FY 2015 Budget Assumptions

1. RELATED TO AGENDA ITEM 6 FY 2015 Budget Assumptions Performance, Administration and Finance Committee April 3, 2014

2. Purpose • Receive the FY 2015 budget assumptions • Provide guidance on the assumptions • Approve the use of assumptions for preparing FY 2015 budget

3. Board policies Goals and priorities Highlights Boardings Revenues Expenses and Staffing Capital Improvement Program (CIP) Key dates Deliverables Key Assumptions

4. Board Policies • Policy No. 17 – Financial principles: • Fund ongoing operations • Annual balanced budget • Conservatively estimate revenues while using one-time revenues for one-time expenses or capital investments • Expenses to support effective transportation • CIP based on need • Effective cost of service through inter-governmental relationships • Board may authorize use of debt for temporary cash flow and emergency shortfalls, and urgent unfunded capital improvements • Accounting in accordance with GAAP

5. Board Policies • Policy No. 9 – Investment policy objectives are: • Compliance with laws • Protection of principal • Liquidity • Generation of investment income • Policy No. 10 – Requires Board Reserve Fund with targeted balance of $15 million or minimum target of 15% of annual budgeted operating expenses • Policy No. 17– Cost neutral budget transfers allowable except for transfers from fuel budget and capital outlays

6. Priorities • Safety and security • Financial health and sustainability • Increase customer ridership and revenue by a minimum of 2% • Successful organizational transformation • Improve customer riding experience • Business development opportunities • Capital program project management and delivery

7. Priorities – 1 Safety and Security • Conduct threat and vulnerability assessment and update system-wide safety and security plans • Reduce incidents, preventable accidents, and workplace injuries • Advance PTC project

8. Priorities – 2 Financial Health and Sustainability • Balanced budget with no fare increases or service reductions • Maintain restricted reserves consistent with Board Policy • Develop contingencies for spikes in commodity prices

9. Priorities – 3 Increase customer ridership and revenue by a minimum of 2% • Continue Amtrak Rail to Rail (R2R) program • Assess the effect of the Mobility Plan on BREEZE operations • Improve revenue collection

10. Priorities – 4 Successful organizational transformation • Complete update to facility management plans • Continue implementation of forms process within document management system • Streamline JDE system business processes • Implement State of Good Repair Program consistent with MAP-21

11. Priorities – 5 Improve customer riding experience • Continued implementation of improved real time travel information • Advance Camp Pendleton Rail Station project

12. Priorities – 6 Business development opportunities • Advance Solana Beach transit oriented development project • Advance joint developments for: • Carlsbad Village Station • Escondido Transit Center • Oceanside Transit Center

13. Priorities – 7 Capital program project management and delivery • Update of project management manual • Continued implementation of Project Management Consultants (PMC) to obtain project readiness and completion of major development and facilities capital projects

14. No planned fare increases or service reduction Projecting ridership at 12.8 million boardings NCTD to surpass 400 million boardings Projecting fare revenue at $19.6 million Investment in the Capital Improvement Plan of $20 million Highlights

15. Ridership Forecast Total ridership increase 2% overall (12,819,638)

16. Operating Revenue

17. Fare revenue of $19.6 million is forecasted by mode based on: Planned ridership Estimated fare revenue per rider for each mode Estimates based on prior years and year to date actuals No planned fare increases Fare Revenue Assumptions

18. Auxiliary Revenue • Auxiliary revenue totals $9,549,450: • Shared use • Advertising • Dispatch • Shared use agreements are with BNSF and Amtrak • BNSF is in process of being renewed (current agreement has increases each April 1 tied to the American Association of Railroads index) • Advertising revenue is projected to remain at FY 2014 levels • Dispatch agreements are with BNSF, Amtrak, and Metrolink

19. Non-Transportation Revenue • Non-transportation revenue totals $1,689,000: • Leases and permits • Investment Income • Administration fees • Miscellaneous • Gains or losses on disposals of assets • No planned changes in non-transportation revenue

20. Grant Revenue

21. Grant Revenue Sources FY 2015 In Thousands Current budget assumption is $63 million for operating grant revenue

22. Local Cash Grants • Local cash grants totaling $44,047,971 are: • TDA (Transportation Development Act 4.0 and 4.5) • TransNet • Grant estimates are based on SANDAG’s approved FY 2015 Transportation Development Act Apportionment and Claims Schedules using the mid-range estimates • Planned decrease of $3.6 million from FY 2014 budget • Total allocation is larger, but more dollars are being allocated to CIP • FY 2014 local grant revenues includes use of prior year funds.

23. State Cash Grants • Primarily the State Transportation Act (STA) • $0.0025 tax on diesel fuel • Estimates are from the California State Controller’s letter dated January 25, 2013 • FY 2015 will be $266,000 less than FY 2014 budget • FY 2014 was $5.8 million • FY 2015 is planned at $5.5 million

24. Federal Cash Grants • Federal cash grants for FY 2014 total $13,839,343: • 5307 – Urbanized Area • 5337 (formerly 5309) – State of Good Repair • 5311 – Rural Area Program • JARC and New Freedom (5316/5317) • Budget for FY 2015 is about $1 million more than FY 2014 as formula allocations are higher than FY 2014

25. Revenue Carry Forward • Proposed FY 2015 Operating budget includes $3.4 million carry forward from FY 2014

26. Proposed Expenses

27. Proposed Expenses by Source FY 2015

28. (1) Purchased Transportation • Increases are due to contract escalations and changes in service levels and increased service levels.

29. Service Levels

30. (2)Professional Services Professional services of $18,020,978: • Engineering ($5,977,932) • Operations ($3,522,448) • Financial & Administrative ($2,126,723) • Facilities ($1,993,165) • Information systems ($1,801,500) • Security ($1,775,000) • Legal & Compliance ($453,000) • Communications ($371,210)

31. Carry Forward Projects

32. One-Time Costs

33. (3) Salaries, Wages, and Benefits • Labor costs of $14,791,818 are primarily: • Regular, holiday, and overtime pay • Payroll taxes • PERS retirement • 401(a) retirement contribution • Medical insurance • Workers’ compensation insurance • Retirees’ health insurance

34. Proposed Staffing

35. Capital Positions (FTE)

36. Benefits

37. Benefits NCTD Monthly Contribution for Medical Insurance (unchanged):

38. Benefits

39. (4) Materials and Supplies Materials and supplies of $8,700,264 are primarily fuel costs (natural gas, diesel, and unleaded fuel) Budget unit prices are based on the U.S. Energy Information Administration’s estimates. NCTD takes a conservative view as the forecasts are subject to volatility and could differ significantly.

40. Utilities, casualty and liability costs, taxes, leases and rentals, and interest expense

41. Miscellaneous Expense • Miscellaneous expense primarily consists of: • Advertising and promotion • Dues and subscriptions • Travel, meetings, and other

42. Contingency • FY 2014 budget included a contingency of $1 million • FY 2015 proposed budget includes a contingency of $865,000

43. FY 2015-2019 CIP

44. FY 2015 Major Projects • Acquisition of 13 CNG buses ($6.9M) • Bridge improvements and replacements ($2.7M) • COASTER locomotive overhaul ($1.3M)

45. Key Dates for Budget

46. Deliverables • Operating Budget and CIP • Classification and Compensation Schedule • Cost Recovery Fee Schedule • Service Implementation Plan (if applicable) • Disadvantaged Business Enterprise Goal

47. Questions?