Finance and Budget Committee

Information Item III-A

February 8, 2018

FY2018 Second Quarter Financial Update

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Washington Metropolitan Area Transit Authority

Board Action/Information Summary

TITLE:

FY2018 Second Quarter Financial Update

PRESENTATION SUMMARY:

Staff will present a summary of FY2018 operating and capital results through the second quarter of FY2018.

PURPOSE:

Management will update the Finance and Budget Committee on the FY2018 operating and capital budget results and highlight key challenges and major accomplishments of the second quarter.

DESCRIPTION:

Key Highlights:

• Operating revenues through the second quarter of FY2018 were $410 million or $10 million below budget, driven largely by lower bus ridership and revenue. Rail ridership continues to stabilize, but bus ridership declines compared to prior year continue aswell.

• Operating expenses totaled $876 million, or $31 million below budget. The favorability was primarily driven by savings in salaries and wages due to vacancies, which were $24 million below budget, and by lower spending on services contracts, which were $22 million below budget.

• Operating subsidy through Q2 was $21 million favorable to budget; full year operating subsidy forecast is $5 million favorable.

• $505 million of capital investments were made through Q2. Full year capital investment is forecasted between $1.1 and $1.2 billion, compared to a budget of $1.25billion.

Background and History:

Operating BudgetThe $1.8 billion operating expense budget is funded by $845 million of passenger fares and non-fare revenue (i.e. advertising, etc.) and $980 million of operating subsidy from Metro’s funding jurisdictions. The FY2018 operating budget represents a $135 million

Action Information MEAD Number:201952

Resolution:Yes No

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increase in jurisdictional subsidy contributions from the level of FY2016 and FY2017 (operating subsidy remained at $845 million both years).

Capital BudgetMetro’s FY2018 capital budget of $1.25 billion includes funding to repair, rehabilitate, and replace Metro's capital assets, including vehicles, stations, track and structures, power, yards and garages and business support.

Discussion:

Operating revenues through the second quarter of FY2018 were $410 million, or $10 million below budget, while operating expenses totaled $876 million ($31 million below budget). The net operating position was $21 million favorable through the secondquarter.

The favorability in operating expenses was primarily driven by savings in salaries and wages due to vacancies, which were $24 million below budget, and by lower spending on services contracts, which were $22 million below budget.

The operating revenue unfavorability to budget is primarily attributable to a continuing decline in bus ridership and revenue versus prior year, as well as lower than forecasted average bus fares. While bus revenue was two percent lower than last year, it was 13 percent below budget through the second quarter. Ridership continues to face challenges stemming from the fare increases, perceived service quality, growth in alternative transportation options, low gasoline prices, and telecommuting.

Operating RevenueTotal WMATA revenue was $410 million through the second quarter, below budget by $10 million or two percent. Metrorail passenger revenue of $266 million was $2 million below budget but was five percent higher than prior year, extending for a second quarter a degree of stability in rail ridership and revenue.

Metrobus passenger revenue of $64 million was $10 million below budget for the quarter (or 13 percent), representing a decline of $1.6 million (two percent) from last year. MetroAccess passenger revenue was three percent below budget, while ridership was three percent below budget and two percent below prior year.

Parking revenue was on budget through December and up three percent compared to the first two quarters of last year. Total Non-Passenger revenue, including Reimbursables, was six percent favorable to budget and grew eleven percent compared to prior year.

Total transit ridership on all modes through the second quarter was 145 million trips, adecrease of 4.2 million trips or three percent compared to prior year. While MetroBus ridership was projected to decline in FY2018, Metrorail and MetroAccess ridership were projected to increase slightly in FY2018. Actual ridership was below budget for all modes through the second quarter and total ridership for all modes was below budgeted trips by 4.4 million or three percent.

Capital Improvement Program

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Metro invested $505 million in its capital program through the first two quarters, compared to a budget of $578 million. Full year capital investment is forecasted between $1.1 and $1.2 billion, compared to a budget forecast of $1,250 million. FY2018 Q2 capital program performance by category is summarized below.

RailcarMetro invested $222.3 million in the Railcar category through FY2018 Q2. Highlights for the quarter include:• 52 new 7000 series railcars accepted - a total of 472 new railcars accepted through December 2017• On-going rehabilitation of railcar lifts at West Falls Church and Shady Grove Service & Inspection Shop• Forecast reflects delay in procurement of spare parts

Rail SystemsMetro invested $42.4 million in Rail Systems through Q2. Highlights include:• Cell service live for the segment between Benning Road and Addison Road• First two milestone reviews conducted for radio equipment• Final shipment of Track Inspector location awareness equipment delivered –installation underway

Track & StructuresMetro invested $57.5 million in Track & Structures through Q2. Highlights include:• 12,227 crossties replaced• 10,977 Direct fixation fasteners renewed• 3,573 insulators renewed• 6 Switches rehabilitated• 4.7 miles of running rail renewed• 20 miles of track tamped• 448 joints eliminated

Stations & Passenger FacilitiesMetro invested $75.9 million in Stations & Passenger Facilities through Q2. Highlights include:• Ceiling lights complete at Arlington Cemetery, Crystal City, Foggy Bottom, and Smithsonian; L’Enfant to be completed Q4• Seven escalators and five elevators replaced/rehabilitated in Q2• AC room rehabilitation compete at Minnesota Avenue• Procurement underway for emergency swing gates• Forecast reflects a reduction for work completed in prior year originally planned to becompleted in FY18

Bus & ParatransitMetro invested $77.1 million in the Bus & Paratransit through Q2. Highlights include:• 25 Metrobus rehabilitations complete• Bus pilot vehicle delivered; testing underway• Installation of security cameras on 230 buses underway – to be completed May 2018• Andrews Federal Center Garage interior slab complete; mechanical, electrical, plumbing and interior finishing to be complete Q4• Forecast reflects delay in the delivery of buses due to changes in emissions

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regulations

Business SupportMetro invested $29.6 million through Q2 in the Business Support program. Highlights include:• WiFi access complete at 31 stations thru Q2• System testing and training materials complete for Metro Time Keeping project• Requirements report completed for the Enterprise Learning Management System• Forecast includes updates to several support projects schedules, e.g.: storage tank replacement project change in procurement vehicle

FUNDING IMPACT:

Information item only - no funding impact.

TIMELINE:

RECOMMENDATION:

No action required -- information item only.

Previous Actions November 2017 - FY2018 First Quarter Update

Anticipated actions afterpresentation

March 2018 - Approval of FY2019 BudgetMay 2018 - FY2018 Third Quarter UpdateSeptember 2018 - FY2018 Year-End Financial Update

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FY2018 Second QuarterFinancial Update

Finance and Budget CommitteeFebruary 8, 2018

Washington Metropolitan Area Transit Authority

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FY2018 Q2 Financial Results

• Operating revenue $410 million, $10 million below budget, primarily due to lower ridership and revenue

• Operating expense $876 million, $31 million favorable to budget, primarily due to vacant positions and lower spending on services

• Operating Net position $21 million favorable through Q2• Capital investment $505 million; year-end forecast is

$1.1-1.2 billion

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Net Operating Position & Forecast

($ in millions)

FY2018 Q2 Favorable (Unfavorable) FY2018 Year End Favorable

(Unfavorable)

Actual Budget $ % Forecast Budget $ %

Revenue $ 410 $ 420 ($10) (2%) $ 821 $ 845 ($24) (3%)Expense $ 876 $ 907 31 3% $ 1,796 $1,825 29 2%

Net Subsidy $ 466 $ 487 21 4% $ 975 $ 980 5 1%Cost Recovery 47% 46% 46% 46%

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(trips in millions)Q2

ActualQ2

BudgetFavorable /

(Unfavorable)FY2018Forecast

FY2018Budget

Favorable / (Unfavorable)

Rail 87 89 (2) 176 179 (3)

Bus 57 59 (2) 113 117 (4)

MetroAccess 1.2 1.2 (0) 2.4 2.4 (0)Total Ridership 145 150 (4) 291 298 (7)

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($ in millions)FY2018 Q2 YTD Actual

FY2018 Q2 YTD Budget

Favorable/ (Unfavorable)

Passenger RevenueMetrorail $265.9 $268.0 ($2.1)Metrobus 64.3 74.2 (9.9)MetroAccess 4.7 4.9 (0.2)Parking 21.1 21.0 0.1D.C. Schools/Other Passenger 8.3 8.3 0.0

Total Passenger Revenue $364.3 $376.4 ($12.1)Advertising 11.3 11.3 0.0Other Revenue 16.5 16.6 (0.1)Reimbursables 17.8 15.3 2.5

Total Non-Passenger Revenue $45.6 $43.2 $2.4TOTAL REVENUE $410.0 $419.6 ($9.7)

FY2018 Q2 Operating Revenue Results

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($ in millions)FY2018 Q2 YTD

ActualFY2018 Q2 YTD

BudgetFavorable/

(Unfavorable)Salary/Wages 377.5 401.4 23.9

Benefits 220.1 210.1 (10.0)

Overtime 39.8 40.4 0.6

Total Personnel Expense $637.4 $651.9 $14.6

Services 126.6 148.3 21.7

Materials & Supplies 57.5 49.2 (8.3)

Fuel (Gas/Diesel/CNG) 13.2 17.9 4.7

Utilities & Propulsion 38.4 43.2 4.8

Insurance/Other 21.9 21.0 (0.9)

Capital Allocation (18.9) (24.9) (6.0)

Total Non-Personnel Expense $238.6 $254.8 $16.2

TOTAL EXPENSES $876.0 $906.7 $30.7

FY2018 Q2 Operating Expense Results

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FY2018 Capital Investment

YTD Actuals$504.8M

Forecast Range$1.1-$1.2B

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FY2018 Q2 Capital Budget Performance

Investment Category($ in millions)

FY18Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Railcar $222.3 $260.1 $478.7 $508.6 ($29.9)

Rail Systems 42.4 49.9 141.4 122.8 18.6

Track & Structures 57.5 58.5 126.7 126.6 0.1

Stations & Pass. Facilities

75.9 78.9 151.0 183.2 (32.2)

Bus & Paratransit 77.1 94.6 188.9 206.9 (18.0)

Business Support 29.6 36.2 91.3 101.9 (10.6)

TOTAL $504.8 $578.2 $1,178.0 $1,250.0 ($72.0)

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Railcar

Investment by Program($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Acquisition $149.0 $173.5 $326.1 $346.7 ($20.6)

Maintenance/ Overhaul

57.7 68.5 115.4 121.6 (6.2)

Maintenance Facilities 15.6 18.1 37.2 40.3 (3.1)

Total $222.3 $260.1 $478.7 $508.6 ($29.9)

FY2018 Q2 Accomplishments• 52 new 7000 series railcars in service - total of 472 new

railcars accepted through December 2017• On-going rehabilitation of railcar lifts at West Falls

Church and Shady Grove Service & Inspection Shop• Forecast reflects delay in procurement of spare parts

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Rail Systems

Investment by Program($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Propulsion $17.5 $15.5 $40.6 $39.5 $1.1

Signals & Communications

24.9 34.4 100.8 83.3 17.5

Total $42.4 $49.9 $141.4 $122.8 $18.6

FY2018 Q2 Accomplishments• Cell service live for the segment between

Benning Road and Addison Road• First two milestone reviews conducted for

radio equipment• Final shipment of Track Inspector location

awareness equipment delivered – installationunderway

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Track & Structures

Investment by Program ($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Fixed Rail $39.5 $52.7 $77.3 $90.7 ($13.4)

Structures 18.1 5.8 49.4 35.9 13.5

Total $57.5 $58.5 $126.7 $126.6 $0.1

FY2018 Accomplishments through Q2• 12,227 crossties replaced• 10,977 Direct fixation fasteners renewed• 3,573 insulators renewed• 6 Switches rehabilitated• 4.7 miles of running rail renewed • 20 miles of track tamped• 448 joints eliminated• 7,285 ln. ft. of water intrusion mitigation

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Stations & Passenger Facilities

Investment by Program($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Platforms & Structures

$39.2 $42.3 $71.3 $91.0 ($19.7)

Vertical Transp. 28.6 22.6 50.2 56.5 (6.3)

Station Systems 8.1 14.0 29.5 35.7 (6.2)

Total $75.9 $78.9 $151.0 $183.2 ($32.2)

FY2018 Q2 Accomplishments• Ceiling lights complete at Arlington Cemetery, Crystal

City, Foggy Bottom, and Smithsonian; L’Enfant to be completed Q4

• Seven escalators and five elevators replaced/rehabilitated in Q2

• AC room rehabilitation compete at Minnesota Avenue• Procurement underway for emergency swing gates• Forecast reflects a reduction for work completed in

prior year originally planned to be completed in FY1811

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Bus & Paratransit

Investment by Program($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

Bus and Paratransit Acquisition

$3.7 $54.0 $56.3 $77.8 ($21.5)

Bus Maint./Overhaul 24.8 31.4 53.7 59.3 (5.6)

Bus Maint. Facilities 47.0 7.0 76.0 63.3 12.7

Bus Passenger Facilities

1.6 2.2 2.9 6.4 (3.6)

Total $77.1 $94.6 $188.9 $206.9 ($18.0)

FY2018 Q2 Accomplishments• 25 Metrobus rehabilitations complete• Bus pilot vehicle delivered; testing underway• Installation of security cameras on 230 buses underway – to be

complete May 2018• Andrews Federal Center Garage interior slab complete; mechanical,

electrical, plumbing and interior finishing to be complete Q4• Forecast reflects delay in the delivery of buses due to changes in

emissions regulations 12

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Business Support

Investment by Program($ in millions)

FY18 Actual

thru Q2

FY18 Budget thru Q2

FY2018 Forecast

FY2018 Budget

Over/(Under) Current Budget

IT $23.1 $27.7 $73.8 $74.9 ($1.1)

MTPD 0.3 0.4 0.8 1.0 (0.2)

SupportEquip./Services

6.2 8.1 16.7 26.0 (9.3)

Total $29.6 $36.2 $91.3 $101.9 ($10.6)

FY2018 Q2 Accomplishments• WiFi access complete at 31 stations thru Q2• System testing and training materials complete for

Metro Time Keeping project• Requirements report completed for the Enterprise

Learning Management System• Forecast includes updates to several support

projects schedules, e.g.: storage tank replacement project change in procurement vehicle

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Appendix: Ridership

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Q2 Q2 FY2017Actual Actual Budget Prior Year Budget

Metrorail 41,159 42,100 42,484 2.3% -0.9%Metrobus 30,183 27,738 28,926 -8.1% -4.1%

MetroAccess 587 584 601 -0.6% -3.0%System Total 71,929 70,422 72,013 -2.1% -2.2%

YTD FY2017Actual Actual Budget Prior Year Budget

Metrorail 86,075 87,033 88,896 1.1% -2.1%Metrobus 62,133 56,955 59,408 -8.3% -4.1%

MetroAccess 1,187 1,167 1,209 -1.7% -3.5%System Total 149,395 145,155 149,512 -2.8% -2.9%

(trips in Thousands)Q2 FY2018 Variance vs.

FY2018 Variance vs.

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Appendix: Ridership

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Appendix: 7000 Series Railcar Acquisition Program

$ in millions

Total Estimated Project Cost

$1,709

Life to Date Expenses $978

Remaining Cost to Complete

$731

592

As of the end of June, ALL

1000/4000 series railcars were removed from

service.

472 7K vehicles accepted as of 12/31

0

748

16

7000-Series Railcars# Accepted 472 # Remaining 276 Total 748

Railcars Removed from Service# Removed of Total

1000 300 300 4000 100 100 5000 60 192

Total 460 592

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