2018 Financial Plan COP Briefing January 3, 2019
Updated Financial Forecast Key Planning Assumptions Program Independent Costs from Revenue and Engineers’ Inflation Estimates Forecasts Board- Financial Budget and Adopted Projections Audited Financial 2019-2041 Financials Policies 2
Long Term Financial Planning Long-term Financial Projection to 2041 25-year plan including all Sound Move, ST2, and ST3 sources and uses. Transit Improvement Plan to 2024+ Board-approved life-to-date and future costs for active projects. Budget 2019 The annual appropriation for all revenues and expenditures. 3
2018 Financial Plan Projections Includes SM, ST2 and ST3 Plans Plans totals for the period of 2017-2041, YOE$ in Billions: Sound Fall 2017 2018 Move ST3: Financial Financial and ST2: Plan: Plan $53.8 $92.4 Projections: $38.7 Billion Billion $96.2 Billion Billion Change from Expenditure Fall 2017 Type 2017-2041 in Billions Capital $ 1.70 O&M $ 2.10 Total $ 3.80 4
Agency Remains in Strong Financial Standing Voter approved plan is affordable based on updated projections. Ongoing operating expenses, state of good repair, and reserves are fully funded. Agency’s financial performance is consistent with its AAA Rating for bond obligations. 3.55x gross debt service coverage ratio vs. 1.5x parity bonds covenant requirement. Slightly increased from 3.26x projected in 2017. 5
October 2018 Financial Plan Sources & Uses of Funds - $96.2 Billion YOE (2017-2041) Sources of Funds Uses of Funds (In Millions YOE$) (In Millions YOE$) Interest Earnings Reserves & Fares & Other Debt Service $453 1% $7,071 7% Other $531 1% $15,336 16% TIFIA $3,320 4% SOGR Bonds $6,238 6% $13,878 14% Capital Tax Revenues $50,053 52% $63,450 66% O&M $24,012 25% Grant Revenues $7,997 8% 6
Total Projected Sources of Funds 2017-2041 (in millions, YOE$) $50,000 $45,000 $40,000 $35,000 $30,000 2017 2018 $25,000 $20,000 $15,000 $10,000 $131 $5,000 $94 $- Sales tax MVET tax Property Rental Car Bonds and Grants Fares and TIFIA Other Tax revenues: $2.8B, 4.7% more than 2017 projection due to a strong economy. Federal grants: The $298M increase is related to the Federal Way Link cost increase including FTA required contingency. The FFGA funds 25% of the cost and the amount increased proportionately. Bond proceeds: $384M, 2.8% more than 2017 projection due to increase in funding needs. Fare and other revenue: $529M, 8.8% more than 2017 projection. Fare revenue assumptions are updated in accordance with Board-adopted fare-box recovery ratios. 7
Tax Revenue Forecast: Strong Near Term Regional Economy Tax revenues increased $2.8B (2017-2041) over 2017 projection. Sales Tax over 25 years (2017-2041) : $2.2B increase over 2017. MVET over 25 years (2017-2041) : $401M increase over 2017 projections. Property Tax over 25 years (2017-2041) : $245M increase over 2017 projections. Rental Car Tax over 25 years (2017-2041) : $37M decrease over 2017 projections due to decline in growth rates, from 12% in 2014 to 1% in 2017. 8
Total Projected Uses of Funds 2017-2041 (in millions, YOE$) $50,000 $45,000 $40,000 $35,000 2017 2018 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Capital O&M SOGR Debt Service Reserves and other Capital Expenditures: $1.7B, 3.6% more than 2017 projection. $1.1B due to Federal Way and Lynnwood cost increases. $600M due to inflation increases and expenditure timing on all non-baselined projects. Operating Expenses: $2.1B, 9.5% more than 2017 projection. $1.4B due to Link and Bus purchased transportation services. $230M due to increases in public safety related costs. 9
Total Projected Uses of Funds Continued 2017-2041 (in millions, YOE$) $50,000 $45,000 $40,000 $35,000 2017 2018 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Capital O&M SOGR Debt Service Reserves and other Debt Service: $727M, 6.3% more than 2017 projection due to earlier and additional borrowing. State of Good Repair: $62M, 1.0% less than 2017 projection due to reduced overhead cost assumptions as recommended from third party audit. Reserves: $57M more than 2017 projection, $28M due to increase in reserves for additional bond issuance, and $24M due to increase in O&M reserves per financial policy requirement. 1 0
Operating Costs Increase in Conjunction with Increased Ridership • Ridership projected to grow to 193 million by 2041 Operating Cost and Ridership Projections $1,600 200 Sounder Commuter Rail 180 $1,400 Link Light Rail and Tacoma Link 160 ST Express Bus and Bus Rapid Transit Operating Cost, YOE$ in Millions $1,200 Total Ridership Annual Boardings in Millions 140 $1,000 120 $800 100 80 $600 60 $400 40 $200 20 $- - 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 11
Forecasted Revenues Fully Fund Voter Approved Capital Program Light Rail $ 42,766 85.4% Commuter Rail $ 3,190 6.4% Regional Express Bus $ 1,048 2.1% $3,500 Bus Rapid Transit $ 1,824 3.6% $3,000 Other $ 1,225 2.5% Total $ 50,053 100.0% $2,500 YOE$ in Millions $2,000 $1,500 $1,000 $500 $- Link Light Rail Tacoma Link Light Rail Sounder Commuter Rail Regional Express Bus Rapid Transit Systemwide and Other 12
Capacity “Pinch Year” Shifted From 2035 to 2032 Strong economy and property value increases create additional capacity. Higher cost growth creates earlier financial burden. $30 $25 Fall 2018 Pinch Year 2032 Fall 2017 $20 Pinch Year 2035 Billions of YOE$ $15 $10 $5 $- 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 13
Key Challenges Near term recession (loss of tax revenue and debt capacity) Continued inflation impact both the capital and the operating programs. Loss of Full Funding Grant (FFGA) program Continued threat on MVET revenue One or a combination of the these scenarios threatens our ability to delivery the program as planned. 14
Ongoing Risk Monitoring and Board Update Financial plan projections are continuously updated to reflect the most current information. Stress tests are regularly performed on the long term plan to assess and monitor risk and its impact to the agency. New Finance Committee in 2019 will receive regular updates on financial capacity and risk status.
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