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Home My WebLink About05/20/2008, PH 4D - TRANSIT FUND REVIEW FOR 2008-09 Council "`` "°'" May 20,2008 ac Enna Repout C I T Y OF SAN L U 1 S OBISPO FROM: Jay D. Walter,Director of Public Works Prepared By: Timothy Scott Bochum, Deputy Director of Public Works John Webster, Sr.,Transit Manager SUBJECT: TRANSIT FUND REVIEW FOR 2008-09 CAO RECOMMENDATION 1. Review and discuss the 2008-09 Transit Enterprise Fund Review. 2. Approve minor changes in the Transit Fund budget for 2007-08 and 2008-09 as outlined in this report. DISCUSSION This report includes the 2008-09 Transit Fund Analysis for the City's transit budget for 2008-09. At this time, it is anticipated that revenues will meet expenditures for the next year and that ridership rates will remain consistent with current trends. An update to the current 2004 Short Range Transit Plan is anticipated in the first half of 2008-09 and it will likely make recommendations for modified service levels as well as expenditures. The current fare rates and revenues are adequate to support operations for 2008-09 if the amount of Transportation Development Act (TDA) monies available to the City meets expected levels and funding for additional services to the San Luis Obispo Regional Transit Authority (SLORTA) system does not increase dramatically. The SLORTA Board has yet to adopt its final FY 2008-09 operating budget. Ultimately when the budget is adopted it is expected that the TDA required from the City for SLORTA services will be consistent with prior years. Transit Milestones 2007-08 1. Transit fares have remained the same even though operating costs have risen (due to significant increases in fuel costs). 2. So far in 2007-08, ridership per hour on SLO Transit (average=28 riders/hour) continues to be higher than average for similar systems nationwide. To date SLO Transit has carried 720,568 passengers during 25,136 system revenue hours. 3. Ridership in October 2007 was the highest ever recorded for a single monthly period at 125,265 passengers and was up 12,518 from the 2006 record of 112,747 riders. 4. Total ridership for 2007-08 is projected to be in the mid-900,000 range and is expected to be above the 934,534 passengers carried in 2006-07. 5. The San Luis Obispo Council of Governments (SLOCOG) funded Evening Service Extension Program continues with expansion to include routes 2, 3, 5AB and 6AB (Monday-Thursday) in September 2007. Those routes now end between 10:00 pm and 10:45 pm. Since September 7 2008-09 Transit Fund Review Page 2 2007, evening service is averaging just over 22 riders per hour with some individual routes (4A &5B) exceeding 35-40 passengers per revenue hour. 6. The City received a "Green" Low-Cart Beautification Award from the Downtown Association in April 2008 for the purchase of two buses using clean diesel Cummins engines. 7. The Council approval of a bus replacement program in April 2008 resulted in leveraging State Transportation Improvement Program (STIP), Prop 1B and Federal Transit Administration (FTA) funding for these bus purchases. Funding Source Local Match Total Funding STIP $ 600,000 $ 110,000 $ 710,000 Prop 1B $ 683,601 $ 42,000 $ 726,000 FTA Grant $ 300,000 $ 75,000 $ 375,000 8. Purchase orders were issued in January and February 2008 for six bus replacements with Gillig via a piggyback agreement (Rochester-Genesee RTA)with expected delivery in the first quarter of 2009. 9. Five older buses were retrofitted with emission systems (Particulate Matter Traps) to help meet California Air Resources Board (CARB) emission reduction requirements with funding from the 2007-08 FTA Section 5307 Grant. 10. An Invitation for Bid (IFB) was issued in January 2008 for a new trolley and awarded to National Bus Sales and Leasing. This project is proceeding to a pre-build conference and a purchase order should be issued before the end of May 2008. Delivery is expected 4-5 months after the purchase order is issued. 11. A Short Range Transit Plan (SRTP) update continues to be prepared by Urbitran Associates. The project is approximately 85% complete. Staff expects final recommendations to be presented to Council in July 2008. Transit Issues 2008-09 and beyond There are several significant challenges San Luis Obispo Transit will be facing in the next few yam• First, fuel costs continue to be volatile and are expected to continue to rise in the next few years. The proposed transit budget anticipated this increase to a certain extent ($3.52/gallon for diesel for 2008-09 up 5% from the $3.35/gal used in 2007-08). However, the 5% projected increase in fuel costs for 2008-09 has been underestimated as the non-tax fuel cost for April was $3.70 per gal with the average (diesel/gas/cng combined) at$3.66 per gallon. If fuel costs soar dramatically, the transit budget may not be able to absorb all of the cost increase. Due to the slowing in the economy, State TDA revenues have seen a reduction in recent months. This resulted in a revised 2007-08 annual amount of $1.4 million to SLO Transit of about $188,000 less revenue than expected. Anticipating that this could be a significant impact to jurisdictions that program all of their transit money each year, SLOCOG made up this net difference for the current fiscal year using regional STA discretionary funding. This approach will not continue next year and the SLO Transit budget has been revised accordingly to balance expected revenues and expenditures. 7 2008-09 Transit Fund Review Page 4 "Spillover" is the term for the net revenue from the 4.75 percent sales tax on gasoline in excess of the 0.25 percent sales tax on all other goods. In the Governor's proposed budget, one-half of spillover will go to the Mass Transportation Fund annually to offset General Fund transportation- related expenditures, including transportation-related debt service payments, Proposition 42 loan repayments, Regional Center transportation, and Home-to-School transportation. The remaining one-half of spillover funds will go to the PTA. The majority of the PTA revenue is allocated to fund State Transit Assistance (STA), with the remainder of PTA funds available for non-STA purposes. Regional Center transportation will be funded from PTA on an ongoing basis. The current-year State budget actions reduced the amount available to fund projects already planned in the 2006 STIP, which extends from 2006-07 through 2010-11. In total, from 2007-08 through 2009-10, the California Transportation Commission (CTC) estimates that there would be about $1 billion less in PTA funds for projects already planned for those years. The Governor's budget estimates PTA to have insufficient revenues to keep the account solvent and proposes a $60 million loan in 2008-09. With the loan, the account will end 2008-09 with a slim balance of $29 million. If actual revenues to PTA for 2008-09 are lower than estimated, this balance could disappear, and PTA may require additional loans to stay solvent. The STA will receive $743 million in 2008-09, significantly more than the level of funding ($306 million) provided in the current year. This issue is partially offset by increased transit revenue due to the sales tax increase on fuel that is dedicated to public transit,however, that funding usually takes sometime to materialize and will be received in future fiscal years. Complicating this finiher is the Governor's proposed 2008-09 budget. The challenges posed to the Public Transportation Account (PTA) which is funded by the sales tax on diesel fuel and a portion of sales tax on gasoline are "primarily due to diversion of virtually all of the `spillover' revenue from the PTA in the current year and 50 percent of the spillover revenues in the budget year." In fact, the proposed diversions would cost State transit programs at least$455 million next year,if enacted. The net effect of increased fuel prices, limited State funding and declining revenues is that while there will be money made available for transit capital, there may not be significant new funding to help maintain or expand operations. This comes at a time when the public's use of transit is increased due to soaring fuel costs. SLORTA budget uncertainty While the 2008-09 Draft SLORTA budget appears to hold San Luis Obispo funding requirements at current levels, it is unknown if increases in funding requests may occur in future years. SLORTA is currently negotiating its first operational contract with MV Transportation (who replaced the previous contractor Southland Transit in January 2008) and higher contracting costs, or higher than expected costs associated with a new maintenance facility may result in additional TDA funding requested from the City in future fiscal years. SLORTA has been working very closely with its member jurisdictions in the County on these issues and its provision of advance notice of potential funding request changes has improved dramatically. y�3 2008-09 Transit Fund Review Page 4 Bus replacement Finally, capital replacement of buses for SLO Transit will continue to be one of the biggest issues affecting funding. The proposed budget anticipates that most of the future capital bus replacement funding will come from Proposition 1B and non-conventional funding sources such as FTA Section 5309, which is a nationwide discretionary program. In order to balance operating costs, SLO Transit will need to utilize significant amounts of FTA Section 5307 funding (the Federal Urbanized Area funding) for operating assistance and capital cost of recovery to help pay for bus maintenance through the operations contract. Transit Budget for 2008-09 Table 1 shows the SLO Transit budget for the 2008-09. Overall, revenues will meet expenditures. However, if TDA revenues continue to decline or if SLORTA funding needs increase the amount of annual capital needed to fund bus replacements may be reduced. If this occurs the City may need to defer some bus replacements scheduled for next year. Table 1.-Proposed SLO Transit Budget for 2008-09 CHANGES IN WORKLYG CAPITAL-TRANSIT FUND 2008-09 2006-07 2007-08 Projected 2009-10 2010-11 Actual . Revised Budget Budget Projected Projected. Revenues Investment and Property Revenues 4,800 4,800 4,900 5,000 5,100 Subventions and Grants TDA Grants 1,546,100 1,598,100 1,450,800 1,491,900 1,485,500 Other Grants 5,000 1,283,000 374,900 375,000 375,000 FTA Grants 473,000 2,779,900 1,310,900 1,345,800 1,381,900 Service Charges 505,500 503,800 528,400 541,500 561,500 Other Revenues 260,500 2,000 2,000 2,000 2,000 Total Revenues 2,794,900 6,171,600 3,671,900 3,761,200 3,811,000 Expenditures Operating Programs Transportation 2,193,200 2,057,900 2,149,700 2,107,500 2,120,800 General Government 287,800 280,900 292,100 323.800 333,500 Total Operating Programs 2,481,000 2,338,800 2,441.800 2,431,300 2,454,300 Capital Improvement Plan Projects 150,000 4,351,700 1,170,000 1,191,000_ 1,213,000 Total Expenditures 2,631,000 6,690,500 3,611,800 3,622,300 3,667,300 Other Sources(Uses) Potential MOA Adjustments (6,500) (69700) (6,900) (6,900) Savings Other Sources(Uses) Total Other Sources(Uses) - (6,500) (6,700) (6,900) (6,900) Revenues and Other Sources Over(Under) Expenditures and Other Uses 163,900 (525,400) 53,400 132,000 . 136,800 Working Capital,Beginning of Year 614,600 778,500 253,100 3069500 438,500 Working Capital,End of Year 778,500 253,100 .306,500 438,500 575,300 Fare/Cost Ratio 20.4% 21.5% 21.6% 22.3% 22.9% The proposed budget indicates that there may be modest working capital remaining at the end of each year for the years 2008 to 2009. While this might indicate that there may be sufficient monies to increase service, staff is proposing to leave this working capital as a reserve for FY 2009-10. This 7 2008-09 Transit Fund Review Page 5 is being recommended for two reasons. First, as identified above, fuel prices may continue in an upward trend and may exceed budget assumptions. Second, the proposed outside funding sources for bus replacement capital may not be fully realized. Keeping the modest working capital amount will allow for some adjustments in these two critical components of the SLO Transit system if funding levels are below expectations. FISCAL IMPACTS There are no direct fiscal impacts to the General Fund due to the recommendations in this report. ATTACHMENT 2008-09 Transit Fund Analysis TABudget Folders\2008-09 Financial Plan Supplement\Enterprise Fund Working Capitalkt. Transit Fund\Transit CAR 2008-10 Transit Fund Final 050108.DOC 7am- Attachment 1 Page 1 ATTACHMENT 1 2008-09 Transit Fund Analysis san Luis ompo transit May 20, 2008 Prepared by the Public Works Department city of San 1UI s OBISPO yb = z 1\ - J Attachment 1 Page 2 City of San Luis Obispo 2008- 09 Transit Fund TABLE OF CONTENTS I. OVERVIEW II. 2008-09 FINANCIAL PLAN A. Summary of Revenues B. Summary of Operating Programs C. Significant Operating Program Change Requests D. Capital Improvement Projects III. ASSUMPTIONS IV. LOOKING TO THE FUTURE A. Fleet Replacement B. Short Range Transit Plan V. EXHIBIT A —FINANCIAL SCHEDULES Status Quo Scenario 1D i Attachment 1 Page 3 city of �� San LUIS OBISp0 2008- 09 Transit Fund Report I. OVERVIEW This report presents the financial condition of the Transit Fund, based on the 2007-09 Financial Plan operating program budgets, existing situation, and recommended program and capital requests to address the identified needs in the Transit Program. II. 2008-09 FINANCIAL PLAN A. Summary of Revenues 2007-08 2008-09 REVISED BUDGET BUDGET Investment $ 4,800 $ 4,900 Grants $ 5,661,300 $ 3,136,600 Service Charges $ 503,800 $ 528,400 Other Revenue $ 2,000 $ 2,000 Total Revenues $ 6,171,900 $ 3,671,900 B. Summary of Operating Program 2007-08 2008-09 REVISED BUDGET BUDGET Transportation $ 2,057,900 $ 2,149,700 General Govemmentment $ 280,900 $ 292,100 Total Transit Services $ 2,338,800 $ 2,441,800 C. Significant Operating Program Change Requests 2007-08 2008-09 REVISED BUDGET BUDGET None $ $ Total $ $ Ji C j Attachment 1 Page 4 D. Capital Improvement Projects 2007-08 2006-07 REVISED 2008-09 2009-10 2010-11 ACTUAL BUDGET BUDGET BUDGET BUDGET Capital Cost of Contracting 150,000 400,000 420,000 441,000 463,000 Bus Stop Improvements 0 148,000 0 0 0 Fleet Replacement-Transit 0 3,410,900 750,000 750,000 750,000 Fleet Expansion-Transit 0 0 0 0 0 Short Range Transit Plan 0 50,000 0 0 0 Bus Barn Improvements 0 180,000 0 0 0 Diesel Aftertreatment Devices 0 158,800 0 0 0 $ 150,000 $ 4,347,700 $ 1,170,000 $ 1,191,000 $ 1,213,000 Note: Supporting documentation for these capital improvement projects is provided in Appendix B of the 2007- 09 Financial Plan. As discussed below, CEP for 2008-09 has been reduced by $80,000 for capital cost of contracting and increased by$25,000 for two bus purchases. Appendix B of the 2007-09 Financial Plan contains a proposed CIP for the purchase of a new transit vehicle in FY 2011 for use in serving the Margarita expansion area when the housing tracts are occupied. However, since the printing of that document it has been determined that the purchase of a new vehicle may not be necessary in the next few years if existing vehicle replacements can be accelerated using new Proposition 1B or other discretionary funding. This issue will be considered as part of the SRTP update project currently underway and staff will return with recommendations for fleet expansion, if necessary, at a future time. III. ASSUMPTIONS The following provides more detail for the key assumptions in Exhibits Al this report, the financial schedules showing the Transit Fund's changes in financial position and the listing of assumptions. FY 2007-08 Revenues 1. STA direct allocation revenue amount slightly higher than expected (5% or$85,600). 2. State reduced TDA revenues by $187,600, which was "backfilled" by SLOCOG with a one-time only STA Discretionary at$187,600.. 3. "Other Grants" line item was adjusted down $110,000 for the Costco Mitigation Grant which was received in FY 2007, but assumed to come in FY 2008. 4. FTA Grant amounts reduced by $60,500 to reflect actual grants received to date and carryover amounts from prior grants. 5. Fare Revenue (Service Charges) adjusted slightly down by 1% ($6,400) based upon Year- to-Date actuals. 6. Cal Poly contribution @ $322,000 for 2007-08. Grows at 3% ($9,700) thereafter per contract. Attachment 1' Page 5 7. Other Grants adjusted to reflect actual received from Prop 1B ($683,000) and STIP ($600,000) and Costco Mitigation ($110,000) which was received in 2006-07 but assumed to come in 2007-08 Expenditures 8. Pilot Evening Service added approximately 14,144 miles of service with an annual cost of $33,846. This service is supported by Discretionary STA Grant funding in the amount of $205,000and will continue until funds are exhausted. 9. Estimated fuel costs increased higher than the 5% expected in FY 07-08. Current estimates project an additional 5% ($17,250) over budget. Fuel costs were estimated at$3.35 per gal in 2007-08 FY. The non tax fuel cost for April was $3.70 per gallon with an average (diesel/gas/cng combined) at $3.66 per gallon. It is expected that gas prices will remain very volatile in FY2008-09. 10. Vehicle repairs were higher than expected and exceeded the budget by $10,000 in FY 2007-08. Replacement of an engine and transmission in January 2008 were deemed necessary due to the City's aging fleet. The following summarizes revised operating budget changes for 2007-08 of$28,000: Pilot Evening Service (Offset by Added STA Revenues) 33,800 Increased Fuel Costs 17,300 Vehicle Repairs 10,000 Offsetting Cost Savings in Other Areas (33,100) Total $ 289000 FY 2008-09 Revenues 11. FY 2008-09 STA assumed to be $210,238 per SLOCOG projections on March 2008. 12. FY 2008-09 TDA assumed increase by 4% ($69,230) pursuant to SLOCOG projections in March 2008. 13. SLORTA Contributions ($511,215) based upon FY 08-09 Board Estimates. Contributions could be less depending on contract issues and costs of maintenance. 14. Estimated Prop 1B Funding (50% of the cost of two bus replacements). The match funding will come from FTA 5307 POP. 15. FTA Grant revenue assumed to be a combination of FTA Capital ($711,000) and FTA Operating Assistance ($600,000). The City is eligible for 40% of$2,278,000. This amount does include the Capital Costs of Contracting (COC). FTA Operating assistance increased to $600,000 from 2007-08 at$450,000. 16. The FTA budget assumes most of the bus replacement capital costs FY 08-09 and beyond will be from Prop 1B and FTA 5307 funding on a 50/50 Match. This will not change CIP cost but funding source line items for "Other and FTA" have been modified to reflect new assumptions. 17. FTA grant apportionments will be at levels consistent to the City's award of funds from the 2008 POP (FTA $1,241,040 per Resolution No. 9942 (2007 Series). 18. Fare Revenue (Service Charges) adjusted slightly down by less than 1% ($11,000) in 2008- 09 FY due to previous years' actuals. While staff expects a 3% increase of$9,660 per the Attachment 1 Page 6 Cal Poly agreement, fare box revenue came in less than expected in the previous year and is only anticipated to increase by a modest 1% in 2008-09. 19. The revised "Other Revenues" projected for 2008-09 includes anticipated Prop 1B funding for two buses. This funding ($580,000) has been reallocated to "Other Grants" line item to correctly account for funding received. Expenditures 20. Adopted budget of FTA Capital Cost of Contracting (COC) for FY 2009 of$500,000 was reduced by $80,000 to reflect likely FTA approval amount. This is added to operating costs. 21. Increase in "Operating Transportation" expenditure line item in the amount of $133,600 reflects the increase of $80,000 in COC conversion (Assumption 22), RVMs for evening service ($34,500) and additional 5% in fuel costs than previously budgeted ($19,100). While the projections for evening service may the less than anticipated, the rising fuel costs continue to be very volatile. Staff feels that the 5% projected increase in fuel costs is conservative. Staff may need to return to Council at a later date to address the unstable fuel costs and adjust the budget accordingly. 22. CIP assumptions includes two bus purchases at $375,000 each and $420,000 in Capital Costs of Contracting (COC). 23. The Margarita Expansion, or Cal Poly Canyon Service, increase will take place no sooner that 2009-10. The following summarizes changes for 2008-09: Pilot Evening Service(Offset by Added STA Revenues) 34;500 Increased Fuel Costs 19,100 Reclassification of Capital Cost of Contracting _ 80,000 Total Opera 133,600 Reclassification of Capital Cost of Contracting (80,000) Added Costs for Two Bus Purchases 25,000 Total CIP (559000) TOTAL $ 789600- VI. 8 600_VI. LOOKING TO THE FUTURE A. Fleet Replacement and Expansion The City embarked on an aggressive fleet replacement program in April 2008 when the Council approved an expedited process in order to comply with the emission mandates of the California Air Resources Board. By this time next year we expect to have replaced over fifty percent of our 16 vehicle active fleet with new clean diesel powered buses many of which are well beyond their 12 year FTA useful life. The proposed FY 2007-09 Financial Plan relies heavily of funding from discretionary grant sources to accomplish bus replacement in future years. SLOCOG recently approved$638,601 in Proposition 1B y�-�i I Attachment 1 Page 7 funds, and SLO Transit received another $42,000 in direct operator Prop 1B funds for a total of $683,601 which will be used for two bus replacements. SLOCOG has also estimated as much as $15 million made be made available countywide for transit capital as part of the Proposition lb program. B. Short Range Transit Plan In December 2006 Council authorized a Request for Proposals (RFP) for professional services to prepare the Short Range Transit Plan (SRTP) for the City of San Luis Obispo. The RFP was awarded to Urbitran Associates in August 2007 and work began in November 2007 starting with stakeholder interviews. This plan includes an origin/destination survey to evaluate ridership patterns, review the operating and financial health of the service, and make recommendations to improve productivity and service to the community. The project is approximately 85% complete and staff expects that final recommendations will be presented to the Council by July 2008. TABudget Folders\2008-09 Financial Plan SupplemenAlinterprise Fund Wonting Capital\4. Transit Fund\08-09 Transit fund analysis attachl-Final 050108.DOC Attachment 1 Page 8 EXHIBIT A 2007 - 09 TRANSIT FUND FINANCIAL SCHEDULES y�-/3 8ggo � 8 8885 0 B o s Q . 1 V1 O 00 ,n M M O; O\ 00 in M O v� lr-L N O e-i v M r \O \O \O oo kr N S v M M V1 00 MR N \o v kn N N -+ ri W o CD C) Cl 88880 8 S +�+ Or 00 V'' O N to 00 M O M. O\ O\ vy h N Q Y� Yl it kr N r- rl --: N \O \O Nq Z 00 N N 0. --, •-- M N N — M 00 0 0 0 0 O $ 0 0 C000C� O\ oo \oo. \\40 , \0S \oo� z r M O\ C 000 v M M V1 r V — N M `-' tn •--� v v r .. 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