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Approval of Public Hearing Staff Report and Adoption of FY2020

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Approval of Public Hearing Staff Report and Adoption of FY2020 Finance and Capital Committee Action Item III-B March 14, 2019 Approval of Public Hearing Staff Report and adoption of FY2020 Operating Budget and FY2020-2025 CIP Washington Metropolitan Area Transit Authority Board Action/Information Summary MEAD Number: Resolution: Action Information 202068 Yes No TITLE: Adopt FY2020 Operating Budget and FY2020-2025 CIP PRESENTATION SUMMARY: Staff will review feedback received from the public and equity analysis on the FY2020 Proposed Budget and request approval of the Public Outreach and Input Report, FY2020 Operating Budget and FY2020-2025 Capital Improvement Program (CIP). PURPOSE: The purpose of this item is to seek Board acceptance and approval of the Public Outreach and Input Report and Title VI equity analysis, and the FY2020 Operating Budget and FY2020-2025 CIP. DESCRIPTION: Budget Priorities: Keeping Metro Safe, Reliable and Affordable The budget is built upon the General Manager/CEO's Keeping Metro Safe, Reliable and Affordable (KMSRA) strategic plan. Metro is making major progress to achieve the goals of this plan by ramping up to average capital investment of $1.5 billion annually, establishing a dedicated capital trust fund exclusive to capital investment, and limiting jurisdictional annual capital funding growth to three percent. Metro continues to encourage the U.S. Congress to reauthorize the Passenger Rail Investment and Improvement Act (PRIIA) beyond FY2020, which provides $150 million in annual federal funds matched by $150 million from the District of Columbia, State of Maryland, and Commonwealth of Virginia. In order to establish a sustainable operating model, Metro is limiting jurisdictional operating subsidy growth to three percent and deploying innovative competitive contracting. The items on the KMSRA agenda that remain to be completed include restructuring retirement benefits and creating a Rainy Day Fund. Key Highlights: The FY2020 Budget totals $3.5 billion, including $2.0 billion of operating expenses and $1.5 billion in capital program spending in FY2020. In the interest of demonstrating compliance with new restrictions in Maryland and Virginia dedicated revenue legislation, the FY2020 Budget is broken down as follows: a base budget which reflects a 3 percent subsidy growth cap including customer/ridership initiatives, and items legislatively excluded from the subsidy cap. The total operating subsidy, including capped subsidy and legislative exclusions, is $1.1 billion. The budget is designed to attract new customers and deliver better service for current riders, by increasing service, making passes more affordable without raising fares or cutting existing services. Outreach Results: Service and fare proposals included in the FY2020 Budget received favorable support from customers during public outreach, particularly those proposals that would improve rail service. Among the most popular proposals were extending the Red and Yellow lines. For the low-income customers surveyed, support for these proposals was nearly twice the level of support for extending rush hour service levels. Customers also expressed support for unlimited ride Metrorail passes; four in 10 were "highly interested" in having this product. Initiatives Included in Budget: Consistent with comments from the Finance and Capital Committee and public feedback received during outreach efforts, the final budget proposal before the Board for approval includes extending the Yellow Line to Greenbelt to double rush-hour service at nine stations, running all Red Line trains to Glenmont to double service at an additional three stations and enhancing the value of Metro unlimited bus and rail passes. These customer service improvements are in addition to the General Manager's original FY2020 budget proposal that included the enhancement of Metro’s industry-first “Rush Hour Promise” for unscheduled delays of 10 minutes or more and other initiatives like automatic train operation to give customers a smoother and more reliable ride. Title VI Analysis: In accordance with Federal Transit Administration (FTA) regulations, any major service change or any change in fares must undergo a Title VI equity analysis to evaluate the impacts of the proposed changes on minority and low-income populations. The FY2020 Budget does not have a Disparate Impact on minority populations nor cause a Disproportionate Burden on low-income populations. The complete FY2020 Budget Title VI Equity Analysis is included as an attachment to the resolution for this item. Background and History: FY2020 Budget Priorities are the following: FY2020-2025 Capital Improvement Program z Fully fund system safety and compliance z Improve the customer experience z Continue focus on system preservation and State of Good Repair z Meet program budget and schedule z Ramp up to $1.5 billion average annual program z Develop capital investment pipeline (D&E) Operating Budget z Increase ridership z Improve the customer experience z Maximize operating efficiency z Increase non-fare revenues z Enhance employee engagement and development z Comply with Dedicated Revenue restrictions Discussion: The FY2020 Operating Budget totals $2.0 billion in FY2020. The FY2020 Base Budget has no fare increases and includes new initiatives to grow ridership and revenue with extensions of Yellow and Red Lines as well as pass product changes. Management actions of $47 million are required to reduce subsidy growth to within the 3 percent cap in the Base Budget. The budget includes $14 million for mandates legislatively excluded from the cap, including litigation, ADA paratransit, occupational safety and health and jurisdiction-requested bus service. The recommended FY2020 Capital Budget of $1.5 billion and six-year capital plan of $9.2 billion include investment in ongoing projects, prioritized system preservation and renewal needs from the Capital Needs Inventory. The six-year plan includes $450 million of reimbursable projects such as the Silver Line, the Potomac Yard infill station, and the Purple Line. PRIIA funding ends in Federal FY2019; without reauthorization from Congress, capital contributions from jurisdictions could increase by nearly $750 million over five years. With PRIIA, Jurisdictional Match and System Performance requirements will total $2.6 billion over six years. Without PRIIA, Jurisdictional Match and System Performance will increase to $3.3 billion over that time frame. New Initiatives: Pass adjustments to encourage ridership included in the FY2020 Budget: z Reduce 7-Day Bus Pass ($17.50 to $15) z Reduce 1-Day Visitor Pass Price ($14.75 to $13) z Reduce 7-Day Visitor Pass Price ($38.50 to $38 on short-trip (up to $3.85 per trip) and $60 to $58 on full system pass) z Add a 3-Day Weekday Pass ($28) z Add unlimited bus in all Visitor and SelectPasses New service initiatives to drive ridership growth include: Extend Yellow Line service to Greenbelt. Today, Yellow Line trains turn back at Mt. Vernon Square during rush hours and at Fort Totten at all other times. The GM’s budget recommendation would extend every Yellow Line train to Greenbelt, which would double service during rush hours and address current crowding conditions at the nine stations north of Mt Vernon Square (Shaw-Howard, U Street, Columbia Heights, Georgia Ave-Petworth, Fort Totten, West Hyattsville, Prince George’s Plaza, College Park, and Greenbelt). During off-peak times, the four stations north of Fort Totten would see an increase in service. Many current Green Line customers traveling to Yellow Line stations in Virginia (e.g. Reagan National Airport) would be able to make the trip without changing trains. Extend Red Line service to Glenmont. Currently, some Red Line trains turn back at Silver Spring, while others operate to the end of the line at Glenmont. To simplify Metro’s service pattern for customers while increasing service at three Red Line stations, the FY2020 Budget includes funding to run all Red Line trains to Glenmont. As a result, service levels will double at three stations: Forest Glen, Wheaton and Glenmont. Budget Risks: Metro receives $150 million in dedicated federal grant funding authorized by the Passenger Rail Investment and Improvement Act (PRIIA) each year, matched by $50 million each from the District of Columbia, State of Maryland and Commonwealth of Virginia, for a total of $300 million annually that funds critical safety and state of good repair improvements. Federal FY2019 is the last year of authorization for these funds and with approval of the budget, staff will submit applications for these grants beginning next month, for use in FY2020. Federal legislation is needed to authorize funding for use in FY2021 and beyond. With the creation of the dedicated funding stream to support capital investments, Metro needs an operating contingency reserve fund to better position the Authority to deal with unpredictable financial shocks. This fund will insulate jurisdictions from the added costs of major disruptions to Metro’s operating budget, including weather and other major events in the D.C. region. The FY2020 Budget assumes ridership will stabilize from FY2019 budget levels. Ridership declines would create revenue shortfalls in the budget. Bus revenues also continue to decline, due in part to fare evasion. Recent legislation to decriminalize fare evasion may further erode revenues. For MetroAccess, the paratransit service required by the Americans with Disabilities Act, the FY2020 Budget assumes no increase in ridership. As the FY2020 subsidy per passenger for MetroAccess
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