Agenda Item No. 6

To:    Finance-Auditing Committee/Committee of the Whole
Meeting of March 7, 2002
 
From:    Joseph M. Wire, Auditor-Controller
Celia G. Kupersmith, General Manager
 
Subject    REVIEW OF OPERATING AND CAPITAL NEEDS ASSESSMENT PROGRAM AND INFORMATION REGARDING THE DEVELOPMENT OF A TOLL STRUCTURE IN A FUTURE FINANCING PLAN

Recommendation

The following report is provided for informational purposes and no action is recommended.

Summary

This report contains a preliminary 10-year financial resource needs assessment for the District. It provides an overview of projected revenues and expenses of the District over a ten-year period. The needs assessment is based on projections of resources needed to continue existing levels of District services to the public as well as maintenance or replacement of our existing assets. It does not include resources for expansion of service or the acquisition of new assets beyond those already planned.

The preliminary needs assessment represents staff¹s best estimate of the magnitude of resources needed to fully undertake all that is required to provide the public with the highest level of service, including a full maintenance program for all of the District¹s assets. It was developed to serve as a starting point for development of a long-range financial plan.

In the coming months, the needs assessment will be refined based on resource availability and will result in a final long-range financial plan that matches funding with the desired levels of service. The long-range financial plan will be developed and refined as an integral part of the Board and public discussion on potential toll and transit fare increases.

In developing the needs assessment, staff focused on the ten Strategic Goals adopted by the Board in early 2001. All of the projects identified in the following pages support these Strategic Goals. The current listing of projects is not cost-constrained in any way. In fact, the purpose of the exercise was to project resources available over the next ten years, the project needs of the organization, and the resulting gap in funding for the needed projects. Once decisions are made regarding revenue enhancements, it will be possible to seriously prioritize the project list so that it matches available resources. A revenue-constrained financial plan will be essential to setting priorities for agency workplans, annual budgets, grant funding goals, and long-term planning of District services and projects.

This preliminary needs assessment will be shared with the public at the informational open houses on a potential toll increase. The meetings are scheduled for late March and early April. Detailed information on these open houses is provided in Attachment E.

Next Steps -- Process to Transform the Needs Assessment into a Financial Plan

The following Next Steps outline how the preliminary Needs Assessment will be finalized and used throughout the toll increase analysis process. This calendar is consistent with the project calendar approved by the Board on February 8, 2002. A copy of the original project calendar is included in Attachment F.

March 7th Finance-Auditing Committee Meeting -- The first step is to review the preliminary needs assessment to make sure it includes all foreseen expenditures for the next ten years. Staff throughout the District has worked to this end and now it is ready for Board review. Board priorities and comments will be incorporated into the needs assessment. The needs assessment can be brought back for further review to subsequent Committee meetings, as requested.

April 25th Finance-Auditing Committee Meeting ­ A further refined version of the needs assessment will be provided for Board consideration as part of the technical report on the financial and environmental impacts of the 12 bridge toll options under study. (See Attachment G for a list of the 12 bridge toll options under analysis.) Also on this date, the Committee will receive the preliminary Fiscal Year 2002-2003 budget. This budget will incorporate a number of actions aimed at reducing the District¹s expenses and will include ideas for making further reductions in order to reduce the extreme need for a toll increase.

May 9th Finance-Auditing Committee Meeting ­ Staff will provide the Board with a preliminary recommendation on a toll option. In addition, the Board will be presented with a preliminary financial plan that demonstrates how the District will use these resources to meet the needs described in the needs assessment. It is likely that even with a toll increase, not all of the needs identified in the course of this project will have sufficient funding available to move the project forward. Staff recognizes that resources and the demands on resources are not always in alignment. The goal is to maximize the alignment through good financial planning and decision-making. The toll recommendations under consideration by the Board will be shared with the public at a second series of open houses to be held in late May and early June.

June 13th Finance-Auditing Committee Meeting ­ A revised preliminary recommendation from staff on a toll option and a corresponding financial plan will be provided to the Committee. The recommendation will incorporate comments and direction from the Board and the public open houses. Staff will recommend that the Board set a formal public hearing to be held on the recommended toll option.

June 27th Finance Auditing-Committee Meeting ­ A final recommendation from staff on a toll option and a corresponding financial plan will be provided to the Committee. The recommendation will incorporate comments and direction from the Board and the formal public hearing. Staff will recommend that the Committee submit the final recommendation to the full Board for action the following day.

Outline of the Preliminary Needs Assessment

The preliminary Needs Assessment is made up of three basic parts: a revenue projection, a projection of operating needs, and a projection of capital needs. It is a ten-year needs assessment and the basic assumptions that drive the revenue and expense projections are included in the following materials as well. Attachment A provides an overview of revenue projections for the next ten years. Attachment B provides an overview of the operating expense projections. Attachment C provides an overview of the capital expense projections. Attachment D provides an overview of the assumptions used to develop the revenue and expense projections. Attachment E presents the schedule of informational open houses in late March and early April and Attachment F provides the toll increase analysis project schedule. Attachment G summarizes the twelve toll options under analysis.

It is important to note that all long-term projections are subject to events outside the control of the District such as economic booms and recessions or natural disasters which may impact our long-term future resources and needs. The needs assessment and projections presented here serve as long-range planning guidelines from which short-term plans can be built.

Preliminary Total Needs

The total needs, as presented below, are based on a projection of revenue available assuming the current toll and fare structure balanced against a comprehensive tally of the many operating and capital needs of the organization over the next ten years. It includes assumptions on the amount and timing of grant funding for various projects. Changes in any of these assumptions may have a dramatic impact on the total needs of the District. For example, a delay in grant funding of several major capital projects could increase the amount of revenue needed because of cost increase caused by the delay in funding availability.

The following table presents the highlights of the detailed material included in the attachments. The preliminary total 10-year shortfall is estimated to be $1 billion. That amount is split fairly evenly between operating and capital needs. Please remember that the needs assessment assumes no toll increase and no fare increase beyond that already approved for the coming budget year.

GOLDEN GATE BRIDGE, HIGHWAY AND TRANSPORTATION DISTRICT

 

Cumulative Total (in millions)

Revenue

After 1 Year After 3 Years After 5 Years After 10 Years
Bridge Tolls $60 $182 $304 $614
Transit Fares $22 $65 $108 $215
Other (Investment Income, Gift Center Sales, Café and Concessions, Other) $10 $27 $42 $84
Operating Grants $15 $45 $76 $154
Capital Grants $84 $215 $313 $441

Total Revenue

$191 $533 $843 $1,507

Expenses

       
Labor $90 $286 $497 $1,088
Services /Supplies/Other $36 $123 $223 $508
Capital $117 $372 $619 $1,024

Total Expenses

$243 $781 $1,338 $2,620
Capital Funding from Reserves: $33 $66 $68 $68

Deficit

$19 $182 $428 $1,045

Attachments:

  1. Revenue Projection
  2. Operating Expense Projection
  3. Capital Expense Projection
  4. Assumptions Used to Develop Revenue and Expense Projections
  5. Schedule of First Round of Open Houses on the Technical Report on Bridge Tolls
  6. Toll Increase Analysis Schedule
  7. Toll Options Under Analysis