ad hoc financial stability committee please note...

AD HOC FINANCIAL STABILITY COMMITTEE

Friday, November 16, 2018

3:00 PM

PLEASE NOTE MEETING DATE AND TIME

VTA Auditorium

3331 North First Street

San Jose, CA

AGENDA

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. ACTION ITEM - Approve the Ad Hoc Financial Stability Committee Regular Meeting

Minutes of August 17, 2018.

6. INFORMATION ITEM - Receive an update on November 2018 Election Results.

(Verbal Report)

7. INFORMATION ITEM - Receive presentation from Harvey M. Rose Associates,

LLC. (Verbal Report)

8. ACTION ITEM - Recommend that the Santa Clara Valley Transportation

Authority (VTA) Board of Directors approve mitigation measures to address VTA’s

structural deficit and promote long-term financial stability. (Verbal Report)

Santa Clara Valley Transportation Authority

Ad Hoc Financial Stability Committee November 16, 2018

9. ANNOUNCEMENTS

10. 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.

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.

5

Ad Hoc Financial Stability Committee

Friday, August 17, 2018

MINUTES

CALL TO ORDER

The Santa Clara Valley Transportation Authority’s (VTA’s) Ad Hoc Financial Stability

Committee (“Committee”) meeting was called to order by Chairperson Bruins at 1:34 p.m., in

the VTA Conference Room B-106, 3331 North First Street, San José, California.

1. ROLL CALL

Attendee Name Title Status

Jeannie Bruins Chairperson Present

Cindy Chavez Board Member Present

Johnny Khamis Vice Chairperson Present

A quorum was present.

2. Introductions

Chairperson Bruins provided welcome remarks and a brief overview of the meeting.

3. Orders of the Day

There were no Orders of the Day.

4. PUBLIC PRESENTATIONS

Jim Stallman, Interested Citizen, made the following comments: 1) suggested to not

reduce bus service and re-examine 2000 Measure A funds for bus service; 2) urged

Metropolitan Transportation Commissioners representing Santa Clara County to advocate

for funding for VTA; and 3) suggested Express Lanes toll revenue be used for express

bus service.

Roland Lebrun, Interested Citizen, made the following comments: 1) urged to keep

Express Bus Route 181 and suggested exploring public-private partnerships as a way to

maintain express bus service; 2) advocated for buses over light rail due to cost; and

3) offered suggestions to facilitate employee retirement.

5. Workshop Meeting Summary Minutes of June 8, 2018

M/S/C (Khamis/Chavez) to approve the Workshop Meeting Summary Minutes of

June 8, 2018.

Ad Hoc Financial Stability Committee Minutes Page 2 of 3 August 17, 2018

6. Committee Workshop Results

Stakeholders asked about the process for developing the Committee recommendations.

On order of Chairperson Bruins, and there being no objection, the Committee received

the Committee Workshop Results.

7. Structural Deficit Mitigation Measures

Chairperson Bruins provided a brief overview of the structural budget deficit and

highlighted the Committee’s role.

Raj Srinath, Chief Financial Officer, introduced Carol Lawson, Fiscal Resources

Manager, who provided an overview of the proposed structural deficit mitigation

measures, noting: 1) goals; 2) deficit reduction targets; 3) short-term common themes

from the Committee Workshop meeting discussions; 4) overview of staff proposed

short-term mitigations; 5) overview of staff proposed additional mitigations; 6) selection

criteria for staff proposed mitigation; and 7) overview of long-term mitigation/policy

items for future discussion.

Stakeholders noted their concerns and questions related to the Committee

recommendation process and proposed mitigations. They requested additional review and

discussion and suggested strategies on messaging pertaining to service level adjustments

and ways to increase revenue.

Stakeholders further referenced letters provided to the Committee from Working

Partnerships USA; Amalgamated Transit Union Local 265 (ATU); American Federation

of State, County, and Municipal Employees Local 101 (AFSCME); Service Employees

International Union Local 521 (SEIU); Transportation Authority Engineers & Architects

Association Local 21 (TAEA); and SPUR, outlining additional questions, comments, and

proposals.

Members of the Committee discussed Committee objectives, decision process, and

timeline. They provided the following comments: 1) noted importance of keeping

proposed mitigations in line with VTA’s mission and in the spirit of 2016 Measure B;

2) asked about VTA’s business model and the need for a more balanced “product”; and

3) prioritize topics to be forwarded to the Board for further discussion such as Next

Network service rollout adjustment, capital expansion plans and its financial impacts,

labor efficiencies and other collective bargaining matters, and contributions to regional

partners.

Jim Lawson, Director of Government Affairs & Executive Policy Advisor and Staff

Liaison, noted collective bargaining matters should be discussed in the appropriate

setting.

Ad Hoc Financial Stability Committee Minutes Page 3 of 3 August 17, 2018

Chairperson Bruins briefly discussed next steps, noting no action will be taken on the

proposed mitigation measures.

On order of Chairperson Bruins and there being no objection, the Committee tabled

the recommendation to the Santa Clara Valley Transportation Authority (VTA) Board of

Directors to approve the proposed mitigation measures to address VTA’s structural

deficit and promote long-term financial stability. In addition, direct staff to begin

implementation and negotiation, where applicable, of these measures as soon as feasible.

8. Roundtable Discussion

There was no Roundtable Discussion.

9. ANNOUNCEMENTS

Mr. Lawson expressed appreciation of Stakeholders for their work and contribution to the

committee.

Stakeholders provided comments on capital project impacts and encouraged staff to

examine successful planning strategies by other transit agencies.

Upon query, Chairperson Bruins noted the Committee is anticipated to take action at their

next meeting, and encouraged Committee Members to reach out to staff should they need

additional information.

10. ADJOURN

On order of Chairperson Bruins, and there being no objection, the Committee

adjourned the meeting at 4:25 p.m.

Respectfully submitted,

Michelle Oblena, Board Assistant

VTA Office of the Board Secretary

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Page 1 of 2

From: Adina Levin Sent: Friday, November 16, 2018 2:03 PM To: VTA Board Secretary Subject: Ad Hoc Sustainability Committee

Honorable board members,

Thank you for engaging with the challenges of VTA's financial situation. We are very glad to

see that with the retention of SB1 funds through the failure of Prop 6, and the likely retention of

Measure B funds via the result of the lawsuit, that the financial crisis is less severe.

All options for dealing with the financial crisis are going to be challenging. Given this, we are

puzzled to observe that the potential options being considered at today's meeting focus on

reductions to bus and light rail service. The presentation does not suggest options that affect

capital projects. Any change to expectations will provide disappointment to some voters. In

addition, new capital projects will incur additional operating costs. Building out new capital

projects will deliver less than hoped for results if there is even less budget to pay to operate the

system.

Therefore, we recommend that the solutions evaluated to address the financial issues should

consider re-thinking the capital projects that are on the books, including some capital projects

that have been on the books for many years, and the current and future conditions, and in some

cases the policy goals, are different than anticipated when the projects were initially conceived.

Thank you for your consideration,

- Adina

Adina Levin

Friends of Caltrain

http://greencaltrain.com

From: Jim Stallman Sent: Friday, November 16, 2018 2:23 PM To: Peter Hertan; VTA Board Secretary Subject: FSTF VTA mtg. - regrets

The mtg. looks to be a sham. I had to take my wife to a same day scheduled doctor appt in

Redwood City and won’t be at the mtg.

1. The mtg was scheduled late in a Friday ahead of Thanksgiving break week so as to make it

difficult to attend.

2. The action to be taken is not provided - no proposal list.

3. Yet another financial spreadsheet leaving lots of questions - still haven’t shown the dedicated

voter passed taxes for running buses (& LRT).

http://greencaltrain.com/

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Page 2 of 2

It’s not just sad - it’s diabolically criminal.

I have 3 recommendations:

1. Use bus money to run bus service

2. Keep to the adopted budget so we restore bus service to at least what we had 25 years ago

3. Quit misappropriating taxpayer provided transit money on consultants and instead rely on

staff to do the work as they are quite able to do

OverviewofVTAFinancialCondition

Preparedfor:VTABoardofDirectors

Ad-HocFinancialStabilityCommittee

November,16,2018

Agenda Item #7

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HarveyM.RoseAssociates

Foundedin1979,weareaconsultingfirmthatworksprimarilyforstate

andlocaljurisdictionsprovidinganalyticalservicessuchas:

Ø LegislativeAnalysis

Ø PerformanceAudits

Ø BudgetAnalysis

Ø PolicyAnalysis

WewerehiredbyATULocal265toindependentlyassessVTA’sfinancial

condition.

HarveyM.RoseAssociates,LLC 2

VTA’sProjectionsasofJune2017


FY18 FY19 FY20 FY21 FY22Revenues $455.02 $466.78 $480.64 $492.85 $505.76Expenses ($475.48) ($493.20) ($509.43) ($514.24) ($531.22)OperatingBalance ($20.45) ($26.42) ($28.79) ($21.40) ($25.46)OperatingReserve $62.60 $42.15 $15.73 $0.00 $0.00SalesTaxStabilizationFund $35.00 $35.00 $35.00 $21.94 $0.54TotalAvailableReserves* $97.60 $77.15 $50.73 $21.94 $0.54OperatingBalance ($20.45) ($26.42) ($28.79) ($21.40) ($25.46)EndingReserves* $77.15 $50.73 $21.94 $0.54 ($24.92)*ReservesrefertotheOperatingReserveandtheSalesTaxStabilizationFund

VTA’sHistoricalBudgetvs.Actuals


FY BudgetedRevenues

BudgetedExpenditures

BudgetedBalance

ActualRevenues

ActualExpenditures

ActualBalance

2008 $365,720 $364,191 $1,529 $378,087 $337,713 $40,3742009 $379,686 $371,734 $7,952 $337,584 $342,963 ($5,379)2010 $349,600 $353,395 ($3,795) $346,960 $330,680 $16,2802011 $336,255 $351,898 ($15,643) $371,821 $338,833 $32,9882012 $366,110 $363,967 $2,143 $392,158 $347,443 $44,7152013 $376,825 $375,118 $1,707 $394,289 $356,438 $37,8512014 $392,642 $380,162 $12,480 $404,377 $371,124 $33,2532015 $402,161 $398,846 $3,315 $428,091 $386,129 $41,9622016 $420,189 $419,579 $610 $408,680 $398,361 $10,3192017 $419,836 $435,447 ($15,611) $424,519 $426,066 ($1,547)2018 $455,024 $475,478 ($20,454) $441,731 $447,500 ($5,769)2019 $466,777 $493,195 ($26,418)

ProjectionsAdjustedforActuals


FY18 FY19 FY20 FY21 FY22Revenues $441.73 $452.77 $464.09 $475.70 $487.59

Expenses ($447.50) ($463.16) ($479.37) ($496.15) ($513.52)

OperatingBalance ($5.77) ($10.39) ($15.28) ($20.46) ($25.93)

TotalAvailableReserves $97.60 $91.83 $81.44 $66.16 $45.71OperatingBalance ($5.77) ($10.39) ($15.28) ($20.46) ($25.93)

EndingReserves $91.83 $81.44 $66.16 $45.71 $19.78

Assumptionsforourprojections


BasebudgetofFY18actualrevenuesandexpenditures.

Revenuegrowthof2.5%annually.

Expendituresgrowthof3.5%annually.

Doesnotinclude:

• MeasureBrevenuesandexpenditures

• $12.7ofunbudgetedstateassistanceinFY2018-19

CapitalProjects


VTATransitFundappropriationsforcapitalprojects

AppropriationsthroughFY17

SpendingthroughFY17

Carryover AppropriationinFY18-19

TotalVTATransitFundforCapitalProjects

FY18-19

$195,535,000 $66,373,000 $129,162,000 $62,686,000 $191,848,000

Exampleofprojectcarryover


Project AdoptedFundingthroughFY17

SpendingthroughFY17

Carryover AppropriationinFY18-19

Totalfornon-revenue

vehiclesinFY18-19

Non-revenuevehicleprocurement $3,866,000 $2,702,000 $1,164,000 $1,300,000 $2,464,000

ContractAuthority


ServiceCategory TotalContractAuthority EstimatedAnnualAuthority

EngineeringConsulting $120,706,863 $32,262,866ContractTransitOperations $117,381,045 $48,756,575ConstructionProjectManagement $99,329,863 $24,544,309ContractStaff $46,889,096 $11,749,773Planning/Strategy $36,863,495 $14,386,155TechnologyServices $27,652,325 $12,826,327FinancialServices $16,016,462 $3,578,067OnCallServices $12,381,049 $2,768,439TechnologyConsulting $7,666,697 $2,726,522EquipmentProcurement $5,182,470 $2,890,871Marketing $4,469,169 $1,632,344Other $4,012,842 $1,653,378LegalServices $2,146,000 $802,612LegislativeAffairs $1,140,000 $227,452Training $976,568 $1,010,610GrandTotal $502,813,942 $161,816,300

Structural Deficit Mitigations

Ad Hoc Financial Stability Committee

November 16, 2018

Agenda Item #8

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Deficit Reduction Target

2

• $50-$60 million per year at full

impact:

- Budgeted Operating deficit- FY19 $26M(assumes 1.6M bus hours and 192K light rail hours of

service)

plus

- VTA local share of Capital-

$30M-$35M annual need

Mitigation Measure Options

3

Identified based on:

• Ad Hoc Committee discussions and suggestions

• Board direction at time of FY18 & FY19 Budget Adoption

• Implementation schedule—relatively short

• Financial impact—immediate and ongoing

• Excludes items which require collective bargaining

Mitigation Measure Categories

4

• Incremental Revenues with no VTA

Board action required

• Service Delivery Levels

• Fare & Other

Incremental Revenues-No VTA Board

Action Required

5

MitigationProjected Annual

RevenuesImplementation

Timeframe

Full Revenue Impact

Timeframe

STA/SB1 Revenues $23.0M-$27M* Immediate Immediate

Full Sales Tax collection for online purchases

$5.5M Up to 2 years Ongoing

Total $28.5M-$32.5M

* Represents incremental STA revenue above pre-SB1 receipts. Earlier estimates from MTC totaled $16M, current projection based on latest information available from MTC. Actual revenues received will vary based on diesel prices.

Remaining Deficit Reduction Target

6

$50-$60 million Starting Target

less:

$23-$27 million STA/SB1

$5.5 million Sales Tax-online purchases

~$25 million Remaining Target

Service Delivery Level Options

7


Savings/Revenues at Full Implementation

Implementation Timeframe

Full Savings Timeframe

Option 1 Implement Next Network concepts to greatest extent possible with less service than currently provided (~1.4M bus hours, ~150K light rail hours)

$30.0M 1 year FY 2020

Option 2 Implement Next Network concepts to greatest extent possible within currently provided service levels (~1.52M bus hours, ~156K light rail hours)

$14.7M 1 year FY 2020

Service Hours Comparison/Context

8

Service TypeFY18

Actual

FY19

Adopted

Budget

Mitigation

Option 1

Mitigation

Option 2

Bus Service 1,483 1,601 1,400 1,520

Light Rail Service* 153 192 150 156

Total 1,636 1,793 1,550 1,676

* Train Hours

In Thousands

Fare & Other Options

9


Savings/Revenues at Full Implementation

Implementation Timeframe

Full Savings Timeframe

Index Fares to inflation $2.0M* 2-3 yearsOngoing/

Cumulative

Voluntary Early Retirement Incentive

$1.0M 3-6 months FY 2020

* Annual revenue impact would grow as fares are re-indexed

VTA Ad-Hoc Stability Plan

Financial Actions

Action Budget Impact Timeline

SB1/STA $23-27 million Immediate

Joint development and value capture (development fees) $2 million 2 years

Full Sales Tax share $5 million Immediate

Congestion/Express Lanes Pricing $5-10 million 2 years

Maintain current service levels (approx. 1.5m hours of bus service) combined with refocus on frequency

$15 million 18 months

Early retirement and staff reorganization through attrition and changes in productivity/leave

$8 million 2 years

Contracting cost reductions $5-10 million 2 years

Total $60-$70 million 2 years

Policy Changes

Policy Impact

Shift $30 million in capital funding from under-budget projects, delayed or canceled projects, and other capital funds to save $30 million bus and light rail operating costs.

Staff has identified that a primary cost driver is low efficiency within the system, estimating that a broad increase in service speeds for bus and light rail could save up to $30 million per year. We propose spending $30 million in capital funds to help make the changes that are necessary to achieve the efficiency improvements.

Set transit funding allocation targets in revenue measures

End the cannibalization of transit funding and the bias toward higher income serving projects like high-capacity rail and highway projects. Standard should be a minimum of 25% allotted to operations in all future measures.

Legal and legislative feasibility of new sources of revenue

Study feasibility (polling, political support) of new sources of revenue including property and rideshare based fees and levies to diversify VTA’s funding base.

Use role as congestion management agency and funder to move cities to make land use changes to help improve transit viability.

While pushing for legislation like AB 2923, which gave BART land use authority on property it owns, VTA can immediately play a more forceful role to make cities change land use to speed up and improve service.

NEXT Network to focus on more on frequency and efficiency.

NEXT Network should be revisited to increase balance to 90% frequency/10% coverage. VTA should incorporate disparate programs (Light rail speed improvement, FAST network, Fare payment technology) into a single broad “Transit Forward” plan.

Address productivity issues by adjusting leave policy

Allow for more flexible use of leave time to allow employees and management to better plan for potential overtime needs.

Begin outreach and consulting process to formulate a business plan

VTA must begin process to prepare itself for a sustainable future business model that includes a more integral role in climate mitigation, real estate, and land use policy.

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ad hoc financial stability committee please note...

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