FY 2015 Budget Assumptions

Performance, Administration and Finance CommitteeApril 3, 2014

RELATED TO AGENDA ITEM 6

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Purpose1.Receive the FY 2015 budget

assumptions

2.Provide guidance on the assumptions

3.Approve the use of assumptions for preparing FY 2015 budget

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Key Assumptions• Board policies• Goals and priorities• Highlights• Boardings• Revenues• Expenses and Staffing• Capital Improvement Program (CIP) • Key dates• Deliverables

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Board Policies• Policy No. 17 – Financial principles:

– Fund ongoing operations– Annual balanced budget– Conservatively estimate revenues while using one-time

revenues for one-time expenses or capital investments– Expenses to support effective transportation– CIP based on need– Effective cost of service through inter-governmental

relationships– Board may authorize use of debt for temporary cash flow and

emergency shortfalls, and urgent unfunded capital improvements

– Accounting in accordance with GAAP

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Board Policies• Policy No. 9 – Investment policy objectives are:

– Compliance with laws– Protection of principal– Liquidity– Generation of investment income

• Policy No. 10 – Requires Board Reserve Fund with targeted balance of $15 million or minimum target of 15% of annual budgeted operating expenses

• Policy No. 17 – Cost neutral budget transfers allowable except for transfers from fuel budget and capital outlays

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Priorities1. Safety and security

2. Financial health and sustainability

3. Increase customer ridership and revenue by a minimum of 2%

4. Successful organizational transformation

5. Improve customer riding experience

6. Business development opportunities

7. Capital program project management and delivery

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Priorities – 1Safety and Security• Conduct threat and vulnerability

assessment and update system-wide safety and security plans

• Reduce incidents, preventable accidents, and workplace injuries

• Advance PTC project

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Priorities – 2Financial Health and Sustainability• Balanced budget with no fare

increases or service reductions• Maintain restricted reserves

consistent with Board Policy• Develop contingencies for spikes in

commodity prices

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Priorities – 3 Increase customer ridership and revenue by a minimum of 2%• Continue Amtrak Rail to Rail (R2R)

program • Assess the effect of the Mobility

Plan on BREEZE operations • Improve revenue collection

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Priorities – 4Successful organizational transformation• Complete update to facility management

plans• Continue implementation of forms process

within document management system• Streamline JDE system business processes

– Implement State of Good Repair Program consistent with MAP-21

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Priorities – 5Improve customer riding experience• Continued implementation of improved real

time travel information• Advance Camp Pendleton Rail Station

project

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Priorities – 6Business development opportunities• Advance Solana Beach transit

oriented development project• Advance joint developments for:

–Carlsbad Village Station–Escondido Transit Center–Oceanside Transit Center

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Priorities – 7Capital program project management and delivery• Update of project management manual• Continued implementation of Project

Management Consultants (PMC) to obtain project readiness and completion of major development and facilities capital projects

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Highlights• No planned fare increases or service

reduction• Projecting ridership at 12.8 million

boardings• NCTD to surpass 400 million boardings• Projecting fare revenue at $19.6 million• Investment in the Capital Improvement

Plan of $20 million

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Ridership ForecastTotal ridership increase 2% overall (12,819,638)

Mode Planned Increase

Why?

BREEZE 2% 3% increase in service

COASTER 2% Continued Rail2Rail program

SPRINTER 2% Economic improvement

LIFT -6% Service Model transition from brokerage to dedicated fleet

FLEX 3% Maturing service

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Operating Revenue

FY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Projected

FY 2015 Proposed

BudgetFare revenue 18,169,759 18,910,726 19,295,003 19,295,003 19,579,855 Auxiliary revenues 9,145,777 9,782,156 9,311,694 9,444,474 9,549,450 Non-transportation revenues 4,121,453 4,019,042 1,621,138 1,596,265 1,689,000

SUBTOTAL OPERATING REVENUE 31,436,989 32,711,924 30,227,835 30,335,742 30,818,305

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Fare Revenue Assumptions

• Fare revenue of $19.6 million is forecasted by mode based on:– Planned ridership – Estimated fare revenue per rider for each

mode• Estimates based on prior years and year to

date actuals

• No planned fare increases

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Auxiliary Revenue• Auxiliary revenue totals $9,549,450:

– Shared use– Advertising– Dispatch

• Shared use agreements are with BNSF and Amtrak– BNSF is in process of being renewed (current agreement has

increases each April 1 tied to the American Association of Railroads index)

• Advertising revenue is projected to remain at FY 2014 levels

• Dispatch agreements are with BNSF, Amtrak, and Metrolink

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Non-Transportation Revenue

• Non-transportation revenue totals $1,689,000:– Leases and permits– Investment Income– Administration fees– Miscellaneous– Gains or losses on disposals of assets

• No planned changes in non-transportation revenue

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Grant Revenue

FY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Projected

FY 2015 Proposed

BudgetLocal operating 39,109,403 34,475,230 47,711,563 47,711,563 44,047,971 State operating 5,873,274 6,243,363 5,771,888 5,771,888 5,506,123 Federal operating 12,475,024 16,716,608 12,875,585 12,875,585 13,839,343

SUBTOTAL GRANT REVENUE 57,457,701 57,435,201 66,359,036 66,359,036 63,393,437

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Grant Revenue Sources FY 2015

In Thousands

Current budget assumption is $63 million for operating grant revenue

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Local Cash Grants• Local cash grants totaling $44,047,971 are:

– TDA (Transportation Development Act 4.0 and 4.5)– TransNet

• Grant estimates are based on SANDAG’s approved FY 2015 Transportation Development Act Apportionment and Claims Schedules using the mid-range estimates

• Planned decrease of $3.6 million from FY 2014 budget– Total allocation is larger, but more dollars are being allocated

to CIP– FY 2014 local grant revenues includes use of prior year funds.

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State Cash Grants• Primarily the State Transportation Act

(STA)– $0.0025 tax on diesel fuel– Estimates are from the California State

Controller’s letter dated January 25, 2013• FY 2015 will be $266,000 less than FY

2014 budget – FY 2014 was $5.8 million– FY 2015 is planned at $5.5 million

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Federal Cash Grants• Federal cash grants for FY 2014 total

$13,839,343:– 5307 – Urbanized Area– 5337 (formerly 5309) – State of Good Repair– 5311 – Rural Area Program– JARC and New Freedom (5316/5317)

• Budget for FY 2015 is about $1 million more than FY 2014 as formula allocations are higher than FY 2014

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Revenue Carry Forward

• Proposed FY 2015 Operating budget includes $3.4 million carry forward from FY 2014

FY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Projected

FY 2015 Proposed

BudgetFY 2014 Carry Forward:

Carry Forward Projects - - - - 350,000 Carry Forward for One-Time Expenses - - - - 3,045,488 SUBTOTAL CARRY FORWARD REVENUE - - - - 3,395,488

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Proposed ExpensesFY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Projected

FY 2015 Proposed

BudgetEXPENSES:

Salaries and wages 5,882,270 6,656,785 8,531,778 7,505,491 9,120,559 Employee benefits 7,253,594 4,048,996 5,371,944 4,679,043 5,671,259 Professional services 14,622,091 16,202,921 19,396,868 20,010,416 18,020,978 Materials and supplies 6,728,351 6,748,677 8,787,513 7,524,325 8,700,264 Utilities 1,740,372 1,836,534 2,082,845 1,993,105 2,291,762 Casualty and liability 2,721,246 3,224,256 3,450,717 3,224,997 3,255,717 Taxes 407,729 416,640 592,005 408,768 554,984 Purchased Transportation 39,670,822 43,067,001 44,907,168 44,907,168 46,598,970 Miscellaneous Expenses 463,830 805,178 839,010 727,553 827,177 Expense Transfers (503,259) (309,738) (100,000) (21,306) - Debt related expenses 1,401,264 1,194,470 1,212,500 1,136,169 1,148,430 Leases and Rentals 540,187 516,476 514,523 541,377 552,130

TOTAL EXPENSES BEFORE CONTINGENCY 80,928,496 84,408,195 95,586,871 92,637,106 96,742,230

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Proposed Expenses by Source

FY 2015

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(1) Purchased Transportation

• Increases are due to contract escalations and changes in service levels and increased service levels.

FY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Forecast

FY 2015 Proposed

Purchased Transportation

System-Wide $39,670,822 $43,067,001 $44,907,168 $44,907,168 $46,598,970BREEZE $25,943,253 $28,323,656 $28,948,629 $28,948,629 $29,788,851LIFT $2,771,726 $3,186,182 $3,231,213 $3,231,213 $3,582,040FLEX $324,087 $510,197 $584,375 $584,375 $412,632COASTER $6,351,525 $6,624,935 $7,087,669 $7,087,669 $7,237,970SPRINTER $4,280,231 $4,422,031 $5,055,282 $5,055,282 $5,577,477

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Service Levels FY 2012 Actual

FY 2013 Actual

FY 2014 Budget

FY 2014 Forecast

FY 2015 Proposed

Vehicle Revenue Miles

System-Wide 7,073,720 7,612,379 7,722,317 7,678,199 8,212,399 BREEZE 5,198,156 5,672,303 5,623,630 5,554,657 5,646,805 LIFT 1,026,212 1,160,826 1,215,713 1,242,332 1,678,839 FLEX 57,794 84,097 84,799 85,018 87,193 COASTER 278,044 277,179 278,535 277,561 278,822 SPRINTER 513,514 417,973 519,640 518,631 520,740

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(2)Professional Services

Professional services of $18,020,978:• Engineering ($5,977,932)• Operations ($3,522,448)• Financial & Administrative ($2,126,723)• Facilities ($1,993,165)• Information systems ($1,801,500)• Security ($1,775,000)• Legal & Compliance ($453,000)• Communications ($371,210)

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Carry Forward Projects

Project CostCarry

ForwardBluff/Slope Stabilization Study $50,000 $50,000Signal Audit $210,400 $200,000Compliance Services $253,000 $100,000

$513,400 $350,000

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One-Time CostsProject Cost

Carry Forward

Project Management Consultants $700,000 700,000 Electrical Systems Planning & Improvement Activities $50,000 50,000 Epic Land Solutions - On call real estate services $250,000 250,000 Gobis - 813250 Outdoor Advertising Cons $50,000 25,048 Signal Audit $210,400 10,400 Harris - Dashboard Audit & Review $10,000 10,000 Grants & CIP Business Process Documentation $215,000 215,000 Management Leadership Development (agency wide) $50,000 50,000 JDE Implementation $1,000,000 1,000,000 Standard Operating Procedures - Phase 1 $325,000 325,000 Announcement Software/Upgrade $25,000 25,000 Mobile App Customer Service Mobile APP (Notification S/W - Page outs) $32,000 32,000 CH2M Hill - Rail Consulting Services $150,000 150,000 Compliance Services $253,000 153,000 Laserfiche Implementation $50,000 50,000

$3,370,400 $3,045,448

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(3) Salaries, Wages, and Benefits

• Labor costs of $14,791,818 are primarily:– Regular, holiday, and overtime pay– Payroll taxes– PERS retirement– 401(a) retirement contribution– Medical insurance– Workers’ compensation insurance– Retirees’ health insurance

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Proposed StaffingFY 2014 Budgeted Staff 126.5

FY 2014 Revised Budget 151.0

FY 2015 Proposed Staff 151.0

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Capital Positions (FTE)

Year Capital Headcount

Total Headcount

% Capital to Total

FY 2014 16.8 126.5 13%

FY 2014 Revised

16.6 151.0 11%

FY 2015 10.7 151.0 7%

Change -5.9 0 -4%

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BenefitsBenefit Assumption

PERS retirement (NCTD Plan funded at 91.9%)

Rate increases from 11.988% to 18.672% based on the CALPERS Actuarial Valuation June 30, 2012. Employee portion blended for 6 months at 4.67% and 6 months at 7.00%.

401(a) retirement contribution (unchanged)

NCTD matching contribution of 50% of employee deferrals up to 8% of salary or 4% of salary maximum match.

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Benefits NCTD Monthly Contribution for Medical Insurance (unchanged):

FY 2014 FY 2015Employee $550 $550Employee + One $1,040 $1,040Family $1,392 $1,392Waive $462 $462

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Benefits Benefit Assumption

Workers compensation insurance

Workers compensation insurance is comparable to FY 2014. Expense is related to variance from accrual of prior years’ claims as of June 30, 2012, based on an actuarial study completed by Bickmore, a Risk Management Services firm, on November 16, 2012.

Retirees’ health insurance

No planned increases from FY 2013 budget based on OPEB report draft dated July 1, 2012.

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(4) Materials and SuppliesMaterials and supplies of $8,700,264 are primarily fuel costs (natural gas, diesel, and unleaded fuel)

Budget unit prices are based on the U.S. Energy Information Administration’s estimates. NCTD takes a conservative view as the forecasts are subject to volatility and could differ significantly.

FY 2014 Budget

FY 2015 Budget

Change %

Change Natural Gas Therms 1.00$ 0.80$ (0.20) -20%

Diesel Fuel Gallons 3.50$ 3.13$ (0.37)$ -11%

Unleaded Gas Gallons 3.50$ 3.13$ (0.37)$ -11%

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Utilities, casualty and liability costs, taxes, leases and rentals, and interest expense

Cost AssumptionUtilities 10% increase over FY 2014 Budget

Casualty and liability costs

6% decrease over FY 2014 Budget

Taxes Sales tax on fuel costs (comparable)

Leases and rentals 7% increase over FY 2014 Budget

Interest expense Decrease of about $64,000 from FY 2014 Budget due to retirement of $1.2 million in Certificates of Participation 2004 Series A in FY 2014.

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Miscellaneous Expense

Miscellaneous expense primarily consists of:

• Advertising and promotion• Dues and subscriptions• Travel, meetings, and other

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Contingency•FY 2014 budget included a contingency of $1 million

•FY 2015 proposed budget includes a contingency of $865,000

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FY 2015-2019 CIPAsset Class Asset Description 2015 2016 2017 2018 2019 Totals

104 Revenue Vehicles 10,367,900 7,657,700 10,959,200 11,379,485 8,529,836 48,894,121

223 Service Vehicles 244,500 - - 105,000 432,000 781,500

338 Bldg & Structure Improvements 1,500,000 1,500,300 1,505,937 1,524,852 1,500,000 7,531,089

431 Transit Way Equipment 850,000 125,000 - - - 975,000

433 Right-of-Way Improvements 2,856,493 8,143,136 5,711,248 4,612,047 5,644,548 26,967,471

435 Shop/Garage Equipment 508,000 - - - 20,000 528,000

436 Signal Equipment 860,494 1,284,359 860,494 - - 3,005,347

439 Revenue Collection & Fare Equipment 467,000 - - - 467,000

440 Data Processing Equipment 2,293,750 1,150,000 823,616 1,378,616 873,616 6,519,598

601 Improvements to Land 742,000 - - - - 742,000

Discretionary Operating Projects 170,357 - - - - 170,357

Totals - Constrained CIP 20,860,494$ 19,860,494$ 19,860,494$ 19,000,000$ 17,000,000$ 96,581,482$

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FY 2015 Major Projects• Acquisition of 13 CNG buses ($6.9M)• Bridge improvements and replacements ($2.7M)• COASTER locomotive overhaul ($1.3M)

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Key Dates for BudgetDate Action

April 3, 2014 Present assumptions to the Performance, Administration and Finance Committee

April 14, 2014 Notice to the public that NCTD will hold a public hearing on May 15, 2014

April 17, 2014 Budget Assumptions and Draft Operating Budget presented to the Board

April 29, 2014 Release budget documents to the public

May 1, 2014 Final review of Operating Budget with the PAF Committee

May 15, 2014 Receive public comment, close hearing, and adopt the budget

June 20, 2014 Informational budget presentation to SANDAG Transportation Committee

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Deliverables• Operating Budget and CIP• Classification and Compensation

Schedule• Cost Recovery Fee Schedule• Service Implementation Plan

(if applicable)• Disadvantaged Business Enterprise

Goal

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Questions?