EXECUTIVE
MANAGEMENT AND AUDIT COMMITTEE
JUNE 20, 2002
SUBJECT: PROP A/C ADMINISTRATION FUNDS
ACTION: APPROVE CLARIFICATIONS TO Metro FY03 FINANCIAL STANDARDS
RECOMMENDATION
Approve clarifications to Metro’s FY03 Financial Standards as noted
in Attachment A.
ISSUE
The Board requested clarification as to the eligible uses of
Prop A and C administration funds as described in the Metro FY03 Financial
Standards, standard B9, which was approved in April 2002.
POLICY IMPLICATIONS
The Financial Standards are
divided into three sections: General,
Debt, and Business Planning Parameters. The
Business Planning Parameters provide management with a framework for developing
the following year's budget and other longer range financial plans and
establishing future business targets for management to achieve.
Clarification of standard B9 regarding the eligible uses of Prop A and C
administration funds impacts funds available to all other funding categories of
Props A and C since administration funds are taken “off the top.”
FINANCIAL
IMPACT
Approval
of this action will impact the adopted FY03 budget as follows:
A.
The costs of labor negotiations, $661,000, and sector planning
activities, $18,000, totaling $679,000 previously funded by Prop A
administration will be transferred to the Enterprise Fund as part of bus and
rail operating costs. $679,000 of
Prop C 40% funds will be transferred to cover these additional operating costs.
The bus portion of this amount is approximately $600,000 based on union
FTEs. Therefore, an additional
“fair share” amount of approximately $254,000 will be programmed for the
municipal operators. Funds are available from the “designated, unreserved,”
available cash that is not programmed for expenditure in FY03, Prop C 40%
Special Revenue fund balance.
B.
The costs of regional activities including customer relations,
$9,654,000, and transit way maintenance, $412,000, previously funded by Prop A
administration funds will be transferred to the Enterprise Fund as part of bus
and rail operating costs. $10,066,000
of Prop C 40% funds will be transferred to cover these additional operating
costs. The bus portion of the
customer relations amount is approximately $8,000,000 based on boardings.
Therefore, an additional “fair share” amount of approximately
$3,600,000 will be programmed for the municipal operators.
Funds are available from the designated, unreserved fund balance.
C.
In total, $10,745,000 of Prop A administration funds are freed up by this
action. These funds will lapse in
accordance with the Financial Standard if they are not expended or encumbered
within one year.
D.
The resulting FY03 bus cost per revenue service hour (c/rsh) is $99.14.
Restated on this current basis, the FY02 budgeted c/rsh is $99.21.
ALTERNATIVES
CONSIDERED
The
county-wide 1-800-COMMUTE activity benefits all modes of transportation by
providing bus and rail transit information to customers.
One
alternative is to fund this activity off the top of Prop A 40% Discretionary
that is allocated to bus operators through the formula allocation procedure (FAP).
Implementation of this funding plan would have the impact of all bus
operators sharing the burden in accordance within their respective FAP shares.
This alternative is not recommended because the Muni operators will argue
that they are also providing regional information to patrons but within their
existing formula shares. Therefore,
this method would not be equitable to them.
Another
alternative is to provide the funding for Metro’s customer service activities
without the fair share to the Munis. Or,
investigate the proportion of this activity that pertains solely to Metro bus
operations in order to quantify the portion that is regional versus Metro bus.
The regional amount would then not be subject to the fair share policy.
Based on similar arguments noted above, it is expected that the Munis
would feel that this method would also not be equitable to them.
DISCUSSION
Under the clarifications, regional programs that are
operations-related and Metro operations-related expenditures are included in
Metro’s transit operating costs. In
order to keep the Enterprise Fund whole, additional transfers from Prop C 40%
are required. Under current Metro
Board policy, this additional transfer for Metro bus operations requires a “fair
share” amount for the municipal operators.
The current fair share is approximately 30%.
Administrative or overhead activities such as Consent Decree
Oversight will continue to be eligible for Prop A and C administration funds.
The costs of operating the services implemented for Consent Decree remain
in the Enterprise Fund.
NEXT
STEPS
Update
the previously approved budget document to reflect the changes approved in
this action.
Initiate
an effort to assess regional activities in order to recommend an equitable
method of sharing those costs and related funding between the Metro and Munis.
Attachment A – Revised Financial
Standard B9
Attachment B – Revised FY03 Uses of
Prop A and C Administration Funds
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Terry Matsumoto Executive Officer, Finance and Treasurer |
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Roger Snoble Chief Executive Officer |