Dallas Area Rapid Transit FY 2011 Business Plan (Including FY 2011 Annual Budget and Twenty-Year Financial Plan) DART Board of Directors Scott Carlson Richard Carrizales Randall D. Chrisman Jerry Christian John Carter Danish Secretary City of Dallas Cities of Carrollton and Irving City of Dallas Vice Chairman City of Dallas City of Irving Loretta L. Ellerbe Mark C. Enoch Pamela Dunlop Gates Raymond Noah Robert W. Strauss Assistant Secretary Cities of Farmers Branch, City of Dallas Cities of Addison, Highland Park, City of Dallas City of Plano Garland and Rowlett Richardson and University Park William Tsao William Velasco, II Claude R. Williams, Jr. Faye Wilkins Tracey M. Whitaker City of Dallas Chairman City of Dallas Cities of Dallas, Plano, City of Garland City of Dallas Glenn Heights and Cockrell Hill DART Board August 6, 2010 Page 2 Within the same time frame, the Agency will open a Blue Line infill station, Lake Highlands, in December 2010 and has two other light rail expansion projects underway. The Orange Line will extend from the Bachman Lake station on the Green Line through the northern portion of the Las Colinas area of Irving. The first two sections will be open by the end of 2012 with service to DFW to hopefully follow in a relatively short time thereafter. The Blue Line is being extended from downtown Garland to the City of Rowlett and is scheduled to open in December 2012 as well. It is important not to lose sight of our accomplishments and work program for our existing fixed route modes. In the spring of 2010, the Board approved the purchase of a long-term natural gas contract, thus moving the Agency firmly toward the full introduction of a CNG-powered bus fleet. The first phase of the procurement of the new fleet should be completed this fall, with actual delivery of buses in late 2012 and early 2013. There are also significant improvements in commuter rail passenger service underway. The grade separation and elevation and double-tracking of the TRE rail line in south Irving is nearing completion. This project reduces the noise to the adjacent neighborhoods, increases average train speeds, and eliminates north/south traffic bottlenecks that have been a challenge of south Irving businesses and residents for years. To the north, the Agency will connect with another commuter passenger rail system, the A Train of the Denton County Transportation Authority (DCTA), in the summer of 2011. The two systems will connect at the Trinity Mills Station in north Carrollton. Riders will be able to travel from downtown Denton and the three university campuses located in that vicinity to anywhere in the DART and Ft. Worth “T” service areas. C:\FY11 Business Plan 080610\FY11 Presidents Letter.doc 08/06/10 DART Board August 6, 2010 Page 3 Additionally, the Agency will have completed the system- wide level boarding project by December 2010, a major commitment to the ridership of the service area to assure easy on/off access to our vehicles by all of our riders. By the end of September 2011 we will have replaced and upgraded all of our ticket vending machines located on each rail platform as well as introducing these to our bus transit centers. The new machines accept credit cards and allow for the purchase of 7-day and 31-day passes, thus greatly improving customer convenience as they make their fare payment choices. All of these accomplishments occurred during one of the most severe economic downturns in our history. Our primary revenue source is the sales tax, which is nearly seven times as great as our next largest source of income--our revenues from farebox and pass sales. In FY 2009 it was forecast that sales tax receipts would be $431 million, up from the preceding year’s total of $416 million. Instead, the Agency received $377 million. Fortunately, DART received ARRA stimulus funding of $63 million in the spring of 2009 and another $78 million advance refunding payment on our Green Line Full Funding Grant Agreement later in the summer. For the current year the budget forecast for sales tax receipts was $387 million, but current projections indicate that the receipts will be $375 million. Farebox revenue was projected to increase by $11 million after the adoption of a new fare structure that went into effect in September 2009, but they will only rise by $4 million; the difference largely attributable to the soft economy and higher unemployment that has reduced our system ridership. This past Spring, the Finance Department, working in conjunction with three outside economists, determined that the long-term sales tax forecasts for the Agency needed to be recalibrated downward due to updated data on long-term population and employment trends in the DART Service Area. Approximately $3 billion in projected sales tax revenue had to be removed from the twenty-year forecast. C:\FY11 Business Plan 080610\FY11 Presidents Letter.doc 08/06/10 DART Board August 6, 2010 Page 4 The Requirements Needed to Meet Our Budgetary Challenges This revision, which has been the subject of four separate briefings to the Budget and Finance Committee throughout the spring and summer of this year, has required significant and far- reaching changes to DART’s Twenty-Year Financial Plan. Taking into account the use of sales tax projections to leverage additional debt, spending for the Agency over the next twenty years has to be reduced by nearly $8.8 billion. Approximately $6.6 billion of this reduction is attributable to scaling back proposed capital expansion projects, another $1.2 billion would be associated with reduction in debt service due to fewer debt issuances, and, finally, another $1 billion needs to be achieved through permanent reductions in operating expenditures. With respect to the operating budget, management has worked diligently to develop a cost reduction proposal that would minimize the impact on ridership. The Agency must reduce annual operating expenditures by at least $30 million. To accomplish that objective it has been necessary to make substantial reductions in capital planning and development and administrative overhead, achieving annual reductions in the $20 million range. The remaining $10 million in operating savings are targeted to come from a combination of service refinements across all of the operating modes: HOV, commuter rail, light rail, bus, and paratransit. The largest savings (approximately $5.6 million) will be accomplished through the adjustment of light rail system headways from 10 minutes at peak to 15 minutes, with insert trains at peak hours shifting from 5 minutes to 7-minute headways. These changes will take effect in December coincident with the opening of the Green Line and the change in bus schedules. Relatively modest adjustments in commuter rail service (largely associated with the elimination of late night weekday service) and HOV will achieve another $1 million in reductions. Additionally, Paratransit management is considering a new system of coordinated dispatch and delivery of services that they estimate will have the potential of significant operating and capital savings over the life of the twenty-year financial plan. Management hopes to achieve the remaining $3.5 million in savings in the bus mode but without a reduction in actual services. Our staff is proposing the introduction of a smaller vehicle to serve an approximate demand of 85 to 90 vehicles at peak travel times on low volume routes. These routes typically generate less than 15 to 18 passengers an hour per trip at peak and can be served by an under- 30 foot vehicle that costs one-third the price of a standard 35 to 40-foot transit bus. This bus is less costly to maintain and is typically associated with a C:\FY11 Business Plan 080610\FY11 Presidents Letter.doc 08/06/10 DART Board August 6, 2010 Page 5 lower wage scale for the operator. It would be our objective to place these vehicles in service by the fourth calendar quarter of 2012, more or less coincident with the introduction of light rail service in Irving and Rowlett and at the time of our next major service change. All of these adjustments will translate into the need for a smaller workforce overall. Our previous forecast for total positions by the end of 2013 was 4,100. Our revised estimate, tailored to fit our budgetary limitations, is approximately 3,750 positions. The light rail expansion will increase the need for operators, mechanics, and police. Consequently, staff reductions will be required in the balance of the Agency. It will be our objective to accomplish the staffing adjustments through the elimination of vacant positions where possible, normal attrition, and an early retirement incentive package. Should these not be sufficient and a mandatory reduction-in- force be required, our established severance policies will apply. Although it is our fervent hope that we can avoid the latter, it would be inappropriate to suggest that we can avoid mandatory reductions altogether. The challenges to the operating budget are more than matched by the limitations the Agency faces in completing future capital expansion projects currently in the 2030 System Plan and the Twenty-Year Financial Plan. Suffice it to say that, with several exceptions, most of the new expansion projects can no longer be supported within the constraints of the financial plan forecast and must be shifted to a status of deferred and unfunded. Passenger rail expansion projects The revised and reduced financial plan will fully accommodate all of the projects currently under construction or in current stages of procurement (such as the bus fleet replacement). Equally important, all state-of-good-repair commitments over the forecast period, including orderly replacement of the rail car fleet in the mid-2020s, are provided for in the new plan.