Good morning and welcome to the Metrolink Audit and Finance Committee meeting for Friday,
May 12, 2023, calling the meeting to order at...
Thank you, Chair.
Because there are committee members participating by a teleconference, all votes must be done
by roll call and each county receives 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, please speak into the microphone so that the audience
and teleconferencing board members can hear you. Thank you, chair. That concludes housekeeping.
Thank you, Frank Castellan, our chief safety security and compliance officer, is going
to conduct today's safety briefing. Good morning, Chair Burksen, directors and
attendants and those remote. So this morning's safety briefing for the folks here. If we
We have a fire alarm activation.
We are all going to exit the building together, stage in Patzaurus Plaza, wait for the all
clear for those calling in remote, know where your exits are.
If we hit an event of an earthquake, we are going to shelter in place, get in our large
object table, et cetera, wait until the shaking stops, do an assessment, and determine whether
or not we need to evacuate.
The event of a first aid situation, of course, we're going to call 911, get an anonymous
jury to do that.
will provide first aid until EMS gets here and in the event of an active
attacker we always use the saying run hide and fight. That concludes this
morning's safety briefing. Next we will do the Pledge of Allegiance and
Ann O'Connor is going to lead us. Thank you very much and item number four is a roll
call. Director Middleton. Present. Vice Chairman Callan. 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-Leslie. Here. Chair
we do have a quorum present we have not received any written public
comments or any requests to speak a is the approval of the meeting minutes from
April 14th 2023 do any of my colleagues have any comments questions
a motion. Travis was second. Yes, call vote, please. Vice Chairman Callan. Yes. Director
Nguyen. Yes. Director Chavez. Aye. Director Najarian. Aye. Chair Bergson. That motion
carried unanimously very good we are off and running to item 6b big item of the
day the proposed fiscal year 2023 2024 budget and the request to transmit that
to the five member agencies presented by Christine Wilson senior manager of
finance good morning chairman I'm presenting a request for your
recommendation to the board for the transmittal of the proposed FY 24 budget
to the member agencies for their review and adoption.
Next slide, please.
This slide provides the result of research
on Metrolinx sister transit agencies across the U.S.
who are experiencing similar or worse levels
of ridership recovery.
Next slide, please.
This slide describes the challenges made manifest
by the reduction in ridership.
Next slide.
I would like to pause for a moment from the numbers to explain that the proposed FY24
budget was produced through a close collaboration of all areas of the authority.
The amounts were then scrubbed, reviewed, and presented again to the organizational
chiefs, the chief financial officer, and the chief executive officer.
The revised budget was then presented to and discussed with each member agency, CFO, and
the member agency advisory committee and the member agency CEOs. We feel that we
have constructive agreement on this budget. Next slide. Oh, sorry, stay here
please. These are the assumptions we use to create the FY 24 operating budget.
They include service, service at the current level of train service. Also full
co-chair which is still in negotiation, arrow service as a separate budget. I
should mention here that the arrow budget is not included here because we
are continuing to work with SBCTA to create the budget and that we will in
June be bringing back a continuing resolution to be to continue to fund
era while we continue to work on that budget. For revenue in this FY24 budget, the revenue
and ridership are based on the lowest vary capital KPMG forecast. There are no fair increases.
There will be fair promotions. As to expense, contractor increases only as mandated by agreements.
new FTE headcounts, a 5% merit pool with no COLA.
Reporting will be monthly, there will be a formal mid-year budget review, and the Aeroservice
will also be reported monthly.
Next slide, please.
Here you can see the difference between the forecast used to create the FY23 ridership
and revenue as compared to the forecast we are using to produce the FY24 ridership and
revenue.
is, as you can see, far more conservative and will prevent the kind of revenue shortfall
we experienced in FY23.
Next slide, please.
Next.
This is a summary of the proposed FY24 operating budget.
Revenue is 58.2 million with the 13.7 decrease from FY23, reflecting our more conservative
forecast.
Public expenses are 303.4 million, an increase from the FY23 budget of 2.4 percent.
Member agency support is 250.7 million, an increase of 20.9 million or 9.1 percent.
Our working capital request is still under discussion, and we need to work on a policy
to be brought to the board.
Next slide, please.
You see here the operating expenses, actual or budgeted, FY19 through FY24.
Next slide, please.
This stack chart displays the major components of the $303.4 million of expense in the proposed
FY24 budget, including specifically maintenance of way at $53.3 million, train operation at
46.5 million, and equipment maintenance, including parts at 44.6 million.
Next slide, please.
This chart shows the amounts of funding provided by member agency,
revenue, and federal relief from FY19 through FY24.
The numbers that you see there are the amount provided by member agencies.
Next slide, please.
This pie chart displays the proportional amount of support requested from each
of the member agencies for the proposed FY24 budget.
Next slide.
Proposed amount for capital for the state
of good repair totals 126.3 million, which is an increase
of 31.9 million from the FY23 budget.
The request for new capital totals 20.9 million,
an increase of $8.8 million from the FY23 budget.
It is important to note that the state of good repair amount covers only current needs
and does not cover any backlog currently estimated at approximately $750 million.
There are two revisions to the capital program, which occurred too late for us to change the
documents here, but which will be included in the transmittal.
One of them is a change to the state of good repair, an increase of $3.5 million for projects
which have been added at the request of VCTC and will be supported by their funding.
And for new capital, $600,000 has been removed as a result of a grant awarded to Metrolink
to cover fuel studies.
Next slide.
Next.
Next.
Okay, this shows the amounts for each of the two programs from the various member agencies,
each their portion of those programs.
Next slide.
Next slide.
These charts show the operating and capital support requested by member agencies.
Next slide, please.
And this shows the details of the amounts requested from each member agency for operating
support, capital support, the total, and comparisons for each member and the
total compared to last year. Next slide. Okay, your packet also includes
attachments which provided operating statements by category, by member agency,
and by category by line with comparisons to FY23. That concludes my
report? May I answer any questions? Mr. Chair, if I could just make two quick
comments before the committee poses questions to Ms. Wilson. I want to
make sure that the board is aware when we first started the process of
developing this year's budget, you'll recall we had a retreat back in December
and we asked the question pretty clearly, what level of service shall we budget
for. And the board said we want to pursue 100% of our service pre-pandemic. We started down that
path, but again in a collaborative effort we've done in working with our member agencies,
we heard loud and clear, and of course I think this committee received feedback directly from
Director Nguyen from OCTA about OCTA's desire to look towards service levels that are at our current
at service level versus additional service levels
getting us back to 100% of our pre-pandemic ridership.
We received feedback from other counties as well
in that regard.
So as Ms. Wilson indicated, this budget,
based on that feedback, this budget has been built
based on current service levels.
At the same time, we've heard from a couple of member
agencies that there's a desire to potentially
get that service level back.
So our intent would be if that does occur
and we come to agreement and we get to those,
We can handle those costs through those member agencies.
We would do a budget amendment in the fall
with those counties that might want
to bring back service levels to a higher amount.
So I think it strikes the balance
of where we needed to be with our member agencies.
Secondly, the issues with the costs associated
with both the capital program and state of good repair.
Ms. Wilson indicated some fairly significant increases
in those amounts.
The good news in this is that we are all familiar with the federal bipartisan infrastructure
law, or IIJA, that has, if this board's not aware of it, has increased significantly
the amount of funding for state of good repair to all of our agencies, our member agencies.
So those costs are being covered in almost all instances by the increase in funding that
we receive from the IIJA, I should say, the member agencies receive, and they pass along
to us.
So this is a positive recognition by the federal government of needing to invest in state of
good repair.
As Ms. Wilson indicated, it doesn't get to our backlog.
Mr. Fornelli would remind me of that if I didn't say it myself.
Our chief of program delivery, he would say, what are you talking about?
We still have a backlog.
Yes, we still have a backlog, but we are able to address our immediate needs of where we
are with our state of good repair.
So with those two added comments, I will turn it back over to you, Mr. Chair, for questions
from the committee.
Thank you so much. Thank you for that comment. I see we have a hand raised by either Tam
Nguyen or Mark Murphy. Either one of you go ahead.
Yeah. Thank you, chair. This is Tam Nguyen, MOCTA. First of all, thank you, Ms. Wilson,
for that presentation and the updates. And I also wanted to thank CEO Kettle along with
the CFO packet for coming down and they presented this proposed budget to the OCTA board meeting
on May 8th and prior to that as well at our finance committees. I appreciated the comments
that CO Kendall just made in terms of just reiterating where OCTA stands as we're in support
of not reinstating the 100% of the pre-pandemic service levels but as it's premature we know
that's given the current ridership
and the revenue projections.
After seeing Ms. Wilson's presentation,
it was really appreciative of the implementation
of new conservative forecasts
and the feedback that we've given.
So stand to support the recommendation
as it stands at this point.
And thank you for allowing me to share these comments, Chair.
Absolutely, thank you very much.
Any other questions for Ms. Wilson?
No, I just wanna say that I think this is a good budget
based on the current economic and
radish conditions we're dealing with right now
and uh... continue on the current level of service
uh...
so obviously hopefully there's some relief maybe coming down in Sacramento
we'll see uh...
maybe later on today from the governor's budget we'll see if there's any relief in there but overall
I do appreciate staff coming down to our SBCTA transit
transit committee yesterday to make the presentation
do we have any uh... public comments
We do not have any public comment on this item.
Okay, I'll bring it back up here.
Any other comments?
Any of my colleagues?
I'm appreciative of the new forecast, I'll just say,
and I like the fact that we're not gonna be chasing
our tail the whole time, and it's so far
been pretty accurate thus far.
I just peeled on it, but hopefully we can get
some more funding this next year
so that the member agencies may be able to tamp down the amounts that are
coming out of with that this is an action item to move this item forward is
there a motion I'll move the item I'll move the item. We have a motion and a second. Certainly. Vice
Vice Chair McCallum?
Yes.
Director Nguyen?
Yes.
Director Chavez?
Aye.
Director Krakorian?
Aye.
Chair Bergson?
Yes.
That motion carried unanimously.
Very good, thank you.
All right, item 6C, Financial Results for the Nine Months ending March 2023,
ridership and revenue recovery and operating statements.
Also being presented by Christine Wilson, senior manager of finance.
again. Next slide please. This slide shows actuals by quarter through the third
quarter of FY 23 which are the green boxes. The gray line is the FY 23 budget.
The black line shows the forecast that we will be using in FY 24 for that
budget. As you can see there's a considerable difference. Next slide
slide please. This slide shows the FY23 budget and at the bottom the amounts of recovery
by month for all the 12 months. Next slide please. This slide shows the actuals, the
recovery that we've made over since the beginning of the pandemic in 22. The black line shows
the revenue projections from our November 21 projection which is what we
use to create the FY 23 budget. The blue line that you see is shows the
projections were provided by Sperry Capital and as you can see anywhere we
have actuals we are very close to that amount. Next slide please. This slide
This slide shows the revenue through March of FY23.
As you can see, the month of March produced a 44% recovery.
However, the year-to-date recovery is 40%.
Our budgeted revenue year-to-date is 33.9 million,
while the actual is 23.2 million, producing a revenue shortfall of 10.7 million for farebox revenue.
Next slide, please.
slide shows the ridership for that same period. As you can see, forecast was 5.2 million and
the actual was 3.7 million, leaving a shortfall of 1.5. Next slide, please. I might mention
that in your packets you have this same information by line. This slide shows operating statement
results to the third quarter of FY 23. Revenue is 11.2 million below plan but expenses are
30.4 million below plan. Some of the items that are contributing to this savings are
administrative and services under by 9.1, train ops under by 8.8, MOW under by 3.5.
Next slide.
Here we see the results for arrow service.
You can see that year to date the forecast was for $537,000 instead it's $105,000, leaving
a shortfall of $431,000.
Next slide.
This is that same information except with respect to the ridership.
Forecast was $191,000.
The actual is 44.4, so we have a shortfall of 146.5.
Next slide.
Arrow service operating statement.
As I said, the revenue is below plan by 432,000,
but the total expenses are 4.0 million below plan.
So the support required is 3.6 million below plan.
Next slide.
Thank you.
That concludes my report.
May I answer any questions?
All right, does anybody have questions
on the writership recovery report?
We have not received any public comment on this item.
Okay, this is a receive and file item.
If there's no questions or comments,
we will go ahead and receive and file this.
And we'll move on to item 6D,
the corrective action status update
for the third quarter ending March 31st, 2023.
This is gonna be a receive and file
and be presented by Elizabeth Lizardi,
Senior Manager of Audit.
Next slide, please.
Good morning, Chairman and members of the committee.
The board directed Internal Audit to provide quarterly updates
on the corrective action status related
to past internal and external audits.
For third quarter ended March, 2023.
There were five items implemented and verified.
One implemented pending verifications, no past due items,
and 20 items not yet due.
This concludes my item.
I'm happy to answer if you have any questions.
Okay, very quick report, but very good.
Any questions by my colleagues on this?
We have not received any public comment on this item.
Okay, well thank you for the report on that.
I know you're still standing by
because we're gonna receive and file that
and move to 6E, the Internal Audit Department
quarterly update for the third quarter
of fiscal year 2023, also being presented by Elizabeth.
So those already I'm presenting a status update for the internal and external audit activities for a third quarter ended March
2023
The status of the annual audit plan is included in the attachment a to the staff report and the internal audit
External equality control review result was presented in the April
AFCOM and board meetings, and as requested by our contracts department, assistance is
being provided to review proposed contract labor costs and incurred charges for various
contracts.
And for the third quarter, we have three external audits.
The first one, the MTA-MOU compliance audit was completed with no findings.
The IRS audit was initiated back in November, 2022
and still in progress.
And finally, the FDA trial review virtual site visit
is scheduled for July, 2023.
And this concludes my item.
Happy to answer if you have any questions.
Okay, any questions on this item?
Again, compliment our entire team.
When we get no findings on audits,
especially internal audits of the audits
It makes me smile so thank you again for that any public comments on this item
We have not received any public comment on this item. Okay, and this is a receive and file item
there are no questions from my colleagues then we will receive and file that and move on to item 6f and
And this is the fiscal year 2022-23 quarterly fuel purchase program update for the quarter ending March 31, 2023.
And this will be presented by Alex Barber, Senior Manager General Accounting.
Next slide, please.
The purpose of the fuel hedge is not to make money or lose money, but to make costs predictable.
On that basis, it is expected that the sale of positions
or contracts may create a gain or loss
depending on the movement of fuel prices.
As of March 31st, 2023, the authority's hedging account
had a value of 13.3 million dollars,
a decrease of 350,000 from December 31st, 2022.
Next slide please.
This completes my presentation.
I'll be happy to answer any questions you may have.
All right, uh, so we've lost a little bit, but would you say that in general we are still
seeing the consistent, uh, pricing that, that keeps us consistent year long?
Absolutely.
Uh, the thing that you want to remember is as we're losing money in our fuel hedge, the
nice thing is the price of fuel is coming down, so we're paying less at the pump.
The two, um, activities really offset each other, so I think the hedging program is doing
fantastic job. We have not received any public comment on this item. This is a
receiving file item so we will move forward with receiving and filing and move to item
6G that's grants quarterly update third quarter fiscal year 2023. This is going
to be a receiving file item presented by Tom Shamber, director of grants. Good
Good morning, Mr. Chair, members of the committee.
This is a receive and file item providing an update of grants activity for the period
from January 1 through March 31, 2023.
Next slide, please.
During the quarter, we acquired one state TIRCP grant of $106.9 million from a supplemental
round of the program.
This grant provided critical funding to projects experiencing shortfalls due to unexpected
circumstances such as extreme inflationary.
We closed three grants from the state's LC top program, totaling 6.3 million.
This resulted in a total portfolio of 1.9 billion as of March 2023.
This concludes my report.
I'm happy to answer any questions.
Okay, thank you very much for the report.
My colleagues have questions or comments?
This is a library today.
I'm not sure what Mr. Kokorian is thinking because usually you're on the radio telling
us what ordinance somebody's breaking so do we have any public comments on this
item we have not received any public comment on this item keep up the good
work with getting us more grants and the ones that you're doing we appreciate so
thank you with that and we will receive and file that we are off to obviously
the best item of the day chief executive officers report mr. kettle I thank you
Thank you Mr. Chair. So this actually is a good news story. It's relatively late breaking
over the course of the last few days. We've been working with the Orange County Transportation
Authority and the City of San Clemente. The City of San Clemente is issued a contract
to do some work at the Casa Romantica. This is the location where we've had to shut down
the railroad in the San Clemente area, right near the San Clemente Pier. We had been looking
at a variety of different options about how to shore up that hillside and protect our
tracks. The city has just recently announced the award of a contract. Work will be starting,
as I understand it today, on the slope above our tracks, and then we'll continue doing
some grading over the course of the next couple of weeks, at which point we're hopeful that
we will be able to resume service all the way down on the corridor, all the way down
down to San Diego, of course our service
only goes to Oceanside.
We've had this closure now in place for a couple of weeks
after the near six month closure at Cypress Shores.
So we will be working again, quite closely,
supporting the city's efforts because they will be doing
work from both above our tracks and then there will be
a right of entry under our tracks so they can work
from our corridor which is below where this city facility is.
So again, positive news in that we have a solution
that appears to work for us.
It is a short term solution for the purposes of the city,
but it serves our purposes, we believe, longer term
and knock on wood, we will not have further issues there.
So again, good news story in that.
Mr. Chair, that concludes my report.
You have a timing on that for the work to be completed
and our trains to get back up and running?
Right now, the city is telling us they anticipate
the work to take about two weeks.
If it takes two weeks, we are going to be planning.
Obviously, there's a lot of things that have to go
into making sure we have our, of all things,
we will be marketing the heck out of
once we're able to officially start service,
we wanna have a good week in anticipation of that,
so that we can announce it,
we can update our ticket vending machines,
all the things that happen behind the scenes
that not everybody sees, but in talking with our team,
we believe that two week window,
two-week timeframe makes sense and that we're gonna at least be prepared that we
can do that as start service assuming it's safe of course in that time frame
of just after two weeks. I almost skipped everybody else, sorry. Item 8,
committee member comments. Any committee members would like to make any comments
anything. I'm starting to wonder if the 9 a.m. shift was really a good idea or
not. Nobody's saying anything. Larry, thank you. Thank you, Mr. Chair. I just just
wanted to say I'm sorry I'm not there in person to see Director Krakorian. He
He hasn't been there in such a long time.
We really missed him, so I apologize, Paul.
I appreciate the kind words and the scolding, Larry.
Well, I know you have been very busy.
You've got other issues going on,
but it's good to see you back when you can be.
Very good.
With that, we are going to adjourn the meeting at 9.33.
Thank you so much.
you