Board of Directors

MEETINGS OF THE Board of Directors

Valley Metro RPTA METRO Light Rail

MEETING DATE MEETING DATE Thursday, February 20, 2014 Thursday, February 20, 2014

TIME TIME 12:15 p.m. Meeting will begin no earlier than 1:30 p.m.

LOCATION Valley Metro RPTA Lake Powell Conference Room

101 N. 1st Avenue, 10th Floor Phoenix

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

February 13, 2014

TO: Members of the Valley Metro RPTA and METRO Light Rail Board of Directors

FROM: Steve Banta Chief Executive Officer

RE: February 20, 2014 Packet Notes

Attached is the February 20, 2014 agendas and supporting information for the Valley Metro RPTA and METRO Light Rail Board of Directors meetings.

These meetings can be attended via teleconference. Please contact the receptionist at 602-262-7433 for the call-in information.

If you have any questions regarding the information in this packet, please let me know.

Parking is available onsite and parking can be accessed via the entrance on Adams Street. Parking validation will be available at the meeting. Transit tickets are also available to those who attend the meeting using transit. If you need detailed directions, please contact the receptionist at 602-262-7433.

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

February 13, 2014

Board of Directors Thursday, February 20, 2014 Lake Powell Conference Room 101 N. 1st Avenue, 10th Floor 12:15 p.m.

For those participating by telephone, please mute your phone when not speaking.

Members please make sure your microphone is turned on when speaking and turned off when you are not speaking.

The Pledge of Allegiance will be said at the beginning of the meeting.

Action Recommended

1. Public Comment 1. For information

A 15-minute opportunity will be provided to members of the public at the beginning of the meeting to address the Board on all agenda items. The Chair may recognize members of the public during the meeting at his/her discretion. Up to three minutes will be provided per speaker or a total of 15 minutes total for all speakers.

2. Minutes 2. For action

Minutes from the January 23, 2014 Board meeting are presented for approval.

3. Chief Executive Officer’s Report 3. For information

Steve Banta, Chief Executive Officer (CEO), will brief the Board on current issues.

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

CONSENT AGENDA

4A. Workers’ Compensation and Employer’s Liability Insurance 4A. For action Coverage Renewal

Staff will request that the Board of Directors authorize Valley Metro to purchase workers’ compensation and employer’s liability insurance to cover work-related injuries to all RPTA employees. The current insurance policy will expire on March 1, 2014.

4B. Contract Award for Concrete Rehabilitation at the Mesa 4B. For action Operations Facility

Staff will request that the Board of Directors authorize the CEO to execute a job-order contract with Centennial Contractors Enterprises, Inc. for concrete rehabilitation work at the Mesa Operations Facility for an amount not to exceed $300,000.

4C. Fiscal Year 2013 (FY13) Comprehensive Annual Financial 4C. For action Report (CAFR) and Single Audit Act Reporting Package

Staff will request that the Board of Directors accept the FY13 Comprehensive Annual Financial Report and Single Audit Act Reporting Package.

REGULAR AGENDA

5. 2014 Federal Public Transportation Agenda 5. For action

Steve Banta, CEO, will introduce John Farry, Government Relations Officer, who will request that the Board of Directors approve the Valley Metro Federal Public Transportation Agenda for 2014.

6. East Valley Dial-a-Ride Update – Pilot Program Status 6. For information

Steve Banta, CEO, will introduce Ron Brooks, Accessible Transit Services Manager, who will provide an informational update on the East Valley Dial-a-Ride Brokerage Model Pilot Project.

7. Transit Performance Report 7. For information

Steve Banta, CEO, will introduce John McCormack, Chief Financial Officer, who will provide information to the Board concerning ridership, operating costs, fare revenue, and performance indicators contained in the FY13 Transit Performance Report.

8. Review of 2014 Bond Issuance 8. For information

Steve Banta, CEO, will introduce Paul Hodgins, Manager of Revenue Generation and Financial Planning, who will provide information regarding the results of the recent sale of $115 million in tax-exempt, senior lien bonds.

9. Future Agenda Items Request and Report on Current 9. For information Events and discussion

Chair Somers will request future agenda items from members, and members may provide a report on current events.

10. Next Meeting 10. For information

The next meeting of the Board is scheduled for Thursday, March 20, 2014 at 12:15 p.m.

Qualified sign language interpreters are available with 72 hours notice. Materials in alternative formats (large print, audiocassette, or computer diskette) are available upon request. For further information, please call Valley Metro at 602-262-7433 or TTY at 602-251-2039.

To attend this meeting via teleconference, contact the receptionist at 602-262-7433 for the dial-in- information.

The supporting information for this agenda can be found on our web site at www.valleymetro.org.

DATE AGENDA ITEM 1 February 13, 2014

SUBJECT Public Comment

PURPOSE A 15-minute opportunity will be provided to members of the public at the beginning of the meeting to address the Board on all agenda items. The Chair may recognize members of the public during the meeting at his/her discretion. Up to three minutes will be provided per speaker or a total of 15 minutes total for all speakers.

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS None

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

DATE AGENDA ITEM 2 February 13, 2014 Minutes of the Valley Metro RPTA Board of Directors Thursday, January 23, 2013 12:15 p.m.

Meeting Participants Councilmember Scott Somers, City of Mesa, Chair (via phone) Councilmember Trinity Donovan, City of Chandler, Vice Chair Councilmember Jim McDonald, City of Avondale, Treasurer (via phone) Vice Mayor Eric Orsborn, City of Buckeye Mayor Lana Mook, City of El Mirage (via phone) Councilmember Jenn Daniels, Town of Gilbert Councilmember Gary Sherwood, City of Glendale Vice Mayor Joe Pizzillo, City of Goodyear Vice Mayor Ron Aames, City of Peoria Councilmember Thelda Williams, City of Phoenix Councilmember Shana Ellis, City of Tempe Councilmember Kathie Farr, City of Tolleson Councilmember Bob Littlefield, City of Scottsdale

Members Not Present Supervisor Mary Rose Wilcox, Maricopa County Mayor Sharon Wolcott, City of Surprise Councilmember Sam Crissman, Town of Wickenburg

Vice Chair Donovan called the meeting to order at 12:15 p.m. and said welcome to the January meeting. Can we have the people who are on the phone say who you are?

Chair Scott Somers said here.

Mayor Lana Mook said here.

1. Public Comment

Vice Chair Donovan said I have one general public comment card. So an opportunity is provided to the public to address the Board of Directors on items that are not on the agenda that are within the jurisdiction of RPTA or non-action agenda items that are on the agenda for discussion and information only.

Citizens are requested not to exceed a three-minute time period for their comments. And a total of fifteen minutes will be provided for the public comment agenda item

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

unless the Board requests an exception to this limit.

Please note that those wishing to comment on agenda items posted for action may be provided the opportunity at the time the item is heard.

And actually I realized that I skipped the Pledge of Allegiance. Now that I've read that why don't we go to the Pledge of Allegiance and then we'll go back to the public comment cards.

(The pledge is recited.).

Vice Chair Donovan said thank you. So we have one public comment card. Blue Crowley, if you could state your name and address for the record. And then you'll be given three minutes for your comments.

Mr. Crowley said thank you. William C. Blue Crowley and western Maricopa County mostly, but all over this region.

I've got some maps here and I'd point them out, but then when you have it in the minutes it doesn't show it as well as it is, but if you look at the bus map and compare it to the detail of the bicycle map, the amount of usage of the populous and the coverage isn't the same.

And I'm looking at the super grid from the six to twenty-six and it says years funded. And one of the things in here for 2012 was Camelback Road to Litchfield to Scottsdale Community College. And then I see in 2014 it's saying that we're going to be doing Thunderbird from 103rd to Fountain Hills. And I don't see that in your plans.

I don't see where you are doing your due diligence and outreach and also acquisition of the ability to use the bus pass. I had the unfortunateness [sic] of having to go to seven different vendors around Arrowhead mall trying to get a bus pass finally getting one at Union Hills and 67th, and I had started out at Thunderbird.

So when you do the $2.00 extra on the bus and say, City of Phoenix, we won't change that, I wonder why. Because when you are charging the extra when you're using it on the bus and then all your vendors aren't up to par and where I told the gentleman from Peoria that there were how many of the Circle Ks in Peoria and Glendale around Arrowhead mall that didn't even have the passes.

So when you brag about 700 outlets and it doesn't work, what's happening. Why, since this says years funded, aren't we doing what you said you were going to be doing, you know. I look at the grid and I don't see where you have a minimum amount of transportation on a roadway and say we need to put a bus there because of air quality that how many times did we go into violation.

I had the unfortunate occurrence of having a dog come up missing. Where did they take it? To the Mesa, Councilman Somers, the Mesa facility. I use the bus. I had to

walk how many miles to get there? Well, yeah, I do have a bike so I was able to cut that, but it was miles. How many of our citizenry have lost pets because Mesa didn't do the job and put a bus on Rio Salado. There's a grid there. We need to be using it. See you during the rest of this.

2. Minutes

Vice Chair Donovan said next we have the minutes from the December 19, 2013 board meeting which are presented for approval.

IT WAS MOVED BY COUNCILMEMBER SHERWOOD, SECONDED BY VICE MAYOR AAMES AND UNANIMOUSLY CARRIED TO APPROVE THE BOARD MINUTES FROM DECEMBER 19, 2013.

3. Chief Executive Officer’s Report

Mr. Banta said good afternoon, Vice Chair, Members of the Board. Good to see you. Happy new year, by the way.

Couple of good notes, the PF Chang's Rock and Roll Marathon went on this past weekend. Valley Metro had a booth at the racer's expo to communicate our services during and after the race. Light rail ridership was up. It was 33,815 people that day up 46 percent over an average Sunday.

Service changes take effect on January 27. The Transit Book is complete and is out to our distribution centers available for our customers. Service change materials have been distributed urging passengers to check their routes in case there was a modification to what they're used to utilizing.

Ridership as a whole, we had a high ridership day on Saturday, December 7. For light rail it was 65,773 boardings. Activities on that day driving that ridership was an ASU football game, Tempe Festival of the Arts, Festival of Lights Parade in Phoenix, and a concert at the US Airways Center.

Monthly ridership for December -- bus and light rail together is on average down 1.8 percent. Weekday boardings on bus down 4.7 percent and light rail weekday down to 2.5 percent.

One of the things that ridership in December is typically an ebb and flow month. There's not a lot of consistency and typically ridership is down a bit in December depending upon when the holidays fall, how much money is available to either spend or vacation or travel.

We don't look at this as something that we’re concerned with now, but we are looking at strategies in which to promote public transportation in the region and potentially talk about marketing some of our routes and services to encourage continued increased in ridership.

We hope to see ridership rebound after the January-February time frame. But at this point in time we don't believe that it's an alarming measure. It is something we want to bring to your attention and we are focusing on trying to increase visibility around transit.

Another opportunity to partner with Coors for free rides on New Year's Eve night. Valley Metro partnered with them for the event. It began at 7:00 p.m. New Year's Eve night, continued to early in the morning on New Year's Day. Ridership on bus was up 16 percent. Ridership on light rail was up 63 percent. And we are glad to see that the partnership with Miller Coors worked.

Legislative update is at your seat. And if you have any questions I'd be glad to answer those.

Vice Chair Donovan said thank you. Are there any questions? Yes.

Councilmember Sherwood said just a shout out to the maintenance people that worked these past two previous weekends to get all the cars ready for the various events in Phoenix.

Mr. Banta said thank you very much. I'm sure our operations person sitting in the audience would appreciate that comment. And I'm sure he will take it back to his men and women at the facility.

4. Consent Agenda

Vice Chair Donovan said we've had the opportunity to review the items. Is there anyone who wants a presentation on either A or B? We do have a public comment for agenda Item No. 4. Mr. Crowley.

Public Comment Mr. Crowley said every business that has 50 employees or more has to present to the trip reduction program from their employees what they would do.

When you're surveying in the way you do an onboard and the other telephone surveys and that, are you using the resources available to you, because I know that you don't do that. You don't check that. It's not gone into by staff. It's not by the electeds.

But I have so many people tell me that when I had to fill that thing out I told them if you had the bus I would use it, but I work second or third shift or this that or the other thing that caused them not to be able to do it. So when you do the onboard surveys of boarding and destination, it's only half the coin that you're really trying to look at. And when I also see that on destinations, as I was mentioning in public comment, a county facility on the Rio Salado between two freeways that has how much traffic or is it because of the parochialism of the committee process. When we have the parochialism of each of your communities doing what it can to not have that communication, not have that thing trans-versing, not having that commerce as in look at the way that Grand

Avenue is done and treated between these two municipalities, Phoenix and Glendale. Why isn't it that when you're doing the surveys, rather than do what the feds demand saying this is what we have as a minimum standard for you to do, why aren't you doing your due diligence looking at what the community is saying, this is what I would do, please get those facilities to us rather than, well, we called people up and this is what we found out and it only cost us a quarter million dollars. Give you back a minute of your time.

IT WAS MOVED BY COUNCILMEMBER WILLIAMS, SECONDED BY VICE MAYOR ORSBORN AND UNANIMOUSLY CARRIED TO APPROVE THE CONSENT AGENDA.

5. Employee Benefits Consulting Services Contract Award

Mr. Banta said Vice Chair, Members of the Board, Item No. 5, Employee Benefits Consulting Services Contract Award; this is an action item for your consideration. This is for employee benefit, consulting services. Our current contract expires on March 1, 2014. Aon Hewitt was the highest rated proposer and best value for the agency and therefore being recommended for employee benefits consulting services contract award.

The Hewitt company is a national consulting brokerage firm with a local office in Arizona to serve Valley Metro. Clients served include other metropolitan transportation agencies as well as many local Arizona school districts.

Valley Metro evaluated four proposals with two pricing options for compensation for employee benefits consulting services including a fee for services with firm fixed pricing and a commission-based option.

I believe back when we went out with the RFP we discussed with you the reason we were asking for the two options. And actually, the fee for services option was determined to be the most cost effective pricing option over the five-year contract. The overall contract value is $300,500. Valley Metro's initial year of contract is worth $58,500. With that, Vice Chair, members of the board, I ask for your permission to enter into a contract with Aon Hewitt.

Vice Chair Donovan said I appreciate that we were able to go through two different scenarios so that we could find the best price for the organization. Were there any questions or comments?

Vice Mayor Orsborn said is there an opportunity to gain some efficiency by coupling this with what's done at METRO? I didn't read in there any of the fact that we could possibly use them for METRO or vice versa depending on who METRO uses.

Mr. Banta said we have always done that. METRO has always gotten their benefits from the RPTA. So that's not a change. METRO is included in this pricing.

Vice Mayor Aames said I understand this is a savings from the previous vendor.

Mr. Banta said this is a savings of approximately 30 percent.

IT WAS MOVED BY VICE MAYOR AAMES, SECONDED BY COUNCILMEMBER WILLAMS AND UNANIMOUSLY CARRIED TO AUTHORIZE THE CEO TO EXECUTE A FIVE-YEAR CONTRACT WITH AON HEWITT TO PROVIDE EMPLOYEE BENEFITS CONSULTING SERVICES FOR A NTE AMOUNT OF $300,500.

6. Fiscal Year 2014 Second Quarter Reports.

Mr. Banta said thank you, Vice Chair, Members of the Board. I will have the Operations, the Safety and Security, the Planning, and the Finance Department Directors follow each other in providing you with the second quarter reports.

Mr. Abraham said I will give you a brief report on our operations statistics.

This is regional ridership both fixed route and light rail. And as you can see we are a little below the second quarter of FY13, not much, but there was a slight decline in ridership.

The next slide is just bus ridership just fixed route ridership both operated by Valley Metro and operated by any other operators in the region. And the same trend is there as we expect that we were a little bit lower this second quarter than we were in FY13 second quarter.

Next slide is just light rail ridership. And the trend continues we're a little lower the second quarter of FY14 than we were in the second quarter of FY13. Not a lot, but a little.

This is information on our unified contract, the fixed route bus contract for the East Valley only. And I have a few statistics here. Our on time performance for the last two quarters and also compared to last year is you'll see in the first quarter of FY14, the statistics aren't too good. The indicators aren't good, but that was our transition quarter where we transitioned a new contractor in and we also unified two garages. So we transferred a lot of work. There was a lot of training to be done. Just everybody had to get their feet on the ground. And between First Transit and our staff we worked hard with them.

And as you can see a dramatic increase in Fiscal FY14 second quarter. So we're hoping to hold to those kinds of numbers, 96 percent or better on the on time performance of our maintenance and 92 percent on time performance. And keep in mind, that's general on time performance. We don't take anything out for road closures, detours. We just keep it within the statistics. So these are real numbers.

Go to fixed route West Valley. Of course a lot smaller operation. Some of the numbers like mechanical failures per hundred thousand, we didn't track that last year, but we do

now. And they're doing a very good job. Complaints are down. Mechanical failures per hundred thousand miles are down, so I think it shows a good picture. That's the one area where ridership increased a little bit from FY13.

Dial-A-Ride, again, our trips are up from Fiscal FY13, but we knew that. The on time performance is very good, 99 percent. Complaints per hundred thousand trips, we show 0.11 that's very good. And a cost per trip is been staying pretty steady at about twenty-six dollars and some change per trip.

West Valley Dial-A-Ride, complaints are similar, they're in line with the East Valley Dial- A-Ride. The on time performance is a little less. And we're going to work to improve that. We hope.

The rides, as you can see the one-way trips are up substantially from last year, so we're working with some of the cities to see how we're going to manage that and try to keep it sustainable.

The other accessibility service that we offer is the RideChoice program and we're trying to move folks into it, but seems like the RideChoice is down from last year. The cost per trip RideChoice is up a bit. Platinum pass rides are up substantially from last year, which is a good thing.

That cost per trip that I show, I don't believe that's the cost per trip that we charge the cities for a platinum pass. We're actually showing our cost per passenger ride on a bus or light rail.

This is something that everyone has been interested in. It's our people applying for ADA certification. They are down from last year as far as the numbers, but since we've had our consultant come in and he audited our processes, we've established some changes within the process.

And as you can see the numbers, the unconditional certifications have dramatically changed from last year. The conditional certifications have come up a bit. Denials are up a bit, so I think we're on the right -- we're showing progress, we're getting in the direction we need to be to keep this program sustainable.

Customer service call center, your packets were sent out and somehow we inadvertently reversed first quarter and second quarter, so I apologize for that. But this is accurate now, so our calls were higher in the first quarter and our complaints were higher in the first quarter, which we expected, because we put out a new schedule, we did our transition in the East Valley, so the numbers now make a little more sense. And that's the end of my report unless you have questions for me.

Mr. Tabon said good afternoon, Vice Chair, members of the RPTA board. This afternoon I'll be presenting our quarterly update on bus activities safety and security. In the first slide, as you can see, we have accidents that only reflect what is reportable to the FTA through the National Transit Database. And for FY14, first quarter, we have

a total of one accident. And FY14 quarterly, the second quarter, two accidents, and five for FY13. We've had quite a drop from FY13.

And for Dial-A-Ride, we've had two accidents, one and zero for FY13. Our security incidents, FY14, first quarter, 37 incidents. FY14, second quarter, 41 incidents. FY13, second quarter, we had 23.

Vice Mayor Orsborn said what constitutes a security incident?

Mr. Tabon said those where PD have to respond.

Vice Mayor Pizzillo said I know the numbers are not that large, but it's almost a 100 percent increase from the FY13 quarter to FY14 quarter.

Mr. Tabon said that's a result, we believe, of an increase in territory that we now cover. The numbers that you see for FY14 first quarter, FY14 second quarter are combined services Tempe and Mesa. And FY13 second quarter reflects what we operated just in Mesa. So there's some increase in activity as a result.

And here you have a description of the incidents: Criminal damage, disorderly conduct, assault, unknown substances, weapon possession, theft, bomb threat, and we had one unfortunate homicide.

Currently we're not seeing any major trends. The security committee meets monthly, typically on rail issues, but then we, towards the end of our meetings we do discuss some bus items any trends that we're seeing because we know that could impact our light rail activities as well. And we're not currently seeing any major trends heading our way.

Vice Mayor Aames said are all on the bus vehicle? Or at the station.

Mr. Tabon said yes, sir. They're either on the bus or at the stations.

Councilmember Sherwood said were there any additional extra incidents when we ran New Year's Eve.

Mr. Tabon said no. Actually New Year's Eve ran fairly well. We were very pleased to report it ran very well. We didn't have any extraordinary incidents. Anything else?

Councilmember Daniels said are our bus drivers are really the first line of defense, if you will? When it comes to something like this, are they given training on how to handle -- de-escalation training or anything like that to help them manage some of these situations?

Mr. Tabon said yes, they are trained. Valley Metro has met with our contractor to ensure that they receive the front line training necessary to respond to transit security specific incidents. And we've found that they've acted appropriately with the incidents

they've had.

Vice Chair Donovan said great. Thank you for the safety and security update.

Mr. Grote said Vice Chair, members of the Board, I'm going to give you a quick update on bus planning studies that we've been undertaking over the last quarter. Starting off with the transit standards and performance measures, we had a milestone last quarter. We completed Phase I and that was adopted by the Board in November. We are now moving on to Phase II in our efforts.

In our initial focus, we have a number of different issues that we're addressing in Phase II, but our initial focus is to look at the goals that we addressed that we wanted for service provision in Phase I and make sure that we're developing performance measures that match up with those goals.

And we have met with our technical advisory committee which is members of our various member agencies. And had an initial, really good discussion on that. And we're actually making good progress on moving forward with performance measures so much so that I'm hoping that maybe we can come back even sooner than I'm anticipating on the slide here, which we said mid-2015.

We also continued to work on Title VI policies and procedures. Last year we adopted a policy here at the Board. We also have a requirement from FTA to develop procedures. And we are working through that this year.

We also are working with MAG and the City of Phoenix on a regional planning memorandum of understanding and the roles and responsibilities. This is something we did a few years ago. We're updating that. And we're adding the responsibilities for Title VI into that agreement so that the federal government knows what we're doing to comply with their requirements.

We also have completed the park and ride survey during the last quarter. We in December, we came here to the Board. We gave you the results of our efforts and the report has now been distributed to staff. And so that is done. Next time that will come off of my list. That's no longer going to be a project for us.

We also have continued with the Fountain Hills transit study which we're close to wrapping up in the next month or so. We have completed a final report. The focus really for Fountain Hills is more demand responsive kind of service with their limited funding that they're looking at potentially having available. And we're going to be making recommendations to their town council probably sometime next month for that project.

We also continued to do a transit plan for the Town of Queen Creek. And that is going to be done by the middle of this year. And we're continuing to develop the service concepts over the last quarter.

The Southeast Valley Transit Study, this is a new study. This is one that is actually being led by MAG, but we are partners in the study with MAG. We're sharing in the responsibilities. MAG just went through the hiring process for a consultant. The consultant, URS, is now onboard. And we are about to initiate a kickoff meeting here with MAG in the very near future for that project.

The last thing is the corridor project that we have for bus. And this is the Scottsdale Rural Road LINK project. And for those of you who maybe don't know, LINK is very similar to what we've done already in Mesa and also in Chandler. And the purpose is to provide a limited stop service that links in with light rail.

We have been focusing on this project on what we call Phase I, which is the area north of the light rail line in Tempe up into north Scottsdale. There's also a segment south of there which involves south Tempe and then Chandler.

So for right now we're finalizing our capital and operating plan for Phase II. But we also recognize that there's some opportunities and benefits to try and combine Phase I and Phase II and doing these two phases concurrently, although we really only have the funding in place for Phase I.

And so we're exploring options for ways that maybe we can move that forward so that we can have a complete project that really makes more sense for us as an agency then only developing half of a project here.

So we're looking at options. One of the things that we're talking about, this is still in discussion, no decisions, but we see some possibilities from the consolidation efforts this last year from East Valley services that there's some potential savings. This may be one way to spend those or some of the savings here.

Again, there are a lot of different things that we're still talking about. But that's pretty much where we are at this point. And if there are any questions, I'd be happy to entertain.

Councilmember Sherwood said Phase II is budgeted for next year, next fiscal year?

Mr. Grote said Phase II is not budgeted right now. Initially when Prop. 400 passed, there were funds to do the whole project. And as the funds got tighter, some projects were deferred and some were continued. And I wasn't part of this at the time, because we were a different organization at the time, but what I understand is that there was decision to move forward with Phase I in the life cycle program. But Phase II remained unfunded for the time being.

Councilmember Sherwood said do you have an approximate cost of what that Phase II would run?

Mr. Grote said we do, Councilman, but I don't have the number with me. We're developing some costs, but I hazard to say what the number is without -- I can certainly

find that out for you, if you'd like.

Mr. McCormack said good afternoon. I'd like update you on some of the financial results for the second quarter and year to date. Operation results for the second quarter are shown on the left side of your table. And the year to date or six months results are shown on the right side.

So the budget is one quarter of the year budget, on this case it's six months of the year budget, and then the actual expenses incurred are shown.

So for the second quarter operating expenditures total $33.4 million, which is $300,000 favorable versus the $33.7 million budget.

Fixed route bus expended about $200,000 higher than planned this quarter. However, the year-to-date expenditures are still favorable by about $1.1 million to the plan.

Our paratransit expenses were right on plan for the second quarter. Year-to-date were about a $100,000 unfavorable and there's another item coming, a mid-year budget adjustment, coming to follow and we'll talk about where we think the paratransit costs are going to go for the rest of the year for the East Valley Dial-A-Ride program.

All the remaining expenses are favorable to plan. And with respect to staff positions, this is the first time we've brought this into the quarterly report, so as you may recall our budgeted full-time equivalent positions was 288. As of December 31, a snapshot at that point in time, there were 254 employees on the payroll. There are 34 at that point in time that hadn't been filled.

I do have another slide as a result of the discussion that we had at the Budget and Finance Subcommittee. This was not in your packet. So this is a new slide. But it provides a little extra information about where we are today.

So as I mentioned before, we had 34 open positions versus 288 as of December. Since that time we have filled five positions. And we have 29 open at this point in time. The majority of the open positions are in the operations and maintenance where we have 19 open of a total of 170 positions. In that area we have a number of entry level positions that experience routine turnover. And we also have some technical maintenance positions where we're finding and retaining the qualified staff at the 100 percent level is challenging for us.

I think the only other item here that I would address in terms of a larger number is the administrative organization development. We're currently working to restructure some of our IT resources. And we anticipate having that completed within the next two to three months. And so some of those positions should be filled.

Councilmember Sherwood said Mr. McCormack, so is this fairly typical if you look at operations and maintenance, is that a fairly typical number. You mentioned a lot of those are lower level positions of where you do have the turnover?

Mr. McCormack said I would look to Steve to address that with his experience.

Mr. Banta said I would say yes. There's a high turnover. A lot of times what we like to do is promote from within. So sometimes there are opportunities for people to come in as cleaners that might have maintenance skills that move up in the organization. Or if they're at the lower level and they are the cleaning crew, sometimes they find a job a little more lucrative somewhere else very quickly and they do transitions that way.

Councilmember Sherwood said so do we cover this deficiency with over time? How do you get through that?

Mr. McCormack said yes, certainly there is some overtime to cover it. And we watch carefully the costs of overtime and the total salary costs are within plan for the year to date. So when the balance gets to a point, we certainly step up the timing of the refilling of those positions.

On the customer service side, we have been looking at, we have the NextRide program and we're trying to not hire as many individuals in customer service depending on the success of the NextRide program. So I mean in that area we've held back a little bit, but for the most part the overtime is not a negative factor at this point because of these open positions.

Councilmember Sherwood said and, of course, that all leads to then are you maybe staffed a little heavily in terms of your overall requisitions or, I mean, I'm sure you go through a review on that periodically.

Mr. McCormack said we do. It's part of our annual budget process. And we will be looking from the bottom up from a zero-based budgeting aspect of all the needs in all of the departments. We look at the requirements of new capital that's coming on. If the activities are increasing on the capital area, the number of positions may rise.

On the operating side we've also had an increase in the services that we provide. So we re-evaluate the needs on that annual budget process basis.

Councilmember Sherwood said thank you. I know the Board appreciates seeing this, you know, in summary form. So appreciate that.

Mr. McCormack said this is just a look at capital. It's the same format. The second quarter budget for capital expenditures was $33.5 million. We expended only in two areas Valley Metro bus purchases of three million and METRO Rail lead agency disbursements of $6.4 million in the quarter for a total of $19.4 million.

When we look at the year-to-date expenses, our overall budget is nearly $67 million, our expenditures to date $34 million, the significant variance is there are in bus purchases and I'm going to address a reduction and actually reduce our budget this year because the timing of those expenses are not going to hit this year.

And also with respect to Valley Metro Rail, we had a number of projects that did not get started this year: The Tempe Streetcar project, the OMC solar project, they contributed to the first six months being below plan.

We are going to have acceleration in the second half of the year on the two major capital projects for rail: Northwest Extension and Central Mesa, where those monthly expenses are really going to escalate and there's a mid-year budget adjustment to address that as well.

So that's basically it for the second quarter update.

7. RPTA Fiscal Year 2014 (FY14) Mid-Year Budget Adjustment

Mr. McCormack said Agenda Item 7 is an action item requesting that the board approve changes to the Fiscal 2014 Operating and Capital Budget.

These changes have been reviewed with member city finance staff and have been recommended for approval by the Transit Management Committee at the January 8 meeting. In addition on January 16, the Budget and Finance Subcommittee recommended the Board move forward these changes for approval here today. Changes to operating activities include service increases within the East Valley Dial-A- Ride program which are driven by passenger trips to be delivered this year. The net increase to the budget is approximately $1.5 million funded by PTF and city contributions.

Information technology improvements will increase the capital outlay budget by $167,000. As you probably recall back in August we brought the SAN issue before you and the storage area network and server upgrades were purchased to increase our network capacity, reliability, and enable twenty-four-seven data operations.

I want to look in a little more detail at the East Valley operations, Dial-A-Ride operations. Here's a three-year look at service levels and cost.

In FY12, 203,000 trips were delivered at a cost of $8.6 million and that is a net of fares that were collected.

In FY13 under the new cab delivery model 252,000 trips were delivered at a cost of 6.7 million. And our current forecast in 2014, this fiscal year, is to deliver 315,000 trips at a contractor cost of $8 million.

This $8 million contractor level is down from the $8.5 million projection that we presented at the June Board meeting.

You may recall that the Transit Management Committee recommended that we hold the contractor budget level to $7.7 million. And we initiated control measures to try to hold the costs at that $7.7 million level.

In October we increased the non-ADA fares. And we put reservation policies were changed to enable daily caps to be enforced for non-ADA trips.

In February, staff will be presenting to the Board, an overview of the East Valley Dial-A- Ride program which will include updated ridership forecasts for the year next year along with projected costs and funding requirements.

I will say that with each passing month we are seeing positive impacts of the controls that we put in place last October.

This is a snapshot or excuse me -- a table that shows the adopted budget which was a total of $6.8 million dollars that was funded $5.2 million with PTF and one and a half million with member city contributions.

With the proposed amended budget, total program costs are $8.3 million with $6.5 million funded by PTF and $1.7 million funded by member city contributions.

With respect to the PTF, the funding change of about $1.3 million on PTF is incorporated into the 2014 service agreements with the members and is consistent with the amount included in the adopted Transit Life Cycle Plan.

With respect to the member city funding, I have another table down here. Member city funds required under the amended budget will be $1.7 million. We've executed service agreements with the member cities of $1.7 million and there is a slight variance, as you can see, for each of the member cities based upon the new forecast.

I will say that the trends that we have seen in recent months are suggesting that the $8.2 million is perhaps a little high, and we're hopeful that the costs will come in below that $8.253 million. That we anticipate at this time as the controls that we put place in October have seen impact in November and December.

With respect to the capital activities, changes on the capital activities include reductions to the bus standard replacement bus fleet of $2.3 million and expansion of about $300,000. These are related to the timing of buses that arrive this year versus last year.

With respect to the fleet other, here we had initiated a retro fit program last year that was not completed last year. All the costs were not expended last year, and so we will expend -- we're rolling forward, continuing the project and funding that out of this year's budget.

With relationship to the Scottsdale Rural Road LINK, there's a $1.1-million-dollar reduction as the right-of-way improvements that we're anticipated to occur this year will not occur this year and so they will be a part of our FY15 budget. So basically the timing of the expenses is moving from this year to next year.

The two items here on the Valley Metro Rail, with respect to lead agency disbursements of a bond and PTF funds to fund the light rail construction, we're expending $51 million greater than we had in the budget -- planned in the budget and that has to do with the timing of the expenses of the Northwest Extension and the Central Mesa project. And with respect to the debt service, there's the bond issue that we just completed. We will be expending an additional $45 million in this fiscal year than we had anticipated and that will be offset by reductions in the future years.

So there's no overall change to the capital budget for Northwest Extension or Central Mesa. Rather it's the timing of when the expenditures are going to hit. A summary of the uses of funds, for the operating projects there's an increase of $1.6 million to $147.6 million based upon the increase of the East Valley Dial-A-Ride and the administrative capital.

With respect to the capital projects, a net increase of $2.4 million. Reductions for the most part on the RPTA bus related activities, an increase on the rail activities of about $6 million offsets those.

And with respect to source of funds, total funding for the year, $367.6 million versus the initial budget of $363.6 million. That's a little over 1 percent increase in the overall sources and uses of funds for the year.

Some of the accounts here that you see increasing, PTF is increased based upon the updated forecast from ADOT, the RARF funds, and the lottery proceeds are trued up to the actual revenues that we've received. Federal grants are increased based upon the RPTA bus deliveries that are federally funded this year above last year.

And finally the bond proceeds and carryforwards and reserves are a net increase of $1.4 million. Those are a net effect of fewer dollars going out on the bus side and greater reserves being used on the rail side.

That concludes the presentation, the recommendation here before you. I'm here to answer any questions you may have.

Vice Chair Donovan said thank you. Any questions from the Board?

Chair Somers said just a comment on this. I have no objection to the upcoming motion and vote. However, I just wanted to make a comment that does relate to the East Valley Dial-A-Ride.

I know we have efforts underway to improve the accuracy of our forecasting, as well as to try to reduce the costs as it continues to be a huge expense as it relates to the total costs for East Valley communities.

From Mesa's perspective and from a budget perspective I'm having difficulty with the forecast in thousands of dollars in Mesa, we started at a projection of $140,000 and it went back up to $900,000. It dropped to $500,000 and now it's at $625,000 or so.

These wild vacillations in overages make it very difficult for us to budget and it's akin to try to target shoot a yo-yo. We need to see improvements in our forecast models specifically as it relates to East Valley Dial-A-Ride because these budget numbers -- and first of all, I am appreciative of them coming in earlier than they did last year -- still make it difficult for us to project in time to put a budget together that preserves service. Like last year, we had to cut some service in Mesa. I'm hoping to put that service back up. But as we move forward, these numbers need to be become increasingly accurate.

Mr. McCormack said Councilmember Somers, I appreciate the comment and certainly feel the pain as we implemented the new service there were a lot of unknowns and the success of the ridership was something that was not foreseen and certainly we all recall the meeting that we had back in June when we really brought that information to this Board.

Since that time we've, as you said, we have been working hard closely with the cities. We've implemented the cost controls and we will continue to refine and really zero in on the forecast of ridership and cost for this program as we move forward.

Chair Somers said thank you. And from what I've seen, we've hired some new people to -- or a new person from the private sector to help address that and we've also, as you mentioned, working with the contract, so I'm confident that we're going to move in that direction, but I wanted to make those comments here for the record because it's still a concern. Our budget and our projections are still a concern.

Councilmember Daniels said have we done some analysis of the demographics of our riders, if you will, to attribute on the success of the Dial-A-Ride program? And I think what I'm getting, and I'll just be really forthcoming, is if we can understand more about our riders, perhaps we can predict more of their behavior, which would allow us to forecast in a more accurate way.

It seems like our costs are lowering, which is wonderful, we went from, you know, $40- something dollars a ride to $26.00 and now to $25.00, which is a fantastic improvement. And, of course, we want to keep moving in that direction. But with the increase in ridership that's really where we're seeing the added cost. So what can we learn about the people that we're serving to help us maybe better manage our predictions?

Mr. McCormack said I'm really not the right person to answer that, but I hear the question that you ask and we are going to be presenting, as I mentioned in February, a rather complete overview of where we are today. And Mr. Brooks who's in the room today, I'm sure has heard this, so we will address your question at the February meeting and bring some light to that.

Public Comment

Mr. Crowley said I look at Item 6 on the last page of it where it says bus replacement year to date $1.4 million, budgeted $8.6 million and the excuse is, well, we'll get to that later.

And I see what you're doing now and I look at the documents that we're all pretty much aware of from MAG which would be the TIP. And I look on page 227 where it starts the 45 pages of transit and the first one of course is the abandoned projects of which purchase buses, purchase buses, purchase buses, and we didn't.

Then I look at your mid budget and planning and such and I heard them say, well, we're going to look out in Queen Creek and Fountain Hills and I grab the MAG RTP and I note that just about everything south of Chandler we're not planning for any buses and nothing in Queen Creek, so I know the reach out is there, but when I look at the maturation of documents and you're not buying buses but you did increase by $190 million dollars the acquisition for rail. And when I see in there a debt service and cost, do we have debt service on the moneys for the bus? No, we don't bond them. That's all rail.

I look at the percentages that we gave you as a document to put it together and I don't see where you're doing the study to check out Tonopah or to replace the rural routes because what we were given was to expand, not just to be parochial, so when I see the documents that you present to MAG, which is the other half of the coin but the main metropolitan planning agency and I don't see buses going in and what you're doing is adjusting seven and a half million dollars not to buy buses. What's going on here? What are you doing?

IT WAS MOVED BY VICE MAYOR AAMES, SECONDED BY COUNCILMEMBER SHERWOOD AND UNANIMOUSLY CARRIED TO AUTHORIZE THE MID-YEAR BUDGET ADJUSTMENT UPDATE TO THE VALLEY METRO RPTA OPERATING AND CAPITAL BUDGET FOR FY14.

8. Future Agenda Items Request and Report on Current Events

Vice Chair Donovan said do any board members have any agenda items for future meetings or anything you would like to inform the board about? Yes.

Vice Mayor Orsborn said I've got a couple current events that I wanted to talk about. One is the change in the route for 685. If you recall, that's the route that goes from Ajo all the way into Desert Sky Pavilion, I can't remember the name of it right now, and that route used to catch people in Buckeye and then go on a very scenic route on the south side of Buckeye, on MC85, past farm fields and a beautiful drive, but no population. So what Valley Metro is doing is making some changes to that route to where it now becomes a much more efficient route within the City of Buckeye. And it picks up people at the same place that it used it and then it hits population centers and goes along main transportation corridors.

So from Buckeye's perspective we want to thank Valley Metro for making those changes and making that route work so much more efficient for the city.

And then second we had a transportation master plan workshop this last Tuesday. And we talked about the transportation corridors and what Buckeye eventually grows into. And this is part of the west -- it's actually the entire valley. Everything is going to continue to grow again. We're going to grow into these land areas that we are. And we have the opportunity now with Valley Metro's help to plan where that transit goes within those transportation corridors and plan our community to where it maximizes transit and we can make best use of buses and light rail and things like that. And we're not trying to shoehorn that stuff into an existing city that didn't account for that.

In one of the stats that came up, in population and land area, so just kind of the an idea about the future and how things are going to grow, the City of Phoenix has a population according to quick facts.census.gov. So .gov means it's correct; right? It's on the Internet, so it's right. Of 1.488 million people. And a land mass of 516 square miles. And the City of Buckeye will eventually grow to, depending on water and how that land plan works out, about one and a half million people and a land mass of 600 square miles right now in our planning area.

So pretty incredible to think about the future of what we're doing here, of what we're doing as a city, and this isn't just a West Valley plug, this is Mesa, you know, from east to west Queen Creek, you name it. But there's a lot of planning to do and a lot of future for transit and probably a great opportunity to plan things and make them right or better than they have ever been. So thank you for the opportunity.

Councilmember Farr said on the same note that Councilman Orsborn spoke of, Tolleson appreciates Valley Metro, for their addition of the new schedule on the Route 3, which goes out through Tolleson and will be running every half hour instead of every hour. And we in turn have had to or -- happily have had to partner with Avondale to purchase more buses, well, for the ZOOM bus because the Circulator is working so well and our ridership is up 143 percent. So we are very excited with -- you can get us from Phoenix out to the West Valley and then you can get on the circulator and go in other areas to do your shopping and your errands, so it's a win-win situation for us. And thank you Valley Metro.

Vice Chair Donovan thank you for that update. Any other updates or request for future agenda items?

Chair Somers said I just want to thank you for chairing today's meeting. For those of you wondering, I am obviously out of town. I'm in Washington D.C. doing some work with the American Red Cross. I'm at their headquarters today. Buses are running but there's a little bit of snow on the ground, so I'm missing 78 degrees.

With no further discussion the meeting adjourned at 1:20 p.m.

DATE AGENDA ITEM 3 February 13, 2014

SUBJECT Chief Executive Officer’s Report

PURPOSE Steve Banta, Chief Executive Officer, will brief the Board on current issues.

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS None

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

DATE AGENDA ITEM 4A February 13, 2014

SUBJECT Workers’ Compensation and Employer’s Liability Insurance Coverage Renewal

PURPOSE To request Board authorization for Valley Metro to purchase workers’ compensation and employer’s liability insurance to cover work-related injuries to all RPTA employees. The current insurance policy will expire on March 1, 2014. Coverage is required by statute.

BACKGROUND/DISCUSSION/CONSIDERATION The workers’ compensation and employer’s liability insurance has been covered by SCF Western (a subsidiary of SCF Arizona) for more than 12 years. In December 2013, SCF changed its name to CopperPoint Mutual Insurance Company. Past attempts to market this coverage to other carriers have produced no viable results.

This year our insurance broker, Arthur J. Gallagher, requested quotes on Valley Metro’s behalf from 18 different markets. All but one has declined to quote coverage. We received a quote from CopperPoint Mutual Insurance Company (formerly SCF). The majority of the market providers declined to quote due to Valley Metro’s business classification in the insurance market which includes class code 8385 – Bus and Light Rail Company Garage and Yard Employees.

CopperPoint Mutual Insurance Company has quoted a price to renew the coverage. They have been a trusted partner with Valley Metro for more than 12 years.

COST AND BUDGET The following premium indication was provided by CopperPoint Mutual Insurance Company:

Expiring Renewal Line of Coverage Policy Limit Premium Premium Workers’ Compensation / Statutory / $ 185,343 $177,165 Employer’s Liability $1,000,000 (unaudited) (estimated)

Allocation of this cost to be attributed to RPTA and METRO budgets are based on actual payroll allocations between the two budgets. Historically, this split has been approximately 11% to the RPTA budget and 89% to the METRO budget.

The annual premium is subject to a payroll audit at the end of the policy period which runs from immediately following the expiration of the existing policy on March 1, 2014

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

through March 1, 2015. If the audited payroll differs from the estimated payroll, there will be a premium adjustment.

COMMITTEE ACTION RTAG: January 21, 2014 for information TMC: February 5, 2014 approved Board: February 20, 2014 for action

RECOMMENDATION It is recommended that the Board of Directors authorize the CEO to renew the workers’ compensation and employer’s liability insurance coverage for a one year period with CopperPoint Mutual Insurance Company for an estimated annual premium of $177,165.

CONTACT Carol Ketcherside Director of Administration and Organizational Development 602-523-6040 [email protected]

ATTACHMENTS None

DATE AGENDA ITEM 4B February 13, 2014

SUBJECT Contract Award for Concrete Rehabilitation at the Mesa Operations Facility

PURPOSE To request Board authorization for the Chief Executive Officer (CEO) to execute a job-order contract with Centennial Contractors Enterprises, Inc. for concrete rehabilitation work at the Mesa Operations Facility for an amount not to exceed $300,000.

BACKGROUND/DISCUSSION/CONSIDERATION Valley Metro’s Mesa Operations Facility’s vehicle parking and staging area has experienced multiple concrete panel failures. There are also several storm water catch basins and valley gutters that have deteriorated and require repair. The repair includes approximately 1,900 square yards of 8 inch concrete pavement, approximately 2,500 linear feet of joint sealant and three catch basins. These repairs are part of an on-going rehabilitation process for this facility.

Centennial Contractors Enterprises, Inc. was selected through the contracting services procured by the Mohave Educational Services Cooperative, Inc., is compliant with the state- wide contract and is recommended to perform the required repairs. Valley Metro’s Design and Construction Department will provide the construction management services for this work.

COST AND BUDGET The cost for this work will not exceed $300,000 and is included in the Fiscal Year 2014 (FY14) Valley Metro budget in Project 9110 - Operating/ Maintenance Facilities. All funding required for this capital expense is from IRS fuel tax credit receipts.

COMMITTEE ACTION RTAG: – January 21, 2014 for information TMC: February 5, 2014 approved Board of Directors: February 20, 2014 for action

RECOMMENDATION It is recommended that the Board of Directors authorize the CEO to execute a job-order contract with Centennial Contractors Enterprises, Inc. for concrete rehabilitation work at the Mesa Operations Facility for an amount not to exceed $300,000.

CONTACT Rick Brown Chief Engineer 602-744-5556 [email protected]

ATTACHMENTS None

DATE AGENDA ITEM 4C February 13, 2014

SUBJECT Fiscal Year 2013 (FY13) Comprehensive Annual Financial Report (CAFR) and Single Audit Act Reporting Package

PURPOSE To request that the Valley Metro Board of Directors accept the Comprehensive Annual Financial Report and Single Audit Act Reporting Package for the period ended June 30, 2013.

BACKGROUND/DISCUSSION/CONSIDERATION Heinfeld, Meech & Co., P.C., Certified Public Accountants, has completed the FY13 RPTA audits. Completion of the June 30, 2013, financial statement and Single Audit Act audits indicates Valley Metro’s compliance with both state and federal statutory audit requirements as well as adherence to Generally Accepted Accounting Principles in financial reporting. Preparation of a Comprehensive Annual Financial Report demonstrates Valley Metro’s commitment to the highest standard of financial reporting for a governmental entity. The accompanying report is submitted for review and acceptance.

In planning and performing the audit of the financial statements, Heinfeld, Meech & Co., P.C. considered RPTA’s internal controls in order to determine auditing procedures for the purpose of expressing opinions on the financial statements and not to provide an opinion on internal controls.

During the course of the audit there were no findings. Valley Metro’s Comprehensive Annual Financial Report for FY13 received an unmodified opinion and the receipt of the GFOA Certificate of Excellence for the FY12 CAFR demonstrates the commitment to the highest standard of financial reporting for a government entity. Attached you will find a copy of the Auditor’s reports and Management Discussion and Analysis section of the CAFR.

The complete reports are available on the Valley Metro website at the following URL: http://www.valleymetro.org/publications_reports/annual_reports

COST AND BUDGET None

COMMITTEE ACTION RTAG: January 21, 2014 for information Financial Working Group: January 21, 2014 for information TMC: February 5, 2014 approved Budget and Finance Subcommittee: February 13, 2014 for information Board of Directors: February 20, 2014 for action

RECOMMENDATION It is recommended that the Board of Directors accept the FY13 Comprehensive Annual Financial Report and Single Audit Act Reporting Package.

CONTACT John McCormack Chief Financial Officer [email protected] 602-262-7433

ATTACHMENTS Auditors Opinion – CAFR FY13 2013 Management Discussion and Analysis – CAFR FY13 Audit Standards Disclosure Auditors Opinion – Single Act Audit Reports FY13

10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718

INDEPENDENT AUDITOR’S REPORT

Board of Directors Valley Metro Regional Public Transportation Authority

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of Valley Metro Regional Public Transportation Authority (the Authority), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the Valley Metro Regional Public Transportation Authority, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparisons for the General Fund and major special revenue funds for the year then ended in conformity with accounting principles generally accepted in the United States of America.

TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com Change in Accounting Principle As described in Note 1, the Authority implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, for the year ended June 30, 2013, which represents a change in accounting principle. Our opinion is not modified with respect to this matter.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 13 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The accompanying supplementary information such as the Introductory Section, Other Supplementary Information – Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Other Supplementary Information – Combining and Individual Fund Financial Statements and Schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Other Supplementary Information – Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2013, on our consideration of Valley Metro Regional Public Transportation Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Valley Metro Regional Public Transportation Authority’s internal control over financial reporting and compliance.

HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants

December 16, 2013 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis

As management of Valley Metro Regional Public Transportation Authority (the Authority), we offer this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, 2013. This discussion and analysis is designed to (1) assist the reader in focusing on significant financial issues, (2) provide an overview of the Authority’s financial activity, (3) identify changes in the Authority’s financial position, (4) identify any material deviations from the financial plan (adopted annual budget) and (5) identify individual fund issues or concerns.

Financial Highlights x The Authority’s total net position increased $23.0 million in FY 2013, comprised of an increase of $2.5 million in governmental activities and an increase of $20.5 million in business-type activities. Total net position of the Authority is $128.6 million, of which $108.4 million is unrestricted. x The governmental activities revenues increased by approximately $5.5 million (4.4%) over the previous year. x The business-type activities revenues decreased by approximately $2.0 million (3.4%) from the previous year. x At June 30, 2013, the Authority’s governmental fund balance sheet reported a combined ending fund balance of $49.7 million, an increase of $2.3 million (4.8%) compared to the previous fiscal year.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial statements are presented as follows: x Government-wide reporting – presents financial statements on a government-wide basis. x Fund financial statements – presents governmental, proprietary and fiduciary fund financial statements, with the focus on major funds within each fund type. x Measurement focus for governmental activities – in the government-wide financial statements all activities, including the governmental activities, are reported using the economic resources measurement focus and accrual basis of accounting. The current financial resources focus and modified accrual basis of accounting are followed for the governmental fund financial statements. x Budgetary reporting – the display of both the original adopted budget and the revised budget in the budgetary comparison schedules is required by GAAP. These schedules are only required for the General Fund and major special revenue funds; these statements are presented as part of the basic financial statements. The Authority has presented this information for the proprietary funds in Other Supplementary Information. x Required narrative analysis – the financial statements are required to be accompanied by narrative introduction and analytical overview of the government’s financial activities in the form of “Management’s Discussion and Analysis” (MD&A).

3 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

As presented below, the financial section of the Comprehensive Annual Financial Report (CAFR) for the Authority consists of this discussion and analysis, the basic financial statements and required supplementary information (other than MD&A). There are also additional non-required supplementary schedules presented after the basic financial statements. The basic financial statements include the government-wide financial statements, fund financial statements, including the budgetary statements for the general fund and major special revenue funds, and notes to the financial statements.

Government-wide Financial Statements The government-wide financial statements (see pages 14 – 16) are designed to provide a broad overview of the Authority’s finances in a manner similar to those used by private businesses. All of the activities of the Authority, except those of a fiduciary nature, are included in these statements.

The activities of the Authority are broken down into two columns on these statements – governmental activities and business-type activities. A total column for the Authority is also provided. x The governmental activities include the basic services of the Authority including general government (administration), regional planning, transportation demand management and regional customer services. Grants and general revenues generally support these activities. x The business-type activities include the private sector type activities which are transit service operations and light rail transit. These activities are partially supported by user charges and provide substantial benefits, both direct and indirect, to the public at large.

The Statement of Net Position presents information on all of the Authority’s assets and liabilities, both current and noncurrent, with the difference between the two reported as net position. The focus on net position is designed to be similar to the emphasis for businesses. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. To assess the overall health of the Authority, other indicators, including non-financial indicators like the Authority’s tax base and the condition of its capital assets, should also be considered.

4 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

The Statement of Activities presents information showing how the Authority’s net position changed over the most recent fiscal year. Since full accrual accounting is used for the government-wide financial statements, all changes to net position are reported at the time that the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This statement also focuses on both the gross and net costs of the various functions of the Authority, based only on direct functional revenues and expenses. This is designed to show the extent to which the various functions depend on general taxes and revenues for support.

Fund Financial Statements Also presented are more traditional fund financial statements for governmental funds, proprietary funds and fiduciary funds. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or conditions. Funds are used to ensure and demonstrate compliance with finance-related legal requirements as well as for managerial control to demonstrate fiduciary responsibility over the assets of the Authority.

Governmental funds – Governmental funds are used to account for most of the Authority’s basic services. Unlike the governmental activities column on the government-wide financial statement, these fund financial statements (pages 17 - 22) focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information is useful in looking at the Authority’s near-term financial requirements. Since the governmental activities on the statements focus on near-term spendable resources, while the governmental activities on the government-wide financial statements have a longer term focus, a reconciliation of the differences between the two statements is provided following the fund financial statements and is also provided in Note 2 (pages 35 - 36).

Proprietary funds – Proprietary funds are used to account for business-type activities of the Authority. Enterprise funds are used for activities that primarily serve customers outside the governmental unit. The proprietary fund financial statements (pages 23 - 25) are prepared using the same long-term focus as the government-wide financial statements. The enterprise funds generally provide information similar to the business-type activities column of the government- wide financial statements, but provide more detail and additional information (i.e., cash flows).

Notes to the Financial Statements – The notes to the financial statements (pages 26 – 47) provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements.

Required supplementary information other than MD&A – Governments have an option of including the budgetary comparison statements of the general fund and major special revenue funds as either part of the fund financial statements within the basic financial statements or as required supplementary information after the footnotes. The Authority has chosen to present these budgetary statements as part of the basic financial statements.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

The following tables and analysis discuss the financial position and changes to the financial position for the Authority as a whole as of and for the year ended June 30, 2013, with comparative information for the previous year.

5 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

Net Position Net position may serve over time as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2013 compared to the prior year:

Condensed Statement of Net Position As of June 30 (in thousands of dollars)

Governmental Business-type Total Activities Activities Primary Government Percent 2013 2012 2013 2012 2013 2012 Change

Current and other assets $ 51,642.3 $ 48,029.6 $ 106,992.2 $ 75,408.8 $ 158,634.5 $ 123,438.4 28.5% Noncurrent assets Cash and cash equivalents - - 14,833.2 23,448.7 14,833.2 23,448.7 -36.7% Deferred charges - - 635.7 696.1 635.7 696.1 -8.7% Capital assets 1,308.7 1,199.1 90,619.2 85,449.3 91,927.9 86,648.4 6.1% Total assets$ 52,951.0 $ 49,228.7 $ 213,080.3 $ 185,002.9 $ 266,031.3 $ 234,231.6 13.6%

Other liabilities$ 2,531.4 $ 1,233.6 $ 42,750.3 $ 29,506.3 $ 45,281.7 $ 30,739.9 47.3% Long-term liabilities 164.9 218.7 91,988.1 97,686.9 92,153.0 97,905.6 -5.9% Total liabilities$ 2,696.3 $ 1,452.3 $ 134,738.4 $ 127,193.2 $ 137,434.7 $ 128,645.5 6.8%

Net position: Net Investment in capital assets,$ 1,308.7 $ 1,199.1 $ 8,437.7 $ 6,528.6 $ 9,746.4 $ 7,727.7 26.1% Restricted 2,117.8 188.8 8,286.5 120.7 10,404.3 309.5 3261.7% Unrestricted 46,828.2 46,388.5 61,617.7 51,160.6 108,445.9 97,549.1 11.2% Total net position$ 50,254.7 $ 47,776.4 $ 78,341.9 $ 57,809.9 $ 128,596.6 $ 105,586.3 21.8%

The Authority’s total net position increased $23.0 million in FY 2013, comprised of an increase of $2.5 million in governmental activities and an increase of $20.5 million in business-type activities. Total net position of the Authority is $128.6 million, of which $108.4 million is unrestricted.

Of the $128.6 million total net position, $9.7 million are the Authority’s net investment in capital assets used to acquire those assets. The Authority uses these capital assets to provide services to the region’s citizens; consequently, it is not the Authority’s intention to sell these assets, and they are therefore not available for future spending. The capital assets are reported net of related debt; as discussed in the Capital Assets and Debt Administration section (pages 10 - 11), the Authority has pledged future transportation excise tax revenues to repay the outstanding debt obligations. The capital assets themselves are not intended to be used to liquidate these liabilities.

Approximately $108.4 million of the Authority’s net position (84.3% of the total) represents unrestricted resources that may be used to meet the Authority’s ongoing obligations to citizens, member agencies, contractors and creditors within the respective governmental and business- type activities. In fiscal year 2013 Business-type restricted assets include $7.9 million for cash escrowed for debt service. The remaining $2.5 million reflects resources that are subject to other external restrictions.

The governmental activities reported an increase of $0.4 million (0.9%) of unrestricted net position over the prior year largely attributed to sales tax collection increases which were in excess of increases to expense activities of the Authority. The significant increase of $10.5 million of unrestricted net position over the prior year in business-type activities is primarily due to PTF transfers to the Valley Metro Rail Fund for capital projects to be expended in FY 2014 and FY

6 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

2015 ($17.9 million). The increase in the Rail fund was offset by a $7.5 million decrease in the Transit Services unrestricted net position.

Changes in Net Position The following table compares the revenues and expenses of the Authority for the current and previous fiscal year. The increase (decrease) in net position for each year represents the extent to which revenues were over (under) expenses during the year.

Changes in Net Position Fiscal year ended June 30 (in thousands of dollars)

Governmental Business-type Total Activities Activities Primary Government Percent 2013 2012 2013 2012 2013 2012 Change

REVENUES Program revenues: Charges for services$ 176.0 $ 153.4 $ 25,865.9 $ 25,558.8 $ 26,041.9 $ 25,712.2 1.3% Operating grants and contributions 13,102.6 13,601.9 10,717.0 1,337.1 23,819.6 14,939.0 59.4% Capital grants and contributions - - 19,661.1 31,347.3 19,661.1 31,347.3 -37.3% General revenues: - Sales taxes 118,336.0 112,353.3 - - 118,336.0 112,353.3 5.3% Interest earnings 114.1 73.1 137.0 109.8 251.1 182.9 37.3% Other 127.0 100.2 9.3 16.6 136.3 116.8 16.7% Total revenues 131,855.7 126,281.9 56,390.3 58,369.6 188,246.0 184,651.5 1.9%

EXPENSES Governmental activities: Regional planning 1,245.0 1,287.4 - - 1,245.0 1,287.4 -3.3% Transportation demand management 1,587.1 1,391.3 - - 1,587.1 1,391.3 14.1% Regional customer services 8,200.1 8,044.5 - - 8,200.1 8,044.5 1.9% Administration 1,988.9 1,820.5 - - 1,988.9 1,820.5 9.3% AZ Lottery fund disbursements 10,200.1 10,346.0 - - 10,200.1 10,346.0 -1.4% Business-type activities: Transit service operations - - 91,327.3 113,091.6 91,327.3 113,091.6 -19.2% Light rail transit - - 50,687.2 33,665.2 50,687.2 33,665.2 50.6% Total expenses 23,221.2 22,889.7 142,014.5 146,756.8 165,235.7 169,646.5 -2.6%

Excess (deficit) before transfers 108,634.5 103,392.2 (85,624.2) (88,387.2) 23,010.3 15,005.0 53.4% Transfers in (out) (106,156.2) (108,464.1) 106,156.2 108,464.1 - - N/A Increase (decrease) in net position $ 2,478.3 $ (5,071.9) $ 20,532.0 $ 20,076.9 $ 23,010.3 $ 15,005.0 53.4%

The largest sources of revenue for the Authority are sales taxes (62.9%). The major funding sources of governmental activities are sales taxes (89.7%) and federal and state grants (9.9%). The major funding sources for business-type activities are federal grants (53.9%) and charges for services to member cities (45.9%).

The Authority’s overall revenues increased by $3.6 million, or 1.9%, compared to last fiscal year. Total revenues of governmental activities increased by $5.5 million, (4.4%) over the previous year due to increased sales tax revenues ($6.0 million) which were offset by reductions in Arizona Lottery Fund revenues (-$0.4 million). All other governmental program revenues increased by $0.1 million. Program revenues of business-type activities decreased by $2.0 million or 3.4%, compared to last fiscal year. Federal Transit Administration (FTA) capital grants for bus fleet and facilities decreased by (-$11.7 million) while FTA operating grants increased by $9.4 million. Charges for Services increased by $0.3 million.

Spending of the Authority’s sales tax revenues is limited to funding those activities necessary to implement the Proposition 400 Transit Life Cycle Program (TLCP). The Public Transportation Fund (PTF) revenues are restricted to the implementation of the transit element of the Regional

7 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

Transportation Plan (RTP). Regional Area Road Fund (RARF) revenue is limited to fund administration in the General Fund and planning activities.

Business-type activities are the largest users of resources for the Authority with $142.0 million of expenses (85.9%) which include Transit Service operations and Light Rail Transit lead agency disbursements. Governmental activities expended $23.2 million, with the largest being AZ Lottery Fund Disbursements of $10.2 million and Regional Customer Services of $8.2 million. Administration, Regional Planning, and Transportation Demand Management activities totaled $4.8 million for the year.

Total Primary Government expenses decreased by $4.4 million, or 2.6%, compared to last fiscal year. The governmental expenses increased by $0.3 million, or 1.4%, over the prior year. AZ Lottery Fund Disbursements were $10.2 million for the year, down (-$0.1 million) or 1.4%. All other governmental activity expenses increased by $0.4 million or 3.4%. Business-type activity expenses were decreased by $4.7 million, or 3.2%, compared to the prior year. The decreases in business-type activity expenses were primarily due to $20.3 million in reductions to capital conveyances of bus fleet and bus stop facilities to Member Cities. ($8.1 million expended in FY 2013 versus 28.4 million expended in FY 2012) The amounts of capital conveyances fluctuate from year to year based on cyclical needs to replace bus fleet. The capital conveyance decreases were offset by expense increases of $17.0 million in the Valley Metro Rail (VMR) rail fund due to increasing lead agency disbursements for construction activities ($14.2 million) and structural changes to staffing levels ($2.8 million) related to replacement of contracted staff for vehicle maintenance with in-house staff.

FINANCIAL ANALYSIS OF THE AUTHORITY’S FUNDS

As previously mentioned, the Authority maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements.

Governmental Funds The focus of the governmental funds financial statements (pages 17 – 22) is to provide information on near-term inflows, outflows and balances of spendable resources. The fund balance of the governmental funds is $49.7 million, an increase of $2.3 million, or 4.8%, from the previous year. Of the $49.7 million total fund balance, the Authority has designated $2.1 million restricted for special purpose activities the remainder is in unrestricted fund balance in the General Fund (see Note 6 - page 40). Unrestricted fund balance may serve as a useful indicator of a government’s net resources available for spending at the end of the year. Of the $49.7 million fund balance, $47.5 million is unrestricted.

The General Fund accounts for activities that include regional customer service, financial management and agency administration. General Fund revenues increased $5.5 million (4.4%) over the previous year. Public Transportation Fund (PTF) sales tax revenue increased by $5.9 million (5.5%) in FY 2013 to $113.8 million. Regional Area Road Funds (RARF) sales tax revenues increased slightly by $0.1 million (2.1%) in FY 2013 to $4.6 million. The sales tax revenue increase was due to the improving economy in the region. The remaining General Fund revenues decreased by $0.5 million, primarily the AZ Lottery Funds which reduced by $0.4 million (3.8%) from $11.6 to $11.2 million. General Fund expenditures increased by $0.5 million (2.3%) from $20.1 to $20.6 million. Excess General Fund revenues over expenditures were $109.5 million for the year versus $104.5 million in the prior year, up $5.0 million or 4.8%.

8 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

The Transit Planning Fund accounts for activities related to the development of strategies to promote social and economic well-being of the community through the provision of an efficient and effective regional transit system. Revenues decreased due to the reduction of FTA grant awards received, down $72,000 to $228,022. Expenditures decreased slightly from $1.3 million to $1.2 million due to reduced planning activities during the year. Prior to 2006, sales taxes allocated to the Transit Planning Fund were shown as revenues. RARF sales tax revenues are designated for transit planning efforts. These monies are now shown as transfers in. Total transfers into the Transit Planning Fund from the General Fund were $1.0 million, with no significant change versus the prior year.

The Transportation Demand Management Fund accounts for activities related to the county-wide ridesharing program, trip reduction program and clean air campaign. From the prior year, revenues increased $0.2 million (11.1%) to $1.6 million from federal CMAQ and state and county grants. Expenditures increased $0.2 million (14.1%) to $1.6 million from the prior year due to increases in the ridesharing program and other activities.

Proprietary Funds The proprietary fund financial statements (pages 23 – 25) are prepared on the same accounting basis and measurement focus as the government-wide financial statements, but provide additional detail since each enterprise fund is a major fund and is shown discretely on the fund statements.

The Transit Service Operations Fund accounts for the activities related to the operations of local and express bus, paratransit and vanpool services for the region. Net position increased by $2.7 million over the prior year to $28.6 million. Operating revenues ($20.4 million) increased by $4.5 million while operating expenses ($61.4 million) decreased by $3.9 million. Decreases in local and express bus service costs, paratransit service costs and depreciation expense contributed to the overall operating expenses decrease. Non-operating expenses ($26.2 million) decreased by $20.2 million, primarily due to the reduction in capital conveyance of bus fleet and facilities to member cities. Capital Contributions ($26.7 million) were down by $11.5 million due to fewer bus fleet and facility purchases during the year. Net transfers in from the General Fund ($50.0 million) were down by $14.5 million.

The Valley Metro Rail Fund accounts for staffing and administrative services that are contractually provided by the Authority to Valley Metro Rail, Inc. (VMR) and the PTF sales tax revenues and expenses of such funds related to the Regional Transportation Plan approved light rail projects. Valley Metro Rail, Inc. is a nonprofit corporation organized for the purpose of planning, designing, constructing, and operating the light rail transit project in metropolitan Phoenix (see Note 1(a) on page 26). The Valley Metro Rail Fund has net position of $49.8 million as of June 30, 2013 as compared to net position of $31.9 million at the end of the previous year. In fiscal year 2013 the Valley Metro Rail Fund received 43.2% of the total PTF sales tax revenues distributed to the Authority from the Arizona Department of Revenue, totaling $49.2 million and received 11.0% of the $4.6 million RARF sales tax revenue received by the Authority, totaling $0.5 million. Additionally, the Valley Metro Rail Fund received $11.2 million of transfers in of 2009 Bond proceeds from the Transit Service Operations Fund for VMR capital expenditure reimbursements.

GENERAL FUND BUDGETARY HIGHLIGHTS

The Authority revised the adopted budget during the fiscal year, reducing the overall budget from $277.1 million to $276.4 million. The primary change was a reduction to the operating budget from $90.8 million to $90.1 million. For the year ended June 30, 2013, actual expenditures in the General Fund were over the adopted budget amounts by $10.0 million. The variance was

9 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued) attributable to the incorporation of AZ Lottery fund disbursements of $10.2 million as General Fund expenditures which were not included in the annual budget. In prior year financial reporting, the AZ Lottery Fund Proceeds and Disbursements were reported as fiduciary funds and not included in the General Fund transactions. The remaining General Fund activities were below budget by $0.2 million for the year.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets As of June 30, 2013, the Authority had $91.9 million invested in various capital assets, net of accumulated depreciation, for its governmental and business-type activities. The overall net increase in the Authority’s capital assets for the current fiscal year was $5.3 million, an increase of 9.1% for governmental activities and an increase of 6.1% for business-type activities for the current year. Major capital asset events in the current year attributing to the increase included the following:

x Transit Fleet additions accounted for $4.7 million of the net change. x Depreciation expense in the current year totaled $9.9 million, $9.4 million for business type capital assets and $0.5 million for governmental activities capital assets.

The following table provides a breakdown of capital assets of the Authority at June 30, 2013 with comparative information for the previous year. Additional information on the Authority’s capital assets may be found in Note 7 on pages 41 – 42.

Capital Assets, Net of Accumulated Depreciation As of June 30 (in thousands of dollars)

Governmental Business-type Total Activities Activities Primary Government Percent 2013 2012 2013 2012 2013 2012 Change

Non-depreciable assets: Land$ - $ - $ 5,292.0 $ 5,292.0 $ 5,292.0 $ 5,292.0 0.0% Work-in-progress - - 1,957.5 2,515.4 1,957.5 2,515.4 -22.2% Depreciable assets: Transit fleet - - 60,354.6 55,710.4 60,354.6 55,710.4 8.3% Vehicles 75.6 - 20.7 - 96.3 - 100.0% Building - - 11,935.2 12,226.3 11,935.2 12,226.3 -2.4% Site improvements 369.8 300.4 6,201.7 6,768.1 6,571.5 7,068.5 -7.0% Computers & software 221.9 187.6 - 44.1 221.9 231.7 -4.2% Ticket Vending Machines - - 1,208.2 - 1,208.2 - 100.0% Equipment 541.8 572.6 3,620.0 2,884.3 4,161.8 3,456.9 20.4% Furniture & fixtures 99.6 138.6 - 8.7 99.6 147.3 -32.4% Infrastructure - - 29.3 - 29.3 - 0.0% Total assets$ 1,308.7 $ 1,199.2 $ 90,619.2 $ 85,449.3 $ 91,927.9 $ 86,648.5 6.1%

10 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

Debt Administration At June 30, 2013, the Authority had total bonded debt outstanding (including unamortized premium) of $96.8 million related to business-type activities. The Authority has pledged future transportation excise tax revenues to repay this outstanding debt. Business-type Activities

(in millions of dollars) 2013 2012

Revenue bonds payable $ 92.7 $ 97.8 Plus unamortized premium: Bond premium payable 4.1 4.6

Total $ 96.8 $ 102.4

The Authority’s current bond ratings on transportation excise revenue tax bonds are AA+ from Standard & Poor’s and AA from Fitch.

Additional information on the Authority’s bonded debt and other long-term liabilities can be found in Note 10 on pages 43 - 44.

ECONOMIC FACTORS and NEXT YEAR’s BUDGET

RPTA undertook a number of key initiatives during FY 2013, as the agency continues the implementation of the TLCP operating and capital projects. Funding for these initiatives comes from a combination of regional sales tax revenues member city service payments and federal grants.

The key initiatives for fiscal year 2013 included:

East Valley Bus Service Unification On January 24, 2013, the Authority’s Board of Directors unanimously approved an action to authorize the CEO to execute a contract with First Transit, Inc. for unified East Valley fixed route bus operations and maintenance. This action unifies the RPTA- managed bus operations in Mesa with bus operations in Tempe, which were managed under a City of Tempe contract. With the unified bus operations contract, management staffing will be streamlined and economies of scale will be realized for purchasing, training and administrative functions. In addition, it will equate to lower operating costs as route scheduling is optimized using the two existing Mesa and Tempe bus operations facilities. The new service delivery contract took effect July 1, 2013 and will deliver cost savings in fiscal year 2014.

Fare increase On March 1, 2013, the Authority implemented a region-wide fare increase to maintain the cost sharing relationship between passenger fares and transportation tax subsidies. The $.25 increase to the passenger cost of a single ride was the first fare increase since 2009 and raised the fare from $1.75 to $2.00. (up 14.3%) Paratransit fares for ADA certified persons increased from $3.50 to $4.00. (up 14.3%) The new fare structure will maintain the Board- adopted target of 25% fare recovery ratio for region-wide fixed route transit services.

East Valley Dial-a-Ride Program On July 1, 2012, the Authority commenced a pilot Paratransit service program to serve persons with disabilities and eligible seniors with a new service delivery model. The new taxi cab delivery model incorporates greater efficiency utilizing resources from the private sector, while allowing the custom, door-to-door service that passengers need in their daily

11 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued) travels. In its first year, the program was favorably accepted by the passengers and reduced the cost per trip from $42.40 under the former program to $26.64 per trip under the new program. Program cost of operation was $6.8 million in FY 2013 versus $8.8 million in FY 2012, a $2.0 million savings. Growth in passenger usage was 30% during the year and poses a challenge to long term sustainability should ridership continue to grow rapidly in response to the improved level of services provided.

Next Year’s Budget The adopted FY 2014 combined operating and capital budget is $363.6 million (up approximately 31% from fiscal year 2013). Public Transportation Funds are projected to increase by 5% to $120.2 million with continuing improvement to region’s economy. Transit Service Agreements (TSA) are increasing due to the integration of east valley bus service to be operated by RPTA in fiscal year 2014. Bus transit services formerly operated by the City of Tempe will be operated by the RPTA and funding from Tempe and other member cities will increase the TSA’s to $30.6 million, up $13.9 million. In FY 2014 RPTA is collecting fare revenues ($14.2 million) and depositing the fares to the City of Phoenix for distribution back to agencies funding the operating costs. In prior years, the fares were retained by the contractor and credited against service billings. The change will improve transparency of full costs of operation and fare revenue collections. AZ Lottery Proceeds and Disbursements are included in the annual budget in FY 2014 ($11.2 million). In FY 2013 and prior years the Lottery Funds were treated as fiduciary funds and not included in the annual budget. The RPTA deferred its planned FY 2013 bond issue of $70.0 million to FY 2014 due to schedule delays in cash requirements for light rail capital projects. The FY 2014 bond issue ($114.2 million) is anticipated to occur in January 2014.

RPTA Operating and Capital Budgets Fiscal Years 2014 and 2013 Sources of Funds

Funding Sources FY 2014 FY 2013 Change $ Change %

Public Transportation Funds $ 120,246 $ 114,600 $ 5,646 5% Transit Service Agreements 30,573 16,659 13,914 84% Federal Grants 28,396 32,946 (4,550) -14% METRO Rail Reimbursement 15,389 14,028 1,361 10% Fixed Route Fare Revenues 14,167 - 14,167 ------AZ Lottery Proceeds 11,200 - 11,200 ------Regional Area Road Funds 4,584 4,518 66 1% Other Revenues 3,104 2,371 733 31% Bond Proceeds 114,150 70,000 44,150 63% Use of Bond Proceeds 21,810 12,938 8,872 69% Use of Fund Balance - 9,050 (9,050) -100% Total $ 363,619 $ 277,110 $ 86,509 31%

Increases to Uses of Funds in fiscal year 2014 versus 2013 total $86.6 million. Lead Agency Disbursements are up $12.7 million primarily due to bus procurement increases for the City of Phoenix. Transit service contracts and fuel costs are up $26.3 million due to the integration of east valley bus services whereby RPTA is operating services formerly provided by the City of Tempe. RPTA bus fleet capital purchases are down in FY 2014 by $11.4 million. Lead Agency Bond Disbursements are up by $20.1 million due to increased construction of light rail in Phoenix and Mesa. Carry forwards to Reserves are up by $21.0 million due to increases in future year light rail construction to be funded by PTF bond and sales tax proceeds.

12 Valley Metro Regional Public Transportation Authority Management’s Discussion and Analysis (Continued)

RPTA Operating and Capital Budgets Fiscal Years 2014 and 2013 Uses of Funds

Uses of Funds FY 2014 FY 2013 Change $ Change %

Lead agency disbursements $ 81,914 $ 69,248 $ 12,666 18% Transit service contracts & fuel 80,416 54,080 26,336 49% Capital 23,457 34,895 (11,438) -33% RPTA & METRO Personnel Costs 24,471 22,960 1,511 7% Bond Principal & Interest 13,042 10,741 2,301 21% Contractual Agreements 4,280 3,494 786 22% AZ Lottery Disbursements 11,200 - 11,200 ------Lead Agency Bond Disbursments 42,585 22,500 20,085 89% Other Costs 10,766 8,692 2,074 24% Sub Total 292,131 226,610 65,521 29% Carryforwards to Reserves 71,488 50,500 20,988 42% Total $ 363,619 $ 277,110 $ 86,509 31%

The increases in capital expenses correspond to projects programmed in the Transit Life Cycle Program (TLCP) for fiscal year 2014. The budget is balanced; decreases in net position other than depreciation charges to capital assets are not anticipated for fiscal year 2014.

FINANCIAL CONTACT

The financial report is designed to provide a general overview of the Authority’s finances and to demonstrate accountability for the use of public funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to the Authority’s Chief Financial Officer, Valley Metro RPTA, 101 N. 1st Avenue, Suite 1300, Phoenix, AZ 85003.

13 10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718

December 27, 2013

To the Board of Directors Valley Metro Regional Public Transportation Authority

We have audited the financial statements of the governmental activities, the business-type activities, and each major fund of Valley Metro Regional Public Transportation Authority for the year ended June 30, 2013. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and OMB Circular A-133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter provided to you during the planning phase of the audit. Professional standards also require that we communicate to you the following information related to our audit.

Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Valley Metro Regional Public Transportation Authority are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the Valley Metro Regional Public Transportation Authority during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. The financial statement disclosures are neutral, consistent, and clear.

As described in Note 1 of the financial statements, the Valley Metro Regional Public Transportation Authority implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, for the year ended June 30, 2013. GASB Statement No. 63 establishes reporting guidance for certain elements of the financial statements which are distinct from assets and liabilities. The effect on the financial statements was essentially limited to replacing the phrase “net assets” with “net position”.

Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit.

Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. During the course of the audit we did not identify any uncorrected misstatements and/or audit adjustments that we deemed to be material.

Page 1 TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations We have requested certain representations from management that are included in the management representation letter provided to us at the conclusion of the audit.

Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Valley Metro Regional Public Transportation Authority’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Information in Documents Containing Audited Financial Statements With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

Other Issue We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management throughout the course of the year. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention as the RPTA’s auditors.

Responsibility for Fraud It is important for both management and the members of the Board of Directors to recognize their role in preventing, deterring, and detecting fraud. One common misconception is that the auditors are responsible for detecting fraud. Auditors are required to plan and perform an audit to obtain reasonable assurance that the financial statements do not include material misstatements caused by fraud. Unfortunately most frauds which occur in an organization do not meet this threshold.

The attached document is provided as a courtesy and provides some basic steps that should be taken to help prevent fraud from occurring in your organization. Some of these steps may already be in place, others may not. Not even the most well-designed internal controls or procedures can prevent and detect all forms of fraud. However, an awareness of fraud related factors, as well as the active involvement by management and the members of the Board of Directors in setting the proper “tone at the top”, increases the likelihood that fraud will be prevented, deterred and detected.

Page 2 The information in this letter is intended solely for the use of the members of the Board of Directors and management of Valley Metro Regional Public Transportation Authority and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,

HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants

Page 3 Steps Management Should Take in Preventing the Occurrence of Fraud

First and Foremost, acknowledge that fraud can and does occur – Fraud occurs in organizations often because management provides the perpetrator with a substantial amount of authority and a high degree of trust. Consequently, management performs limited or no review of the individual’s work. Recognizing that fraud can occur in any organization, including your own, is the first step in prevention.

Clearly communicate to employees the behavior that is expected of them – Believe it or not, ignorance has been cited as a common cause of fraud. Some employees have been trained to commit fraudulent acts without knowing what they were doing, just assuming that "that’s the way it’s done".

Take strong action against employees who commit fraud – Call the police or other law enforcement agency and press charges. Failing to do so sends a message to other employees that management doesn’t take fraud seriously.

Provide employees an opportunity to report the occurrence of fraud or other abuse anonymously – In a recent survey, one in five employees said they were personally aware of the occurrence of fraud in the workplace. Eighty percent said they would be willing to report fraud if they did not have to identify themselves. Management can establish a fraud hotline, "suggestion boxes," or other means to enable employees to bring the occurrence of fraud to its attention without requiring employees to give their names.

Conduct your own activities on a high ethical level – Employees will follow the lead of the governing body and management, whether that lead is ethical or not. More than what is said or included in a policy manual, the actions of the governing body and management establish behavioral norms.

Be alert to changes in employee attitudes, behavior and lifestyles – Because of day-to-day contact, management is in the best position to observe the unusual – attitudes that are hostile or defensive toward management or the organization in general, changes in behavior that are inconsistent with employees’ normal disposition or lifestyles that are not reasonable based on the employees’ level of compensation. Matters that may be of particular concern include:

 Indications of dissatisfaction with compensation, or a lack of promotion  Indications of gambling  Indications of drug use or excessive use of alcohol  Indications of financial distress  Indications of severe stress

Steps Management Should Take in Preventing the Occurrence of Fraud

Perform thorough background checks on all new employees – Call former employers and educational institutions for verification of previous employment and education. Beware of "gaps" in employment or educational history. Consider obtaining a credit report (if authorized by the candidate) before employment.

Require uninterrupted vacations for all employees and establish a schedule of rotation of employee responsibilities – More than just good management, rotation of duties provides a strong disincentive to commit fraud. In addition, it provides an opportunity to discover fraud that has already occurred.

Establish a budget – The governing body/management should establish an operating budget and monitor actual results on a regular basis. Any significant variances should be investigated.

Monitor exception reports – Unprocessed transactions should be carefully examined for propriety. This includes revenues, expenses, purchasing and payroll transactions.

Control the mail –The mail should be picked up by an employee who has no responsibilities related to the handling or recording of deposits, accounts receivable records or revenues. All remittances should be directed to a post office box. Limiting access to the organization’s mail is essential in preventing the unauthorized negotiation of cash receipts.

Control the bank statements – Similarly, the bank statements should be picked up by an employee who has no related responsibilities and delivered to the management or other person independent of the reconciliation process. This person should review the contents of the statements before they are reconciled. Specific items to be alert to include:

 Missing checks  Checks issued out of sequence  Unknown payees  Checks that appear to have been altered  Checks not signed by authorized signatories  Other unusual items

Account for sequences – Whether it is checks, invoices, credit memoranda, receiving reports, shipping documents, or other pre-numbered items, all sequences should be accounted for. Voided documents should be defaced to prevent unauthorized use and retained to complete sequences.

Steps Management Should Take in Preventing the Occurrence of Fraud

Control general journal entries – Management should either make or personally review and approve all general journal entries. Supporting documentation should be reviewed before approving general journal entries. In particular, the following items should be investigated:

 Entries made to unrelated accounts  Entries made to receivables or revenues at or near the close of a period  Entries made by persons whose responsibilities are not consistent with the accounts being adjusted

Obtain reasonable fidelity bond coverage – If the unthinkable occurs, insurance coverage is the most likely means of recovery of amounts misappropriated. The amount of coverage should be reviewed periodically for adequacy.

Evaluate the internal control framework – Lastly, evaluate the internal control framework of your organization. One particular useful evaluation tool is available in the Committee of Sponsoring Organization’s (COSO) guidance on internal control over financial reporting for smaller organizations. This guidance may be obtained through the AICPA’s website at www.cpa2biz.com (product #990017).

Single Audit Reporting Package

Fiscal Year Ended June 30, 2013

Regional Public Transportation Authority Phoenix, Arizona Valley Metro Valley VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY SINGLE AUDIT REPORTING PACKAGE FOR THE YEAR ENDED JUNE 30, 2013

CONTENTS Page

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 1

Report on Compliance For Each Major Federal Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 3

Schedule of Expenditures of Federal Awards 6

Notes to Schedule of Expenditures of Federal Awards 7

Schedule of Findings and Questioned Costs 8

Summary Schedule of Prior Audit Findings 10

10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Independent Auditor’s Report

Board of Directors Valley Metro Regional Public Transportation Authority

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, business-type activities, and each major fund, of Valley Metro Regional Public Transportation Authority, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise Valley Metro Regional Public Transportation Authority’s basic financial statements, and have issued our report thereon dated December 16, 2013. Our report included an emphasis of matter paragraph as to comparability because of the implementation of Governmental Accounting Standards Board Statement No. 63.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Valley Metro Regional Public Transportation Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Valley Metro Regional Public Transportation Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of Valley Metro Regional Public Transportation Authority’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com

Compliance and Other Matters As part of obtaining reasonable assurance about whether Valley Metro Regional Public Transportation Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants

December 16, 2013

Page 2 10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133

Independent Auditor’s Report

Board of Directors Valley Metro Regional Public Transportation Authority

Report on Compliance for Each Major Federal Program We have audited Valley Metro Regional Public Transportation Authority’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Valley Metro Regional Public Transportation Authority’s major federal programs for the year ended June 30, 2013. Valley Metro Regional Public Transportation Authority’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Valley Metro Regional Public Transportation Authority’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Valley Metro Regional Public Transportation Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Valley Metro Regional Public Transportation Authority’s compliance.

Page 3 TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com

Opinion on Each Major Federal Program In our opinion, Valley Metro Regional Public Transportation Authority complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2013.

Report on Internal Control Over Compliance Management of Valley Metro Regional Public Transportation Authority is responsible for establishing and maintaining effective internal control over compliance with the types of requirements referred to above. In planning and performing our audit of compliance, we considered Valley Metro Regional Public Transportation Authority’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Valley Metro Regional Public Transportation Authority’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the governmental activities, business-type activities, and each major fund, of Valley Metro Regional Public Transportation Authority as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise Valley Metro Regional Public Transportation Authority’s basic financial statements. We have issued our report thereon dated December 16, 2013, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements.

Page 4

The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements taken as a whole.

HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants

December 16, 2013

Page 5 VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS JUNE 30, 2013

CFDA Pass-Through Pass-Through Awards Federal Grantor Agency and Program Title Number Grantor Identifying Number Expended

U.S. Department of Transportation

Federal Transit Administration Federal Transit Cluster: Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X074 $ 349,084 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X080 1,580,559 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X088 647,809 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X103 7,831,593 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X109 6,829,058 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-90-X114 1,178,168 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-96-X002 1,116,397 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-95-X013 1,268,327 Federal Transit - Formula Grants (Urbanized Area Formula Program) 20.507 City of Phoenix AZ-95-X009 1,676,258 Subtotal CFDA No. 20.507 22,477,253

Federal Transit - Capital Investment Grants 20.500 City of Phoenix AZ-05-0201 791,630 Federal Transit - Capital Investment Grants 20.500 City of Phoenix AZ-05-0202 8,635 Federal Transit - Capital Investment Grants 20.500 City of Phoenix AZ-05-0203 744,295 Federal Transit - Capital Investment Grants 20.500 City of Phoenix AZ-05-0204 71,362 Subtotal CFDA No. 20.500 1,615,922

Total Federal Transit Cluster 24,093,175

Transit Services Programs Cluster: New Freedom Program 20.521 City of Phoenix AZ-57-X001 66,941 New Freedom Program 20.521 City of Phoenix AZ-57-X009 127,755 New Freedom Program 20.521 City of Phoenix AZ-57-X012 453,896 New Freedom Program 20.521 City of Phoenix AZ-57-X013 158,955 New Freedom Program 20.521 City of Phoenix AZ-57-X016 281,252 New Freedom Program 20.521 City of Phoenix AZ-57-X012 80,000 New Freedom Program 20.521 City of Phoenix AZ-57-X013 120,000 Subtotal CFDA No. 20.521 1,288,799

Job Access - Reverse Commute 20.516 City of Phoenix AZ-37-X008 200,000 Job Access - Reverse Commute 20.516 City of Phoenix AZ-37-X011 101,646 Job Access - Reverse Commute 20.516 City of Phoenix AZ-37-X014 236,000 Job Access - Reverse Commute 20.516 City of Phoenix AZ-37-X017 170,162 Job Access - Reverse Commute 20.516 City of Phoenix AZ-37-X018 336,813 Subtotal CFDA 20.516 1,044,621

Total Transit Services Programs Cluster 2,333,420

Formula Grants for Other Than Urbanized Areas 20.509 ADOT AZ-18-0038 336,054 Formula Grants for Other Than Urbanized Areas 20.509 ADOT AZ-18-0045 58,677 Subtotal CFDA 20.509 394,731

Total Federal Transit Administration 26,821,327

Federal Highway Administration Highway Planning and Construction (Federal-Aid Highway Program) 20.205 MAG 413 666,966 Highway Planning and Construction (Federal-Aid Highway Program) 20.205 Maricopa County C85-12-005-3-00-2012-TM12 365,788 Highway Planning and Construction (Federal-Aid Highway Program) 20.205 Maricopa County C-85-11-004-3-00 250,000 Highway Planning and Construction (Federal-Aid Highway Program) 20.205 ADOT N/A 224,522 Subtotal CFDA No. 20.205 1,507,276

Highway Research and Development Program 20.200 ADOT JPA 11-0051 78,325 Highway Research and Development Program 20.200 ADOT JPA 10-0421 151,893 Subtotal CFDA No. 20.200 230,218

Total Federal Highway Administration 1,737,494

Total Expenditures of Federal Awards $ 28,558,820

See accompanying notes to the Schedule of Expenditures of Federal Awards.

Page 6 VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2013

1. General The Schedule of Expenditures of Federal Awards presents the activity of all federal award programs of the Regional Public Transportation Authority (the “Authority”). All federal awards received are passed through the City of Phoenix, Arizona Department of Transportation, Maricopa County and Maricopa Association of Governments. Federal financial award activities are reported in the special revenue and enterprise funds in the Authority’s fund financial statements.

2. Basis of Accounting and Reporting Entity The accompanying Schedule of Expenditures of Federal Awards is presented using a basis of accounting that is consistent with the basic financial statements, as is described in Note 1 of the Authority’s basic financial statements.

The Authority, for purposes of the Schedule of Expenditures of Federal Awards, includes all funds of the primary government as defined by Governmental Accounting Standards Board Statement.

3. Catalog of Federal Domestic Assistance (CFDA) Numbers The program titles and CFDA numbers were obtained from the 2013 Catalog of Federal Domestic Assistance.

4. Pass-Through Grantors Reference The Authority receives all federal awards as pass-through from other governmental and nonprofit agencies. Abbreviations are as follows:

ADOT Arizona Department of Transportation MAG Maricopa Association of Governments

5. Period of Award There is no specified time period in which the grant award must be spent.

6. Federal Assistance not included Expenditures related to assistance not considered federal awards in accordance with OMB Circular A-133 have not been presented in this schedule as follows:

Build America Bond Subsidies $564,261

Page 7 VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

SUMMARY OF AUDITOR’S RESULTS

Financial Statements

Type of auditor’s report issued: Unmodified

Internal control over financial reporting:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? yes X none reported

Noncompliance material to financial statements noted? yes X no

Federal Awards

Internal control over major programs:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? yes X none reported

Type of auditor’s report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of OMB Circular A-133? yes X no

Identification of major programs:

CFDA Numbers Name of Federal Program or Cluster 20.500, 20.507 Federal Transit Cluster 20.205 Highway Planning and Construction

Dollar threshold used to distinguish between Type A and Type B programs: $856,765

Auditee qualified as low-risk auditee? X yes no

Page 8 VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

FINDINGS RELATED TO FINANCIAL STATEMENTS REPORTED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

None reported.

FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS

None reported.

Page 9 VALLEY METRO REGIONAL PUBLIC TRANSPORTATION AUTHORITY SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2013

Status of Federal Award Findings and Questioned Costs

The Valley Metro Regional Public Transportation Authority had no findings or questioned costs related to federal awards noted in prior audits that require a status.

Page 10

DATE AGENDA ITEM 5 February 13, 2014

SUBJECT 2014 Federal Public Transportation Agenda

PURPOSE To request Board approval of the Valley Metro Federal Public Transportation Agenda for 2014.

BACKGROUND/DISCUSSION/CONSIDERATION Each year, Valley Metro works with member city intergovernmental staff to develop a federal public transportation legislative agenda. The agenda provides information to member cities to bring attention to the importance of federal involvement in public transportation in the Phoenix metropolitan region.

Transportation policy and funding are directed by the Moving Ahead for Progress in the 21st Century (MAP-21). The legislation was signed into law in July 2012 and will expire in September 2014. The new law works to simplify and consolidate transit programs and significantly reduces the number of discretionary programs. Most of the funding is delivered to transit agencies directly through the core federal transit programs by formula.

There are several larger issues at the federal level currently impacting public transportation. Issues include:

• The adoption of the Bipartisan Budget Act in December 2013 provides “topline” spending limits for all discretionary federal funding for both federal Fiscal Year 2014 (FY14) and FY15. It is anticipated that while the legislation provides greater stability and predictability for federal funding, public transportation funding should remain relatively flat for the near future. • In January, Congress passed and the President signed an omnibus FY14 appropriations bill in accordance with December's budget agreement. o The bill contained $8.595 billion for transit formula programs, the full amount authorized by MAP-21. o The bill also provided $2.132 billion for new starts funding, the full amount requested by the Obama Administration. That should ensure full funding of all of the Administration's New Starts project requests, including $19.5 million for the Central Mesa Extension. • Early in 2014, the federal debt ceiling needs to be increased to avoid default on federal debt. • Dozens of federal tax extenders expired on December 31, 2013. Those provisions include one to maintain parity in commuter tax benefits between VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

parking and transit and one that provides an alternative fuel tax credit for alternatively fueled vehicles. • A “fiscal cliff” is forecasted for the Highway Trust Fund (HTF) that will result in a zero balance of the HTF beginning early in FY15.

Staff has developed a federal agenda for 2014 with goals to:

• Maximize transit funding levels at the national level; • Continue to monitor and have input on the implementation of MAP-21 by the Federal Transit Administration (FTA); • Pursue grant opportunities through the limited discretionary programs authorized as part of MAP-21; • Support the restoration of tax benefits related to public transit; and • Prepare for the reauthorization of MAP-21, especially related to adequate funding for the HTF).

COST AND BUDGET None

COMMITTEE ACTION RTAG: January 21, 2014 for information TMC: February 5, 2014 approved Board of Directors: February 20, 2014 for action

RECOMMENDATION It is recommended that the Board of Directors approve the 2014 Federal Public Transportation Agenda.

CONTACT John Farry Government Relations Officer 602-744-5550 [email protected]

ATTACHMENTS 2014 Federal Public Transportation Agenda

FEDERAL PUBLIC TRANSPORTATION AGENDA

SPRING 2014

The federal government is a critical partner supporting local and Pursue Grant Opportunities – Although MAP-21 limits regional public transportation systems in metropolitan Phoenix. discretionary funding, the region will seek opportunities related With the implementation and reauthorization of Moving Ahead for to TIGER and other grants as they become available. We will also Progress in the 21st Century (MAP-21) and the annual pursue additional federal funding through programs as announced. transportation appropriations bill, it will help maintain and expand a transit system that serves nearly four million residents and over Support Tax Law Changes 16 million visitors annually. • The package of tax extenders expired on December 31, 2013. Two of those extenders have a direct As a region, our strategies in 2014 are to: impact on public transportation. • Parity between the parking and transit benefits at Support maximum transit funding levels – investing $240 per month. in transportation infrastructure results in higher • Tax credit for use of alternative fuels. economic growth • Pursue the permanent extension of the tax benefit • Ensure the solvency of the Highway Trust Fund. parity for parking and public transportation and the • Both the highway and transit accounts in the alternative fuels tax credit. Highway Trust Fund will be zero in FY15 unless additional revenues are deposited. Secure Reauthorization of MAP-21 • Immediately addressing this funding crisis will • Monitor Congressional oversight hearings and reduce the threat of service reductions and help mark-ups and participate in reauthorization efforts with transit systems, as well as local and state the American Public Transportation Association agencies, with future planning. (APTA), New Starts Working Group, Streetcar • Maximize federal transit funding to all programs to Coalition and other affiliated organizations. help meet growing public demand. • Encourage federal policymakers to consider the • Maximize the financial commitment to the New reauthorization policy recommendations of these Starts program confirming the completion of the organizations. 60-mile light rail system in the region.

Monitor and provide input on the implementation FOR ADDITIONAL INFORMATION, PLEASE CONTACT: of MAP-21 • Continue close monitoring of Federal Transit Administration (FTA) regulations and guidance that Stephen R. Banta, CEO affect the New Starts Program to guarantee fair 602.495.8214 | [email protected] evaluation of our light rail projects that are eligible for federal funding. John Farry, Government Relations Officer • Encourage local sponsors to advance multiple 602.744.5550 | [email protected] projects simultaneously within a reasonable time frame. In doing so, allow the sponsors to use locally Valley Metro funded projects currently in design or construction 101 N. 1st Ave., Suite 1300, Phoenix, AZ 85003 as a local match for those projects built with federal 602.262.7433 | valleymetro.org funds. This action should be in included with any comments to FTA’s Program of Inter-Related Projects guidance. • Monitor other provisions of MAP-21, including State of Good Repair, transit asset management, safety and transit representation on Metropolitan Planning Organization (MPO) boards. 2/13/2014

2014 Federal Agenda February 2014

Big Picture • Congress passed budgets for FY14 and FY 15 in December • FY 14 Omnibus Appropriations bill passed in January • Debt ceiling extension through March 2015 • MAP-21 expires September 30, 2014 • “Fiscal cliff” approaching for Highway Trust Fund (HTF) in 2014 – http://www.dot.gov/highway-trust-fund-ticker

1 2/13/2014

Importance of Federal Investment FY 2015 FEDERALLY FUNDED BUS FLEET AND FACILITIES Total Cost FY 2015 Project (in millions) Federal Funding Phoenix Buses –26 need $15.1 $12.8 replacement Valley Metro –12 need $8.7 $7.4 replacement Laveen Park‐and‐Ride – $2.4 $1.9 Land/Design Peoria Transit Center – $0.9 $0.8 Land/Design Scottsdale/Rural Roads $28.9 $16.4 LINK –Phase I & II Total $56.0 $39.3 3

Importance of Federal Investments

FIXED GUIDEWAY CAPITAL INVESTMENT PROGRAM (NEW STARTS/SMALL STARTS) 2014 Project Cost Estimate Federal Scheduled Project Activity (in millions) Funding Completion Central Mesa Construction $199 5309, CMAQ 2016 Northwest Phase I Construction $285 None 2016 Tempe Streetcar Environmental $130 5309, CMAQ 2017 Gilbert Road Engineering $133 STP‐Flex 2018 Capitol / I‐10 West Environmental $1,033 5309, CMAQ 2023 Northwest Phase II AA $134 5309, CMAQ 2026 West Phoenix / Central Glendale AA $481 5309, CMAQ 2026 South Central AA $467 5309 TBD

Source: 2013 TLCP Update 4

2 2/13/2014

Federal Agenda

• Support maximum transit funding levels • Monitor MAP-21 implementation • Pursue grant opportunities • Support permanent tax law changes – Parking and transit commuter equity – Alternative fuels tax credit • Prepare for reauthorization of MAP-21 – Funding???

Communication Strategy

3 2/13/2014

4 2/13/2014

5 2/13/2014

6 2/13/2014

Next Steps

•March – President’s Budget – NLC Congressional Cities Conference in Washington, DC – Valley Metro Congressional Staff Meeting Luncheon

Valley Metro Congressional Staff Luncheon

Monday, March 10, 2014 Noon – 1:30 pm Capitol Hill, Room 121 Cannon HOB

7 2/13/2014

Recommendation

It is recommended that the Board of Directors approve the 2014 Federal Public Transportation Agenda.

John Farry Government Relations Officer 602-744-5550 [email protected]

DATE AGENDA ITEM 6 February 13, 2014

SUBJECT East Valley Dial-a-Ride Update

PURPOSE To provide an informational update to the Board on the East Valley Dial-a-Ride (EVDAR) Brokerage Model Pilot Project.

BACKGROUND/DISCUSSION/CONSIDERATION EVDAR is a sub-regional demand response transportation service provided in Chandler, Gilbert, Mesa, Scottsdale, Tempe and other unincorporated areas of Maricopa County. Prior to July 2012, EVDAR services were provided by private contractors, using vehicles, fuel and technology provided by Valley Metro. On July 1, 2012, EVDAR service began operating as a brokered service under contract with Total Transit. Under this model, Total Transit utilizes its own call center, technology and fleet, as well as a mix of taxi and non-emergency medical transportation subcontractors, to provide all EVDAR services.

The brokerage service model offers East Valley cities an opportunity to provide the appropriate vehicle for each customer’s needs, integrates private sector capital investment into the public transportation system, and develops a foundation for regional paratransit operations.

The presentation will review the status of the EVDAR program and recommended next steps.

COST AND BUDGET None

COMMITTEE PROCESS RTAG: January 21, 2014 - for information TMC: February 5, 2014 - for information Board of Directors: February 20, 2014 - for information

RECOMMENDATION This item is presented for information only.

CONTACT Ron Brooks Accessible Transit Services Manager 602-716-2107 [email protected]

ATTACHMENTS None

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 602-262-7433

2/13/2014

Update East Valley Dial-a-Ride Board of Directors February 20, 2014

Purpose & Presentation Outline

Provide an informational update on the East Valley Dial-a-Ride (EVDAR) Brokerage Model Pilot Project – Summarize Valley Metro’s paratransit goals – Provide background on the EVDAR Taxi Brokerage Pilot Project – Give an assessment of the Pilot Project – Next-steps

1 2/13/2014

Valley Metro’s Paratransit Goals Source – Accessible Transit Service Goals for FY14 & FY15 – Strengthen and enhance ADA paratransit eligibility certification process – Improve effectiveness and efficiency of Dial-a- Ride operations – Improve regional coordination and service consistency – Other goals focus on fixed-route accessibility and community engagement

Background – Goals of the Pilot Project

• Reduce the amount of capital required to support the program

• Improve service quality and reduce cost

2 2/13/2014

Financial Results

FY12 FY13 FY 14 (Thru December) Trips 202,812 251,830 141,874 Contractor Cost $ 8,600,072 $6,708,548 $3,851,339 Cost/Trip $42.40 $26.64 $26.85

Cost Comparison with Peer Agencies

Total Demand Percent Cost/Trip Response Demand Response Agency Peer Cities NTD Expense Expense to total Fixed 2012 $ Millions Route service Expense

Denver RTD $39.94 $ 46.439 13% Houston Metro $25.33 $ 40.593 12% San Diego MTS $28.24 $ 13.411 7% TriMet $32.97 $ 34.896 10% Utah Transit Authority $41.61 $ 17.180 9% Peer City Average $33.62 $ 30.504 11% Valley Metro/Region Fiscal Year 2013 $36.90 $ 37.474 14%

3 2/13/2014

Other Results

FY12 FY 13 FY 14 (Thru December) On-Time Performance 97.2% 94.6% 98.6% Complaints/ 1,000 Boardings 1.8 0.8 1.1

Customer Perceptions

2011 2013 Service on the phone 92% 94% Driver safety 97% 96% Driver courtesy 96% 97% Vehicle cleanliness 96% 97% Vehicle Comfort 89% 96%

4 2/13/2014

Opportunities for Improvement Need to increase trip-sharing – Reduces cost – Manages rising demand – Improves customer experience for riders traveling together Improve management tools and technology – Trip-by-trip eligibility – Integration of paratransit with accessible fixed-route service – Trip-sharing – Better management of cross-boundary trips

– Improved data, reports and accountability 9

Alternatives Revert to traditional paratransit model – Agency provides fleet and fuel – Agency or contractor provides facility – More trip sharing, longer ride times, less demand – May increase cost Continue with Taxi Brokerage Model – Contractor provides fleet, facilities and fuel – Lower cost but higher demand driven by less trip- sharing and shorter ride times – Requires tighter management of eligibility and use of accessible fixed-route where possible 10

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Potential Impact of Model on Demand • Traditional service may not generate same growth in demand as taxi model – Tested scenarios with: • Traditional demand growth between 2% and 5% • Taxi demand growth between 5% and 10% • Taxi service less than traditional service for FY15 and FY16 under all scenarios • If taxi demand increases by 8% per year or more, traditional service may cost less, beginning in FY17 • Caveats: – Demand increases may not be driven solely by model. – Costs are based on current contract prices

Cost Projection – Traditional Model

Traditional Model FY15 FY16 FY17 FY18 FY19 Total

Growth 3% 3% 3% 3% 3%

Trips 324,430 334,163 344,188 354,514 365,149 1,722,445

Service Cost $8,886,898 $9,330,951 $9,799,131 $10,292,822 $10,813,486 $49,123,288

Capital Cost $1,372,297 $1,455,870 $1,544,533 $1,638,595 $1,738,385 $7,749,681

Fuel Cost $1,512,410 $1,635,671 $1,768,978 $1,913,150 $2,069,071 $8,899,280

Total Cost $11,771,605 $12,422,492 $13,112,642 $13,844,567 $14,620,943 $65,772,249

Cost/Trip $36.28 $37.17 $38.10 $39.05 $40.04 $38.19

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Cost Projection – Taxi Model

Taxi Model FY 15 FY16 FY17 FY18 FY19 Total Annual Growth 5% 5% 5% 5% 5%

Trips 330,730 347,267 364,630 382,861 402,004 1,827,492

Service Cost $ 9,531,231 $ 10,282,427 $ 11,091,604 $ 12,137,190 $ 13,095,775 $ 56,138,226

Capital Cost $ - $ - $ - $ - $ - $ -

Fuel Cost $ - $ - $ - $ - $ - $ -

Total Cost $ 9,531,231 $ 10,282,427 $ 11,091,604 $ 12,137,190 $ 13,095,775 $ 56,138,226

Cost/Trip $28.82 $29.61 $30.42 $31.70 $32.58 $30.72

Comparison of Taxi and Traditional Model Growth Scenarios

Traditional Taxi Year 1 5 Year Growth Growth Taxi Savings Taxi Savings

5% 5% $2,407,894 $12,693,131

4% 5% $2,324,134 $11,143,164

3% 5% $2,240,374 $9,634,023

2% 5% $2,156,614 $8,164,808

2% 6% $2,070,980 $6,537,851

2% 7% $1,985,347 $4,867,249

2% 8% $1,899,713 $3,152,038

2% 9% $1,814,079 $1,391,241

2% 10% $1,728,445 ($416,135) 14

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Next Steps

Negotiate 3-year agreement with Total Transit that: – Reduces brokerage requirement from 50% to 25% and focuses on trip-sharing – Includes more advantageous pricing – Establishes financial incentives/penalties based on success relative to agency goals

DATE AGENDA ITEM 7 February 13, 2014

SUBJECT Fiscal Year 2013 (FY13) Transit Performance Report (TPR)

PURPOSE To provide information to the Board of Directors and member cities regarding ridership, operating costs, fare revenue, and performance indicators contained in the FY13 Transit Performance Report.

BACKGROUND/DISCUSSION/CONSIDERATION The Transit Performance Report (TPR) is updated annually using data provided by our member agencies and the Valley Metro Regional Ridership Report. Performance targets that were developed as part of the Service Effectiveness and Efficiency Study in 2010 are being updated as part of the Valley Metro Operations Standards study. Given the ongoing discussions on how to appropriately update the performance targets, the FY13 TPR does not include performance targets.

For the FY13 TPR, the reporting basis continues to use the updated methodology used in the FY12 TPR. In general this reporting basis incorporates a greater scope of operating activities to conform with National Transit Database (NTD) standards. As a result, some financial measures are not directly comparable to FY11 data, which was reported under the old methodology.

COST AND BUDGET None

COMMITTEE PROCESS RTAG: January 21, 2014 for information Financial Working Group: January 21, 2014 for information TMC: February 5, 2014 for information Budget and Finance Subcommittee: February 13, 2014 for information Board of Directors: February 20, 2014 for information

RECOMMENDATION This item is being presented for information only.

CONTACT John P. McCormack Chief Financial Officer 602-495-8239 [email protected]

ATTACHMENTS FY13 TPR Report

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

Valley Metro Transit Performance Report FY 2013 (July 1, 2012 - June 30, 2013)

valleymetro.org Cost Efficiency & service Effectiveness | Performance Results

System Summary FY 2013

Performance % Change Indicator Bus Light Rail Paratransit Vanpool System Total from FY12

Total Boardings 59,123,712 14,286,093 1,015,635 1,227,297 75,652,737 3.6%

Percent of Total 78.2% 18.9% 1.3% 1.6% ------Boardings

Vehicle Revenue 28,152,162 2,430,774 6,666,704 6,527,280 43,776,920 2.8% Miles

Operating Cost $8.09 $11.81 $5.62 $0.58 $6.80 -0.8% Per Revenue Mile

Boardings Per 2.10 5.88 0.15 0.19 1.73 0.7% Revenue Mile

Average Fare $0.83 $0.90 $2.09 $3.16 $0.90 0.9%

Farebox Recovery 21.6% 44.6% 5.7% 101.7% 22.8% 2.4%

Operating Cost $3.85 $2.01 $36.90 $3.10 $3.94 -1.5% Per Boarding

Subsidy Per $3.02 $1.11 $34.81 ($0.05) $3.04 -2.2% Boarding

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 2 Cost Efficiency & service Effectiveness | Performance Results

FY 2013 Transit Performance Report (TPR)

The annual Transit Performance Report (TPR) provides information to the Boards of Directors and member cities concerning ridership, operating costs, fare revenue and performance indicators for region-wide transit services, including the following transportation modes: • Fixed Route Bus • Light Rail • Paratransit (Demand Response) • Vanpool

Performance targets that were developed as part of the Service Effectiveness and Efficiency Study in 2010 are being updated as part of the Valley Metro Operations Standards study. Given the ongoing discussions on how to appropriately update the performance targets, the FY 2013 TPR does not include performance targets.

For the FY 2013 TPR, the reporting basis continues to use the updated methodology used in the FY 2012 TPR. In general, this reporting basis incorporates a greater scope of operating activities to conform with NTD standards. As a result, some financial measures are not directly comparable to FY 2011 data, which was reported under the old methodology.

Dashboard Indicators:

Green Indicates the trend is positive (Greater than 3% improvement)

White Indicates the trend is neutral (Current year results are within 3% of prior year)

Red Indicates the trend is negative (Greater than 3% decline)

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 3 Cost Efficiency & service Effectiveness | Performance Results

Bus Farebox Recovery Ratio Operating Cost Per Boarding 100% $5.00 Service Expansions 90% $4.50 80% $3.88 $3.85 Local Route – 96 $4.00 $3.77 Circulator Routes – SMART and ZOOM 70% $3.50 60% $3.00 Service Modifications 50% $2.50 • Local Routes – 10, 16, 60, 80, 106, 122 and 40% $2.00 Grand Ave Limited 30% $1.50 22.0% 21.4% 21.6% • Express Routes – I-17, SR-51, I-10 East, I-10 20% $1.00 West, 533-Mesa Express and 541-Chandler 10% $0.50 Express 0% $0.00 2011 2012 2013 2011 2012 2013 Service Increases • Local Route – 96 • Express Routes – 535-Mesa Express, Operating Cost Per Revenue Mile 542-Chandler Express and 562-Goodyear Fixed route service reduced revenue miles by Express 1.8% or by 500,000 miles. Operating Subsidy Per Boarding $10.00 New Routes $8.09 $3.02 $9.00 • Local Routes – Mesa Route 277 (operated Oct. $2.94 $3.05 $3.00 $8.00 $7.78 2012 to April 2013) $7.08 • Express Routes – 514-Scottsdale Express and $2.50 $7.00 522-Tempe Express $6.00 $2.00 • RAPID Route – Central/South Mountain $5.00 $1.50 $4.00

Route Eliminations $3.00 $1.00 • Express Routes – 510–Scottsdale Express, $2.00 $0.50 512-Scottsdale Express, 540-Chandler Express, $1.00 560-Avondale Express and 581-North Mountain $0.00 $0.00 Express 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 4 Cost Efficiency & service Effectiveness | Performance Results

Average Fare Annual Increase / Decrease in Total Boardings

Bus 15% $1.00 Fixed Route (System-Wide) 12% $0.90 $0.83 $0.83 $0.83 Includes: $0.80 9% 6% • Local $0.70 4.88% 2.84% • Circulator $0.60 3% • Express $0.50 0% -1.37% • RAPID $0.40 -6% • LINK $0.30 -9% • Rural Routes $0.20 -12% $0.10 -15% $0.00 -18% 2011 2012 2013 2011 2012 2013

Annual Increase / Decrease in Weekday Annual Increase / Decrease in Saturday Average Boardings Average Boardings

15% 15% 12% 12% 9% 9% 6.56% 5.12% 6% 6% 3.37% 4.34% 3% 3% 0.98% 0% 0% -6% -6% -2.13% -9% -9% -12% -12% -15% -15% -18% -18% 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 5 Cost Efficiency & service Effectiveness | Performance Results

Bus Annual Increase / Decrease in Sunday Average Boardings 15% Fixed Route (System-Wide) 12% Includes: 9% 6.50% • Local 6% 3.82% 3.60% • Circulator 3% • Express 0% • RAPID -6% • LINK -9% • Rural Routes -12% -15% -18% 2011 2012 2013

Boardings Per Revenue Mile On-Time Performance Fixed route service provided fewer revenue miles This data includes Local, Express and RAPID service. compared to FY 2012 (1.8% or 500,000 miles). 95.6% 95.1% 94.1% 5.0 100% 4.5 90% 4.0 80% 3.5 70% 3.0 60% 2.5 50% 1.88 2.00 2.10 2.0 40% 1.5 30% 1.0 20% 0.5 10% 0.0 0% 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 6 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 7 Cost Efficiency & service Effectiveness | Performance Results

Light Rail Farebox Recovery Ratio Operating Cost Per Boarding 100% $5.00 90% $4.50 80% $4.00 70% $3.50 60% $3.00 50% $2.50 45% $2.42 $2.13 41% $2.01 40% $2.00 33% 30% $1.50 20% $1.00 10% $0.50 0% $0.00 2011 2012 2013 2011 2012 2013

Operating Subsidy Per Boarding Operating Cost Per Revenue Mile

$50.00 $3.00 $40.00 $2.50 $30.00 $2.00 $1.62 $20.00 $1.50 $1.26 $15.00 $12.90 $1.11 $11.87 $11.81 $1.00 $10.00

$0.50 $5.00

$0.00 $0.00 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 8 Cost Efficiency & service Effectiveness | Performance Results

Light Rail Total Boardings Boardings Per Revenue Mile 6.0 5.88 5.56 15 14.3 5.5 5.32 14 13.6 5.0 13 12.8 4.5 12 4.0 11 3.5 10 3.0 8 2.5 7 2.0 (in millions) 6 1.5 5 1.0 4 0.5 3 2011 2012 2013 0.0 2011 2012 2013

On-Time Performance

97.5% 97.2% 94.7% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 9 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 10 Cost Efficiency & service Effectiveness | Performance Results

Proposition 400 Paratransit

This data represents Proposition 400 funding used Paratransit Prop 400 as % Proposition 400 System Operating Cost to fund service for ADA-certified passengers only. Operating System of Total Ops Cost Each operating system may include more than one jurisdiction. The values in the “Proposition 400” Glendale DAR $589,866 $2,622,120 22.50% column represents the amount reimbursed or credited to each jurisdiction in FY 2013 and may not Peoria DAR $157,061 $955,554 16.44% correlate to the amount of Proposition 400 funding a jurisdiction spent that year. System Operating Cost is the total operating cost for each operating system. Phoenix DAR $14,450,416 $17,299,362 83.53%

Phoenix Taxi $0 $844,264 0.00% information Scottsdale Taxi $220,703 $460,760 47.90% • East Valley Dial-a-Ride includes the cities of Chandler, Gilbert, Mesa, Scottsdale and Tempe • Northwest Valley Dial-a-Ride includes the cities Surprise DAR $16,853 $127,252 13.24% of Surprise, Sun City and Sun City West, El Mirage, Peoria and Youngtown Valley Metro EVDAR $6,194,725 $10,973,348 56.45% • Phoenix Dial-a-Ride includes the cities of Phoenix, Avondale, Goodyear, Tolleson and Paradise Valley Valley Metro NWDAR $162,284 $1,817,524 8.93%

Valley Metro RideChoice $0 $2,374,019 0.00%

Total $21,791,908 $37,474,203 58.15%

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 11 Cost Efficiency & service Effectiveness | Performance Results

Paratransit Farebox Recovery Ratio Operating Cost Per Boarding 10% $50.00 The Americans with Disabilities Act (ADA) 9% $45.00 of 1990 is federal law which prohibits $42.18 8% $40.00 $36.90 discrimination against persons with 6.8% $37.72 disabilities in public accommodations, 7% $35.00 5.7% 6% including public transportation. On-time 5.4% $30.00 performance measures how many ADA 5% $25.00 boardings occurred within 30 minutes of the 4% $20.00 pick-up time given to the passenger at the 3% $15.00 time of their reservation. 2% $10.00 1% $5.00 0% $0.00 2011 2012 2013 2010 2011 2012

Operating Subsidy Per Boarding Operating Cost Per Revenue Hour ADA On-Time Performance

$97.17 97.39% $39.89 $100.00 100% 97.16% $40.00 $35.17 95.81% $34.81 $90.00 90% $30.00 80% $80.00 $74.98 $68.26 $20.00 $70.00 70% $60.00 60% $20.00 $50.00 50% $15.00 $40.00 40%

$10.00 $30.00 30% $20.00 20% $5.00 $10.00 10% $0.00 $0.00 0% 2011 2012 2013 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 12 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 13 Cost Efficiency & service Effectiveness | Performance Results

Vanpool

Farebox Recovery Ratio Operating Cost Per Boarding Operating Subsidy Per Boarding

120% $5.00 $0.40

110% $4.50 101.7% 100.8% 99.3% $4.00 $0.30 100% $3.50 $3.13 $3.10 90% $2.98 $3.00 $0.20 80% $2.50

70% $2.00 $0.10 $1.50 $0.02 60% $0.00 -$0.05 $1.00 $0.00 50% $0.50

40% $0.00 -$0.10 2011 2012 2013 2011 2012 2013 2011 2012 2013

Operating Cost Per Revenue Mile Total Vanpool Boardings

$1.00 1.5

1.4 $0.80 1.3 1,227,297 $0.60 $0.62 $0.58 $0.60 1.2 1,145,501

(in millions) 1.1 $0.40 1,054,315 1.0 $0.20 0.5

$0.00 0.0 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 14 Glossary

Average Fare boarding. Average fare is the average price a person pays for a transit trip. It is equal to total fare revenue collected divided by total boardings. Local Bus Route Local bus routes may operate on either arterial or local collector streets. These are Boarding designed to serve localized trip patterns with one or more cities. A boarding is known as an unlinked passenger trip. Every time a person boards a vehicle it is counted as a boarding. For example, if a person makes a trip involving one National Transit Database (NTD) transfer, this trip is counted as two boardings. National Transit Database was established by Congress as a primary source for information and statistics on the transit system in the United States. Any recipients of Circulators Federal Transit Administration funding are required to submit data to the NTD. Circulator routes typically serve small specific areas with short routes that are designed to provide connections between transportation systems and other area attractions, like Net Vanpool Starts employment centers or schools. Many circulator routes charge no fare. Calculated by subtracting number of deleted vanpools from the number of new vanpools started. Express/RAPID Express/RAPID routes provide higher speed services by operating within a limited stop On-Time Performance and other enhancements. Express/RAPID routes operate on regional freeways. ADA Percent of all ADA trips that are picked up within the 30 minute ready window. Farebox Recovery Ratio Bus This is the percentage of total operating cost that is covered by fares collected. It is Percent of all trips that operate no more than 0 minutes early and 5 minutes late, equal to total fare revenue collected divided by total operating costs. compared to scheduled arrival/departure times at published time points.

Fixed Route Rail Fixed route bus service typically operates along a designated or “fixed” route with no Percent of all trips that arrive at the opposite terminal within 0 minutes early and deviations. Characteristics of this service type include controlled vehicle frequencies 5 minutes late of scheduled arrival times. and scheduled passenger stops. In this report, fixed route service comprises Local, Express, RAPID, LINK, Circulator and Rural Connector routes. Operating Cost Total costs associated with the operation of revenue vehicles which includes LINK Service maintenance and administrative costs. These are gross costs (fare revenue has LINK is a type of bus service operating on arterial streets that functions as an not been subtracted). extension of Valley Metro Rail and features limited stops, signal priority and near level

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 15 Glossary

Paratransit Service Rural Routes This service is a shared-ride origin to destination service where an individual can request Rural routes typically provide connections between rural and urban communities. transportation from one specific location to another specific location at a certain time. This service complements fixed route service. Some systems restrict service to those Subsidy per Boarding who are ADA certified, while other systems offer service to the general public. Also known as net operating cost per boarding, this is the operating cost per boarding minus the fare revenue per boarding. This number indicates the amount of public funding Revenue Hour that is used to make up the difference between the cost of providing transportation A revenue hour is an hour that one vehicle in revenue service is available to pick up service and the revenue generated by this service on a per boarding basis. fare-paying passengers. If ten vehicles are in revenue service for two hours each, they collectively perform twenty revenue hours of service. Weekday / Saturday / Sunday Average Daily Boardings This measures boardings on a typical weekday, Saturday or Sunday. This is calculated by Revenue Mile dividing total boardings on a weekday, Saturday or Sunday by the number of weekdays, A revenue mile is a mile traveled by one vehicle in revenue service that is available to Saturdays or Sundays in the fiscal year. pick up revenue passengers. If ten vehicles are in service for two miles each, they collectively perform twenty revenue miles of service.

Revenue Service Revenue service occurs when a vehicle is available to the general public and there is an expectation of carrying passengers who pay the required fare. Vehicles operated in fare-free service are also considered in revenue service. Revenue service includes layover/ recovery time, but does not include deadhead (i.e. travel from garage to the start point of a route) or vehicle maintenance testing.

RPT2402/01.21.14 Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 16 2/13/2014

Transit Performance Report FY 2013 (July 1, 2012 - June 30, 2013)

Board of Directors February 20, 2014

FY 2013 TPR Overview

• System wide highlights: – Ridership up • Fixed Route Bus 3% • Rail 5% – Fixed route bus boardings per revenue mile up 5% from FY12 – Systemwide cost per boarding 1.5% lower than FY12

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System Wide Summary

Performance % Change Indicator Fixed‐Route Paratransit Vanpool Light Rail System Total from FY12

Total Boardings 59,123,712 1,015,635 1,227,297 14,286,093 75,652,737 3.6%

Percent of Total 78.2% 1.3% 1.6% 18.9% ‐‐‐ ‐‐‐ Boardings Vehicle Revenue 28,152,162 6,666,704 6,527,280 2,430,774 43,776,920 2.8% Miles Operating Cost Per $8.09 $5.62 $0.58 $11.81 $6.80 ‐0.8% Revenue Mile Boardings Per 2.10 0.15 0.19 5.88 1.73 0.7% Revenue Mile

Average Fare $0.83 $2.09 $3.16 $0.90 $0.90 0.9%

Farebox Recovery 21.6% 5.7% 101.7% 44.6% 22.8% 2.4%

Operating Cost Per $3.85 $36.90 $3.10 $2.01 $3.94 ‐1.5% Boarding Subsidy Per $3.02 $34.81 ($0.05) $1.11 $3.04 ‐2.2% Boarding 3

Bus System Peer Comparison

Salt Lake Peer Valley Metro Dallas Denver Houston Sacramento San Diego City Average Region 2012 NTD Passenger Trips (millions) 38.4 76.7 58.1 13.1 20.2 51.8 43.0 59.1 Fare Revenue (millions) $32.5 $82.7 $32.6 $14.5 $19.4 $50.0 $38.6 $49.2 Total Ops Cost (millions) $242.6 $301.7 $289.9 $68.8 $106.8 $133.5 $190.5 $227.7 Vehicle Revenue Miles (millions) 25.7 36.7 41.4 5.6 15.9 16.0 23.5 28.2

Operating Cost per Boarding $ 6.32 3.93$ $ 4.99 5.23$ 5.30$ 2.58$ $ 4.43 $ 3.85

Average Fare $ 0.85 1.08$ $ 0.56 1.10$ 0.96$ 0.97$ $ 0.90 $ 0.83

Average Subsidy per Boarding $ 5.47 2.85$ $ 4.43 4.13$ 4.34$ 1.61$ $ 3.53 $ 3.02

Fare Recovery 13% 27% 11% 21% 18% 37% 20% 22%

Boardings per VRM 1.49 2.09 1.40 2.35 1.27 3.24 1.83 2.10

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Light Rail System Peer Comparison

Salt Lake Peer Valley Metro Dallas Denver Houston Sacramento San Diego City Average Rail 2012 NTD No. Directional Route Miles 143.6 70.0 14.8 73.8 70.7 108.4 80.2 39.2 Passenger Trips (millions) 27.7 20.6 11.3 13.2 17.4 32.7 20.5 14.3 Fare Revenue (millions) $17.6 $28.7 $4.0 $14.5 $16.8 $35.2 $19.5 $12.8 Total Ops Cost (millions) $135.9 $68.5 $17.4 $45.5 $42.2 $63.3 $62.1 $28.7 Vehicle Revenue Miles (millions) 7.6 8.4 0.9 3.8 5.9 7.5 5.7 2.4

Operating Cost per boarding $ 4.92 $ 3.32 1.54$ $ 3.45 $ 2.42 $ 1.94 $ 3.04 $ 2.01

Average Fare $ 0.64 $ 1.39 0.35$ $ 1.10 $ 0.97 $ 1.08 $ 0.95 $ 0.90

Average Subsidy per boarding $ 4.28 $ 1.93 1.19$ $ 2.35 $ 1.46 $ 0.86 $ 2.08 $ 1.11

Fare Recovery 13% 42% 23% 32% 40% 56% 31% 45%

Boardings per VRM 3.66 2.44 12.45 3.45 2.93 4.33 3.59 5.88

Supplemental Information: Added System Route Miles for Peer systems Generally speaking, Directional Route Miles = bidirectional length of rail alignment. 5

Paratransit System Peer Comparison

Salt Lake Peer Valley Metro Dallas Denver Houston Seattle San Diego 2012 NTD City Average Region Average trip length # miles 7.72 8.85 9.96 8.72 5.65 6.34 7.87 6.56 Passenger Trips (millions 1.1 1.2 1.5 1.1 0.4 0.5 1.0 1.0 Fare Revenue (millions $2.5 $2.7 $1.3 $1.0 $1.4 $1.7 $1.8 $2.1 Total Ops Cost (millions $43.1 $46.4 $37.7 $60.0 $17.2 $13.4 $36.3 $37.5 Vehicle Revenue Miles (millions) 8.8 10.3 14.8 9.8 2.3 3.0 8.2 6.7 Total Ops Cost/VRMile $ 4.88 $ 4.51 $ 2.54 6.15$ $ 7.37 $ 4.46 $ 4.99 $ 5.62

Operating Cost per boarding $ 37.73 39.94$ 25.33$ $ 53.64 $ 41.61 28.24$ $ 37.56 $ 36.90

Average Fare $ 2.16 $ 2.33 $ 0.85 0.90$ $ 3.35 $ 3.56 $ 1.81 $ 2.09

Average Subsidy per boarding $ 35.57 37.61$ 24.48$ $ 52.74 $ 38.25 24.68$ $ 35.75 $ 34.81

Supplemental Information: Added Average (Passenger) trip length stated in number of miles 6

3 2/13/2014

Summary of results

• FT13 Transit System usage grew – Fixed Route bus up 3% – Light Rail up 5% – Paratransit up 19%

• Fixed route operations efficiency improved ( Bus and Rail ) – Cost per boarding • lower than prior year • lower than peer average – Average fare • slightly lower than peer cities

• Paratransit operations efficiency – improvements realized – Cost per boarding • 4% reduction from prior year • lower than peer average – FY 14 fare structure changes to improve subsidy per boarding

DATE AGENDA ITEM 8 February 13, 2014

SUBJECT Review of 2014 Bond Issuance

PURPOSE To provide information regarding the results of the recent sale of $115 million in tax-exempt, senior lien bonds.

BACKGROUND/DISCUSSION/CONSIDERATION RPTA recently sold $115 million in tax-exempt bonds, pursuant to the Second Supplemental Resolution approved by the Board of Directors on November 21, 2013. RPTA will manage the proceeds and pass them through to METRO to fund the Central Mesa Extension, Northwest Extension and Tempe Streetcar and other TLCP projects.

RPTA worked with its financial advisor, RBC Capital Markets, bond counsel, Squire Sanders, and underwriting team of Barclays, JP Morgan and Citigroup to sell the bonds. The Series 2014 bonds were priced on January 14, 2014 and closed on January 29, 2014. The bonds were sold at a premium with coupons ranging from 3% to 5.25%. Final maturity for the bonds is July 1, 2025. The premium received was $20,406,165.

The net amount deposited to the bond proceeds account after paying issuance costs was $134,843,173. The all-in True Interest Cost (TIC) was 2.43%

COST AND BUDGET The costs of issuance are included in the RPTA FY14 Operating and Capital Budget. The costs of issuance totaled $562,991. These costs were paid from the proceeds of the sale and were well under the budgeted amount of $800,000.

COMMITTEE PROCESS RTAG: January 21, 2014 for information TMC: February 5, 2014 for information BFS: February 13, 2014 for information Board of Directors: February 20, 2014 for information

RECOMMENDATION This item is presented for information only.

CONTACT Paul Hodgins John P. McCormack Manager of Revenue Generation and Chief Financial Officer Financial Planning 602-495-8239 602-262-7433 [email protected] [email protected]

ATTACHMENTS Series 2014 Debt Service Schedule

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

Exhibit A $115,000,000 Regional Public Transportation Authority Transportation Excise Tax Revenue Bonds (Maricopa County Public Transportation Fund) Series 2014

Dated: 01/29/2014 Delivery: 01/29/2014 Total Fiscal Year CUSIP Date Principal* Coupon Interest Debt Service Debt Service (75902J)

07/01/2014 $ 2,453,169.17 $ 2,453,169.17 $ 2,453,169.17 01/01/2015 2,905,068.75 2,905,068.75 07/01/2015 $ 8,185,000 3.000% 2,905,068.75 11,090,068.75 13,995,137.50 AT6 01/01/2016 2,782,293.75 2,782,293.75 07/01/2016 8,430,000 5.000% 2,782,293.75 11,212,293.75 13,994,587.50 AU3 01/01/2017 2,571,543.75 2,571,543.75 07/01/2017 8,850,000 5.000% 2,571,543.75 11,421,543.75 13,993,087.50 AV1 01/01/2018 2,350,293.75 2,350,293.75 07/01/2018 9,295,000 5.250% 2,350,293.75 11,645,293.75 13,995,587.50 AW9 01/01/2019 2,106,300.00 2,106,300.00 07/01/2019 9,780,000 5.250% 2,106,300.00 11,886,300.00 13,992,600.00 AX7 01/01/2020 1,849,575.00 1,849,575.00 07/01/2020 10,295,000 5.250% 1,849,575.00 12,144,575.00 13,994,150.00 AY5 01/01/2021 1,579,331.25 1,579,331.25 07/01/2021 10,835,000 5.250% 1,579,331.25 12,414,331.25 13,993,662.50 AZ2 01/01/2022 1,294,912.50 1,294,912.50 07/01/2022 11,405,000 5.250% 1,294,912.50 12,699,912.50 13,994,825.00 BA6 01/01/2023 995,531.25 995,531.25 07/01/2023 12,000,000 5.250% 995,531.25 12,995,531.25 13,991,062.50 BB4 01/01/2024 680,531.25 680,531.25 07/01/2024 12,630,000 5.250% 680,531.25 13,310,531.25 13,991,062.50 BC2 01/01/2025 348,993.75 348,993.75 07/01/2025 13,295,000 5.250% 348,993.75 13,643,993.75 13,992,987.50 BD0

$115,000,000 $41,381,919.17 $156,381,919.17 $156,381,919.17

* The Series 2014 Bonds maturing on or after July 1, 2025 are subject to optional redemption prior to their stated maturities on or after July 1, 2024 at par.

2/13/2014

2014 Bond Issuance

Board of Directors February 20, 2014

Overview

• Board authorized sale of $115 million par value • Bonds priced on January 14, 2014 – Low supply in market – Bond market very favorable • Bond closing on January 29, 2014

1 2/13/2014

Summary

Preliminary Actual Difference Par value $115,000,000 $115,000,000 Coupons 4%, 5% 3%, 5%, 5.25% Premium $13,633,340 $20,406,165 + $6,772,825 Issuance costs $600,000 $562,991 - $37,009 All-in TIC 2.89% 2.43% - 0.46% Net proceeds $128,033,340 $134,843,174 + $6,809,834

Bond Proceeds Usage

• Passed through to METRO – Northwest Extension construction costs – Central Mesa Extension construction costs • Fully drawn in 18-24 months

DATE AGENDA ITEM 9 February 13, 2014

SUBJECT Future Agenda Items Request and Report on Current Events

PURPOSE Chair Somers will request future agenda items from members, and members may provide a report on current events.

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS Pending Items Request

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

Pending Items Request

Item Requested Date Requested Planned Follow-up Date

February 13, 2014

Board of Directors Thursday, February 20, 2014 Lake Powell Conference Room 101 N. 1st Avenue, 10th Floor Meeting will begin no earlier than 1:30 p.m.

For those participating by telephone, please mute your phone when not speaking.

Members please make sure your microphone is turned on when speaking and turned off when you are not speaking.

Action Recommended

1. Public Comment 1. For information

2. Minutes 2. For action

Minutes from the January 23, 2014 Board meeting are presented for approval.

3. Chief Executive Officer’s Report 3. For information

Steve Banta, Chief Executive Officer (CEO), will brief the Board on current issues.

4. Valley Metro Rail, Inc., Fiscal Year 2013 (FY13) 4. For action Comprehensive Annual Financial Report and Single Audit Act Report

Staff will request that the Board of Directors accept the Comprehensive Annual Financial Report and Single Audit Act Report for the period ended June 30, 2013.

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 602-262-7433

5. 2014 Federal Public Transportation Agenda 5. For information

Steve Banta, CEO, will introduce John Farry, Government Relations Officer, who will provide information on the Valley Metro Federal Public Transportation Agenda for 2014.

6. FY 2013 Transit Performance Report (TPR) 6. For information

7. Review of 2014 Bond Issuance 7. For information

8. Future Agenda Items Request and Report on Current 8. For information Events

Chair Ellis will request future agenda items from members and members may provide a report on current events.

9. Next Meeting 9. For information

The next meeting of the Board is scheduled for Thursday, March 20, 2014. The meeting will begin no earlier than 1:30 p.m.

To attend this meeting via teleconference, contact the receptionist at 602-262-7433 for the dial-in- information.

The supporting information for this agenda can be found on our web site at www.valleymetro.org

DATE AGENDA ITEM 1 February 13, 2014

SUBJECT Public Comment

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS None

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

DATE AGENDA ITEM 2 February 13, 2014

Minutes of the METRO Board of Directors Thursday, January 23, 2014 2:00 p.m.

Meeting Participants Councilmember Shana Ellis, City of Tempe, Chair Councilmember Dennis Kavanaugh, City of Mesa, Vice Chair Councilmember Rick Heumann, City of Chandler Councilmember Gary Sherwood, City of Glendale Councilmember Thelda Williams, City of Phoenix

Chair Ellis called the meeting to order at 2:02 p.m.

Chair Ellis said we will go ahead and call this meeting to order of the Thursday, January 23, METRO Board of directors meeting.

1. Public Comment

First item on the agenda is public comment. I received one public comment card from Blue Crowley. Mr. Crowley.

Mr. Crowley said good afternoon. I've just been paging through the regional transit plan and looking at your part of it and the other parts of it. I look at the funding that the division that it was supposed to be, so much for freeway, so much for arterial, so much for bus, rubber tire, and so much for just capital on the rail. And when I was just looking at the numbers here, and the percentages were 60, 40, if I remember correctly, when it comes to public transit funds. Sixty percent for the bus, 40 percent for the rail.

And then I come across in here on projections of expenditures, and the rail is four times more than the bus. That's buying them and operating and I wonder why.

And then I looked at the way the planning is going and it shows you that the high speed rail capacity goes out to the stadium and that we're extending a little bit into the East Valley, but I don't see where we're going multimodal and connecting light rail and heavy rail and using heavy rail to the extent that it should be.

I know you're the light rail committee, but when I look at Glendale and I see at 59th and Glendale a railroad station, when I go into Gilbert, I see the same, when I look at Rittenhouse Road and see that there's a rail that runs along it, I go, what are we doing

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 602-262-7433

with you people just sitting here arguing about how do we get it across the I-17.

Now originally the west extension was to go to Metrocenter. Well, I've got a document when I asked why is it now going to Margaret Hance or not Margaret Hance, but Rose Mofford Sports facility that Metrocenter is a concept. No, it's not. It's a place. And it has a transit facility there. And a 500 capacity park and ride lot. So when the City of Phoenix says well, we'll just do it to here, is that the committee thing, is that parochial thing where Glendale doesn't have the access? Why isn't it that that is going that way. When I look at the extensions into Chandler, et cetera, and I look here at the roadway improvements to 35, and we got four lanes all over, but then when I look at the bus and the same thing and it shows that Chandler and Gilbert and Mesa nothing above Rio Salado, nothing west or east of Power Road, and nothing south of Chandler Boulevard. How are you really planning? What are you really doing? This isn't a joke.

The best I can say to you is that when you're bragging and patting yourself on the back about this thing that you did on New Year's of free rail, hey, free rail on New Year's is good because you know what, you run past midnight. So people could get on and off of it. But if they could if they used any but rail because you were bragging about at the last meeting, hey, wasn't that neat that we did the buses, your buses didn't run past eleven o'clock. How is that doing it. Thank you.

Chair Ellis said are there any other members of the audience that would like to address the Board under public comment?

Mr. Rochelle said if I may I would like to address Blue about something.

It's not the city or any of the cities that are stopping the light rail from going to Metrocenter. It's ADOT. I've proposed to ADOT back in 1997 and they looked at me like I was crazy that they had a double deck I-17 to get rid of the traffic problem. They still haven't done anything about it. That's what is stopping the light rail from going into Metrocenter. Thank you.

2. Minutes

Chair Ellis said Item No. 2 is the minutes.

IT WAS MOVED BY COUNCILMEMBER SHERWOOD, SECONDED BY COUNCILMEMBER WILLIAMS AND UNANIMOUSLY CARRIED TO APPROVE THE MINUTES FROM DECEMBER 19, 2013.

3. Chief Executive Officer’s Report

Chair Ellis said Item No. 3 is the Chief Executive Officer Report.

Mr. Banta: Thank you, Madam Chair, members of the Board. Happy new year for

those of who you weren't here at the RPTA meeting.

As you know on January 19, we partnered with PF Changs for the Rock 'n' Roll marathon. Valley Metro had a booth at the racer's expo to communicate all of our services before the event.

Light rail ridership reached 33,000 that day. Average Sunday is about 23,000. It's about a 46 percent increase over an average Sunday ridership for us.

Service changes take effect on January 27. The Transit Book is completed and available for customers and service change materials have been distributed urging passengers to look up their routes and make sure there weren’t modifications to them and their normal travel patterns.

On Thursday, January 16, Valley Metro was pleased to host a delegation from Las Vegas. Las Vegas is looking at their current transit system in conjunction with their stakeholders on this trip and the Convention and Visitor's Bureau figuring out ways in which they can cooperatively advance the transit system to provide connectivity between destinations in Las Vegas.

They were very interested in the success of our light rail system here and the coordination with bus and the event venues that we service in and around the valley. Chair Ellis was there for the majority of the day. We thank her for her efforts. There were elected officials, county officials, transit professionals, and private sector stakeholders that were down here.

We went through a presentation and a welcoming from the chair. We had Dennis Smith from MAG talk about how we move through the voter tax referendum process. I gave an overview of Valley Metro. And then we had a speaking part for the Phoenix Convention and Visitor's Center talking about the importance of transit and what it does from his perspective as it relates to drawing convention business.

So it was really good. We've got a lot of kudos from Las Vegas by all accounts the visit was a success. And we look forward to working with them as they continue to advance their transit system in Las Vegas.

Ridership, on December 7, we had another all-time high on light rail ridership, 65,773 boardings. That day included activities of an ASU football game. Tempe Festival of the Arts, Festival of Lights Parade in Phoenix, and also a concert at the US Airways Center. All of those events increased our ridership that day to 65,000.

Light rail ridership for the month of December '13 over month of December of '12, zero percent is flat. Average daily boardings in the month for light rail is down on weekday about 2.5 percent. We don't think that's an alarming number.

We are starting to look at ways in which we can communicate the importance of transit regionally and start talking about the value of what we bring to the communities and make sure that there are opportunities for folks to understand how to engage in our system for their transit options.

Another event that we're very proud of, Mr. Crowley mentioned it earlier in his comments, was us partnering with Coors for free rides on New Year's Eve. It was for bus and light rail.

We saw a bus increase of ridership by 16 percent on New Year's Eve over last year. And by 63 percent on light rail. We appreciate the support from the Board on that partnership and we look forward to continuing that partnership as years go on. Legislative update is at your seat. And I'd be available for questions if you have any.

Vice Mayor Heumann said Steve, with December ridership down, October was down, I know we thought it was more of the shutdown of the federal government, but how many of the last five months have we been down in ridership.

Mr. Banta said it depends on what the margin of error is. What we're reporting is probably the last three out of the last five months we've seen either a .1 or 2 to 3 to 4 percent depending upon if it's bus or light rail.

We do believe that as the economy starts to change, we see some shifts in people taking public transit. What we've seen have more of an effect on bus than light rail is the cost of gasoline. Gasoline prices seem to be a little bit lower and have stabilized. And you usually see a migration of bus use with the ebb and flow of fuel prices.

We are starting to look at time of day ridership on light rail. We're starting to capture as much ridership with the automatic passenger counters on our bus fleet as we can. And then our operations planning service group is going to start looking at ways in which we can see if we're picking up on any trends to potentially change or develop a strategy to look at ridership.

Vice Mayor Heumann said have we, in the last six months, done any kind of surveys with our light rail ridership to find out other than the potential gas prices and gas was up $.20, $.25 cents over the last month, what may be some of those reasons why people are not riding other than the gas thing you're thinking about.

Mr. Banta said we did have at the RPTA board a request for proposals for survey services. And this is the type of work that we're going to be doing with this contract. We're going to put the RFP out on the street now. We're going to look for replies from the private sector for the survey results and then look to implement that over the next five years.

Councilmember Sherwood said obviously I'm still confused between bus and rail by the comment I made at the RPTA meeting. Again, I wanted to give kudos to Mr. Abraham and his staff for the extra hours they had to put in for these last two weekends to get the -- when you ran all the cars for the two various events. So again, I made those comments earlier, it was more appropriate to be made obviously at this board meeting. So thank you.

4. Fiscal Year 2014 Second Quarter Reports

Chair Ellis said we'll move on to Item No. 4, the fiscal year 2014 second quarter reports.

Mr. Banta said Madam Chair, Members of the Board, I'd like to have the department directors follow one by one to give the second quarter reports.

Mr. Abraham said Madam Chair, Members of the Board, I will try to give you a brief report on the operations statistics for the last quarter. And we'll start with ridership. And it's regional ridership. It includes all fixed route bus and light rail and you can see the graph in front of you here, we are down from last year second quarter from FY13 quarter. We're down a little bit in overall ridership for the region.

The next slide is just bus service, fixed route service, the two different colors are what Valley Metro operates and what the other cities operate. And the same trend from FY14 quarter compared to FY13 quarter -- we're slightly down.

And light rail ridership following the same trend as the general ridership, we're down a little bit from FY13 quarter two to FY14 quarter two. Not a lot in the light rail side about a hundred thousand, not even a hundred thousand.

These are some of our performance indicators that we track on the light rail system. Of course our on time performance and it's down a little bit and I attribute some of it to our passengers are learning more and more how to hold our doors to stop the train from pulling out of a station for friends boarding or people attempting to board.

A lot has got to do with our wanting our operators to be a little more considerate of the public. And if we see people close to the doors approaching the doors we try to wait for them. So we're sort of opting for a little better customer service and it might be giving us a little bit of a late arrival at the terminals.

Complaints per 100,000 boardings, as you can see, there's not too many. These are valid complaints. These are complaints after we validate that they are real complaints.

And the mechanical LRV failures are just that. They are failures to the LRV that causes a delay of more than five minutes in service. And they are calculated per hundred thousand miles.

Councilmember Sherwood said what constitutes on time performance, what's your leeway there?

Mr. Abraham said five minutes at the terminals.

Mr. Abraham said the mechanical system failures, that is failures that result in more than a five-minute delay in service due to the systems that on the light rail side that we have to maintain, catenary systems, signaling systems, switches, track work, so that is anything that even takes into consideration the track -- the bar signals, if they malfunction, hold a train up, they're not getting all permissives, so that lateness is a general system caused lateness.

Ridership is up from the first quarter of FY14 to the second, but down from the comparable quarter in FY13.

And on the light rail side, we do our maintenance in-house, so that is our preventive maintenance inspection on time on the vehicle, the light rail vehicle was a hundred percent. It has been a 100 percent since we've opened. Our light rail vehicle maintainers are very, very on the ball, they make sure the trains get in when they're scheduled to get in for all inspections.

The second line is the preventive maintenance inspections on the systems and that's from TVMs to signals, traction power, and track. It was a little low first quarter and we're working on that -- that's also facilities, I should add, that's also the buildings, the stations.

Vice Mayor Heumann said the mechanical failures that have tripled and quadrupled for the first quarter, if the maintenance is being done on a hundred percent, what can you account to why the mechanical failures have significantly increased?

Mr. Abraham said I think more in the traffic signal system and some of it is our switches are aging and sometimes we get a little problem on a switch, so we have to wait for a technician to get there. But I don't know for sure if anything else has changed from last year, but it has gone up quite a bit.

We were at preventive maintenance. Employee injuries, these are employee injuries, lost time employee injuries. And we didn't have any in the first, second quarter of FY13. We've had one in FY14.

The customer service screen you see is different than what you received in your packets because we had the first quarter of FY14 and the second quarter of FY14 reversed. So as you can see, the second quarter of FY14, the calls received went down, the complaints went down as opposed to what we sent out to you, it looked like it was the other way.

And the reason for the higher numbers in the first quarter of FY14 that was when we did our transition on the unified bus contract and we also had a schedule change that quarter and we had a work stoppage that quarter.

Vice Mayor Heumann said on the complaint number you had earlier you had like one, about three or four slides before this, it had something about complaints per 100,000 boardings.

Mr. Abraham said they are the validated complaints. They are the complaints that we get from the call center and we validate them whether they're a justifiable complaint or not.

The complaints on the customer service slide are strictly raw complaints. We're just reporting to you the volume of work at the customer service staff. And it's all complaints, not just rail.

Vice Mayor Heumann said so it's bus and rail?

Mr. Abraham said bus and rail, but that we operate, bus that everybody else operates because it's a regional call center, so that's the total volume of complaints.

Vice Mayor Heumann said is there a breakdown of what the complaints are? Is it just simple things like the bus was five minutes late?

Mr. Abraham said I have a general breakdown. The highest number of complaints generally trends to be with what passengers perceive as pass-ups. The second is late. And the third is operator attitude. That's the third highest complaint. But most of them are pass-ups, like I want to say it's in the 40 percentile, is what a customer perceives to be a pass-up to them that the bus passed them up.

Vice Mayor Heumann said are we getting any complaints about the ridership in terms of misbehavior.

Mr. Abraham said we do get some. They're not dramatic. I mean, every once in a while we'll get a few, but most of the light rail complaints are similar. They'll either come in if we had a delay in service. Some of them are the same that they feel the operator saw them and closed the door. And for the light rail it's a lot easier to validate them because we have the cameras, so we can go back and see really where that passenger was when the operator closed the door.

Mr. Tabon said good afternoon, Madam Chair, and members of the METRO light rail Board. This afternoon I'll be presenting to you our quarterly safety and security report. The first slide you see a list of accidents we've had for the previous quarter. And we've had a total of six accidents. One that included a broadside accident, two left turn -- actually three left-turn accidents, one sideswipe, and one right turn, one involving an

individual who broadsided the train and caused extensive damage and injury to herself actually in running a red signal.

The remainder of the accidents are relatively minor in nature. There were no injuries in the other accidents that you see listed. And that's about it. They were relatively minor in nature.

And here are the accidents here. I'm comparing them quarter by quarter. And FY14, first quarter, we had six. FY14, second quarter, we had six. And for FY13 second quarter, we had five. So it's about the same across the board.

Prior to moving on to additional stats regarding fare inspection and security on the light rail, I'd like to give you an overview. And our fare inspection coverage overview will tell you that we have a total of 37 fare inspectors. We have ten fare inspectors per shift. Each are assigned to cover the entire system. We have five zones and the illustration will follow. We have two fare inspectors per zone.

Fare inspectors are expected to inspect fares and detour evasion, respond to security- related incidents, respond to medical emergencies, respond to safety-related emergencies, collaborate with local and federal law enforcement, provide weekday station platform high school coverage, provide event coverage such as ASU games, foot races, protests, concerts, SUNS, and Diamondback games. And also at any time they're inspected to respond to the courts for citations that have been issued.

Here's an illustration of our zones. Zone No. 1 at the top of the map extend from Montebello and 19th Avenue to Campbell and Central. Zone No. 2 from Campbell -- Central to Van Buren and Central. Zone No. 3 Van Buren to 44th and Washington. Zone No. 4, 44th and Washington to University Drive at Rural. Zone No. 5 University Drive at Rural and Sycamore and Main.

For fares inspected for the first quarter of FY13 our team inspected 386,598 fares. FY14, the second quarter, our team inspected 414,152 fares. For FY13, second quarter, which was about their beginning their start with us, 306,806 fares were inspected.

Fare compliance. This rate represents the individuals that we actually made contact with that were found not having proper fare. As you can see for the first quarter of FY14, 95 percent of the individuals that we made contact with had proper fare. And for the second quarter of FY14, 93.6 percent. And for the second quarter of FY13 90.8 percent individuals had their fares.

For this slide is the citations that were issued solely by Allied Barton personnel. FY14, the first quarter, 231. FY14 second quarter 194. And 68 for FY13 second quarter.

Now for that particular data, for FY13, second quarter, that one only represents what was issued in the City of Tempe and it was when Allied Barton had just started with us. So that's why you see such a low number there on the end.

Vice Mayor Heumann said FY14 quarter two, is that Allied Barton's entire system?

Mr. Tabon said yes. That's correct.

Vice Mayor Heumann said if you have a 93.4, 93.6 percent compliance rate based on the numbers that I just did there's somewhere around 24,000 people who evaded or didn't pay fares. We cited 194. I guess my question would be is when I hear ridership is down, I hear from citizens around the valley saying that they're not comfortable on the train, people don't pay. If we issued 194 citations out of 24,000 people, based on the math, that didn't pay, I'd like to know why that's such a low number.

You inspected 414,000 people. And 93.6 were there, so that left 6.4 percent. You do the math, 6 percent of that is about 24,000 people. Maybe I'm doing the math wrong. But we cited 194 people. So my question is: What are we doing to all those other people that who said they didn't pay their fare? Are we putting their name in the system? Other cities around the country that have the system, you know, if somebody didn't pay, hey, I didn't pay, I'm sorry. Okay. Fine. It's your first time. Great. But are these recurring people.

And I saw a dip from the first quarter to the second quarter in terms of compliance, so I have some concerns as, you know, as a taxpayer and funding the system if people aren't paying. But if you got over 6 percent noncompliance and we're issuing 194 citations, the math doesn't work.

Mr. Tabon said the first part of that is we're not the only entity issuing citations. City of Phoenix, Tempe, and Mesa also issue citations. It's not just for fare compliance, but they also issue citations.

Vice Mayor Heumann said I'm asking about fare compliance. This is something I've asked for several months and we talked about education a year ago, we talked about all these different things, and I just am very frustrated by 194 citations being issued if we have that many people not paying the fare.

Now we have a system set up that, you know, scanning, and all the tapping and all the other stuff, but we don't have like New York City with turnstiles and things like that, but if we're actually doing this, my question is where is the other -- everybody who has been checked, what are we doing about it? Third question, I think.

Mr. Banta said if I could, when our fare inspectors engage and they come across someone without a valid fare, a number of things can happen: There's a citation, the person runs, the person does not have ID to issue a citation to; therefore, the Allied

Barton person has to stay try to stay engaged with that person and then call for the police department in a local jurisdiction to come and interdict in the investigation. The majority of them I would say anecdotally run. Gardner and I, have meetings set up with Allied Barton to go out and talk to every one of the fare enforcement people. We are going to talk about the importance of the perception, the questions that were asked about fare evasion, citations, and fare compliance, and try to think about ways in which to come up with potentially a different strategy that would help make these numbers move in a different direction.

Vice Mayor Heumann said what I'd like to see also is there's other cities that are on a similar type system. I know Seattle from the guys that were up there for that, is there a way to get comparative numbers from those cities on what they do, what their inspections are, how many citations they offer, things like that, so maybe we can learn from other cities that maybe have a better perception of their system.

Mr. Banta said we can do that. I would say from my experience every system is a little bit different, so we'll try to figure out how we can get some comparisons that make sense to what we do here.

Vice Mayor Heumann said I just think 194 out of a potential 24,000 is totally unacceptable. And I think the public, if they see those numbers, would say the same thing that the perception is people aren't paying. We have 93.6 whatever is paying, which is great. But that's still 24,000 riders that we scan that didn't pay.

Chair Ellis said I have a question about the inspection piece of it. Are all of those actually on the train or are some before people get on the train? Because if they're not on the train yet, they really haven't committed any kind of, you know, I mean, they could still go back and pay before they get on the train. So are they all on the train where people are checked? Because I have seen some of the fare inspectors talking to people before they get on the train.

Mr. Tabon said these are both train and station platform. People are required to have proper fare media while on station platform. So from time to time you will see our fare inspectors inspect on a station platform.

Chair Ellis said so then in that case they would just walk over and buy a ticket in order to get on the system. They actually hadn't done anything.

Mr. Tabon said we try to accommodate. We try where possible and we're reasonable. We really try to accommodate the customer. And there are a fair amount customers that are just not knowledgeable, especially if you consider 44th and Washington where a number of individuals are coming in from the airlines, and we just try to be as accommodating in teaching individuals how to ride our system properly.

Chair Ellis said but I do agree with Vice Mayor Heumann that that does seem very low, but I realize that some of it does take place on the platform, but even if half did, that would still be very low.

Chair Ellis said any other questions on any of these slides? Okay. Continue.

Mr. Tabon said total of security incidents FY14, first quarter, 177, FY14, second quarter, 194 and FY13, second quarter, 321. And here's a breakdown of the incidents that have occurred.

Unfortunately we've had a shooting, trespass warnings were provided to individuals, criminal trespass, warrants were issued, assaults occurred, assaults on PD and/or security, disorderly conduct, disorderly arrests, robbery, theft, and criminal damage. Each of these we respond to.

Just in case you may not be aware, we do have emergency call boxes on the platforms and these calls come in directly to our operations control center to our staff, our Allied Barton staff.

Here's a breakdown of the calls emergency and non-emergency calls, FY14, first quarter, we had 1009: 738 were non-emergency, 271 were actual emergency calls. FY14, second quarter, 749 calls were non-emergency. 316 were actual emergencies.

FY13, second quarter, 849 calls were non-emergency, 504 were emergency. Each of the calls are investigated to a certain degree or another by our personnel. Medical responses, FY14, first quarter, 140, FY14, second quarter, 135. FY13, second quarter, 86.

And again, our personnel respond to these calls and to these emergencies. And you can see the numbers, quite a few medical assists and illness calls and responses, along with medical assist and injuries, meaning individuals that are actually injured on the train and medical assists off property. These are individuals who may come from the community to seek medical attention for their illness or their injury. And we, again, we respond to each of these incidents our fare inspectors and other personnel.

Chair Ellis said any other questions about safety and security? Okay. Thank you.

Mr. Brown said good afternoon. The first project I would like to report on is the Central Mesa Extension that's the 3-mile line extension down Main Street in Mesa from the Sycamore station and Mesa Drive.

In regards to the project's progress, the third-party utility work is continuing with SRP irrigation work ongoing. The roadway work is continuing in several locations along the project. The contractor has started the excavation work for the guideway or for the track work just west of Alma School Road. That would be the first installation.

The rail welding has been completed. The contractor brought in a welding machine and welded all of the short pieces of rail into longer pieces of rail. I have some photographs of that in just a few minutes. All the special track work has been delivered for the project.

The contractor is also installing catenary pole foundations and duct bank work along the entire project, but specifically west of Alma School Road where the first guideway or track work is going to be installed.

Public utility work continues with the water main and gas line work being completed. Regarding the CAB, or the community advisory board, that entity gave the contractor a 90 percent rating for the quarter based on their performance. Also in the last quarter we've turned over all of the 122 pieces of property to the contractor for the contractor's use. So that's a good thing.

I've got some photographs of the work progress. This is the SRP irrigation work. Three shots of the Mesa powered duct line work. This is the duct work that will provide the power from the City of Mesa to power our traction powered substations and our trains. This shot is showing the removal of street lights from the median so that we can build our guideway/track work and our catenary poles. Some more duct bank work. We are rapidly finishing up the utility work and getting into an above grade light rail project which we're very excited about.

This shows some of the roadway work, widening the roadways for the station platforms and getting ready for the guideway.

This is the demolition work for the guideway itself. We move in the median and the roadway adjacent to the median so that we can construct the guideway. This is the rail. The rail was delivered last summer. It's a nominal 80-foot long pieces and this contractor welds them into strings 560 feet long. This shows the 80-foot pieces of rail. The machines load them onto the rack that leads into the welding machine. This is the actual flash welding machine that's fusing the two rails together. The rail is welded and then pushed on ahead into the storage pile.

And we have two storage piles, one in the east end of the project and one on the west end. This is the one on the west end. And you can see the rails nominally 560 feet long in storage ready for use. Just yesterday the contractor pulled the first two rails out, and if you look west of Alma School Road, you'll see the first two rails with the rubber boot on them ready for rebar installation, form work, et cetera.

And if all goes wells, the contractor is scheduled to install the first or to place the first guideway or concrete pour the first week of February. So that's a very exciting major accomplishment. And of course, after the rails are in the street then we'll use thermite welds to connect the rails together and that's what the February 8th event is all about in

Mesa the first thermite weld in the project.

Regarding project schedule with our contractor is 39 percent complete. The baseline schedule shows completion in August of 2015. The contractor is now projecting the finish almost four months earlier in April of 2015, which is really -- we think is very good news.

There's one challenge with that and that is that the contractor's cash flow projections are exceeding our cash flow estimates. So the next item on the agenda will be the mid- year budget adjustment. And John McCormack is going to present that. But what we're proposing to do is to take moneys from 2016 and 2015, move them up to 2014. Not change the budget at all. The overall budget remains the same, but we want to accommodate the contractor's cash flow so we can get the project done and keep moving.

Councilmember Sherwood said is that a typo under utilities under current? Should that be four eight of 2014?

Mr. Brown said no. We'll still be doing utility work up into -- 2015 we will still be doing utility work. We anticipated that it would be done by then, but we're, I guess, lagging with SRP. The SRP work is lagging a little bit and so they'll still be work going on.

Councilmember Sherwood said okay. It just looks, I mean, when you look at that overall, looks a little screwy.

Mr. Brown said regarding cost and budget, the contractor's budget is $123 million. Contractor has spent $42.2 million so far. They have spent 34 percent of the money for the contract. Overall budget is $199 million. And we are forecasting to complete the job at $199 million within budget.

Regarding project contingency, we have allocated contingency of $15.2 million dollars. As of the end of December, we've executed change orders in the amount of $10.2 million leaving us $5 million left over. We're currently negotiating additional change orders and some of that five million dollars will be used for those change orders.

We have unallocated contingency of $16.9 million that we have not touched. It's remaining there not being used. With the $16.9 million and the $5 million, we have a total of $21 almost $22 million of contingency as of the end of December.

Regarding funding this slide really hasn't changed since the last quarter, but we have funding from federal small starts, federal CMAQ, and PTF funding for the project. Are there any questions on the Central Mesa Extension?

If not, the next project is the Northwest Extension. And that, of course, is the 3-mile extension up 19th Avenue from Bethany Home Road to Dunlap in the City of Phoenix.

Third-party utility work is ongoing and earnest. SRP, Century Link and Cox and Southwest Gas are all working on the job.

The contractor is working as well. The rail delivery was completed in the quarter. Road work began on 19th Avenue between Dunlap and Butler and also on Dunlap itself. Public utility work continues and retaining wall work began. The City of Phoenix is continuing to do cut and reface work on two of the properties that are needed for the project.

The CAB gave the contractor a 100 percent rating for their performance and we have turned over 162 of the 168 properties to the contractor for their use.

I have some photos. This is SRP irrigation work. This is the Century Link vault that was installed in the northeast quadrant of Dunlap and 19th Avenue. This was a major milestone for our project. You can tell it's a pretty good sized vault. It was set probably a month and a half ago. The contractor has installed cable and they're in there doing all of their splicing right now and hopefully within a couple of weeks they'll have all the splicing done and will be moving on. So that's a major activity for the project.

Photographs of some road work that's ongoing. Retaining wall work, excavation work along 19th Avenue and storm drain installation. And we're now installing catenary pole foundation up at Dunlap and that's the first activity as we move towards guideway construction. Although the rail won't be welded until probably the May-June time frame, but after that then we'll be getting into the guideway construction which is a major event.

Regarding schedule, the contractor is 38 percent complete. Contractor is moving ahead very well. Baseline schedule shows completion in July of 2016. Currently the contractor is projecting May of 2016. A couple months ahead of schedule, but we anticipate the contractor is going to be moving ahead even faster. So we have the same good news we think the contractor is going to finish earlier. The challenge is the cash flow and ditto to the last project, we want to move money from 2016 and 2015 into 2014. No change in the overall budget though and John's going to explain that with the next item.

Regarding cost and budget, contractor's budget is $150 million. Contractor has spent almost $51 million. Contractor has spent 33, 34 percent of the project moneys. Overall budget is $327 million dollars and we are forecasting to be complete at $327 million dollars within budget.

Regarding contingency, the total contingency for the project is $10 million. We have executed change orders of $1.8 million leaving $8.2 million in contingency. We are still negotiating change orders on the project. Again, project funding has not changed since last month. The percentages or the dollars. Money coming from Phoenix 2000 tax, Phoenix advance moneys, and PTF.

Are there any questions on the Northwest Extension project?

Councilmember Sherwood said Mr. Brown, back to my utility question; I'm just trying to be a little smart on this. So on that one you show on this project the utilities finished two years in front of the actual construction. How is that -- again, just more for education, why is that so different than the Mesa project? A lot less going on utility-wise?

Mr. Brown said I'm going to have to drill down, I'm going to ask -- Marty, can you address that question? You know more of the details than I do.

Mr. Spong said on the Northwest Extension, the majority of the utilities or the total utilities are being replaced for widening the street completely. So the majority of those utilities are being replaced now and then we'll put the guideway on.

In Mesa, we're only widening it in certain areas and we have some of the utilities we relocated such as the SRP irrigation. We went in and replaced all of the pipes for the irrigation lines, which were very large. They also get set forms so they get a lining put inside of those. We'll do that at a later date.

Chair Ellis said Mr. Grote.

Mr. Grote said Madam Chair, Members of the Board, I'm going to be giving you a quick update on our future transit corridors and what we are currently working on and planning.

As of right now, you've seen this map many times, but the point of this map is that there's six highlighted areas shown in yellow and those are the areas that we're currently doing studies in that I'm going to be talking about here.

The Tempe Streetcar is the first project I'll mention. And this project is in what FTA calls project development. And we have been, as many of you know, we've been looking at reconfiguring this project. We've got two primary reconfiguration options utilizing different elements of Apache Boulevard and/or Rio Salado Parkway. And we are continuing to analyze these options and intend to finish our analysis soon so that we can go into public review of what we've been putting together. With the intent of completing this project development phase towards the end of this year.

Gilbert Road Extension, this project in the last quarter received an environmental clearance from the Federal Transit Administration, which allowed us to move forward with other elements of the project. We are also concurrently working on preliminary engineering for the project which takes us to around 25, 30 percent of design and that will be complete over the next couple of months. And then we will go on to the next phase in hiring contractors to do design and construction of the project. And this project is forecasted for completion in 2018.

Next is our capital I-10 west corridor, going out the I-10 freeway to 79th Avenue. In this corridor, we started the environmental assessment earlier this year. We just continued to work on the environmental within the corridor hoping to complete that by spring of 2015 for environmental clearance.

We also in the last quarter we spent some time with ADOT trying to coordinate with them with our alignment and their facilities along the I-10 freeway, and particularly they have a drainage channel there. There are pumping stations and other things that are potential conflicts and we're just trying to work through all of those and make sure that we're coordinated in what we're doing.

The West Phoenix Central Glendale corridor, we're currently conducting an alternative analysis. Last quarter, I think I mentioned that we were in Phase I of the evaluation. We've now progressed into Phase II. And now we have five remaining alignments showing on this map on Glendale Avenue, Bethany Home and Camelback and various ways to get to downtown Glendale. The one line that's been removed since the last meeting is the line that goes on Northern Avenue. And we're beyond that at this point.

We also in addition to analyzing these next five alternatives in more detail, we're also spending some time in downtown Glendale trying to better understand the alignment there. Now the map isn't to the right scale, so you can see the details, but we're looking at other alternatives in downtown Glendale, not just Glendale Avenue. So some of the parallel streets are also be evaluated for potential going through the downtown area. More to come on that.

Northwest Extension, Phase I of course is under construction. We have another piece of this to build. We completed an alternatives analysis several years ago, but things have changed. We are doing an update of that alternatives analysis now, hope to complete that sometime later on this spring, but the focus on this one is really to see what the feasibility is of getting from the east side of I-17 into the Metrocenter area on the west side.

We're analyzing various options to do that right now. In fact, we had in the last quarter we had a workshop with a number of staff from the City of Phoenix, ourselves, and our consultants and we spent a half day just brainstorming different ways to make this happen. Recognizing one of the challenges here is that the light rail line would be at the same level as the freeway. So somehow one or the other has to go up or down, and so we're looking at options of going over, we're looking at options going under. And one of the favorite options that seem to be coming out of the workshop was that potential for us to actually tunnel underneath the I-17 freeway may be an option. Again, we haven't decided anything, but these are things that we're exploring for this project.

Councilmember Sherwood said so you're looking at a couple of places where you're going to cross over; right?

Mr. Grote said yes, primarily we're looking at the alignment that was decided several years ago that took this project, you know, right now it stops at 19th Avenue and Dunlap. We would be continuing along Dunlap to 25th Avenue going up 25th Avenue to Mountain View and now we're really just looking at not so much if we would cross at different locations, but how do we get across here and how do we tie into Metrocenter to really make an effective project.

Councilmember Sherwood said but for the Glendale extension, that would be coming across lower.

Mr. Grote said yes, the Glendale extension is -- right. That would either be at Glendale, Bethany Home or Camelback depending on which alignment we're selecting.

Councilmember Sherwood said but would you do those studies concurrently in terms of whether you're tunneling or bridging?

Mr. Grote said yes. It's a different animal there because the freeway is at a different elevation than the surrounding street system. In this particular case the freeway and the land around it are at the same level.

The last project is the alternatives analysis that we've been doing for the City of Phoenix. We're hoping to wrap this up here in the spring months. Last quarter we did get approval from the Phoenix City Council for the recommendations from the alternatives analysis which include light rail predominantly on Central Avenue from the downtown area. We still have some items to clean up and that is more specifics about station locations as well as the configuration of the street, whether it's a two-lane street or a four-lane street in some sections is still under discussion.

We are working with the City of Phoenix to develop a financial plan because this project can't be moved into the regional transportation plan without funding behind it. So it's important that we continue to have these discussions with Phoenix to decide, how do we move this project forward.

Chair Ellis said Mr. McCormack.

Mr. McCormack said good afternoon. I'd like to give you a little update on the second quarter operations financial results.

On this slide you'll see a comparison of budget to actual for the second quarter. And also on the right side you see the year to date.

So with respect to the second quarter, our budget was $11.2 million. Actual expenses came in at $9.2 million. We were favorable on rail operations by about$ 900,000. Favorable on future project development at $1.1 million.

Looking to the year-to-date expenses, light rail operations are $1.7 million favorable for the first six months. We are presenting a budget adjustment for that favorable variance that I will be showing you in a few minutes.

Future project development is running favorable for the year. The future project development cost, these are the projects that Wulf was just sharing with you all. Those projects tend to lag in their billing and so we catch up with greater expenses towards the second half of the year, but also I think that what we see is there is some optimism in the original budget and the actual expenses flow later than they were anticipated. And so the projects tend to get dragged out from fiscal year to fiscal year.

In terms of agency operating, we're running right on plan. For the first time here we're reporting our integrated agency number of full-time equivalent positions. The budget was 288 for the combination of staff that served the RPTA, Valley Metro activities and the Valley Metro Rail activities. As of December 31, 254 of those were on board with 34 unfilled positions.

This is a status of the unfilled positions. As I mentioned, there were 34 of those in December. That's about 12 percent of the total authorized positions of 288. You can see that since December 31, we've filled five of those positions leaving a balance of 29 open at this point about 10 percent of the total. The largest segment of those open positions are in operations and maintenance. And that's 19 out of 170 total positions that were unfilled. And we typically have a number of entry level positions there. And they experience rather routine turnover. We also have some technical maintenance positions where finding and retaining the qualified staff at the 100 percent level is challenging.

I also mention that in the administration organization development, we're currently restructuring our IT human resources. And we anticipate that to be completed within the next two to three months which would fill some of those positions.

Moving on to the capital projects, same format, capital expenses for the second quarter, $26.8 million versus $37.4 million planned. For the second quarter the central Mesa project ran favorable to budget and from the year to date it's about $5.6 million. But as Rick Brown mentioned, the costs will escalate in the third and fourth quarter here, the first half of 2014. That trend we'll see that for Northwest Extension, as well as the central Mesa projects.

The Tempe Streetcar project is we have some engineering expenses but that's certainly has been delayed pending the approval of federal funding. And in terms of the Gilbert Road project, we haven't generated any real estate purchases at this time and we are running a little bit behind where we had anticipated one year ago when we built the budget. So total capital year to date, we're at $55.3 million for the six-month period. Variance of $19.6 million.

I have a slide that we've been showing which is the average rail fare. There were some additional slides in your packet. This monitors the average fare collected in each of the quarterly periods. What we're looking at here is the second quarter of FY14, which was $.92 cents average fare versus the budget of $.96 cents. We increased the budget to $.96 cents this year because of the fare increase that we implemented on March 1. So this number last year or this row right here which was $.84 cents was our budget last year for average fare. We actually did better than plan in this third and fourth quarters last year.

Some of the factors that are going to drive the average fare are the mix of ridership fares that are utilized. We are seeing a greater number of passengers with reduced fares that are utilizing the system this year versus last year.

I actually have a slide that depict this is. This is a comparison of fare usage type. And what you see in green here are FY14, this is just a mix of the number of passengers in the second quarter using each fare type. So a single ride which has the highest fare relatively lower percentage of total riders use that fare.

We have reduced fares, which are 50 percent of the single full fare base. And you can see the trend is going to continue all the way across that FY14 reduced fares are higher than the prior year here. With respect to the all-day fare, we have a higher number of reduced and for the 31-day passes as well.

So that is a significant driver in average fare as the number of passengers that qualify for reduced fares are using those that media.

Any questions on the average fare before I move on? Okay. That concludes the second quarter report.

5. METRO Fiscal Year 2014 (FY14) Mid-Year Budget Adjustment

Mr. McCormack said agenda Item 5 is an action item seeking the board's approval for adjustments to the FY14 operating and capital budget. These changes have been reviewed with the financial working group and comments have been addressed. The Rail Management Committee recommended approval of the changes at their January 8 meeting.

With respect to operating activities there's three changes: Number one, rail operations are being reduced by $1.7 million to reflect lower actual costs that have been incurred in the first six months.

Future project development costs have been increased by $300,000. And that's to accommodate the additional environmental work on the Tempe streetcar project fund where we're going back to the FTA with a new alignment.

And finally, agency overhead costs are being increased for IT improvements including the storage area network that was brought to the board in August for that purchase. With respect to capital costs, these are increasing due to the timing of scheduled work as Mr. Brown just indicated. The Northwest Extension will have no change to the total project, however, the costs incurred this fiscal year are being increased due to the timing of that work. And so for Northwest Extension and the central Mesa projects, both of those will experience large increases in the second half of the year exceeding what we had planned in this fiscal year.

With respect to the Tempe Streetcar, the capital phase has been delayed due to the pending federal funding, so there's a reduction of that project by $3.5 million. And with the Gilbert Road Extension, the real estate is now forecasted to occur in early 2015.

This is a five-year look, comprehensive look, of the cash flow for the Northwest Extension project. On top this is the current five-year program that was brought to the Board last May as part of the annual budget. The total project costs are $328 million dollars. The proposed adjustments with the mid-year budget adjustment, the total projects costs remain at $328 million; however, the capital costs that are going to be incurred this fiscal year have been increased to $88 million. And on the bottom line here you can see the impact year over year versus the five-year plan that we had anticipated. So reduced costs last year and in FY15 and FY16 are really funding the increase in this fiscal year.

Similar condition on the central Mesa capital project, the existing plan, $199 million, no change to the capital plan in total. However, increased capital costs in this fiscal year of about $23 million. And those are really being offset by reductions that we experienced last year and out into 2016. Any question on the two major capital projects?

So summary of the changes, total uses of funds in the adopted budget is 202 million. That's increasing to $249 million. On the operating side we're reducing the cost by $1.2 million. On the capital side we're increasing by $48 million and the two major drivers there are the northwest and central Mesa projects.

In terms of the funding for all of those activities, on the operating side, member city contributions are being reduced by $3.2 million. That's being driven by two things: First, we have some greater amount of federal preventive maintenance money this year, about $1.6 million greater than anticipated; and also the $1.7 million reduction in operating costs are contributing to that reduction.

On the capital side, increased amounts this fiscal year in new starts money and CMAQ money, these are related to the central Mesa project.

The member city contributions are reduced due to the timing of CNPA funded activities in the City of Phoenix for the Northwest Extension. And the major funding source for those increases for the two major projects are coming from the PTF bond revenues, 45

million, and a million and a half from PTF sales tax revenue.

So that concludes my presentation. This is the recommendation seeking your approval to approve the budget adjustments.

Chair Ellis said are there any questions for Mr. McCormack before we go to public comment? Okay. We did receive one card on this item. Blue Crowley.

Public Comment

Mr. Crowley said well, I go over the meeting and I see how you have to do the adjustments and such. I look back and see that with the planning I didn't realize that the I-10 -- that, Thelda, we're not going to bring it all the way to that terminal that's in the middle of deck park, we're going to make a turn there at the stack? This is the way we plan. This is the way we budget. This is the way we do things. So that $28-million facility still sits as a hole.

You got the legislative update, but I didn't hear of the 630 bills how many of them applied to us, but not only that, if you are planning and doing, et cetera, unless you're going to do something before February 3rd, it doesn't go in the hopper. Legislature won't be looking at it.

And I see, you know, you look at the funding sources, especially I enjoyed when you said you've been getting complaints about people on the rail being not paying and dirty and such, so I didn't know whether it was that you wanted the rail to have a certain level of only middle class and above can use it or what because it's not for profit that you people are supposed to be running the operation.

And what is it that you're saying there that with those 24,000 are we going to make sure that we arrest and charge all of them because maybe some of them are economically disadvantaged or poor, but we don't want them on the rail; right? Is that what you were expressing, because when I see you adjusting the budget and the thing we're doing with is surely the same.

So when I hear the legislative update and all of you are neophytes when it comes to that so it's not that you are all experienced politicians, you know, that when it comes from the legislature unless you're dealing with that before the fact, after the fact trying to make things right, this is what should be done.

So when I look at that part of it, I look at what you're changing and doing -- making sure that on the rail accidents, I found it fascinating that when you stated that and I looked at the thing here, the meeting, what, two months ago we had a car parked on the rails so unless it hits a vehicle, that's not an accident, you know. Just wondering because Phoenix staff came up and said, well, that was just a car.

Chair Ellis said Mr. Crowley, if you could keep your comments to the budget items that we're about to pass or not pass.

Mr. Crowley said what I'm saying on that budget is, one, that if you're doing things on planning, you're not planning correctly.

If you're doing things on working with other of the political entities with it, you're not doing it successfully, because like I said, the hopper closes on the 2nd for the House and on the 10th for the Senate.

How are you going to get extra funding to get what you really need to get done and that is rail throughout the region unless you get the money for it and where you get the money is from them, not on the 24,000 that snuck onto the rail. Thank you.

Chair Ellis said is there any other public comments on this item? Any more discussion? If not, I'll entertain a motion.

IT WAS MOVED BY COUNCILMEMBER KAVANAUGH, SECONDED BY COUNCILMEMBER WILLIAMS AND UNANIMOUSLY CARRIED TO AUTHORIZE THE MID-YEAR BUDGET ADJUSTMENT UPDATE TO THE VALLEY METRO RAIL OPERATING AND CAPITAL BUDGET FOR FY14.

6. Future Agenda Items Request and Report on Current Events

Chair Ellis said the next item on the agenda is Future Agenda Items and Report on Current Events. Any board members have comments? Yes, Mr. Sherwood.

Councilmember Sherwood said I was going to bring this up this time, but again, we had the discussion on enforcement and I think we just need to have some more, whether it's a study session or just some additional information on it, because, again, I agree with Vice Mayor Heumann we should be writing more citations or it seems like, I guess I was concerned at one point that we didn't have enough people out there, but it looks like we do. It looks like we're staffed pretty well. And again, it was requested, Mr. Banta, you replied to it that, if we could get a few other cities that have been in this for a while and see how they do enforcement and what some of their statistics are even though it may be slightly different run than what we have here, but it continually comes up on an every other month type basis, so I think we should, you know, have some discussions on it again, whether we do it at a board meeting or maybe have a study session, but I think it's worthy of some time. Thank you.

Councilmember Williams said we have the call box now for any teens that are runaway. Could we have a report on how many have used the system and any other information?

Mr. Banta said The Safe Place program. We will. Yes.

Chair Ellis said great. Anything else? Our next meeting is Thursday, February 20, and we're going to try something new here. It will be posted as no earlier than 1:30 p.m. So depending on when the RPTA meeting ends, we won't start earlier than 1:30, but we could start at 1:30 if the other meeting is done. So we hope that that schedule will work a little bit better for people. And we are adjourned. Thank you.

With no further discussion the meeting adjourned at 3:21 p.m.

DATE AGENDA ITEM 3 February 13, 2014

SUBJECT Chief Executive Officer’s Report

PURPOSE Steve Banta, Chief Executive Officer, will brief the Board on current issues.

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS None

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

DATE AGENDA ITEM 4 February 13, 2014

SUBJECT Valley Metro Rail, Inc., Fiscal Year 2013 (FY13) Comprehensive Annual Financial Report and Single Audit Act Report

PURPOSE The Rail Management Committee (RMC) is being requested to recommend that the METRO Board (Board) accept the Comprehensive Annual Financial Report (CAFR) and Single Audit Act Report (SARP) for the period ended June 30, 2013.

BACKGROUND/DISCUSSION/CONSIDERATION In October 2002, the cities of Glendale, Mesa, Phoenix, and Tempe formed Valley Metro Rail, Inc. (METRO), an Arizona public nonprofit corporation. METRO is responsible for the planning, designing, construction, and operation of the Light Rail Transit (LRT) System in the region. The fiscal year ended June 30, 2013 is the tenth full year of operation as a separate entity.

The By-Laws of the Corporation require an annual audit to be performed of the financial records by a certified public accountant. In addition, all recipients of federal grant funds are required to have an audit performed in compliance with the Single Audit Act provisions. The reports contained in the attached CAFR meet these requirements for the period ended June 30, 2013. All reports are prepared in conformity with generally accepted accounting principles.

METRO is required to have an independent audit of expenditures of federal awards received (Single Audit) directly from federal agencies or passed through by other governmental entities during the period. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the internal control over compliance and other matters having a direct and material impact on major programs, with special emphasis on internal controls and compliance requirements involving the administration of major federal awards.

Heinfeld, Meech & Co., P.C. has completed the METRO audits for the period ended June 30, 2013. Completion of the June 30, 2013 financial statement and Single Audit Act audits produced no findings.

METRO’s Comprehensive Annual Financial Report for FY13received an unmodified opinion. Attached you will find a copy of the Independent Auditor’s Report, Management Discussion and Analysis section of the CAFR, Audit Standards Disclosure and Single Act Audit Report.

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 602-262-7433

The complete CAFR and SARP reports are available on our website at the following URL: http://www.valleymetro.org/publications_reports/annual_reports

COST AND BUDGET None

COMMITTEE PROCESS RTAG: January 21, 2014 for information Financial Working Group: January 21, 2014 for action RMC: February 5, 2014 approved Board of Directors: February 20, 2014 for action

RECOMMENDATION It is recommended that the Board of Directors accept the Comprehensive Annual Financial Report and Single Audit Act Report for the period ended June 30, 2013.

CONTACT John P. McCormack Chief Financial Officer 602-262-7433 [email protected]

ATTACHMENTS Auditors Opinion –CAFR Fiscal Year 2013 Management Discussion and Analysis –CAFR Fiscal Year 2013 Audit Standards Disclosure Auditors Opinion –Single Act Audit Reports Fiscal Year 2013

Valley Metro Rail, Inc. Management’s Discussion and Analysis

As management of Valley Metro Rail, Inc. (METRO), we offer this narrative overview and analysis of the financial activities of METRO for the fiscal year ended June 30, 2013. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii – ix of this report. This discussion and analysis is designed to (1) assist the reader in focusing on significant financial issues, (2) provide an overview of METRO’s financial activity, (3) identify changes in METRO’s financial position, (4) identify any material deviations from the financial plan (adopted annual budget), and (5) identify other issues or concerns.

Financial Highlights

• METRO’s total net position increased $6.6 million in FY 2013. The increase was caused by new capital investments which exceeded scheduled depreciation charges. Total net position for METRO was $1.145 billion at June 30, 2013.

• METRO’s operating revenues for FY 2013 were $31.0 million compared to $31.0 million for the prior period. Operating revenues consisted of contributions from METRO member cities ($11.6 million), passenger fares ($12.8 million), FTA operating grants ($5.4 million) and other revenues ($1.3 million). Passenger operating costs were reduced by $0.2 million and fare revenues were increased by $0.9 million. The combination of cost savings measures, increased ridership (fare revenue) and utilization of federal grant funding resulted in reductions in contributions from Member Cities of $2.7 million.

• Capital contributions totaled $59.8 million consisting of Member City Contributions of $4.3 million, Public Transportation Funds of $27.8 million and Federal Transit Administration Capital Grants totaling $27.7 million. In addition, the City of Phoenix provided an advance capital loan for $37.9 million for the Northwest Extension capital project. Construction in progress for capital projects includes $31.8 million for the Central Mesa LRT extension and $38.3 million for the Northwest LRT extension. In addition, the capital funds provided for a $10.0 million capital lease payment for 14 light rail vehicles and for conveyance of $11.5 million in real estate to member cities.

OVERVIEW OF THE FINANCIAL STATEMENTS

METRO’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). GAAP requires that the financial statements be accompanied by a narrative introduction and analytical overview of the government’s financial activities in the form of “Management’s Discussion and Analysis” (MD&A). The financial section of the Comprehensive Annual Financial Report (CAFR) for METRO consists of this discussion and analysis and the basic financial statements. This report also contains other supplementary schedules presented after the basic financial statements. METRO’s basic financial statements include a statement of net position; a

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

statement of revenues, expenses and changes in net position; a statement of cash flows; and the notes to the financial statements. METRO’s financial statements are prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America promulgated by the Governmental Accounting Standards Board (GASB).

Fund Financial Statements – METRO is presented as an enterprise fund. Enterprise funds are used for activities that primarily serve customers outside the governmental unit. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or conditions. Funds are used to ensure and demonstrate compliance with finance-related legal requirements as well as for managerial control to demonstrate fiduciary responsibility over the assets of METRO.

The statement of net position presents information on all of METRO’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of METRO is improving or deteriorating.

The statement of revenues, expenses and changes in fund net position presents information showing how the agency’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected grant revenues).

Notes to the Financial Statements – The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements and should be read with the financial statements. The notes can be found beginning on page 13.

Enterprise Operations – METRO was formed in October 2002 by the cities of Glendale, Mesa, Phoenix and Tempe as a public nonprofit corporation to manage design, construction and operation of the Light Rail Transit (LRT) System within the Metropolitan Area. The city of Chandler became the fifth contributing member in April of 2007. The member cities pay for their share of METRO’s operating expenses based on expense allocation methods approved in the by-laws of METRO. See Note 1 for a summary of METRO’s significant accounting policies.

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

Light Rail Ridership Comparison 2010 / 2011 / 2012 / 2013

FINANCIAL ANALYSIS OF METRO

The following tables and analysis discuss the financial position and changes to the financial position for METRO as a whole as of and for the year ended June 30, 2013, with comparative information for the previous period.

Net Position – Net position may serve over time as a useful indicator of METRO’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2013, compared to the prior period.

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

VMR's Condensed Statement of Net Position As of June 30, 2013 and 2012 Percent 2013 2012 Change Change Current assets $ 77,300,100 $ 40,472,072 $ 36,828,028 91.0% Noncurrent assets 1,193,125,907 1,158,677,475 34,448,432 3.0% Total assets 1,270,426,007 1,199,149,547 71,276,460 5.9%

Current Liabilities 73,323,565 36,581,615 36,741,950 100.4% Noncurrent Liabilities 51,678,875 23,701,501 27,977,374 118.0% Total liabilities 125,002,440 60,283,116 64,719,324 107.4%

Net Investment in Capital Assets 1,143,025,388 1,136,804,227 6,221,161 0.5% Unrestricted 2,398,179 2,062,204 335,975 16.3%

Total Net Position $ 1,145,423,567 $ 1,138,866,431 $ 6,557,136 0.6%

Total net position represents the sum of METRO’s unrestricted net position plus net investment in capital assets. The largest portions of the investment are capital assets for the Central Phoenix/East Valley Light Rail Transit Project (CP/EV LRT). In December 2008, METRO placed these capital assets into service for operation of the light rail transit system and in day-to-day operations of METRO. It is not METRO’s intention to sell these assets and they are therefore not available for future spending. Net position increased $6.6 million largely due to the addition of the construction in progress for the Central Mesa Extension and the Northwest Extension capital projects. Funding sources for the new investments include Federal grants and Public Transportation Funds.

CHANGES IN NET POSITION

Total operating revenues, which consist of Contributions from Member Cities, Passenger Fares, FTA grants, and Other Revenues (advertising and MAG planning funds), increased slightly by $0.04 million. Member City contributions decreased $2.7 million and were primarily impacted by increases in Passenger Fares, advertising revenues and federal operating grants.

Operating expenses decreased by $0.2 million to $76.0 million: Administrative expenditures increased slightly from $8.2 to $8.3 million. Passenger Operations Service expenses were reduced by $0.2 million from $28.9 to $28.7 million. Depreciation expense reduced slightly from $39.1 million to $39.0 million for the year.

Non-Operating expenses: This year's non-operating revenue and expense activities report a net $8.3 million decrease in net position. The decrease includes capital conveyance of real estate to member cities ($11.5 million), private utility relocation expense ($5.5 million) and accrued interest expense on the 14 LRV capital lease obligation and Northwest Extension capital funding obligation ($2.2 million).

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

The expenses were offset by Regional Public Transportation Funds ($10.1 million) and federal planning grants ($0.8 million).

Capital contributions totaling $59.8 million consist of FTA capital grants ($27.7 million), Public Transportation Funds ($27.8 million) and Member City Contributions ($4.3 million). Capital projects funded include the Central Mesa and Northwest Extension construction projects, along with capital improvements to light rail vehicles and other equipment. The $32.1 million increase over prior year capital contributions were primarily related to a $18.6 million increase in federal grants and a $9.5 million increase in PTF contributions for the Central Mesa project.

The following table compares the revenues and expenses of METRO for the current fiscal year and the previous period.

VMR's Changes in Net Position Fiscal year ended June 30, 2013 and 2012 Percent 2013 2012 Change Change Operating revenues: Contributions from Member Cities $ 11,614,615 $ 14,274,817 $ (2,660,202) -18.6% Passenger Fares 12,791,801 11,889,930 901,871 7.6% FTA Operating Grants 5,382,997 3,614,541 1,768,456 48.9% Other Revenues 1,252,967 1,225,206 27,761 2.3% Operating revenues 31,042,380 31,004,494 37,886 0.1% Operating expenses: Administrative 8,287,393 8,201,127 86,266 1.1% Passenger Operations Service 28,711,628 28,909,661 (198,033) -0.7% Depreciation 38,978,409 39,115,165 (136,756) -0.3% Operating expenses 75,977,430 76,225,953 (248,523) -0.3%

Operating income (loss) (44,935,050) (45,221,459) 286,409 -0.6% Non-operating revenues (expense) (8,283,802) (1,995,774) (6,288,028) 315.1% Deficiency before Capital Contributions (53,218,852) (47,217,233) (6,001,619) 12.7% Capital Contributions 59,775,988 27,711,027 32,064,961 115.7% Increase (Decrease) in Net Position 6,557,136 (19,506,206) 26,063,342 -133.6% Net Position, July 1 1,138,866,431 1,158,372,637 (19,506,206) -1.7% Net Position, June 30 $ 1,145,423,567 $ 1,138,866,431 $ 6,557,136 0.6%

CAPITAL ASSETS AND LONG TERM DEBT

Capital Assets: The following table provides a breakdown of capital assets of METRO at June 30, 2013, with comparative information for the previous period. Additional information on METRO’s capital assets may be found in Note 5.

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

VMR's Capital Assets, Net of Depreciation As of June 30, 2013 and 2012 Percent 2013 2012 Change Change Buildings $ 87,357,938 $ 89,921,241 $ (2,563,303) -2.9% Guideway 514,647,312 525,957,876 (11,310,564) -2.2% Bridges 52,288,930 54,339,476 (2,050,546) -3.8% Operation Control Center 11,339,858 10,363,063 976,795 9.4% Passenger Stations and Facilities 86,657,467 90,055,798 (3,398,331) -3.8% Park and Ride Facilities 28,574,490 31,242,220 (2,667,730) -8.5% Electric Power Substations 72,759,869 76,309,385 (3,549,516) -4.7% Signal and Communication System 37,590,235 40,015,959 (2,425,724) -6.1% Computers and Software 168,000 174,758 (6,758) -3.9% Furniture and Fixtures - 74,243 (74,243) -100.0% Site Improvements 12,611 - 12,611 100.0% Revenue Vehicles 179,490,100 186,620,009 (7,129,909) -3.8% Non-Revenue Vehicles 813,139 731,731 81,408 11.1% Equipment 7,137,540 8,461,421 (1,323,881) -15.6% Construction in Progress 114,288,418 44,410,295 69,878,123 157.3%

Net Capital Assets $ 1,193,125,907 $ 1,158,677,475 $ 34,448,432 3.0%

As of June 30, 2013, METRO had $1,193 million in capital assets, net of accumulated depreciation. There was a net increase in capital assets, of $34.4 million from June 30, 2012; primarily resulting from an increase to construction in progress of $69.9 million for the Central Mesa and Northwest Extension LRT Projects offset by the annual depreciation charge of $39.0 million for the Light Rail System infrastructure. Refer to Note 5 on page 18 for more information regarding the capital assets.

Long Term Debt: During fiscal year 2009, METRO (as Lessee) completed the process of formally accepting 14 Light Rail Vehicles (LRV’s) under the terms of a Master Lease/Purchase Financing Agreement dated March 3, 2006, with the City of Phoenix (as Lessor). Under the agreement, the City financed the purchase of the vehicles with the payments due from METRO commencing in 2011. In June of 2013, METRO made the third $10.0 million scheduled payment under the lease. The capital lease obligation at June 30, 2013 includes $12,186,000 of remaining principal and $13,346,692 accrued interest totaling $25,532,692. Refer to Note 8 on page 19 for more information regarding the capital lease.

METRO signed the Project Funding Agreement (Northwest Light Rail Extension) with the City of Phoenix on December 20, 2012. The agreement provides $60 million during fiscal years 2013 and 2014 to fund the expenses of the Northwest Light Rail Extension capital project. These funds will be repaid to City of Phoenix with Regional Public Transportation Funds on June 30, 2017. During fiscal year 2013, the City of Phoenix advanced $37,914,519 to cover the project expenses. Refer to Note 9 on page 20 for more information regarding the funding agreement.

Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued)

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET

METRO’s adopted fiscal year 2014 total operating and capital budget is $202.0 million, up $23.2 million from fiscal year 2013’s amended Budget. The primary cause for the increase is within the capital budget; with the 14 LRV Capital Lease interest payment ($15.9M) coming due this year; increases to the construction activities for the Northwest Extension ($6.7M) and Central Mesa ($3.2M) LRT projects and related Concurrent Non Project Activities (CNPAs) ($7.4M). In addition, design and real estate activities commence for the Gilbert Road LRT Project ($4.2M). Offsetting the increases are reductions to budgets for the South Tempe Streetcar ($9.2M) related to delays in federal funding approvals and Systemwide Improvements ($3.2M) with a reduced OMC Solar project scope.

On the operating side, METRO’s FY14 budget is $44.8 million, down $2.1 million versus fiscal year 2013 with budgets reflecting cost improvements realized and reductions in planning project work scope.

Comparison of Annual Expenditure Budgets

Fiscal Year 2014 vs. 2013

FY 2014 FY 2013 Adopted Amended Change Uses of Funds ($,000) ($,000) ($,000) Operating Activities: Revenue Operations 34,236 35,293 (1,057) Future Project Development 9,741 10,610 (869) Agency Operating Budget 826 1,010 (184) 44,803 46,913 (2,110) Capital Projects: 20-Mile METRO Initial Segment - 2,550 (2,550) Northwest Extension 43,672 37,003 6,669 Non-Prior Rights Utilities Relocations 11,756 10,813 943 Other Capital Projects: - Central Mesa Extension 54,580 51,425 3,155 Gilbert Road Capital Project 4,177 - 4,177 South Tempe Streetcar 4,047 13,324 (9,277) CNPAs - Mesa Extension 2,581 2,526 55 CNPAs - Northwest Extension 7,349 - 7,349 Systemwide Improvements 5,695 8,892 (3,197) 14 LRV's Interest 15,897 - 15,897 Subtotal Capital before Debt Service 149,754 126,533 23,221 Capital Project Debt Service: Debt Service - Interest 4,508 2,594 1,914 Debt Service - Principal 2,980 2,771 209

Total Uses of Funds 202,045 178,810 23,234

In fiscal year 2014 METRO will commence design work on the Gilbert Road Extension. Expenses during the year are anticipated to reach $4.2 million pending necessary approvals from federal funding sources to enter preliminary engineering activities.

FINANCIAL CONTACT

The financial report is designed to provide a general overview of METRO’s finances and to demonstrate accountability for the use of public funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to METRO’s Chief Financial Officer, Valley Metro Rail, Inc., 101 North 1st Avenue, Suite 1300, Phoenix, Arizona 85003.

DATE AGENDA ITEM 5 February 13, 2014

SUBJECT 2014 Federal Public Transportation Agenda

PURPOSE To provide information on the Valley Metro Federal Public Transportation Agenda for 2014.

There are several larger issues at the federal level currently impacting public transportation. Issues include:

• The adoption of the Bipartisan Budget Act in December 2013 provides “topline” spending limits for all discretionary federal funding for both federal Fiscal Year 2014 (FY14) and FY15. It is anticipated that while the legislation provides greater stability and predictability for federal funding, public transportation funding should remain relatively flat for the near future. • In January, Congress passed and the President signed an omnibus FY14 appropriations bill in accordance with December's budget agreement. o The bill contained $8.595 billion for transit formula programs, the full amount authorized by MAP-21. o The bill also provided $2.132 billion for new starts funding, the full amount requested by the Obama Administration. That should ensure full funding of all of the Administration's New Starts project requests, including $19.5 million for the Central Mesa Extension. • Early in 2014, the federal debt ceiling needs to be increased to avoid default on federal debt. • Dozens of federal tax extenders expired on December 31, 2013. Those provisions include one to maintain parity in commuter tax benefits between parking and transit and one that provides an alternative fuel tax credit for alternatively fueled vehicles. VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

• A “fiscal cliff” is forecasted for the Highway Trust Fund (HTF) that will result in a zero balance of the HTF beginning early in FY15.

Staff has developed a federal agenda for 2014 with goals to:

COST AND BUDGET None

COMMITTEE ACTION RTAG: January 21, 2014 for information RMC: February 5, 2014 for information Board of Directors: February 20, 2014 for information

RECOMMENDATION This item is for information only.

CONTACT John Farry Government Relations Officer 602-744-5550 [email protected]

ATTACHMENTS 2014 Federal Public Transportation Agenda

2 FEDERAL PUBLIC TRANSPORTATION AGENDA

SPRING 2014

2014 Federal Agenda February 2014

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Importance of Federal Investments

Source: 2013 TLCP Update 4

2 2/13/2014

Federal Agenda

Communication Strategy

3 2/13/2014

4 2/13/2014

5 2/13/2014

6 2/13/2014

Next Steps

•March – President’s Budget – NLC Congressional Cities Conference in Washington, DC – Valley Metro Congressional Staff Meeting Luncheon

Valley Metro Congressional Staff Luncheon

Monday, March 10, 2014 Noon – 1:30 pm Capitol Hill, Room 121 Cannon HOB

7 2/13/2014

Recommendation

It is recommended that the Board of Directors approve the 2014 Federal Public Transportation Agenda.

John Farry Government Relations Officer 602-744-5550 [email protected]

DATE AGENDA ITEM 6 February 13, 2014

SUBJECT Fiscal Year 2013 (FY13) Transit Performance Report (TPR)

COST AND BUDGET None

RECOMMENDATION This item is being presented for information only.

CONTACT John P. McCormack Chief Financial Officer 602-495-8239 [email protected]

ATTACHMENTS FY13 TPR Report

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

Valley Metro Transit Performance Report FY 2013 (July 1, 2012 - June 30, 2013)

valleymetro.org Cost Efficiency & service Effectiveness | Performance Results

System Summary FY 2013

Performance % Change Indicator Bus Light Rail Paratransit Vanpool System Total from FY12

Total Boardings 59,123,712 14,286,093 1,015,635 1,227,297 75,652,737 3.6%

Percent of Total 78.2% 18.9% 1.3% 1.6% ------Boardings

Vehicle Revenue 28,152,162 2,430,774 6,666,704 6,527,280 43,776,920 2.8% Miles

Operating Cost $8.09 $11.81 $5.62 $0.58 $6.80 -0.8% Per Revenue Mile

Boardings Per 2.10 5.88 0.15 0.19 1.73 0.7% Revenue Mile

Average Fare $0.83 $0.90 $2.09 $3.16 $0.90 0.9%

Farebox Recovery 21.6% 44.6% 5.7% 101.7% 22.8% 2.4%

Operating Cost $3.85 $2.01 $36.90 $3.10 $3.94 -1.5% Per Boarding

Subsidy Per $3.02 $1.11 $34.81 ($0.05) $3.04 -2.2% Boarding

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 2 Cost Efficiency & service Effectiveness | Performance Results

FY 2013 Transit Performance Report (TPR)

Dashboard Indicators:

Green Indicates the trend is positive (Greater than 3% improvement)

White Indicates the trend is neutral (Current year results are within 3% of prior year)

Red Indicates the trend is negative (Greater than 3% decline)

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 3 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 4 Cost Efficiency & service Effectiveness | Performance Results

Average Fare Annual Increase / Decrease in Total Boardings

Annual Increase / Decrease in Weekday Annual Increase / Decrease in Saturday Average Boardings Average Boardings

15% 15% 12% 12% 9% 9% 6.56% 5.12% 6% 6% 3.37% 4.34% 3% 3% 0.98% 0% 0% -6% -6% -2.13% -9% -9% -12% -12% -15% -15% -18% -18% 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 5 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 6 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 7 Cost Efficiency & service Effectiveness | Performance Results

Operating Subsidy Per Boarding Operating Cost Per Revenue Mile

$50.00 $3.00 $40.00 $2.50 $30.00 $2.00 $1.62 $20.00 $1.50 $1.26 $15.00 $12.90 $1.11 $11.87 $11.81 $1.00 $10.00

$0.50 $5.00

$0.00 $0.00 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 8 Cost Efficiency & service Effectiveness | Performance Results

On-Time Performance

97.5% 97.2% 94.7% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 9 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 10 Cost Efficiency & service Effectiveness | Performance Results

Proposition 400 Paratransit

Valley Metro RideChoice $0 $2,374,019 0.00%

Total $21,791,908 $37,474,203 58.15%

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 11 Cost Efficiency & service Effectiveness | Performance Results

Operating Subsidy Per Boarding Operating Cost Per Revenue Hour ADA On-Time Performance

$97.17 97.39% $39.89 $100.00 100% 97.16% $40.00 $35.17 95.81% $34.81 $90.00 90% $30.00 80% $80.00 $74.98 $68.26 $20.00 $70.00 70% $60.00 60% $20.00 $50.00 50% $15.00 $40.00 40%

$10.00 $30.00 30% $20.00 20% $5.00 $10.00 10% $0.00 $0.00 0% 2011 2012 2013 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 12 Cost Efficiency & service Effectiveness | Performance Results

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 13 Cost Efficiency & service Effectiveness | Performance Results

Vanpool

Farebox Recovery Ratio Operating Cost Per Boarding Operating Subsidy Per Boarding

120% $5.00 $0.40

110% $4.50 101.7% 100.8% 99.3% $4.00 $0.30 100% $3.50 $3.13 $3.10 90% $2.98 $3.00 $0.20 80% $2.50

70% $2.00 $0.10 $1.50 $0.02 60% $0.00 -$0.05 $1.00 $0.00 50% $0.50

40% $0.00 -$0.10 2011 2012 2013 2011 2012 2013 2011 2012 2013

Operating Cost Per Revenue Mile Total Vanpool Boardings

$1.00 1.5

1.4 $0.80 1.3 1,227,297 $0.60 $0.62 $0.58 $0.60 1.2 1,145,501

(in millions) 1.1 $0.40 1,054,315 1.0 $0.20 0.5

$0.00 0.0 2011 2012 2013 2011 2012 2013

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 14 Glossary

Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 15 Glossary

RPT2402/01.21.14 Transit Performance Report (TPR) | FY 2013 (July 1, 2012 - June 30, 2013) 16 2/13/2014

Transit Performance Report FY 2013 (July 1, 2012 - June 30, 2013)

Board of Directors February 20, 2014

FY 2013 TPR Overview

• System wide highlights: – Ridership up • Fixed Route Bus 3% • Rail 5% – Fixed route bus boardings per revenue mile up 5% from FY12 – Systemwide cost per boarding 1.5% lower than FY12

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System Wide Summary

Performance % Change Indicator Fixed‐Route Paratransit Vanpool Light Rail System Total from FY12

Total Boardings 59,123,712 1,015,635 1,227,297 14,286,093 75,652,737 3.6%

Average Fare $0.83 $2.09 $3.16 $0.90 $0.90 0.9%

Farebox Recovery 21.6% 5.7% 101.7% 44.6% 22.8% 2.4%

Operating Cost Per $3.85 $36.90 $3.10 $2.01 $3.94 ‐1.5% Boarding Subsidy Per $3.02 $34.81 ($0.05) $1.11 $3.04 ‐2.2% Boarding 3

Bus System Peer Comparison

Operating Cost per Boarding $ 6.32 3.93$ $ 4.99 5.23$ 5.30$ 2.58$ $ 4.43 $ 3.85

Average Fare $ 0.85 1.08$ $ 0.56 1.10$ 0.96$ 0.97$ $ 0.90 $ 0.83

Average Subsidy per Boarding $ 5.47 2.85$ $ 4.43 4.13$ 4.34$ 1.61$ $ 3.53 $ 3.02

Fare Recovery 13% 27% 11% 21% 18% 37% 20% 22%

Boardings per VRM 1.49 2.09 1.40 2.35 1.27 3.24 1.83 2.10

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Light Rail System Peer Comparison

Operating Cost per boarding $ 4.92 $ 3.32 1.54$ $ 3.45 $ 2.42 $ 1.94 $ 3.04 $ 2.01

Average Fare $ 0.64 $ 1.39 0.35$ $ 1.10 $ 0.97 $ 1.08 $ 0.95 $ 0.90

Average Subsidy per boarding $ 4.28 $ 1.93 1.19$ $ 2.35 $ 1.46 $ 0.86 $ 2.08 $ 1.11

Fare Recovery 13% 42% 23% 32% 40% 56% 31% 45%

Boardings per VRM 3.66 2.44 12.45 3.45 2.93 4.33 3.59 5.88

Supplemental Information: Added System Route Miles for Peer systems Generally speaking, Directional Route Miles = bidirectional length of rail alignment. 5

Paratransit System Peer Comparison

Operating Cost per boarding $ 37.73 39.94$ 25.33$ $ 53.64 $ 41.61 28.24$ $ 37.56 $ 36.90

Average Fare $ 2.16 $ 2.33 $ 0.85 0.90$ $ 3.35 $ 3.56 $ 1.81 $ 2.09

Average Subsidy per boarding $ 35.57 37.61$ 24.48$ $ 52.74 $ 38.25 24.68$ $ 35.75 $ 34.81

Supplemental Information: Added Average (Passenger) trip length stated in number of miles 6

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Summary of results

• FT13 Transit System usage grew – Fixed Route bus up 3% – Light Rail up 5% – Paratransit up 19%

• Fixed route operations efficiency improved ( Bus and Rail ) – Cost per boarding • lower than prior year • lower than peer average – Average fare • slightly lower than peer cities

DATE AGENDA ITEM 7 February 13, 2014

SUBJECT Review of 2014 Bond Issuance

PURPOSE To provide information regarding the results of the recent sale of $115 million in tax-exempt, senior lien bonds.

The net amount deposited to the bond proceeds account after paying issuance costs was $134,843,173. The all-in True Interest Cost (TIC) was 2.43%

COMMITTEE PROCESS RTAG: January 21, 2014 for information TMC: February 5, 2014 for information BFS: February 13, 2014 for information Board of Directors: February 20, 2014 for information

RECOMMENDATION This item is presented for information only.

CONTACT Paul Hodgins John P. McCormack Manager of Revenue Generation and Chief Financial Officer Financial Planning 602-495-8239 602-262-7433 [email protected] [email protected] ATTACHMENTS Series 2014 Debt Service Schedule

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 85003 • 602-262-7433

Exhibit A $115,000,000 Regional Public Transportation Authority Transportation Excise Tax Revenue Bonds (Maricopa County Public Transportation Fund) Series 2014

Dated: 01/29/2014 Delivery: 01/29/2014 Total Fiscal Year CUSIP Date Principal* Coupon Interest Debt Service Debt Service (75902J)

$115,000,000 $41,381,919.17 $156,381,919.17 $156,381,919.17

* The Series 2014 Bonds maturing on or after July 1, 2025 are subject to optional redemption prior to their stated maturities on or after July 1, 2024 at par.

2/13/2014

2014 Bond Issuance

Board of Directors February 20, 2014

Overview

• Board authorized sale of $115 million par value • Bonds priced on January 14, 2014 – Low supply in market – Bond market very favorable • Bond closing on January 29, 2014

1 2/13/2014

Summary

Bond Proceeds Usage

• Passed through to METRO – Northwest Extension construction costs – Central Mesa Extension construction costs • Fully drawn in 18-24 months

DATE AGENDA ITEM 8 February 13, 2014

SUBJECT Future Agenda Items Request and Report on Current Events

PURPOSE Chair Ellis will request future agenda items from members, and members may provide a report on current events.

BACKGROUND/DISCUSSION/CONSIDERATION None

COST AND BUDGET None

COMMITTEE PROCESS None

RECOMMENDATION This item is presented for information only.

CONTACT Steve Banta Chief Executive Officer 602-262-7433 [email protected]

ATTACHMENTS Pending Items Request

VALLEY METRO • 101 N 1ST AVE • STE 1300 • PHOENIX AZ • 602-262-7433

Pending Items Request

Item Requested Date Requested Planned Follow-up Date