This item was referred to the Finance-Auditing Committee from the Building and Operating Committee meeting of May 5, 2006, for concurrence with a budget decrease. In a memorandum to Committee, Deputy District Engineer Ewa Bauer, District Engineer Denis Mulligan and General Manager Celia Kupersmith reported on staff’s recommendation to award Contract No. 2007-FT-1, Larkspur Ferry Terminal Channel Maintenance Dredging, to Dutra Dredging Company, whose bid price of $3,101,500 was significantly lower than the Engineer’s cost estimate of $4,257,000. Therefore, a capital budget decrease in the amount of $950,000 is necessary. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/EDDIE to forward the following recommendation to the Board of Directors for its consideration:

The Finance-Auditing Committee recommends that the Board of Directors authorize a budget decrease in the FY 05/06 Ferry Division Capital Budget in the amount of $950,000, relative to the award of Contract No. 2007-FT-1, Larkspur Ferry Terminal Channel Maintenance Dredging, to Dutra Dredging Company.

Action by the Board – Refer to the
Building and Operating Committee Meeting of May 5, 2006

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize the General Manager to execute and submit an application, as well as related assurances and allocation request, with the Metropolitan Transportation Commission (MTC) for Regional Measure 2 funds, in the amount of $2,455,693, to support bus services on Golden Gate Transit Routes 40/42, 72 and 75.

The report stated that in March 2004, voters passed Regional Measure 2 (RM2) raising the toll for all vehicles on the seven State-owned toll bridges in the San Francisco Bay Area by $1.00.  This additional toll revenue will be used to fund various transportation projects within the region, that have been determined to reduce congestion or to improve travel in the toll bridge corridors.  The report also stated that Golden Gate Transit Route 40/42 San Rafael/Richmond Bridge service and Routes 72 and 75 Express Bus services are eligible services for RM2 transit operating funds. 

The report further stated that in accordance with MTC’s RM2 Regional Traffic Relief Plan Policies and Procedures for receiving capital assistance, the District Board of Directors is required to adopt a resolution authorizing application for RM2 assistance and approving related certifications and assurances, as listed in the staff report.  It is recommended that the Board authorize all actions necessary in order to secure RM2 funds to support continued operation of Routes 40/42, 72 and 75 bus services in FY 06/07.  The report noted that this grant application to MTC will request funds in the amount of $2,163,473 for Routes 40/42; funds in the amount of $149,029 for Route 72; and, funds in the amount of $143,191 for Route 75.  The report also noted that these RM2 grant funds, in the total amount of $2,455,693, have been included in the FY 06/07 Bus Division Operating Budget.  A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

• Operating Budget revenues of $144.9 million;
• Operating Budget expenditures of $147.6 million;
• Capital Budget revenues of $33.0 million;
• Capital Budget expenditures of $47.3 million; and,
• District reserves are budgeted to be used to fund the FY 06/07 Operating Budget shortfall of $2.7 million and District share of the Capital Budget of $14.3 million.

The report also included background summary information regarding the proposed FY 06/07 Budget, providing details on the Operating Budget, the Capital Budget and the use of reserves. A copy of the report, including a copy of the proposed FY 06/07 Budget, is available in the Office of the District Secretary.

At the meeting, Joseph Wire provided an overview of the proposed FY 06/07 Budget, noting that this meeting will provide an opportunity for the first of several discussions of the proposed FY 06/07 Budget, which will continue at meetings of the Finance-Auditing Committee in May and June, culminating with final adoption of the FY 06/07 Budget scheduled for the June 9, 2006 meeting of the Board of Directors.

Mr. Wire then proceeded to guide the Committee members through the FY 06/07 Budget document, focusing on an overview of the District’s current financial situation, Operating Budget revenues and expenses, as well as the Capital Budget. He highlighted the list of District accomplishments which took place in FY 05/06, as follows:

• Successfully negotiated a five-year contract with Marin County Transit District to provide local bus transit services;
• Achieved full funding for Phase IIIA of the Golden Gate Bridge Seismic Retrofit project;
• Began the Toll Plaza Bus Improvement Project, which will relocate and improve bus transfers points and pedestrian crosswalks in and around the Golden Gate Bridge toll plaza area;
• Completed the transfer of the Northwestern Pacific Railroad Right-of-Way assets to the Sonoma-Marin Area Rail Transit District;
• Participated in a Bay Area-wide Office of Homeland Security Grant Funding Request in an attempt to secure grant funding for various Bridge and transit-related security enhancements;
• Completed consolidation of the Regional FasTrak™ Customer Service Center located in San Francisco, in cooperation with the Bay Area Toll Authority;
• Developed a five-year regional fare increase program to increase regional bus, complementary ADA paratransit, and ferry fares annually by five percent in order to meet operating expenses beginning July 1, 2006;
• Executed an agreement with dredging design and environmental consultants to provide support services during channel dredging at the Larkspur Ferry Terminal;
• Continued the District’s revenue enhancement program efforts by authorizing interior ferry vessel advertising and launching the Third Edition of the Golden Gate Bridge Collectible Ornament;
• Transferred surplus buses currently not in use on Golden Gate Transit’s service system to other transit operators; and,
• Completed implementation of the second phase of the Integrated Fund Accounting System (IFAS) which included Payroll and Human Resources modules.

Mr. Wire described the revenue sources and expense allocation in the proposed FY 06/07 Budget as shown on pages 11 and 12 of the budget document presented to the Committee.  He stated that the amount of District reserve funds available for capital and operating expenses have been steadily increasing over the past several years as a result of direction by the Board to make annual capital contributions to the reserves to pay for future capital projects, as well as the fact that the budget has been balanced for the past two years, allowing the reserves to grow each year.  He noted that the impact on the reserves for the proposed FY 06/07 Budget will be $17 million, made up of a projected $2.7 million operating deficit, and $14.3 million in capital reserves necessary to fund the District’s portion of capital projects scheduled during FY 06/07.  He further noted that it could be possible to balance the budget by the end of FY 06/07, as was done last year, by such measures as: 1) reduced overall Workers Compensation and benefits costs; and, 2) savings associated with not completing 100% of all capital projects scheduled for the fiscal year.  Mr. Wire also described two new restricted reserves set up for specific purposes: 1) Retiree Medical Benefits Liability fund; and, 2) Bridge Self-Insurance Loss Reserve.  The District’s reserve structure was explained in further detail in the appendices to the budget document.

Mr. Wire briefly described the District’s strategic planning process over the past fiscal year, which will continue throughout FY 06/07 with a focus on long-term strategies for raising additional revenue, continued efforts to reduce District expenses and a program to raise revenue from underutilized property resources.  He noted that a workshop in September 2006 has been planned to re-examine the District’s financial situation in the context of recent positive trends in the economy and new projections based on the FY 06/07 Budget after its adoption in June 2006.

Mr. Wire then described the categories of operating revenues contained in the proposed FY 06/07 Budget, and noted changes in revenues over the past two fiscal years, as shown on the table below:

FY 04/05

ACTUAL

FY 05/06

CURRENT

BUDGET

FY 05/06

ESTIMATED

ACTUAL

FY 06/07

PROPOSED

BUDGET

• Approximately 0.5% increase in Bridge traffic based on previous year trend;
• No significant change to Toll Revenue in FY 06/07 due to growth in FasTrak™ use;
• Transit fares increase 5% on July 1, 2006;
• Bus patronage increases 1%, Ferry patronage remains flat;
• Investment Income increases due to projected higher interest rates and principal balance;
• Marin County Local Service payment is estimated to be $5.5 million for FY 06/07; and,
• Other Operating Income includes $133,000 for the seasonal Muir Woods Shuttle.

Mr. Wire noted that toll revenues will remain flat, since any growth in FasTrak™ use will be offset by the discounted toll offered to FasTrak™ users.  He further noted that transit revenue will also remain flat, with an increase in the number of local riders (who pay lower fares) offset by a decrease in the number of regional commuters (who pay higher fares).

FY 04/05

ACTUAL

FY 05/06

CURRENT

BUDGET

FY 05/06

ESTIMATED

ACTUAL

FY 06/07

PROPOSED

BUDGET

• Changes to the Table of Organization;
• Negotiated 2% increase for Amalgamated Transit Union (ATU) represented employees;
• Includes Employee PERS (7%), Employer PERS contribution (14.024%), and ATU Pension contribution (15.165%);
• Medical costs increase approximately 12% over FY 05/06 estimated actual expenses;
• Workers’ Compensation expense is budgeted based upon historical expense experience;
• Capital Labor expenses are directly charged to the capital budget reducing the operating budget;
• $2.20 per gallon for fuel costs for all Divisions except Ferry which is projected at $2.10 per gallon;
• All fiscal years show the transfer of District Division expense by its respective line item;
• Commercial Paper interest expense is fully budgeted per requirement of the Indenture; and,
• Capital Contribution of $9 million.

• Chair Stroeh made the following inquiries:
  • He inquired regarding the District’s share of the Capital Budget.  In response, Mr. Wire explained that the proposed FY 06/07 budget projects that $14.3 million in capital reserves will be necessary to fund the District’s share of the capital projects scheduled for FY 06/07.
  • He inquired as to how the District can make a capital contribution from the reserves when some of the reserves are also being used to fund the operating deficit.  In response, Mr. Wire explained that in the proposed FY 06/07 Budget, capital contribution of $9 million will be reduced by the amount of $2.7 million in reserves needed to fund the operating shortfall, resulting in a reduced capital contribution in the amount of $6.3 million.

• Director Boro made the following comments and inquires:
  • He inquired whether the recent increase in the price of gasoline has caused an increase in bus ridership, particularly on the longer-distance commute routes.  In response, Mr. Wire stated that the Planning Department and the Service Review Committee are watching ridership numbers very carefully to identify any increases in ridership associated with gasoline price increases.  Director Cochran noted that there is a common assumption on the part of automobile commuters that sharp increases in gasoline prices are temporary, and that it would be prudent to wait until fall of 2006 to see if gasoline prices continue to increase and subsequently result in increased bus ridership.
  • He suggested that at the September 2006 workshop, the Board should focus on the following matters:

    • Consider the relationship between the annual capital contribution and the amount of the operating deficit, and whether or not the amount of the capital contribution can be reduced by obtaining new state or federal funding.  He noted that the proposed state infrastructure bond, if passed by the voters, could be another potential source of capital funding for the District.
    • Consider some type of revenue generation program similar to the National Park Service’s Proud Partner program, as a way to decrease contributions from the public in the way of tolls and fares by trying to find other sources of revenue.
    • He requested that staff provide additional details at the workshop to help the Board better understand what constitutes the deficit, and that the Board should aggressively address the deficit.

    Action by the Board – None Required