San Diego Metropolitan Transit System San Diego, California Comprehensive Annual Financial Report and Independent Auditors’ Report For the Years Ended June 30, 2019 and 2018 PREPARED BY SAN DIEGO METROPOLITAN TRANSIT SYSTEM FINANCE DEPARTMENT San Diego Metropolitan Transit System Table of Contents Page Introductory Section (Unaudited): Letter of Transmittal ......................................................................................................................................... i Listing of Board of Directors and Management ............................................................................................. vii Executive Level Organization Chart ............................................................................................................... ix Certificate of Achievement for Excellence in Financial Reporting – GFOA................................................... x Financial Section: Independent Auditors' Report ...................................................................................................................... 1 Management's Discussion and Analysis (Required Supplementary Information) (Unaudited) ................................................................................. 3 Basic Financial Statements: Statements of Net Position ......................................................................................................................... 8 Statements of Revenues, Expenses, and Changes in Net Position .......................................................... 11 Statements of Cash Flows ........................................................................................................................ 12 Notes to Basic Financial Statements ........................................................................................................ 16 Required Supplementary Information (Unaudited): Schedule of Proportionate Share of the Net Pension Liability ................................................................ 72 Schedule of Changes in Net Pension Liability and Related Ratios ......................................................... 73 Schedule of Contributions ....................................................................................................................... 76 Schedule of Changes in the Total OPEB Liability and Related Ratios ................................................... 80 Supplementary Information: Combining Schedule of Net Position ...................................................................................................... 84 Combining Schedule of Revenues, Expenses, and Changes in Net Position .......................................... 87 Combining Schedule of Cash Flows ........................................................................................................ 89 Schedules of Revenues, Expenses, and Changes in Net Position – Budget and Actual: Combined Operations ......................................................................................................................... 91 General Operations: General Operations ........................................................................................................................ 93 Taxicab Administration ................................................................................................................. 95 San Diego and Arizona Eastern Railway ....................................................................................... 96 Contracted Services ....................................................................................................................... 97 San Diego Transit Corporation ...................................................................................................... 99 San Diego Trolley Incorporated. .................................................................................................. 101 San Diego Metropolitan Transit System Table of Contents (Continued) Page Statistical Section (Unaudited): Financial Trends: Net Position by Component ................................................................................................................... 106 Changes in Net Position ......................................................................................................................... 107 Revenue Capacity: Operating Revenues by Source .............................................................................................................. 110 Fare Structure ........................................................................................................................................ 111 Farebox Recovery Percentage ............................................................................................................... 112 Debt Capacity: Ratio of Outstanding Debt by Type ....................................................................................................... 114 Demographic and Economic Information: Regional Population and Personal Income Statistics ............................................................................. 116 Full-Time and Part-Time Employees by Function ................................................................................ 117 Ten Largest Employers in San Diego County ....................................................................................... 118 Operating Information: Operating Indicator by Function ............................................................................................................ 120 Service Performance Data ..................................................................................................................... 121 Capital Assets Statistics by Function ..................................................................................................... 122 Ridership ................................................................................................................................................ 123 Operating Subsidy ................................................................................................................................. 124 Independent Auditors' 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 ....................................................... 125 INTRODUCTORY SECTION This page intentionally left blank. Board of Directors and Transit Riders San Diego Metropolitan Transit System The comprehensive annual financial report of the San Diego Metropolitan Transit System (MTS) for the fiscal years ended June 30, 2019 and 2018 is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with management. The MTS Board of Directors has established an Audit Oversight Committee to provide an additional level of scrutiny to the preparation of the comprehensive annual financial report. Management of MTS is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of MTS are protected from loss, theft, or misuse and to ensure that adequate accounting data are compiled to allow for preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. State statutes require an annual audit by independent certified public accountants. The Pun Group LLP, Accountants and Advisors, has been retained to meet this requirement. The goal of the independent audit was to provide reasonable assurance that the financial statements of MTS for the fiscal years ended June 30, 2019 and 2018 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that MTS's financial statements for the fiscal years ended June 30, 2019 and 2018 are fairly presented, in all material respects, in conformity with U.S. GAAP. The independent auditors' report is presented as the first component of the financial section of this report. The independent audit was also designed to meet the requirements of a broader, federally mandated "Single Audit" and to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements required the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s compliance with the requirements described in OMB Compliance Supplement that could have a direct and material effect on each of MTS’s major federal programs. The auditors are required to test and report on internal control over compliance