SANTA CLARA VALLEY TRANSPORTATION AUTHORITY (V T A) ADOPTED BUDGET FISCAL YEAR, JULY 1, 2001 through JUNE 30, 2002 2001 Board of Directors: Manuel Valerio, Chairperson of V T A Board of Directors, and Council Member of t he City of Sunnyvale Ron Gonzales, Vice-Chairperson of V T A Board of Directors, and Mayor of the Cit y of San Jose Blanca Alvarado, Supervisor on the Santa Clara County Board of Supervisors Cindy Chavez, Council Member of the City of San Jose David Cortese, Council Member of the City of San Jose Pat Dando, Council Member of the City of San Jose Don Gage, Supervisor on the Santa Clara County Board of Supervisors Dennis Kennedy, Mayor of the City of Morgan Hill Jane P. Kennedy, Council Member of the City of Campbell Sally Lieber, Vice-Mayor of the City of Mountain View Judy Nadler, Mayor of the City of Santa Clara Forrest Williams, Council Member of the City of San Jose Board Member Alternates: Randy Attaway, Vice-Mayor of the Town of Los Gatos Sandra Eakins, Mayor of the City of Palo Alto Pete McHugh, Supervisor on the Santa Clara County Board of Supervisors Thomas Springer, Mayor of the City of Gilroy Ken Yeager, Council Member of the City of San Jose Ex-Officio: James Beall, Jr., Chairperson of the Metropolitan Transportation Commission (M T C) John McLemore, M T C Representative, and Vice Mayor of the City of Santa Clara A description of V T A's Administration Organizational follows: Peter M. Cipolla, General Manager Suzanne Gifford, General Counsel Sandra Weymouth, Board Secretary Scott Buhrer, Chief Financial Officer Division Directors: Jack Collins, Rail Design and Construction Michael P. Evanhoe, Congestion Management and Highway Programs Kaye L. Evleth, Human Resources Frank Martin, Operations Jim E. Pierson, Planning and Development Anne-Catherine Vinickas, Marketing and Customer Service Budget Department: Victor Chan Christine Huynh Pauline Man Jim McCutchen Linda Schwartz TABLE OF CONTENTS General Manager's Budget Message Introduction: Budget Resolution

Executive Summary Vision, Mission, and Strategic Plan Current Operations Operating Budget: Operating Budget Budget Policies, Practices, and Methodologies Major Budget Assumptions and Explanations Division Budgets: Fiscal Year 2000-2001 Accomplishments and Fiscal Year 2001/2002 Goals Office of the General Manager Office of the General Counsel Operations - Administration Operations - Transportation Operations - Maintenance Fiscal Resources Human Resources Planning and Development Rail Design and Construction Marketing and Customer Services Other Congestion Management and Highway Programs Capital Budget: Introduction Capital Budget Schedule Major Transit Capital Programs 1996 Measure B Transportation Improvement Program Appendices: A Employee Positions by Division and Pay Ranges B Budgeted Positions by Division and Classification C Population Data for Santa Clara County by City D Fiscal Year 2001/2002 ATU Pension Fund Expenditure Plan E List of New and Augmented Capital Projects F Additional Information on Non-Revenue Vehicle Purchase G Fee Schedule Glossary GENERAL MANAGER'S BUDGET MESSAGE: Authoring this budget message calls to mind the many changes and challenges the Santa Clara Valley Transportation Authority has tackled during the preceding fis cal year. Extend the reflection over the past six years and it's apparent that V T A's challenges and attendant responsibilities have increased in both number a nd scope with each year. Together, - the Board of Directors, customers, staff a nd the general public - we have forged some unprecedented progress. The positiv e results, however, are tempered by the reality that some solutions are still to be completed and that external factors require our constant flexibility and str ategic action. Ridership, public confidence in our transportation vision, and project delivery reached new heights this past fiscal year. Conversely, our service reliability dipped lower than ever before; some basic business practices continue to hold us back; and external economic conditions, including energy costs, demand vigilanc e.

Of course, maintaining and improving both the quantity and quality of transit se rvices is our foremost concern. Ridership records have been consistently eclips ed. Total ridership increased 7 point 3 percent in the first six months of Fisca l Year 2000/2001. Such ridership growth despite our service reliability issues caused by an unprecedented labor shortage is remarkable and heartening. The ser vice reliability decline was so severe we had no option but to delay our schedul ed service expansion. We responded by reinventing our recruitment methods, incl uding two successful job fairs, and by initiating compensation realignments to b e more competitive with prevalent market rates. We renegotiated our labor agreem ent with the Amalgamated Transit Union to enhance our ability to retain and attr act qualified operators and mechanics. These actions have shown promising resul ts and we believe will serve well in addressing our labor shortages. We remain determined to return to our service expansion mode as soon as possible. This bu dget calls for the resumption of service expansion in Fiscal Year 2001/2002, add ing 50,000 service hours and over 600,000 service miles. The passage of Measure A this past November by over 70 percent of the electorate is a resounding affirmation of V T A's transportation vision. We recognize tha t this unprecedented confidence comes with a weighty responsibility: to honor su ch trust through successfully implementing the Valley Transportation Plan 2020 ( V T P 2020), the blueprint for investment in a balanced transportation infrastru cture for Santa Clara Valley. This budget reflects our initial steps to accompl ish V T P 2020, including the 2000 Measure A and 1996 Measure B programs. We are gearing up organization wide to ensure quality project deliveries as soon as fe asible. While the scope and magnitude of 2000 Measure A will provide a central focus for V T A's efforts for decades to come, this budget also incorporates our current efforts directed at delivering the 1996 Measure B Transportation Improvement Pro gram. Before the current fiscal year is over, we will have started construction on the Highway 17 and I 880 projects as well as the Vasona Light Rail Line, and , opened service on the initial segment of the Tasman East Light Rail Line, from Baypointe Transfer Station to the new I 880/Milpitas station. Tasman East to I 880 marks the delivery of the first transit project funded by the 1996 Measure B Transportation Improvement Program, on schedule and under budget. External influences continue to need our attention. The explosive growth of the economy appears to have finally stalled, and expenses related to energy resource s can be expected to rise. Prudent fiscal responses are imperative. In Fiscal Y ear 2001/2002, we anticipate a decrease in our major operating revenue - the per manent half-cent sales tax approved by voters in 1976. Revenues to complete the 1996 Measure B projects must also be watched carefully. The challenges may seem daunting, but the opportunities are once in a lifetime. We will continue to work in earnest with our many partners, both current and fu ture ones, to develop an effective regional transportation network that supports economic vitality and quality of life. We will continue to make major investm ents in our greatest asset, our employees, through recruitment, training and dev elopment programs. We will continue outreach to our diverse communities. And, we will continue to seek the resources essential to fulfilling our vision "...to provide a transportation system that allows anyone to go anywhere in the region easily and efficiently." Signed by Peter M. Cipolla, General Manager August 17, 2001 Resolution No. 01.06.38 RESOLUTION OF THE BOARD OF DIRECTORS OF THE SANTA CLARA VALLEY TRANSPORTATION AU THORITY (V T A) ADOPTING THE ANNUAL BUDGET OF V T A FOR FISCAL YEAR 2001/2002

WHEREAS, on or before April 5, 2001, the General Manager presented the Santa Cla ra Valley Transportation Authority Fiscal Year 2001-2002 Recommended Budget to t he Board of Directors and mailed a copy to each City Manager and Mayor in the Co unty of Santa Clara and to the County Executive; and WHEREAS, additional copies of the Recommended Budget were distributed to V T A's Advisory Committee membership, libraries in Santa Clara County, Santa Clara Cou nty's state and federal legislative delegation, senior and disabled groups, prof essional community organizations, and the media, and were available for perusal at V T A's Downtown Customer Service Center, as well as libraries and city halls throughout the County; and WHEREAS, the Recommended Budget includes all administrative, operational and cap ital expenses for the Congestion Management Program together with the apportionm ent of Congestion Management Program expenses by levy against each Member Agency to the extent necessary to fund the Congestion Management Program; and WHEREAS, the Recommended Budget was reviewed by the Administration and Finance C ommittee on April 20, 2001, and May 18, 2001, and on May 3, 2001, by the Board o f Directors at a public meeting; and WHEREAS, a list of employee position classifications and pay ranges is included in the recommended budget as Appendix A, and the amount of funds budgeted for wa ges, salaries and benefits for Fiscal Year 2001/2002 is based upon V T A's posit ion classification and pay plan and is set forth in the Statement of Revenues an d Expenses in the Recommended Budget; and WHEREAS, the Board of Directors desires to adopt an annual budget for the Fiscal Year 2001/2002; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Santa Clara Vall ey Transportation Authority that the attached recommended budget for the Santa C lara Valley Transportation Authority (marked "Exhibit A" and incorporated herein as though set forth at length), as revised as shown on Exhibit B, is hereby ado pted as V T A's budget for the Fiscal Year 2001/2002. BE IT FURTHER RESOLVED that, effective July 1, 2001, positions may be authorized and filled, as required, by the General Manager and General Counsel, as appropr iate, provided that total V T A-wide budgeted wages, salaries and benefits accou nt is not exceeded. BE IT FURTHER RESOLVED, that, as necessary for efficient administration, positio n classifications may be added, modified, or deleted and salary ranges adjusted with the approval of the General Manager or General Counsel, as appropriate, pro vided that the changes are in accordance with applicable V T A personnel policie s and procedures and are consistent with pay practices in the transportation ind ustry. Such changes shall include pay and classification adjustments arising fr om agreements between V T A and its recognized labor organizations. BE IT FURTHER RESOLVED, that operating appropriations for major professional ser vices for one time non-recurring programs or projects, which are not expended du ring the fiscal year, shall carryover to the successive fiscal years until the p rograms or projects are completed or terminated. Other operating appropriations shall lapse at year-end. BE IT FURTHER RESOLVED, that capital appropriations, which are not expended duri ng the fiscal year, shall carry over to successive fiscal years until the projec ts are completed or otherwise terminated.

BE IT FURTHER RESOLVED, that the budget shall consist of three Funds, the Transi t Enterprise Fund, the Congestion Management Program Fund, and the 1996 Measure B Transportation Improvement Program Fund. The General Manager may reallocate a ppropriations between budget units and cost groups within each Fund up to the li mits of each Fund's annual appropriation. Any net increase in authorized approp riations to any Fund (including an allocation from reserves) shall require an af firmative vote of at least eight Directors. BE IT FURTHER RESOLVED, that the Recommended Assessments of member agencies for the Congestion Management Program are hereby approved. PASSED AND ADOPTED by the Santa Clara Valley Transportation Authority Board of D irectors on June 7, 2001, by the following vote: AYES: Chavez, Cortese, Dando, Eakins, Gage, Gonzales, D. Kennedy, J.P. Kennedy, Lieber, McHugh, Williams, Valerio NOES: None ABSENT: None Signed by MANUEL VALERIO, Chairperson of Board of Directors ATTEST and signed BY SANDRA WEYMOUTH, Secretary of Board of Directors APPROVED AS TO FORM and signed BY SUZANNE GIFFORD, General Counsel SANTA CLARA VALLEY TRANSPORTATION AUTHORITY FISCAL YEAR 2001/2002 BUDGET EXECUTI VE SUMMARY: Ridership in thousands: Bus: Fiscal Year 1999/2000 Actual 47,008; Fiscal Year 2000/2001 Adopted Budget 4 9,500; Fiscal Year 2000/2001 Revised Budget 47,800; Fiscal Year 2001/2002 Budget 48,800; Percent of change from Fiscal Year 2001 Revised is 2 point 1 percent. Light Rail: Fiscal Year 1999/2000 Actual 7,914; Fiscal Year 2000/2001 Adopted Bu dget 8,500; Fiscal Year 2000/2001 Revised Budget 9,200; Fiscal Year 2001/2002 Bu dget 10,000; Percent of change from Fiscal Year 2001 Revised is 8 point 7 percen t. Total Ridership: Fiscal Year 1999/2000 Actual 54,922; Fiscal Year 2000/2001 Adop ted Budget 58,000; Fiscal Year 2000/2001 Revised Budget 57,000; Fiscal Year 2001 /2002 Budget 58,800; Percent of change from Fiscal Year 2001 Revised is 3 point 2 percent. Service Miles in thousands: Bus: Fiscal Year 1999/2000 Actual 22,924; Fiscal Year 2000/2001 Adopted Budget 2 3,596; Fiscal Year 2000/2001 Revised Budget 22,944; Fiscal Year 2001/2002 Budget 23,479; Percent of change from Fiscal Year 2001 Revised is 2 point 3 percent. Light Rail: Fiscal Year 1999/2000 Actual 1,651; Fiscal Year 2000/2001 Adopted Bu dget 2007; Fiscal Year 2000/2001 Revised Budget 2,007; Fiscal Year 2001/2002 Bud get 2,088; Percent of change from Fiscal Year 2001 Revised is 4 point 0 percent. Total Service Miles: Fiscal Year 1999/2000 Actual 24,575; Fiscal Year 2000/2001 Adopted Budget 25,603; Fiscal Year 2000/2001 Revised Budget 24,951; Fiscal Year 2001/2002 Budget 25,567; Percent of change from Fiscal Year 2001 Revised is 2 po int 5 percent. Positions full time and part time in whole number: Fiscal Year 1999/2000 Actual 2,463; Fiscal Year 2000/2001 Adopted Budget 2,757; Fiscal Year 2000/2001 Revised

Budget 2,790; Fiscal Year 2001/2002 Budget 2,863; Percent of change from Fiscal Year 2001 Revised is 2 point 6 percent. Revenues in thousand dollars: Total Revenues: Fiscal Year 1999/2000 Actual 301,876; Fiscal Year 2000/2001 Adop ted Budget 298,327; Fiscal Year 2000/2001 Revised Budget 316,814; Fiscal Year 20 01/2002 Budget 346,508; Percent of change from Fiscal Year 2001 Revised is 9 poi nt 4 percent. Major Revenue Components: Half Cent Sales Tax: Fiscal Year 1999/2000 Actual 166,764; Fiscal Year 2000/2001 Adopted Budget 152,680; Fiscal Year 2000/2001 Revised Budget 170,000; Fiscal Ye ar 2001/2002 Budget 180,000; Percent of change from Fiscal Year 2001 Revised is 5 point 9 percent. Transportation Development Act Funds: Fiscal Year 1999/2000 Actual 75,310; Fisca l Year 2000/2001 Adopted Budget 81,183; Fiscal Year 2000/2001 Revised Budget 81, 183; Fiscal Year 2001/2002 Budget 95,402; Percent of change from Fiscal Year 200 1 Revised is 17 point 5 percent. Fares: Fiscal Year 1999/2000 Actual 30,622; Fiscal Year 2000/2001 Adopted Budget 32,897; Fiscal Year 2000/2001 Revised Budget 32,897; Fiscal Year 2001/2002 Budg et 33,586; Percent of change from Fiscal Year 2001 Revised is 2 point1 percent. Expenses in thousand dollars: Total Expenses: Fiscal Year 1999/2000 Actual 252,657; Fiscal Year 2000/2001 Adop ted Budget 287,359; Fiscal Year 2000/2001 Revised Budget 292,906; Fiscal Year 20 01/2002 Budget 337,382; Percent of change from Fiscal Year 2001 Revised is 15 po int 2 percent. Major Expense Components: Wages and Benefits: Fiscal Year 1999/2000 Actual 179,744; Fiscal Year 2000/2001 Adopted Budget 190,823; Fiscal Year 2000/2001 Revised Budget 188,014; Fiscal Yea r 2001/2002 Budget 214,462; Percent of change from Fiscal Year 2001 Revised is 1 4 point 1 percent. A D A Paratransit: Fiscal Year 1999/2000 Actual 16,443; Fiscal Year 2000/2001 Ad opted Budget 20,403; Fiscal Year 2000/2001 Revised Budget 20,403; Fiscal Year 20 01/2002 Budget 25,152; Percent of change from Fiscal Year 2001 Revised is 23 poi nt 3 percent. Material and Supplies: Fiscal Year 1999/2000 Actual 13,481; Fiscal Year 2000/200 1 Adopted Budget 19,994; Fiscal Year 2000/2001 Revised Budget 18,934; Fiscal Yea r 2001/2002 Budget 17,948; Percent of change from Fiscal Year 2001 Revised is mi nus 5 point 2 percent. Professional Services: Fiscal Year 1999/2000 Actual 6,250; Fiscal Year 2000/2001 Adopted Budget 8,416; Fiscal Year 2000/2001 Revised Budget 17,847; Fiscal Year 2001/2002 Budget 14,617; Percent of change from Fiscal Year 2001 Revised is minu s 18 point 1 percent. Caltrain: Fiscal Year 1999/2000 Actual 6,850; Fiscal Year 2000/2001 Adopted Budg et 13,543; Fiscal Year 2000/2001 Revised Budget 13,808; Fiscal Year 2001/2002 Bu dget 14,300; Percent of change from Fiscal Year 2001 Revised is 3 point 6 percen t. Security: Fiscal Year 1999/2000 Actual 6,921; Fiscal Year 2000/2001 Adopted Budg et 8,012; Fiscal Year 2000/2001 Revised Budget 8,201; Fiscal Year 2001/2002 Budg et 9,313; Percent of change from Fiscal Year 2001 Revised is 13 point 6 percent. Other Services: Fiscal Year 1999/2000 Actual 7,603; Fiscal Year 2000/2001 Adopte

d Budget 7,471; Fiscal Year 2000/2001 Revised Budget 9,363; Fiscal Year 2001/200 2 Budget 8,666; Percent of change from Fiscal Year 2001 Revised is minus 7 point 4 percent. Fuel: Fiscal Year 1999/2000 Actual 5,093; Fiscal Year 2000/2001 Adopted Budget 6 ,249; Fiscal Year 2000/2001 Revised Budget 7,453; Fiscal Year 2001/2002 Budget 7 ,706; Percent of change from Fiscal Year 2001 Revised is 3 point 4 percent. Altamont Commuter Express: Fiscal Year 1999/2000 Actual 3,821; Fiscal Year 2000/ 2001 Adopted Budget 3,702; Fiscal Year 2000/2001 Revised Budget 3,702; Fiscal Ye ar 2001/2002 Budget 5,100; Percent of change from Fiscal Year 2001 Revised is 37 point 8 percent. Operating Cost Recovering Ratio: Fiscal Year 1999/2000 Actual 17 point 4 percent ; Fiscal Year 2000/2001 Adopted Budget 16 point 7 percent; Fiscal Year 2000/2001 Revised Budget 15 point 9 percent; Fiscal Year 2001/2002 Budget 14 point 2 perc ent. Number of Capital Projects: New Projects: Fiscal Year 2000/2001 Adopted Budget 20; Fiscal Year 2000/2001 Rev ised Budget 38; Fiscal Year 2001/2002 Budget 33; Percent of change from Fiscal Y ear 2001 Revised is minus13 point 2 percent. Augmented Projects: Fiscal Year 2000/2001 Adopted Budget 8; Fiscal Year 2000/200 1 Revised Budget 24; Fiscal Year 2001/2002 Budget 5; Percent of change from Fisc al Year 2001 Revised is minus 79 point 2 percent. Carryover Projects: Fiscal Year 2000/2001 Adopted Budget 186; Fiscal Year 2000/2 001 Revised Budget 178; Fiscal Year 2001/2002 Budget 213; Percent of change from Fiscal Year 2001 Revised is 19 point 7 percent. Total Number of Projects: Fiscal Year 2000/2001 Adopted Budget 214; Fiscal Year 2000/2001 Revised Budget 240; Fiscal Year 2001/2002 Budget 251; Percent of chang e from Fiscal Year 2001 Revised is minus 4 point 6 percent. Gross Project Expenditure in thousand dollars: New Projects: Fiscal Year 2000/2001 Adopted Budget 44,214; Fiscal Year 2000/2001 Revised Budget 59,653; Fiscal Year 2001/2002 Budget 61,281; Percent of change f rom Fiscal Year 2001 Revised is 2 point 7 percent. Augmented Projects: Fiscal Year 2000/2001 Adopted Budget 25,046; Fiscal Year 200 0/2001 Revised Budget 44,115; Fiscal Year 2001/2002 Budget 76,010; Percent of ch ange from Fiscal Year 2001 Revised is 72 point 3 percent. Carryover Projects: Fiscal Year 2000/2001 Adopted Budget 1138,272; Fiscal Year 2 000/2001 Revised Budget 1179,217; Fiscal Year 2001/2002 Budget 982,029; Percent of change from Fiscal Year 2001 Revised is minus 16 point 7 percent. Total Project Expenditures: Fiscal Year 2000/2001 Adopted Budget 1,207,532; Fisc al Year 2000/2001 Revised Budget 1,282,985; Fiscal Year 2001/2002 Budget 1,119,3 20; Percent of change from Fiscal Year 2001 Revised is minus 12 point 8 percent. VISION, MISSION, AND STRATEGIC PLAN In September 1995, the Board of Directors adopted a vision and mission statement for the Santa Clara Valley Transportation Authority (V T A). This statement pr ovides a framework for making future policy, planning and budgetary decisions. VISION STATEMENT The vision of the Santa Clara Valley Transportation Authority (V T A) is to prov

ide a transportation system that allows anyone to go anywhere in the region easi ly and efficiently. This statement contains the long-range vision for V T A and portrays the desired future V T A seeks to achieve. The vision is regional, including both the imme diate areas of Santa Clara County and the bordering Bay Area to which the County is linked economically, socially, and culturally. MISSION STATEMENT The mission of the Santa Clara Valley Transportation Authority (V T A) is to pro vide the public with a safe and efficient countywide transportation system. The system increases access and mobility, reduces congestion, improves the environm ent, and supports economic development, thereby enhancing quality of life. The mission or core purpose of V T A is to provide a "safe and efficient countyw ide transportation system." The emphasis is on an integrated transportation sys tem that comprises the full range of mobility options, from cars, buses, and rai l systems to walking and bicycle trips. The system will allow members of the pu blic to travel easily and comfortably to their destination by the most appropria te means. POLICY DIRECTIONS In adopting the vision and mission in 1995, the Board of Directors specified fou r key policy directions for V T A. In March 1999, the Board adopted a fifth poli cy direction related to the 1996 Measure A transportation program of projects. Integrate transportation and land use Use all transportation options Create a safe, convenient, reliable and high-quality bus/rail operation Build a regional perspective In partnership with the County of Santa Clara, implement the 1996 Measure A tran sportation program of projects STRATEGIC PLAN The Strategic Plan serves as the umbrella policy document for V T A and drives t he Recommended Budget and other documents for which V T A has responsibility, su ch as the Short Range Transit Plan (SRTP), the Congestion Management Program (C M P), and the Countywide Transportation Plan. The goals set forth in the Strate gic Plan are ambitious but attainable, and include mechanisms for measuring perf ormance. The Strategic Plan contains V T A's strategies for implementing the mission and achieving the vision. Five broad goal areas form the basis of the plan: Enhance our customer focus Improve mobility and access Integrate transportation and land use Maintain financial stability Increase employee ownership The divisional goals contained in this budget are consistent with the broad goal s established in the Strategic Plan. The Strategic Plan also includes a 10 year Business Plan for V T A. The Busines s Plan consists of a 10-year forecast of transit service levels, expenses, reven ues, and specific performance measures with annual benchmarks for monitoring pro gress towards attaining our goals. V T A's actual performance is analyzed each year against the performance measures, and the Business Plan is modified accordi ngly. V T A's current Business Plan was released in the later part of 1998.

CURRENT OPERATIONS The Santa Clara Valley Transportation Authority (V T A) is an independent public agency responsible for bus and light rail operation, regional commuter and inte r-city rail service, A D A paratransit service, congestion management, specific highway improvement projects, and countywide transportation planning. As such, V T A is both an accessible transit provider and a multi modal transportation pl anning and implementation organization involved with transit, roadways, bikeways , and pedestrian facilities. V T A provides transit services to the 326 square mile urbanized portion of Sant a Clara County that is comprised of 15 cities and the County of Santa Clara with a total population of more than 1.7 million residents. A historical summary of the county population by city is presented in Appendix C. V T A operates 79 bu s routes and two light rail transit (L R T) lines within this service area. In addition, V T A funds paratransit and privately operated shuttle services in the County and participates in providing inter-regional commuter rail and express b us services. All of the bus and rail vehicles are accessible for individuals wi th disabilities. In January 1995, V T A was designated as the Congestion Management Agency and ch anged from being exclusively a transit provider to an organization responsible f or countywide transportation planning, funding, and congestion management within the County. V T A, in partnership with the County of Santa Clara, assumed the responsibility for implementing the 1996 Measure B Transportation Improvement Program of trans it and highway improvement projects. In addition, V T A is responsible for imple menting the latest voter-approved transportation improvement measure - the 2000 Measure A, an essential element of V T P 2020. Map of Santa Clara County Transit Service Area -- Description The map depicts the urbanized area of Santa Clara County. It shows the locations of the following cities: Campbell, Cupertino, Gilroy, Los Altos, Los Altos Hill s, Los Gatos, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara, Saratoga and Sunnyvale. In addition, it shows the major high ways such as 17, 85, 87, 101, 237, 280, 680, and 880 traversing the County and s ome major surface streets in the County. The following section provides a summary of V T A's services: BUS OPERATIONS By the beginning of Fiscal Year 2001/2002, V T A will have an active bus fleet o f 500 diesel-powered buses, which includes 55 low-floor buses. The average age of these buses is about 7.83 years and the buses range from brand new to over 17 years old. There are approximately 4,700 bus stops and 600 shelters along the bus routes. V T A also maintains 15 park and ride lots -- five owned by V T A a nd ten provided under a lease, permit, or joint use agreement with other agencie s. Buses are operated and maintained from three operating divisions and an Over haul and Repair (OandR) facility: Cerone Operating Division, Don Pedro Chaboya O perating Division, North Operating Division, and Cerone OandR Division. LIGHT RAIL TRANSIT (L R T) With the opening of service on the initial segment of the Tasman East Light Rail Line in May 2001, V T A will be operating a 29.7-mile L R T system connecting t he Silicon Valley industrial areas of Mountain View, Sunnyvale, Santa Clara and North San Jose to residential areas in South San Jose. The L R T system will ha ve a total of 48 stations and 14 park and ride lots. It operates on three route s: service between Santa Teresa and the Baypointe Station in North San Jose, ser vice between Mountain View and the I 880/Milpitas Station in Milpitas and shuttl

e service between Almaden and Ohlone-Chynoweth Stations in South San Jose. A fl eet of 50 light rail vehicles is operated on the L R T system. During the month s of April through October, weather permitting, V T A also operates five histori c trolleys from the Civic Center Station to the Convention Center Station. All light rail vehicles and historic trolleys are stored and maintained at the Guada lupe Operating Division near downtown San Jose. PARATRANSIT SERVICES In 1992, V T A implemented a paratransit system, which operates throughout the C ounty. V T A contracts with Outreach and Escort, Inc., to provide the service. Eligible riders call Outreach to schedule their trips. Outreach then assigns t he trips based on the most appropriate mode that can meet the riders' needs: tax i, accessible van, or transfer to or from fixed-route. V T A is in full complia nce with the Americans with Disabilities Act (A D A). Since January 1, 1999, V T A has offered the Same Day paratransit service, which allows qualified individuals to arrange and take trips on the day of the reques t to provide for their urgent or unplanned transportation needs. CONTRACTED AND INTERAGENCY TRANSIT SERVICES V T A is also a partner in various ventures that expand the transportation optio ns for our customers. These relationships include commuter rail, inter-county e xpress bus lines, and rail feeder services. They are operated either by contrac t or through cooperative agreements. Caltrain/Peninsula Corridor Joint Powers Board (P C J P B) Caltrain is the commuter rail service provided by the P C J P B, which is govern ed by representatives from San Francisco, San Mateo, and Santa Clara counties. It operates between Gilroy and San Francisco. Seventy-eight trains operate betw een San Jose Diridon Station and San Francisco each weekday, with 62 of these tr ains extended to the Tamien Station in San Jose where a connection can be made t o the L R T system. Connection to the L R T system can also be made at the Moun tain View Caltrain Station. Eight peak-hour weekday trains (four northbound in the morning and four southbound in the evening) extend Caltrain from Tamien stat ion to Gilroy. There are 33 stations along the line. The system uses diesel-po wered locomotives. The funding share of the operating costs apportioned to each member agency is based upon morning peak period boardings that serve in each cou nty, currently about 41percent for V T A. Altamont Commuter Express Rail Service The Altamont Commuter Express (A C E) rail service provides peak hour, weekday c ommuter rail service from the Central Valley to Santa Clara County (three mornin g and three afternoon commuter trains). V T A, the San Joaquin Regional Rail Com mission, and the Alameda County Congestion Management Agency administer the serv ice under a Joint Exercise of Powers Agreement. The 85-mile rail line includes ten stations located in Stockton, Lathrop, Tracy, Livermore (2), Pleasanton, Fre mont, Great America, Santa Clara and San Jose Diridon Station. V T A provides te n free shuttles to transport A C E riders between the Great America and Diridon stations and nearby employment sites. The funding share of the operating costs apportioned to each participating county is based upon the proportional share of total daily boardings and alightings that occur in each county (currently about 46 percent for V T A). Capitol Corridor Intercity Rail Service The Capitol Corridor Intercity Rail service began in December 1991 and is a 170mile train corridor from Auburn and Sacramento to San Jose, through Placer, Sacr amento, Yolo, Solano, Contra Costa, Alameda and Santa Clara Counties. Operating on the Union Pacific railroad tracks, Capitol Corridor service consists of four daily round trips from Sacramento to San Jose and three daily round trips from Sacramento to Oakland with connecting bus service to and from San Jose. One rou

nd trip per day extends beyond Sacramento to Auburn. The train service parallels the Interstate 80 corridor between Sacramento and Oa kland, and Interstate 880 between Oakland and San Jose. Service includes stops in Roseville, Sacramento, Davis, Suisun/Fairfield, Martinez, Richmond, Berkeley, Emeryville, Oakland, Hayward, Fremont, Santa Clara at Great America, and San Jo se Diridon Station. On July 1, 1998, the Capitol Corridor Joint Powers Authorit y (C C J P A), which is comprised of representatives from the eight counties ser ved by the corridor, assumed responsibility for the service. Under contract wit h the C C J P A, the Bay Area Rapid Transit District (BART) manages the service and Amtrak operates the service on tracks owned by Union Pacific Railroad. The f unding is provided by the State of California. Inter-county Bus Services V T A sponsors two inter-county bus services through cooperative arrangements wi th other transit systems. The Dumbarton Express is a transbay express route operating between the Union Ci ty BART Station and the Stanford Research Park in Palo Alto. It provides the on ly regularly scheduled public transit service over the Dumbarton Bridge. A cons ortium comprised of representatives from the Alameda Contra Costa Transit Distri ct (A C Transit), the San Francisco Bay Area Rapid Transit District (BART), the City of Union City, the San Mateo County Transit District (SamTrans), and V T A underwrite the net operating costs of the service. This service is contracted o ut to a private transit provider. SamTrans and V T A are responsible for 50 perc ent of the net operating costs and the other East Bay transit operators are resp onsible for the rest. The 50 percent of the operating costs is apportioned based upon all day boardings in the Santa Clara County and San Mateo County (currentl y about 36 percent for V T A). Express service over Highway 17 between Santa Cruz and downtown San Jose is fund ed and operated through an agreement between the Santa Cruz Metropolitan Transit District and V T A. Santa Cruz Metro operates this service. The two agencies share the net operating costs equally. Rail Shuttle Program Under this program, V T A offers financial assistance to employers that wish to operate shuttle bus service between L R T stations and nearby employment centers . The service is operated through a private contractor provided by V T A or the employer. Shuttles, usually vans, operate trips carrying employees from light rail in the morning to work and back again in the afternoon. Funding to operate this program is provided by the employer (minimum of 25 percent), V T A (typica lly 30 percent), and grants (45 percent) from the Transportation Fund for Clean Air Act (A B 4 3 4). Downtown and Arena Shuttle Programs V T A operates a free shuttle (D A S H) on weekdays between the downtown San Jos e Transit Mall, San Jose State University, and the San Jose Diridon Train Statio n. V T A, the Transportation Fund for Clean Air Act, the City of San Jose, and the San Jose Downtown Association fund this service. In addition, V T A operate s a free shuttle service from the downtown San Jose Transit Mall to all public e vents held in the Compaq Center (formerly San Jose Arena). The number of buses operating and frequency of service depend upon the event. San Jose Airport Flyer Service V T A, in partnership with the City of San Jose, provides free Airport Flyer bus service connecting San Jose International Airport terminals and airport employe e parking lots with V T A's Metro/Airport Light Rail Station and the Santa Clara Caltrain Station. The City of San Jose and V T A equally share the operating c osts for this service.

CONGESTION MANAGEMENT V T A, as the Congestion Management Agency for Santa Clara County, is responsibl e for coordinating and prioritizing projects for state and federal transportatio n funds, administering the Bay Area Air Quality Management Program, and coordina ting land use and other transportation planning. 1996 MEASURE B TRANSPORTATION IMPROVEMENT PROGRAM (M B T I P) In November 1996, the voters in Santa Clara County overwhelmingly approved Measu re A, an advisory measure listing an ambitious program of transportation improve ments for Santa Clara County. Also approved on the same ballot, Measure B autho rized the County Board of Supervisors to collect a nine-year half-cent sales tax for general county purposes. Subsequently, the County Board of Supervisors ado pted a resolution dedicating the tax for Measure A projects. Collection of the t ax began in April 1997; however, use of the revenue was delayed pending the outc ome of litigation challenging the legality of the sales tax. In August 1998, th e California courts upheld the tax allowing the implementation of the Measure A transportation projects to move forward. In February 2000, the V T A Board of Directors approved a Master Agreement forma lizing our partnership with the County of Santa Clara to implement the 1996 Meas ure B Transportation Improvement Program. With this partnership in place, the C ounty and V T A are in a position to complete a transportation program valued at over 1 point 6 billion dollars. V T A will be responsible for project implemen tation and management of the transit and highway projects and will assist in the administration of the pavement management and bicycle elements of the program. A more detailed description of the program elements can be found in Sections IV and V. 2000 MEASURE A TRANSPORTATION IMPROVEMENT PROGRAM In August 2000, the V T A Board of Directors approved placing a measure on the N ovember 7, 2000, General Election ballot allowing Santa Clara County voters the opportunity to vote on transportation improvements funded by a 30 year half-cent sales tax to take effect after the 1996 Measure B sales tax expires (March 31, 2006) in the county. More than 70percent of the voters approved the 2000 Measure A. It is estimated that $6.5 billion (Fiscal Year 2000 constant dollars) will be co llected. The revenue from this Measure may be used to finance the transit projec ts and operations specified in 2000 Measure A and listed in V T A's V T P 2020 T ransportation Plan and Expenditure Program. V T P 2020 provides for a balanced t ransportation system consisting of transit, roadway, bicycle and pedestrian impr ovements. The activities specified in 2000 Measure A are: Connect BART to Milpitas, San Jose, and Santa Clara; Build a rail connection from San Jose International Airport to BART, Caltrain, l ight rail; Purchase vehicles for disabled access, senior safety, clean air buses; Provide light rail throughout Santa Clara County; Expand and electrify Caltrain; and Increase rail and bus services. Staff is currently developing the implementation details of the program for adop tion by the V T A Board of Directors. Following is a description of V T A's organizational chart: The Board of Directors is supported by the General Manager, Peter M. Cipolla, an d the General Counsel, Suzanne Gifford.

Operations, Director, Frank Martin Fiscal Resources, Chief Financial Officer, Scott Buhrer Rail Design and Construction, Director, Jack Collins Congestion Management and Highway Programs, Director, Michael P. Evanhoe Marketing and Customer Service, Director, Anne Catherine Vinickas Human Resources, Director, Kaye L. Evleth Planning and Development, Director, Jim Pierson SANTA CLARA VALLEY TRANSPORTATION AUTHORITY FISCAL YEAR 2001/2002 BUDGET STATEME NT OF REVENUES AND EXPENSES IN THOUSAND DOLLARS Fares: Fiscal Year 1999/2000 Actual 30,622; Fiscal Year 2000/2001 Adopted Budget 32,897; Fiscal Year 2000/2001 Revised Budget 32,897; Fiscal Year 2001/2002 Budg et 33,586; Percent of change from Fiscal Year 2001 Revised is 2 point 1 percent. 1/2 Cent Sales Tax: Fiscal Year 1999/2000 Actual 166,764; Fiscal Year 2000/2001 Adopted Budget 152,680; Fiscal Year 2000/2001 Revised Budget 170,000 (* current estimate is 185,000); Fiscal Year 2001/2002 Budget 180,000; Percent of change fr om Fiscal Year 2001 Revised is 5 point 9 percent. TDA: Fiscal Year 1999/2000 Actual 75,310; Fiscal Year 2000/2001 Adopted Budget 8 1,183; Fiscal Year 2000/2001 Revised Budget 81,183; Fiscal Year 2001/2002 Budget 95,402; Percent of change from Fiscal Year 2001 Revised is 17 point 5 percent. STA: Fiscal Year 1999/2000 Actual 4,364; Fiscal Year 2000/2001 Adopted Budget 4, 263; Fiscal Year 2000/2001 Revised Budget 4,263; Fiscal Year 2001/2002 Budget 7, 681; Percent of change from Fiscal Year 2001 Revised is 80 point 2 percent. Federal Operating Grants : Fiscal Year 1999/2000 Actual 6,051; Fiscal Year 2000/ 2001 Adopted Budget 7,582; Fiscal Year 2000/2001 Revised Budget 7,582; Fiscal Ye ar 2001/2002 Budget 7,504; Percent of change from Fiscal Year 2001 Revised is mi nus 1 point 0 percent. State Operating Grants : Fiscal Year 1999/2000 Actual 766; Fiscal Year 2000/2001 Adopted Budget 1,080; Fiscal Year 2000/2001 Revised Budget 1,080; Fiscal Year 2 001/2002 Budget 1,355; Percent of change from Fiscal Year 2001 Revised is 25 poi nt 5 percent. Investment Earnings: Fiscal Year 1999/2000 Actual 8,286; Fiscal Year 2000/2001 A dopted Budget 10,702; Fiscal Year 2000/2001 Revised Budget 10,702; Fiscal Year 2 001/2002 Budget 10,850; Percent of change from Fiscal Year 2001 Revised is 1 poi nt 4 percent. Advertising Income: Fiscal Year 1999/2000 Actual 3,831; Fiscal Year 2000/2001 Ad opted Budget 4,865; Fiscal Year 2000/2001 Revised Budget 4,309; Fiscal Year 2001 /2002 Budget 4,608; Percent of change from Fiscal Year 2001 Revised is 6 point 9 percent. Other Income: Fiscal Year 1999/2000 Actual 5,882; Fiscal Year 2000/2001 Adopted Budget 3,075; Fiscal Year 2000/2001 Revised Budget 4,798; Fiscal Year 2001/2002 Budget 5,522; Percent of change from Fiscal Year 2001 Revised is 15 point 1 perc ent. Total Revenues: Fiscal Year 1999/2000 Actual 301,876; Fiscal Year 2000/2001 Adop ted Budget 298,327; Fiscal Year 2000/2001 Revised Budget 316,814; Fiscal Year 20 01/2002 Budget 346,508; Percent of change from Fiscal Year 2001 Revised is 9 poi nt 4 percent. Wages and Salaries: Fiscal Year 1999/2000 Actual 104,029; Fiscal Year 2000/2001

Adopted Budget 129,704; Fiscal Year 2000/2001 Revised Budget 130,621; Fiscal Yea r 2001/2002 Budget 143,975; Percent of change from Fiscal Year 2001 Revised is 1 0 point 2 percent. Benefits: Fiscal Year 1999/2000 Actual 75,715; Fiscal Year 2000/2001 Adopted Bud get 66,178; Fiscal Year 2000/2001 Revised Budget 65,452; Fiscal Year 2001/2002 B udget 78,265; Percent of change from Fiscal Year 2001 Revised is 19 point 6 perc ent. Wages, Salaries and Benefits Savings: Fiscal Year 1999/2000 Actual 0; Fiscal Yea r 2000/2001 Adopted Budget minus 5,059; Fiscal Year 2000/2001 Revised Budget min us 8,059; Fiscal Year 2001/2002 Budget minus 7,778; Percent of change from Fisca l Year 2001 Revised is minus 3 point 5 percent. Materials and Supplies: Fiscal Year 1999/2000 Actual 13,481; Fiscal Year 2000/20 01 Adopted Budget 19,994; Fiscal Year 2000/2001 Revised Budget 18,934; Fiscal Ye ar 2001/2002 Budget 17,948; Percent of change from Fiscal Year 2001 Revised is m inus 5 point 2 percent. Security: Fiscal Year 1999/2000 Actual 6,921; Fiscal Year 2000/2001 Adopted Budg et 8,012; Fiscal Year 2000/2001 Revised Budget 8,201; Fiscal Year 2001/2002 Budg et 9,313; Percent of change from Fiscal Year 2001 Revised is 13 point 6 percent. Professional and Special Services: Fiscal Year 1999/2000 Actual 6,250; Fiscal Ye ar 2000/2001 Adopted Budget 8,416; Fiscal Year 2000/2001 Revised Budget 17,847; Fiscal Year 2001/2002 Budget 14.617; Percent of change from Fiscal Year 2001 Rev ised is minus 18 point 1 percent. Other Services: Fiscal Year 1999/2000 Actual 7,603; Fiscal Year 2000/2001 Adopte d Budget 7,471; Fiscal Year 2000/2001 Revised Budget 9,363; Fiscal Year 2001/200 2 Budget 8,666; Percent of change from Fiscal Year 2001 Revised is minus 7 point 4 percent. Fuel: Fiscal Year 1999/2000 Actual 5,093; Fiscal Year 2000/2001 Adopted Budget 6 ,249; Fiscal Year 2000/2001 Revised Budget 7,453; Fiscal Year 2001/2002 Budget 7 ,706; Percent of change from Fiscal Year 2001 Revised is 3 point 4 percent. Traction Power: Fiscal Year 1999/2000 Actual 597; Fiscal Year 2000/2001 Adopted Budget 2,711; Fiscal Year 2000/2001 Revised Budget 2,711; Fiscal Year 2001/2002 Budget 3,297; Percent of change from Fiscal Year 2001 Revised is 21 point 6 perc ent. Tires: Fiscal Year 1999/2000 Actual 1,264; Fiscal Year 2000/2001 Adopted Budget 1,034; Fiscal Year 2000/2001 Revised Budget 1,034; Fiscal Year 2001/2002 Budget 1,084; Percent of change from Fiscal Year 2001 Revised is 4 point 8 percent. Utilities: Fiscal Year 1999/2000 Actual 2,540; Fiscal Year 2000/2001 Adopted Bu dget 1,721; Fiscal Year 2000/2001 Revised Budget 1,721; Fiscal Year 2001/2002 Bu dget 2,364; Percent of change from Fiscal Year 2001 Revised is 37 point 4 percen t. Insurance: Fiscal Year 1999/2000 Actual 2,403; Fiscal Year 2000/2001 Adopted Bud get 1,562; Fiscal Year 2000/2001 Revised Budget 1,562; Fiscal Year 2001/2002 Bud get 3,273; Percent of change from Fiscal Year 2001 Revised is 109 point 5 percen t. Data Processing: Fiscal Year 1999/2000 Actual 2,137; Fiscal Year 2000/2001 Adopt ed Budget 2,249; Fiscal Year 2000/2001 Revised Budget 3,555; Fiscal Year 2001/20 02 Budget 3,617; Percent of change from Fiscal Year 2001 Revised is 1 point 7 pe

rcent. Office Expense: Fiscal Year 1999/2000 Actual 800; Fiscal Year 2000/2001 Adopted Budget 786; Fiscal Year 2000/2001 Revised Budget 815; Fiscal Year 2001/2002 Budg et 846; Percent of change from Fiscal Year 2001 Revised is 3 point 8 percent. Communications: Fiscal Year 1999/2000 Actual 2,030; Fiscal Year 2000/2001 Adopte d Budget 2,023; Fiscal Year 2000/2001 Revised Budget 1,840; Fiscal Year 2001/200 2 Budget 1,882; Percent of change from Fiscal Year 2001 Revised is 2 point 3 per cent. Employee Related Expense: Fiscal Year 1999/2000 Actual 1,088; Fiscal Year 2000/2 001 Adopted Budget 1,988; Fiscal Year 2000/2001 Revised Budget 2,072; Fiscal Yea r 2001/2002 Budget 2,459; Percent of change from Fiscal Year 2001 Revised is 18 point 7 percent. Leases and Rents: Fiscal Year 1999/2000 Actual 637; Fiscal Year 2000/2001 Adopte d Budget 684; Fiscal Year 2000/2001 Revised Budget 720; Fiscal Year 2001/2002 Bu dget 828; Percent of change from Fiscal Year 2001 Revised is 15 point 0 percent. Contingency: Fiscal Year 1999/2000 Actual 0; Fiscal Year 2000/2001 Adopted Budge t 7,153; Fiscal Year 2000/2001 Revised Budget 4,000; Fiscal Year 2001/2002 Budge t 10,423; Percent of change from Fiscal Year 2001 Revised is 160 point 6 percent . Miscellaneous: Fiscal Year 1999/2000 Actual 664; Fiscal Year 2000/2001 Adopted Budget 1,742; Fiscal Year 2000/2001 Revised Budget 1,297; Fiscal Year 2001/2002 Budget 2,790; Percent of change from Fiscal Year 2001 Revised is 115 point 1 per cent. Reimbursements: Fiscal Year 1999/2000 Actual minus 10,076; Fiscal Year 2000/2001 Adopted Budget minus 17,493; Fiscal Year 2000/2001 Revised Budget minus 19,207; Fiscal Year 2001/2002 Budget minus 15,594; Percent of change from Fiscal Year 2 001 Revised is minus 18 point 8 percent. Operating Expenses: Fiscal Year 1999/2000 Actual 223,176; Fiscal Year 2000/2001 Adopted Budget 247,125; Fiscal Year 2000/2001 Revised Budget 251,932; Fiscal Yea r 2001/2002 Budget 289,981; Percent of change from Fiscal Year 2001 Revised is 1 5 point 1 percent. A D A Paratransit: Fiscal Year 1999/2000 Actual 16,443; Fiscal Year 2000/2001 Ad opted Budget 20,403; Fiscal Year 2000/2001 Revised Budget 20,403; Fiscal Year 20 01/2002 Budget 25,152; Percent of change from Fiscal Year 2001 Revised is 23 poi nt 3 percent. Caltrain: Fiscal Year 1999/2000 Actual 7,850; Fiscal Year 2000/2001 Adopted Budg et 13,543; Fiscal Year 2000/2001 Revised Budget 13,808; Fiscal Year 2001/2002 Bu dget 14,300; Percent of change from Fiscal Year 2001 Revised is 3 point 6 percen t. Light Rail Shuttles: Fiscal Year 1999/2000 Actual 1,013; Fiscal Year 2000/2001 A dopted Budget 1,223; Fiscal Year 2000/2001 Revised Budget 1,223; Fiscal Year 200 1/2002 Budget 1,439; Percent of change from Fiscal Year 2001 Revised is 17 point 7 percent. Altamont Commuter Express: Fiscal Year 1999/2000 Actual 3,821; Fiscal Year 2000/ 2001 Adopted Budget 3,702; Fiscal Year 2000/2001 Revised Budget 3,702; Fiscal Ye ar 2001/2002 Budget 5,100; Percent of change from Fiscal Year 2001 Revised is 37 point 8 percent.

Highway 17 Express: Fiscal Year 1999/2000 Actual 420; Fiscal Year 2000/2001 Adop ted Budget 545; Fiscal Year 2000/2001 Revised Budget 545; Fiscal Year 2001/2002 Budget 564; Percent of change from Fiscal Year 2001 Revised is 3 point 5 percent . Dumbarton Express: Fiscal Year 1999/2000 Actual 151; Fiscal Year 2000/2001 Adopt ed Budget 160; Fiscal Year 2000/2001 Revised Budget 160; Fiscal Year 2001/2002 B udget 197; Percent of change from Fiscal Year 2001 Revised is 23 point 1 percent . Contribution to Other Agencies: Fiscal Year 1999/2000 Actual 373; Fiscal Year 20 00/2001 Adopted Budget 485; Fiscal Year 2000/2001 Revised Budget 485; Fiscal Yea r 2001/2002 Budget 501; Percent of change from Fiscal Year 2001 Revised is 3 poi nt 3 percent. Other Expense: Fiscal Year 1999/2000 Actual 410; Fiscal Year 2000/2001 Adopted B udget 173; Fiscal Year 2000/2001 Revised Budget 648; Fiscal Year 2001/2002 Budge t 148; Percent of change from Fiscal Year 2001 Revised is minus 77 point 2 perce nt. Other Expenses: Fiscal Year 1999/2000 Actual 29,481; Fiscal Year 2000/2001 Adopt ed Budget 40,234; Fiscal Year 2000/2001 Revised Budget 40,974; Fiscal Year 2001/ 2002 Budget 47,401; Percent of change from Fiscal Year 2001 Revised is 15 point 7 percent. Total Expenses: Fiscal Year 1999/2000 Actual 252,657; Fiscal Year 2000/2001 Adop ted Budget 287,359; Fiscal Year 2000/2001 Revised Budget 292,906; Fiscal Year 20 01/2002 Budget 337,382; Percent of change from Fiscal Year 2001 Revised is 15 po int 2 percent. Surplus/(Deficit) to Reserves: Fiscal Year 1999/2000 Actual 49,219; Fiscal Year 2000/2001 Adopted Budget 10,968; Fiscal Year 2000/2001 Revised Budget 23,908; Fi scal Year 2001/2002 Budget 9,126; Percent of change from Fiscal Year 2001 Revise d is minus 61 point 8 percent. OPERATING BUDGET The Fiscal Year 2001/2002 Operating Budget is a conservative budget. In the curr ent environment of economic uncertainty, it is of the utmost importance that an organization be prepared and safeguard its resources in order to ride out busine ss cycles intact. V T A, a public agency relying mainly on sales tax revenues an d located in one of the most volatile economic areas in the U.S. - the Silicon V alley - is vulnerable to an economic downturn. Consequently, we have chosen cons ervative assumptions in developing the Fiscal Year 2001/2002 budget. The details are provided in the Major Budget Assumptions and Explanations section. Total revenue is projected at 346 point 5 million dollars, an increase of 9 poin t 4 percent over the Fiscal Year 2000/2001 Revised Budget. Significant areas of revenue increase include: 10 million dollars in the half cent sales tax revenue ; 14 point 2 million dollars in the quarter-cent sales tax revenue (also known a s Transportation Development Act fund or T D A in short); and 3 point 4 million dollars in State Transit Assistance (S T A). In Fiscal Year 2001/2002, expenses have increased by 15 point 2 percent and tota l 337 point 4 million dollars. Primary areas of expense increase are: 26 point 4 million dollars increase in salaries and benefits; 6 point 4 million dollars f or an increase in the General Manager's contingency fund; 4 point 7 million doll ars of additional funding for more A D A services; and 3 point 6 million dollars reduction in reimbursements.

The projected operating recovery ratio, which measures the proportion of operati ng expense covered by operating revenue (excluding all purchased and interagency services, and interest income and expense), is 14 point 2 percent (which we bel ieve is understated as a result of the conservative budget assumptions). BUDGET POLICIES, PRACTICES, AND METHODOLOGIES This budget consists of three funds: the Transit Enterprise Fund that accounts f or V T A's regular operations, the Congestion Management Program, and the 1996 M easure B Transportation Improvement Program. The budget for the Transit Enterpri se Fund is developed on an accrual basis. Revenues are recognized when earned, and expenses are recognized when incurred. The Congestion Management Program is budgeted on a modified accrual basis of accounting. The 1996 Measure B Transpor tation Improvement Program is budgeted as capital projects, which are based upon total expected completion costs. The Fiscal Year 2001/2002 Budget was developed using a modified-base budget appr oach. Last year's Adopted Budget served as the baseline for the development of the current budget. One time major items were subtracted from, and mid-year bud get modifications and significant adjustments were added to the Adopted Budget. Then a 4 percent cost escalation factor representing inflation was applied as a ppropriate to the non labor expense items. Labor-related expenses were increased according to the terms of the collective bargaining agreements. The result beca me the Baseline Budget - the extent to which V T A must commit resources to cont inue its current level of operations. For selected major cost items, such as fue l expenditure, we developed the budgets using a zero based budgeting approach. N ew activities or programs were submitted as supplemental budget requests. V T A senior management reviewed these items and, to the extent approved, items were a dded to the Baseline Budget to complete the Fiscal Year 2001/2002 Recommended Bu dget. Last September, we started the Fiscal Year 2001/2002 operating and capital budge ting process by developing the major budget assumptions such as the inflation ra te, benefit rates, and sales tax receipts. After review by V T A senior managem ent, the key assumptions were submitted to the Administration and Finance Commit tee and the Board of Directors for approval. In October and November respectivel y, the Budget Department sent out capital and operating budget preparation packa ges to the departmental managers. The departmental managers returned their comp leted baseline budgets, supplemental budget requests, and other forms in Decembe r 2000. During this period, the Budget Department assisted in generating depart mental budgets. V T A senior management conducted budget review sessions with e ach division in late January and early February to discuss the budget requests. After the review, revisions were forwarded to the Budget Department for inclusi on in the Recommended Budget. Starting from February, the divisions and the Bud get Department coordinated to draft the Recommended Budget book. The final Reco mmended Budget is distributed to the public for review and comments. As shown b elow, the public is also given opportunities to provide input in the budget proc ess. A workshop will be conducted in May for the Board members to review the bu dget. The Administration and Finance Committee will consider the public and Boar d comments on May 18, and the Board is scheduled to adopt the budget at its June 7 meeting. Schedule for the Fiscal Year 2001/2002 Budget Process: September 2000, Major budget assumptions developed. October and November, Budget preparation packages distributed. November through January 2001, Departmental baseline budgets, supplemental budge t requests, capital budget requests, and other budget forms completed. Late January and early February, Budget requests reviewed by SPG. March, Budget revisions and the Recommended Budget generated. April 5, Recommended Budget published and distributed.

April 20, Budget presented to Administration and Finance Committee. April 24, May 1 and 8, Public hearing meetings held. May 3, Workshop for Board members. May 18, Administration and Finance Committee review. June 7, Board of Directors final review adoption. If budget changes are necessary during the fiscal year, a department manager sub mits a budget modification request with all the necessary supporting documents t o the Budget Department. After determining the fiscal impacts, concurring with the request, and obtaining the required management approvals, the Budget is modi fied. A mid year budget review will be included in the January 2002 Board workshop. Th e review provides the Board and the public with an opportunity to evaluate V T A 's actual performance after several months of operations. In addition, it presen ts a forum for V T A management to report to the Board any major budgetary chang es that have been implemented since the budget adoption and to request resource reallocations that are warranted due to changes caused by both internal and exte rnal factors. MAJOR BUDGET ASSUMPTIONS AND EXPLANATIONS REVENUES Regional Economic Growth - Half Cent Sales Tax and T D A The half-cent local sales tax and a quarter-cent state sales tax (also known as the Transportation Development Act or T D A) are the two most important income s ources to V T A. About 80 percent of V T A's operating revenues are generated fr om them. They are driven by the local economy. Besides being the prime source of our operating income, sales tax revenues are extremely important to us because our ability to raise revenue from other sources is very limited. The quarter cen t sales tax is derived from the same tax base as the half cent sales tax but it is collected by the State, and the proceeds are administered and allocated by th e Metropolitan Transportation Commission (M T C). V T A receives the T D A fund s through the County of Santa Clara. The cash flow fluctuates differently from the half cent tax because the annual receipts are based on forecasts, which are adjusted in subsequent years for overfunding or underfunding in prior years. A pie chart shows the percentage of the major revenue sources: Half cent sales tax, 51 point 9 percent T D A, 27 point 5 percent Fares, 9 point 7 percent Other, 10 point 8 percent We adjusted our Fiscal Year 2001/2002 sales tax growth projection from 5 point 0 percent, as stated in the Fiscal Year 2001/2002 Budget Assumptions, to 5 point 9 percent when compared to the Fiscal Year 2000/01 Revised Budget of 170 million dollars and a negative 2 point 7 percent reduction to the final revised Fiscal Year 2000/01 forecast of 185 million dollars, which is 15 million dollars over t he Revised Budget. Our actual sales tax receipts in the first two quarters of Fi scal Year 2000/2001 have already exceeded our Revised Budget by a surprising 18 point 4 million dollars. However, we believe consumers in this county will event ually become less confident and limit spending, beginning in the third quarter o f the current fiscal year, as businesses are restructuring and laying off employ ees to return to profitability. While Fiscal Year 2000/2001 will be another soli d growth year for V T A in sales tax receipts, we project negative growth year F iscal Year 2001/2002. A line and bar chart shows the annual half cent sales tax receipts and yearly pe rcentage changes (dollars in million):

1991 Annual Receipts 95 point 1; Year to Year Percent of Change is not applicabl e 1992 Annual Receipts 88 point 7; Year to Year Percent of Change is minus 6 point 7 1993 Annual Receipts 90 point 5; Year to Year Percent of Change 2 point 0 1994 Annual Receipts 95 point 1; Year to Year Percent Change 5 point 1 1995 Annual Receipts 100 point 6; Year to Year Percent Change 5 point 8 1996 Annual Receipts 122 point 3; Year to Year Percent Change 21 point 6 1997 Annual Receipts 129; Year to Year Percent Change 5 point 5 1998 Annual Receipts 138 point 4; Year to Year Percent Change 7 point 3 1999 Annual Receipts 143 point 7; Year to Year Percent Change 3 point 8 2000 Annual Receipts 166 point 8; Year to Year Percent Change 16 point 0 2001 Final Revised Budget Annual Receipts 185 point 0; Year to Year Percent Chan ge 10 point 9 2002 Budget Annual Receipts 175 point 0; Year to Year Percent Change minus 2 poi nt 7 We believe consumer spending will remain weak going into the first quarter of Fi scal Year 2001/2002. By the second quarter, with the impacts of the three intere st rate adjustments orchestrated by the Federal Reserve in January and March beg in to take effect, and coupled with a reduction of excess inventory, the economy will begin to emerge from the business slowdown. Gradually, consumer confidence will recoup but we expect a weak recovery in Fiscal Year 2001/2002. We project sales tax receipts of 180 million dollars in Fiscal Year 2001/2002, a decline of 5 million dollars or 2 point 7 percent from the final Fiscal Year 2000/2001 rev ised budget. According to M T C, V T A's T D A funds will increase to 95,402,000 dollars, a 1 7 point 5 percent increase over the Fiscal Year 2000/2001 allotment, primarily d ue to underestimating in prior years. However, it is perceivable that the allotm ent for Fiscal Year 2002/2003 will be significantly less due to the sudden slowd own of the economy this year. Ridership and Fares Fiscal Year 2001/2002 is forecast to be another strong ridership growth year for V T A. Ridership is expected to hit another record high of 58 point 8 million, an increase of about 3 point 2 percent over the Fiscal Year 2000/2001 revised e stimate. In the middle of Fiscal Year 2000/2001, we modified the Transit Servic e Plan due to a severe shortage of qualified personnel. However, we will resume our service expansion plans when staffing levels have stabilized. Bus ridership is projected to grow at a modest 2 point 1 percent but light rail ridership shou ld have a strong growth of 8 point 7 percent, largely attributable to the openin g of the Tasman West Light Rail Extension. Fare revenue for Fiscal Year 2001/2002 is estimated at 33,586,000 dollars, which is a 2 point 1 percent increase over the Fiscal Year 2000/2001 revised forecast of 32,897,000 dollars. The Eco Pass program continues to grow both with employers and with our new Resi dential Eco Pass program. As of this writing, we are serving over 103,000 emplo yees and residents in the area. Our new Caltrain pilot program has also been ex tremely well received. In Fiscal Year 2001/2002, we project that the average fare per boarding will dec rease slightly to 57 cents. Ridership in thousands: Bus: Fiscal Year 1997/1998 Actual 46,118; Fiscal Year 1998/99 Actual 47,487; Fis cal Year 1999/2000 Actual 47,008; Fiscal Year 2000/2001 Adopted Budget 49,500; F iscal Year 2000/2001 Revised Budget 47,800; Fiscal Year 2001/2002 Budget 48,800.

Percent of Change: Fiscal Year 1998/99 Actual 3 point 0 percent; Fiscal Year 199 9/2000 Actual minus 1 point 0 percent; Fiscal Year 2000/2001 Adopted Budget 5 po int 3 percent; Fiscal Year 2000/2001 Revised Budget 1 point 7 percent; Fiscal Ye ar 2001/2002 Budget 2 point 1 percent. Light Rail: Fiscal Year 1997/1998 Actual 6,878; Fiscal Year 1998/99 Actual 6,863 ; Fiscal Year 1999/2000 Actual 7,914; Fiscal Year 2000/2001 Adopted Budget 8,500 ; Fiscal Year 2000/2001 Revised Budget 9,200; Fiscal Year 2001/2002 Budget 10,00 0. Percent of Change: Fiscal Year 1998/99 Actual minus 0 point 2 percent; Fiscal Ye ar 1999/2000 Actual 15 point 3 percent; Fiscal Year 2000/2001 Adopted Budget 7 p oint 4 percent; Fiscal Year 2000/2001 Revised Budget 16 point 2 percent; Fiscal Year 2001/2002 Budget 8 point 7 percent. Total Ridership: Fiscal Year 1997/1998 Actual 52,996; Fiscal Year 1998/99 Actual 54,350; Fiscal Year 1999/2000 Actual 54,922; Fiscal Year 2000/2001 Adopted Budg et 58,000; Fiscal Year 2000/2001 Revised Budget 57,000; Fiscal Year 2001/2002 Bu dget 58,800. Percent of Change: Fiscal Year 1998/99 Actual 2 point 6 percent; Fiscal Year 199 9/2000 Actual 1 point 1 percent; Fiscal Year 2000/2001 Adopted Budget 5 point 6 percent; Fiscal Year 2000/2001 Revised Budget 3 point 8 percent; Fiscal Year 200 1/2002 Budget 3 point 2 percent. Fare Revenue in thousand dollars: Fiscal Year 1997/1998 Actual 27,201; Fiscal Ye ar 1998/99 Actual 27,070; Fiscal Year 1999/2000 Actual 30,622; Fiscal Year 2000/ 2001 Adopted Budget 32,897; Fiscal Year 2000/2001 Revised Budget 32,897; Fiscal Year 2001/2002 Budget 33,586. Percent of Change: Fiscal Year 1998/99 Actual minus 0 point 5 percent; Fiscal Ye ar 1999/2000 Actual 13 point 1 percent; Fiscal Year 2000/2001 Adopted Budget 7 p oint 4 percent; Fiscal Year 2000/2001 Revised Budget 7 point 4 percent; Fiscal Y ear 2001/2002 Budget 2 point 1 percent. Average Fare per Boarding: Fiscal Year 1997/1998 Actual 51 cents; Fiscal Year 19 98/99 Actual 50 cents; Fiscal Year 1999/2000 Actual 56 cents; Fiscal Year 2000/2 001 Adopted Budget 57 cents; Fiscal Year 2000/2001 Revised Budget 58 cents; Fisc al Year 2001/2002 Budget 57 cents. Percent of Change: Fiscal Year 1998/99 Actual minus 3 point 0 percent; Fiscal Ye ar 1999/2000 Actual 11 point 9 percent; Fiscal Year 2000/2001 Adopted Budget 1 p oint 7 percent; Fiscal Year 2000/2001 Revised Budget 3 point 5 percent; Fiscal Y ear 2001/2002 Budget minus 1 point 0 percent. Other Income The TEA-21 Federal guidelines allow V T A to claim grants (which are normally re stricted to capital projects) for preventive maintenance costs. V T A expects t o apply and receive 7,504,000 dollars from this source in Fiscal Year 2001/2002, which is 1percent less than the Fiscal Year 2000-01 Revised Budget. Our princip al motivation in programming capital grants for preventive maintenance is to acc elerate the cash flow, and hence improve financial position. State Transit Assistance (S T A) is estimated at 7,681,000 dollars, a significan t increase of 3,418,000 dollars or 80 point 2 percent from the current year. Thi s was the result of a state budget surplus created by the booming economy. Such an increase will likely not be repeated next year as the economy is contracting.

Advertising revenue is projected to increase slightly to a total of 4,608,000 do llars. It is comprised of two components: advertising on buses and light rail ve hicles; and bus shelter advertising. Advertising on buses and light rail vehicle s will increase by 342,000 dollars to a total of 4,095,000 dollars; while bus sh elter advertising revenues are projected at 513,000 dollars, a decrease of 7 poi nt 7 percent from current year reflecting the sharp decline in advertising spend ing. We project interest income to reach 10,850,000 dollars, based on a projected ave rage invested funds totaling 217,000,000 dollars for investment at 5 percent. It represents only a 1 point 4 percent increase due to lower prevailing interest r ates. EXPENSES Inflation Rate The Consumer Price Index (C P I) is the gauge of inflation at the retail or cons umer level. C P I reached an annual rate of 4 point 46 percent for the San Franc isco Oakland San Jose region in 2000. It was the second consecutive year that th e Bay Area had a rate above 4 percent. A line chart shows the consumer price index yearly changes for the San Francisco , Oakland and San Jose region and the U S Average: 1988 San Francisco, Oakland, San Jose, 4 point 4 percent, U S Average 4 point 1 percent 1989 San Francisco, Oakland, San Jose, 4 point 9 percent, U S Average 4 point 8 percent 1990 San Francisco, Oakland, San Jose, 4 point 5 percent, U S Average 5 point 4 percent 1991 San Francisco, Oakland, San Jose, 4 point 4 percent, U S Average 4 point 2 percent 1992 San Francisco, Oakland, San Jose, 3 point 3 percent, U S Average 3 point 0 percent 1993 San Francisco, Oakland, San Jose, 2 point 7 percent, U S Average 3 point 0 percent 1994 San Francisco, Oakland, San Jose, 1 point 6 percent, U S Average 2 point 6 percent 1995 San Francisco, Oakland, San Jose, 2 point 0 percent, U S Average 2 point 8 percent 1996 San Francisco, Oakland, San Jose, 2 point 3 percent, U S Average 3 point 0 percent 1997 San Francisco, Oakland, San Jose, 3 point 4 percent, U S Average 2 point 3 percent 1998 San Francisco, Oakland, San Jose, 3 point 2 percent, U S Average 1 point 6 percent 1999 San Francisco, Oakland, San Jose, 4 point 2 percent, U S Average 2 point 2 percent 2000 San Francisco, Oakland, San Jose, 4 point 46 percent, U S Average 3 point 3 6 percent Source: Bureau of Labor Statistics When preparing the Fiscal Year 2001/2002 budget assumptions, oil prices and the economy were the major unknown. Since then, oil prices have dropped and stabiliz ed as we had hoped; however, the surge of electricity and gas prices has overtak en oil as the one of the driving forces of inflation in California. Although the economy of the County has deteriorated, inflation has not subsided noticeably. We still believe that a slowing economy will eventually drive down inflation. We continue to believe that 4.0percent is still the appropriate inflation factor t o be used for Fiscal Year 2001/2002. We use the inflation factor to escalate mos t non-labor budget items in the prior year adopted budget to generate the new ba

seline budget numbers. All major expense items will be discussed in a programmatic fashion. However, we will begin the discussion with the general changes in wages and benefits becaus e it represents 73 point 9 percent of V T A's operating expense. Wages and Benefits We practice a very conservative approach in budgeting for labor cost. Although w e are currently experiencing a 12 point 4 percent vacancy rate, we have projecte d only a 3 point 5 percent wages, salaries and benefits savings. If appropriate, we will reduce the wages and benefits budget by the realized vacancy savings in the mid year revised budget. Labor cost has increased by 14 point 1 percent, or 26,448,000 dollars, from 188, 014,000 dollars in the Fiscal Year 2000/2001 Revised Budget to 214,462,000 dolla rs in the Fiscal Year 2001/2002 Budget. A net of 16 positions were added to the Fiscal Year 2000/2001 Revised Budget sin ce its approval. Fifty-three new positions are requested in the Fiscal Year 2001 /2002 budget (descriptions follow). As a result, V T A will have a total of 2,86 3 budgeted positions. The booming economy in this county has created a serious labor shortage for V T A. We are experiencing an average of 12 percent vacancy rate across all division s. The shortage situation had become so severe that we had to modify our Fiscal Year 2000/2001 Service Expansion Plan. In order to retain and attract enough qua lified and experienced workers, we believe we need to align our pay rates more c losely to the market rates. We took the initiative early this year to collectiv e bargaining with the A T U a year before the contract would have expired. Also we are realigning approximately one-third of the classifications in the Service Employees International Union (S E I U) and County Employees Management Associat ion (C E M A) every year. All these actions resulted in an increase of 11 point 6 million dollars in labor cost (8 point 3 million dollars in salaries and 3.3 m illion dollars in benefits) in Fiscal Year 2001/2002. New proposed positions for Fiscal Year 2001/2002 will cost 2 point 9 million dol lars. V T A's contribution to the A T U pension fund has been increased by 2 poi nt 8 million dollars. A 9 point 1 million dollars increase is due to adjustments to salary savings and partially funded positions in the Fiscal Year 2000/2001 R evised Budget. Service Expansion In recent years, V T A has enhanced service by expanding service hours, increasi ng service frequency, improving connections and strengthening commuter service. As shown on the following chart, the proposed Fiscal Year 2001/2002 Transit Serv ice Plan will continue to provide more service hours and miles to the V T A tran sit users. The Plan will increase overall service miles 2 point 5 percent from 2 4,945,000 to 25,567,000 and service hours 2 point 8 percent from 1,778,000 to 1, 828,000. To support this service increase, V T A will need 25 new bus operators and additional resources including diesel fuel, traction power and tires. The to tal additional costs of this service expansion in Fiscal Year 2001/2002 will be approximately 1,064,000 dollars. V T A has an ongoing program of projects to expand and rehabilitate its bus and light rail facilities to accommodate the expanded service. The completion of fac ilities expansion at the North and Guadalupe Divisions will necessitate the addi tion of one Transit Maintenance Supervisor and five Transit Facilities Workers t o properly maintain these expanded facilities. The estimated annual cost of thes e six positions is 258,000 dollars.

SERVICE MILES IN THOUSANDS: Bus Miles: Fiscal Year 1997/1998 Actual 21,185; Fiscal Year 1998/99 Actual 22,40 0; Fiscal Year 1999/2000 Actual 22,924; Fiscal Year 2000/2001 Adopted Budget 23, 596; Fiscal Year 2000/2001 Revised Budget 22,944; Fiscal Year 2001/2002 Budget 2 3,479. Percent of Change: Fiscal Year 1998/99 Actual 5 point 7 percent; Fiscal Year 199 9/2000 Actual 2 point 3 percent; Fiscal Year 2000/2001 Adopted Budget 2 point 9 percent; Fiscal Year 2000/2001 Revised Budget 0 point 1 percent; Fiscal Year 200 1/2002 Budget 2 point 3 percent. Light Rail Train Miles: Fiscal Year 1997/1998 Actual 1,368; Fiscal Year 1998/99 Actual 1,360; Fiscal Year 1999/2000 Actual 1,651; Fiscal Year 2000/2001 Adopted Budget 2,007; Fiscal Year 2000/2001 Revised Budget 2,007; Fiscal Year 2001/2002 Budget 2,088. Percent of Change: Fiscal Year 1998/99 Actual minus 0 point 6 percent; Fiscal Ye ar 1999/2000 Actual 21 point 4 percent; Fiscal Year 2000/2001 Adopted Budget 21 point 6 percent; Fiscal Year 2000/2001 Revised Budget 21 point 6 percent; Fiscal Year 2001/2002 Budget 4 point 0 percent. Total Service Miles: Fiscal Year 1997/1998 Actual 22,553; Fiscal Year 1998/99 Ac tual 23,760; Fiscal Year 1999/2000 Actual 24,575; Fiscal Year 2000/2001 Adopted Budget 25,603; Fiscal Year 2000/2001 Revised Budget 24,951; Fiscal Year 2001/200 2 Budget 25,567. Percent of Change: Fiscal Year 1998/99 Actual 5 point 4 percent; Fiscal Year 199 9/2000 Actual 3 point 4 percent; Fiscal Year 2000/2001 Adopted Budget 4 point 2 percent; Fiscal Year 2000/2001 Revised Budget 1 point 5 percent; Fiscal Year 200 1/2002 Budget 2 point 5 percent. Light Rail Car Miles: Fiscal Year 1997/1998 Actual 2,126; Fiscal Year 1998/99 Ac tual 2,249; Fiscal Year 1999/2000 Actual 2,791; Fiscal Year 2000/2001 Adopted Bu dget 3,151; Fiscal Year 2000/2001 Revised Budget 3,151; Fiscal Year 2001/2002 Bu dget 3,278. Percent of Change: Fiscal Year 1998/99 Actual 5 point 8 percent; Fiscal Year 199 9/2000 Actual 24 point 1 percent; Fiscal Year 2000/2001 Adopted Budget 12 point 9 percent; Fiscal Year 2000/2001 Revised Budget 12 point 9 percent; Fiscal Year 2001/2002 Budget 4 point 0 percent. SERVICE HOURS IN THOUSANDS: Bus Hours: Fiscal Year 1997/1998 Actual 1,465; Fiscal Year 1998/99 Actual 1,566; Fiscal Year 1999/2000 Actual 1,624; Fiscal Year 2000/2001 Adopted Budget 1,673; Fiscal Year 2000/2001 Revised Budget 1,642; Fiscal Year 2001/2002 Budget 1,687. Percent of Change: Fiscal Year 1998/99 Actual 6 point 9 percent; Fiscal Year 199 9/2000 Actual 3 point 7 percent; Fiscal Year 2000/2001 Adopted Budget 3 point 0 percent; Fiscal Year 2000/2001 Revised Budget 1 point 1 percent; Fiscal Year 200 1/2002 Budget 2 point 7 percent. Light Rail Train Hours: Fiscal Year 1997/1998 Actual 87; Fiscal Year 1998/99 Act ual 89; Fiscal Year 1999/2000 Actual 113; Fiscal Year 2000/2001 Adopted Budget 1 36; Fiscal Year 2000/2001 Revised Budget 136; Fiscal Year 2001/2002 Budget 141. Percent of Change: Fiscal Year 1998/99 Actual 2 point 3 percent; Fiscal Year 199 9/2000 Actual 27 point 0 percent; Fiscal Year 2000/2001 Adopted Budget 20 point 4 percent; Fiscal Year 2000/2001 Revised Budget 20 point 4 percent; Fiscal Year 2001/2002 Budget 3 point 7 percent.

Total Service Hours: Fiscal Year 1997/1998 Actual 1,552; Fiscal Year 1998/99 Act ual 1,655; Fiscal Year 1999/2000 Actual 1,737; Fiscal Year 2000/2001 Adopted Bud get 1,809; Fiscal Year 2000/2001 Revised Budget 1,778; Fiscal Year 2001/2002 Bud get 1,828. Percent of Change: Fiscal Year 1998/99 Actual 6 point 6 percent; Fiscal Year 199 9/2000 Actual 5 point 0 percent; Fiscal Year 2000/2001 Adopted Budget 4 point 1 percent; Fiscal Year 2000/2001 Revised Budget 2 point 4 percent; Fiscal Year 200 1/2002 Budget 2 point 8 percent. Light Rail Car Hours: Fiscal Year 1997/1998 Actual 135; Fiscal Year 1998/99 Actu al 147; Fiscal Year 1999/2000 Actual 189; Fiscal Year 2000/2001 Adopted Budget 2 13; Fiscal Year 2000/2001 Revised Budget 213; Fiscal Year 2001/2002 Budget 221. Percent of Change: Fiscal Year 1998/99 Actual 8 point 9 percent; Fiscal Year 199 9/2000 Actual 28 point 6 percent; Fiscal Year 2000/2001 Adopted Budget 12 point 7 percent; Fiscal Year 2000/2001 Revised Budget 12 point 7 percent; Fiscal Year 2001/2002 Budget 3 point 8 percent. Capital Program Support V T A's ambitious capital program requires more support in several crucial areas . Rail Design and Construction Division requests 16 new positions in areas of en gineering, construction inspection, survey, mapping, utility coordination and co nstruction materials management. Anticipating growth in capital programs activities, the General Counsel's office needs an additional Senior Assistant Counsel position to provide legal support to these activities. Lastly, Fiscal Resources Division will need two additional staff to help in cons truction contract administration. The annual cost of these 19 positions is projected at 1,618,000 dollars. Information Systems, Communications, and Technologies This budget reflects V T A's growing integration of information technology into the management of our operations and capital programs. The need to support the e xpanding usage of our enterprise resource planning (E R P) system, the Bid, Disp atch and Timekeeping (B D T) system, and other information systems has placed a great demand upon the Information Service Group (I S G). However the strong tech nology sector of the local economy has exacerbated this situation by creating a labor shortage in the information technology field. This has resulted in high tu rnover and understaffing for I S G. Consequently, I S G has had to scale back in itiatives and rely on outside consultants to supplement our staff and provide te chnical assistance for our most critical applications. I S G's FY 2000-01 Revised Budget was augmented by 7 point 8 million dollars for system consultants and professional services. 1 point 3 million dollars for sof tware and hardware was also added. In Fiscal Year 2001/2002, we will continue t o need consultant support; however, the level of support has been reduced signif icantly as we are now two years into the E R P system implementation. The syste ms seem stabilized and V T A's staff has become more experienced and self-relian t. I S G requests only 4 point 0 million dollars for such services in Fiscal Yea r 2001/2002, a reduction of 3 point 8 million dollars from the Fiscal Year 2000/ 2001 Revised Budget. Administrative Support Fiscal Resources will be increasing activities in several facets of its operatio n. This budget includes 598,000 dollars for additional professional services for financial advisory, annual financial audit, and development of workstation proc

edures, along with the addition of one Financial Analyst to support the Accounti ng Department. One Office Specialist 2 position will be added to support the Operations Control Center at the Guadalupe Division at an annual cost of 53,000 dollars. Training The demands for staff development, training and improved skill levels remain hig h. To meet these challenges, this budget augments 323,000 dollars for staff tra ining and development programs in the Human Resources Division. One Rail Mainten ance Instructor position will be added in Maintenance Training to provide techni cal expertise in hands-on training in Way, Power and Signal. Other Operating Expenses To conform to the actual accounting practice of recording and settling work orde rs, 1 point 5 million dollars was reduced from the parts budget. In Fiscal Year 2001/2002, security and protective services provided by our contr actor will increase 1,111,000 dollars due to an increase in billing rates and to provide increased security at selected light rail stations and park and ride lo ts along the Guadalupe line. The Sales Program Department requests an increase of 154,000 dollars for enhance d advertising efforts to adequately promote the full range of V T A's programs a nd services. Accessible Services will implement two programs in Fiscal Year 2001/2002: the Jo b Access program (500,000 dollars) and the Low-Income Flexible Transportation pr ogram (750,000 dollars). Both of them are 100 percent grant funded and will have zero net financial impact on the Fiscal Year 2001/2002 budget. The Maintenance Division will be hiring a consultant to perform a wheel/rail int erface study that will determine the optimum rail wheel profile, maintenance cyc les and tasks. The budget for this study is 300,000 dollars. Insurance expense will be increased by 1 point 7 million dollars as a result of an increase in both of the self insurance program and property casualty premium, and a three year program of underfunding due to excess reserves. Contingency In order to maintain a more efficient budgeting process, an individual division does not budget for contingency within its own budget. An organization-wide con tingency fund is established within the Office of the General Manager to fund ur gent and unexpected programs or projects. During development of the Fiscal Year 1997/1998 Budget, the Administration and Finance Committee recommended that V T A's budget policy should include the establishment of a contingency fund (that is, the General Manager's unallocated fund) at 3 percent of the operating budget . Recognizing that V T A should attain that level incrementally, we have been in creasing the percentage of contingency fund by point 5 percent each year startin g at 1 percent in Fiscal Year 1997/1998. Fiscal Year 2001/2002 will be the first year we reach the 3 percent goal. Following the policy guidance of the Administ ration and Finance Committee, the contingency reserve is set at 10,423,000 dolla rs. Reimbursements This item is used primarily by three divisions for two completely different purp oses. The Maintenance Division uses it to record internal repair cost transfers; the Planning and Development Division and the Rail Design and Construction Divi sion use it to accumulate capitalized labor costs for project cost monitoring an d grant billing purposes. In Fiscal Year 2001/2002, it shows a decrease of 3,613

,000 dollars, which is primarily due to our changing the forecasting method to c onform to the actual accounting practice. As a result of implementing the E R P system, accounting for reimbursements has changed significantly, especially in the area of capturing costs for rebuilt par ts and maintenance work. In the Maintenance Division, both parts and labor costs were included in reimbursements using the old budgeting method. However, only l abor cost is charged to the reimbursement account under the new system. Lacking a clear idea of how the process works in the new system, we have been continuing the old method to forecast the reimbursement amounts in order to expedite the b udgeting process. After almost two years, the E R P system has gathered enough d ata to show a pattern that we can use to develop the reimbursement budget accura tely. In Fiscal Year 2001/2002, we reduced the Maintenance Division's reimbursem ents to 3,858,000 dollars, a 48 point 2 percent reduction from the Revised Budge t. In Fiscal Year 2001/2002, the Planning and Development Division and the Rail Des ign and Construction Division have combined reimbursements of 12,615,000 dollars , a decrease of 634,000 dollars from the Fiscal Year 2000/2001 Revised Budget. T he decrease is partially due to the fact that project scopes of some of our new projects are still at the early planning stage; therefore, project managers cann ot project the demands for V T A's internal labor accurately. However, as the pr oject requirements for the major facilities improvement program, the 1996 Measur e B Transportation Improvement Program and the 2000 Measure A projects begin to finalize, more reimbursements for V T A labor are expected. For labor costs incurred for the 1996 Measure B Transportation Improvement Progr am, we will not recover 100 percent of our fully allocated expenditures. As stat ed in the Master Agreement with the County of Santa Clara, we agreed to seek onl y reimbursement for the direct costs but not indirect costs. As a result, we bud geted 3,606,000 dollars in the Non-Departmental cost center to reflect the indir ect costs V T A will absorb. A D A Paratransit Paratransit ridership continues to increase and has almost doubled over the past four years. In Fiscal Year 2001/2002, ridership is anticipated to increase 12 p oint 1 percent over the Fiscal Year 2000/2001 Revised Budget. It is estimated th at V T A will provide 1,018,000 paratransit trips at a net cost of 25,153,000 do llars. This budget amount ensures that adequate operating funds are set aside to address the demand for A D A paratransit services and to examine alternative se rvice and delivery concepts that meet both the spirit and the letter of the A D A. It also includes 250,000 dollars for a short-range and long-range accessibili ty service study and professional service for capital program designs to meet ac cessibility requirements of the Americans with Disabilities Act (A D A). A D A Trips in thousands: Fiscal Year 1997/1998 Actual 529; Fiscal Year 1998/99 Actual 646; Fiscal Year 1999/2000 Actual 779; Fiscal Year 2000/2001 Adopted Budg et 908; Fiscal Year 2000/2001 Revised Budget 908; Fiscal Year 2001/2002 Budget 1 ,018; Percent of Change from FY 2000/2001 Revised Budget 12 point 1 percent. Percent of Change: Fiscal Year 1998/99 Actual 22 point 1 percent; Fiscal Year 19 99/2000 Actual 20 point 6 percent; Fiscal Year 2000/2001 Adopted Budget 16 point 6 percent; Fiscal Year 2000/2001 Revised Budget 0 point 0 percent; Fiscal Year 2001/2002 Budget 12 point 1 percent. A D A Net Operating Expense in thousand dollars: Fiscal Year 1997/1998 Actual 11 ,162; Fiscal Year 1998/99 Actual 14,510; Fiscal Year 1999/2000 Actual 16,443; Fi scal Year 2000/2001 Adopted Budget 20,403; Fiscal Year 2000/2001 Revised Budget 20,403; Fiscal Year 2001/2002 Budget 25,153; Percent of Change from FY 2000/2001 Revised Budget 23 point 3 percent.

Percent of Change: Fiscal Year 1998/99 Actual 30 point 0 percent; Fiscal Year 19 99/2000 Actual 13 point 3 percent; Fiscal Year 2000/2001 Adopted Budget 24 point 1 percent; Fiscal Year 2000/2001 Revised Budget 0 point 0 percent; Fiscal Year 2001/2002 Budget 23 point 3 percent. Net Cost per Trip: Fiscal Year 1997/1998 Actual 21 dollars and 10 cents; Fiscal Year 1998/99 Actual 22 dollars and 46 cents; Fiscal Year 1999/2000 Actual 21 dol lars and 11 cents; Fiscal Year 2000/2001 Adopted Budget 22 dollars and 47 cents; Fiscal Year 2000/2001 Revised Budget 22 dollars 47 cents; Fiscal Year 2001/2002 Budget 24 dollars and 71 cents; Percent of Change from FY 2000/2001 Revised Bud get 10 point 0 percent. Percent of Change: Fiscal Year 1998/99 Actual 6 point 4 percent; Fiscal Year 199 9/2000 Actual minus 6 point 0 percent; Fiscal Year 2000/2001 Adopted Budget 6 po int 4 percent; Fiscal Year 2000/2001 Revised Budget 0 point 0 percent; Fiscal Ye ar 2001/2002 Budget 10 point 0 percent. Caltrain VTA's current contribution for Caltrain is 42% of the net operating expenses, ba sed on a formula included in the Joint Powers Agreement. VTA is estimating that its share of the operating expenses will be $14.3 million, a 3.6% increase over the FY 2000-01 Revised Budget. This increase reflects operating a full year of 80 weekday trains, fuel and energy increases, improved Pacific Bell Park servic e and VTA funding for a new summer demonstration of weekend service to Gilroy. Altamont Commuter Express Rail VTA's FY 2001-02 budget for ACE is planned to be $5.1 million, a 37.8% increase over the last fiscal year. This reflects a full year of the third round trip se rvice, the addition of a fourth roundtrip train in November 2001, additional res ources to support the highly successful connecting shuttles and VTA's share of t he ACE capital program. Member agency contributions are determined by a formula based on the total rider boardings in each county. VTA's current contribution i s 43% of the net expenses. VTA's budget for ACE also includes the full costs of the ACE shuttles operated i n Santa Clara County. VTA staff manages this program and contracts with a priva te carrier to operate the service. These shuttle expenses are reimbursed by ACE . Finally, VTA budgets and pays for the ACE use of the San Jose Diridon and San ta Clara Stations and for ACE ticketing services at San Jose Diridon Station. FISCAL YEAR 2000/2001 ACCOMPLISHMENTS PLANNING AND ADMINISTRATION: The 2000 Measure A, which was placed on the ballot by the V T A Board of Directo rs to support the 20 year Valley Transportation Plan 2020, was overwhelmingly ap proved by more than 70percent of the voters in November 2000. The approval of M easure A is both a mandate and a vote of confidence in V T A. Before the Novembe r election, only two of 36 transportation measures statewide had ever cleared th e two-thirds majority hurdle needed to pass. Successfully negotiated the new four year labor contract with ATU. Held the first "V T A Great Job Fair" to increase recruitment outreach. Expanded the employer-based Eco Pass Program from 95 to 135 participating employ ers, representing more than 104,000 employees. The number of employers particip ating in the Eco Pass Program has increased by approximately 42 percent during t he fiscal year.

Secured State and Federal Capital Grants in excess of 100 million dollars. Completed the Downtown/East Valley Major Investment Study and initiated Conceptu al Engineering and E I R/E I S. CAPITAL IMPROVEMENTS: Tasman West Light Rail Project was the recipient of transportation "Project of t he Year" award from American Public Works Association and also received a "Trann y Award" for project of the year in California. Began construction of major elements of V T A's Facilities Improvement Program i ncluding North Division Reconstruction and Guadalupe Light Rail Facility Expansi on. Complet