2018 Financial Plan COP Briefing January 3, 2019 Updated Financial - - PowerPoint PPT Presentation

January 3, 2019

2018 Financial Plan COP Briefing

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Updated Financial Forecast

Financial Projections 2019-2041 Board- Adopted Financial Policies Program Costs from Engineers’ Estimates Key Planning Assumptions Independent Revenue and Inflation Forecasts Budget and Audited Financials

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Long Term Financial Planning

Long-term Financial Projection to 2041 Transit Improvement Plan to 2024+ Budget 2019

• 25-year plan including all Sound Move, ST2, and ST3 sources and uses.
• Board-approved life-to-date and future costs for active projects.
• The annual appropriation for all revenues and expenditures.

2018 Financial Plan Projections Includes SM, ST2 and ST3 Plans

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Sound Move and ST2: $38.7 Billion ST3: $53.8 Billion Fall 2017 Financial Plan: $92.4 Billion 2018 Financial Plan Projections: $96.2 Billion

Expenditure Type Change from Fall 2017

2017-2041 in Billions

Capital 1.70 $ O&M 2.10 $ Total 3.80 $

Plans totals for the period of 2017-2041, YOE$ in Billions:

Agency Remains in Strong Financial Standing

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• 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.

Capital $50,053 52% O&M $24,012 25% SOGR $6,238 6% Debt Service $15,336 16% Reserves & Other $531 1%

October 2018 Financial Plan

Sources & Uses of Funds - $96.2 Billion YOE (2017-2041)

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Sources of Funds

(In Millions YOE$)

Uses of Funds

(In Millions YOE$)

Tax Revenues $63,450 66% Grant Revenues $7,997 8% Bonds $13,878 14% TIFIA $3,320 4% Interest Earnings $453 1% Fares & Other $7,071 7%

Total Projected Sources of Funds

2017-2041 (in millions, YOE$)

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• 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.

$131 $94 $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

Sales tax MVET tax Property Rental Car Bonds and TIFIA Grants Fares and Other

2017 2018

Tax Revenue Forecast: Strong Near Term Regional Economy

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• 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.

Total Projected Uses of Funds

2017-2041 (in millions, YOE$)

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• 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.

$- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 Capital O&M SOGR Debt Service Reserves and other 2017 2018

Total Projected Uses of Funds Continued

2017-2041 (in millions, YOE$)

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• 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.

$- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 Capital O&M SOGR Debt Service Reserves and other 2017 2018

Operating Costs Increase in Conjunction with Increased Ridership

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• Ridership projected to grow to 193 million by 2041
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40 60 80 100 120 140 160 180 200 $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Annual Boardings in Millions Operating Cost, YOE$ in Millions

Operating Cost and Ridership Projections

Sounder Commuter Rail Link Light Rail and Tacoma Link ST Express Bus and Bus Rapid Transit Total Ridership

Forecasted Revenues Fully Fund Voter Approved Capital Program

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$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

YOE$ in Millions Link Light Rail Tacoma Link Light Rail Sounder Commuter Rail Regional Express Bus Rapid Transit Systemwide and Other Light Rail 42,766 $ 85.4% Commuter Rail 3,190 $ 6.4% Regional Express Bus 1,048 $ 2.1% Bus Rapid Transit 1,824 $ 3.6% Other 1,225 $ 2.5% Total 50,053 $ 100.0%

Capacity “Pinch Year” Shifted From 2035 to 2032

13 Pinch Year 2032 Fall 2018 Pinch Year 2035 Fall 2017

$- $5 $10 $15 $20 $25 $30

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041

Billions of YOE$

• Strong economy and property value increases create additional capacity.
• Higher cost growth creates earlier financial burden.

Key Challenges

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• 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.

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.