70,085) Surplus (deficit) for the year 36,766 42,622 1,983 (40,639) Accumulated surplus, beginning of year 89, , ,063 42,622 Accumulated surplus, end of year 126, , ,045 1,983 Revenues from continuing operations are budgeted to be $39.2 million higher than The two main sources of TransLink s revenue are transit fares and taxation. There is no fare increase for cash or general fare products scheduled for 2015 except a contractual increase for U-Pass; transit revenue is expected to increase $17.5 million due to increased transit ridership, continuing to reallocate bus service to high demand routes, park and ride use, adjacent and integrated development projects, and wireless telco royalties. Taxation revenue is expected to increase $10.9 million driven by property tax and parking rights tax. On-going expenditures are budgeted to increase $60.8 million over the 2014 forecast. The increase for 2015 is driven by contractual labour increases ($20.5 million), amortization of capital assets ($11.1 million), capital infrastructure contributions to municipalities ($9.9 million), significant investments in maintenance, resiliency and reliability of the SkyTrain ($4.6 million), reallocation of credit card fees which were previously recorded in revenue ($2.2 million), Compass operating and maintenance and network costs ($6.3 million), Canada Line contractual increase $1.9 million and Board and Mayors increase $0.4 million. The remaining $3.9 million is for miscellaneous and inflationary increases. Page 6

8 One-time costs for 2015 include contingency provision, Sky Train resiliency improvements, funding for plebiscite, rapid transit studies, and Compass implementation. FINANCIAL INDICATORS as at December Budget Variance ($ thousands) ACTUAL Q2 FORECAST* BUDGET Fav/ (Unfav) % Cumulative Funded Surplus 1 342, , ,544 (17,996) (4.9%) Gross interest cost as a % of operating revenue % 13.0% 12.4% 0.6% 4.8% Capital Assets 3 4,451,189 4,636,232 4,871, , % Net debt 4 (1,913,921) (1,994,326) (2,180,655) (186,329) (9.3%) Deferred concessionaire credits and GEB contractor liability 5 (1,664,001) (1,648,587) (1,624,788) 23, % Total net debt 6 (3,577,922) (3,642,913) (3,805,443) (162,530) (4.5%) * Q2 Forecast has been updated for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations 1 The funded surplus as calculated under the SCBCTA Act represents the amount of resources available to fund future operations. 2 Ratio of 12 month results. Operating revenue includes fares, taxation, GEB toll revenue, operating transfers from Provincial government and miscellaneous income figure restated for BCRTC capital spares 4 Includes bonds, debentures, capital leases, short-term debt net of sinking funds and debt reserve deposits 5 Includes deferred concessionaire credits and GEB contractor liability. 6 Net debt + deferred concessionaire credits and GEB contractor liability. In 2015, the cumulative funded reserve is forecasted to decrease $18.0 million to $352.5 million compared to the 2014 second quarter forecast. The gross interest cost as a percentage of operating revenues improves to 12.4 per cent in 2015 (13 per cent in 2014) on lower interest costs and higher revenues. Planned capital spending during 2015 will result in a net increase of $235.4 million (5.1 per cent) in capital assets. Significant projects are Evergreen, Compass Card and Hamilton Transit Centre. Net debt increases by $186.3 million (9.3 per cent) in 2015 to $2.18 billion. Increased long-term borrowing is anticipated towards the end of 2015, offset by increased sinking fund contributions. Deferred concessionaire credit, which is the liability owed to the Golden Ears Bridge contractor, declines by $23.8 million in 2015 relative to the 2014 forecast as principal payments begin in 2015 for the Golden Ears Bridge contractor liability. Page 7

9 Operating Indicators OPERATING INDICATORS Twelve months ending December Budget Variance ACTUAL Q2 FORECAST BUDGET Fav/ (Unfav) % Scheduled Transit Service Overall Performance Rating (out of 10) % Service Hours 6,211,708 6,262,887 6,318,728 55, % Total Cost Recovery 55.4% 52.6% 52.5% (0.1%) (0.3%) Operating Cost per Service Hour * (1.52) (1.1%) Complaints per million Boarded Passengers (0.3) (0.3%) Access Transit Service Number of Trips 1,181,369 1,172,239 1,212,735 40, % Operating Cost per Trip % Number of Trips Denied 42,418 34,740 1,800 32, % Complaints per million Boarded Passengers 1, ,035 (115) (12.6%) Golden Ears Bridge Crossings (millions) % Average Toll per Crossing % Ridership (thousands) Boarded passengers 355, , ,004 7, % Revenue passengers 233, , ,368 5, % Average fare per revenue passenger % * Includes Bus, Rail and Police operating costs Conventional System Service hours provided will increase by 55,841 (0.9 per cent) in 2015 compared to the 2014 forecast. These hours are the annualization of existing service plus continuing adjustments for service optimization. Cost recovery in 2015 is slightly lower than the 2014 forecast as transit revenues are expected to increase at a lower rate than operating costs. Operating cost per service hour in 2015 is forecast to increase 1.1 per cent over the 2014 forecast which is below inflation. Complaints per million boarded passengers are forecast to increase slightly in 2015 by 0.3 per cent over the updated 2014 forecast due to increased demand with no increase in service. Access Transit More than 40,000 additional trips are projected in 2015 compared to 2014, an increase of 3.5 per cent. A large portion of this increase is due to increased use of taxis and efforts to improve the productivity on HandyDART service. Trips are forecast to grow faster than costs in 2015, bringing the budgeted cost of each trip down by $0.68 (1.6 per cent) in Page 8

10 After a successful Taxi Pilot project, additional investment was provided starting June 2014 to provide additional taxi rides for Access Transit customers. The number of denied trips for 2015 is projected to be reduced by 94.8 per cent from the 2014 levels. The increased taxi use lowers overall delivery costs, resulting in the ability to provide more service. Golden Ears Bridge Crossings for the Golden Ears Bridge are expected to increase in 2015 by 231,000 (2.0 per cent). The rates for crossing also include an inflation factor in Transit Ridership Revenue passenger trips are expected to grow by 5.2 million (2.2 per cent) in 2015 compared to the 2014 annual forecast, mainly due to general population growth and continued service optimization. The average fare per revenue passenger is expected to increase from the 2014 forecast of $2.05 to $2.08 for the 2015 budget. Approximately one cent of this increase can be attributed to a one-off prior period adjustment relating to the Government Bus Pass. There is no scheduled fare increase on cash or fare products in 2014 and 2015 with the exception of a contractual price increase for U-Pass. Page 9

11 Key Drivers The following table highlights the primary drivers of change between the 2015 budget and the 2014 forecast: Key Drivers ($ millions) Revenues ACTUAL Q2 FCST* BUDGET $ Change Drivers Transit Golden Ears Bridge Tolls growth in ridership of 2.2 per cent U-Pass rate increase effective May 1, 2015 growth in crossings of 2 per cent 2 per cent rate increase (CPI) effective July 2015 Taxation property tax revenue increase of 3 per cent fuel tax revenues, improved growth in Gasoline sales offset by reduced growth in Diesel sales Transfers from Government varies with nature and timing of capital projects Interest Income (0.6) lower cash balances projected for the year Emissions Testing (12.5) AirCare program eliminated at end of 2014 Expenditures before debt service costs Transit (Bus & Rail Division) Labour - contractual increases Insurance - rate increases Materials and contract services - inflation Increased staff and maintenance to improve reliability and resiliency of SkyTrain Transit Police fill vacancies of sworn officers Corporate operations Compass card implementation Contractual labour increases Roads & Bridges timing of capital projects undertaken by municipalities AirCare (15.6) AirCare program for emissions testing of light cars and trucks eliminated at end of 2014 Corporate - onetime Plebiscite costs Rapid transit studies SkyTrain resiliency improvements Compass card implementation Contingency provision of one per cent of operating expenditures Debt service costs Amortization several projects reaching completion during 2015 and being capitalized to fixed assets Interest (4.4) lower interest rates higher allocation to capital projects for interest during construction * Q2 Forecast has been updated for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations Page 10

12 Assumptions and Sensitivity Analysis The following table highlights the financial impact of changes in key assumptions used to develop the 2015 budget: ASSUMPTIONS SENSITIVITIES RATE / Impact VOLUME Change ($ millions) Revenue Regional Fuel Consumption millions of litres 2,024 1 per cent +/- 3.4 Ridership impact on Fare Revenue per cent +/- 5.0 Golden Ears Bridge Crossings millions of crossings per cent +/- 0.4 Expense Diesel cost dollars per litre 1.29 $0.10 +/- 4.5 Operational Diesel Use millions of litres per cent +/- 0.6 Interest rate Short term 1.9% 0.5 per cent +/ Long term 5.0% 0.5 per cent +/- 1.0 Inflation General 1.9% 0.5 per cent +/- 0.3 Materials 1.9% 0.5 per cent +/- 0.3 Electricity 6.0% 0.5 per cent +/- 0.1 Page 11

13 3. Consolidated Statement of Operations Analysis Consolidated Revenues 2015 Budget and 2014/2013 Comparatives CONSOLIDATED REVENUES Twelve months ending December Budget Variance ($ thousands) ACTUAL Q2 FORECAST* BUDGET Fav/ (Unfav) % Taxation 741, , ,456 10, % Transit 495, , ,214 17, % Transfers from Government 84,558 90,164 98,992 8, % Golden Ears Bridge tolls 39,421 41,500 43,580 2, % Interest Income 34,208 33,922 33,353 (569) (1.7%) Amortization of Deferred Concessionaire Credit 23,273 23,337 23, % Miscellaneous 5,771 3,031 3, % Sub Total Continuing Operations 1,424,115 1,439,239 1,478,421 39, % Emissions Testing 19,619 12,486 0 (12,486) (100.0%) Gain on Disposal (167) 6,638 9,388 2, % PSAB Total 1,443,567 1,458,363 1,487,809 29, % * Q2 Forecast has been updated for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations Overview TransLink receives its revenue mainly through taxation, user fees and government transfers. In recent years, TransLink has implemented new non-taxation revenue sources such as wireless telco royalties and Adjacent and Integrated Development projects. Revenues from continuing operations for 2015 are expected to be $1.478 billion, an increase of $39.2million (2.7 per cent) over the 2014 forecast. Taxation 2015 Budget and 2014/2013 Comparatives TAXATION REVENUES Twelve months ending December Budget Variance ($ thousands) ACTUAL Q2 FORECAST BUDGET Fav/ (Unfav) % Fuel 349, , ,111 (158) (0.0%) Property & Replacement 316, , ,095 9, % Parking Rights 56,642 58,669 60,235 1, % Hydro Levy 19,295 19,644 20, % Total Taxation 741, , ,456 10, % Taxation revenues account for just over 50 per cent of the total consolidated revenues. The majority of the taxation revenues come from fuel (45 per cent) and property tax (44 per cent). Fuel tax revenues based on litres sold for 2015 are estimated to remain relatively unchanged from 2014 in total, although there are varying trends between diesel and gasoline. Lower fuel prices and unfavourable exchange rates, making cross-border fuel purchases less attractive, are expected to have a positive impact on gasoline volume sold in However, this is offset by a recent decline in diesel volumes, suggesting Page 12

14 that the increase represented in the 2014 forecast was only a short-term spike estimates reflect flatter growth. Property tax revenues include an allowable three per cent increase in property tax revenue received as permitted in TransLink s legislation. The replacement tax component remains at $18 million. Risks and Challenges Total fuel tax volumes are unpredictable, as fuel suppliers have up to 48 months to make subsequent adjustments. Transit 2015 Budget and 2014/2013 Comparatives TRANSIT REVENUES Twelve months ending December Budget Variance ($ thousands) ACTUAL Q2 FORECAST BUDGET Fav/ (Unfav) % Fare Revenue 480, , ,397 17, % Other 15,161 16,585 16, % Total Transit 495, , ,214 17, % Transit revenue makes up 35 per cent of TransLink s total consolidated revenue. This consists of cash fares and discounted prepaid daily, monthly and annual passes. Also included are other transit revenues such as advertising, property rental, parking lot fees and retail. Total transit revenue is expected to be up $17.5 million (3.5 per cent) from the 2014 forecast. This increase is mainly due to expected natural growth in ridership and the annualised impact of increased U-Pass rates but also includes the increase in fare revenues resulting from the impact of service optimization over the past few years. In 2012, TransLink introduced service optimization, which shifts conventional bus service from underperforming routes to high demand routes. The underperforming routes were served by replacing longer, 40-foot conventional buses with community shuttles and in some cases, reduced frequency. This has allowed for more revenue passengers to board within the same allotted service hours. The estimated increased revenue is over $10 million per year. There is no other scheduled fare increase on cash or fare products in 2014 and 2015, with the exception of the contractual price increase for U-Pass. Risks and Challenges The transit fare revenue risks include uncertainty of fuel prices and the impact they have on ridership, as well as the impact of migration to different product options with the implementation of Compass Card. Page 13

15 Consolidated Expenses by Segment 2015 Budget and 2014/2013 Comparatives CONSOLIDATED EXPENSES BY SEGMENT Twelve months ending December Budget Variance ($ thousands) ACTUAL Q2 FORECAST* BUDGET Fav/ (Unfav) % Bus Division 618, , ,590 (18,590) (2.9%) Corporate Operations 61,906 68,053 76,931 (8,878) (13.0%) Rail Division 239, , ,563 (11,535) (4.5%) Roads & Bridges 93,466 74,339 87,940 (13,601) (18.3%) Transit Police 30,600 31,805 33,263 (1,458) (4.6%) Amortization of Capital Assets** 167, , ,321 (11,121) (6.9%) Interest** 172, , ,546 4, % Sub Total Continuing Operations 1,384,521 1,395,335 1,456,154 (60,820) (4.4%) AirCare 16,163 15, , % Corporate - onetime 6,117 4,758 29,672 (24,914) (523.6%) Total Expenses by Segment 1,406,801 1,415,741 1,485,826 (70,085) (5.0%) * Q2 Forecast has been updated for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations ** shown as a separate line to help facilitate analysis of debt service costs, as GAAP statements allocate these amounts to the various segments Overview TransLink is responsible for delivering transit services, owns and operates five bridges, and provides operating and capital funding for the Major Road Network (MRN) and cycling in Metro Vancouver. Before one-time items, expenditures for 2015 are forecast at $1.46 billion, an increase of $60.8 million (4.4 per cent) over the 2014 forecast. Bus Division The bus division s budget is $653.6 million, up $18.6 million (2.9 per cent) from the 2014 forecast. In , $25 million in cost reductions were achieved through scheduling efficiencies, vehicle conversions and fleet reductions resulting in lower spare vehicles. Indirect costs reductions during that period are related to the reorganization, and less training. Factoring out the budgeted contractual labour and benefits increase of $11.4 million, leaves an increase of 1.1 per cent which includes inflation. Maintenance materials will increase in 2015 mainly due to emergency power batteries on the trolley fleet that require replacing at an estimated cost of $1.5 million. Fare media costs are also increasing with the implementation of Compass Cards, as well as increased facility costs. These additional costs have been offset by additional initiatives such as fuel cost savings from CNG replacement vehicles which will result in $1.1 million savings in Corporate Operations Corporate operations costs are budgeted to increase $8.9 million (13.0 per cent) from the 2014 forecast. Excluding Compass operating costs which ramp up in 2015, it leaves an increase of $0.8 million or only 1.3 per cent which is used for re-investment in Business Technology. Rail Division Rail division costs are budgeted to increase $11.5 million (4.5 per cent) from the 2014 forecast to $266.6 million. Compensation increases are the result of contractual agreements of $4.9 million (1.8 per cent of total rail division budget) and increases in employer-paid benefits and employee future benefits for an Page 14

16 additional $1.6 million. SkyTrain is increasing staffing levels, at a cost of $2.6 million, to improve service delivery as well as ramp up towards the 2016 start-up of the Evergreen extension. During , the rail division reduced costs by $4.3 million from reduced non-revenue kilometres, reduced off-peak frequency without impacting riders, and reduced Canada Line expenses. Ongoing activities to maintain a state of good repair at the rail division will cost an additional $1.4 million over the 2014 forecast. Activities budgeted specifically to address the November 2014 independent review of the July 2014 SkyTrain disruptions are expected to cost $668,000 for the first phase with more to spend over the next four years. Lease payments for West Coast Express railcars have increased by $1.3 million and increases in insurance and fare media costs overlap with Compass system account for most of the remainder of the overall increase. Roads and Bridges Total expenditures for roads and bridges in 2015 are expected to be $13.6 million higher than the 2014 forecast. The increase is almost entirely attributable to timing of the capital infrastructure contributions to municipalities for the Major Road Network. Annual funding allocated to municipalities for rehabilitation of the Major Road Network (MRN) remains unchanged; however, the timing of expenditures vary from year to year. In recent years, TransLink has tightened the requirements for completing the work and now municipalities have a four-year period to use the funds. Transit Police Transit Police expenditures for 2015 are budgeted to increase $1.5 million (4.6 per cent) from the 2014 forecast. The increase is mainly attributable to filling sworn officer vacancies that were deferred in With the opening of the Evergreen extension, Transit Police will continue to operate with the same number of sworn officers. Amortization and Interest Interest expense is budgeted to be down $4.4 million (2.6 per cent) from the 2014 forecast, which is mainly attributable to more interest being capitalized during construction in 2015, as a result of the significant capital projects underway. Amortization is budgeted to be $11.1 million higher than the 2014 forecast. The increase is a result of several projects reaching completion in 2015, specifically, the Expo line propulsion upgrade and Compass Card projects. AirCare In accordance with the provincial government s May 2012 announcement, the AirCare program for testing of light cars and trucks was eliminated at the end of Corporate One Time One-time costs in the 2015 budget are attributable to contingency and TransLink s major 2015 initiatives such as implementation of Compass Card, and the 2015 Metro Vancouver Transportation and Transit Plebiscite. Risks and Challenges The plebiscite taking place in spring 2015 and the launch of the Compass Card during 2015 are two significant milestones for TransLink which carry their own risks and operational challenges. Improving Page 15

17 SkyTrain resiliency by addressing the recommendations from the November 2014 independent review is a major undertaking. In addition to consuming employee and financial resources, all three projects will have a significant impact on TransLink s operations beyond the 2015 calendar year. Consolidated Expenses by Category 2015 Budget and 2014/2013 Comparatives by expense category CONSOLIDATED EXPENSES BY CATEGORY Twelve months ending December Budget Variance ($ thousands) ACTUAL Q2 FORECAST* BUDGET Fav/ (Unfav) % Administration 24,399 28,771 35,250 (6,479) (22.5%) Amortization of Capital Assets 167, , ,321 (11,121) (6.9%) Capital Infrastructure contributions 52,432 35,119 44,978 (9,859) (28.1%) Contracted Services 189, , ,467 (8,996) (4.6%) Fuel and Power 68,815 70,858 71,513 (655) (0.9%) Insurance 17,460 18,695 19,765 (1,070) (5.7%) Interest 172, , ,546 4, % Maintenance, Materials and Utilities 102, , ,669 (3,771) (3.3%) Professional and Legal 13,752 12,575 16,381 (3,806) (30.3%) Rentals, Leases and Property Tax 45,701 38,484 40,285 (1,801) (4.7%) Salaries, Wages and Benefits 529, , ,979 (17,625) (3.2%) Sub Total Continuing Operations 1,384,521 1,395,335 1,456,154 (60,820) (4.4%) AirCare 16,163 15, , % Corporate - onetime 6,117 4,758 29,672 (24,914) (523.6%) Total Expenses by Category 1,406,801 1,415,741 1,485,826 (70,085) (5.0%) * Q2 Forecast has been updated for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations Administration Administrative costs are budgeted to be $35.3million, $6.5 million higher than the 2014 forecast. The increase reflects reallocation of $2.2 million of credit card in charges related to fare revenue, $1.2 million for fare media, $2.2 million of overall increases to computer and system costs resulting from new software and licenses, and $0.9 million for miscellaneous items and inflation. Amortization of Capital Assets Amortization is budgeted to be $11.1 million higher than 2014 forecast as a result of several projects reaching completion in 2015 and therefore being capitalized to fixed assets, specifically the Expo Line propulsion upgrade and Compass Card projects. Capital Infrastructure Contributions Capital infrastructure contributions are budgeted to be $9.9 million higher in The increase in spending is directly attributable to municipal capital spending projects. Annual funding allocated to the municipalities for rehabilitation of the Major Road Network (MRN) remains unchanged; however, the timing of expenditure vary from year to year as municipalities have a four-year window to use the funds. Contracted Services Spending on contracted services in 2015 is budgeted to be $9.0 million more than The main increase is a combination of $5.9 million related to the Compass Card program and $1.9 million related Page 16

18 to the inflation rate applied to the Canada Line performance payments. In , $3.2 million in savings was achieved through elimination of funding for Canada Line change orders. Fuel and Power Fuel costs are budgeted to increase $0. 6 million in 2015 from the 2014 forecast, relating to power costs at the rail division which are estimated to increase $620,000. Interest Interest expense is budgeted to be lower by $4.4 million (2.6 per cent) from the 2014 forecast. The lower overall interest expense in 2015 is due to an additional $9.2 million more interest being capitalized during construction as a result of the significant capital projects underway. This is partially offset by an increase in interest due to increased debt. Maintenance, Materials and Utilities Maintenance, materials and utilities costs are budgeted to be up $3.7 million (3.3 per cent) from the 2014 forecast. Rail division increases are $1.9 million, including $936,000 of projects to maintain assets in a state of good repair and $120,000 to address recommendations from the 2014 independent review of service disruptions, offset by the removal of $600,000 in recoveries unique to Bus division increases are $1.5 million arising from $2.2 million spending on trolley battery replacements and net third-party service expenses related to trolley overhead and $800,000 of inflationary increases, offset by a $1.4 million reduction in revenue vehicle materials due to work-plan mix and concerted costcontainment efforts. Use of fleet conversions and reduced spare vehicles has lowered maintenance costs over the last few years. Professional and Legal Professional and legal fees are budgeted to increase $3.8 million from the 2014 forecast. This is due to $2.2 million in feasibility studies, $0.4 million for Mayors Council, $0.5 million for Real Estate programs which are recoverable, and $0.7 million towards other miscellaneous projects. Rentals, Leases and Property Tax Rentals, leases and property tax costs are budgeted to increase $1.8 million compared to the 2014 forecast mainly due to scheduled escalating rental payments for the West Coast Express rail cars. Salaries, Wages and Benefits Salaries, wages and benefits are expected to increase $17.6 million (3.2 per cent) from the 2014 forecast. Bus division compensation and benefits is increasing $12.2 million as a result of contractual increases, operator sick leave, and employer-paid benefits. Rail division compensation and benefits is increasing $6.8 million due to a combination of contractual rate increases, increases to staffing levels in preparation for the Evergreen extension and to address resiliency concerns and maintain system-wide state of good repair. Salaries, wages and benefits at corporate headquarters are estimated to be in line with the 2014 forecast, reflecting increases relating to new hires required for enterprise technology solutions and the completion phase of Compass Card, contractual labour increases for existing employees, offset by expected vacancy savings of approximately $5 million based on experience over prior years. In , $6.1 million in labour efficiencies were achieved from reduced supervisors and other operations staff. AirCare The AirCare program was eliminated at the end of Page 17

19 4. Investment in Capital Assets Summary of Capital, by Program 2015 Capital Cash Flow Total Current Budget ($ thousands) Gross Cost Less: Funding Net Cost Gross Cost Less: Funding Net Cost 2015 New Capital Program Equipment 1, ,756 1, ,850 Facilities 7,988 (1,832) 6,156 14,539 (1,831) 12,708 Infrastructure 34,630 (5,062) 29,568 71,101 (16,930) 54,171 Technology 9, ,089 10, ,301 Vehicles - Revenue ,200 (72,144) 14,056 Vehicles - Non Revenue 1, ,667 1, ,932 Major Construction 2,669 (265) 2,404 4,626 (265) 4,361 Subtotal 57,800 (7,160) 50, ,547 (91,168) 99,379 Capital Infrastructure Contributions 19, ,742 24, ,214 Total 77,542 (7,160) 70, ,761 (91,168) 123,593 Capital In Progress Equipment 8,592 (2,915) 5,678 40,237 (4,500) 35,737 Facilities 55,996 (45,762) 10, ,018 (109,676) 120,342 Infrastructure 133,023 (24,561) 108, ,298 (253,358) 625,940 Technology 6, ,696 59,011 (3,694) 55,317 Vehicles - Revenue 60,134 (48,265) 11, ,036 (471,009) 235,027 Vehicles - Non Revenue , ,029 Major Construction 93, , , ,841 Subtotal 357,854 (121,502) 236,351 2,323,470 (842,237) 1,481,233 Capital Infrastructure Contributions 25, , , ,583 Total 383,090 (121,502) 261,588 2,555,053 (842,237) 1,712,816 Grand Total 460,632 (128,662) 331,970 2,769,814 (933,405) 1,836,409 Overview TransLink s current mandate is to maintain existing service levels and ensure assets are in a state of good repair. TransLink s capital program ensures assets provide the most efficient and effective infrastructure required to serve its customers and stakeholders. Capital projects are planned through an integrated enterprise system where bus, rail and TransLink initiatives are evaluated against long-term goals and corporate strategies. The above table highlights the capital projects grouped into asset categories and includes capital project contributions for which TransLink is authorized and mandated to provide funding to address regional Major Road Network needs. The total budget for the 2015 capital program is $214.8 million. The projected 2015 cash flow for capital is $460.6 million which is made up of $383.1 million for existing capital programs and $77.5 million for the 2015 capital program. The net cash impact to 2015 after senior government funding is $332.1 million. Page 18

20 2015 Capital Program The 2015 capital program is focused on maintaining existing service levels and keeping the system in a state of good repair with some minor upgrades. This focus remains unchanged until a new, sustainable funding source is identified. TransLink s 2015 capital program budget is $190.5 million plus $24.2 million in contributions to the Major Road Network and Bike Capital Program, for a total of $214.8 million. Anticipated senior government contribution total $91. 2 million, so net capital spending for the total 2015 capital program are forecast to be $123.6 million. The following table provides summary information on the projects with a project budget greater than $2 million for each category New Capital Program ($ thousands) Project Name Description Gross Cost 2015 Capital Cash Flow Total Project Budget Less Funding TransLink Net Cost Gross Cost Less Funding TransLink Net Cost Equipment Other Three projects in this asset category 1, ,756 1, ,850 Facilities STC CNG Facility Retrofit Retrofit the Surrey Transit Centre with CNG infrastructure to delivery alternate fuel dispensing to new CNG fleet addtion 4,903 (1,792) 3,111 9,238 (1,792) 7,446 Other Six other projects in this asset category 3,085 (40) 3,045 5,301 (39) 5,262 Infrastructure 2015 Unallocated Funds for Ad Hoc Budget envelope to fund Ad Hoc project Projects requests 10, ,000 10, ,000 Joyce Collingwood SkyTrain Station Upgrade Construction Joyce SkyTrain station upgrade construction to improve passenger circulation and capacity 6,414 (4,783) 1,631 18,751 (16,430) 2,321 Metrotown Station and Exchange Upgrade Construction Phase 2 Expo and Millennium Line Signage and Station Fixture Replacement Second phase of Metrotown SkyTrain station upgrade construction to include a new bus exchange First of multi-year program to upgrade signage at Expo and Millennium Line stations for operational changes, and code, regulatory and TransLink standard compliance 2015 BCRTC Resiliency Program Capital projects to insure business continuity and operational resiliency 2, ,664 11, , , ,760 2, ,951 6, ,000 Seismic Upgrade South Seabus and Skywalk - Construction Improvement to the South SeaBus terminal and SkyWalk structures for seismic resiliency 2, ,138 6, ,000 Other Sixteen other projects in this asset category 9,465 (279) 9,186 12,390 (500) 11,890 Technology Applications Other Thirteen projects in this asset category 9, ,089 10, ,301 Vehicles Conventional Revenue 2016 Conventional Bus Replacement 2016 HandyDART Replacement Vehicles Other Procure and put into service 84 forty-foot standard and 26 sixty-foot articulated replacement buses ,400 (63,324) 13,076 Replacing 39 HandyDART vehicles ,600 (5,040) 560 One other project in this asset category for replacement of 20 Community Shuttle vehicles ,200 (3,780) 420 Vehicles Non-Revenue Other Four projects in this asset category 1, ,667 1, ,932 Major Construction Projects Other One project in this asset category for Evergreen integration 2,669 (265) 2,404 4,626 (265) 4,360 Total, before MRN Capital Infrastructure Contributions 57,800 (7,160) 50, ,547 (91,168) 99, Major Road Network and Bike Capital Program Annual contribution program to member municipalities for pavement rehabilitation, and road and bike infrastructure upgrades 19, ,742 24, ,214 Total 77,542 (7,160) 70, ,761 (91,168) 123,593 Page 19

21 Active and Approval in Principle (AIP) Projects Underway The table highlights specific projects with project budget greater than $5 million and cash flows in Capital In Progress (in $ 000) 2015 Capital Cash Flow Total Project Budget Project Name Description Gross Less TransLink Gross Less TransLink Cost Funding Net Cost Cost Funding Net Cost Equipment ATC Existing Equipment Replacement - Phase 2 Other Replace ATC equipment to improve system reliability and maintain state of good repair. Thirty other projects in this asset category 3,238 (2,915) 323 6,515 (4,500) 2,015 5, ,354 33, ,722 Subtotal for Equipment 8,592 (2,915) 5,677 40,237 (4,500) 35,737 Facilities Hamilton Transit Centre Design and construction of a new 53,746 (45,762) 7, ,539 (84,978) 52,561 Preliminary and Detailed Design transit centre in the Hamilton area of Richmond Other Seventeen other projects in this asset 2, ,250 92,479 (24,698) 67,781 category Subtotal for Facilities 55,996 (45,762) 10, ,018 (109,676) 120,342 Infrastructure Golden Ears Bridge Canada Line Bus Loops Main St. SkyTrain Stn Upgrade - Construction Smart Card and Faregate - Phase 3 EXPO Line Propulsion Power Upgrade Pattullo Bridge short term rehabilitation Phase 2 Metrotown Station and Exchange Upgrade Design Commercial Broadway SkyTrain Station Phase 2 Upgrade Design New Westminster Station Upgrades Construction Pattullo Bridge Rehabilitation Phase 2 Design STC CNG Facility Retrofit TOH Metrotown Group Rectifier Replacement Replace Platform LEDs System Other Remaining spending relates to sound wall installation. Design, tendering and construction of bus loops at the Marine Drive, Bridgeport and Richmond Brighouse Canada Line stations. Construction of Main Street Sky train station Design and construction of system wide Compass Card and Faregate infrastructure and supporting ancillary facilities. Design, supply and install transformerrectifier units at 10 substations, 19.1 KM of power rail, and power cable feeders Replace components of the Pattullo Bridge. Upgrade construction of Metrotown SkyTrain station and new bus exchange. Design and construction of Phase 2 Commercial Broadway SkyTrain station development to increase capacity Upgrade construction of New Westminster SkyTrain station Design for structural seismic upgrade work on the Pattullo Bridge AIP - Retrofit the Surrey Transit Centre to accommodate CNG bus fuelling and maintenance requirements AIP - Design and construct rectifier station replacements at Central Park, Willingdon East and Willingdon West rectifier stations. AIP - Replace the existing red PLED panels at the Expo and Millennium Line stations Fifty seven other projects in this asset category , ,000 2, ,456 11, ,669 6, ,068 33,195 (20,851) 12,344 35,922 (14,761) 21, ,200 (101,822) 92,378 16,904 (5,831) 11,073 58,335 (43,000) 15,335 3, ,000 9, ,000 3, ,669 44,320 (34,800) 9,520 9, ,498 60,700 (28,217) 32,483 1, ,931 9,000 (5,420) 3,580 41, , , ,000 2,453 (2,208) 245 5,000 (2,208) 2,792 1,956 (1,761) 195 6,300 (4,725) 1,575 1, ,213 12, ,000 5, , ,579 (12,315) 143,264 Subtotal for Infrastructure 133,023 (24,561) 108, ,298 (253,358) 625,940 Page 20

22 Active and Approval in Principle (AIP) Projects Underway (Cont.) Capital In Progress (in $ 000) 2015 Capital Cash Flow Total Project Budget Project Name Description Gross Less TransLink Gross Less TransLink Cost Funding Net Cost Cost Funding Net Cost Major Construction Projects Evergreen Line - TransLink Contribution Contributions to the design and construction of the Evergreen Line Subtotal for Major Construction Projects Technology Applications SkyTrain Public Announcement Replacement of Integrated Alarm System Notification System at all Expo Line passenger stations, Expo Line propulsion power stations and the SkyTrain Operations and Maintenance Centre Other Subtotal for Technology Applications Vehicles Conventional Revenue Thirty one projects in this asset category 93, , , ,841 93, , , ,841 2, ,078 6, ,375 4, ,618 52,636 (3,694) 48,942 6, ,696 59,011 (3,694) 55,317 2nd Replacement SeaBus SeaBus replacement. 313 (282) 31 25,083 (23,197) 1, Series MK I Refurbishment Project 2013 Community Shuttle Replacement Project 2014 Conventional Replacement Buses 2014 HandyDART Vehicle Replacement 2014 Community Shuttle Bus Replacement WCE Pitney Bowes Lease Buyout of Original 28 Cars 2015 Conventional Replacement Buses 2015 HandyDART Vehicle Replacement Other Refurbish the original 114 MKI SkyTrain cars to extend service lives by another 15 years Procure forty-four Community Shuttle vehicles to replace 44 diesel vehicles that have reached the end of their service lives Procure 45-40ft CNG buses to replace 52-40ft diesel buses Procure new 65 HD vehicles (40 Microbuses, 25 Midibuses) to replace 65 (37 Microbuses, 21 Midibuses, 7 Minibuses) from the existing fleet Procure 53 replacement Community Shuttles to replace 55 retiring shuttle vehicles allocated to Langley, Surrey and Vancouver (Oakridge) Exercise the lease buyout options for 28 WCE rail cars Procure new replacement 40 and 60 articulated buses to replace 1997 conventional buses that have reached the end of their useful service life Replace 25 HandyDART vehicles with 25 new HandyDart vehicles Four other project in this asset category 14,867 (8,618) 6,249 37,875 (28,460) 9, (41) 4 10,225 (8,276) 1,949 17,655 (15,854) 1,801 30,550 (25,750) 4, (800) 89 10,300 (10,130) (498) 61 7,800 (7,020) ,680 (14,058) 6,622 16,000 (14,400) 1,600 49,500 (44,550) 4,950 4,000 (3,600) 400 8,980 (5,370) 3,610 5,694 (4,172) 1, ,043 (304,198) 200,845 Subtotal for Vehicles 60,134 (48,265) 11, ,036 (471,009) 235,027 Conventional Revenue Vehicles Non-Revenue Other Seven projects in this asset category , ,029 Subtotal for Vehicles Non , ,029 Revenue Total 357,852 (121,503) 236,349 2,323,470 (842,237) 1,481,233 Page 21

23 5. Changes in Financial Position Consolidated Statement of Financial Position as at December ($ thousands) PROJECTED * BUDGET Inc./(Dec) Cash 148, ,669 (23,433) Accounts Receivable 83,998 87,998 4,000 Restricted cash and investments 507, ,715 43,198 Investments 74,463 74,463 0 Debt reserve deposits 39,671 39,671 0 Financial Assets 853, ,515 23,764 Accounts payable and accrued liabilities 209, , Debt 2,108,263 2,330, ,156 Deferred government transfer 1,312,898 1,364,377 51,479 Golden Ears Bridge contractor liability 1,052,982 1,052,520 (462) Deferred concenssionaire credits 595, ,268 (23,337) Employee future benefits 93, ,637 6,750 Deferred lease inducements - net 13,131 13,131 0 Liabilities 5,386,354 5,643, ,178 Net Debt (4,532,604) (4,766,018) (233,414) Tangible Capital Assets 4,636,232 4,871, ,397 Supplies Inventory 48,346 48,346 0 Prepaid Expenses 17,089 17,089 0 Non-Financial Assets 4,701,667 4,937, ,397 Accumulated Surplus 169, ,045 1,983 * revised from Q2 forecast for known changes in contingency, capital related costs, the compass project, road operations, AirCare and bus operations Financial Assets The increase in restricted cash and investments primarily represents the receipt of the gas tax funding. Liabilities Deferred government transfer represents the receipt of capital funding offset by the amortization and revenue recognition for government funding. The Golden Ears Bridge contractor liability decreases slightly as principal payments are expected to commence during Deferred concessionaire credits represent the funding provided by the Canada Line Concessionaire. This balance is amortized to income on a straight-line basis over the operating term of the concessionaire agreement, which will expire in July Page 22