TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager/Chief Executive Officer
SUBJECT: Recommended FY 2024-25 Operating and Capital Budgets
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider adoption of Resolution 24-023 approving the Recommended FY 2024-25 Operating and Capital Budgets.
Staff Contact:
Chris Andrichak, Chief Financial Officer
Body
STRATEGIC IMPORTANCE:
Goal - Financial Stability and Resiliency
Initiative - Financial Efficiency and Revenue Maximization
The District must adopt a balanced budget per Board Policy and to provide financial stability for operations during the fiscal year.
BUDGETARY/FISCAL IMPACT:
The Recommended FY 2024-25 Operating Budget is balanced and includes a projected operating revenue and subsidy budget of $605.8 million and an operating expense budget of $605.8 million. These figures are outlined in Attachment 2.
The Recommended FY 2024-25 Capital Budget includes a projected maximum investment of $267.1 million, composed of $238.3 million in grant funds and $28.8 million in District Capital funds. The Recommended Capital Budget is shown in Attachment 3.
BACKGROUND/RATIONALE:
Overview
Based on the review of the Proposed FY 2024-25 budget at the May 22nd board meeting, a reduction of $1.1 million was made by removing the proposed labor initiatives for new Safety headcount ($593,000) and the following non-labor initiatives in Services: Mobile App 2.0 ($200,000), All Door Boarding Study ($100,000), and DEIA (Diversity, Equity, Inclusion, and Accessibility) consultant work ($80,000). Further reductions were incorporated for the Board of Directors budget in Services ($125,000) and travel expenses ($10,000). These savings will allow the District to reduce American Rescue Plan (ARP) Act funding by $1.1 million and can be used to support future years of service.
Overall, the $36.9 million change (6.5%) from the FY 2023-24 Operating Budget is due primarily to anticipated increases in Paratransit Services ($18.0 million; 44.6%), Casualty & Liability ($4.2 million; 17.2%) and overall increases in labor in line with expectations due to labor contracts (3.2%), cost of Healthcare (6.3%), and Workers Compensation (12.1%).
The Recommended FY 2024-25 budget is balanced, but because of the significant efforts to control expenses there is little to no margin for unforeseen expenses.
Recommended Operating Budget
Revenue
Revenues are reduced by $1.1 million due to reductions identified by the Board at the May 22nd Board meeting. This reduction reduces the use of ARP funds from $45.8 million to $44.7 million in FY 2024-25.
• Farebox revenue of $36.7 million, a $5.3 million (16.8%) increase from FY 2023-24 budget. No fare increases are assumed.
• Other Operating revenues increases by $1.7 million from the FY 2023-24 budget due mostly to an increase in Alameda Student Transit Pass Program estimated revenue.
• Property and parcel taxes (Measure VV/C1) remain resilient and is budgeted at $190.2 million, a $15.5 million (8.9%) increase over the FY 2023-24 budget, which is in line with recent trends.
• Sales Taxes (Measures BB/J, Transportation Development Act (TDA), and AB1107) decreases and are budgeted at $240.1 million, a $11.9 million (4.7%) reduction from the FY 2023-24 budget due primarily to reductions in MTC and local government estimates.
• Other Federal, State & Local Revenues increase by $5.1 million compared to the FY 2023-24 budget primarily due to the addition of SB 125 funding of $4 million as well as a $900,000 RM3 subsidy estimate increase from MTC.
• Federal emergency funds of $44.7 million from the ARP Act is an increase of $21.0 million over the FY 2023-24 budgeted amount.
Expenses
The Recommended Operating budget is balanced; Expenses equal Revenues at $605.8 million. The changes from Proposed to Recommended budget are indicated below for labor and non-labor expenses.
Labor expenses
• Salaries and Wages of $184.1 million, a $7.3 million (4.2%) increase over the FY 2023-24 budget based on a combination of the below factors:
o (Change from Proposed) Includes a reduction of $296,000 for wages associated with the removal of three budgeted headcounts in Safety
o Contractual wage increases
o Continued reliance on overtime to maintain service levels
o $1.0 million added for retention initiatives
• Fringe Benefits of $151.2 million, a $8.1 million (5.6%) increase over FY 2023-24 budget, primarily due to increasing Healthcare costs.
o (Change from Proposed) Includes a reduction of $296,000 for fringe benefits associated with the removal of three budgeted headcount in Safety
• Pension contribution of $70.5 million, a $1.0 million (1.4%) decrease from the FY 2023-24 budget due to an updated estimated reduction in the District pension liability.
Non-Labor expenses
• (Change from Proposed) Before significant budget adjustments were made to balance the Proposed budget, the increase in Services from FY 2023-24 to FY 2024-25 was around $4.4 million due to the number of District Initiatives initially requested. A rigorous review of District Initiatives, which are primarily budgeted in Services, lowered the increase over FY 2023-24 to $676,000. Further reductions identified by the board at the May 22nd meeting lowers the increase from FY 2023-24 to FY 2024-25 to $170,000 (0.3%). The Proposed FY 2024-25 Operating Budget included the following, which have been removed:
o Mobile App 2.0 ($200,000)
o Board budget reduction for professional services and travel ($135,000)
o All Door Boarding Study ($100,000)
o DEIA (Diversity, Equity, Inclusion, Accessibility) Program Implementation ($80,000)
• Fuel and Lubricants of $18.6 million is the same as FY 2023-24 budget. Staff is watching fuel prices closely and will adjust the budget, if necessary, at the mid-year since geo-political and federal actions are in flux.
• Casualty & Liability of $28.3 million, a $4.2 million (17.2%) increase over FY 2023-24 budget due to anticipated insurance premium increases.
• Purchased Transportation (Paratransit and Dumbarton) of $58.6 million, an eye- opening $18.1 million (44.6%) increase over FY 2023-24 budget and a further $6.7 million higher than the Draft budget.
Recommended Capital Budget
The Recommended FY 2024-25 Capital Budget includes a maximum investment of $267.1 million, composed of $238.3 million in grant funds, and $28.8 million in District Capital funds. The Recommended Capital Budget is shown in Attachment 3.
The Recommended FY 2024-25 Capital Budget includes 11 new, 47 continuing, and 8 annual projects for a total of 66 projects. Overall, Capital projects budgets are 89% grant-funded, with an even higher share in facilities and bus purchases. However, District Capital commitment is needed as match for certain grants, and for projects that are difficult to fund with grants. The Capital Budget is significantly higher this year due to several new bus purchases that are expected to be completed or initiated this coming fiscal year, namely 51 fuel cell buses and 73 40-foot diesel buses.
Additionally, many projects included in the FY 2023-24 Capital Budget have not yet commenced due to delays in getting executed grants from funding agencies. Consequently, of the $267.1 million in total commitments identified in FY 2024-25, $108.9 million is in existing grants and $19.1 million reflects existing District Capital commitments.
The Recommended Capital Budget adds new grants on several corridor projects including MacDonald Ave Transit Signal Priority (TSP), Tempo Lane Delineation Quick Build, Durant and MacArthur quick builds, and Telegraph Ave. Additionally, the District recently won a grant for Climate Adaptation Planning as well as two new grants from the BusAID program for Park St TSP, and International Blvd Phase 2. New projects also include new vehicle purchases, additional funding for TEC modernization, and facilities state of good repair projects identified in the current Capital Improvement Plan (CIP).
Ridership Report
This ridership update (Attachment 5) provides a condensed analysis for the period from July 2023 to April 2024, and follows the format of the mid-year ridership report presented in February 2024. Due to the limited dataset, this report focuses on Spring 2023 ridership performance using available data through April 2024. Ridership projections are provided for the remaining two months of the Fiscal Year ending June 30, 2024, along with a preliminary ridership outlook for the upcoming Fiscal Year.
• Monthly Trend: July 2023 through April 2024 continued a positive ridership recovery trend since bottoming in early 2020 near the start of the Covid-19 pandemic. This period saw an average year-over-year growth of 14.8% over the same period in the previous year. In the current Fiscal Year, October 2023 saw peak monthly riders (3.64 million), followed by September 2023 (3.46 million), both months representing peak ridership in the Fall season. Fiscal year-to-date (July - April 2024) cumulative ridership of 32.8 million riders currently reflects 74% of pre-pandemic (FY18-19) ridership. Ridership is projected to remain at 74% of pre-pandemic levels by June 30, 2024, with an estimated 39-40 million annual riders.
• Recovery Levels: Local (MB-Motorbus) service has seen a year-over-year increase in ridership of 13.9% from the same period last fiscal year. Transbay (CB-Commuter Bus) service has increased 17.4% year-over-year through the same period last year. However, current ridership on Commuter lines represents only 18.7% of pre-pandemic levels (44,000 compared to 235,000 monthly riders). The TEMPO (RB-Rapid Bus) service mode increased 21.3% year-over-year, and continues to be the district’s highest ridership line, with ridership exceeding 400,000 monthly riders.
• Route-level performance: Average weekday ridership performance provides a quick comparison of pre-pandemic ridership levels with current performance. The Tempo line had the highest average daily ridership, carrying on average just over 15,000 riders per weekday. Lines 51B, 40, 51A, 6, 57, 72R, 18, 52 and 14 round out the top 10 routes in terms of average weekday ridership with a range between 3,000 and 8,300 passengers.
ADVANTAGES/DISADVANTAGES:
Staff cannot identify any disadvantages to approving the recommended budgets as described.
ALTERNATIVES ANALYSIS:
Staff analyzed many possible reductions to expense items and requests from all departments. The Recommended budget builds on the feedback from the Board and all departments received based on the Draft and Proposed budgets.
PRIOR RELEVANT BOARD ACTION/POLICIES:
SR 23-513 FY25 Budget Development Process and Calendar
SR 23-513a FY25 Budget Goals
SR 23-513b FY25 Draft Operating and Capital Budget
SR 23-513c FY25 Proposed Operating and Capital Budget
ATTACHMENTS:
1. Resolution
2. Operating Budget Table
3. Capital Budget Table
4. Recommended Budget Book
5. Ridership Summary
Prepared by:
Mary Archer, Budget Manager
In Collaboration with:
Richard Oslund, Director of Management and Budget
Emily Heard, Capital Planning and Grants Manager
Diana Nguyen, Principal Financial Analyst
Anthony Manaois, Senior Financial Analyst
Campbell Jung, Manager of Business Analytics
Approved/Reviewed by:
Chris Andrichak, Chief Financial Officer
Ramakrishna Pochiraju, Executive Director of Planning & Engineering
Shayna van Hoften, Interim General Counsel/Chief Legal Officer