As we approach the end of the Fiscal Year (October 1 – September 30) at DCTA, the Board of Directors and the Staff are busy finalizing the budget for next year. The proposed budget will be presented to the Board and the public at tomorrow’s Board meeting (August 23, 2012) for review and comment. Final adoption is scheduled for the September 27, 2012 Board of Director’s meeting. There have been many steps leading to this point, and understanding these steps is beneficial to our riders and supporters. Key elements include the revenues, expenditures, capital expenditures, designated reserves, and the long-range cash flow model.
Almost all of our revenues are based on sales tax, grant revenue from the federal and state governments, contracts and passenger fares. In order to develop reasonable estimates, we review past history, current economic conditions, and trends around the state. During FY 12, we are seeing a trend in sales tax growth of over 10% compared to last year. Historical sustainable growth trends have been over 4%. We are assuming a growth of 3% over actuals from FY12, and have in place a contingency plan for additional investments in service if the growth we are seeing for the last several months is sustained. The passage of the Federal transportation bill defined our grant revenues for the next two years. Our total revenues are estimated to be $25M reflecting an increase of 4%.
The majority of our expenditures (86%) are directly related to bus and rail operations. As such our budgetary decisions are primarily based on sustaining and hopefully enhancing our service levels. This must be done is a manner that ensures current year revenues fund current year operating expenditures. We are fortunate this year to be recommending an increase in service on the rail system (9% service increase, effective August 2012) and an increase in bus service (15% service increase, effective January 2013). These service enhancements include mid-day rail service and additional hours for bus service. These enhancements are being provided well within our estimate for revenues. Our total operating expenditures for FY13 are estimated to be $22M reflecting an over-all increase of 3% compared to FY12.
With the completion of the A-train project, our capital expenditures will slow down significantly. The Bus O&M facility will start this year, and that project will increase our ability to efficiently maintain our fleet. It will also significantly improve the quality of the workplace for our employees. This project is primarily funded through a Federal grant ($8.2M). Additional projects include Bus Operations Safety and Security Equipment ($88K), right-of-way fencing ($25K), and “Where’s My Ride” ($940K) passenger information system. We are particularly excited about the “Where’s my Ride” project. When complete, this system will provide real time arrival data for buses and trains. This will provide real-time schedule information and enhance the experience for riders. Our budget also accounts for the funding of positive train control, a currently unfunded federal mandate.
Because 75% of DCTA’s revenue is from sales tax – a very volatile revenue stream, reserve funds are a critical element of a sustained operation. We have four separate reserve/stabilization funds. The first is to have 90 days of operating funds invested but available ($5.5M). This ensures sufficient cash on hand to clear all payments and serves as a backup in case of a critical emergency or dire circumstances. The second is a sales tax stabilization fund. Sales tax is our primary revenue source, and it is also our most volatile. Setting aside an amount equal to 3% of our sales tax revenue ($550K) allows the Agency to absorb a short term dip in sales tax without making draconian service cuts. In the case of a sustained drop, it provides a time to react in reducing costs long term. The third is a fuel stabilization fund. As we all know, fuel prices can swing significantly in a short period. While we are assuming a cost of $4.00 per gallon for diesel, the establishment of a fund in an amount of $100K will allow us to weather the ups and downs. The last is the capital/infrastructure fund. These funds allow us to build cash needed for matching funds for bus/equipment replacement, fund unexpected major repairs or help address other capital needs. This is proposed to be funded at $2M.
The last piece of the puzzle is the long-range cash flow model. This is important as it ties decisions made today and their impact on the future. This model provides a check to ensure we have sufficient cash to sustain our services and maintain high financial standards. One you will hear us talk about is the internal coverage ratio. This ratio is the relationship of net income to debt service payments on an annual basis (to pay back lenders for debt that is issued or planned). We strive to keep this number above 1.25. This means that our income supports the required debt payments with a solid cushion. This is not unlike the decisions we make in our families with major purchases. Debt service in FY 13 is $2.1M, and our internal coverage ratio is 1.66. Accounting for future bond sales, the minimum internal coverage ratio is held to a minimum of 1.25 for the foreseeable future.
DCTA and our riders are fortunate to be in a circumstance where we can look forward to increasing our service levels. Careful budgeting as well as monitoring to make sure we operate within our budget will ensure the high level of service to which we have all become accustomed can be sustained well into the future.
Previous budgets can be found online at dcta.net.