Valley Metro Rail Inc., Phoenix, AZ 2017 Comprehensive Annual Financial Report FISCAL YEAR ENDED JUNE 30 VALLEY METRO RAIL, INC. Phoenix, Arizona Comprehensive Annual Financial Report For the fiscal year ended June 30, 2017 Prepared by: Finance Division VALLEY METRO Rail System FY17 Facts and Figures Ridership Highest Ridership Days 16.5 million rail riders March 31-April 2: NCAA Final Four events 60 100000 50,009 50 80,210 80000 74,107 69,278 39,892 Five Busiest Stations 40 19th Ave/Dunlap 60000 30,558 Mesa Dr/Main St 30 19th Ave/Montebello 40000 Riders (In Thousands) 19th Ave/Camelback 20 Riders (In Thousands) Van Buren/Central Ave 20000 10 0 0 Weekdays Saturdays Sundays March 31 April 1 April 2 AVERAGE DAILY HIGHEST RIDERSHIP About Valley Metro Rail Valley Metro Rail is responsible for the planning, design, construction and operations of the region’s light rail/high-capacity transit system, serving 15.5 million total passengers in Fiscal Year 2017. The initial 20-mile light rail line opened on December 27, 2008. Two extensions began service by spring 2016, adding six more miles and connecting downtown Mesa to northwest Phoenix. The 35 stations were designed with significant consideration given to the desert sun and heat. Eleven park-and-rides provide 4,488 parking spaces along 26 miles. System Overview Artwork is also an integral part of the urban system, reflecting the history and Number of miles: 26 culture of local neighborhoods. Number of stations: 35 Each light rail vehicle has a comfort capacity of 175 passengers and features Number of vehicles: 50 state-of-the-art technology designed for the urban desert climate. Number of parking spaces: 4,488 Total travel time: 85 minutes Cost to ride: $2.00 per ride; $4.00 All-Day Pass VALLEY METRO RAIL SYSTEM Operations 6% 3% Valley Metro Rail operates 365 days a year, 20+ hours a day, with 12-minute peak frequency. The cost of operations is supported by rail member cities, passenger fares and advertising. Rail service is coordinated with bus to provide a seamless transit network for customers. Transit passes can be purchased at fare vending machines located at 41% each station, online or from retail outlets valleywide. Security officers regularly 50% patrol the system and ask passengers at random for proof of payment. Violators are subject to fines ranging from $50 to $500 and can lose their transit privileges. The Valley Metro Rail system connects the region to the cities of Phoenix, Tempe and Mesa. It provides connections to work, education and entertainment. There are many sports, shopping, restaurants and arts and culture destinations along the line. Valley Metro Rail also connects to Phoenix Sky Harbor International Airport Fares with PHX Sky Train® at the 44th St/Washington station. Member Cities Federal Advertising Future Expansion Seven high-capacity extensions are planned or under construction to create a 66-mile system by 2034. The Valley Metro Rail Board of Directors sets the policy direction for the system with the intent of advancing regional public transit in the Valley. LEGEND Bell Rd Valley Metro Rail 17 Phoenix Gilbert Road Light Rail Extension Thunderbird Rd 50th Street Station Peoria Tempe Streetcar 2034 101 Peoria Ave Capitol/I-10 West Phase I Light Rail Extension 51 101 2023 Northwest Phase II Light Rail Extension Paradise Northern Ave South Central Light Rail Extension Valley Glendale Capitol/I-10 West Phase II Light Rail Extension Bethany Home Rd 2026 West Phoenix/Central Glendale Transit Corridor Study Northeast Transit Feasibility Corridor Study Indian School Rd Avondale Scottsdale McDowell Rd 10 202 2019 McKellips Rd Tolleson2030 202 Mesa Buckeye Rd 17 2023 143 University Dr Broadway Rd Phoenix 2020 2019 Southern Ave Baseline Rd Tempe Guadalupe Rd 2023 Gilbert 101 10 Warner Rd C handler 202 24th St 40th St 56th St Mesa Dr Price Rd 51st Ave Rural Rd 19th Ave 67th Ave 35th Ave 99th Ave 83rd Ave Gilbert Rd Central Ave Val Vista Dr Alma School Rd LRT2417/10.17 valleymetro.org facebook.com/valleymetro @valleymetro Valley Metro Rail, Inc. Table of Contents Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2017 Page Introductory Section Letter of Transmittal iii Certificate of Achievement for Excellence in Financial Reporting xiii Policy Organizational Chart xiv List of Appointed Officials xv Financial Section Independent Auditors’ Report 1 Management's Discussion and Analysis (Required Supplementary Information) 4 Basic Financial Statements Statement of Net Position 11 Statement of Revenues, Expenses, and Changes in Fund Net Position 12 Statement of Cash Flows 13 Notes to the Financial Statements 14 Other Supplementary Information Schedule of Operations - Budget and Actual 26 Statistical Section Financial Trends Net Position by Component 28 Changes in Net Position 29 Demographic and Economic Information Growth in Regional Transit Usage 30 Population Growth 31 Top Employers in Maricopa County 32 Project Report – 50th Street 33 Project Report – Capitol/I-10W 35 Project Report – Gilbert Road 36 Project Report – Northwest Phase II 38 Project Report – South Central 39 Project Report – Tempe Streetcar 41 Project Report – West Phoenix/Central Glendale 43 Project Report – Northeast 44 Project Report – Fiesta Downtown Chandler 45 Operating Information Full-Time Equivalent Positions 46 Schedule of Insurance Coverage 49 Design & Construction Milestones 51 INTRODUCTORY SECTION The Introductory Section includes Valley Metro Rail’s transmittal letter, policy organizational chart, and list of appointed officials Gilbert Road Extension Ground Breaking Event in Mesa, AZ on October 15, 2016 Planning and Building our FUTURE We are in the planning phase of several light rail extensions. 50th Street Groundbreaking Event in Phoenix, AZ on June 7, 2017 101 N. 1st Ave. Suite 1300 Phoenix, AZ 85003 valleymetro.org 602.253.5000 November 14, 2017 To Chairman and Members of the Valley Metro Rail, Inc. Board of Directors: The comprehensive annual financial report of Valley Metro Rail, Inc. (VMR) for the fiscal year ended June 30, 2017, is hereby submitted in accordance with the requirements of the Bylaws and Board directives. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with management. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner that presents fairly the financial position, results of operations and cash flows of VMR. All disclosures necessary to enable the reader to gain an understanding of VMR’s activities have been included. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for local governments as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). The independent auditors, CliftonLarsonAllen LLP., whose report is included herein, have audited the basic financial statements and related notes. As stated in the independent auditors’ report, the goal of the independent audit was to provide reasonable assurance that the basic financial statements of VMR as of and for the fiscal year ended June 30, 2017, are free from material misstatement. The independent audit involved examining, on a test basis; evidence supporting the amounts and disclosures in the financial statements; assessing accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon their audit, that there was a reasonable basis for rendering an unmodified opinion that the basic financial statements of VMR for the fiscal year ended June 30, 2017, are fairly presented, in all material respects, in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report. Additionally, VMR is required to have an independent audit of expenditures of federal awards received (Single Audit) by VMR directly from federal agencies, or passed through to VMR by other governmental entities during the fiscal year. 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 VMR’s internal controls and compliance with legal requirements 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. The results of VMR’s Single Audit for the fiscal year ended June 30, 2017, found no instances of material weakness in the internal control structure or significant violations of applicable laws and regulations with respect to major programs. The auditors’ reports on internal controls and compliance with applicable laws and regulations are included in a separately issued Single Audit Report. The financial statements are prepared and presented in conformity with accounting principles generally accepted in the United States of America. More information about the presentation can be found in Management’s Discussion and Analysis (MD&A) beginning on page 4 and also iii Valley Metro Rail, Inc. Letter of Transmittal November 14, 2017 discussed in the notes to the financial statements beginning on page 14. This transmittal letter is designed to complement MD&A and should be read in conjunction