FY2016 True Up Overview
Basis for Budgeting HRT s dependency on federal, state and local budgetary decisions guides revenue and. expenditure estimates. Both are based on the best available information during budget preparation. HRT s annual budget differs from that of a local government due to the uncertain nature of grant awards from other entities and utilization of public transit. HRT currently utilizes a line of credit for daily operations to address the uncertainty of the timing and arrival of grant awards HRT does not have a dedicated revenue source for capital and/or operating funds. Overly Dependent on Local Contribution Overly Reliant on Federal Support Lack of a Rainy Day Fund No Dedicated Funding No Ability to Address Budgetary Shortfalls 2
Cost Allocation Agreement (CAA) Overview Major Guiding Principles (paraphrased) HRT will operate a consolidated regional public transportation system within and between the Participating Cities. Each participating city will have final determination on the type, amount and location of public transportation service provided within its borders. To recognize the distinct characteristics of each cities and to insure that each city is equitably allocated only the net cost of providing public transportation services for its citizens, separate operating cost and passenger revenue allocation formulas will be used. 3
Revenue Overview
Ridership Impact Ridership decline resulted in a farebox revenue shortfall: Revenue from ridership is projected based on the most recently completed fiscal year. FY14 year-end results were used to develop FY16 budget. Full year of a fare adjustment also budgeted in FY16. As an agency, ridership trended downward, by mode, 13%-bus, 12%- light rail, and 27%-Ferry as compared 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 DR Ferry Light Rail Bus FY16 Target FY16 Actual to the target. Budget Actual Fav(Unfav) % Revenue $ 22,075,000 $ 19,653,533 $ (2,421,467) -12.3% 5
Expense Overview
Budgetary Challenges Millions $45 $40. $35 $30 $25 $20 $15 $10 $5 $ Budget Actual Staffing requirements that exceeded current staffing levels and higher than anticipated turnover rate of operators. Overtime is utilized to sustain daily operations, on a temporary basis. The recruitment process (posting and selection, pre-employment process, onboarding, and training) for bus operators generally takes six (6) months. Budget Actual Fav(Unfav) % Personnel $ 39,585,343 $ 42,049,347 $ (2,464,004) -6.2% 7
Budgetary Challenges Millions $45 $40. $35 $30 $25 $20 $15 $10 $5 $ Budget Actual Budget Actual Fav(Unfav) % Fringe Benefits $ 16,684,043 $ 19,646,257 $ (2,962,214) -17.8% HRT experienced a higher than anticipated utilization of pay and nonpay fringe benefits. More employees opted into the health insurance program than projected. Higher than projected usage of paid leave. Non Pay Fringe Benefits consist of health insurance, retirement, pension, dental, DOT physicals, drug and alcohol testing, Naval Base pass badge access, operator uniforms and mechanic tool allowance. 8
Budgetary Challenges Millions $45 $40. $35 $30 $25 $20 $15 $10 $5 $ Budget Actual Budget Actual Fav(Unfav) % Material & Supplies $ 4,973,606 $ 6,679,850 $ (1,706,244) -34.3% Maintenance costs were higher than anticipated due to maintaining a 10 year old and aging bus fleet. The average useful life of a transit bus is roughly 12 years. State of Good Repair (SGR) per FTA is 6-7 years-old. Would need to purchase 25 buses per year to maintain SGR Older buses are more expensive to maintain tend to be less reliable Parts needed to repair them are more expensive 9
Budgetary Challenges Other Notable Budgetary Challenges Flat or moderate growth in Federal and State funding. Increased regulatory and oversight requirements State of Good Repair (SGR) Transit Asset Management (TAM) Safety Title VI Compliance DOT Americans with Disabilities Act (ADA) Historically low consumer gas price per gallon 2016 prices were the lowest in 12 years Anemic job growth/recovery 0.46% - Hampton Roads 1.92% - U.S. Metro Area Average Additional amenities and services (transit center, shelters, benches, trash receptacles, landscape maintenance) procured or requested by localities. 10
Cost Allocation Agreement (CAA) Overview Major Guiding Principles (paraphrased) Calculation Of Local Share Of Operating Costs Farebox revenue is captured by route and/or city and subtracted from service costs to determine if a deficit exists. If a deficit exists, federal aid (FA) and state aid (SA) will be applied. If funds are required after farebox revenue, FA and SA and any other assistance are applied to costs, the city approving services will provide the funds. Expense Total Service Cost Revenue Fares Federal State = Local Funding $2.7M $2.4M $0 $0 $5.1M 11
Recap HRT s dependency on federal, state and local budgetary decisions guides revenue and expenditure. estimates. Both are based on the best available information during budget preparation. HRT s annual budget differs from that of a local government due to the uncertain nature of grant awards from other entities and utilization of public transit. HRT currently utilizes a line of credit for daily operations to address the uncertainty of the timing and arrival of of grant awards HRT does not have a dedicated revenue source for capital and/or operating funds. In summary, HRT begins each fiscal year with $0 and ends the fiscal year with $0 Overly Dependent on Local Contribution Overly Reliant on Federal Support Lack of a Rainy Day Fund No Dedicated Funding No Ability to Address Budgetary Shortfalls 12
Your Help is Needed Correcting the Structural Imbalance to Foster Financial Flexibility and Fiscal Strength Amend the Cost Allocation Agreement to allow for the creation of and maintaining an unassigned reserve fund. Help find a regional funding source for transit operations and capital acquisition. Continued commitment to maintain and/or increase funding for HRT s SHIFT program. Reduce the reliance on Federal capital funding that is currently used to offset daily operations. 13
FY2016 True Up Overview