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Home My WebLink About06-12-2012 b2 2012 transit fund reviewcounci lj acEnaa nEpoRt Meeting Date June 12, 201 2 Item Number B 2 C I T Y O F S A N LUIS O B I S P O FROM : Jay D . Walter, Director of Public Work s Prepared By :Timothy Scott Bochum, Deputy Director of Public Work s John Webster, Sr., Transit Manage r SUBJECT :TRANSIT ENTERPRISE FUND REVIEW 201 2 RECOMMENDATION S 1.Review and accept the 2011-12 Transit Enterprise Fund analysis . 2.Conceptually approve the 2012-13 FY Transit Enterprise Fund budget, with final action on Jun e 19, 2012 . DISCUSSIO N This report summarizes the status of the Transit Enterprise Fund and key issues that may affect th e health of the fund during the second year of the two year Financial Plan . Funding for transit service s continues to be tight, with no funding available for new initiatives or major capital expenditures . Overall, it is forecast that the Transit Fund will end 2011-12 with a modest year-end working capita l amount to assist with operations and minor capital expenditure project needs . As of this writing, the Federal Government has yet to adopt the final twenty-five percent of transi t appropriations for the 2011-12 fiscal year. Indications are that the final transit apportionments will remain at current levels but due to the current budget stalemate in Washington, the final 25 % apportionment could be delayed until the end of the Federal fiscal year on September 30, 2012 . SLO Transit has already submitted a grant application for the 75% apportionment of transit fundin g and anticipates payment of this portion by August 2012 . However, should the final 25 % apportionments be lower than projected, Transit Fund reserves will be needed to support the defici t for the immediate shortfall . Should a reduction in the final 25% apportionment be significant, staf f will return to Council with a proposal for reducing service levels and/or deferment of capita l projects . Transit Accomplishments in 2011-1 2 Although the Transit Fund Review primarily reports on financial and budgetary information, it i s important to reflect on the accomplishments that have occurred during the past fiscal year . Council approval of the Transit Fund budget allows SLO Transit to provide continued services and support . The following is a list of highlights that SLO Transit has been able to accomplish in the 2011-12 fiscal year . 1 . Ridership SLO Transit ridership is up 7 .75% for a total of 940,923 passengers through Apri l 30, 2012 . It is projected that SLO Transit total ridership for 2011-12 will exceed 1 .1 million riders . Transit Enterprise Fund Review 2012 Page 2 2.Mobility Training - New Freedoms Gran t The Ridership Development Consultant has held at least 14 information, outreach an d training sessions for senior and disabled rider education . Program marketing an d informational materials are available at over a dozen locations throughout the City . SLO Transit has experienced a year-to-date increase in ridership of 15% (13,568 riders ) in this segment as compared to the same period in 2009-10 before the start of this gran t funded program . 3.Ad Hoc Marketing Committe e On March 9, 2011, the Mass Transportation Committee (MTC) approved the SL O Transit marketing plan report . The SLO Transit Marketing Plan had been deferre d until funding sources could be identified . The SLO Transit Marketing Ad Ho c committee met with Cal Poly faculty and students in attempt to seek marketin g assistance from the University . On March 14, 2012, the MTC members reviewe d five Cal Poly class marketing plan presentations and recommended the Ad Ho c Marketing Committee to continue working with . Cal Poly to develop . products t o assist with transit system marketing in the 2012-13 fiscal year . 4.Excellence in Government Awar d SLO Transit serves our City of 44,000 permanent residents and 18,000 temporar y student residents, many of whom rely on the transit system as their primary mode o f transportation . The Deputy Director of Public Works was recognized by th e Municipal Manager's Association of Southern California with an Excellence i n Government Award for his work in enhancing the SLO Transit system, optimizin g routes used to serve the university and maintaining on-time performance of th e buses . SLO Transit continues to forge strong partnerships with Cal Poly, San Lui s Obispo Regional Transit Authority (SLORTA) and the San Luis Obispo Council o f Governments (SLOCOG) to ensure that transit services remains a high priority, eve n during difficult budget times . 5.Completion of Foothill/Tassajara corner Modification This capital improvement project widened the corner of Foothill/Tassajara to allo w buses to again use this intersection and remove the buses from Ramona . This projec t was completed in May 2012 . Transit Revenue s State Fundin g State Budget Impacts Overall, the Governor's proposed State budget does not make any significant changes to funding fo r transportation or public transit . However, it is not known what final funding changes would occur i f the proposed tax increases are not approved by voters in the November election . Any furthe r reduction of funding to the City, Cal Poly or SLORTA could have a significant impact on servic e levels for 2012-13 and beyond . SLO Regional Transit Authority SLO Transit shares State and Federal funding for transit services with SLORTA . This Agreemen t funds SLORTA "off the top" each year from the City's share of State Transportation Developmen t B2-2 Transit Enterprise Fund Review 2012 Page 3 Act (TDA) funding . The recently adopted 2012-13 SLORTA budget increased the City's contribution to SLORTA, thereby decreasing SLO Transit's allotment of State revenue available b y approximately $145,500 in 2012-13 . Representatives from SLORTA, SLOCOG and SLO Transi t continue to work on options for funding that maximize transit service provisions for each agency . State Transportation Development Ac t The State Transportation Development Act (TDA) provides two sources of funding fo r transportation programs . The first, Local Transportation Fund (LTF), is derived from '/4 cent collected in retail sales taxes . The second, State Transit Assistance (STA), is derived from th e statewide sales tax on diesel fuel . Both of these funds are distributed to the regions by the State . The regional agency, SLOCOG, then allocates this amount to each of the seven cities, the County , SLOCOG, and the Consolidated Transportation Services Agency for the San Luis Obispo region . LTF funds are apportioned according to population for public transit, street/road improvements an d bikeway/pedestrian facilities . STA funds are used for public transit purposes . The State budget has yet to be approved and therefore the State Controller projected STA fundin g allocation remains preliminary at this time but represents an increase of approximately $48,000 ove r 2011-12 FY . Local Transportation Fun d The County Auditor LTF projections are higher than originally estimated with an 11% increase i n 2012-13 largely attributed to a one-time carryover of funding, which is not anticipated in futur e years . With a proposed fund reserve, the County Auditor has increased the LTF allocations fo r jurisdictions . This allocation is a one-time bump in LTF funding and as such will not become th e new base for subsequent years . Federal Fundin g Program of Projects The Transit Fund analysis anticipates the same level of Federal Transportation Assistance (FTA ) 5307 funding apportionment for in the 2012-13 fiscal year . This projection provides adequat e support for operating assistance and preventive maintenance functions for SLO Transit only . N o additional capital projects have been projected as part of the Program of Projects (POP) in the 2012 - 13 fiscal year . However, capital projects may be brought forward as part of a revised POP i f Federal funding allocations come in higher than projected . Any reduction in Federal operatin g assistance will need to be offset with potential service reductions or other cost savings measures . Subsidie s Cal Poly Subsidy Agreemen t The City successfully negotiated a five-year Subsidy Agreement with Cal Poly which began on Jul y 1, 2011 . The SLO Transit budget projection for 2012-13 includes a 4% increase in Cal Poly subsid y with smaller increases in the following three years . If the State budget significantly affects Cal Poly's ability to fund the Subsidy Agreement, the City and the University have agreed to meet an d discuss potential program modifications or service level reductions . Trolley Operation s The Friday and Saturday Trolley funding subsidy from the SLO Promotional Coordinatin g Committee (PCC) will end on June 30, 2012 . There are sufficient Transit operating funds to Transit Enterprise Fund Review 2012 Page 4 continue this service through the end of October 2012 . Ridership on Fridays and Saturdays hav e dropped significantly (-2,352 riders or 42%) when compared to the same July-April period last year . When trolley services conclude in October, staff will evaluate the trolley ridership data to determin e if further service adjustments are warranted and whether to resume Friday and Saturday trolle y services again in April 2013 . The Thursday trolley service levels continue to see steady ridershi p trends and will not be affected by the loss of subsidy funding from the PCC . Thursday trolle y service remains productive with an overall increase of 5 .36% (+499 riders) during the same July - April period last year. SLO Transit Operating Progra m First Transit Service Contrac t In June 2006 the City Council approved a three-year service contract with First Transit to provid e SLO Transit with Purchased Transportation for operations and maintenance services . In February 2012, Council approved a contract extension through June 30, 2013 . Staff is in the process o f reviewing transit services to determine if an additional extension agreement will be negotiated wit h First Transit or if a new Request for Proposals will be circulated for transit operations and maintenance for 2013-14 and beyond . In anticipation of a pending change in contract services, staff has assumed a 3 .2% increase in Purchased Transportation operating contract costs for 2013-14 . Continued Volatility in Fuel Costs Fuel costs are once again very volatile as experienced in 2008 and 2010 when fuel prices increase d significantly to almost $5 per gallon . Although fuel prices were showing stabilization in April, staf f projects fuel costs will continue to rise over the next year . Staff has projected fuel costs at $4 .32 per gallon with an average of 118,000 gallons of diesel fuel purchased in a fiscal year . Staff project s this budget to be adequate for the 2012-13 fiscal year but outside market influences make thi s assumption difficult to control . Should fuel prices increase significantly above projections, staf f will return to Council with identified service-level reductions or possible use of reserves . Cost Allocatio n The revised Cost Allocation Plan, approved by Council on May 15, 2012, resulted in a ver y significant increase to Transit Services indirect charges . This increase of 33% or $118,000 (33%) over previously projected amounts for the 2011-12 fiscal year is significant and effects actua l service on the street . The increase is attributed to the change in methodology for how the Cit y calculates direct and indirect charges for Enterprise Funds that receive General Fund progra m support . The Cost Allocation Plan,. which also affects the performance of farebox ratio, is subject t o Federal audits that the Transit Services program undergoes on a regular basis . The revised Cos t Allocation Plan is currently under review by the FTA and awaiting formal agency approval to b e used in FY 2013 . Farebox Rati o With the fare increase approved in 2009, SLO Transit's farebox ratio was projected to stabilize i n 2010-11 and beyond .. Staff projected the renegotiated Cal Poly Subsidy Agreement would be a ke y component in meeting the required 20% farebox ratio for the SLO Transit system . In the 2011-1 2 fiscal year, farebox ratios have fallen slightly below the 20% required farebox ratio with a projecte d annual average of 19 .6%. This will continue through 2013-2014 . This decrease in farebox ratios i s a direct result of a change in the City's methodology for calculating direct and indirect charges fo r Enterprise Funds that receive General Fund program support . B2-4 Transit Enterprise Fund Review 2012 Page 5 As noted above, the revised Cost Allocation Plan resulted in a significant increase to Transi t Services indirect charges . If farebox ratios consistently fall below the 20% level, the City could b e subject to a State funding penalty and reduced transit funding, if the farebox ration remains belo w 20%, a fare increase may be necessary so as not to endanger funding levels . Significant Operating Program Chang e Due to the extended leave of the Deputy Director of Public Works, there is an additional Significan t Operating Program Change (SOPC) request for $7,500 in contract services for the 2012-13 fiscal yea r (Attachment 2). Since the onset of leave for the Deputy Director of Public Works - Transportation , staff has assessed the increasing time constraints with increasing complexities related to th e Enterprise Funds, workload balance, and constraints facing supervisors and managers . The Transi t Manager has taken a lead role in representing the City at SLOCOG meetings and hearing s previously handled by the Deputy Director . This assistance has had an impact on the ability for Transit Services to provide website updates, detour notices, event assistance, bus stop, schedule an d route evaluations, and bus pass distribution . The proposed increase to the Transit Program budge t for contract services will address ensure the ability of the program to continue to perform and mee t its service obligations . Budget Balancing Strategie s In order to assist in the overall effort to have a more sustainable budget, the Transit Enterprise Fun d continues to look for opportunities to reduce spending and make minor revenue adjustments . Management salary concessions occurred at the beginning of 2012 and have been incorporated into th e fund analysis . Based on salary and benefit updates provided by Finance, 6 .8% salary and benefit s concessions from SLOCEA, and increased City PERS contributions commencing July 1, 2013 ar e integrated into the fund review . FISCAL IMPAC T As shown in the Transit Enterprise Fund Analysis 2011-12 (Attachment 1), staff is projecting th e 2012-13 fiscal year to end with a modest year-end working capital . Funding continues to be lea n and highly dependent upon Federal and State grants and final budget appropriations . While staff does not project any service-level reductions for SLO Transit at this time, the projected revenu e forecasts give very little capacity for funding variations . Due to one-time-only funding increases, a s well as other cost savings and a minimal capital improvement program, staff is projecting to finis h 2011-12 fiscal year with a small amount of positive cash flow . These projections are dependen t upon revenues provided by the State and Federal budgets, which have yet to be approved . Changes in Financial Position is included as part of the 2011-12 Fund Analysis (Attachment 1 - Exhibit A). Overall, revenues are projected to meet or exceed expenditures in 2011-12 ; leaving a positive year-end balance of $96,500 as we move into next year . Should the final Federal apportionment be significantly reduced from projected, the transit reserve fund will be needed t o support this deficit for the immediate shortfall . The revised 2011-12 budget and projected funding for the 2012-13 Financial Plan include s assumptions of revenues in key funding sources that have seen significant reductions by Stat e budget take-aways over the past three years . With the one-time State funding increases for FY 2013, Transit Enterprise Fund Review 2012 Page 6 staff projects ending the 2012-13 fiscal year with a small year-end savings of $67,700 . Staff i s proposing a conservative budget, which minimizes capital projects, defers bus replacements an d maintains year-end reserves to address minor shortfalls in revenues . Maintaining year-end working capital reserve funding is prudent for the following three reasons : • Minimizing service-level impacts as a result of State and Federal budget reduction s • Minimizing service-level impacts as a result of purchased transportation operations an d maintenance contract cost s • Weathering volatile fuel price s ALTERNATIVE Modify the Fund Analysis .The City Council could reject the 2011-12 Transit Fund analysis as presented and direct staff to seek additional funding sources, defer capital projects or provide transi t operating cost reductions . Staff does not recommend this option as the proposed fiscal forecas t provides the best "snapshot" of funding at this time based upon the current information provided b y the State and Federal government. Staff will continue to update the fiscal forecast and informatio n on funding sources as received, with an intention to defer capital projects if grant funds are no t realized . ATTACHMENT S 1.Transit Enterprise Fund Analysis 2011-1 2 2.Significant Operating Program Chang e t\cowwn ay.,.,w ruy~il„—u L,I L-.a-1L,:,r,faro:;:;IC:.u :cyu :c,~i.u.,ii,;.at.L'. _.:..::::,:: tad lur.a re .anal:vf-06-12-2012.dOCx ATTACHMENT 1 Transit Enterprise Fun d Sall LUIS OBISpO transit Transit Enterpris e Fun d 2012 Fund Analysi s June 12,2012 Attachment 1 Page 2 City of San Luis Obisp o 2011-13 Transit Fund Analysis Table of Content s I . OVERVIEW II . 2011-13 FINANCIAL PLAN 5 a.Summary of Operating Programs 5 b.Capital Improvement Program 5 III . ASSUMPTIONS 6 a . General Assumptions 6 c.Operating and Capital Expenditures 8 d.Ridership and Evening Service IV . LOOKING TO THE FUTURE 1 0 a.State, Federal and Regional Budget Impacts 1 0 b.Operations and Maintenance Contract 1 0 c.Volatile Fuel Prices 1 0 V . EXHIBIT A — Changes in Financial Position 12 Attachment 1 Page 3 city o f sal') Luis oBisp o 2011-13 Transit Fund Repor t I . OVERVIE W This report presents the financial position of the Transit Enterprise Fund, based on the 2011-1 3 Financial Plan operating program budget, projected 2011-12 year-end funding, and recommend s operating program and capital project requests to address the identified needs in the Transi t Services program . While the State budget proposal does not make any significant changes to project funding fo r transportation, the ever-turbulent Federal budget situation continues to delay the final Federa l Transit Administration (FTA) apportionment for transit-related program funding . As a result, th e Transit Enterprise Fund program moves cautiously into the 2012-13 fiscal year and is optimisti c that the estimated level of Federal funding will be approved . State transit funding is predicted to increase for this fiscal year as a result of the better tha n expected sales/gas tax/excise tax revenues and one-time carryover funding, which results in a n increase in State revenues of approximately 11% over current year . However, this increase i n funding is somewhat offset by an increase in the City's subsidy to the San Luis Obispo Regiona l Transit Authority (SLORTA). Federal revenues are expected to be about the same as previou s year's allocation, however ; if the final Federal apportionment is significantly reduced fro m projected, the Transit Enterprise Fund year-end reserves will be needed to support the deficit for the immediate shortfall . Staff has included projections of expenditures in the operating budge t that are realistic, but if exceeded, will cause funding hardship . The City successfully negotiated a five-year Subsidy Agreement with Cal Poly which began on July 1, 2011 . The SLO Transit budget projections for the 2012-13 fiscal year include a 4 % increase in the Cal Poly subsidy . If the State budget significantly affects Cal Poly's ability t o fund the Subsidy Agreement, the City and the University will undertake discussions on potential program modifications or service-level reductions . With these factors under consideration, staff is projecting a year free of service reductions bu t one that is contingent on outside influences ultimately determining if service changes or far e increases may be necessary .. Due to already conservative revenue projections, there is very littl e room for funding variations should State and Federal funding come in below projections . Unti l the State budget is approved, SLO Transit will not have final dollar amounts to rely upon . Additionally, 2012-13 fiscal year is anticipated to be a very challenging year based on projecte d revenue amounts . Staff will be monitoring the budget situation closely, and return later in th e year with any changes or reductions that require Council consideration . Capital expenditures wil l be limited to projects that can be funded from grant revenues, keeping the local match require d to a minimum, and preserving as much for operating expenses as possible . If needed, the capital purchases can be deferred, in the short-term, freeing up funds intended to be used as a local match . B2-9 Attachment 1 Page .4 Due to the need to program almost all available funding resources for support of transi t operations, there will not be significant capital funding available in the 2012-13 budget from th e conventional funding sources, such as State Transportation Development Act (TDA) and FT A funding. Instead, it is likely that the City will need to continue to rely heavily on one-time onl y grant sources to deliver needed vehicle replacements and other major capital expenses . Thes e funds are discretionary under the purview of the San Luis Obispo Council of Government s (SLOCOG) and as such, have not been anticipated nor included as part of the budget forecasts . However, staff will continue to seek these grants when available to assist in meeting capita l replacement needs . Staff currently forecasts the 2012-13 budget as balanced, with revenues meeting or exceedin g expenditures . However, volatile fuel costs, additional costs associated with contract rebidding , increase subsidy to SLORTA and unresolved issues at the State and Federal levels would affec t transit funding levels . The 2012-13 fiscal year will be challenging based on projected revenu e amounts . Staff will continue to monitor the budget situation closely, and return later in the yea r with any changes or reductions that need to be considered . Farebox Rati o With the fare increase approved in 2009, SLO Transit's farebox ratio was projected to stabiliz e in 2010-11 and beyond . Staff projected the renegotiated Cal Poly Subsidy Agreement would be a key component in meeting the required 20% farebox ratio for the SLO Transit system . There is a definite negative impact from the new cost allocation plan and the main reason it has droppe d below the required 20% level The performance of the farebox ratio is the subject of Federa l audits that the Transit Services program undergoes on a regular basis and the new cost allocatio n plan has not been formally accepted by the Federal Transit Administration (FTA) as of thi s writing . If the cost allocation plan is rejected at the Federal level there is a risk that FTA Sectio n 5307 funds could be withheld or denied. FTA Section 5307 funding is a major source of transi t revenue for operations, preventative maintenance and Capital projects . If the farebox ratio fall s consistently below the 20% level, then the City will be subject to losing additional State funding . B2-10 Attachment 1 Page 5 II.2011-13 FINANCIAL PLAN a.Summary of Operating Program s The 2011-13 revised operating budget projections for the Transit Services Enterpris e Fund . Operating cost information for the Transit Services program is provided o n page D-86 of the 2011-13 Financial Plan . 2010 `X17112-13 'MI TI ransitnterprise Fund Actual Budget Budget Projecte d Staffing $230,300 i0 ,;~.3($236,20 0 Contract Services $2,237,800 2 4 .2 ;no 211(1 $2,622,50 0 Other Operating Expenses $156,300 08 .-1110 5 iIOO $62,20 0 Minor Capital $-$ Operating Budget $2,624,400 2 .758 .(00 2,855,700 $2,920,90 0 General Government $357,200 4 -6 .5 0ill 416,500 $416,500 Total Transit Operating $2,981,600 S 3,235 .100 S 3,272,200 $ 3,337,400 The Fund Analysis includes a reduction in staffing expenditures as a result o f employee concessions and increase in contract costs for purchased transportatio n services, fuel and one-time contract services support during an interim leave of th e Deputy Director of Public Works . A significant increase to SLO Transit's operatin g expenditures is accounted for by a recent change in methodology for calculatin g direct and indirect charges as part of the City's Cost Allocation Plan . b.Capital Improvement Progra m The table below shows the 2011-13 revised Capital Improvement Program an d assumptions for capital projects . Both years of the Financial Plan are light in capital expenditures due to the need to program almost all transit funding for operations and maintenance . Fortunately, the City has been very successful in acquiring outside grant funding to assist in capital projects, including vehicle replacements, in 2010-11 fisca l year as shown in table below . There are no bus replacement capital projects schedule d in the 2012-13 fiscal year and one service truck replacement projected for 2013-14 . The City will need to rely heavily on grants in the next two fiscal years to augmen t the proposed Transit capital program of projects . Attachment 1 Page 6 (-vMTN), Pl O(,RAy1 2_11111-1 I Actua l 91006 FOXPRO REPLACE $ 23,000 91022 LASERFICHE $ 2,40 0 90918 DOUBLE-DECK REPLACEMENT $ 850,00 0 90921 ELECTRONIC FAREBOX UPGRADE $ 3,400 90920 AVL PASSENGER ACCESS SYSTEM $ 33,700 90922 TRANSIT FACILITY IMPR $ 1,00 0 99601 BUS MAINT FACILITY EXP $ 58,30 0 90996 FORKLIFT $ 30,00 0 90997 STAFF VEHICLE $ 50,00 0 90919 BUS STOP IMPROVEMENTS $ 25,70 0 99001 BUS STOPS $ 40 0 91090 FACILITY SECURITY IMPR PROJ $ 48,10 0 91077 RADIO REPLACEMENT PROJECT $ 209,60 0 90998 DWNTWN TRANSIT COORD STUDY $ 125,000 91089 BUS CAPITAL ENGINE-REHAB $ 47,00 0 91086 BUS REPLACEMENT (Asset#9710)$ 386,00 0 91087 BUS REPLACEMENT (Asset# 9823)$ 419,500 9 .1088 BUS REPLACEMENT (Asset# 9824) -$ 415,000 91122 SERVICE TRUCK RPLCMNT (Asset# 0028)$ - 91104 CITY WEBSITE UPGRADE $ 91106 MICROSOFT OFFICE REPLACEMENT $ - 9XXXX BUS STOP SAFETY SECURITY IMPR $ 2012-13 2013-14 Budget Projecte d ' 2011-1 2 Budget Capital Program Expenditures $ 2,728,100 100 $ 76,10 0 I .-;(/,1)111Carryover from Previous Yea r Total Capital Program Expenditures $ 2,728,100 1 .-82,0o ti 76,10 0 III . ASSUMPTION S The following assumptions have been used to forecast the Transit Enterprise Fun d analysis . The discussion below provides detail for the key assumptions used to generat e the changes in financial position as provided as Exhibit A . It is important to note th e proposed budget is a "snapshot" of current funding and expenditure projections as o f April 2012 . The following discussion focuses on major issues that could have an affect the Transit Enterprise Fund next fiscal year . These assumptions have been incorporate d into the 2011-13 budget projections . a.General Assumption s The Transit Enterprise Fund will commit all available transit funding to SL O Transit and will carryover any unused funding for use in subsequent years and t o maintain an adequate year-end fund balance (reserve) to help weather budge t uncertainties . b.Revenues, Subventions and Grants Fare Revenu e Fare increases adopted by the City Council in April 2009 continue to help bring i n revenue to meet expenses and the farebox recovery ratio of 20% required by th e State . SLO Transit has proposed a conservative budget based upon revenu e projections . There is little ability for adjustment should the State and Federa l allocations come in significantly lower than projected . Staff will return t o B2-1 2 Attachment 1 Page 7 Council for proposed service-level reductions or rate increases the decrease i n revenues be significant . A 3% increase in fare revenues have been projected i n the 2012-13 fiscal year based upon past experience with an increase in ridershi p due to rising fuel costs . Farebox Rati o With the fare increase approved in 2009, SLO . Transit's farebox ratio wa s projected to stabilize in 2010-11 and beyond . Staff projected the renegotiated Cal Poly Subsidy Agreement would be a key component in meeting the required 20 % farebox ratio for the SLO Transit system . In the 2011-12 fiscal year, farebox ratios have fallen slightly below the 20% required farebox ratio with a projecte d annual average of 19 .6% from 2011-12 through 2013-2014 . This decrease i n farebox ratios is a direct result of a change in the City's methodology fo r calculating direct and indirect charges for Enterprise Funds that receive General Fund program support . The revised Cost Allocation Plan, approved by Counci l on May 15, 2012, resulted in a significant increase to Transit Services indirec t charges of $118,000 (33%) over previously projected amounts for the 2011-1 2 fiscal year . The Cost Allocation Plan, which affects the performance of farebo x ratio, is subject to Federal audits that the Transit Services program undergoes on a regular basis . The revised Cost Allocation Plan is currently under review by th e FTA and awaiting formal agency approval . Until recently, SLO Transit has consistently met the required 20% farebox ratio . Had there not been a cost allocation increase, SLO Transit would have met th e farebox requirements in 2011-12 and beyond . If the farebox ratio fall s consistently below the 20% level, the City will be subject to a State fundin g penalty, which would represent the difference between required revenues an d actual revenues received . SLO Transit would need to reduce service levels o r system costs by these amounts, increase fares, or face a significant loss of Stat e funding estimated at $258,000 over a 3-year period . Cost Allocation Plan &Farehor Ratio lmpa c 2010-11 2011-1 2 ?Fares $595,800 (?x .410 (iTransit Operatng $2,981,600 s .11H1 S 'eboxRatio .200%19 7 Cost Reductions/Loss ofStatefunding oi")i Farebox 20 .0%20 .1 2012-13 2013-1 4 649,00 0 19 194 %.. ~'W $3,337,40 0 " (106,500) 20,1 20 .1 % Cal Poly Subsidy The City successfully negotiated a five-year Subsidy Agreement with Cal Pol y which went into effect on July 1, 2011 . The SLO Transit budget projections for 2012-13 fiscal year includes a 4% percent increase in the Cal Poly subsidy, wit h increases in the subsequent three years . If the State budget significantly affect s Cal Poly's ability to fund the Subsidy Agreement, the City and the University wil l Attachment 1 Page 8 undertake discussions on potential program modifications or service-leve l reductions. Local Transportation Ac t The Local Transportation Fund (TDF) is State funding derived from the cen t retail sales tax . The Transit Enterprise Fund analysis assumes a 10% increase i n the 2012-13 fiscal year for LTF grant funds, as estimated by SLOCOG . Thi s funding increase is mainly due to increased sales tax revenue and one-tim e allocation increase from carryover funds that are only be available in 2012-13 . The final State budget amounts for next fiscal year have not been released an d will likely affect the final funding levels . State Transit Assistanc e Although initially eliminated in 2009-10, the State Transit Assistance (STA ) funding was renewed under the State budget gas tax swap agreement and i s expected to provide SLO Transit with annual funding . The Transit Fund Analysi s includes an assumption of that $229,800 will be received in STA funding fo r 2012-13 and 2013-14 . Federal Transit Administratio n Federal Transit Assistance (FTA) funding is formula-based upon population an d service level categories, and it is anticipated that SLO Transit will receiv e $1,274,600 in 2012-13 and $1,329,700 in 2013-14. This Federal funding will b e used primarily for operating assistance of SLO Transit services . Actual Federa l allocations may vary due to changes in reporting statistics for these categories . Due to recent changes in the reporting of these statistics, it is likely that the City coul d need to share a larger portion of STIC funding with SLORTA . Additionally, th e 2010 Census has the potential to show a reduction in the urbanized area's population density. This could result in reduced base FTA transit funding allocation for SLO Transit for 2012-13 and beyond . The City is working wit h SLOCOG to resolve this issue with the Census Bureau . Operating and Capital Expenditure s Staffing The Transit Services program staffing will remain consistent with a regular staffing level of 2 .32 full time equivalent (FTE) employees . The Transit Enterprise Fund provides funding to support a full-time Transit Services Manager , a Transportation Assistant and a shared part-time temporary worker position wit h the General Fund Transportation Planning and Engineering Division fo r alternative transportation programs and marketing services . Management salar y concessions occurred at the beginning of the 2012 and have been incorporated int o the fund analysis . Additional employee concessions are anticipated to be achieved i n the next fiscal year when general employee contract negotiations are complete . Contract Service s In February 2012, Council approved a contract extension with First Transit, th e purchased transportation provider for SLO Transit services, through June 30 , 2013 . This assumption includes a 4% contract increase annually . An additiona l extension agreement will need to be negotiated next fiscal year or a new Reques t B2-14 Attachment 1 Page 9 for proposals circulated for transit operations and maintenance in 2013-14 an d beyond. Not knowing which option will be recommended, staff has assumed a 3 .2% increase in purchased transportation contract costs for the 2013-14 fisca l year . Due to the extended leave of the Deputy Director of Public Works, staff submitted a program request for a one-time augment to contract services in the amount of $7,50 0 in the 2012-13 fiscal year . This funding will provide for additional contract service s to augment work efforts of the Transit Services program such as website updates , detour notices, event assistance, bus stop, schedule and route evaluations and bu s pass distribution . Fue l Fuel costs are once again very volatile and as experienced in the 2008 and agai n 2010 when fuel prices increased significantly to almost $5 per gallon . Although fuel prices are showing stabilization in April, staff projects fuel costs wil l continue to rise over the next year and stabilize at a "new norm". SLO Transit ha s budgeted fuel costs at $4 .32 per gallon with an average of 118,000 gallons o f diesel fuel purchased in a fiscal year . Staff projects this budget to be adequate i n the 2012-13 fiscal year . Should fuel prices increase significantly abov e projections, staff will return to Council with identified service-level reductions . General Governmen t The revised Cost Allocation Plan, approved by Council on May 15, 2012, resulte d in a significant increase to Transit Services indirect charges of 33% or $118,00 0 (33%) over previously projected amounts for the 2011-12 fiscal year . Thi s increase is attributed to a change in methodology for how the City calculate s direct and indirect charges for Enterprise Funds that receive General Fun d program support . The Cost Allocation Plan, which also affects the performance o f farebox ratio, is subject to Federal audits that the Transit Services progra m undergoes on a regular basis . The revised Cost Allocation Plan is currently unde r review by the FTA and awaiting formal agency approval . Short Range Transit Pla n On May 5, 2009 the City Council adopted the Short Range Transit Plan (SRTP ) update that was prepared by Urbitran Associates, Inc . Due to significant fundin g constraints at this time, all available revenues are allocated to support SL O Transit operating services . No new initiatives or increase in services, a s recommended in the SRTP, have been included in the Transit Enterprise Fun d analysis . These recommendations will be addressed and brought forward t o Council as funding sources are identified . Capital Improvement Progra m The Transit Fund analysis anticipates a conservative level of Federal fundin g apportionment for in the 2012-13 fiscal year . This modest revenue projection will provide support for operating assistance and preventive maintenance functions fo r SLO Transit . As a direct result, no additional capital projects have been projecte d as part of the Program of Projects (POP) in the 2012-13 fiscal year . However , capital projects may be brought forward as part of a revised POP if Federa l B2-15 Attachment 1 Page 1 0 funding allocations come in higher than projected . The City will need to rely heavily on grant sources, such as Proposition 1B, t o secure funding for vehicle replacements and other major capital items . N o additional bus replacements are proposed at this time as part of the Financial Pla n and instead will need to be brought forward as individual grants are receive d d.Ridership and Evening Servic e Staff has estimated SLO Transit ridership to increase at a modest 3% in 2012-1 3 if existing service-levels are maintained. The Evening Service program i s estimated at approximately 31,500 miles at an annual net cost to the Transi t Services program (minus fare revenues) of $118,000 annually . The Evening . Service program does not deliver significant additional revenue to assist wit h farebox recovery ratios . The Transit Enterprise Fund analysis does not includ e any assumptions in reductions for Evening Service program levels at this time . Overall, SLO Transit fare rates and revenues are adequate to support curren t operations for the 2012-13 fiscal year . Should revenue sources declin e significantly from projected, staff will return to Council with recommendation s for service-level reductions or fare modifications as necessary . IV .LOOKING TO THE FUTUR E a.State, Federal and Regional Budget Impact s Overall, the Governor's May 2012 revision to the State budget does not make an y significant changes to funding for transportation or public transit . The budget language states that the reenactment of the gas tax swap (AB 105, Chapter 6 , Statutes of 2011), which was completed in March 2011, provided the State's General Fund with $903 .5 million in relief for 2010-11 . While the legislature ha s approved the Transportation Trailer Bill (AB 105), the measure has not been sen t to the Governor's desk for a signature and is not expected until the Governor's entire State budget proposal is approved . Ultimately, the final impact on the SL O Transit budget remains unknown until the State budget is approved . Any further reductions of funding to the City, Cal Poly or SLORTA could have a significan t impact on service-level funding for the 2012-13 fiscal year and beyond . b.Operations and Maintenance Contrac t The purchased transportation contract is set to expire on June 30, 2013 . Staff i s currently analyzing whether to recommend a contract extension agreement or t o solicit proposals for this service . Staff will return to Council in the 2012-13 fisca l year with a recommendation for continued purchased transportation services . c.Volatile Fuel Price s Staff continues to exercise prudent judgment in projecting budgets for fuel neede d for the SLO Transit system . Highly volatile fuel prices continue to pos e challenges in balancing the budget . After analyzing fuel cost trends, staff feel s confident that the level of budget project for fuel is adequate to support fuel cost s in the 2012-13 fiscal year . Staff will continue to analyze fuel trends and mak e budget adjustments as necessary . However, should fuel prices increas e B2-16 Attachment 1Page11 significantly above staff projections, staff will return to Council with identifie d service-level reductions . Attachment 1 Page 1 2 V . EXHIBIT A —Changes in Financial Positio n 2011-1 3 TRANSIT FUN D FINANCIAL SCHEDULES B2-18 CHANGES IN FINANCIAL POSITION —TRANSIT FUN D 000-10 0!0.11 :Ion-1'-2012-[3 ---2 013-1-r ctu i1 Acun1 Pudt I3uSuet F'rojccfiu n 5 .100 5,600 'Ii4)(nti 5 .800 992400 `1,046,200 1 .37'1,300 1 .416 .00o 1,416,90 0 _.,?72>19P,1,290 .300 1 .10!1 .u00 32,100 1 33_1 000 2,663,500 1 ,s S3 ut I?~-1_000 1,329,700 584,900`592,800 u04PI 7oo 649,000 : (33,000)22,500 18,100 5 .1)1)0 5,000 3,859,500 5,620,900 5,101,300 3,339,9(10 3,438,50 0 2,446,200 2,624,400 ;s_)ii 1tt)2,920,900 350,200`357,200 470 .500 41 (5))0 416,500 _1796 .400,2 981,60_0 ;_I ~~)2 0(1 .1337,400 986,500 2,728,100 1 7(x)o 76,100 3,782,900 5,709,700 5,0 17,800 3,272,200 3,413,50 0 0 F 0 0 33,300 0 1 1 1 (1(11 1 0 0 (l 13,0(1 0 76900 _0.M.29)90,01)1)f 7 .hii)25,000 726,800 "838,600 )08 ,700 1 .151,.41)0 1,213,800 838,600 998,700 1,095,200 1,224 .100 1,238,80 0 209%119 .9%105 19% 'Expenditures Operating Program s Transportation General Governmen t To taI Op Brat )n .Pro grams Capital Improvement Plan Total Expenditures Other Sources (Uses ) ins Expenditure Adjustmen t Projected MOA Adjustment s Projected Debt Proceed s Other Sources (Uses ) Total Other Sources (Uses ) nditures and Other Use s Working Capital, Beginning of Yea r Working Capital, Fnd of Year Fund Reserve s !Unadjusted Fare/Cost Rati o ;Revenues and Other Sources over nde r Revenues Investment and Property Revenue s Subventions and Grant s TDA Grants (LTF, STA ) ::FTA Grant s Service Charge s Other Revenues Total Revenues CHANGES IN FINANCIAL POSITION - TRANSIT FUND lctu l n~al u1l-i 13iI c I1 --,. Revenues Investment and Property Revenues 5,100 5,600 5,80 0 Subventions and Grant s TDA Grants (LTF, STA)992,400 1,046,200 _ oOU 1 .-' 1 (ono 1,416,90 0 Other Grants (ARRA, Prop 1B, Other)979,100 1,290,300 n0(a 32,10 0 FTA Grants 1,331,000 2,663,500 ,,000 4 hoo 1,329,700 Service Charges 584,900 592,800 ? .-lHD ;7 ,701 649,00 0 Other Revenues (33,000)22,500 oo T,.uou 5,000 Total Revenues 3,859,500 5,620,900 5,101,300 3,330,900 3,438,500 Expenditures Operating Program s Transportation 2,446,200 2,624,400 27 60t)2 .H 7nn 2,920,900 General Government 350,200 357,200 4 ;ON)4 1 h 416,500 Total Operating Programs 2,796,400 2,981,600 72~_.hoo ;7 2 Zoo 3,337,40 0 Capital Improvement Plan 986,500 2,728,100 '.270)o 76,10 0 Total Expenditures 3,782,900 5,709,700 5,016,300 3 .272 .200 3,413,50 0 Other Sources (Uses ) Operating Expenditure Savings 0 0 i ; Operating Expenditure Adjustment 33,300 0 Projected MOA Adjustments ___nli0 o Projected Debt Proceed s Other Sources (Uses)0 0 Total Other Sources (Uses)13 .000 Revenues and Other Sources over (Under ) Expenditures and Other Uses 76,100 (88,800)uun -(i0 25,000 Working Capital, Beginning of Year 726,800 838,600 s,uu L i ~~,,~n1 1,213,80 0 Working Capital, End of Year Fund Reserves 838,600 998,700 1 .096,700 1,224,1011 1,238,80 0 Unadjusted Fare/Cost Ratio 20 .9%19.9%19 19 .4% B2-2 0