Report to the Board of Directors Citizens Advisory Committee on the Budget

Transcription

1 Report to the Board of Directors Citizens Advisory Committee on the Budget Tri-County Metropolitan Transportation District of Oregon Spring 2009

2 Tri-County Metropolitan Transportation District of Oregon Citizens Advisory Committee on the Budget Report to the Board of Directors April 8, 2009 Committee Cynthia Chilton Mark D. Lewis Jessica Smith Brian Wannamaker

3 TABLE OF CONTENTS Page 1.0 INTRODUCTION 1.1 The Citizens Advisory Committee on the Budget (CAC) FY09 Focus Calendar FINANCIAL OVERVIEW 2.1 Background and Financial Forecasting Process...3 CAC Perspectives MARKETING AND CUSTOMER SERVICE UPDATE 3.1 Marketing Overview Branding and Outreach Trip Planning Services Community Marketing...8 CAC Perspectives SERVICE PLANNING AND SCHEDULING 4.1 Service Planning Operator Workforce Forecasting Service Reductions Fare Enforcement...13 CAC Perspectives TRIMET EMPLOYEE BENEFITS 5.1 Background Information Provided Key Facts Presented...18 CAC Perspectives CONCLUSION...21 APPENDIX

4 1.0 INTRODUCTION 1.1 The Citizens Advisory Committee on the Budget (CAC) The CAC provides comment and offers perspective on issues, policies and programs reflected in TriMet s Proposed Budget submitted to the Board of Directors ( Board ) each spring by the General Manager. The CAC has been assisting the Board for 29 years. Members of the CAC are nominated by the General Manager and appointed by the Board of Directors. Members are selected to provide diverse perspectives on operating and capital issues, with an emphasis on the financial impacts of policy alternatives being considered by the agency. CAC members come from a wide range of vocations, experience and training. Committee members diverse backgrounds also provide a business and community view to agency issues. This year s CAC also includes members who are TriMet customers who ride the system daily to get to work. Members serve staggered three-year terms. 1.2 FY09 Focus The CAC approached their work on the FY10 budget similar to how the committee reviewed last year s budget. This year, the CAC focused their attention on selected topics and areas of special interest and understanding of committee members. For FY10, the CAC focused on four topics and was briefed on proposed changes to Fareless Square: 1. FY10 financial overview 2. Branding, outreach and community marketing 3. Service planning and scheduling 4. TriMet employee benefits 5. An update on Fareless Square 1.3 Calendar The CAC met between January and April. The CAC participated in sessions with TriMet staff from a variety of divisions and departments across the agency. At each meeting, executive and staff members provided materials related to the topic under consideration. During each session, the CAC identified CAC Perspectives related to those topics. These perspectives are summarized at the end of each chapter in this report. PAGE 1

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6 2.0 FINANCIAL OVERVIEW 2.1 Background and Financial Forecasting Process TriMet staff reviewed the agency s financial condition with the committee. TriMet payroll tax revenues are expected to be significantly lower than budget and previous forecasts. In addition, stock market declines will increase the annual contributions required to fund TriMet s defined benefit pension plans. TriMet is watching payroll tax revenue receipts carefully and has reduced its estimate of growth since early fall. To maintain fiscal stability, TriMet has decided it must reduce the cost of operations. The needed cost reductions are caused by changes in the economy that are affecting businesses and households throughout the nation. To maintain fiscal stability, the General Manager has identified actions including: $23.5 million in across the board budget reductions (8%), including bus and rail service reductions. Reduced capital spending of at least $3.3 million in FY09, $5 million in FY10 and $5 million in FY11. LIFT in-person assessments with emphasis on assessing the ability of riders to use fixed route options and conditional eligibility for LIFT. Review of amortization timeframe of management and union DB pension unfunded liabilities. Deferral of scheduled bus replacements by one year, beginning with the FY10 order. Key forecast assumptions shared with the CAC are as follows. Operating Revenues In the contingency budget, payroll tax revenues are assumed to be flat for six quarters beginning with the third quarter FY09. Underlying payroll tax revenue growth (growth excluding new revenues from the rate increase) is assumed to increase 3.2% in FY11. Following past post-recession patterns, payroll tax revenues grow +7% (underlying growth) in FY12 and 9.5% in FY13. In subsequent years, payroll tax revenues grow 6.2% per year, the historical average, which are based on 1.7% employment growth (Metro employment forecast), 3% inflation (historical average) and 1.4% real wage growth (historical average). Self-employment tax revenue, which was down in FY08 after two years of 20% growth (FY06 and FY07), is assumed to decline 6% in FY09 and then increase moderately in subsequent years: FY10 +2% and FY %. PAGE 3

7 Passenger revenue is projected to be 5.8% over budget in FY09 continuing the trend to date. No fare increase is assumed in September Inflation adjusted fare increases are assumed each year thereafter; 5-cent adult cash, $2 adult pass. Federal grants increase 3% per year, the status quo. Watching the federal transportation reauthorization, a cent federal gas tax increase is needed to keep the Surface Transportation Program (highway and transit funded) at today s levels plus 3% to 6% annual program growth. The required increase is 5-7 cents more if the New Starts Program is removed from the federal General Fund. No additional revenues are assumed for Elderly and Disabled transportation. The 2.5- cent cigarette tax increase proposed in the Governor s budget would provide an additional $1 million a biennium over forecast for LIFT vehicle replacement. No new revenues are assumed. TriMet staff updated the CAC on General Manager Fred Hansen s decisions on investing TriMet s American Recovery and Reinvestment Act funds ( ARRA, a.k.a. Economic Stimulus), noting that the ARRA funds would provide one-time revenues for the agency and help TriMet reduce the severity of service cuts in FY10. Operating Expenditures Global economic slowdown cools inflation. Actual and projected union wages are 3.4% in FY08, 3% in FY09, 3% in FY10, then 3% thereafter. Health benefits costs are assumed to increase 6.8% in FY10 (combines 2.4% increase second half of calendar 2009, with a projected 17% union and 8% management increase first half of calendar 2010). Health benefits costs are assumed to increase 12% per year FY11 through FY14 and 10% per year thereafter. Health benefits have increased 12% annually per employee since the mid 90 s. Retiree medical costs are assumed to increase 17% per year, the combined effect of plan rate changes and additional retirees. 520 employees (or 780 additional members with dependents) are estimated to retire with retiree-medical benefits between FY09 and FY13. Retiree-medical costs increased at an annual rate of 18.0% between FY99 and FY08. Retiree Medical Annual Required Contribution as defined by new accounting rules = $56 million (TriMet paid the minimum required $11 million to cover benefits in FY08). Health benefit self-insurance is assumed to save $2.5 million a year beginning FY11. Stock market declines are expected to increase the annual required contribution to TriMet s defined benefit pension plan about $7 million. PAGE 4

8 Diesel fuel cost per gallon in FY09 of $3.39, including fixed, floating, bio-diesel, bus, LIFT and Commuter Rail is $5.0 million below budget in FY09 and $6.4 million below the FY10 forecast. Other energy costs are assumed to increase 15% in FY10, 8% in FY11 and 7% per year thereafter. Other materials and services costs grow 3% per year. LIFT Service: TriMet implements in-person assessments with conditional eligibility determination. Savings from recertifying current clients and lowering long-term growth rates are included in the forecast along with the higher costs of the in-person assessment. Savings net of higher assessment costs = $32 million over six years (including capital). Green Line service begins September Beginning in FY12, rail and bus service are projected to increase annually to meet peak hour customer demand as the region grows. Projected service increases are:.5% annual bus increase, 1.8% annual increase in Blue Line service, 1% increase in Yellow Line service and no increase in Red Line service. TriMet s share of Eastside Streetcar operations is included in the forecast beginning FY11. These costs are covered with the scheduled increase in the payroll tax rate. Milwaukie Light Rail operating costs are included in the forecast, with service starting September Then costs are paid for with the scheduled increase in payroll tax rate. Capital Expenditures Required capital replacement and improvement are included annually throughout the forecast, with spending reductions in FY09, FY10 and FY11 to help achieve fiscal stability. Debt issued to spread long-life capital expenses over time. Projected debt service as a percent of operating cost is above 5% by FY12 and is around 6% throughout the forecast. TriMet s benchmark for debt service is 5% of operating cost. 40 fixed route buses are replaced per year beginning in FY11. TriMet replaces fixed route buses when they are at least 15 years of age and have traveled approximately 750,000 miles. LIFT vehicles are replaced when 10 years old and at 350, ,000 miles. About 27 LIFT vehicles are replaced each year. Light rail vehicles are replaced when they are 36 years old. $40.8 million Commuter Rail cost additions are included in the forecast. Washington County s share of costs ($13.75 million) is paid by the County FY09-FY12 with 4.5% interest. TriMet will issue long-term bonds to cover approximately $27 million of Commuter Rail cost additions. The region will provide $13.3 million of MTIP funds to TriMet for buses to offset the Commuter Rail cost increases. PAGE 5

9 Communication system replacement for buses; estimated cost = $41 million FY10-FY12. Fare system replacement FY12-FY15, $42 million. Funded with 15-year debt to spread expenses over time. TriMet s share of Milwaukie Light Rail construction is $30 million, funded with debt issued FY12. No capital costs for Columbia River Crossing are assumed in the TriMet forecast. CAC Perspectives: 1. The TriMet budget is large and complex. We encourage the agency to continue its efforts to explain to the community, riders and employees the implications of the current economic crisis on TriMet s financial position. The complexity of transit funding is not well understood, locally or nationally, and we encourage TriMet to take a leadership role in educating the public. 2. We encourage the agency to enter into a discussion with union representatives and union members, prior to entering labor negotiations later this year, to discuss the agency s current budget crisis so that the union is fully aware of the impact of the economy on TriMet s financial stability. 3. Many of the projects recommended in the TriMet stimulus package will provide needed infrastructure improvements and provide jobs. However, because stimulus funds must be used for capital investments (not operations) they cannot be used to offset service cuts. The CAC urges TriMet to be proactive in communicating with the public about the limits and benefits of federal stimulus dollars received. 4. The CAC supports implementation of in-person functional assessments to determine eligibility for LIFT door-to-door transportation for people with disabilities. The CAC also supports providing applicants for LIFT with the information about their transportation options, including fixed route bus and rail, Ride Connection transportation options and RideWise fixed route travel training. PAGE 6

10 3.0 MARKETING AND CUSTOMER SERVICE UPDATE 3.1 Marketing Overview The Marketing Department supports TriMet s guiding principles through activities that increase and retain customers, build public support for transit by enhancing the rider experience, and strengthen and maintain community relationships. Marketing initiatives are broken down as shown in the graph below. The 14% ($30K) shown on the pie chart makes up the Community Marketing piece and covers advertisements in minority publications to reach diverse markets. Service marketing is 18% of the marketing budget and covers services like the Transit Investment Plan (TIP), open houses and Transit Tracker by phone. All other percentages are allocated to either the agency s fare employer programs, brand overlay, public/private partnership marketing (Zoo, Art Museum, etc.). 3.2 Branding and Outreach TriMet s Marketing Department presented its comprehensive marketing program. The TriMet philosophy is, the customer owns the experience and TriMet owns its brand. TriMet views itself as part of the fabric of the community. TriMet s aspiration is to make the Portland region the most livable in the country. TriMet s role is essential to livability and its mission is to build and operate the total transit system, in which customers can depend on TriMet for their transportation needs. TriMet also has internal goals for employees to understand the agency s mission and values, and then embody them by being responsive, acting inclusively and solving problems creatively. For example, prior to the Westside Express Line (WES) opening, staff met with conductors of the commuter trains, who are Portland and Western Railroad employees, to ensure that they present the TriMet brand and message to the commuter rail passengers. The response was very favorable among the WES operators. 3.3 Trip Planning Services Trip planning and real time arrival services are part of Customer Service. One of TriMet s great success stories is Transit Tracker by phone that provides real time arrival information for all bus PAGE 7

11 stops and MAX platforms. Since the implementation of Transit Tracker by phone in late 2004, usage of Transit Tracker has increased each month. In February 2009 alone, TriMet recorded 1.3 million calls. Due to heavy call volume, TriMet is adding T1 lines to manage those incoming calls. TriMet is working on a new interactive map that uses inexpensive open-source technology to make planning a trip easy. New elements include the ability to plan a trip to a stop or a platform by bike, car or on foot. Once the new program is completed, the interactive map can be accessed through the TriMet website TriMet shares datasets with Google. 3.4 Community Marketing Community marketing focuses on: Noting historical events and giving the community a voice. Supporting TriMet security enforcement efforts. Increasing rider awareness of TriMet rules for riding (key code of conduct rules). TriMet wants to reassure riders that TriMet has clear rules of conduct for riders and will enforce these rules. The past year has brought questions of safety and security of the system to the forefront and TriMet is dedicated to improving the perception as well as the reality of the safety of the system. As part of these efforts, the Marketing Department has worked to communicate to riders that there are consequences for breaking the rules. TriMet has also provided TriMet enforcement personnel with posted rules that are available for riders in English and Spanish. As part of this effort, the Marketing Department launched a campaign to reach riders with the following messages visible on buses: Let s clear the air. MAX stations and bus shelters are now smoke-free. See something? Say something! By reporting suspicious packages or activities to a TriMet employee or call Let s count one each other for a safe and respectful ride - A valid and correct fare is required. - Move for seniors and people with disabilities. - Don t threaten or intimidate riders or operators. - Don t be so loud that you disturb others. - Don t block the aisles or doors. - If you bring a pet, keep it in a carrier. - Keep food and drinks in closed containers. In addition, Marketing is drafting a campaign regarding facts about safety and security on the TriMet system. TriMet messaging includes information to help customers pay for fares when they encounter a Ticket Vending Machine (TVM) that is not working. On the WES platforms, all TVMs provide information on where the local fare sale outlets are located. On MAX platforms at Gresham Central, El Monica and Sunset Transit Center (TC), signage communicates that tickets are for PAGE 8

12 sale at the station concession. TriMet is pursuing the same arrangement with the concessions at Rose Quarter, Gateway, Beaverton TC and Washington Park. Finally, Ticket Vending Machines will be programmed to communicate alternatives when the machines are down. CAC Perspectives: 1. TriMet s internal and external marketing efforts are comprehensive and focused. The CAC believes the Marketing Department is doing excellent work in developing TriMet s internal branding and in its many efforts to promote ridership through creative marketing and collaboration with community organizations. The CAC is also an enthusiastic supporter of Transit Tracker and the use of open-source technology that links TriMet s scheduling information and transit routes with Google maps. This committee fervently supports TriMet s efforts to use innovative technology to increase the efficiency and ease of use of the transit system. 2. The CAC is concerned about the disparity between the negative media coverage and the reality of the system. We believe that TriMet can partially address this public relations problem with additional marketing that speaks directly to its riders. A new campaign should post tangible facts and statistics on buses and MAX trains, as well as around station platforms to communicate the improvements TriMet has made to address rider concerns. For example, we encourage TriMet to articulate what is being done to increase the overall safety and security of the system. One effective method may be to develop marketing collateral with concrete facts such as the number of new TriMet security officers added this year. 3. Much of the general public does not understand how TriMet is funded or why there are service cuts in conjunction with recent fare increases. We understand that TriMet has been working with the Press to clearly articulate the organization s financial situation and has posted good explanations on the TriMet website. We believe that specific, creative and attractive marketing on buses and around stations might significantly increase the dispersion and comprehension of this message. For example, marketing messages that post the real cost of one ride, and perhaps explain the deteriorating state of the other funding sources, would catch a rider s attention. 4. With respect to stimulus funds, the CAC suggests posting signs in areas where stimulus monies will be spent, explaining the scope of the funding and the federal focus on improving investment in infrastructure. 5. One of the daily frustrations of well-intentioned TriMet riders is broken ticket vending machines. One measure to address this problem is to increase the number of concession vendors who sell TriMet tickets around the TriMet bus and MAX stops. The CAC supports TriMet s efforts to expand the number of concessions selling fares at platforms, to provide signage and to reprogram the TVMs to communicate alternatives when the machines are down. 6. TriMet could be more proactive managing the public s perception of the service reduction process. The CAC would like to see TriMet better explain to the public the PAGE 9

13 careful deliberation process that it undertakes when considering bus and rail service reductions. This type of messaging should be prominent on the TriMet website in conjunction with the proposed service cut announcements. It might also appear on postings on station platforms and inside the buses and trains. 7. The CAC noted the need for additional announcements about service changes and public open houses on the buses and/or in the shelters. While TriMet has dispatched staff to hand out information on all affected lines and posted notices in shelters, the CAC recommends placing notification of public hearings and open houses inside all buses, bus shelters, MAX trains and at platforms in the vicinity of the affected lines, not only at the specific locations where service reductions are being considered. 8. The CAC is interested in exploring if TriMet riders can be more involved in a recognition program for the operators. If the riders are directly involved with voting for the best TriMet operator, this may motivate more bus drivers to provide excellent customer service, at all times. PAGE 10

14 4.0 SERVICE PLANNING & SCHEDULING 4.1 Service Planning TriMet Service Planning & Scheduling staff presented how routes and schedules are planned and how service investment decisions are made. TriMet s General Manager established the basis for agency-focused service investments and introduced the concept of the total transit system to its customers. The total transit system includes all elements of the customer's experience, including customer information, access to stops, amenities at the stops, quality and cleanliness of the vehicle, as well as travel time. TriMet s approach is to partner and work with local jurisdictions and always be open to public input. TriMet s Service Investment Plan flows from Region 2040 and Metro s Regional Transportation Plan (RTP). The TriMet Transit Investment Plan, a five-year plan that implements the transit part of the RTP, is updated annually and adopted by the TriMet Board of Directors. The agency s service priorities are to maintain the quality of the existing system, grow higher capacity transit, expand the number of frequent service lines that run at least every 15 minutes and improve local service to meet passenger demand. TriMet currently provides 90+ bus lines, of which 16 are Frequent Service lines. The frequent service lines account for 60% of bus ridership. The Service Planning & Scheduling department uses ridership data to evaluate service and to make investment decisions. Data are collected through the Bus Dispatch System (BDS) and the Automatic Passenger Counters (APC). Most buses have equipment which records the number of riders getting on and off at each stop for each trip. The information is collected daily and aggregated into quarterly performance reports for service delivery and ridership. The ridership data are analyzed to find out where and when ridership is low, which could result in service adjustments to better match service levels with ridership. Likewise, high ridership times and areas indicate potential demand for improved service levels. The BDS also records on-time performance and travel times so that schedules can be adjusted to reflect real-world conditions. TriMet staff use the following indicators to evaluate service productivity: Peak capacity. Peak passenger capacity is an indicator that is watched carefully to address overloaded buses or trains. Using the data collected from the APCs discussed above, TriMet is able to monitor ridership changes on each line. A peak load of 3.2 persons per square meter, or greater is defined as achievable capacity and indicates that additional peak service may be needed. Four persons per square meter is considered a passenger overload. Achievable capacity is 51 passengers (39 seated and 12 standing) on buses and 133 persons (64 seated, 69 standing) on a light rail car. PAGE 11

15 Effectiveness. Measures how well the public uses each bus line during different times of the day and day of the week. The basic measure used by TriMet is boarding rides per vehicle hour; how many people board a bus or train each hour that the vehicle is on the road or on tracks. Efficiency. The number of peak vehicles and the spare ratio needed to maintain vehicles determines peak costs. Spare ratio formula = number of vehicles on the road during rush hour divided by (number of vehicles in the active fleet, minus number on the road during rush hour). TriMet operates a 15% bus and 18% light rail spare ratio. TriMet lowered the bus spare ratio in the 2001 recession to 15% from 20% in order to reduce capital costs. This was accomplished partly by moving more maintenance to off-peak hours and on nights and weekends (off hours) when vehicles are available. The ratio of revenue time to total vehicle time (including end-of-line breaks and deadheads to and from garages) is a key efficiency measure. TriMet has increased the bus revenue to vehicle time ratio from below 70% to over 75% over the last five years. On-Time Performance and Headway Management. TriMet s standard for on-time means that a vehicle should be no more than one minute early or five minutes late at a time point (headway means time interval between vehicles moving in the same direction on a particular route). Staff has tried to improve the level of bus on-time performance by adjusting schedules and break times to better reflect increasing traffic levels and ridership. To improve reliability, TriMet is interested in improving headway management, noting that poor headway management causes bus bunching during peak hours, which is a poor use of service hours and capacity. When vehicles are scheduled closer than 10 minutes apart, in order to handle large passenger loads during rush hours, it is more important to keep an even interval between vehicles than to keep them on schedule. For example, if every bus is six minutes late on a line, passenger loads are evenly distributed and there would not be passenger overloads. One of the simplest means of improving bus on-time performance and decreasing travel times is to increase the number of blocks between stops from two to three. This requires intensive work with the public, but when it has been done on-time performance has improved. Use of communications system tools by dispatch can also improve headway management. 4.2 Operator Workforce Forecasting Staff explained the workforce forecasting process to the CAC. To save costs, management focuses on just-in-time hiring; however, many unknowns including retirement and termination rates affect workforce forecasting. The changing economic environment can result in higher levels of operators than projected as more people opt to stay in the workforce longer. On the other hand, too few operators can result in higher overtime costs than needed to cover necessary service. Workforce forecasting is a continual focus of several departments, including Human Resources. PAGE 12

16 4.3 Service Reductions The FY10 budget is slated to cut low performing lines and reduce the upcoming Green Line service (starting September 2009) from previous plans, primarily due to payroll tax revenue declines. The many factors that go into service reduction recommendations were discussed. These include the effectiveness of the service (boardings per hour), alternative service availability, equity and efficiency. Preliminary proposals are discussed with the public at community workshops and customer service staff rides several affected lines to inform riders of the proposed changes. Public hearings will be held in the spring before a final decision is made regarding service reductions. 4.4 Fare Enforcement September 2008, General Manager Fred Hansen announced increased TriMet security measures, including additional Transit Police, security cameras and fare enforcement. For increased fare enforcement, the General Manager announced that TriMet would hire additional Field Supervisors and combine them with Fare Inspectors, doubling the number of staff dedicated to fare enforcement duty from 15 to 30. In February 2008, the General Manager gave authority to all TriMet Field supervisors to be able to check fares (Bus and Rail Field supervisors, as well as Fare Inspector supervisors). Doubling the number of staff dedicated to checking fares has greatly increased the likelihood that a rider will have their fare inspected on any given trip. Deployment resources: MAX system fare inspection: - 2 AM teams, 4 Field supervisors each, 8 hours, 7 days per week - 2 PM teams, 4 Field supervisors each, 8 hours, 7 days per week Bus system fare inspection: - 1 PM team, 4 Field supervisors, 8 hours, 7 days per week Total duty hours, per year 58,240 annual vacation and other absence 4,160 FTE: 30 x 2,080 = 62,400 The goal of the program is to eliminate any perception that not having a fare is a chance worth taking, i.e., that everyone feels they must have a fare to ride. TriMet Transit Police Division (TPD) officers also provide substantial support to the fare inspection program. September 2008, General Manager Fred Hansen announced an increase in TPD officer positions to 58 during FY09, doubling the number of TPD officers that were working on the system at the beginning of FY08. The General Manager has directed that 70% of PAGE 13

17 TPD officers work time be on TriMet vehicles or stations, engaging riders. Fare inspection is the primary tool that TPD officers use to engage passengers. Coincident with implementation of the increased fare inspection program during FY09, all freestanding MAX platforms have been signed as fare-paid zones, allowing fare inspection on MAX platforms, as well as on MAX trains. This change to TriMet Code was made in mid CAC Perspectives: 1. The CAC understands the fiscal realities of the current recession, which have lead to the necessity to cut service. We recommend that TriMet continue to reach out to the community and to not overlook lower income neighborhood bus lines where riders rely on bus service to get to and from work and medical appointments. The CAC recommends identifying key stakeholders in low-income areas and discussing the impact service reductions would have on their neighborhoods. Service reductions can be particularly devastating for low-income riders who depend on a particular route to travel to work, as some may be forced to quit their jobs if their service is cut. 2. The CAC is favorably impressed with TriMet s on-time performance and urges staff to continue to achieve the on-time goal for MAX (90%) and to improve bus performance to reach 83% from its current 73% on-time performance. This is a critical detail that dramatically affects the satisfaction of the TriMet rider and is a key litmus test for potential riders. The CAC also endorses efforts to improve headway management to improve overall system efficiency. 3. Given the state of the economy, additional service cuts may be required. The CAC recommends reviewing options such as increasing bus departure intervals coupled with increasing the distance between bus stops, where reasonable. These service changes could be determined through TriMet s existing data collection system, which we understand to be one of the most progressive in the country. 4. The CAC notes that not all bus stop signs include the Transit Tracker number and urges staff to complete the identification project at every bus stop as soon as possible. 5. Past Citizen Advisory Committee members have recommended the elimination of Fareless Square. The majority of the current CAC members feel strongly that Fareless Square should be eliminated in its entirety, particularly given the economic climate and the fact that TriMet is reducing service. Other members are sympathetic to the case for retaining Fareless Square, but believe it should be restricted to rail only in the downtown core to promote downtown mobility and showcase Portland s multi-modal lifestyle. 6. A concern of the CAC is fare enforcement. If TriMet were to eliminate or alter Fareless Square to be rail only, the CAC would like to see the savings used to improve enforcement of fares to ensure that the elimination of Fareless Square is equitable. The CAC supports the recent changes made to increase fare enforcement. However, we believe more can be done. The CAC would like to see TriMet raise the penalty from $115 to $250, the maximum allowed for fare evaders. Currently, TriMet retains $60 of PAGE 14

18 the $115 fee, $37 goes to the State (fixed amount) as a Unitary Assessment and $18 is a County fee. We encourage TriMet to explore what other public transit agencies have in place for collecting penalties and how much those agencies generate from fine revenue. We recommend that TriMet explore a non court-based system where violators could be turned in for collection, thereby decreasing court costs and allowing for more of the collection to go directly to the agency. A benefit of increased fare inspection is an improved perception of safety and improved perception of the integrity of the fare system. PAGE 15

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20 5.0 TRIMET EMPLOYEE BENEFITS Staff provided the CAC with comprehensive information covering employee compensation, including benefits. Information was provided on TriMet benefits compared to other public agencies and national transit agency peers. 5.1 Background Information Provided The following information was provided to the CAC: 1. TriMet management s salary compensation plan and benchmarking process versus other local employers. 2. An overview of TriMet s benefits for active and retired employees, focusing on pension plans and health benefits. 3. General cost information about TriMet s active employee health benefits compared to other agency health benefits. 4. Information from John A. Dash and Associates, Transit Labor Economist, including data from transit agencies nationwide with respect to wages, healthcare benefits and premiums and labor contract information. 5. The cost of TriMet s active and retiree employee benefits, including 2009 renewal rates for health benefits. 6. Information on how TriMet has reduced the costs of management health benefits by increasing employee cost sharing and plan design features. 7. Information from TriMet s Financial Statements and Supplementary Information as of June 30, 2008, which describes TriMet s pension and other post-employment benefits, cost and funding plans of the Management Defined Contribution plan, the Management Defined Benefit pension plan, the Union Defined Benefit pension plan and TriMet s postemployment health benefits. 8. TriMet staff also provided data to the CAC comparing the cost of a 2% wage floor, with the current 3% union wage floor written into the union contract since TriMet also discussed the high costs of absenteeism in the operator ranks, where each absence must be covered by an extraboard operator hired to standby to operate runs for absent operators. Staff noted that each 1% of additional absenteeism costs $1 million a year in extraboard costs. PAGE 17

21 5.2 Key Facts Presented Management salaries are benchmarked using the mid-point salary levels of similar jobs in the markets to recruit from, which are both in the private and public sectors. This allows TriMet to remain competitive in the job market. Salary surveys for management are conducted biannually. Union wages are subject to labor negotiations. TriMet health benefits costs per active employee have increased 12% annually since the mid- 90 s. Over the past decade, retiree-medical costs increased at an annual rate of 18.0%. If past trends continue, health plan costs for retired and active employees will increase from 13% of TriMet s operating costs in FY10 to 36% of costs in This is partially due to the nationwide escalation in healthcare costs, and is partially the result of the fact that 40% of TriMet s current employees are projected to retire over the next 10 years, resulting in a surge in retiree medical costs. To reduce costs, management employees enrolled in the PPO health and dental plans pay an annual deductible co-insurance for most services with higher co-insurance for prescription drugs and premium cost sharing to cover dependents. The FY09 solved forecast assumes a 5% overall savings in retiree medical benefits in FY11 based on plan changes. Compared to its peers locally, TriMet management and union retiree healthcare benefits (other post-employment benefits, or OPEB) are rich. Most Oregon public and private employers do not provide any retiree health benefit after age 65 and, in fact, few private employers provide any retiree medical benefits. Most local agencies provide either a small contribution to employee benefits for early retirees, or early retirees can buy-in at plan rates, but must pay 100% of the cost. By comparison, TriMet employees are fully vested in retiree medical benefits after 10 years of service at age 55, and the benefits received as an active employee continue after retirement for the employee and dependents. At its March 2009 meeting, the TriMet board authorized the establishment of a trust fund for future OPEB obligations for management employees. TriMet does not have the financial capacity to fund the trust adequately. Additionally, after May 1, 2009, new non-union employees who complete ten years of credited service and retire at or after age 55, will be eligible for retiree health care benefits comparable to the health care plan offered to active employees but shall pay the entire cost of the coverage provided by TriMet. While TriMet has many peers in the public sector with growing unfunded retiree healthcare liabilities, there is an increasing need to address this issue further. The District pays for 100% of the premiums for eligible retirees from the General Fund revenues each year, using what is known as the pay-as-you-go method of funding. The District paid approximately $11.15 million in FY08 post-employment healthcare and life insurance benefits. The District s total annual OPEB cost, or Annual Required Contribution (ARC), is an amount actuarially determined in accordance with accounting standards. The ARC represents a level of funding, which if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period of 30 years. TriMet s 2008 ARC was $54.9 million. PAGE 18

22 With respect to pension benefits, staff explained that TriMet is one of the few public sector agencies not in PERS, the Public Employee Retirement System managed by the State of Oregon. By comparison, the management Defined Benefit and union Defined Benefit pension plans provide benefits to TriMet employees with 30 years of service that are roughly comparable to PERS Tier Two, the reformed PERS. The union Defined Benefit plan payment to retirees is calculated based on years of service for all union employees, regardless of pay rate or earnings. The management Defined Benefit plan is based on final average salary. Annual Required Contribution to the management pension plan in FY08 was $6.9 million and the Annual Required Contribution to the union plan in FY08 was $26.1 million. In 2003, TriMet closed its management defined benefit plan to new employees. Non-union employees hired after April 27, 2003 are part of a defined contribution plan to which TriMet contributes 8% of salary. CAC Perspectives: 1. The CAC notes that TriMet s current health benefit plan for active and retired employees is unsustainable and its impact on the bottom line will worsen the longer it remains unaddressed. TriMet s $1,932 monthly family healthcare premium (union employee PPO cost is cited) is the highest reported in the July 2008 US Transit Systems Survey. The CAC notes that the current economic crisis and coinciding renewal of the labor agreement provide an opportunity for TriMet to address health benefit costs to help achieve fiscal stability. 2. The CAC believes TriMet should promptly inform employees about TriMet s current and future health benefit costs and the impact on the agency s financial picture going forward. Healthcare benefits should be presented within the context of total compensation to ensure that employees appreciate the need to balance benefits, wages and, ultimately, jobs. 3. The CAC notes that compared to its peers in the transit industry, TriMet is one of 13 among 96 transit agencies that pay 100% of healthcare premiums for union employees and dependents. The average agency premium contribution is 85% of family premium. The CAC endorses employee contributions for active and retiree healthcare benefits as a means of cost sharing, as well as assuring employee awareness of the agency s expense. Other approaches employers have taken to manage benefit costs are to cap the total amount paid by the agency for health benefits and to limit the amount paid toward dependent benefits. 4. The CAC supports reviewing the level of benefits provided to active and retired employees and their dependents. PAGE 19

23 5. The CAC suggests TriMet consider a different overall benefit package for new employees to appeal to a younger more mobile workforce. At a minimum, the CAC supports freezing enrollment of the current retiree medical program. Most private sector employers no longer offer any retiree benefits and many public sector agencies offer nothing for Medicare-eligible retirees and require younger retirees to pay their own premiums. 6. TriMet should focus on reducing absenteeism and those associated costs. The CAC noted that San Diego capped sick days at eight days a year in its recent contract. 7. The CAC suggests that TriMet review with the union the current ceiling and floor on union wage increases. A lower floor and higher ceiling may provide wage increases that are more closely linked to CPI and could also save money for TriMet during times of recession. PAGE 20

24 6.0 CONCLUSION The committee s focus for the FY10 budget review was on major financial issues facing TriMet. The financial topics reviewed this year included financial overview and forecasting process, branding, outreach and community marketing, service planning and scheduling and TriMet s employee healthcare benefits. We greatly appreciated the detailed presentations and thoughtful discussions with TriMet staff who have been consistently knowledgeable, professional, accountable and passionate about the importance of their role in the community. In addition, we like the TriMet brand and applaud the efforts of the agency to take the brand to the community, as well as to TriMet s employees, as other companies with strong identities do. The resounding theme of this year s committee was the important role TriMet plays in the region, the need for financial stability and for TriMet to continue this role. From the examination of employee health benefits to service reductions that TriMet is making in the face of declining payroll tax revenues during the recession, the committee consistently urges TriMet to maintain its focus on fiscal stability in the short and long-term. The committee found that the completeness of the Service Planning analysis process and the extensive public outreach efforts provide TriMet with that essential information to guide the difficult but necessary decisions to reduce service levels during an economic downturn, and encourage the agency this same careful process be applied as the regional economy improves and service can be added back to meet the growing demand. Similarly, in recognition of its fiscal realities, the CAC believes that TriMet must leverage its upcoming labor negotiations to address the difficult, but critically necessary modifications to its employee benefits program. PAGE 21

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26 CITIZENS ADVISORY COMMITTEE ON THE BUDGET Mark D. Lewis Third Year of Service Medical Billing Manager, Multnomah County Department of Health, Portland Oregon; previous employment Entity Accountant, Intel Corporation, Hillsboro, Oregon; Senior Consultant, BearingPoint, Bethesda, Maryland; Accounts Payable Manager, Booz Allen Hamilton, Herndon, Virginia; Member of: Institute of Management Accountants; National Black MBA Association; Education: MBA, General Concentration, Johns Hopkins University, Baltimore, Maryland; BS, Accounting, Hampton University, Hampton, Virginia. Jessica Smith Second Year of Service Research Assistant, ECONorthwest, Portland, Oregon, economics consulting firm; areas of practice include finance, economic development, transportation and land use planning and policy evaluation; primary focus in evaluation of energy conservation programs; previous employment Economic Development Intern at Oregon Bridge Delivery Program, Salem, Oregon; Education: BA, Economics, Willamette University. Brian Wannamaker Second Year of Service Real estate development, investment and property management; Owner, Falcon Art Community and other residential rental units and commercial spaces; investor/developer in the Mississippi Avenue corridor; focus on adding value to new and existing properties by maintaining historical diversity and addition of modern amenities; increased rental rates help subsidize rents for long-time elderly and low-income residents; Education: York University, Toronto, Ontario and Ridley College, St. Catherine s, Ontario. Cynthia Chilton First Year of Service Counselor, Senior Health Insurance Benefits Assistance (SHIBA), friendly visitor and Recruitment & Screening Committee member, State Long-Term Care Ombudsman Program; bike safety advocate and volunteer, Bicycle Transportation Alliance (BTA); retired employee benefits consultant, Mercer HR; Education: BA, Modernization, Brown University, Providence, Rhode Island.