gm/ceo proposed fy2021 budget · 2019-11-01 · to support unplanned and unfunded events of...

Finance and Capital Committee

Information Item IV-B

November 7, 2019

GM/CEO Proposed FY2021 Budget

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Washington Metropolitan Area Transit Authority

Board Action/Information Summary

Action Information MEAD Number:202116

Resolution: Yes No

TITLE:

GM/CEO Proposed FY2021 Budget

PRESENTATION SUMMARY:

Management will present the General Manager and Chief Executive Officer's(GM/CEO) Proposed FY2021 Operating Budget and FY2021-2026 CapitalImprovement Program.

PURPOSE:

To present the GM/CEO's Proposed FY2021 Budget to the Finance and CapitalCommittee for consideration. Full Board discussions and workshops will follow withadoption of the FY2021 Budget scheduled for March 2020.

DESCRIPTION:

Key Highlights:

The GM/CEO's Proposed FY2021 budget totals $3.8 billion, including $2.0billion of operating expenses and $1.8 billion of capital program investments.Consistent with the dedicated revenue legislation requirements, the ProposedFY2021 Budget includes a base operating budget that is within the mandatedthree percent subsidy growth cap. Within the cap, the Proposed Budgetincludes:

Initiatives to further improve service and the customer experience,including restoring some late-night Metrorail service, improving Metrorailand Metrobus service on weekends, as well as improvements toMetroExtra Service. Increasing non-fare revenue to help minimizeincrease to customer fares and reductions to service levelsEnhancing fare options to drive ridership by, among other changes,introducing a full transfer discount between Metrobus and Metrorail, a $2weekend flat fare, and modest fare increases all without increasing passpricesProvides initial funding to establish an Extra Service Fund that willmitigate the need to cut service or seek funding from jurisdictions in order

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to support unplanned and unfunded events of regional significance.

Above the mandated three percent subsidy growth cap, the Proposed Budgetincludes legislatively excluded initiatives that support federal mandates forsafety and paratransit services, as well as additional jurisdictionally requestedbus services. One key initiative that is unfunded is Silver Line Phase 2 service.The funding for Silver Line Phase 2 operations will be determined followingconclusion of the contracting process. At this time, total operating subsidy of$1.17 billion includes capped subsidy of $1.16 billion and legislative exclusionsof $8.6 million.

Background and History:

Key budget priorities for FY2021 include:

FY2021-2026 Capital Improvement Program

Safe, Reliable and AffordablePrioritize rehabilitation and replacement of assets to improvepassenger and worker safetyRegularly evaluate asset condition and reliability for highperformance to meet customer needsInvest in technology to modernize how people travel

FY2021 Operating Budget

Further Improve service and customer experienceEnhance fare options to drive ridershipImplement innovative non-fare revenue initiativesLimit subsidy growth to mandated level

Discussion:

Capital Program Investment

The proposed FY2021 capital budget of $1.8 billion and six-year capital plan of$9.7 billion include investment in ongoing projects, prioritized systempreservation and renewal needs from the Capital Needs Forecast and assetmanagement and reliability plans. Over the past four years, Metro has spent$5 billion on capital investments. Capital delivery exceeded annual investmentgoals in FY2019 with actual capital spending of $1.5 billion. This was 99% ofthe FY2019 budgeted amount and represents the third year that Metro hasexceeded the target of 95% for capital funds invested. Capital program publications detail the following:

Capital Needs Forecast identifying a total of $22.5 billion in investmentneeds unconstrained by cost or execution capacity

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Capital Program Strategy outlining the vision and goals for capitalinvestments10-Year Capital Plan projecting $18.0 billion in investments constrainedby delivery capacity for major projects. (Note: Due to delivery capacityconstraint, there are potentially significant investment needs beyond the10-year planning horizon.)Six-year Capital Improvement Program of $9.7 billion and a FY2021capital budget of $1.8 billion with a list of priority projects and programsconstrained by affordability and delivery capacity.

Major capital program investments to further improve service and customerexperience include:

Customer Facilities & ExperienceMajor investments include station systems improvements, stationinfrastructure upgrades, and bus station and terminal upgrades.VehiclesMoving our riders with modern vehicles is an investment focus withrailcar acquisition, railcar safety and reliability, as well as investments inbus and paratransit vehicle acquisition and rehabilitation.Infrastructure, Systems & Support Facilities Supporting our network with activities to provide safe, reliable serviceincludes major investments in track and structures, rail systems, busgarage replacement, and business support through office consolidationand information technology investments.

The six- year plan includes $270 million of reimbursable projects such as theSilver Line, the Potomac Yard infill station, and the Purple Line. Operating Budget InitiativesThe Proposed FY2021 Budget continues to improve service and the customerexperience, as well as enhances fare options to drive operating efficiency andridership. These initiatives include:

Restore Late Night Metrorail Service. Trains would operate an additional four hours per week staying open 30additional minutes Monday through Thursday (until midnight), and oneadditional hour on Fridays and Saturdays (until 2:00 a.m.). This initiativeprovides additional service to customers without jeopardizingmaintenance and capital work.Better Weekend Metrorail. Trains would operate Saturday frequencies on Sundays. As a result,frequency of service on all lines would be reduced from 15 minutes to 12minutes, and in the core, frequency would be reduced from 8 minutes to6 minutes.Better Weekend Metrobus ServiceBus service frequency would be improved in two ways: first, Sunday

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frequency would improve to match current Saturday service on six buslines that connect to rail stations and second, Saturday and Sundayfrequencies would increase on seven bus lines.Improve MetroExtra Metrobus ServiceService would be added to the weekday service plan of eight MetroExtralines, including adding midday service to three lines, extending theservice period to four lines, and extending the service area of one line.Improve Customer ServiceEnhanced customer service training would be provided to frontlineemployees to better serve the traveling public.Reduce Less Productive Bus RoutesTo fund these investments, while adhering to the mandated three percentsubsidy growth cap and increased operating efficiency, the ProposedBudget includes the elimination of the nine least productive bus routesand some weekday trip reductions where demand does not justify currentservice levels.Increasing Non-Fare RevenueEfforts would continue to increase revenue outside of the fare boxincluding through:

Station Commercialization andNaming Rights

Enhance Fare Options to Drive RidershipMetrobus and Metrorail fares will be updated to provide customers withsimpler fare options, encourage system integration between Metrobusand Metrorail and continue pass adoption, while driving operatingefficiency and ridership. Key changes include:

Metrorail and MetrobusFull transfer discount ($2.00) between Metrobus and Metrorailand vice versa

MetrorailPeak base fare: +$0.10Standardize Peak Mileage Tiers to $0.33 per milePeak Max fare: +$1.00$2 Weekend Flat fare

MetrobusCash fare without SmarTrip: +$0.25Onboard Cash Loading: +$0.25Lower 7-Day Regional Bus Pass price from$15.00 to $12.00

Risks

The Proposed FY2021 Operating and FY2021-2026 Capital budget facestraditional funding and operations risks. The risks include additional labor costsassociated with two collective bargaining agreements which expire at the endof FY2020, as well as the potential escalation of contracting costs related toADA Paratransit service delivery.

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Risks to the capital budget include federal uncertainty of the federal dedicatedfunding reauthorization (PRIIA). PRIIA and other federal formula programs areessential to continued progress on preventive maintenance and major capitalinfrastructure improvements. PRIIA funding ends in Federal FY2019; withoutreauthorization from Congress, Metro and the jurisdictions will need to identifynearly $900 million in additional funding over six years to support Metro’sFY2021-2026 Capital Improvement Program.

FUNDING IMPACT:

This is an information item only, there is no immediate impact on funding.ProjectManagers Dennis Anosike, Tom Webster

TIMELINE:

Previous ActionsOctober 2019 – Presentation to Finance and CapitalCommittee on FY2021 Ridership Outlook and RecentTrends

Anticipated actionsafter presentation

December 2019 – Board authorization of public hearingand budget deliberations January-February 2020 – Budget deliberations, publicoutreach and public comment period March 2020 – Board adoption of the FY2021 Budget andFY2021-2026 Capital Program

April 2020 – Submit Federal grant applications July 2020– Fiscal Year 2021 begins

RECOMMENDATION:

This is an information item. Budget adoption is scheduled for March 2020, which isnecessary to ensure uninterrupted regional funding of the capital program and toallow for the timely application and award of Federal Transit Administration grants.

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1 WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY

Finance and Capital Committee

November 7, 2019

GM/CEO’s FY2021 Proposed BudgetStrengthening Metro to Better Serve the Region

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Present the General Manager/CEO’s Recommended

FY2021-2026 Capital Improvement Program and


▪ Budget Priorities

▪ Proposed FY2021-2026 Capital Improvement Program

▪ Proposed FY2021 Operating Budget

▪ Budget Calendar

Purpose

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Enhance System Safety, Reliability, and

Fiscal Accountability

FY2021 Priorities

3

FY2021-2026 Capital Improvement Program• Focus on State of Good Repair and customer experience

• Maximize project coordination for major system repairs and upgrades

• Leverage dedicated revenue to maximize capital investment

FY2021 Operating Budget• Improve service and customer experience

• Enhance fare options to drive ridership

• Limit subsidy growth to mandated level

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FY2021-FY2026

Capital Improvement Program Budget

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Capital Program Strategy

▪ Safe, Reliable, and Affordable• Prioritize rehabilitation and replacement of assets to improve passenger and worker safety

• Regularly evaluate asset condition and reliability to meet customer needs

• Invest in technology to modernize how people travel

▪ Strategic transformation of the capital program• Active capital planning

• Retooling efforts to maintain, modernize, and upgrade infrastructure— Target assets before they deteriorate

— Bolstering project delivery

— Monitoring performance

Capital Program Strategy

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Capital Program Progress

▪ Positive impact on key performance measures in FY2019• Safety – Rail system fires decreased by 14% compared to FY2018

• On-time performance – Met target of 88% on-time performance

• Infrastructure availability – 97.4% of rail infrastructure was available during passenger hours an increase

from 94.8%

• Railcar reliability – 41% fewer offloads and more on-time arrivals at their destinations

▪ Addressing longstanding challenges:• Platform reconstruction for customer safety

• Track rehabilitation to safely keep trains moving

• Railcar procurement for customer safety, comfort and service reliability

• Bus garage construction to improve safety and efficiency and increase productivity

• Radio and wireless infrastructure/equipment replacement for increased safety and customer satisfaction

▪ Increased delivery of capital investments meeting critical needs

▪ Metro will continue to rehabilitate, replace, and modernize the system

Capital Program Highlights

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Capital Needs Forecast

Metro’s 10-Year Unconstrained Capital Needs Total $22.5B

16%

25%

24%

21%

14%

$6.8B

$15.7B

State of Good Repair Need by Category ($15.7B)

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$2 Billion Reduction in State of Good Repair Backlog

Capital Program Progress

Escalator and Elevator Replacement & Rehabilitation

Radio System Infrastructure Traction Power Substation, Tie

Breaker Station & Cabling Replacements Train Control Switch

Machine & Track Circuit Replacements

Rail Yard Facility Rehabilitation

$0.8

$1.62

$0.83

$2.73

$1.10

$0.12

$0.57

$0.61

$2.50

$1.24

2016 Backlog: $7.08B

2018 Backlog: $5.04B

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$1.8 $1.8

$1.5 $1.5 $1.5 $1.6

$2.1 $2.1 $2.1 $2.1

FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030

10-Year Capital Plan ($B)

Future Investment

Investments Continuing Beyond the 10-year Plan of Approximately $3-5B include:

• Continued Required State of Good Repair and Safety Investments

• 8000 Series Railcar Acquisition• Next Generation Signal

System• Tunnel Ventilation

Improvements• Water Intrusion Remediation• Passenger Circulation Station

Improvements • Railyard Optimization

Capital Budget

6-Year Capital Improvement Program (CIP) Total Investment $9.7B

10-Year Capital Plan

Total 1-Year Investment $1.8B

FY2027 – FY2030 Average Spend

Total Investment $18.0B

Program

Plan

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Customer Facilities & Experience

Major Capital Program Investments

Stations & Passenger Facilities

Station Systems ImprovementsPublic Address Systems Passenger Information Displays

Lighting Fare Collection Fire Systems Station Cooling Systems

Station Infrastructure UpgradesElevator & Escalator Rehabilitation & Replacement

Platform Rehabilitation - East Falls Church, West Falls Church,

Dunn Loring, Vienna, Cheverly, Landover, New Carrollton,

Addison Road, National Airport and Arlington Cemetery

Bicycle-Pedestrian Infrastructure Upgrades

Proposed Program

Customer Facilities

& Experience

$560MFY2021

Proposed

Capital Budget

$2.3BFY2021-FY2026

Proposed

Capital Program

Bus Station and Terminal UpgradesMetrobus Shelter Replacement

Bus Stop Accessibility

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Vehicles


Proposed Program

Vehicles

Bus & Paratransit Vehicles

Railcars

Railcar AcquisitionComplete 7000-Series Railcar Acquisition

Begin 8000-Series Railcar Acquisition

Railcar Safety & ReliabilityRailcar Scheduled Rehabilitation and Preventive Maintenance

Bus Acquisition & RehabilitationBus Acquisition Program Bus Rehabilitation Program

Metrobus Onboard Location Equipment Electric Bus Demonstration

$399MFY2021

Proposed

Capital Budget

$2.5BFY2021-FY2026

Proposed

Capital Program

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Infrastructure, Systems & Support Facilities Proposed Program

Infrastructure, Systems

& Support Facilities

Track & Structures

Rail Systems Business Support

Bus & Paratransit Infrastructure

Track RehabilitationTrack & Structures Rehabilitation

Traction PowerRail Power System Rehabilitation Emergency

Trip Station System Replacement and Upgrades

Automatic Train Control (ATC)Track Circuit Cable Replacement Switch Machine

Replacement Program Train Control System Rehabilitation

Bus Garage ReplacementNorthern and Bladensburg Bus

Garage Replacement

Office ConsolidationNew Office Buildings in the District of Columbia,

Maryland and Virginia New Data Center Infrastructure

Information Technology InvestmentsEnterprise Resource Planning (ERP)

Software Replacement

$840MFY2021

Proposed

Capital Budget

$5.0BFY2021-FY2026

Proposed

Capital Program


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Bus & Paratransit

12%

Business Support23%

RailSystems

9%Railcar15%

Stations & Passenger Facilities

32%

Track & Structures

9%Debt15%

Federal20%

FederalPRIIA

8%

Reimbursable8%

Dedicated FundingPay-Go

26%

Jurisdictional 23%

FY2021 Proposed Capital Budget

Capital Program Sources & Uses

FY2021 Capital Program UsesTotal: $1.8BTotal: $1.8B

FY2021 Capital Program Sources

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Capital Program Publications

High-level vision and goals for

capital investments▪ Establish priorities

▪ Expected outcomes

Individual planned investments to

accomplish strategy

▪ Project-level detail

▪ Preliminary cost estimates and

schedules

▪ 10-year investment plan

10-Year Capital PlanCapital Program Strategy6-Year Capital

Improvement ProgramCapital Needs Forecast

Existing safety and rebuilding

needs and anticipated costs to

achieve and maintain a state of

good repair

FY2021-2026 Proposed Capital

Improvement Program

▪ Capital Budget for FY2021-

expenditure forecast and funding

plan

Program Documents

Understanding existing &anticipated needs

Outlining the vision and goals for capital investments

Investment plan over next 10 years

to accomplish the strategy

Investment proposal with list of priority

projects & programs recognizing

resource and capacity constraints

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Publication Schedule

Program

ScheduleSUMMER

Start of new fiscal yearon July 1st FALL

Publication of CapitalPlan Overview

Publication of Proposed Capital Program

WINTER/SPRING

Board Review of Proposed Capital

Program

Public Hearings on Capital Program

SPRING

Board Approval of Capital Program

Mid-year update of Capital Plan Overview

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Base Operating Subsidy

FY2021 Capped

Subsidy

Allowable Above Base OperatingSubsidy

FY2021 Budget

Subsidy

3% Subsidy

Growth CapFY2020 Subsidy

FY2021 Capped

Subsidy

Legislative

Exclusions

FY2021 Operating Subsidy Formulation

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Strategic Budget Considerations

FY2021 Operating Budget Outlook

ExclusionsSilver Line Phase 2

ADA paratransit cost increase

Safety and Health Mandate Growth

Policy DecisionsLate Night Hours of Service on Metrorail

Enhanced customer experience

Fares

Extra Services Fund

Base Subsidy GrowthMandated 3% cap

Management efficiencies

Revenue DriversPlatform Improvement Project

Ridership and fare evasion

Expense DriversCollective bargaining agreements

Salaries, wages and fringe benefits

Energy and materials volatility

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Base Operating Expense Grows by 2% in FY20211

Base FY2021 Operating Budget Outlook

($ in millions)Expense

FY2020 Operating Budget $1,939.9

FY2021 Operating Subsidy Drivers

Salaries and Wages $33.8

Fringe Benefits $13.0

Services and Materials Inflation $10.7

Capital Overhead Allocation ($18.9)

Subtotal $38.6

FY2021 Base Operating Budget $1,978.5

1. Does not include Silver Line 2 which is Legislatively Excluded from Mandated 3% Subsidy Growth Cap

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Base FY2021 Operating Revenue Decreases by

$3.6 Million


($ in millions)

FY2020 FY2021 $ Change % Change

Expense $1,939.9 $1,978.5 $38.6 2.0%

Revenue $814.4 $810.8 ($3.6) -0.4%

Required Subsidy $1,125.5 $1,167.7 $42.2 3.7%

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Base Operating Subsidy Stays at Mandated 3%

Cap in FY2021


($ in millions)

Subsidy

Contribution

FY2020 Subsidy $1,125.5

Subsidy Requirement

FY2021 Expense Growth $38.6

FY2021 Revenue Loss $3.6

Less FY2021 Mandated Subsidy Growth Cap ($33.8)

Required Management Actions $8.4

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• Eliminated 800 positions

• Healthcare cost-sharing

• Administrative streamlining

• Non-fare revenue improvements

including Advertising and Parking

• Increased fares

• Competitive contracting

Major Initiatives $8M Additional Savings Required

Management Actions Grow to $194 Million by FY2021

FY2021 Proposed Operating Budget

$98

$136

$186 $186

FY2018 FY2019 FY2020 FY2021

Savings Achieved Savings Required

$194

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FY2021 Initiatives Are Within 3% Subsidy Cap

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Further Improve Service to Win Back Riders

FY2021 Management Initiatives

Faster

Metrobus

Routes

AdditionalMetrorailService

Improve

Metrobus

Service

Increase

Operating

Efficiency

Enhance

Fare

Options

+2M Trips-$3M Revenue

Year

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Restore Late Night Metrorail Service

Provide Better

WeekendService

Improve KeyMetrobus Routes


Initiatives Cost Revenue Subsidy Ridership

Better Weekend Metrobus Service $3.9 $1.0 $2.9 1.2

Improve MetroExtra Service $3.4 $1.2 $2.2 1.2

Better Weekend Metrorail Service $3.6 $1.3 $2.3 0.6

Restore Late Night Metrorail Service $5.0 $1.2 $3.8 0.4

Improve Customer Service $2.5 $0.0 $2.5 0.0

Reduce Less Productive Bus Routes ($32.9) ($3.3) ($29.6) (3.2)

Total ($14.6) $1.3 ($15.9) 0.2

Improving Service and Customer Experience$ and ridership in millions

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MetrorailOff-Peak Base FareOff-Peak Max Fare

Unlimited Monthly Passes1-,3-,7-Day Unlimited Passes

7-Day Short Trip Unlimited Pass

MetrobusFare with SmarTrip

MetroAccess

Max Fare

No Change

Enhancing Fare Options to Drive Ridership


Current

Peak Base Fare $2.25

Simplify Mileage Tiers1 Varies

Peak Max Fare $6.00

Weekend Flat Fare Varies

Fare without SmarTrip $2.00

Onboard Cash Loading $0.00

Lower 7-Day Pass Price $15.00

Full Transfer Discount $0.50

Change Proposed

+$0.10 $2.35

+$0.04 $0.33

+$1.00 $7.00

Up to -$1.85 $2.00

+$0.25 $2.25

+$0.25 $0.25

-$3.00 $12.00

+$1.50 $2.00

Metrorail

Metrobus

Metrorail + Metrobus

1. Standardizes variable Peak Mileage rate of $0.29 to $0.33 to $0.33.

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Regional Improvements to Drive Metrobus Service and Financial Performance

H & I Lanes

with expanded hours

60 Miles48% of Metrobus average weekday riders

37% of Metrobus weekday revenue miles

Jurisdictional

Control

Bus Lanes Signal

Priority

Queue

Jump

Lanes

Improved

Bus

Stops*

Enforcement

(Lane, Stop,

etc.)

Leesburg Pike

Columbia Pike

Wisconsin Ave

M Street

K Street

18th/U/Florida Ave

16th Street

14th Street

Georgia Avenue/

7th Street (DC)

North Capitol

H Street/Benning

Pennsylvania Ave

Minnesota Ave

MLK Ave/Southern

Ave

Georgia Ave (MD) All but K Street based on 2011 Priority Corridor Network and with recent updates. * Applies to high-ridership, high-activity stops.

Completed Identified opportunities for bus priority

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FY2021 Operating Budget is Balanced within Mandated

3% Subsidy Cap


($ in millions) Subsidy Impact

FY2020 Capped Subsidy $1,125.5

FY2021 Subsidy Drivers $42.2

FY2021 Initiatives

Improving Service & Customer Experience ($15.9)

Increasing Non-Fare Revenue ($11.3)

Enhancing Fare Options $15.8

Extra Services Fund $3.0

Subtotal ($8.4)

Mandated Subsidy Growth Cap $33.8

FY2021 Capped Subsidy $1,159.3

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FY2021 Legislative ExclusionsAbove Mandated 3% Subsidy Cap

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Legislatively Excluded Operating Subsidy Requirements


Initiatives Description Category Subsidy

Silver Line Phase 211.5 mile extension, 6 new stations and

Rail Yard Facility

Capital

ProjectTBD

Safety Mandate

Growth

Compliance with expanded training and

testing requirements1

Federal

Mandate$1.0

Paratransit Services

Growth

Cost of services not covered by base

budget increase

Federal

Mandate$7.6

Total $8.6

1. Public Transportation Agency Safety Plan (49 CFR Part 673); Public Transportation Safety Certification Training (49 CFR Part 672); Respiratory Protection, Hearing Conservation, and

Respirable Silica Programs (OSHA)

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GM/CEO’s FY2021 Proposed Operating Budget

Recommendation


1. Excludes Silver Line Phase2

($ in millions)Expense Revenue Subsidy

FY2021 Capped Subsidy $1,967.0 $807.7 $1,159.3

+ Legislative Excluded Subsidy1 $8.6 $0.0 $8.6

FY2021 Capped Subsidy

and Legislative Exclusions $1,975.6 $807.7 $1,167.9

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Potential Issues and Risks

Budget Risks

Labor and Arbitration • CBAs for L689 and L922 expire at the end of FY2020

• General wage increases and healthcare cost growth

Silver Line Phase 2

Major Events• Major unscheduled regional events, snow and

other operational disruptions.

• Safety mandates, energy price volatility

Federal Uncertainty

• Ridership and cost recovery

• Service delivery vehicle

INT

ER

NA

LE

XT

ER

NA

L

ADA Paratransit• Growing demand based on aging population

• Continued contractor cost growth

• Reauthorization of PRIIA and other federal Formula

programs

• Federal employment and contracting levels

• Potential government shutdown

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December AprilMarchJanuary -February

Budget Timeline

Next Steps

Board Budget

Deliberations

and approval of

Public Hearing

Docket

Board

Budget

Adoption

Submit

Federal

Grant

Applications

Fiscal

Year

Begins

July

Board Budget

Deliberations,

Public Outreach

and Public

Comment Period

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