At the December 6, 2018 meeting, the VTA Board of Directors unanimously approved recommendations put forth by VTA’s Ad Hoc Financial Stability Committee (Committee) to address VTA’s immediate and long-term financial challenges. VTA is facing a $20 million structural deficit in fiscal year 2018 and $26 million in 2019.
The Committee’s recommendations approved by the Board focused on three areas: specific action, encouragement/policy discussion, and further examination, as outlined below.
Specific ActionService Delivery
In order for VTA to remain financially sustainable, the Committee determined that the recent redesign effort of VTA’s transit network, known as the Next Network, will need to be implemented with fewer service hours.
The Final Transit Service Plan (Plan) for FY18 & FY19, adopted by the VTA Board on May 4, 2017, included 1.6M hours of bus service and 192K hours of light rail service. This Plan reflects the Board approved “83/17” ridership-to-coverage ratio for bus service, meaning 83 percent of VTA resources would be dedicated to high ridership routes while 17 percent would be dedicated to VTA’s service coverage area.
The Committee recommended that the Next Network be implemented to the greatest extent possible within the bus and light rail service hours VTA currently provides, which is approximately 1.52M and 156K, respectively. These service levels would save approximately $15M annually.
The Committee also recommended increasing the ridership-to-coverage ratio for bus service to 90/10 with the goal of maximizing ridership.
Index Fares to Inflation
Prior to the increase instituted in January 2018, VTA’s Fare structure had not significantly changed since October 2009. During that span, VTA’s operating expenses increased by 37 percent. To help ensure that fare revenues are more in line with service delivery costs, the Committee recommended the Board consider a Fare Policy that indexes certain fares to inflation.
Depending on the impacted fare categories, this recommendation could result in an additional $2M per year initially with the annual amount growing over time.
Voluntary Early Retirement Incentive
There are a number of VTA employees at or near retirement age. The Committee recommended offering a voluntary early retirement incentive to a defined number of eligible employees and restructuring departments where appropriate. Savings estimated at $1M would be realized either by reorganizing and absorbing the duties of the position or from filling the position at a lower cost. Over time, this proposal would increase revenues, reduce expenses, and better align revenue and expense growth rates.
Three additional items were identified by the Committee for specific action:
- Conduct an annual Board assessment and decision on implementation of an indexed fare increase
- Conduct a Board Workshop focused on the future of transportation
- Assign committee(s) to further analyze and recommend options to the Board for VTA’s short and long-term future
Encouragement/Policy DiscussionIn addition to the proposed recommendations and other specific actions, the Committee identified several issues for further review and discussion and encouraged the Board to both continue existing efforts and initiate various policy discussions to address VTA’s structural deficit and promote long-term financial stability:
- Protect services in South County when redesigning the service network
- Develop a framework for funding strategy decisions on ballot measures
- Revisit capital expansion programs and consider options for service provision
- Examine funding partner agreements
- Develop a framework for future Caltrain funding and joint revenue strategy particularly in relation to continued General Fund support if a regional funding measure is sought
- Encourage job/housing balance and developments at areas with existing services
- Continue to aggressively pursue Joint Development opportunities
Committee recommendations also included several items that require further study by staff:
- Examine VTA’s funding base including those that are fungible while ensuring capital funds are not shifted to operations
- Identify additional funding sources
- Conduct a comparative study to identify opportunities for contracting in and out
- Review billing of staff time to capital projects
- Update/refine Joint Development targets, considering the relationship between jobs & housing