AD HOC FINANCIAL STABILITY...

AD HOC FINANCIAL STABILITY COMMITTEE

Friday, June 8, 2018

12:00 PM

VTA Auditorium

3331 North First Street

San Jose, CA

WORKSHOP AGENDA

CALL TO ORDER

1. ROLL CALL

2. Introductions

3. Orders of the Day

4. PUBLIC PRESENTATIONS

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any matter not on the agenda. Speakers are limited to 2 minutes. The law does not

permit Committee action or extended discussion on any item not on the agenda except

under special circumstances. If Committee action is requested, the matter can be placed

on a subsequent agenda. All statements that require a response will be referred to staff

for reply in writing.

5. Discuss potential strategies and solutions to address VTA’s budget/structural deficit.

(Breakout Session)

6. ANNOUNCEMENTS

7. ADJOURN

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Santa Clara Valley Transportation Authority

Ad Hoc Financial Stability Committee May 11, 2018

All reports for items on the open meeting agenda are available for review in the Board

Secretary’s Office, 3331 North First Street, San Jose, California, (408) 321-5680, at least 72

hours prior to the meeting. This information is available on VTA’s website at http://www.vta.org

and also at the meeting.

Structural Deficit Mitigation

Ad Hoc Financial Sustainability Committee-Workshop June 8, 2018

Agenda Item #5

oblena_m

Rectangle

Structural Deficit Solution

2

Requires a combination of:

• Reduction of expenses

and/or increase in revenues

• Aligning of growth rates of

revenues and expenses

Today’s Goal

3

Identify mitigation

measures that have a

short-term implementation

schedule with both a short

and long-term impact

Short-Term Defined

4

Measures that can begin implementation

within one year, with full impact achieved within

three years

VTA Transit Budget Forecast, FY18-FY22

$455 $467 $479 $491 $504$475

$493 $509 $514 $531

$300

$350

$400

$450

$500

$550

$600

FY18 Adopted FY19 Adopted FY20 Projected FY21 Projected FY22 Projected

Mill

ions

Revenues Expenses

$20M$26M

$31M$23M

$26M

$30M annual local share of capital need

$30M$30M

$30M

$30M

$30MTotal$50M

Total$56M

Total$53M

Total$51M

Total$56M

5

Target

6

$50-$60 million

per year at full

impact

MEMORANDUM

TO: Santa Clara Valley Transportation Authority

Ad Hoc Financial Stability Committee

FROM: Chief Financial Officer, Raj Srinath

DATE: June 5, 2018

SUBJECT: Information Follow-up

FOR INFORMATION ONLY

During the May 11, 2018 Ad Hoc Financial Stability Committee meeting, the committee

members and stakeholders requested various information. The attached matrix and attachments

address these requests. Since several of the requests related to information provided in the Public

Financial Management (PFM) May 11th presentation, it is included for reference (Attachment B).

There is also one follow-up item from the April 13, 2018 meeting still outstanding. In response

to the Next Network Plan and Related Efforts presentation, it was suggested that the system

redesign maps presented should better illustrate transit connections. An updated map showing

the main connection points is included as Attachment J.

Prepared By: Carol Lawson, Fiscal Resources Manager, Budget

Question/Comment Response

1 Requested similar cost comparison information for additional agencies (SamTrans, Muni,

AC Transit, BART, Orange County) (5/11/18 PFM presentation slides #8-18)

See Attachment C

2 Requested a breakout of Cost per Unlinked Passenger Trips by function for "Cost

Efficiency Measure Comparison-Unlinked Passenger Trip (UPT)" (5/11/18 PFM

presentation slide #16)

See Attachment C (slides #7 & #8)

3 Requested a breakout by cost in addition to percentage of Operating Expenses by Function

and by Type for "Cost Comparisons-Expenses Type" (5/11/18 PFM presentation slide #18)

See Attachment C (slides #11 & #13)

4 Requested additional information on what is included in the Local Funds, Taxes and Fees

Levied by Transit Agency, and Other Directly Generated Funds categories for "Revenue

Comparisons-By Type of Revenue" (5/11/18 PFM presentation slide #11)

"Local Funds" includes financial assistance from local governments that

support the operation of the transit system including tax levies, general

funds, specific contributions, donations, and other.

"Taxes and Fees Levies by Transit Agency" includes revenues from taxes

and fees imposed on the public by a transit agency that has its own taxing

authority.

"Other Directly Generated Funds" includes advertising revenues, donations,

investment earnings, parking revenues, sale proceeds, etc.

Note that the Sources of Revenue chart on slide #11 (on left side of page) in

the 5/11/18 PFM presentation inadvertently excluded Passenger Revenues.

The updated chart in Attachment C (slide #3) reports Passenger Revenues as

part of "Directly Generated Funds". Slide #4 in Attachment C provides a

further breakdown of "Directly Generated Funds".

5 Requested cost of living data for Peer Agencies See Attachment D

6 Would like to know what year the Peers implemented their various strategies on 5/11/18

PFM presentation "What Other Agencies Have Done" slides (#25-30)

See Attachment E

7 Requested the baseline deficit be added to "Budget Balancing Options" slides for easier

comparison of impact (5/11/18 PFM presentation slides #33-44)

See Attachment F

8 Requested annotation of assumptions used be added to "Budget Balancing Options" slides

(5/11/18 PFM presentation slides #33-44)

See Attachment F

9 Requested an Option slide with SB 1 funding included See Attachment G

10 Requested an Option slide with 2016 Measure B funding excluded See Attachment H


Information Follow-up from 5/11/18 Meeting

Page 1 of 2

Attachment A

Question/Comment Response


Information Follow-up from 5/11/18 Meeting

11 Requested a summary slide that shows key assumptions used for the "Budget Balancing

Options" slides (5/11/18 PFM presentation slides #33-44)

See Attachment I

12 What is the financial impact of a 80/20 split in health benefits (at the individual level) on

"Workforce-Share Pension Costs" (5/11/18 PFM presentation slide #35)

Based on 2018 Kaiser Permanente HMO rates, a 20% share would be $156

per month for single coverage, $312 per month for employee + 1 coverage

and $406 per month for employee + 2 or more coverage.

13 Absenteeism presentation - pointed out need for further study on fluctuations related to

absenteeism due to training and employee living situation

A more in-depth analysis will be conducted to help identify root causes of

absenteeism fluctuations in some areas. This effort is anticipated to begin in

the next few months.

14 Requested information regarding what operating costs are covered by 2008 Measure B Distribution of operating costs to 2000 Measure B is dependent on outcome

of Operations and Maintenance Agreement negotiations with BART which

are still in progress.

15 Requested VTA Budget Book/link to VTA website, as well as links to 5 other Agencies'

budgets

Links provided under separate cover.

16 Are there any other sources of revenue that we can or should be considering? Staff has explored the feasibility of various additional revenue sources in

the past and will continue to explore options.

17 Requested information on how AC Transit was able to get funds from a property/parcel tax General Counsel staff is researching this issue.

18 Requested evaluation of real estate transfer tax - legal/feasible? General Counsel staff is researching this issue.

19 Requested information on number of passes going to VTA from the Downtown Palo Alto

Transportation Management Agency's pilot program to reduce congestion.

The program purchases an average of 14 VTA Adult Monthly Passes per

month using Clipper Direct.

Page 2 of 2

Attachment A

1

© PFM 1

Santa Clara Valley Transportation Authority—Independent Consultant’s Review and Analysis


PFM Group Consulting LLC 50 California Street

Suite 2300

San Francisco, CA

94111

(415) 982-5544

pfm.com

Russ Branson, Director

Presented By:

May 11, 2018

© PFM 2

PFM Charge from Ad Hoc Committee

The scope of work approved by the Ad Hoc Committee included the following elements:

1. Review VTA’s budgeted and forecasted revenues and expenses

2. Review service delivery business models and financial structure in other similarly

positioned transit agencies

3. Review revenue sources for ability to enhance or identify other sources of revenue

4. Review cost structure of providing service

5. Respond to other Ad Hoc Committee requests

6. Provide recommendations to close the structural deficit

Attachment B

pfm.com

2

© PFM 3

Presentation Outline

Peer Agency Comparisons

• Revenues

• Expenses

VTA Budget Forecast Model

How Other Agencies Have Addressed Budget Deficits

Options to Address Structural Budget Deficit

© PFM 4

Peer Agency Comparisons

Attachment B

3

© PFM 5

Industry Overview

National Trends

In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption.

Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series

Increase in service operated – transit agencies

have increased the amount of time its vehicles are

in operation, as measured by Vehicle Revenue

Hours (VRH)

Increase in service costs – total Operating

Expenses have risen sharply in the past decade,

going from $29 billion in 2006 to $45.1 billion in

2016.

© PFM 6

Industry Overview

National Trends

In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption.

Increase in service consumed


• Unlinked passenger trips (UPT), a metric for transit

ridership, on public transit passengers has steadily

been flat for several years and took a dip in FY16

• Additionally, the distance traveled by public transit

passengers is also increasing, Passenger Miles

Traveled (PMT)

Attachment B

4

© PFM 7

Trends in Trips for VTA

Santa Clara VTA riders are taking fewer, but longer trips, with a dip in FY17 along with ridership

The Average Trip Length is a service efficiency measure of the number of miles traveled per passenger trip.

Graphs show annual totals for both transit bus, light rail, and ACE shuttle services--paratransit not included


4.42

4.78 4.97

5.29 5.42

5.75

5.25

4.00

4.50

5.00

5.50

6.00

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

VTA - Average Trip Length, all modes(PMT per UPT)

Average Trip Length, in miles

32,130 34,778

31,652 32,746 33,041 29,464

10,278 10,754 10,015 10,742 11,341 9,132

43,434 46,600

42,492 44,221 45,103

39,138

0

10,000

20,000

30,000

40,000

50,000


VTA - Total # of Passenger Trips (UPT)

Bus, in thousands Light Rail, in thousands All Modes

© PFM 8

Peer Agencies

VTA services the fourth largest population area among peer agencies

Source: Federal Transit Authority – National Transit Database (NTD), 2016 Annual Database

Agency Information

2016 Service Area Statistics

AgencyModes of Transportation

(Directly Operated and Purchased Transit)Population Square Mileage

LACMTA

Los Angeles County

Metropolitan Transportation

Authority

Bus, Bus Rapid Transit, Light Rail, Heavy

Rail, Vanpool8,626,817 1,513

CTA Chicago Transit Authority Bus, Heavy Rail 3,272,295 309

KCDOTKing County Department of

Transportation

Bus, Trolleybus, Street Car Rail, Demand

Response, Demand Response - Taxi,

Ferryboat, Vanpool

2,117,125 2,134

VTASanta Clara Valley

Transportation AuthorityBus, Light Rail, Demand Response 1,927,888 346

UTA Utah Transit AuthorityBus, Commuter Bus, Light Rail, Commuter

Rail, Demand Response, Vanpool1,883,504 737

TriMetTri-County Metropolitan

Transportation, Oregon

Bus, Light Rail, Hybrid Rail, Demand

Response, Demand Response - Taxi1,560,803 534

Sacramento RTSacramento Regional Transit

DistrictBus, Light Rail, Demand Response 1,031,946 226

Attachment B

5

© PFM 9

Revenues

© PFM 10

VTA Transit Revenue Profile

VTA revenues are dominated by sales-tax-

based revenues collected across a number of

different sales tax measures (some are only a

portion of total sales taxes collected). This

reliance on tax puts the VTA at revenue risk

in the event of a recession

Increases to taxes require a 2/3rd vote of the

electorate for approval of a special tax. It is

highly unlikely for additional sales taxes to be

approved to support VTA operations

Source: VTA budget

Note: Sales taxes include TDA funds which are part of

the base Statewide sales tax rate

Sales Tax Based 83%

STA2%

Fares8%

Federal & State Grants1%

Other Revenue

6%

FY18 Budgeted Transit Revenues by Type

Attachment B

6

© PFM 11

Revenue Comparisons | By Type of Revenue

Sources of Operating Revenues – Federal, State, Local, Directly Generated Funds

Directly generated funds are any funds generated by, donated to or earned by the transit agency. Listed as Passenger

Fares, Transit Agency Funds, Other Earnings, and Government Funds

On average, passenger fare revenue accounts for less than 20% of operating revenues nationally.

Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency

Note: TDA funds categorized as “State Funds” for NTD purposes

© PFM 12

Revenue Comparisons | Farebox Recovery Ratios

The farebox recovery ratio is the proportion of fare revenues to operating costs

Farebox recovery has been on the decline nationally;

VTA has consistently had the lowest farebox recovery ratio among comparative agencies

Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series; Agency Budget Documents

FY2013 - FY2017 Farebox Recovery Ratio

Agency FY13 FY14 FY15 FY16 FY17*

CTA 45.2% 44.2% 43.4% 41.7% N/A

TriMet 30.2% 30.3% 31.5% 29.5% N/A

LACMTA 26.9% 26.1% 26.2% 22.6% N/A

Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A

UTA 24.1% 21.9% 22.2% 18.8% N/A

VTA 13.0% 12.4% 12.4% 11.2% 9.5%

RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A

*FY17 data available for VTA only

Attachment B

7

© PFM 13

VTA Farebox Recovery Experience| Compared to VTA Expense Experience

While fare revenues have been declining, expenses have continued to climb…

Source: VTA Historical Data

$356.4

$371.1

$386.1

$398.4

$426.1

$320

$340

$360

$380

$400

$420

$440

FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Actual Actual Actual Actual Actual

Millions

FY13 - FY17 Transit Expenses

$38.3 $38.4

$39.1

$37.7

$34.8

$32

$33

$34

$35

$36

$37

$38

$39

$40

FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Actual Actual Actual Actual Actual

Millions

FY13 - FY17 Farebox Revenues

© PFM 14

Expenses

Attachment B

8

© PFM 15

Wages36.2%

Benefits25.5%

Non-Labor 23.8%

Other Transit

8.9%

Debt Service4.5%

Transfers1.1%

FY18 Transit Budgeted Expenses by Type

VTA Transit Budgeted Expense Profile

VTA budgeted expenses are

dominated by wages and benefits at

62% of FY2018 transit expenditures

Benefit costs are dominated by:

• Pensions – ATU and CalPERS

programs

• Health insurance provided at full

cost for Kaiser plans or lower

Source: VTA budget

© PFM 16

Cost Efficiency Measure Comparison | Unlinked Passenger Trip (UPT)

The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services

For both bus and light rail service, VTA has the highest costs per UPT—over 200% over many low-

cost comparisons

Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics

Attachment B

9

© PFM 17

Cost Efficiency Measure Comparison | Cost Per Service Hour


VTA spends more per

hour on Vehicle

Operations and Vehicle

Maintenance than peer

agencies for buses

Light Rail operations

are high, but in the

middle of comparison

agencies

VTA’s FY17 cost per

service hour for light

rail was $707

© PFM 18

Cost Comparisons | Expenses Type

Expenses for most comparative transit agencies

follow similar patterns with Salaries and Benefits

the dominant cost of service

When categorized by function, Vehicle

Operations represent more than 50% of

most agency operating expenses.

Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses

Attachment B

10

© PFM 19

VTA Budget and Forecast Model

© PFM 20

VTA Budget Forecast

The VTA staff budget forecast for the FY18-FY22 time period shows significant annual deficits barring

corrective action

The resulting negative operating reserves of ($26M) by FY22

Attachment B

11

© PFM 21

Independent Baseline 10-Year Budget Forecast

Baseline forecast with assuming no corrective action taken by VTA Board

($20.5)

($26.4)

($29.5)

($22.9)

($27.7)

($32.4)

($37.0)

($41.8)

($46.8)($45.5)

($51.1)

($60)

($50)

($40)

($30)

($20)

($10)

$0


Millions

FY18 - FY28 Baseline ForecastFY Net Surplus/(Deficit) Assuming No Corrective Action

FY18 Ending Reserves: $81.2 million

FY28 Ending Reserves: ($267.1) million

NOTE: Does not reflect $30M annual local share of capital

need. Adding in this capital payment would increase the deficit

by $330M to ($597.1) million by FY28

© PFM 22

Business Cycle | Current Expansion Phase

The current expansion phases of the business cycle began nine years ago,

after the recession bottomed out in June 2009

Average expansion phase 1945-2009 (11 cycles): 58.4 months

Range: 12 to 120 months

When will next downturn start?

Current expansion 107 months and counting

as of May 2018

Attachment B

12

© PFM 23

Recessions Impact | 1976 VTA Sales Tax

The 1976 Half-Cent Sales Tax is VTA’s largest source of revenue at 47% of total

budgeted revenues in FY2018.

Recessions impacts on sales taxes are increasing

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

'79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17

Annual % Change in VTA 1976 Sales Tax Collections, FY1979 - FY2017*

*Shaded areas indicate periods of recession

© PFM 24

How Other Agencies Have Addressed Budget Deficits

Attachment B

13

© PFM 25

What Other Agencies Have Done

TriMet – Portland, OR

• Defined benefit to defined contribution pension

• No retiree health

• No free downtown routes

• New income tax

© PFM 26


Los Angeles Metro

• Increased fares/changed fare collection

• Wage freezes, changes to health and retirement programs

• New transportation/mobility business model

Attachment B

14

© PFM 27


Sacramento Regional Transit

• Eliminated positions/reduced annual salary adjustment

• New business model

• Introduced SmaRT Ride-on-demand micro transit/100% accessible/similar to

Uber Pool

© PFM 28


Chicago Transit Authority

• Increased fares 25%

• Controlled electrical costs

• Increased advertising and concession revenues

• Cracked down on absenteeism

Attachment B

15

© PFM 29


King County Metro – Seattle, WA

• New service model

• Seattle voters approved a sales tax increase and a vehicle license fee to

raise an additional $45 million annually in 2014

• Last year voters approved another $54 billion expansion of public transit

systems by raising the sales tax another 0.5 percent and increasing the

vehicle license fee again

© PFM 30

Innovative Programs | First/Last Mile & Mobility

• King County Metro – Pilot program offering riders (via an app) within a two-mile radius of four

park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit

• DART (Dallas) – Partnership with Uber to provide access to Uber for first mile/last mile via the

system’s GoPass app

• MARTA (Atlanta) – Partnered with Uber when the I-85 bridge collapsed. Uber helped address

issues with lack of parking as commuters switched to transit. This partnership is continuing, with

Uber targeting major transit centers for first mile/last mile trips

• Bishop Ranch (San Ramon) – First autonomous shuttle licensed by California to shuttle BART

riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to

BART

• LA Metro – Bike Share program in downtown LA and key tourist areas connecting bus and light

rail destinations with first mile/last mile accessibility

• Sacramento RT – Microbus, on-demand transit accessed through an app on a customers

smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass

Attachment B

16

© PFM 31

Options to Address Structural Budget Deficit

© PFM 32

Budget Balancing Options | Three Categories

Workforce

▪ Control wage inflation

▪ Share benefit costs of health insurance and pension

▪ Outsource service, where feasible

Services

▪ “Right-size” service levels – limit/defer Next Network implementation

▪ Rationalized fleet type

▪ Fleet electrification

Revenue

▪ Indexed fare Increases

▪ Additional Sales-Based Taxes or other taxes

Attachment B

17

© PFM 33

Workforce | Control Wage Inflation

Reducing wage and non-medical benefits inflation

• Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching

wage increases to ability-to-pay protects jobs

• Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues;

2) may create issues with labor union in contract negotiations


FY28 Ending Reserves: ($57.8 million)

($20.5)

($26.4)($25.5)

($14.7) ($14.7) ($14.4) ($13.8)($13.1)

($11.5)

($3.2)

($1.7)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions

FY Net Surplus/(Deficit)

VTA Budget Forecast – Net Operating Revenue

© PFM 34

Workforce | Share Health Insurance Costs

Negotiate cost sharing on health insurance premiums

• Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other

cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA’s insurance

costs

• Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing

could cause some employees to opt for lower-cost, non-family benefits

($20.5)

($26.4)

($29.5)

($22.9)

($18.7)

($22.7)

($26.7)

($30.7)

($34.2)

($31.2)

($35.2)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions





Attachment B

18

© PFM 35

Workforce | Share Pension Costs

Create across-the-board parity with employee contribution to pension costs

• Advantages: 1) equal participation in pension funding, 2) provides value to employees by

strengthening total pension funding

• Downsides: 1) Any changes to pension contributions must be negotiated with labor unions

($20.5)

($26.4)($28.2)

($19.7)

($22.1)

($26.3)

($30.5)

($34.8)

($38.5)

($35.8)

($40.1)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions





© PFM 36

Workforce | Outsource Services, Where Feasible

Increasing the amount of transit contracted out, could result in significant savings

• Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of

training, capital, and innovation on contractor

• Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor

staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular

employees

($20.5)

($26.4) ($25.6)

($18.9)

($23.2)

($27.5)

($31.7)

($36.0)

($39.8)

($37.1)

($41.5)($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions





Attachment B

19

© PFM 37

Services | Rationalized Fleet Sizing and Electrification

Rationalized fleet sizing could include use of smaller vehicles* on routes that don’t demand full-

size buses or use of a micro-transit fleet (passenger vans or smaller vehicles)

• Savings: Requires additional study

• Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower

maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate

reduction in pay

• Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and

maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-of-

week, 3) multiple license requirements increases complexity/flexibility in managing workforce

Fleet Electrification of buses


• Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down,

while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles

• Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term,

heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current

market

* Note smaller vehicles would need to be fully accessible to meet needs of transit dependent

© PFM 38

Services | “Right-Size” Service Levels

Implementation of the Next Network is included in the Current VTA budget. These service

improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2)

connect with the coming BART extension, and 3) provide more service in underserved and vulnerable

communities

No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1)

Full pull-back of Next Network improvements, and 2) partial implementation of Next Network

• Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from

expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare

increases

• Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2)

reduces the need for other cost-savings measures

• Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in

downward transit ridership trend, 3) abandons major effort by Board and staff to address transit

service needs of the broader community, 4) survival of transit likely dependent on more service, not

less

Attachment B

20

© PFM 39

Services | Next Network Implementation – Impact to Budget Deficit

Based on the savings discussed in the previous slide, elimination of the Next Network service has a

large impact on the budget forecast

Only implementing half the program costs has a lower, but significant, impact on the budget deficits

as well

$0.5

($5.4)

($10.5)

($3.9)

($8.4)

($12.8)

($17.2)

($21.7)($25.6)

($23.1)($27.6)($30)

($20)

($10)

$0

$10


Millions




($10.0)

($15.9)

($20.0)

($13.4)

($17.9)

($22.3)

($26.7)

($31.2)

($35.1)($32.6)

($37.1)($40)

($30)

($20)

($10)

$0


Millions






© PFM 40

Revenue | Indexed Fare Increases

Index fares to CPI to keep up with service cost inflation

• Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with

service delivery costs

• Downsides: 1) fare increases could have a negative impact on ridership

($20.5)

($26.4) ($26.2)

($19.5)

($21.9)

($26.2)($28.2)

($32.4)($33.8)

($31.0)($32.5)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions





Attachment B

21

© PFM 41

Revenue | Increase 2000 Measure A Support

Increase Measure A support

• Advantages: 1) reduces the need for other cost-savings measures

• Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects

($20.5)

($26.4) ($25.7)

($19.0) ($19.7)

($23.9) ($24.4)

($28.6)($29.8)

($26.9) ($27.4)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Millions





© PFM 42

Revenue | Additional Sales Tax Revenue

Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-to-

year basis

• Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to

extend transit service

• Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly

impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa

Clara County already at limit. Exemption would require State legislative authorization

($20.5)

($26.4)

$15.5

$23.3 $20.1

$16.9 $13.9

$10.8 $8.2

$12.1 $9.1

($30)

($20)

($10)

$0

$10

$20

$30


Millions





Attachment B

22

© PFM 43

Scenario 1: Shared Sacrifice Between Employees, Riders, VTA

Under this scenario, the VTA would work to spread the sacrifice of balancing the budget

between as many constituents as possible. The changes modeled include:

• Slow wage growth

• Increase transit operating revenue from 2000 Measure A

• Index fares

• Contract out services

• Assume $12 million/year in additional State gas-tax revenue

($20.5)

($14.4)

($5.8)

$1.8 $4.0

$0.8

$3.6

$0.6 $3.0

$7.3

$10.8

($25)

($20)

($15)

($10)

($5)

$0

$5

$10

$15


Millions





© PFM 44

Scenario 2: Next Network , Fare Increases , and Employee Health Sharing

Under this scenario, the VTA would work to balance the budget through:

• Implement a lower-cost (50%) Next Network solution

• Employees share in health care premiums

• Index fares


($10.0)

($3.9)

($0.9)

$6.0

$16.0

$12.4 $14.6

$11.1 $13.0

$16.7

$19.6

($15)

($10)

($5)

$0

$5

$10

$15

$20

$25


Millions





Attachment B

23

© PFM 45

QUESTIONS?

Attachment B

© PFM 1

Peer Agencies | Original Comparators

VTA services the fourth largest population area among comparative agencies


Agency Information




LACMTA

Los Angeles County

Metropolitan Transportation

Authority

Bus, Bus Rapid Transit, Light Rail, Heavy

Rail, Vanpool8,626,817 1,513

CTA Chicago Transit Authority Bus, Heavy Rail 3,272,295 309

KCDOTKing County Department of

Transportation

Bus, Trolleybus, Street Car Rail, Demand

Response, Demand Response - Taxi,

Ferryboat, Vanpool

2,117,125 2,134



UTA Utah Transit AuthorityBus, Commuter Bus, Light Rail, Commuter

Rail, Demand Response, Vanpool1,883,504 737

TriMetTri-County Metropolitan

Transportation, Oregon

Bus, Light Rail, Hybrid Rail, Demand

Response, Demand Response - Taxi1,560,803 534

Sacramento RTSacramento Regional Transit

DistrictBus, Light Rail, Demand Response 1,031,946 226

Attachment C

© PFM 2

Peer Agencies | Ad Hoc Committee Additional Comparators

VTA services the second largest population area among additional comparators


Agency Information




OCTAOrange County

Transportation Authority

Bus, Commuter Bus, Demand

Response, Demand Response-Taxi,

Vanpool

3,077,903 463



AC TransitAlameda-Contra Costa

Transit DistrictBus, Demand Response, Commuter Bus 1,425,275 364

MUNISan Francisco Municipal

Railway

Bus, Trolleybus, Light Rail, Street Car

Rail, Cable Car, Demand Response866,583 49

BARTSan Francisco Bay Area

Rapid Transit District

Heavy Rail, Automated Guideway,

Demand Response833,762 93

SamTransSan Mateo County Transit

District

Bus, Demand Response, Demand

Response-Taxi737,100 97

Attachment C

© PFM 3

Revenue Comparisons | Sources of Operating Revenues – All Agencies

VTA receives most of its operating revenue from local sources reported by NTD as “financial

assistance from local governments including income taxes, sales taxes, property taxes, and other

local funds that are not directly generated by the transit agency”

NTD reported “Taxes and Fees Levied by Transit Agency” includes sales taxes, property taxes, other

taxes, and tolls that are imposed by transit agencies with their own taxing authority


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VTA BART SamTrans AC Transit MUNI OCTA SacramentoRT

LACMTA CTA UTA TriMet KCDOT

FY2016 NTD Reported Sources of Operating Revenue

Local Funds State Funds Federal Funds Taxes and Fees Levied by Transit Agency Directly Generated Funds

Note: TDA funds categorized as “State Funds” for NTD purposes

Attachment C

© PFM 4

Directly Generated Revenues are funds generated by, donated to or earned by the transit agency,

and are dominated by passenger fares

“Other Directly Generated Sources” includes investment earnings, rentals, parking revenues, grants

and donations, and the sale of maintenance services

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VTA BART SamTrans AC Transit MUNI OCTA SacramentoRT

LACMTA CTA UTA TriMet KCDOT

FY2016 NTD Reported Directly Generated Revenues

Passenger Fares Park and Ride Advertising & Concessions Purchased Transportation Other Directly Generated Sources

Revenue Comparisons | Directly Generated Revenues – All Agencies


Attachment C

© PFM 5

Revenue Comparisons | Farebox Recovery Ratios – Original Comparators

The farebox recovery ratio is the proportion of fare revenues to operating costs

Farebox recovery has been on the decline nationally

VTA has consistently had the lowest farebox recovery ratio among comparative agencies




CTA 45.2% 44.2% 43.4% 41.7% N/A

TriMet 30.2% 30.3% 31.5% 29.5% N/A

LACMTA 26.9% 26.1% 26.2% 22.6% N/A

Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A

UTA 24.1% 21.9% 22.2% 18.8% N/A

VTA 13.0% 12.4% 12.4% 11.2% 9.5%

RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A


0%

10%

20%

30%

40%

50%

CTA TriMet LACMTA SacramentoRT

UTA VTA

Farebox Recovery Ratio, FY13 - FY16

FY13 FY14 FY15 FY16

Attachment C

© PFM 6

Revenue Comparisons | Farebox Recovery Ratios – Additional Comparators

VTA has consistently had the lowest farebox recovery ratio among the Bay Area and Orange

County comparative agencies




BART 77.4% 77.9% 79.9% 78.2% N/A

MUNI 32.9% 29.8% 28.8% 25.7% N/A

OCTA 23.0% 23.2% 21.9% 19.8% N/A

AC Transit 18.5% 19.9% 19.5% 17.8% N/A

SamTrans 16.9% 18.5% 15.5% 14.0% N/A

VTA 13.0% 12.4% 12.4% 11.2% 9.5%

RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A


0%

20%

40%

60%

80%

100%

BART MUNI OCTA AC Transit SamTrans VTA

Farebox Recovery Ratio, FY13 - FY16

FY13 FY14 FY15 FY16

Attachment C

© PFM 7

Cost Efficiency Measure | Cost Per Bus Trip – All Agencies


VTA has the second highest costs per UPT for bus service when ranked against comparative

agencies


$9.31

$7.54

$6.82 $6.59 $6.55

$4.64$4.36 $4.19

$3.45$3.09 $3.06

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

SamTrans VTA AC Transit UTA SacramentoRT

KCDOT OCTA TriMet LACMTA CTA MUNI

Cost per Unlinked Passenger Trip (UPT) - Bus, FY16

Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration

Attachment C

© PFM 8

Cost Efficiency Measure | Cost Per Light Rail Trip – All Agencies


VTA has the highest costs per UPT for light rail service – over 200% greater than most comparators


$8.62

$5.13$4.82

$4.11$3.50 $3.20

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

VTA LACMTA Sacramento RT MUNI UTA TriMet

Cost per Unlinked Passenger Trip (UPT) - Light Rail, FY16


Attachment C

© PFM 9

Cost Efficiency Measure Comparison | Cost Per Service Hour – Original Comparators


VTA spends more per hour on

Vehicle Operations and

Vehicle Maintenance than

the original peer agencies for

buses, but less on General

Administration than most

comparators

Light Rail operations are

high, but in the middle of

comparison agencies

VTA’s FY17 cost per service

hour for light rail was $707

$103.1

$126.3 $129.3 $134.0$142.3 $145.6

$166.7

$0

$50

$100

$150

$200

UTA TriMet CTA SacramentoRT

KCDOT LACMTA VTA

FY16 Operating Cost per Service Hour - Bus

Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration

$409.6 $411.1

$610.9 $612.3

$996.8

$0

$200

$400

$600

$800

$1,000

UTA TriMet VTA Sacramento RT LACMTA

FY16 Operating Cost per Service Hour - Light Rail


Note: Cost Per Service Hour information provided on

slide #17 of the 5/11/18 PFM presentation inadvertently

included data for modes other than Bus and Light Rail.

These charts reflect the corrected information.

Attachment C

© PFM 10

Cost Efficiency Measure Comparison | Cost Per Service Hour – Additional Comparators


VTA also spends more per

hour on Vehicle Operations

and Vehicle Maintenance

than the new peer agencies

for buses, but is lowest in

general administration

Light Rail operations for VTA

are slightly higher than for

MUNI; however, General

Administration is 70% of

MUNI’s

VTA’s FY17 cost per service

hour for light rail was $707

$125.0

$166.7 $171.7

$196.7

$223.6

$0

$50

$100

$150

$200

$250

OCTA VTA MUNI AC Transit SamTrans

FY16 Operating Cost per Service Hour - Bus


$594.1 $610.9

$0

$100

$200

$300

$400

$500

$600

$700

MUNI VTA

FY16 Operating Cost per Service Hour - Light Rail


Note: Cost Per Service Hour information provided on

slide #17 of the 5/11/18 PFM presentation inadvertently

included data for modes other than Bus and Light Rail.

These charts reflect the corrected information.

Attachment C

© PFM 11

Expenses for most comparative transit agencies follow similar patterns with Salaries and Benefits

as the dominant cost of service

Cost Comparisons | Expenses by Type (Cost) – All Agencies


$1,574,418

$1,394,386

$803,585

$625,985 $625,736

$426,093 $416,575 $359,996

$288,598 $268,970

$139,513 $129,537

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet SacramentoRT

SamTrans

Total Operating Expenses by Type, FY16(in thousands)

Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses

Attachment C

© PFM 12

As a percent of total expenses, VTA is among the highest for salaries and benefits

Cost Comparisons | Expenses by Type (Percent of Total) – All Agencies


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet SacramentoRT

SamTrans

% of Operating Expenses by Type, FY16

Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses

Attachment C

© PFM 13

When categorized by function, Vehicle Operations represent more than 50% of most agency

operating expenses

Cost Comparisons | Expenses by Function (Cost) – All Agencies


$1,574,418

$1,394,386

$803,585

$625,985 $625,736

$426,093 $416,575 $359,996

$288,598 $268,970

$139,513 $129,537

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

LACMTA CTA MUNI BART KCDOT TriMet AC Transit VTA OCTA UTA SacramentoRT

SamTrans

Total Operating Expenses by Function, FY16(in thousands)


Attachment C

© PFM 14

When categorized by function, VTA’s Vehicle Operations are the highest (at 56%), along with King

County

Vehicle maintenance is tied for second highest with MUNI

General Administration is lowest, along with CTA

Cost Comparisons | Expenses by Function (Percent of Total) – All Agencies


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VTA BART SamTrans AC Transit MUNI OCTA LACMTA CTA UTA KCDOT TriMet SacramentoRT

% of Operating Expenses by Function, FY16


Attachment C

© PFM 1

Cost of Living Comparisons | BEA Regional Price Parities

The cost of living for varies for comparator agencies. The data presented on the following

two slides is based on Regional Price Parities

Regional Price Parities (RPPs) are regional price levels expressed as a percentage of

the overall national price level for a given year.

The price level is determined by the average prices paid by consumers for the mix of

goods and services consumed in each region.

RPPs are expressed as a percentage of the overall national price level for each year,

which is equal to 100.00

For example, if the RPP for area A is 120 and for area B is 90, then on average, prices

are 20% higher and 10% lower than the US average for A and B respectively

Attachment D

© PFM 2


The 2016 RPP for all items in the San Jose – Sunnyvale – Santa Clara Metropolitan

Statistical Area (MSA), which is served by VTA, is 27.1 percent higher than the national

average

As shown in the graph below, this difference is also higher than RPPs among peer

agency MSAs

Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA

27.1%

24.7%

17.7%

10.5%

3.8%

2.0% 1.7%

-0.6%

-5%

0%

5%

10%

15%

20%

25%

30%

San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Chicago MSA Sacramento MSA Portland MSA Salt Lake CityMSA

2016 RPPs, All Items: % Difference from National Average

Attachment D

© PFM 3


The 2016 RPP for Rents in the San Jose – Sunnyvale – Santa Clara Metropolitan

Statistical Area (MSA) is 113.3 percent higher than the national average

As shown in the graph below, this difference is also higher than 2016 Rent RPPs among

peer agency MSAs

Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA

113.3%

90.9%

65.4%

34.0%

17.7% 17.6%14.8%

4.2%

0%

20%

40%

60%

80%

100%

120%

San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Portland MSA Sacramento MSA Chicago MSA Salt Lake CityMSA

2016 RPPs, Rents: % Difference from National Average

Attachment D

© PFM 1


TriMet – Portland, OR

• Defined benefit to defined contribution pension (2003)

• No retiree health (In 2009, retiree medical benefits were closed to new non-

union employees)

• No free downtown routes (2009)

• Increased income tax rate (HB2017 – Keep Oregon Moving, transit

improvement bill increased the payroll and self-employment tax to 0.7537%;

effective January 1, 2018)

Attachment E

© PFM 2


Los Angeles Metro

• Increased fares in 2014

• New transportation/mobility business model – adopted the Risk Allocation

matrix (RAM) in 2016

• Introduced a new college student fare program that increased ridership in

2017

Attachment E

© PFM 3


Sacramento Regional Transit

• Eliminated positions/reduced annual salary adjustment (2018)

• New business model introduced in recent years (first implemented in 2016-

17)

• Introduced SmaRT Ride – on-demand micro-transit/100% accessible/similar

to Uber Pool in February 2018

Attachment E

© PFM 4


Chicago Transit Authority

• FY18 Budget included the following cost saving measures:

• Increased fares 25%, took effect on January 7, 2018 – first increase since

2009

• Controlled electrical costs by locking in contractual pricing for fuel and

power – FY18 budget

• Expected increases in advertising and concession revenues

• Implemented new management strategies to crack down on absenteeism in

2012, which cost the agency $40 million in 2011

Attachment E

© PFM 5


King County Metro – Seattle, WA

• New service model in recent years

• Seattle voters approved a sales tax increase and a vehicle license fee to

raise an additional $45 million annually in 2014

• Last year voters approved another $54 billion expansion of public transit

systems by raising the sales tax another 0.5 percent and increasing the

vehicle license fee again

Attachment E

© PFM 6

Innovative Programs | First/Last Mile & Mobility

• King County Metro – Pilot program offering riders (via an app) within a two-mile radius of four

park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit

(2018)

• DART (Dallas) – Partnership with Uber to provide access to Uber for first mile/last mile via the

system’s GoPass app

• MARTA (Atlanta) – Partnered with Uber when the I-85 bridge collapsed. Uber helped address

issues with lack of parking as commuters switched to transit. This partnership is continuing, with

Uber targeting major transit centers for first mile/last mile trips

• Bishop Ranch (San Ramon) – First autonomous shuttle licensed by California to shuttle BART

riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to

BART (March 2018)

• LA Metro – Bike Share program in downtown LA and key tourist areas connecting bus and light

rail destinations with first mile/last mile accessibility

• Sacramento RT – Microbus, on-demand transit accessed through an app on a customers

smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass

(2018)

Attachment E

© PFM 1

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4) ($25.5)

($14.7) ($14.7) ($14.4)($13.8) ($13.1)

($11.5)

($3.2)($1.7)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Controlled Wage Infaltion

Workforce | Control Wage Inflation

Reducing wage and non-medical benefits inflation

• Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching

wage increases to ability-to-pay protects jobs

• Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues;

2) may create issues with labor union in contract negotiations

Key assumptions

• Reduces wages and non-medical benefits inflation from 3.5% to 2%



Baseline Ending Reserves: ($267.1 million)


Attachment F

© PFM 2

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)

($42.1)

($46.6)

($20.5)

($26.4)

($29.5)

($22.9)

($18.7)

($22.7)

($26.7)

($30.7)

($34.2)

($31.2)

($35.2)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Shared Health Insurance Costs

Workforce | Share Health Insurance Costs

Negotiate cost sharing on health insurance premiums

• Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other

cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA’s insurance

costs

• Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing

could cause some employees to opt for lower-cost, non-family benefits

Key Assumptions

• Assumes 80% employer / 20% employee health insurance premium cost sharing





Attachment F

© PFM 3

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4)($28.2)

($19.7)($22.1)

($26.3)

($30.5)

($34.8)

($38.5)($35.8)

($40.1)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Shared Pension Costs

Workforce | Share Pension Costs

Create across-the-board parity with employee contribution to pension costs

• Advantages: 1) equal participation in pension funding, 2) provides value to employees by

strengthening total pension funding

• Downsides: 1) Any changes to pension contributions must be negotiated with labor unions

Key assumptions

• Moves employee pension contributions to a 6% share over three years beginning in FY2020





Attachment F

© PFM 4

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4) ($25.6)

($18.9)

($23.2)

($27.5)

($31.7)

($36.0)

($39.8)($37.1)

($41.5)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Outsourced Services

Workforce | Outsource Services, Where Feasible

Increasing the amount of transit contracted out, could result in significant savings

• Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of

training, capital, and innovation on contractor

• Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor

staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular

employees

Key Assumptions

• Assumes 25% savings can be achieved and 20% of current employee jobs are outsourced,

resulting in a 5% reduction in personnel expenses





Attachment F

© PFM 5

Services | Rationalized Fleet Sizing and Electrification

Rationalized fleet sizing could include use of smaller vehicles* on routes that don’t demand full-

size buses or use of a micro-transit fleet (passenger vans or smaller vehicles)


• Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower

maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate

reduction in pay

• Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and

maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-of-

week, 3) multiple license requirements increases complexity/flexibility in managing workforce

Fleet Electrification of buses


• Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down,

while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles

• Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term,

heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current

market

* Note smaller vehicles would need to be fully accessible to meet needs of transit dependent

Attachment F

© PFM 6

Services | “Right-Size” Service Levels

Implementation of the Next Network is included in the Current VTA budget. These service

improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2)

connect with the coming BART extension, and 3) provide more service in underserved and vulnerable

communities

No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1)

Full pull-back of Next Network improvements, and 2) partial implementation of Next Network

• Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from

expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare

increases

• Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2)

reduces the need for other cost-savings measures

• Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in

downward transit ridership trend, 3) abandons major effort by Board and staff to address transit

service needs of the broader community, 4) survival of transit likely dependent on more service, not

less

Attachment F

© PFM 7

($20.5)

($26.4)($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)($44.6)

($42.1)($46.6)

($10.0)

($15.9)

($20.0)

($13.4)

($17.9)

($22.3)

($26.7)

($31.2)($35.1)

($32.6)

($37.1)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with 50% Next Network Implementation

Based on the savings discussed in the previous slide, elimination of the Next Network service has a

large impact on the budget forecast

Only implementing half the program costs has a lower, but significant, impact on the budget deficits

($20.5)

($26.4)($29.5)

($22.9)($27.4)

($31.8)($36.2)

($40.7)($44.6)

($42.1)($46.6)

$0.5

($5.4)

($10.5)

($3.9)($8.4)

($12.8)($17.2)

($21.7)($25.6)

($23.1)

($27.6)

($50)

($40)

($30)

($20)

($10)

$0

$10


Mill

ions

Baseline Net Operating Results with No Next Network Implementation

Services | Next Network Implementation – Impact to Budget Deficit









Attachment F

© PFM 8

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4) ($26.2)

($19.5)

($21.9)

($26.2)($28.2)

($32.4)($33.8)

($31.0)($32.5)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Indexed Fare Increases

Revenue | Indexed Fare Increases

Index fares to CPI to keep up with service cost inflation

• Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with

service delivery costs

• Downsides: 1) fare increases could have a negative impact on ridership

Key assumptions

• Assumes fares are increased by an inflationary rate every two-year budget cycle





Attachment F

© PFM 9

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4) ($25.7)

($19.0)($19.7)

($23.9) ($24.4)

($28.6)($29.8)

($26.9) ($27.4)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with Increased 2000 Measure A support

Revenue | Increase 2000 Measure A Support

Increase Measure A support

• Advantages: 1) reduces the need for other cost-savings measures

• Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects

Key assumptions

• Increases 2000 Measure A allocation to VTA Transit budget by 2.25 percent every two years in line

with VTA’s budgetary cycle





Attachment F

© PFM 10

($20.5)

($26.4)($29.5)

($22.9)($27.4)

($31.8)($36.2)

($40.7)($44.6)

($42.1)($46.6)

($20.5)

($26.4)

$15.5

$23.3 $20.1

$16.9 $13.9

$10.8 $8.2

$12.1 $9.1

($60)

($50)

($40)

($30)

($20)

($10)

$0

$10

$20

$30


Mill

ions

Baseline Net Operating Results with Additional Sales Tax Revenue

Revenue | Additional Sales Tax Revenue

Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-to-

year basis



• Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly

impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa

Clara County already at limit. Exemption would require State legislative authorization

Key assumptions

• Assumes a $0.001 cent increase to the half-cent sales tax rate, resulting in a 20% rate increase





Attachment F

© PFM 11

($20.5)

($26.4)($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($14.4)

($5.8)

$1.8 $4.0

$0.8 $3.6

$0.6 $3.0

$7.3

$10.8

($50)

($40)

($30)

($20)

($10)

$0

$10

$20


Mill

ions

Baseline Scenario 1

Scenario 1: Shared Sacrifice Between Employees, Riders, VTA

Under this scenario, the VTA would work to spread the sacrifice of balancing the budget

between as many constituents as possible. The changes modeled include:

• Slow wage growth

• Increase transit operating revenue from 2000 Measure A

• Index fares

• Contract out services






Attachment F

© PFM 12

($20.5)

($26.4)($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($10.0)

($3.9)($0.9)

$6.0

$16.0 $12.4

$14.6 $11.1

$13.0 $16.7

$19.6

($50)

($40)

($30)

($20)

($10)

$0

$10

$20

$30


Mill

ions

Baseline Scenario 2

Scenario 2: Next Network , Fare Increases , and Employee Health Sharing

Under this scenario, the VTA would work to balance the budget through:

• Implement a lower-cost (50%) Next Network solution

• Employees share in health care premiums

• Index fares






Attachment F

© PFM 1

($20.5)

($26.4)

($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($14.4)

($17.5)

($10.9)

($15.4)

($19.8)

($24.2)

($28.7)

($32.6)($30.1)

($34.6)

($50)

($45)

($40)

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0


Mill

ions

Baseline Net Operating Results with SB1 Revenue Included

Revenue | SB 1 Revenue Included

Including revenue from SB 1 at $12 million per year starting in FY2019 improves the baseline forecast



• Downsides: 1) revenue is subject to voter approval – an initiative to repeal SB 1 is on the

November 2018 ballot





Attachment G

© PFM 1

($20.5)

($26.4)($29.5)

($22.9)

($27.4)

($31.8)

($36.2)

($40.7)

($44.6)($42.1)

($46.6)

($20.5)

($26.4)

($44.4)

($38.2)

($43.1)

($47.9)

($52.7)

($57.7)

($62.1)($60.0)

($65.0)($70)

($60)

($50)

($40)

($30)

($20)

($10)

$0


Mill

ions

Baseline Net Operating Results with 2016 Measure B Revenue Excluded

Revenue | 2016 Measure B Revenue Excluded

The graph below shows the impact of removing approximately $14 - $15 million in 2016 Measure B

revenue from FY2018 – FY2028

Measure B funds are currently tied up in an ongoing lawsuit that could take up to a year to resolve





Attachment H

© PFM 1

Summary Forecast Results

Initiative/Scenario Key Assumptions

FY2028 Ending

Reserves

($ millions)

Baseline Forecast No corrective action taken by Board ($267.1)

Workforce

Control Wage Inflation Reduces wage inflation from 3.5% to 2% ($57.8)

Share Health Insurance Costs 80% employer / 20% employee cost sharing ($197.3)

Share Pension Costs 6% employee share over 3 years ($221.2)

Outsource Services, Where Feasible 5% reduction in personnel expenses ($226.6)

Services

Rationalized Fleet Sizing Requires additional study N/A

Fleet Electrification of Buses Requires additional study N/A

No Next Network Implementation $19 million savings per year from full pull-back ($54.1)

50% Next Network Implementation $9.5 million savings per year from partial implementation ($160.6)

Revenue

Indexed Fare Increases Increased fares by inflationary rate every two years ($196.8)

Increase 2000 Measure A Support Increased allocation by 2.25% every two years ($170.4)

Additional Sales Tax Revenue Assumes a one-tenth cent sales tax increase $184.8

SB 1 Revenue Included $12 million/year in additional revenue ($147.1)

2016 Measure B Revenue Excluded Removes around $14 million/year in revenue ($416.3)

Scenarios

Scenario 1Reduced wage growth, increased 2000 Measure A

support, indexed fare increases, outsourced services, SB 1 revenue$92.8

Scenario 250% Next Network Implementation, shared health care

costs, indexed fares, SB 1 revenue$196.3

Attachment I

Next Network Frequent Regional ConnectionsAttachment J

AD HOC FINANCIAL STABILITY...

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