Good morning, it is 10 o'clock.
We will go ahead and begin today's audit and finance committee meeting for
Friday, April 14th, 2023 at 10 o'clock am.
Secretary, can you please give us the housekeeping rules for today?
Certainly, because there are committee members participating via teleconference.
All votes must be done by roll call and each county will receive one vote.
Although all directors are encouraged to participate, only voting members can make a motion or
Second the motion on action items for those joining us on zoom
Please use the hand raising feature to indicate that you would like to speak and as a reminder for those in the boardroom
Please speak into the microphone so that the audience and those joining us on zoom can hear you
Thank you chair that concludes housekeeping
Good morning, Director Burksen, committee members, and those of us joining remotely.
I will remind everybody to please be aware of your surroundings.
As a reminder, again, if we have an activation of a fire alarm, I will ask my counterpart,
Jerry, to lead us all, including audience members, down the stairs.
We will go to Patzaurus Plaza.
On the end, we will wait for the all clear and or word to make a determination whether
or not we're going to come back in the building.
In the event of an earthquake, we are going to shelter in place, get underneath the desk,
underneath a large object, doorway, et cetera.
Wait till the shaking stops and do an assessment
whether or not we will exit the building at that point.
In the event of a first aid indoor requirement to do CPR,
I'll nominate myself to perform first aid duties.
I will ask my counterpart, Jerry,
to contact 911 security desk and advise EMS location.
Always a reminder, in the event of an active attacker,
we use the saying, run, hide, fight.
And then finally, hope you enjoy your weekend,
enjoy the weather, and this concludes your safety briefing.
Thank you very much, appreciate the safety briefing.
Item number three, Pledge of Allegiance, and we're going to ask Lauren to please, thank you very much.
And Madam Clerk, will we please go ahead and do the roll call?
Certainly.
Director Middleton?
Vice Chair McCallum?
Here.
Director Dutray?
Here.
Director Nguyen?
Here.
Director Murphy?
Here.
Director Chavez?
Here. Thank you.
Director Corcoran.
Director Najarian.
Here.
Director O'Connor.
Here.
Director Hughes-Lesley.
Here.
Chair Bergson.
Here.
We do have a quorum present.
Excellent, thank you very much.
Do we have any public comments for today's meeting
of items not on the agenda?
We have not received any written public comment
or any request to speak.
Excellent, moving along to the regular calendar, item 6A.
This is the approval of the minutes
the March 10th, 2023 Audit and Finance Committee meeting. Do we have any committee members
that have any comments or revisions to those minutes?
McCallum moves the item. Do we have a motion by McCallum to move? Do we have a second?
Chavez seconds. Chavez seconds. Fantastic. May we please have roll call?
Vice Chair McCallum? Yes.
Director Nguyen? Yes.
Director Chavez? Aye.
Mr. Najarian?
Yes.
Chair Berkson?
Yes.
The motion carried unanimously.
Thank you very much.
Item 6B is the request for deferral of Transmittal of Proposed Fiscal Year 24 Budget being presented
by Christine Wilson, Senior Manager of Finance.
Good morning Chairman Berkson and members of the committee.
I am presenting a request that you recommend that the Board approve the deferral of the
transmission of the FY24 budget to member agencies until May 26, 2023.
Next slide, please.
As we all know, the last two years have been unique for the budget development process.
Just to mention a few items that have caused some disruption to it, you'll recall that
But we obtained external support for updating the ridership and revenue forecast, and that
had to be waited for in order for us to have a more correct revenue for the budget.
There were adjustments to service levels.
We have been working on a collaboration with Losan, and there was also the Arrow service
budget development.
Now we have been collaborating with member agencies on the 24 budget.
of them individually and through the MAC, and so we're requesting the deferral of the
transmittal to ensure that all member agencies concur with the FY24 budget prior to our transmission
to them.
Now, in future years, it's our commitment to initiate budget consultation with member
agencies by the end of January and ensuring the formal transmittal by May 1st.
below on this slide is the proposed timeline for the budget and you notice that although
the transmittal is deferred until May 26th to member agencies, we will be back to the
normal schedule of requesting AFCOM to recommend FY24 Board approval on June 9th and that will
we be requesting the board approval of the 24 budget on June 23rd? May I answer any questions?
I appreciate all the good work that Arnold and your staff, Chris, have been doing. I understand
this budget has been a difficult one to put together because of all of the things listed here
And I just wanted to make sure that we continue to get these budgets
to the member agencies in a timely manner.
So because each agency has committees and boards that meet at different times and it's difficult
if it goes too late in the year to them.
So I know you've been working hard to make sure that doesn't happen and I would hope
that we can in the future when we have not all these difficulties to go
through to get it to the agencies, but again I appreciate all the hard work you
do and certainly our budgeting process is a lot better than it was ten years
ago. Thank you. Thank you. Just to kind of add to that, during our board briefing
My understanding is just use RCTC as the example.
We have most of the data and information to add to our budget which normally we'd be
bringing to the commission in May, beginning May.
So with this we won't be able to bring it to our full commission until June which is
when we would typically vote on it.
So it gives us basically no time to deal with any amendments or changes or be addressed but
at least, I'm comforted in knowing that for the most part,
most of the budget numbers RCTC already has.
So we're really talking about fine tuning,
some maybe minor parts of the overall budget.
So saying that we're pushing the transmittal off
is not, at least in the way I'm thinking about it,
not very accurate, we've transmitted most of the budget.
It's just the very final few pieces.
So I think at least the member agencies are in the know,
have the ability to make those decisions
and their committees and commissions
and boards can appreciate that.
Do we have any public comments on this item?
We do not have any public comment on this item.
I do see a hand raised remotely.
Hello?
Go ahead.
Hello, this is Nguyen from Orange County.
Go ahead, Director Nguyen.
Thank you, Chair.
I'd like to share some comments first
that appreciate the presentation and the budget updates here.
I'd like to share my comments that the Metro Lake CEO
and CFO will be coming down to our OCTA finance
and admin committee on April 26.
And also to our board meeting on May 8,
present the preliminary fiscal year 24 budget.
I'd also like to share that on April 5th,
our OCTA CEO Johnson sent a letter
to our Metro Lake CEO regarding the planned reinstatement
of pre pandemic service levels.
OCT is concerned that returning to our 100% service
is premature given the current ridership
and revenue projections
and is not financially sustainable.
This letter has been shared
with the other four member agencies.
Thank you, Chair, for allowing me to share those comments.
We appreciate your comments.
Thank you very much.
Any other colleagues wishing to comment on this item?
Seeing any this is an action item do we have a motion to move staff's approval
Travis moves motion by Chavez
Second by McAllen
Vice-chair McAllen yes director Nguyen yes director Chavez aye
director Najarian yes chair Bergson yes a motion carried unanimously
very much. Item 6C, the financial results for the eight months ending February 2023,
ridership and revenue recovery and operating statements. This is a receive and file report
also being presented by Christine Wilson, Senior Manager Finance. I'm going to get that
right.
As long as you smile when you say it.
Next slide, please.
This is a quarterly slide showing ridership performance
through the second quarter of FY23.
The gray line is our FY23 forecast used for budgeting
and the green boxes are actuals.
As you can see, we are not meeting the forecasted
ridership goals.
As you know, it was for that reason that we solicited the assistance of KPMG,
Spery Rand Capital to formulate a more informed forecast for use in FY24.
Their forecast, the one which we will use to produce the FY24 budgeted revenue is shown
by the black line there, and the green boxes remember are actuals.
So as you see, the forecast by Spery Rand is far closer
to the actuals we're currently experiencing.
Next slide, please.
This slide is showing actual ridership versus the forecast
by month through February.
Next slide.
Now, this slide is showing how we've progressed as far
as ridership recovery over the past two and a half years.
So, the black line at the top is the one that we used
to create the FY23 budget.
The line that you see underneath that's much closer
to the green boxes are what has been provided for us
by KPM Juice Berry Rand.
And as you can see, we're very close to the numbers
that they're predicting.
And I might mention that for the month of March, which is,
of course, not on here yet because we're reporting February,
but for the month of March, we're at a 44% recovery,
which is only 1% different from what we're gonna use
for the 24 budget.
Next slide, please.
As you can see, this shows that we have a shortfall
from budget through the eight months ended in February,
and whereas we budgeted 29.9 million or a 59% recovery,
the actual recovery has been 20.4 or 40%, which is a shortfall
of 9.5 million from the budgeted revenue.
Next slide, please.
This is the same information except showing ridership.
And as you can see once again, whereas we projected a 58%
recovery or 4.6 million riders, instead we achieved 3.3 million,
which is a shortfall of 1.3 million.
Next slide, please.
The Metrolink operating statement.
In brief, and they're attached
in your package was a complete operating statement
for you to review.
But the total operating revenue is 10.1 million below plan.
But the operating expenses are 25.7 million below plan.
So currently, the support required based on accruals,
instead of actuals, is 15.6 million below plan, below.
Next slide please.
This is the aero performance through the end of February.
423,000 was what was for budgeted.
Actual is 76.4 and so you see that there's a variance of 346.
Next slide please.
This is that same information showing ridership rather than revenue.
Next slide, please.
The Aero Service Operating Statement, while revenue is below plan by 346,000,
the expenses are below plan by 3.7 million.
That's because of the late start of the service.
Required support, therefore, is 3.4 million below plan.
Next slide. Thank you.
That concludes my report.
May I answer any questions?
Thank you.
That was a very good report today.
We appreciate that.
We are, it's good to see the new numbers are right in line
with where we actually are.
Yes.
It's very helpful to see that.
Let me just turn it to my colleagues and ask
if anybody has questions in regards to this item.
When you say required support, you're talking about memory agencies subsidy, right?
Yes.
Thank you.
Yes.
It looks like you're saving some money.
Quite a bit.
Over three million.
Right.
Well, thank you for the report.
Seeing no other further questions, we will go ahead and receive and file this item and
to move along to item 6D, the grants update
between April 2022 through December 2022.
This is gonna be a receive and file
presented by Tom Shamber, Director of Grants.
Good morning, Mr. Chair, members of the committee.
As we just heard, this is a receive and file item
providing an update of grant activity
from April 1st, 2022 to December 31st, 2022.
Next slide, please.
During this period, we acquired eight grants for a total of $88.2 million.
Successing competitive programs include an FRA Trespassing Enforcement Grant, a FEMA
Transit Security Grant, and a CALSTA TIRCP Grant.
We reprogrammed 11.1 million in existing grants for projects that were completed with cost
savings or to facilitate the closure of grants.
We closed 7 grants, totaling $163.5 million, which includes 2 grants from AQMD for the
procurement of our first 40 Tier 4 locomotives.
This resulted in a total portfolio of $1.8 billion as of December 2022.
The report also highlights two recent grant applications submitted to the U.S. Department
of Transportation RAISE Program and the California Transportation Commission's Solutions for
congested corridors program to fund the replacement of eight additional tier 2 locomotives with
tier 4s.
An award under one of these programs would complement an award of $51.7 million from
the 2021 Carl Moyer Award from AQMD and member agency contributions to fully fund the project.
We're anxiously awaiting those results.
This concludes my report.
I'm happy to answer any questions.
Thank you for your report and this I presume is separate from any of the score program
money that's coming in, right?
Well, the total grant portfolio would include the score, the 875 million score TIRCP award.
Fantastic.
Do we have any questions from any of my colleagues not seeing anybody here or remotely with that
being the case?
We'll go ahead and receive and file this item.
Thank you.
Thank you for your report.
Appreciate that.
the internal audit department's external quality control review report, a receive and file
presentation presented by Elisabeth Vozuardi, Senior Manager of Audit.
Good morning, Chairman and members of the committee. Next slide, please. The auditing
standards be externally peer-reviewed by a qualified and independent assessment team
to evaluate the department's compliance and conformance with the auditing standards. The
review was performed in the week of March 6th and the period covered was
January 2020 through December 2022. The peer review team is from the
associations of local government auditors also known as ALGA. The external
quality control review report is attached to the board report. There are
no findings in the report and this concludes my item. Happy to answer if you
have any questions the report do my colleagues have questions on this audit
of the auditors I don't see any questions oh go ahead Larry just a
comment when your peers give you a good report it means you're really doing a
good job thanks I am certainly grateful that the report came in as perfect as it
could possibly be and let your staff know and yourself that we as the board
appreciate the efforts that you go through to get the audit department
where it is compared to when I first jumped onto the Metrolinx so many years
ago it was nothing nothing at all you're you're you're proving success with with
the audit department and when your peers tell you that you're doing a perfect job
without any you know recommendations or faults that tells us you know that's a
great pat on the back for you and your team so walk away knowing that we see
this and and are very happy that the report came out. Thank you so much for a very kind comment.
Thank you. No other comments on this so we'll go ahead and receive and file this
item. Off to item seven our chief executive officers report. Thank you
Mr. Chair just three items briefly to share with the committee of course we're
We're really pleased that we will be bringing back full service on the Orange County line
and the Inland Empire Orange County line starting Monday now that San Clemente repairs have
all been made and Pacific Surfliner will also have seven day a week service.
So we will be going back to the service levels we had prior to the risks of the landslide
in San Clemente.
I want to make sure we do thank OCTA and all their hard work to mobilize the contractor
to perform this work. It took a lot of effort. It was a joint effort, but their team led
and managed the construction contract where Herzog and some of our staff were making sure
that we kept running rails on time and maintaining the track. So it was a very much cooperative
effort, but OCTA tipped the hat to the work that OCTA's team did on making that all happen.
It was a bit more complicated this year,
thanks to weather that is unprecedented
from a winter time perspective,
but still nonetheless, very good news on that.
Also, just wanna remind the members of the committee
that next Saturday, April 22nd, is Earth Day,
and we will be providing free rides
throughout the Metrolink system.
We have been broadcasting this in every possible way
to encourage people to jump on board the train
and utilize Metrolink for whatever trip they might like to take.
So just make note of that, and feel free to share through your social media.
And then lastly, just a very quick introduction.
I shared with the board, I think, last month that we were rounding out
our executive leadership team, and today in the audience,
we have our new chief customer experience officer, Lisa Barr, who has joined us.
That is Lisa there.
For those of you on video, you can't probably see her,
but Lisa Barr has joined us,
and we now have a full executive team.
So I'm very pleased that we're at that point
here at Metrolink.
Lisa brings some experience actually dealing
with fair media.
She comes to us from Cubic,
a company that has international presence
in the world of fair media and that type of thing.
So she's coming from a different customer perspective,
but she's a self-professed transit nerd,
and so those are the type of people we want on our team.
Mr. Chair, that wraps up my executive report.
Thank you, Mr. Kettle, and welcome aboard.
Glad you're here to round out the.
C-suite is helpful.
Very good, very good.
No more excuses, right?
Committee member comments.
Any members of the committee have any comments
anything to share? I see Larry's hand reaching for his button so. Thank you
Mr. Chair. Just wanted to let the board members know that you'll be receiving a
an email from our attorney Don Del Rio. As you know we're in the middle of our
evaluation of our CEO and you will be receiving an email which provides a
rating sheet that you need to fill out. You'll also receive in that email a copy
of what Darren has provided to us for that evaluation
and you're being asked to return that to Don by the 21st.
Hopefully, all of you can participate, the primary members
as well as the alternates will be asked to do the ratings.
So, please do that and plan on being here
at the board meeting for some items that have not come before the board before the committees,
one being the Olympics where we're at with that and also discussions about Bright Line
coming into this area and what that means to Metrolink. So I hope all of you can
and attend in person for that meeting, thank you.
Thank you, Mr. McAllen.
I see Arun Najarian has his hand up, go ahead.
Yes, thank you, Mr. Chair.
So a couple of things to go off of our CEO's report
and some of the information we got.
Last year and in prior years,
we saw a really good bump on Earth Day.
Not just on the day itself,
but we had some good residual ridership
after the free ride promotion.
So I hope that we advertise that
and promote that as best as we can.
And secondly, the opening of the line back down
to Oceanside on the Orange County line
is a pretty big deal,
especially now as we're getting into warmer weather.
So I hope that we can also promote that
and get people thinking about the MetroLink
when they are planning vacations
or just weekend getaways, et cetera.
I think that might help us chip away
at our ridership deficit.
I'm checking the schedule for Earth Day.
Thank you, Ms. O'Connor.
All right, we'll move to Chair's comments.
I, fortunately for all of you, do not have any.
And we immediately move to the adjournment,
which will be at 10.28.
Meeting is now adjourned.
Thank you for being here.
Thank you, bye bye.