VTA Santa Clara Valley Transportation Authority

Memorandum

To: VTA Staff

From: Michael T. Burns, General Manager

Date: October 23, 2009

Subject: VTA Budget Update

Earlier this month I had the unpleasant task of reporting that despite glimmers of economic recovery on the national level, VTA revenues continue to decline substantially. In the third quarter of FY09, sales tax receipts were down 21%, and fourth quarter receipts declined 27%. In June, when VTA adopted its FY10/FY11 budget, the assumption was that sales tax would decline by 5%; this projection was significantly less than the actual decline. Essentially, VTA has received $22 million less in sales tax revenue than was projected in the budget and this downward trend is projected to continue for the next two years. Fare revenue is also down, as ridership has fallen due to rising unemployment in the valley. In September, bus ridership declined 9%, and light rail ridership was down 8.5%. This negative trend is projected to continue for the coming fiscal year.

On several occasions, I have said that VTA is in better financial position when compared to other transit agencies, largely as the result of having established a reserve fund in recent years. Unfortunately, the continued hit ot our revenues, at levels exceeding even our worst case projections, will exhaust our safety net quicker than anyone imagined. VTA’s adopted budget assumed that VTA would draw down on reserves over the next two years to help weather the severe economic downturn and minimize service reductions. Unfortunately, this latest revenue decline has made it clear that our current operations are no longer sustainable. VTA has incorporated the latest economic forecasts in our revised projections, and even the most optimistic analysis indicates that reserves will be depleted by the end of the current fiscal year. As an agency, we must consider fundamental changes to all of our operations if we are to remain financially stable and organizationally viable.

So where do we go from here? At the October Administration and Finance Committee meeting, Board members directed staff to convene a working group to formulate recommendations for strategically addressing the fiscal realities we face. It is anticipated that the Board chair will appoint members of this Ad Hoc Committee and that the Board will approve the scope of the committee’s work at the November board meeting.

Meanwhile, VTA staff continues to explore options for streamlining activities and identifying cost–saving measures. In recent weeks, all divisions, including our capital program, have been reviewing their planned activity, looking for ways to consolidate functions or find other efficiencies to reduce resources while maintaining core service. Earlier this month, I announced a change in non–represented employee health benefits, including lengthening the time to vest for retirement health benefits from 8 to 15 years. In December, the Ad Hoc Committee will report on their work during November. It is expected that this report will include an action plan for short and long–term initiatives to aid VTA in becoming a more sustainable organization.

With regard to other revenues, VTA continues to actively support the California Transit Association (CTA) and our other professional partners in advocating for a restoration of state funding for transit. CTA has successfully challenged the state’s improper diversion of transit funding and is in on–going discussion with the administration and our legislative members to establish a plan for state funding to flow again. In addition, CTA has filed ballot initiative language with the state Attorney General for a proposed statewide initiative to protect state funding for a variety of local services, including public transit. The plan is to have the measure on the November 2010 statewide ballot. Again, this potentially offers a long–term solution; however, it does not change our need to redesign service for the coming fiscal years.

In light of the serious and urgent nature of this continued economic decline and the impact I know it will have on staff as well as the public, I have reactivated the VTA View intranet webpage. This page (located at http://vtanet/services/blog/default.asp) provides dedicated space for sharing the latest budget updates as well as news about what our partner agencies are doing to address their budget deficits. I hope you will these information updates informative and that you will continue to share your ideas for improving service with your supervisors and division management.

We are at a critical juncture; it is time to break from the past and adjust our practices to reflect current economic conditions. Thank you for your hard work and continued support for VTA through these challenging times.

(NB: this is a transcription for a poor copy of the actual memorandum.)