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Metro
Board Report

Los Angeles County


Metropolitan Transportation
Authority
One Gateway Plaza
3rd Floor Board Room
Los Angeles, CA

File #: 2015-0459.
FINANCE, BUDGET 8~ AUDIT COMMITTEE
PUBLIC HEARING - PROPOSED FY16 BUDGET
May 20, 2015

SUBJECT: FISCAL YEAR 2016(FY16) BUDGET


ACTION: ADOPT THE FY16 BUDGET
RECOMMENDATIONS
Adopt the FY16 Budget as presented in the budget document (provided in a separate
transmittal).
Approve the Reimbursement Resolution declaring Metro's intention to issue debt in FY16 for
capital projects (provided in Attachment A). Actual debt issuance will require separate Board
approval.
ISSUE
State Law (Public Utilities Code Section 130105) requires Metro to adopt an annual budget to
manage the revenues and expenses o~ the agency's projects and programs. The budget is the legal
authorization to obligate and spend funds and to implement Board policy. It includes all operating,
capital, planning and programming, debt service requirements, and general fund activities for the
fiscal year. Budget detail is a management plan for financial activity and is prepared at the fund,
project, department, and expenditure level. The legal level of control is at the fund level. Total annual
expenditures cannot exceed the final appropriation by the Board except for capital expenditures,
which are authorized on alife-of-project basis.
Copies of the proposed budget document were made available to the public on May 5, 2015, both
electronically at www.metro.net and through the Records Management Center(RMC)at
RMC(c'r)_metro.net. Printed copies of the budget document were made available at the RMC on the
Plaza level of the Gateway Building on the same day. The public hearing is scheduled for May 20,
2015. Advance public notification of this hearing was issued through advertisements posted in over
two dozen news publications.
The FY16 Budget development process started in December 2015 with monthly updates to the
Finance, Budget, &Audit Committee. Additionally, in that time, Metro staff have provided 22 budget
briefings to Board staff and have answered all questions received from Board staff.

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File #: 2015-0459
DISCUSSION
The proposed FY16 Budget is balanced at $5.6 billion in total agency expenditures with a small
increase of $53.4 million, or one percent, from $5.5 billion in FY15. This year-over-year budget
increase, which is less than half of the Consumer Price Index (CPI), demonstrates Metro's
commitment to fiscal discipline to ensure continued financial stability for the agency while moving
forward on the following transportation priorities:
Safety and security
Transit service quality improvement, including signal prioritization
New bus and rail vehicle purchases
Delivery of rail and highway projects
Opening of Expo 2 extension to Santa Monica and Gold Line Foothill 2A extension to Azusa
Construction of Regional Connector, Purple Line Extension Segment 1, and Crenshaw/LAX
rail lines
Bike programs
Technology enhancements, WiFi, TAP mobile app
State of good repair
Union Station
Other new initiatives such as first last mile and active transportation

Further, in order to ensure that the FY16 Budget applied appropriate calculations on future costs and
revenues, the following assumptions were used:
CPI of 1.97%, which is the midpoint between Beacon and UCLA, the leading economic
forecasts for the Los Angeles region.
FY16 sales tax growth of 3.2%, based on FY15 year-to-date experience; this is conservative
compared to Beacon, UCLA, and MUNI forecasts.
Fare revenue is estimated at $376M based on the new fare restructure and boarding
projections with the addition of new rail services.
Expo 2 and Gold Line Foothill 2A extensions are projected to open in the fourth quarter of

FY16.
An additional 60 new FTEs to be added through the budget process, justified by new services
or projects as directed.
For SMART, ATU, TCU and AFSCME members, FY16 Proposed Budget salaries and fringe
benefits grow by negotiated rates per the Union Contract terms; Non-Contract salary increase
of 3% in line with negotiated union contracts.
Expense consumables (e.g. fuel, parts) linked directly to service levels.
Bus Revenue Service Hours to remain constant at 7,061,700 hours, with boardings to also

remain constant.
Rail Revenue Services Hours to increase by 66,700 hours (6.5%)due to the expansion, for a
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File #: 2015-0459
total of 1,094,500 hours in FY16.
Since FY10, Metro's total budget has increased by 44% from $3.9 billion to the proposed $5.6 billion
in FY16, reflecting $1.7 billion in growth, mainly due to increased capital programs for improving
deferred maintenance, increasing safety and security measures, and constructing Measure R Transit
and Highway projects.
FY16*
Total Budget: $5.6B

FY10
Total Budget: $3.9B

Subsidy Funding
and DebtSeroice
$A,397M (36%)

`Praposed

Subsidy
Funding and
Qebt Service

Metro
Operations
51,192M (31%)

Gen Admin
Gxn Admin
&Agency
Oversi9hf
S1(?4PA {341

fy Jam` 9,~i''l ;'/~~~~i~1t


/~.
~~
Capital
! $1,108M(29/)
'~' ,Y:

& Agency
6versight
S73lA (195}

;..;,j

~r~

:.~~,;~Y~S
/~~'

Genera Planning,
Programs$34M {1Ye) ~~~
Sennces

Genera3 PWnning,~
Programs

81oo6A{zx)
Freeway
Services

Sf2~)

`tai

The proposed FY16 Budget of $5.6 billion provides the resources necessary to maintain existing
service levels; to continue Metro's emphasis on safety; to integrate, test, and operate two new rail
line extensions opening in the fourth quarter of the fiscal year; and to escalate construction activities
for the Crenshaw/LAX line, Regional Connector, and Purple Line Extension Phase I. It further
reduces debt expenditures $6 million annually for the 30-year life of the refinanced debt. Additionally,
the FY16 Budget delivers funding for the commencement of heavy rail vehicle procurement and the
purchase of 350 new buses and 78 new light rail vehicles, expected to arrive over the following few
years.
The FY16 Budget provides increased subsidies to Municipal operators, local cities, and the County of
Los Angeles; increases in Highway subsidies to subregional projects; increases to Highway spending
on I-5 and I-605; and an anticipated doubling in ExpressLanes toll revenues - to $62 million -which
will enhance transportation and transit services along and near the I-110 and I-10 ExpressLane
corridors. Overall, the budget includes additional spending on increased agency support to carry out
its core mission of planning, constructing, and operating amulti-modal transportation system.
Attachments B (Summary of Agency Resources) and C(Summary of Agency Expenditures) provide
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File #: 2015-0459
a high-level summary showing the agency's FY16 expenditures and resources.
FTEs
As shown in Attachment D, the FY16 Budget proposes to add an additional 60 FTEs, which includes
5 Contract FTEs in Communications for the Xerox call center transition plus 55 Non-Contract FTEs in
the following departments:
Office of the Inspector General - 3 FTEs for additional oversight of construction projects;
Equal Employment Opportunity Office - 1 FTE to meet Federal EEO regulation requirements;
Enterprise Risk &Safety Management - 7 FTEs for construction safety monitoring and
evaluation;
Labor/Employee Relations - 2 FTEs to oversee the additional work load supporting agency
recruitments and improve hiring processes;
Program Management - 4 FTEs for project management, budget and cost estimates for the

Purple Line Extension;


Congestion Reduction - 3 FTEs for ExpressLane master planning and management and
improved traffic systems data-sharing coordination;
Engineering &Construction - 15 FTEs for SCRIP, Highway projects on the I-605 and I-5, and
seed positions to allow the start of recruitment of Metro personnel to replace construction
management consultant positions in Transit Project Delivery;
Finance and Budget - 8 FTEs due to support need increases for staff, TAP Munis, public
engagement, and TIFIA loan management;
Information Technology - 3 FTEs for payment card industry (PCI) and cyber security, payroll
systems and increased server maintenance and security;
Planning &Development - 3 FTEs for Eastside Phase II study, Joint Development, and market

research and community outreach; and,


Vendor/Contract Management - 6 FTEs for Measure R transit construction contract
management and contract labor compliance.
Since the FY15 Budget was approved by the Board, an additional 319 positions were added for the
Gold Line Foothill 2A and Expo Line Phase 2 extensions, initially for systems integration and prerevenue operations, and thereafter for ongoing operations and maintenance. Taking into account
these 319 and all other positions previously authorized by the Board of Directors, the total FY16 FTE
request is 9,717 FTEs, which includes the 60 new FTEs described above.
Communications' FY16 budget and FTE requests will be discussed under separate cover once a new
Chief Communications Officer is on board.
Public Engagement
A focus in the development of the FY16 Budget was increased engagement of the public. In addition
to presentations to citizens' Advisory Committees and Regional Service Councils, this year included
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File #: 2015-0459.
the addition of(a) posts on Metro's The Source online weblog and (b) a Public Forum, held on
Saturday, April 25. Attachment E provides a summary of public comments received to date and
considered during the FY16 Budget development process. A complete list of areas of discussion from
public comment collected from all sources will be provided under separate cover.
Reimbursement Resolution
Federal tax law requires that bond proceeds can only be used for expenses incurred after the
issuance of bonds. In order to be reimbursed for expenses incurred before the bond issue, Metro
must pass a resolution indicating the intent to issue bonds at a later date for the expenditures
described in the reimbursement resolution. The attached resolution (Attachment A) is included in the
budget board report as a matter of course, to tie expenditures anticipated in the budget to proceeds
from future bond issuance, and it must be approved as an item separate from the budget document.
DETERMINATION OF SAFETY IMPACT
The proposed budget continues to make safety a primary goal and provides funding for new and
ongoing safety programs throughout Metro.
FINANCIAL IMPACT
The proposed FY16 Budget (provided in a separate transmittal) is $5.6 billion. The budget includes
expenditures and appropriates the resources necessary to fund them. The proposed budget
demonstrates Metro's ongoing commitment to meeting its capital and operating obligations, which is
a requirement necessary in order to continue to receive subsidies from the state and federal
governments and to administer regional transportation funding to local cities and Municipal
Operators.
NEXT STEPS
Implement and monitor the FY16 Budget, modify the budget at midyear as required based on the
vision and priorities of the new CEO, identify areas for improvement, develop multi-year financial
forecasts, and regularly update the Board on the agency's ongoing financial performance.
ATTACHMENTS

Attachment A - Reimbursement Resolution of Metro for Fiscal Year 2016


Attachment B - Summary of Agency Resources
Attachment C - Summary of Agency Expenditures
Attachment D FY16 FTEs
Attachment E FY16 Budget - Summary of Public Comments Received
Prepared by: Luke H. Klipp, Budget Analyst,(213) 922-7412
Melissa Wang, Executive Officer, Finance,(213) 922-6024

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File #: 2015-0459

~, ,/
Nalini Ahuja
Executive Director, Finance & B

. Washin n
Phill
Chief Executive Officer

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ATTACHMENT A
REIMBURSEMENT RESOLUTION
OF THE
LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY
FOR FISCAL YEAR 2016
WHEREAS, the Los Angeles County Metropolitan Transportation Authority (the "Metro")
desires and intends to finance certain costs relating to (i) the design, engineering,
construction, equipage and acquisition of light rail lines including the Exposition Line
Phase II Project, (ii) the design, engineering, construction, equipage and acquisitions for
the Southwestern Rail Maintenance Yard, (iii) the design, engineering, construction,
equipage and acquisitions for the Rail Deferred Maintenance Project, (iv) the design,
engineering, construction, equipage and acquisitions for the Foothill Operating
Maintenance Yard,(v) the design, engineering, construction, equipage and acquisition of
various segments of the Universal City Pedestrian Bridge, (vi) the design, engineering
and construction of Metro Blue Line Pedestrian Swing Gates, (vii) the design,
engineering, construction, equipage and acquisition of the Patsaouras Transit Plaza
Improvements, (viii) the design, engineering and other related close out costs of the I405 Car Pool Lanes project, (ix) the engineering, construction, renovation, maintenance,
and/or acquisition of various capital facilities and equipment, including buses and rail
cars, related to service operation, (x) design, engineering, construction, equipage and
acquisition of various highway projects including soundwalls and carpool lanes, and (xi)
to other transit related projects (each a "Project" and collectively, the "Projects");
WHEREAS, to the extent that federal and/or state grant funding budgeted to be received
during FY16 is delayed or reduced, the Los Angeles County Metropolitan Transportation
Authority desires and intends to finance certain costs relating to the Projects.
WHEREAS, Metro expects to issue debt through the issuance of tax-exempt bond
issues to pay for these expenditures, which bond issues will have three separate
security sources, Proposition A, Proposition C and Measure R sales tax revenues,
respectively, or grant revenues to finance the costs of the Project on a permanent basis
(the "Debt");
WHEREAS, Metro expects to expend moneys of the Enterprise Fund (other than
moneys derived from the issuance of bonds) on expenditures relating to the costs of the
Projects prior to the issuance of the Debt, which expenditures will be properly
chargeable to a capital account under general federal income tax principles;
WHEREAS, Metro reasonably expects to reimburse certain of such capital expenditures
with the proceeds of the Debt;
WHEREAS, Metro expects that the amount of Debt that will be issued to pay for the
costs of the Projects will not exceed $261 million for Proposition A, $143 million for
Proposition C, and $160 million for Measure R;
WHEREAS, at the time of each reimbursement, Metro will evidence the reimbursement
in writing, which identifies the allocation of the proceeds of the Debt to Metro, for the
purpose of reimbursing Metro for the capital expenditures made prior to the issuance of
the Debt;

WHEREAS, Metro expects to make reimbursement allocations no later than eighteen


(18) months after the later of (i) the date on which the earliest original expenditure for the
Project is paid or (ii) the date on which the Project is placed in service (or abandoned),
but in no event later than three (3) years after the date on which the earliest original
expenditure for the Project is paid;
WHEREAS, Metro will not, within one (1) year of the reimbursement allocation, use the
proceeds of the Debt received by way of a reimbursement allocation in a manner that
will result in the creation of replacement proceeds of the Debt or another issue (e.g.,
Metro will not pledge or use the proceeds received as reimbursement for the payment of
debt service on the Debt or another issue, except that the proceeds of the Debt can be
deposited in a bona fide debt service fund); and
WHEREAS, this Resolution is intended to be a "declaration of official intent" in
accordance with Section 1.150-2 of the Treasury Regulations.
NOW, THEREFORE, BE IT RESOLVED, that (i) all of the foregoing recitals are true and
correct and (ii) in accordance with Section 1.150-2 of the Treasury Regulations, Metro
declares its intention to issue Debt in an amount not to exceed $261 million for
Proposition A, $143 million for Proposition C, and $160 million for Measure R; the
proceeds of which will be used to pay for the costs of the Projects, including the
reimbursement to Metro for certain capital expenditures relating to the Projects made
prior to the issuance of the Debt.

ATTACHMENT B
Summary of Agency Resources

($ in millions)

Sales Taxes (Props A, C, and Measure R)


1
Federal, State, and Locaf Grants
2
TDA and STA
3
Passenger Fares
4
ExpressLane, Ad~rtising, and Other Re~nues
5
Prior Year Carryover
7
8 Total Resources

ExpressLar
Advertisir
and OthE
3%

2,290.5
999.2
487.5
376.0
146.8
1,268.4
5.568.4

41%
18%

2
10

ATTACHMENT C
Summary of Agency Expenditures
millions

$ 1,461.3
2,133.4
1,378.4
93.9
172.8
328.7
$ 5,568.4

1
Metro Operations
Metro Capital
2
Subsidy Funding Programs
3
Congestion Management
4
General Planning and Programs
5
Debt Seniice
6
7 Total Expenditures

26%
38%
25%
2%
3%
6%
100%

General Planning
and Programs - 3%
~ ~:}De~i~'~
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Congestion
Management . ~
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v:',''+~"`~:'tiff',~ky"y:'~,~",.~~:'v',,:4"'~:+:k4:'ti+.+.
:':~'1`~:'ti4~'ti1~.~'v~'w~'ti'+~`+4
,+.~ik~i':k.'.l'~.'.'i'.'L~-.4\'.'M1'4'i~~~.~k'i'4~+.~+.\'~.'1'-.~ikk.'M1~~'.

263
95
18

5
60

8,253
9,657

25 Agency Total

22
23

19
20
21

Transit Project Delivery


Engineering &Construction Total
Finance &Budget
Information Technology
Operations
Planning &Development
Vendor/Contract Mgmt
Non-Contract Total

24 Contract Total

4
1

9,717

8,258

190
150
91
285
161
167
1,459

28
8
154

1 RIITS, 2 ExpressLane Master Plan &Management

8
42

0
4
14

8
38
249
95
15
24
7
144

Purple Line Extension Budget and Cost Management

75

73

5forXerox call centertransition

Eastside Phase II, Joint Development, Market research


2 DEOD,4 Measure R Transit Construction Contract Managers

Billing, Pens/Benefits, TIFIA, TAP Munis, Online Budget, NTD, ACCESS


Payroll, PCI, Increase Server Maintenance, Security

I-605, I-5
SCRIP
Transit Construction

HR Increased Recruitment Volume

4for Construction Safety Inspection, 3for Crenshaw Line Safety

EEO

40
S
93

1
0
7

39
5
86

0
3

ATTACHMENT D

Office of the Inspector General - Construction Oversight

39

36

10
15
8
3
0
3
6
55

Regional Rail

Communications
Congestion Reduction
Engineering &Construction
Highway Project Delivery

Chief Policy Office


Enterprise Risk &Safety Mgmt
Labor/Employee Relations
LA Metro Protective Svcs
Program Management
Chief Executive Office Total

Board of Directors
Chief Executive Office
Chief Executive Office

175
142
88
285
158
161
1,404

10
11
12
13
14
15
16
17
18

8
9

2
3
4
5
6
7

1 Non-Contract

FY16 FTEs

ATTACHMENT E
FY16 Budget
Summary of Public Engagement Efforts and Comments Received
Public Engaqement Efforts
Action

Summary/Recap

Stakeholder
meetings

Service Councils(SC)
Citizens Advisory Council(CAC)
Streets and Freeways
Subcommittee (SFS)
Bus Operations Subcommittee
(BOS)
Technical Advisory Committee
(TAC)

Comments
Service Councils: 22
CAC:8
SFS: 4
BOS: 1

Website

Public access to budget details


On-line survey

Page views: 605


Email comments: 16
Budget Survey: 41

Social Media

Podcast, blog posts

Blog hits: 385


Podcast views: 302
Source comments: 11
Facebook likes: 19
Twitter: 14 re-tweets

E-blast

>24,000 emails

Messages on-hold

On-hold message began April 1

Publications
(multi-language)

Notification of public forum/hearing


60 publications

Video views: 323

Distribution of >81,000 throughout


system and at stakeholder events

Phone calls: 2

Take-ones
(English/Spanish)
Budget Public
Forum

>

Strategy

Attendance: 18

Comments Received
Comments received from the public during Metro's FY16 budget outreach process are
summarized below. Feedback was received from the following sources and groups:

Budget Public Forum


Service Council Meetings
Citizens Advisory Council
Streets and Freeways Subcommittee
Bus Operations Subcommittee
Technical Advisory Committee
Online budget survey
Written comments received via mail and email
Social media outreach, including podcasts and blog posts
Synopsis of Comments
More routes, more frequent service, better on time performance, 24
hour service
Focus on mass transit, especially light rail; accelerate these projects
Rail construction causes inconveniences because many bus stops
are temporarily out of service
Existence of short lines makes it inconvenient to travel the longer
route because headways are longer
Increase budget for maintenance on older buses
There is no need to buy 350 new buses with rail lines opening; this
will cause duplicative service
Monitor the growth of the capital program as a percentage of the
total budget
Minimize subsidies by having companies bid competitively for the
right to run bus lines
Many comments or complaints about specific routes and specific
transit service; specific services cited include:
Add or improve bus service: near the Crenshaw Line
construction, to La Habra, to Disneyland, the new Valley
Express bus, on Lincoln through Westchester to the Palisades
Improve North Hollywood station and Red Line, including bus
connections
Increase budget for Green Line station refurbishments
Add a train to Woodland Hills
Do not lengthen the Orange Line buses
Convert regular buses to trolleybuses to decrease pollution
More ticket vending machines and benches at transit stations
Upgrade the Orange Line to light rail service
Partner with private companies to build housing and open more
retail stores at transit stations
Charge for parking in order to generate additional revenues

Alternative
Revenues

Key Topics
Transit
Service

S nopsis of Comments
Bike and pedestrian projects can actually make travel for the
disabled more difficult
Metro has an obli ation to follow accessibilit requirements
TPIS screens are not accurate
Improve the communication of service alerts to Metro customers (i.e.
add alerts on new bus cameras)
Expand TAP program to be used for goods purchase, similar to Visa
or MasterCard
Introduce automatic fare caps on the TAP card
Coordinate with other agencies to create a regional transit mobile
phone app
Complaints about lack of LASD presence and ineffectiveness of law
enforcement
Find ways to control fare evasion
Visit other cities such as New York, London or Tokyo to learn from
their security model and apply those lessons to the Metro system
Permanent) staff transit stations with law enforcement officers
Some suggested expanding the ExpressLanes project to other
highways; conversely, others stated that charging for usage of these
lanes is not fair to low income drivers
Cancel the 710 North project and use the funds to build the Gold
Line out to the LA County border
No room to widen the 5 freeway between the 605 and Downtown LA
Install cameras on Freeway Service Patrol vehicles to protect drivers
Numerous suggestions to reduce or eliminate freeway funding
Customer service should be a top priority
Customer Service should be open longer; should be easier for the
public to give feedback and get a response
Customer Relations should provide faster responses
Decrease the base fare and decrease the monthly pass to $50
Preference for alternative fare structures, such as distance based

Ke Topics
ADA
Comments

Technology

&

Safety
Security

Highway
Programs

Fares

Customer
Service