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AD HOC FINANCIAL STABILITY COMMITTEE
Friday, June 8, 2018
12:00 PM
VTA Auditorium
3331 North First Street
San Jose, CA
WORKSHOP AGENDA
CALL TO ORDER
1. ROLL CALL
2. Introductions
3. Orders of the Day
4. PUBLIC PRESENTATIONS
This portion of the agenda is reserved for persons desiring to address the Committee on
any matter not on the agenda. Speakers are limited to 2 minutes. The law does not
permit Committee action or extended discussion on any item not on the agenda except
under special circumstances. If Committee action is requested, the matter can be placed
on a subsequent agenda. All statements that require a response will be referred to staff
for reply in writing.
5. Discuss potential strategies and solutions to address VTA’s budget/structural deficit.
(Breakout Session)
6. ANNOUNCEMENTS
7. ADJOURN
In accordance with the Americans with Disabilities Act (ADA) and Title VI of the Civil Rights
Act of 1964, VTA will make reasonable arrangements to ensure meaningful access to its
meetings for persons who have disabilities and for persons with limited English proficiency who
need translation and interpretation services. Individuals requiring ADA accommodations should
notify the Board Secretary’s Office at least 48-hours prior to the meeting. Individuals requiring
language assistance should notify the Board Secretary’s Office at least 72-hours prior to the
meeting. The Board Secretary may be contacted at (408) 321-5680 or email:
[email protected] or (408) 321-2330 (TTY only). VTA’s home page is on the web
at: www.vta.org or visit us on Facebook at: www.facebook.com/scvta. (408) 321-2300: 中文
/ Español / 日本語 / 한국어 / tiếng Việt / Tagalog.
Santa Clara Valley Transportation Authority
Ad Hoc Financial Stability Committee May 11, 2018
Page 2
All reports for items on the open meeting agenda are available for review in the Board
Secretary’s Office, 3331 North First Street, San Jose, California, (408) 321-5680, at least 72
hours prior to the meeting. This information is available on VTA’s website at http://www.vta.org
and also at the meeting.
Structural Deficit Mitigation
Ad Hoc Financial Sustainability Committee-Workshop June 8, 2018
Agenda Item #5
Structural Deficit Solution
2
Requires a combination of:
• Reduction of expenses
and/or increase in revenues
• Aligning of growth rates of
revenues and expenses
Today’s Goal
3
Identify mitigation
measures that have a
short-term implementation
schedule with both a short
and long-term impact
Short-Term Defined
4
Measures that can begin implementation
within one year, with full impact achieved within
three years
VTA Transit Budget Forecast, FY18-FY22
$455 $467 $479 $491 $504$475
$493 $509 $514 $531
$300
$350
$400
$450
$500
$550
$600
FY18 Adopted FY19 Adopted FY20 Projected FY21 Projected FY22 Projected
Mill
ions
Revenues Expenses
$20M$26M
$31M$23M
$26M
$30M annual local share of capital need
$30M$30M
$30M
$30M
$30MTotal$50M
Total$56M
Total$53M
Total$51M
Total$56M
5
MEMORANDUM
TO: Santa Clara Valley Transportation Authority
Ad Hoc Financial Stability Committee
FROM: Chief Financial Officer, Raj Srinath
DATE: June 5, 2018
SUBJECT: Information Follow-up
FOR INFORMATION ONLY
During the May 11, 2018 Ad Hoc Financial Stability Committee meeting, the committee
members and stakeholders requested various information. The attached matrix and attachments
address these requests. Since several of the requests related to information provided in the Public
Financial Management (PFM) May 11th presentation, it is included for reference (Attachment B).
There is also one follow-up item from the April 13, 2018 meeting still outstanding. In response
to the Next Network Plan and Related Efforts presentation, it was suggested that the system
redesign maps presented should better illustrate transit connections. An updated map showing
the main connection points is included as Attachment J.
Prepared By: Carol Lawson, Fiscal Resources Manager, Budget
Question/Comment Response
1 Requested similar cost comparison information for additional agencies (SamTrans, Muni,
AC Transit, BART, Orange County) (5/11/18 PFM presentation slides #8-18)
See Attachment C
2 Requested a breakout of Cost per Unlinked Passenger Trips by function for "Cost
Efficiency Measure Comparison-Unlinked Passenger Trip (UPT)" (5/11/18 PFM
presentation slide #16)
See Attachment C (slides #7 & #8)
3 Requested a breakout by cost in addition to percentage of Operating Expenses by Function
and by Type for "Cost Comparisons-Expenses Type" (5/11/18 PFM presentation slide #18)
See Attachment C (slides #11 & #13)
4 Requested additional information on what is included in the Local Funds, Taxes and Fees
Levied by Transit Agency, and Other Directly Generated Funds categories for "Revenue
Comparisons-By Type of Revenue" (5/11/18 PFM presentation slide #11)
"Local Funds" includes financial assistance from local governments that
support the operation of the transit system including tax levies, general
funds, specific contributions, donations, and other.
"Taxes and Fees Levies by Transit Agency" includes revenues from taxes
and fees imposed on the public by a transit agency that has its own taxing
authority.
"Other Directly Generated Funds" includes advertising revenues, donations,
investment earnings, parking revenues, sale proceeds, etc.
Note that the Sources of Revenue chart on slide #11 (on left side of page) in
the 5/11/18 PFM presentation inadvertently excluded Passenger Revenues.
The updated chart in Attachment C (slide #3) reports Passenger Revenues as
part of "Directly Generated Funds". Slide #4 in Attachment C provides a
further breakdown of "Directly Generated Funds".
5 Requested cost of living data for Peer Agencies See Attachment D
6 Would like to know what year the Peers implemented their various strategies on 5/11/18
PFM presentation "What Other Agencies Have Done" slides (#25-30)
See Attachment E
7 Requested the baseline deficit be added to "Budget Balancing Options" slides for easier
comparison of impact (5/11/18 PFM presentation slides #33-44)
See Attachment F
8 Requested annotation of assumptions used be added to "Budget Balancing Options" slides
(5/11/18 PFM presentation slides #33-44)
See Attachment F
9 Requested an Option slide with SB 1 funding included See Attachment G
10 Requested an Option slide with 2016 Measure B funding excluded See Attachment H
Ad Hoc Financial Stability Committee
Information Follow-up from 5/11/18 Meeting
Page 1 of 2
Attachment A
Question/Comment Response
Ad Hoc Financial Stability Committee
Information Follow-up from 5/11/18 Meeting
11 Requested a summary slide that shows key assumptions used for the "Budget Balancing
Options" slides (5/11/18 PFM presentation slides #33-44)
See Attachment I
12 What is the financial impact of a 80/20 split in health benefits (at the individual level) on
"Workforce-Share Pension Costs" (5/11/18 PFM presentation slide #35)
Based on 2018 Kaiser Permanente HMO rates, a 20% share would be $156
per month for single coverage, $312 per month for employee + 1 coverage
and $406 per month for employee + 2 or more coverage.
13 Absenteeism presentation - pointed out need for further study on fluctuations related to
absenteeism due to training and employee living situation
A more in-depth analysis will be conducted to help identify root causes of
absenteeism fluctuations in some areas. This effort is anticipated to begin in
the next few months.
14 Requested information regarding what operating costs are covered by 2008 Measure B Distribution of operating costs to 2000 Measure B is dependent on outcome
of Operations and Maintenance Agreement negotiations with BART which
are still in progress.
15 Requested VTA Budget Book/link to VTA website, as well as links to 5 other Agencies'
budgets
Links provided under separate cover.
16 Are there any other sources of revenue that we can or should be considering? Staff has explored the feasibility of various additional revenue sources in
the past and will continue to explore options.
17 Requested information on how AC Transit was able to get funds from a property/parcel tax General Counsel staff is researching this issue.
18 Requested evaluation of real estate transfer tax - legal/feasible? General Counsel staff is researching this issue.
19 Requested information on number of passes going to VTA from the Downtown Palo Alto
Transportation Management Agency's pilot program to reduce congestion.
The program purchases an average of 14 VTA Adult Monthly Passes per
month using Clipper Direct.
Page 2 of 2
Attachment A
1
© PFM 1
Santa Clara Valley Transportation Authority—Independent Consultant’s Review and Analysis
Ad Hoc Financial Stability Committee
PFM Group Consulting LLC 50 California Street
Suite 2300
San Francisco, CA
94111
(415) 982-5544
pfm.com
Russ Branson, Director
Presented By:
May 11, 2018
© PFM 2
PFM Charge from Ad Hoc Committee
The scope of work approved by the Ad Hoc Committee included the following elements:
1. Review VTA’s budgeted and forecasted revenues and expenses
2. Review service delivery business models and financial structure in other similarly
positioned transit agencies
3. Review revenue sources for ability to enhance or identify other sources of revenue
4. Review cost structure of providing service
5. Respond to other Ad Hoc Committee requests
6. Provide recommendations to close the structural deficit
Attachment B
2
© PFM 3
Presentation Outline
Peer Agency Comparisons
• Revenues
• Expenses
VTA Budget Forecast Model
How Other Agencies Have Addressed Budget Deficits
Options to Address Structural Budget Deficit
© PFM 4
Peer Agency Comparisons
Attachment B
3
© PFM 5
Industry Overview
National Trends
In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption.
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series
Increase in service operated – transit agencies
have increased the amount of time its vehicles are
in operation, as measured by Vehicle Revenue
Hours (VRH)
Increase in service costs – total Operating
Expenses have risen sharply in the past decade,
going from $29 billion in 2006 to $45.1 billion in
2016.
© PFM 6
Industry Overview
National Trends
In comparison to 2006, there has been an increase in public transit service operations, costs, and consumption.
Increase in service consumed
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series
• Unlinked passenger trips (UPT), a metric for transit
ridership, on public transit passengers has steadily
been flat for several years and took a dip in FY16
• Additionally, the distance traveled by public transit
passengers is also increasing, Passenger Miles
Traveled (PMT)
Attachment B
4
© PFM 7
Trends in Trips for VTA
Santa Clara VTA riders are taking fewer, but longer trips, with a dip in FY17 along with ridership
The Average Trip Length is a service efficiency measure of the number of miles traveled per passenger trip.
Graphs show annual totals for both transit bus, light rail, and ACE shuttle services--paratransit not included
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series
4.42
4.78 4.97
5.29 5.42
5.75
5.25
4.00
4.50
5.00
5.50
6.00
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
VTA - Average Trip Length, all modes(PMT per UPT)
Average Trip Length, in miles
32,130 34,778
31,652 32,746 33,041 29,464
10,278 10,754 10,015 10,742 11,341 9,132
43,434 46,600
42,492 44,221 45,103
39,138
0
10,000
20,000
30,000
40,000
50,000
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
VTA - Total # of Passenger Trips (UPT)
Bus, in thousands Light Rail, in thousands All Modes
© PFM 8
Peer Agencies
VTA services the fourth largest population area among peer agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Annual Database
Agency Information
2016 Service Area Statistics
AgencyModes of Transportation
(Directly Operated and Purchased Transit)Population Square Mileage
LACMTA
Los Angeles County
Metropolitan Transportation
Authority
Bus, Bus Rapid Transit, Light Rail, Heavy
Rail, Vanpool8,626,817 1,513
CTA Chicago Transit Authority Bus, Heavy Rail 3,272,295 309
KCDOTKing County Department of
Transportation
Bus, Trolleybus, Street Car Rail, Demand
Response, Demand Response - Taxi,
Ferryboat, Vanpool
2,117,125 2,134
VTASanta Clara Valley
Transportation AuthorityBus, Light Rail, Demand Response 1,927,888 346
UTA Utah Transit AuthorityBus, Commuter Bus, Light Rail, Commuter
Rail, Demand Response, Vanpool1,883,504 737
TriMetTri-County Metropolitan
Transportation, Oregon
Bus, Light Rail, Hybrid Rail, Demand
Response, Demand Response - Taxi1,560,803 534
Sacramento RTSacramento Regional Transit
DistrictBus, Light Rail, Demand Response 1,031,946 226
Attachment B
5
© PFM 9
Revenues
© PFM 10
VTA Transit Revenue Profile
VTA revenues are dominated by sales-tax-
based revenues collected across a number of
different sales tax measures (some are only a
portion of total sales taxes collected). This
reliance on tax puts the VTA at revenue risk
in the event of a recession
Increases to taxes require a 2/3rd vote of the
electorate for approval of a special tax. It is
highly unlikely for additional sales taxes to be
approved to support VTA operations
Source: VTA budget
Note: Sales taxes include TDA funds which are part of
the base Statewide sales tax rate
Sales Tax Based 83%
STA2%
Fares8%
Federal & State Grants1%
Other Revenue
6%
FY18 Budgeted Transit Revenues by Type
Attachment B
6
© PFM 11
Revenue Comparisons | By Type of Revenue
Sources of Operating Revenues – Federal, State, Local, Directly Generated Funds
Directly generated funds are any funds generated by, donated to or earned by the transit agency. Listed as Passenger
Fares, Transit Agency Funds, Other Earnings, and Government Funds
On average, passenger fare revenue accounts for less than 20% of operating revenues nationally.
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency
Note: TDA funds categorized as “State Funds” for NTD purposes
© PFM 12
Revenue Comparisons | Farebox Recovery Ratios
The farebox recovery ratio is the proportion of fare revenues to operating costs
Farebox recovery has been on the decline nationally;
VTA has consistently had the lowest farebox recovery ratio among comparative agencies
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series; Agency Budget Documents
FY2013 - FY2017 Farebox Recovery Ratio
Agency FY13 FY14 FY15 FY16 FY17*
CTA 45.2% 44.2% 43.4% 41.7% N/A
TriMet 30.2% 30.3% 31.5% 29.5% N/A
LACMTA 26.9% 26.1% 26.2% 22.6% N/A
Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A
UTA 24.1% 21.9% 22.2% 18.8% N/A
VTA 13.0% 12.4% 12.4% 11.2% 9.5%
RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A
*FY17 data available for VTA only
Attachment B
7
© PFM 13
VTA Farebox Recovery Experience| Compared to VTA Expense Experience
While fare revenues have been declining, expenses have continued to climb…
Source: VTA Historical Data
$356.4
$371.1
$386.1
$398.4
$426.1
$320
$340
$360
$380
$400
$420
$440
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Actual Actual Actual Actual Actual
Millions
FY13 - FY17 Transit Expenses
$38.3 $38.4
$39.1
$37.7
$34.8
$32
$33
$34
$35
$36
$37
$38
$39
$40
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Actual Actual Actual Actual Actual
Millions
FY13 - FY17 Farebox Revenues
© PFM 14
Expenses
Attachment B
8
© PFM 15
Wages36.2%
Benefits25.5%
Non-Labor 23.8%
Other Transit
8.9%
Debt Service4.5%
Transfers1.1%
FY18 Transit Budgeted Expenses by Type
VTA Transit Budgeted Expense Profile
VTA budgeted expenses are
dominated by wages and benefits at
62% of FY2018 transit expenditures
Benefit costs are dominated by:
• Pensions – ATU and CalPERS
programs
• Health insurance provided at full
cost for Kaiser plans or lower
Source: VTA budget
© PFM 16
Cost Efficiency Measure Comparison | Unlinked Passenger Trip (UPT)
The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services
For both bus and light rail service, VTA has the highest costs per UPT—over 200% over many low-
cost comparisons
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
Attachment B
9
© PFM 17
Cost Efficiency Measure Comparison | Cost Per Service Hour
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
VTA spends more per
hour on Vehicle
Operations and Vehicle
Maintenance than peer
agencies for buses
Light Rail operations
are high, but in the
middle of comparison
agencies
VTA’s FY17 cost per
service hour for light
rail was $707
© PFM 18
Cost Comparisons | Expenses Type
Expenses for most comparative transit agencies
follow similar patterns with Salaries and Benefits
the dominant cost of service
When categorized by function, Vehicle
Operations represent more than 50% of
most agency operating expenses.
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses
Attachment B
10
© PFM 19
VTA Budget and Forecast Model
© PFM 20
VTA Budget Forecast
The VTA staff budget forecast for the FY18-FY22 time period shows significant annual deficits barring
corrective action
The resulting negative operating reserves of ($26M) by FY22
Attachment B
11
© PFM 21
Independent Baseline 10-Year Budget Forecast
Baseline forecast with assuming no corrective action taken by VTA Board
($20.5)
($26.4)
($29.5)
($22.9)
($27.7)
($32.4)
($37.0)
($41.8)
($46.8)($45.5)
($51.1)
($60)
($50)
($40)
($30)
($20)
($10)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY18 - FY28 Baseline ForecastFY Net Surplus/(Deficit) Assuming No Corrective Action
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($267.1) million
NOTE: Does not reflect $30M annual local share of capital
need. Adding in this capital payment would increase the deficit
by $330M to ($597.1) million by FY28
© PFM 22
Business Cycle | Current Expansion Phase
The current expansion phases of the business cycle began nine years ago,
after the recession bottomed out in June 2009
Average expansion phase 1945-2009 (11 cycles): 58.4 months
Range: 12 to 120 months
When will next downturn start?
Current expansion 107 months and counting
as of May 2018
Attachment B
12
© PFM 23
Recessions Impact | 1976 VTA Sales Tax
The 1976 Half-Cent Sales Tax is VTA’s largest source of revenue at 47% of total
budgeted revenues in FY2018.
Recessions impacts on sales taxes are increasing
(25%)
(20%)
(15%)
(10%)
(5%)
0%
5%
10%
15%
20%
25%
'79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17
Annual % Change in VTA 1976 Sales Tax Collections, FY1979 - FY2017*
*Shaded areas indicate periods of recession
© PFM 24
How Other Agencies Have Addressed Budget Deficits
Attachment B
13
© PFM 25
What Other Agencies Have Done
TriMet – Portland, OR
• Defined benefit to defined contribution pension
• No retiree health
• No free downtown routes
• New income tax
© PFM 26
What Other Agencies Have Done
Los Angeles Metro
• Increased fares/changed fare collection
• Wage freezes, changes to health and retirement programs
• New transportation/mobility business model
Attachment B
14
© PFM 27
What Other Agencies Have Done
Sacramento Regional Transit
• Eliminated positions/reduced annual salary adjustment
• New business model
• Introduced SmaRT Ride-on-demand micro transit/100% accessible/similar to
Uber Pool
© PFM 28
What Other Agencies Have Done
Chicago Transit Authority
• Increased fares 25%
• Controlled electrical costs
• Increased advertising and concession revenues
• Cracked down on absenteeism
Attachment B
15
© PFM 29
What Other Agencies Have Done
King County Metro – Seattle, WA
• New service model
• Seattle voters approved a sales tax increase and a vehicle license fee to
raise an additional $45 million annually in 2014
• Last year voters approved another $54 billion expansion of public transit
systems by raising the sales tax another 0.5 percent and increasing the
vehicle license fee again
© PFM 30
Innovative Programs | First/Last Mile & Mobility
• King County Metro – Pilot program offering riders (via an app) within a two-mile radius of four
park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit
• DART (Dallas) – Partnership with Uber to provide access to Uber for first mile/last mile via the
system’s GoPass app
• MARTA (Atlanta) – Partnered with Uber when the I-85 bridge collapsed. Uber helped address
issues with lack of parking as commuters switched to transit. This partnership is continuing, with
Uber targeting major transit centers for first mile/last mile trips
• Bishop Ranch (San Ramon) – First autonomous shuttle licensed by California to shuttle BART
riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to
BART
• LA Metro – Bike Share program in downtown LA and key tourist areas connecting bus and light
rail destinations with first mile/last mile accessibility
• Sacramento RT – Microbus, on-demand transit accessed through an app on a customers
smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass
Attachment B
16
© PFM 31
Options to Address Structural Budget Deficit
© PFM 32
Budget Balancing Options | Three Categories
Workforce
▪ Control wage inflation
▪ Share benefit costs of health insurance and pension
▪ Outsource service, where feasible
Services
▪ “Right-size” service levels – limit/defer Next Network implementation
▪ Rationalized fleet type
▪ Fleet electrification
Revenue
▪ Indexed fare Increases
▪ Additional Sales-Based Taxes or other taxes
Attachment B
17
© PFM 33
Workforce | Control Wage Inflation
Reducing wage and non-medical benefits inflation
• Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching
wage increases to ability-to-pay protects jobs
• Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues;
2) may create issues with labor union in contract negotiations
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($57.8 million)
($20.5)
($26.4)($25.5)
($14.7) ($14.7) ($14.4) ($13.8)($13.1)
($11.5)
($3.2)
($1.7)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
VTA Budget Forecast – Net Operating Revenue
© PFM 34
Workforce | Share Health Insurance Costs
Negotiate cost sharing on health insurance premiums
• Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other
cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA’s insurance
costs
• Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing
could cause some employees to opt for lower-cost, non-family benefits
($20.5)
($26.4)
($29.5)
($22.9)
($18.7)
($22.7)
($26.7)
($30.7)
($34.2)
($31.2)
($35.2)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($197.3 million)
VTA Budget Forecast – Net Operating Revenue
Attachment B
18
© PFM 35
Workforce | Share Pension Costs
Create across-the-board parity with employee contribution to pension costs
• Advantages: 1) equal participation in pension funding, 2) provides value to employees by
strengthening total pension funding
• Downsides: 1) Any changes to pension contributions must be negotiated with labor unions
($20.5)
($26.4)($28.2)
($19.7)
($22.1)
($26.3)
($30.5)
($34.8)
($38.5)
($35.8)
($40.1)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($221.2 million)
VTA Budget Forecast – Net Operating Revenue
© PFM 36
Workforce | Outsource Services, Where Feasible
Increasing the amount of transit contracted out, could result in significant savings
• Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of
training, capital, and innovation on contractor
• Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor
staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular
employees
($20.5)
($26.4) ($25.6)
($18.9)
($23.2)
($27.5)
($31.7)
($36.0)
($39.8)
($37.1)
($41.5)($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($226.6 million)
VTA Budget Forecast – Net Operating Revenue
Attachment B
19
© PFM 37
Services | Rationalized Fleet Sizing and Electrification
Rationalized fleet sizing could include use of smaller vehicles* on routes that don’t demand full-
size buses or use of a micro-transit fleet (passenger vans or smaller vehicles)
• Savings: Requires additional study
• Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower
maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate
reduction in pay
• Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and
maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-of-
week, 3) multiple license requirements increases complexity/flexibility in managing workforce
Fleet Electrification of buses
• Savings: Requires additional study
• Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down,
while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles
• Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term,
heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current
market
* Note smaller vehicles would need to be fully accessible to meet needs of transit dependent
© PFM 38
Services | “Right-Size” Service Levels
Implementation of the Next Network is included in the Current VTA budget. These service
improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2)
connect with the coming BART extension, and 3) provide more service in underserved and vulnerable
communities
No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1)
Full pull-back of Next Network improvements, and 2) partial implementation of Next Network
• Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from
expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare
increases
• Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2)
reduces the need for other cost-savings measures
• Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in
downward transit ridership trend, 3) abandons major effort by Board and staff to address transit
service needs of the broader community, 4) survival of transit likely dependent on more service, not
less
Attachment B
20
© PFM 39
Services | Next Network Implementation – Impact to Budget Deficit
Based on the savings discussed in the previous slide, elimination of the Next Network service has a
large impact on the budget forecast
Only implementing half the program costs has a lower, but significant, impact on the budget deficits
as well
$0.5
($5.4)
($10.5)
($3.9)
($8.4)
($12.8)
($17.2)
($21.7)($25.6)
($23.1)($27.6)($30)
($20)
($10)
$0
$10
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $102.2 million
FY28 Ending Reserves: ($54.1 million)
($10.0)
($15.9)
($20.0)
($13.4)
($17.9)
($22.3)
($26.7)
($31.2)
($35.1)($32.6)
($37.1)($40)
($30)
($20)
($10)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $91.7 million
FY28 Ending Reserves: ($160.6 million)
VTA Budget Forecast – Net Operating Revenue
VTA Budget Forecast – Net Operating Revenue
© PFM 40
Revenue | Indexed Fare Increases
Index fares to CPI to keep up with service cost inflation
• Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with
service delivery costs
• Downsides: 1) fare increases could have a negative impact on ridership
($20.5)
($26.4) ($26.2)
($19.5)
($21.9)
($26.2)($28.2)
($32.4)($33.8)
($31.0)($32.5)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($196.8 million)
VTA Budget Forecast – Net Operating Revenue
Attachment B
21
© PFM 41
Revenue | Increase 2000 Measure A Support
Increase Measure A support
• Advantages: 1) reduces the need for other cost-savings measures
• Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects
($20.5)
($26.4) ($25.7)
($19.0) ($19.7)
($23.9) ($24.4)
($28.6)($29.8)
($26.9) ($27.4)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($170.4 million)
VTA Budget Forecast – Net Operating Revenue
© PFM 42
Revenue | Additional Sales Tax Revenue
Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-to-
year basis
• Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to
extend transit service
• Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly
impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa
Clara County already at limit. Exemption would require State legislative authorization
($20.5)
($26.4)
$15.5
$23.3 $20.1
$16.9 $13.9
$10.8 $8.2
$12.1 $9.1
($30)
($20)
($10)
$0
$10
$20
$30
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($184.8 million)
VTA Budget Forecast – Net Operating Revenue
Attachment B
22
© PFM 43
Scenario 1: Shared Sacrifice Between Employees, Riders, VTA
Under this scenario, the VTA would work to spread the sacrifice of balancing the budget
between as many constituents as possible. The changes modeled include:
• Slow wage growth
• Increase transit operating revenue from 2000 Measure A
• Index fares
• Contract out services
• Assume $12 million/year in additional State gas-tax revenue
($20.5)
($14.4)
($5.8)
$1.8 $4.0
$0.8
$3.6
$0.6 $3.0
$7.3
$10.8
($25)
($20)
($15)
($10)
($5)
$0
$5
$10
$15
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: $92.8 million
VTA Budget Forecast – Net Operating Revenue
© PFM 44
Scenario 2: Next Network , Fare Increases , and Employee Health Sharing
Under this scenario, the VTA would work to balance the budget through:
• Implement a lower-cost (50%) Next Network solution
• Employees share in health care premiums
• Index fares
• Assume $12 million/year in additional State gas-tax revenue
($10.0)
($3.9)
($0.9)
$6.0
$16.0
$12.4 $14.6
$11.1 $13.0
$16.7
$19.6
($15)
($10)
($5)
$0
$5
$10
$15
$20
$25
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Millions
FY Net Surplus/(Deficit)
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: $196.3 million
VTA Budget Forecast – Net Operating Revenue
Attachment B
© PFM 1
Peer Agencies | Original Comparators
VTA services the fourth largest population area among comparative agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Annual Database
Agency Information
2016 Service Area Statistics
AgencyModes of Transportation
(Directly Operated and Purchased Transit)Population Square Mileage
LACMTA
Los Angeles County
Metropolitan Transportation
Authority
Bus, Bus Rapid Transit, Light Rail, Heavy
Rail, Vanpool8,626,817 1,513
CTA Chicago Transit Authority Bus, Heavy Rail 3,272,295 309
KCDOTKing County Department of
Transportation
Bus, Trolleybus, Street Car Rail, Demand
Response, Demand Response - Taxi,
Ferryboat, Vanpool
2,117,125 2,134
VTASanta Clara Valley
Transportation AuthorityBus, Light Rail, Demand Response 1,927,888 346
UTA Utah Transit AuthorityBus, Commuter Bus, Light Rail, Commuter
Rail, Demand Response, Vanpool1,883,504 737
TriMetTri-County Metropolitan
Transportation, Oregon
Bus, Light Rail, Hybrid Rail, Demand
Response, Demand Response - Taxi1,560,803 534
Sacramento RTSacramento Regional Transit
DistrictBus, Light Rail, Demand Response 1,031,946 226
Attachment C
© PFM 2
Peer Agencies | Ad Hoc Committee Additional Comparators
VTA services the second largest population area among additional comparators
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Annual Database
Agency Information
2016 Service Area Statistics
AgencyModes of Transportation
(Directly Operated and Purchased Transit)Population Square Mileage
OCTAOrange County
Transportation Authority
Bus, Commuter Bus, Demand
Response, Demand Response-Taxi,
Vanpool
3,077,903 463
VTASanta Clara Valley
Transportation AuthorityBus, Light Rail, Demand Response 1,927,888 346
AC TransitAlameda-Contra Costa
Transit DistrictBus, Demand Response, Commuter Bus 1,425,275 364
MUNISan Francisco Municipal
Railway
Bus, Trolleybus, Light Rail, Street Car
Rail, Cable Car, Demand Response866,583 49
BARTSan Francisco Bay Area
Rapid Transit District
Heavy Rail, Automated Guideway,
Demand Response833,762 93
SamTransSan Mateo County Transit
District
Bus, Demand Response, Demand
Response-Taxi737,100 97
Attachment C
© PFM 3
Revenue Comparisons | Sources of Operating Revenues – All Agencies
VTA receives most of its operating revenue from local sources reported by NTD as “financial
assistance from local governments including income taxes, sales taxes, property taxes, and other
local funds that are not directly generated by the transit agency”
NTD reported “Taxes and Fees Levied by Transit Agency” includes sales taxes, property taxes, other
taxes, and tolls that are imposed by transit agencies with their own taxing authority
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
VTA BART SamTrans AC Transit MUNI OCTA SacramentoRT
LACMTA CTA UTA TriMet KCDOT
FY2016 NTD Reported Sources of Operating Revenue
Local Funds State Funds Federal Funds Taxes and Fees Levied by Transit Agency Directly Generated Funds
Note: TDA funds categorized as “State Funds” for NTD purposes
Attachment C
© PFM 4
Directly Generated Revenues are funds generated by, donated to or earned by the transit agency,
and are dominated by passenger fares
“Other Directly Generated Sources” includes investment earnings, rentals, parking revenues, grants
and donations, and the sale of maintenance services
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
VTA BART SamTrans AC Transit MUNI OCTA SacramentoRT
LACMTA CTA UTA TriMet KCDOT
FY2016 NTD Reported Directly Generated Revenues
Passenger Fares Park and Ride Advertising & Concessions Purchased Transportation Other Directly Generated Sources
Revenue Comparisons | Directly Generated Revenues – All Agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics; 2016 Transit Agency
Attachment C
© PFM 5
Revenue Comparisons | Farebox Recovery Ratios – Original Comparators
The farebox recovery ratio is the proportion of fare revenues to operating costs
Farebox recovery has been on the decline nationally
VTA has consistently had the lowest farebox recovery ratio among comparative agencies
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series; Agency Budget Documents
FY13 - FY17 Farebox Recovery Ratio
Agency FY13 FY14 FY15 FY16 FY17*
CTA 45.2% 44.2% 43.4% 41.7% N/A
TriMet 30.2% 30.3% 31.5% 29.5% N/A
LACMTA 26.9% 26.1% 26.2% 22.6% N/A
Sacramento RT 24.6% 21.8% 21.8% 21.0% N/A
UTA 24.1% 21.9% 22.2% 18.8% N/A
VTA 13.0% 12.4% 12.4% 11.2% 9.5%
RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A
*FY17 data available for VTA only
0%
10%
20%
30%
40%
50%
CTA TriMet LACMTA SacramentoRT
UTA VTA
Farebox Recovery Ratio, FY13 - FY16
FY13 FY14 FY15 FY16
Attachment C
© PFM 6
Revenue Comparisons | Farebox Recovery Ratios – Additional Comparators
VTA has consistently had the lowest farebox recovery ratio among the Bay Area and Orange
County comparative agencies
Source: Federal Transit Authority – National Transit Database (NTD), Service Data Time Series; Agency Budget Documents
FY13 - FY17 Farebox Recovery Ratio
Agency FY13 FY14 FY15 FY16 FY17*
BART 77.4% 77.9% 79.9% 78.2% N/A
MUNI 32.9% 29.8% 28.8% 25.7% N/A
OCTA 23.0% 23.2% 21.9% 19.8% N/A
AC Transit 18.5% 19.9% 19.5% 17.8% N/A
SamTrans 16.9% 18.5% 15.5% 14.0% N/A
VTA 13.0% 12.4% 12.4% 11.2% 9.5%
RANK 6 of 6 6 of 6 6 of 6 6 of 6 N/A
*FY17 data available for VTA only
0%
20%
40%
60%
80%
100%
BART MUNI OCTA AC Transit SamTrans VTA
Farebox Recovery Ratio, FY13 - FY16
FY13 FY14 FY15 FY16
Attachment C
© PFM 7
Cost Efficiency Measure | Cost Per Bus Trip – All Agencies
The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services
VTA has the second highest costs per UPT for bus service when ranked against comparative
agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
$9.31
$7.54
$6.82 $6.59 $6.55
$4.64$4.36 $4.19
$3.45$3.09 $3.06
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
SamTrans VTA AC Transit UTA SacramentoRT
KCDOT OCTA TriMet LACMTA CTA MUNI
Cost per Unlinked Passenger Trip (UPT) - Bus, FY16
Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration
Attachment C
© PFM 8
Cost Efficiency Measure | Cost Per Light Rail Trip – All Agencies
The cost per Unlinked Passenger Trip (UPT) is a measure of the cost efficiency of transit services
VTA has the highest costs per UPT for light rail service – over 200% greater than most comparators
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
$8.62
$5.13$4.82
$4.11$3.50 $3.20
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
VTA LACMTA Sacramento RT MUNI UTA TriMet
Cost per Unlinked Passenger Trip (UPT) - Light Rail, FY16
Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration
Attachment C
© PFM 9
Cost Efficiency Measure Comparison | Cost Per Service Hour – Original Comparators
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
VTA spends more per hour on
Vehicle Operations and
Vehicle Maintenance than
the original peer agencies for
buses, but less on General
Administration than most
comparators
Light Rail operations are
high, but in the middle of
comparison agencies
VTA’s FY17 cost per service
hour for light rail was $707
$103.1
$126.3 $129.3 $134.0$142.3 $145.6
$166.7
$0
$50
$100
$150
$200
UTA TriMet CTA SacramentoRT
KCDOT LACMTA VTA
FY16 Operating Cost per Service Hour - Bus
Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration
$409.6 $411.1
$610.9 $612.3
$996.8
$0
$200
$400
$600
$800
$1,000
UTA TriMet VTA Sacramento RT LACMTA
FY16 Operating Cost per Service Hour - Light Rail
Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration
Note: Cost Per Service Hour information provided on
slide #17 of the 5/11/18 PFM presentation inadvertently
included data for modes other than Bus and Light Rail.
These charts reflect the corrected information.
Attachment C
© PFM 10
Cost Efficiency Measure Comparison | Cost Per Service Hour – Additional Comparators
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Metrics
VTA also spends more per
hour on Vehicle Operations
and Vehicle Maintenance
than the new peer agencies
for buses, but is lowest in
general administration
Light Rail operations for VTA
are slightly higher than for
MUNI; however, General
Administration is 70% of
MUNI’s
VTA’s FY17 cost per service
hour for light rail was $707
$125.0
$166.7 $171.7
$196.7
$223.6
$0
$50
$100
$150
$200
$250
OCTA VTA MUNI AC Transit SamTrans
FY16 Operating Cost per Service Hour - Bus
Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration
$594.1 $610.9
$0
$100
$200
$300
$400
$500
$600
$700
MUNI VTA
FY16 Operating Cost per Service Hour - Light Rail
Vehicle Operations Vehicle Maintenance Non-Vehicle Maintenance General Administration
Note: Cost Per Service Hour information provided on
slide #17 of the 5/11/18 PFM presentation inadvertently
included data for modes other than Bus and Light Rail.
These charts reflect the corrected information.
Attachment C
© PFM 11
Expenses for most comparative transit agencies follow similar patterns with Salaries and Benefits
as the dominant cost of service
Cost Comparisons | Expenses by Type (Cost) – All Agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses
$1,574,418
$1,394,386
$803,585
$625,985 $625,736
$426,093 $416,575 $359,996
$288,598 $268,970
$139,513 $129,537
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet SacramentoRT
SamTrans
Total Operating Expenses by Type, FY16(in thousands)
Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses
Attachment C
© PFM 12
As a percent of total expenses, VTA is among the highest for salaries and benefits
Cost Comparisons | Expenses by Type (Percent of Total) – All Agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
LACMTA CTA MUNI BART UTA KCDOT AC Transit VTA OCTA TriMet SacramentoRT
SamTrans
% of Operating Expenses by Type, FY16
Salaries, Wages, Benefits Materials and Supplies Purchased Transportation Services Other Operating Expenses
Attachment C
© PFM 13
When categorized by function, Vehicle Operations represent more than 50% of most agency
operating expenses
Cost Comparisons | Expenses by Function (Cost) – All Agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses
$1,574,418
$1,394,386
$803,585
$625,985 $625,736
$426,093 $416,575 $359,996
$288,598 $268,970
$139,513 $129,537
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
LACMTA CTA MUNI BART KCDOT TriMet AC Transit VTA OCTA UTA SacramentoRT
SamTrans
Total Operating Expenses by Function, FY16(in thousands)
Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration
Attachment C
© PFM 14
When categorized by function, VTA’s Vehicle Operations are the highest (at 56%), along with King
County
Vehicle maintenance is tied for second highest with MUNI
General Administration is lowest, along with CTA
Cost Comparisons | Expenses by Function (Percent of Total) – All Agencies
Source: Federal Transit Authority – National Transit Database (NTD), 2016 Operating Expenses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
VTA BART SamTrans AC Transit MUNI OCTA LACMTA CTA UTA KCDOT TriMet SacramentoRT
% of Operating Expenses by Function, FY16
Vehicle Operations Vehicle Maintenance Facility Maintenance General Administration
Attachment C
© PFM 1
Cost of Living Comparisons | BEA Regional Price Parities
The cost of living for varies for comparator agencies. The data presented on the following
two slides is based on Regional Price Parities
Regional Price Parities (RPPs) are regional price levels expressed as a percentage of
the overall national price level for a given year.
The price level is determined by the average prices paid by consumers for the mix of
goods and services consumed in each region.
RPPs are expressed as a percentage of the overall national price level for each year,
which is equal to 100.00
For example, if the RPP for area A is 120 and for area B is 90, then on average, prices
are 20% higher and 10% lower than the US average for A and B respectively
Attachment D
© PFM 2
Cost of Living Comparisons | BEA Regional Price Parities
The 2016 RPP for all items in the San Jose – Sunnyvale – Santa Clara Metropolitan
Statistical Area (MSA), which is served by VTA, is 27.1 percent higher than the national
average
As shown in the graph below, this difference is also higher than RPPs among peer
agency MSAs
Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA
27.1%
24.7%
17.7%
10.5%
3.8%
2.0% 1.7%
-0.6%
-5%
0%
5%
10%
15%
20%
25%
30%
San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Chicago MSA Sacramento MSA Portland MSA Salt Lake CityMSA
2016 RPPs, All Items: % Difference from National Average
Attachment D
© PFM 3
Cost of Living Comparisons | BEA Regional Price Parities
The 2016 RPP for Rents in the San Jose – Sunnyvale – Santa Clara Metropolitan
Statistical Area (MSA) is 113.3 percent higher than the national average
As shown in the graph below, this difference is also higher than 2016 Rent RPPs among
peer agency MSAs
Source: US Bureau of Economic Analysis, 2016 Regional Price Parities by MSA
113.3%
90.9%
65.4%
34.0%
17.7% 17.6%14.8%
4.2%
0%
20%
40%
60%
80%
100%
120%
San Jose MSA SF/Oakland MSA LA MSA Seattle MSA Portland MSA Sacramento MSA Chicago MSA Salt Lake CityMSA
2016 RPPs, Rents: % Difference from National Average
Attachment D
© PFM 1
What Other Agencies Have Done
TriMet – Portland, OR
• Defined benefit to defined contribution pension (2003)
• No retiree health (In 2009, retiree medical benefits were closed to new non-
union employees)
• No free downtown routes (2009)
• Increased income tax rate (HB2017 – Keep Oregon Moving, transit
improvement bill increased the payroll and self-employment tax to 0.7537%;
effective January 1, 2018)
Attachment E
© PFM 2
What Other Agencies Have Done
Los Angeles Metro
• Increased fares in 2014
• New transportation/mobility business model – adopted the Risk Allocation
matrix (RAM) in 2016
• Introduced a new college student fare program that increased ridership in
2017
Attachment E
© PFM 3
What Other Agencies Have Done
Sacramento Regional Transit
• Eliminated positions/reduced annual salary adjustment (2018)
• New business model introduced in recent years (first implemented in 2016-
17)
• Introduced SmaRT Ride – on-demand micro-transit/100% accessible/similar
to Uber Pool in February 2018
Attachment E
© PFM 4
What Other Agencies Have Done
Chicago Transit Authority
• FY18 Budget included the following cost saving measures:
• Increased fares 25%, took effect on January 7, 2018 – first increase since
2009
• Controlled electrical costs by locking in contractual pricing for fuel and
power – FY18 budget
• Expected increases in advertising and concession revenues
• Implemented new management strategies to crack down on absenteeism in
2012, which cost the agency $40 million in 2011
Attachment E
© PFM 5
What Other Agencies Have Done
King County Metro – Seattle, WA
• New service model in recent years
• Seattle voters approved a sales tax increase and a vehicle license fee to
raise an additional $45 million annually in 2014
• Last year voters approved another $54 billion expansion of public transit
systems by raising the sales tax another 0.5 percent and increasing the
vehicle license fee again
Attachment E
© PFM 6
Innovative Programs | First/Last Mile & Mobility
• King County Metro – Pilot program offering riders (via an app) within a two-mile radius of four
park-and-ride lots to be picked-up on demand on a shared-ride basis to connect quickly to transit
(2018)
• DART (Dallas) – Partnership with Uber to provide access to Uber for first mile/last mile via the
system’s GoPass app
• MARTA (Atlanta) – Partnered with Uber when the I-85 bridge collapsed. Uber helped address
issues with lack of parking as commuters switched to transit. This partnership is continuing, with
Uber targeting major transit centers for first mile/last mile trips
• Bishop Ranch (San Ramon) – First autonomous shuttle licensed by California to shuttle BART
riders from nearby neighborhood to BART station. Many small shuttles offering quicker transit to
BART (March 2018)
• LA Metro – Bike Share program in downtown LA and key tourist areas connecting bus and light
rail destinations with first mile/last mile accessibility
• Sacramento RT – Microbus, on-demand transit accessed through an app on a customers
smartphone. Can choose pick up time, schedule for different day. Can purchase a daily pass
(2018)
Attachment E
© PFM 1
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4) ($25.5)
($14.7) ($14.7) ($14.4)($13.8) ($13.1)
($11.5)
($3.2)($1.7)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Controlled Wage Infaltion
Workforce | Control Wage Inflation
Reducing wage and non-medical benefits inflation
• Advantages: 1) able to offer better transit service by keeping cost inflation down, 2) matching
wage increases to ability-to-pay protects jobs
• Downsides: 1) risk not keeping up with labor market and creating retention and recruitment issues;
2) may create issues with labor union in contract negotiations
Key assumptions
• Reduces wages and non-medical benefits inflation from 3.5% to 2%
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($57.8 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 2
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)
($42.1)
($46.6)
($20.5)
($26.4)
($29.5)
($22.9)
($18.7)
($22.7)
($26.7)
($30.7)
($34.2)
($31.2)
($35.2)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Shared Health Insurance Costs
Workforce | Share Health Insurance Costs
Negotiate cost sharing on health insurance premiums
• Advantages: 1) health costs are pre-tax; therefore have a lesser impact on employees than other
cost-sharing or wage impacts, 2) sharing health premiums helps limit growth in VTA’s insurance
costs
• Downsides: 1) Any changes to health care must be negotiated with labor unions, 2) cost-sharing
could cause some employees to opt for lower-cost, non-family benefits
Key Assumptions
• Assumes 80% employer / 20% employee health insurance premium cost sharing
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($197.3 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 3
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4)($28.2)
($19.7)($22.1)
($26.3)
($30.5)
($34.8)
($38.5)($35.8)
($40.1)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Shared Pension Costs
Workforce | Share Pension Costs
Create across-the-board parity with employee contribution to pension costs
• Advantages: 1) equal participation in pension funding, 2) provides value to employees by
strengthening total pension funding
• Downsides: 1) Any changes to pension contributions must be negotiated with labor unions
Key assumptions
• Moves employee pension contributions to a 6% share over three years beginning in FY2020
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($221.2 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 4
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4) ($25.6)
($18.9)
($23.2)
($27.5)
($31.7)
($36.0)
($39.8)($37.1)
($41.5)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Outsourced Services
Workforce | Outsource Services, Where Feasible
Increasing the amount of transit contracted out, could result in significant savings
• Advantages: 1) lower cost, 2) easier to flex services based on ridership demand, 3) can put cost of
training, capital, and innovation on contractor
• Downsides: 1) Less control over staffing, 2) can create culture issues between VTA and contractor
staff, 3) can cause issues with labor unions with loss (expected to be by attrition) of regular
employees
Key Assumptions
• Assumes 25% savings can be achieved and 20% of current employee jobs are outsourced,
resulting in a 5% reduction in personnel expenses
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($226.6 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 5
Services | Rationalized Fleet Sizing and Electrification
Rationalized fleet sizing could include use of smaller vehicles* on routes that don’t demand full-
size buses or use of a micro-transit fleet (passenger vans or smaller vehicles)
• Savings: Requires additional study
• Advantages: 1) lower, or no, up-front capital cost, 2) lower replacement cost, 3) lower
maintenance costs, 4) better fuel mileage, 5) could operate with Class C license with appropriate
reduction in pay
• Downsides: 1) If purchased, adding vehicles to fleet increases complexity of parts and
maintenance demands, 2) proper match of vehicle to route could vary by time-of-day and day-of-
week, 3) multiple license requirements increases complexity/flexibility in managing workforce
Fleet Electrification of buses
• Savings: Requires additional study
• Advantages: 1) Cost of electricity per mile less than fossil fuel, 2) cost of batteries going down,
while life of batteries going up, 3) fewer parts, less maintenance for fully-electric vehicles
• Downsides: 1) requires change-out of fueling facilities, 2) limited current performance in long-term,
heavy commercial use, 3) not yet an industry standard, 4) larger up-front capital costs in the current
market
* Note smaller vehicles would need to be fully accessible to meet needs of transit dependent
Attachment F
© PFM 6
Services | “Right-Size” Service Levels
Implementation of the Next Network is included in the Current VTA budget. These service
improvement are meant to: 1) increase the frequency of service on an expanded transit network, 2)
connect with the coming BART extension, and 3) provide more service in underserved and vulnerable
communities
No or Limited Implementation -- Two alternatives are addressed on the following slide showing: 1)
Full pull-back of Next Network improvements, and 2) partial implementation of Next Network
• Savings: 1) $19 million -- $23 million cost less $4 million in expected fare increases from
expanded services, and 2) $9.5 million -- $11.5 million cost less $2 million in expected fare
increases
• Advantages: 1) reduces cost to balance budget and keep the VTA in a strong financial position, 2)
reduces the need for other cost-savings measures
• Downsides: 1) does not address service needs to coming BART ridership, 2) likely to keep VTA in
downward transit ridership trend, 3) abandons major effort by Board and staff to address transit
service needs of the broader community, 4) survival of transit likely dependent on more service, not
less
Attachment F
© PFM 7
($20.5)
($26.4)($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)($44.6)
($42.1)($46.6)
($10.0)
($15.9)
($20.0)
($13.4)
($17.9)
($22.3)
($26.7)
($31.2)($35.1)
($32.6)
($37.1)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with 50% Next Network Implementation
Based on the savings discussed in the previous slide, elimination of the Next Network service has a
large impact on the budget forecast
Only implementing half the program costs has a lower, but significant, impact on the budget deficits
($20.5)
($26.4)($29.5)
($22.9)($27.4)
($31.8)($36.2)
($40.7)($44.6)
($42.1)($46.6)
$0.5
($5.4)
($10.5)
($3.9)($8.4)
($12.8)($17.2)
($21.7)($25.6)
($23.1)
($27.6)
($50)
($40)
($30)
($20)
($10)
$0
$10
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with No Next Network Implementation
Services | Next Network Implementation – Impact to Budget Deficit
FY18 Ending Reserves: $102.2 million
FY28 Ending Reserves: ($54.1 million)
Baseline Ending Reserves: ($267.1 million)
FY18 Ending Reserves: $91.7 million
FY28 Ending Reserves: ($160.6 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 8
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4) ($26.2)
($19.5)
($21.9)
($26.2)($28.2)
($32.4)($33.8)
($31.0)($32.5)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Indexed Fare Increases
Revenue | Indexed Fare Increases
Index fares to CPI to keep up with service cost inflation
• Advantages: 1) indexing fare increases to inflation ensures fare revenues are more in line with
service delivery costs
• Downsides: 1) fare increases could have a negative impact on ridership
Key assumptions
• Assumes fares are increased by an inflationary rate every two-year budget cycle
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($196.8 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 9
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4) ($25.7)
($19.0)($19.7)
($23.9) ($24.4)
($28.6)($29.8)
($26.9) ($27.4)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Increased 2000 Measure A support
Revenue | Increase 2000 Measure A Support
Increase Measure A support
• Advantages: 1) reduces the need for other cost-savings measures
• Downsides: 1) reduction of revenue available for capital from additional 2000 Measure A projects
Key assumptions
• Increases 2000 Measure A allocation to VTA Transit budget by 2.25 percent every two years in line
with VTA’s budgetary cycle
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($170.4 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 10
($20.5)
($26.4)($29.5)
($22.9)($27.4)
($31.8)($36.2)
($40.7)($44.6)
($42.1)($46.6)
($20.5)
($26.4)
$15.5
$23.3 $20.1
$16.9 $13.9
$10.8 $8.2
$12.1 $9.1
($60)
($50)
($40)
($30)
($20)
($10)
$0
$10
$20
$30
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with Additional Sales Tax Revenue
Revenue | Additional Sales Tax Revenue
Increasing the tax by one-tenths of a cent would yield 20% more in revenue collections on a year-to-
year basis
• Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to
extend transit service
• Downsides: 1) increasing dependence on sales taxes is risky because sales taxes are highly
impacted by economic fluctuations, 2) limit to total sales tax that can be charged in County. Santa
Clara County already at limit. Exemption would require State legislative authorization
Key assumptions
• Assumes a $0.001 cent increase to the half-cent sales tax rate, resulting in a 20% rate increase
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($184.8 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 11
($20.5)
($26.4)($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($14.4)
($5.8)
$1.8 $4.0
$0.8 $3.6
$0.6 $3.0
$7.3
$10.8
($50)
($40)
($30)
($20)
($10)
$0
$10
$20
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Scenario 1
Scenario 1: Shared Sacrifice Between Employees, Riders, VTA
Under this scenario, the VTA would work to spread the sacrifice of balancing the budget
between as many constituents as possible. The changes modeled include:
• Slow wage growth
• Increase transit operating revenue from 2000 Measure A
• Index fares
• Contract out services
• Assume $12 million/year in additional State gas-tax revenue
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: $92.8 million
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 12
($20.5)
($26.4)($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($10.0)
($3.9)($0.9)
$6.0
$16.0 $12.4
$14.6 $11.1
$13.0 $16.7
$19.6
($50)
($40)
($30)
($20)
($10)
$0
$10
$20
$30
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Scenario 2
Scenario 2: Next Network , Fare Increases , and Employee Health Sharing
Under this scenario, the VTA would work to balance the budget through:
• Implement a lower-cost (50%) Next Network solution
• Employees share in health care premiums
• Index fares
• Assume $12 million/year in additional State gas-tax revenue
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: $196.3 million
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment F
© PFM 1
($20.5)
($26.4)
($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($14.4)
($17.5)
($10.9)
($15.4)
($19.8)
($24.2)
($28.7)
($32.6)($30.1)
($34.6)
($50)
($45)
($40)
($35)
($30)
($25)
($20)
($15)
($10)
($5)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with SB1 Revenue Included
Revenue | SB 1 Revenue Included
Including revenue from SB 1 at $12 million per year starting in FY2019 improves the baseline forecast
• Advantages: 1) reduces the need for other cost-savings measures, 2) provides opportunities to
extend transit service
• Downsides: 1) revenue is subject to voter approval – an initiative to repeal SB 1 is on the
November 2018 ballot
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($147.1 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment G
© PFM 1
($20.5)
($26.4)($29.5)
($22.9)
($27.4)
($31.8)
($36.2)
($40.7)
($44.6)($42.1)
($46.6)
($20.5)
($26.4)
($44.4)
($38.2)
($43.1)
($47.9)
($52.7)
($57.7)
($62.1)($60.0)
($65.0)($70)
($60)
($50)
($40)
($30)
($20)
($10)
$0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028
Mill
ions
Baseline Net Operating Results with 2016 Measure B Revenue Excluded
Revenue | 2016 Measure B Revenue Excluded
The graph below shows the impact of removing approximately $14 - $15 million in 2016 Measure B
revenue from FY2018 – FY2028
Measure B funds are currently tied up in an ongoing lawsuit that could take up to a year to resolve
FY18 Ending Reserves: $81.2 million
FY28 Ending Reserves: ($416.3 million)
Baseline Ending Reserves: ($267.1 million)
VTA Budget Forecast – Net Operating Revenue
Attachment H
© PFM 1
Summary Forecast Results
Initiative/Scenario Key Assumptions
FY2028 Ending
Reserves
($ millions)
Baseline Forecast No corrective action taken by Board ($267.1)
Workforce
Control Wage Inflation Reduces wage inflation from 3.5% to 2% ($57.8)
Share Health Insurance Costs 80% employer / 20% employee cost sharing ($197.3)
Share Pension Costs 6% employee share over 3 years ($221.2)
Outsource Services, Where Feasible 5% reduction in personnel expenses ($226.6)
Services
Rationalized Fleet Sizing Requires additional study N/A
Fleet Electrification of Buses Requires additional study N/A
No Next Network Implementation $19 million savings per year from full pull-back ($54.1)
50% Next Network Implementation $9.5 million savings per year from partial implementation ($160.6)
Revenue
Indexed Fare Increases Increased fares by inflationary rate every two years ($196.8)
Increase 2000 Measure A Support Increased allocation by 2.25% every two years ($170.4)
Additional Sales Tax Revenue Assumes a one-tenth cent sales tax increase $184.8
SB 1 Revenue Included $12 million/year in additional revenue ($147.1)
2016 Measure B Revenue Excluded Removes around $14 million/year in revenue ($416.3)
Scenarios
Scenario 1Reduced wage growth, increased 2000 Measure A
support, indexed fare increases, outsourced services, SB 1 revenue$92.8
Scenario 250% Next Network Implementation, shared health care
costs, indexed fares, SB 1 revenue$196.3
Attachment I