All right, well it is time and we'd have a quorum.
So I'm gonna call this meeting to order
and we'll start with our usual safety briefing
by Hilary Conzal.
Good morning.
Good morning, Chairman Schapie, directors.
So I'm gonna go over a few housekeeping items
since this is a virtual meeting,
but in the event of an evacuation,
you have to evacuate your facility you're located at.
be aware of your surroundings, tripping hazards, that sort of thing. In the event of a medical
emergency, make sure that somebody calls 911 that is there for you to render aid. Be aware of where
the AEDs are located at your facility or your home if you're equipped with one. In the event
of an earthquake, we will take cover under the desks or table, whatever you can take cover under,
wait for the rumbling to stop and then just see if further evacuation is necessary.
And then in the event of an active shooter event, you know, we're going to deploy the
run, hide, fight tactic and wish it a successful budget meeting. Thank you.
Thank you, Hillary. And as far as you would also lead us in a pledge.
Sure. I pledge allegiance to the flag of the United States of America and to the
the republic for which it stands one nation under God indivisible with liberty and justice
for all. Thank you, sir. Madam court, would you call the role please? Certainly. Vice
Chair Bergson, Director Tremblay, Director Najarian, here. Director McAllen, here.
your tape be pressing we do have a quorum present and just as an FYI since we are
virtual we will require a roll call vote after every action item all right thank
you and also when we do make a motion or a second I would appreciate if you state
your name so the record is clear you have that opportunity all right now we
go right to our regular calendar starting with a Tom Shambir to
financial officer. I do have to make a public announcement about the public
comment. Oh I'm sorry go ahead. It's okay we received one written public comment from PA
Brown requesting an audit of the fair revenue and fair evasion and
recommending fair checks are universal on all lines that will be emailed to the
committee after the meeting and I do see an attendee with their hand raised so I
will unmute them in case it's someone wishing to make a public comment.
Thank you Madam Clerk, sorry to pass by that. I know we had our own budget
hearing this last Tuesday and I had 144 public comments and so sorry if I'm a
little worn out from that please forgive me all right so I'll go on to our regular
calendar if we can. Okay I have one person with their hand raised that I'll
on uh oh you want to do the public comment right now court clerk this is this is tim sandoval
am i not supposed to be with the rest of the board members we do have a committee composed of
five i understand what you're welcome to okay so so so then if i understand correctly then
i'm just a regular public participant okay got it just that wasn't clear to me thank you thank you
Okay. Mr. Chair and board clerk just see Mr. Bergson did say they were having some
technical challenges at their city hall. Yeah I just added the city of Haruba Valley. So that'll
be I think Vice Chair Bergson joining us as we see it coming through. So I will make note that Vice
Chair Bergson joined the meeting at 907. Welcome. Good morning. Sorry about the technical issues
here. We're good to go now. Good. Thank you for joining us and going
to that extra effort. All right. Now, is there anything else with public
comment at this time? Okay. I'm not hearing or seeing anything. So let's go to our regular
calendar. First is item 6A, our budget development update presented by Tom Shamburr, our chief
financial officer. And so if you give us a status report on the development of the budget,
we coming along? Yes, good morning Mr. Chair, members of the committee. I'm providing an update
on the FY27 budget. This has been a challenging year and we're eager to bring this budget to
completion so we can focus on providing the best service possible to our writers. I hope that this
presentation and conversation that follows will provide greater transparency and an understanding
of our path to deliver the budget. Next slide, please. Here's a brief agenda of the presentation.
We'll start out with a discussion of our budget challenges, and move on to a little bit deeper
dive into the operating budget, providing some historical context of trends, talk about our
development timeline, and our budget assumptions. Then we will move on to a discussion of operating
surplus the history of that surplus has it's been a topic recently with the board.
We will talk a little about state funding and then a very brief touch on the capital budget.
Next slide please. So there are several factors that have created the perfect storm that we find
ourselves in today. These are not isolated factors they are all additive to the shortfall we're
facing. It all started with a realization in the middle of the current fiscal year
that ridership projections were overly optimistic. A budgeted year-over-year growth of 23 percent
was not achievable despite an actual growth rate of 24 percent from FY24 to 25.
In January, we engaged our forecasting consultant to reevaluate their modeling approach and to
to produce a refreshed forecast.
The result was a 27% decrease in forecasted ridership
equating to a $14.8 million reduction
in anticipated fare revenue for the current year.
This then becomes the baseline
for ridership and revenue in FY27.
Second, we began developing an estimate
of operating costs for FY27,
which factored in contractual
and general inflationary increases.
And assuming a 3% escalator on an FY26 budget
of 352 million in expenses,
that's roughly a $10.6 million increase.
Finally, two of our member agencies
communicated financial constraints
that would require a reduction to their operating support
of 9.4 million in total from their FY26 levels.
At a macro level, when these three factors are combined,
we get a budget shortfall of $34.8 million.
There you have the perfect storm.
Next slide, please.
All right, moving into the details of the operating budget.
Let me provide a little bit of context
that's brought us to this point.
We'll start with fair revenues.
This is an eight-year history of fares
paid directly by our writers, and it excludes subsidies.
COVID caused a massive hit,
but from our low point in FY21,
we saw steady growth through FY24.
And then you can clearly see the flattening
from FY24 to the FY26 projected actual.
Reject, reject, reject, reject, reject.
Were you okay on the audio?
All right.
We should be good now.
Okay, this is not a trend unique to Metrolink.
This pattern shows up in commuter railroads
across the nation.
Nonetheless, with an increase in revenue,
without an increase in revenue,
to offset increasing costs,
the budget shortfall begins to develop.
As fair, next slide, please.
As fair revenue is flattening,
our operating expenses have continued to increase,
particularly starting in FY23.
I won't be covering the underlying details
for each of these increases today,
but a single example of an unavoidable increase
that we've faced was an $8 million mobilization cost
to transition our train operator
and equipment maintenance provider in FY25.
That alone increased our year-over-year operating expense
by nearly 3%.
The increase from FY23 to 24 was 8%.
From 24 to 25 was 9.7%, including that mobilization.
And from FY25 to our FY26 forecast to year-end
is just over 5%.
Of course, when you pair the trend in operating revenues
and the trend in our expenses,
member agency support grows.
With our current funding model,
it is unsustainable to expect our member agencies
to fulfill that entire need on their own.
Next slide.
So there's been a lot of discussion and consternation
about how a budget shortfall that we're projecting
could result in such an impact to our service levels.
Keeping in mind the three elements
of the perfect storm that I just spoke about,
it's important to understand Metrolinx cost structure.
This chart shows the large portion of our costs are fixed,
meaning they either don't vary at all or very little
with a reduction in service.
The individual categorizations can be debated,
but you would ultimately still end up
with a large percentage of fixed costs
that will not change materially
based on changes to the service schedule.
Maintenance away or MoW is a good example
of a significant fixed cost
as you will see on the left side of the chart.
Therefore, service cuts must be significant enough
to save enough on variable costs to close the budget gap.
Next slide, please.
So next I'd like to talk about
the budget development timeline.
The first slide shows the activity in budget development
that has happened to date.
Work began on the budget in September, 2025.
Original budget submissions were based
on the optimized service schedule
that we had been running since October, 2024.
We continued on development of this budget
and that assumption in January.
However, in December,
OCTA's CEO informed our CEO
that he would likely soon provide written notice
of their intent to limit financial support to Metrolink
to 10% below their FY26 level.
This letter was ultimately received in early January.
At that point, it was pencils down in finance
while operations began to develop a new service schedule
that accommodated OCTA's request.
Since being appointed as CFO in August of last year,
I was closely watching ridership,
revenue and revenue performance.
It became clear over several months
that projections used for the FY26 adopted budget
were overly optimistic.
I requested that our ridership forecasting consultant
revise their methodology and produce a new forecast.
This was accomplished in February, 2026.
Unfortunately, as I mentioned earlier,
that result came in roughly $15 million
before the forecast used to develop the adopted budget.
It also meant that FY27 ridership
would begin at a much lower level
than had been assumed when the budget process began.
Further, the plateauing of ridership
suggested that we should also be conservative
in our growth expectations for FY27.
In early spring, Metro shared that their CEO
was mandating 3% budget cuts across their agency.
It was not yet clear whether that mandate applied
to Metro's support of Metrolink.
Therefore, budget development continued based
on the scenario driven by OCTA's notice.
Then in early April, Metro provided written confirmation
that they would indeed be expecting a 3% cut
in their support to Metrolink from the FY26 level.
At that time, pencils were again put down in finance
and the budget process began anew
with exploration of a service scenario
that would produce the reductions requested
by both member agencies.
In mid-April, at a meeting of the member agency CEOs,
Metrolinx CEO was asked to prepare two additional scenarios
of the member agency's choosing.
Metrolinx member agency advisory committee
was convened to develop those scenarios.
Based on all the above feedback,
Metrolinx operations team began working with Alstom,
our train operator to develop viable schedules
that preserve the best rider experience possible
while also achieving sufficient cost savings
to resolve our budget shortfall.
This work continued iteratively through last week.
Those results have now been shared with finance staff
so we can further develop a budget
for each of those service scenarios.
Next slide.
The period of evolving direction that I just spoke of
has put the budget process significantly behind schedule.
And my team is working very hard to deliver a budget
as quickly as possible.
Our budget tools are somewhat rudimentary
and number crunching is slow and tedious.
In fact, our budget system wasn't even capable
of handling the development of multiple scenarios
at one time.
I've enlisted the help of IT staff
to reprogram the tool with that capability,
and I've initiated a project to identify
and implement a comprehensive automated budget tool
that will enable us to better respond
to circumstances like these in the future.
Until that system's online,
we must be very methodical to ensure
that our output is completely accurate.
That's as frustrating to us as it is to all of you.
Okay, I acknowledge this timeline is aggressive.
It's driven by my desire to get information
to the member agencies and board as quickly as possible,
but also driven by the need
to start a reduced service schedule as soon as possible.
You could see at the bottom of the schedule there,
we are hoping to do that by October 1st.
This is important to start as soon as possible
in order to achieve the cost savings in FY27
we're trying to achieve.
The later in the year we start,
the less those savings materialize
within this next fiscal year.
To do that and start service reductions on October 1st,
we're required to provide all stone with a six week notice.
The schedule works backward from there
based on scheduled board committee MAC meeting dates
and meeting this timeline will necessitate
shorter periods than normal for MAC
and member agency reviews,
which is understandably not ideal.
Should the board wish for more breathing room
in the schedule,
The decision should be made with the understanding
that service reductions would be delayed
and that an extension of the continuing resolution
may be necessary.
Next slide.
So a brief overview of our operating budget assumptions.
We are currently evaluating three budgets
under three different service scenarios,
which I'll talk about a little more in a moment.
On the revenue side, we brought ridership
and revenue forecasting in-house
so we can shorten the timeline required for this task.
Using a consultant would have taken weeks longer
and involved a high cost.
The budget includes fair increases to one-way tickets
and the SoCal day pass.
There are no new fare promotions planned.
the student youth discount will remain at 50%
with 25% subsidized by an LC top grant.
We also retain the mobility for all 50% discount program
also using state funds.
For expenses, generally our budget increases
were limited to 3%
unless contractual increases were greater than that.
No new head count is being requested.
salaries are being budgeted at 90% of the employee's scale instead of at 100% as has been
past practice. There will be a 3% COLA but no merit increase. All discretionary training and
travel was cut by 33% from FY26 budget levels and no special trains are budgeted and any special
trains operated should be self-supporting such as the holiday train. Next slide. Okay, this slide
is admittedly jarring. However, I believe it's important for the committee to understand the
3D service scenarios being considered at this time. Hey Tom, very briefly, if I could just make
one quick correction on the prior slide. The again the the where we are seeing
fair increases are in one-way tickets and day passes not the monthly passes
that would the fair increases our date that will be proposed are on day passes
and one-way tickets monthly passes will are proposed we this was needed to have
that was supposed to have been edited and I think as we were trying to edit slides,
this was one that got overlooked, but that is again, one-way tickets and day passes.
So that's where the fair increases will be recommended for board action at the right,
at the opportune time.
So just want to make sure we have that clarification.
Thanks, Bob.
Yeah, thank you, Darren.
I did make that edit, but I don't think we got the right presentation up here.
So I'll try to watch closely and make sure any other edits are caught.
So again, this next slide please, this is a listing of the scenarios we're considering
and it's my hope, as I'm sure it is the hope of all of you, that a solution is found that
presents any of these scenarios from being enacted, but for now, we face the very difficult
task of delivering a balanced budget with the facts as they stand.
I won't go through this in detail,
but I will note that the base schedule
is the optimized schedule that was being operated
until late March when we were forced to pull back service
while mechanical issues were being addressed.
These scenarios, as you see, reflect cuts of 27 to 44%
of weekday service and between 17 to 40%
in weekend service.
Next slide.
Here is a list of budget reductions we identified
since the beginning of the budget process
and our first compilation of those numbers.
It's in direct response to the shortfall we faced.
Some of these are reflected in the assumptions
I just shared with you.
And some of them are examples of fiscal conservatism
acknowledging we can make do with less
or delay non-essential initiatives
to more budget-friendly years.
This roughly $11 million in cuts
equates to about a 3% reduction
from the original request made by all departments
at the beginning of the process.
Next slide.
Okay, let's talk about operating surplus.
Next slide.
An operating surplus is generated
when revenues exceed the budget
or expenses are below budget.
It's the net of budget versus actual variances.
This five-year history shows a range of results.
There are outliers like the $2 million deficit in FY22
and the $32 million surplus in FY24.
Because it's attention grabbing,
I've listed a number of the driving factors
for the unusually large surplus in FY24.
I'm not going to go through them all right now,
but you will see that 7.5 million was due
to the grant revenues for the student adventure pass program
because those funds were uncertain
as at the time the budget was prepared.
they ultimately came through and that created a surplus.
Another 5 million is simply due
to unexpectedly favorable interest rates.
Those two items alone explain roughly nearly 40%
of the surplus.
That said, in my role in development of the FY27 budget
and ongoing, I have the opportunity to dive in more deeply
and I can commit to you that I will be looking closely
at all of the agency spending going forward
to identify areas where we can both budget
and spend more conservatively.
Next slide.
In recent board meetings,
the directors have discussed the possibility
of retaining operating surplus to create a reserve
for tough economic crimes like we're facing today.
Over the last five years,
Each member agency has hands surplus differently,
but it is always at their discretion
how Metrolink handles these funds.
In some cases, the member agencies have requested refunds.
In other cases, quite frequently,
they request that we apply the funds we have on hand
to current invoices,
such as their quarterly support payments.
In a discussion with the MAC earlier this week,
we learned that several of the member agencies
have earmarked the funds shown on this schedule
to apply to their FY27 commitments
rather than using them to increase their contributions
towards the current shortfall.
Next slide.
Okay, so what are our near-term solutions to our dilemma?
Next slide.
Our CEO continues to lobby for state funds
to reduce or eliminate the shortfall.
However, there is no formal commitment
of funds at this time.
And I don't know, Darren,
if you have anything you want to add to that.
Yes, just real briefly, Tom.
Thank you, everybody.
So I believe we've informed the board
that we have made an official ask by letter
to the governor as well as key legislative leaders
requesting a out of the state budget,
a $35 million allocation to stave off the reductions
in service that we've presented over the course
of these last couple of months.
A number of meetings have taken place
and advocacy efforts that we've made in Sacramento.
We've also been very fortunate
in that we now have a assembly sponsor
and Assemblymember Carrillo,
who has taken up our, on our behalf,
making a $35 million ask as the Assemblymember.
And then as of yesterday,
Senator Durazzo made the same request,
almost verbatim as dad, as the Assemblymember.
So we now have sponsors in both houses
of the state legislature making this request.
This was a critical ask on the part of Secretary Tox Omaschakan
and Undersecretary of Transportation James Hacker
that we have legislative champions, which we now have.
So that request is official.
I'd also like to thank member agencies, specifically
VCTC, RCTC and SBCTA for support letters
that have also chimed in with that ask.
We are the budget development in Sacramento's ongoing.
I'm cautiously optimistic that we will see some help.
I don't know that we will see what we,
the complete, the entire amount that we're requesting,
but we have received a lot of support
from various players, we'll just see if it actually
translates to resources.
In the meantime though, we have to assume
that those resources aren't there
and why we are having to go through this scenario development
that Tom has just spoken of to address the service reductions
to balance a budget, both for the system,
but also to meet the reductions that
have been asked for on the part of the two member agencies.
So definitely stay tuned there.
We will continue to make you aware of any information
we do get from Sacramento if we get an indication
that we will see some level of state support.
Thanks, Tom, appreciate it.
I'll let you continue.
Thank you, Dan.
Director Bergson does have his face.
Yeah, Darren, do you have any rough idea
when a decision by the state would be made
one way or the other?
Director Bergson, Vice Chair Bergson,
what we have put them on notice of
is to meet these schedules that we wanna have for October.
I need to have communication by no later
than the end of July, early August,
so we can account for that in any budget adoption
that we would be taking.
So we've put them on notice from a timing perspective.
The state budget, as we all know,
is under development right now,
but the way the state budget is working,
they adopt the budget, but then there's trailer bills
that come in oftentimes several weeks later.
So it'll depend on where it fits in that timeframe,
but we have let them know that we need this by early August.
Otherwise we have to plan for moving forward
with those service reductions.
All right, thank you.
Director McAllen also has this hand raised.
these are one-year funds, right?
Yes. What I have communicated, Director McAllen,
is that I anticipate a three-year ask.
This would be a one-year ask because that's the way the state budget process works.
But in all of the meetings I've had,
I have said that this is a three-year ask
to ensure that we're able to maintain service levels
So that when the when LA 28 is here and with three fiscal years from now, that we have the resources to continue our existing service levels. This is not to scale up for the games.
This would just be maintaining the service levels that we have today.
So, but yes, there is a one-year ask in this state budget, but I put it on, put the legislature
on notice.
We need the support through the Olympic Games.
Thank you.
Any more questions?
There is a Director Najarian.
Okay.
Hi.
Thanks, everyone.
Is this the appropriate time for questions, or are we, is this in the middle of the presentation?
I just want to make sure that.
We are almost we are almost wrapped up with the budget presentation director Najarian. This was I this was my chime in on the state funding. So, I'm happy to take a question if you have it on state funding, but if it's a general budget question, we're really close to wrapping up the presentation.
Okay, I'll be out. I'll limit my question, my comment on this.
Wow, I think getting state funding is going to be a huge pull, and it would be one year
or maybe two year or three year funding.
I'm not that optimistic that they're going to be interested in bailing us out, but of
course that remains to be seen up in Sacramento.
I'll hold the rest of my questions for now.
Thank you.
Okay.
I can't see if hands are up.
Are we good?
You're clear, Tom.
Good.
Okay.
Very good.
Okay, it's not on this slide, but I'm sure it's on all of your minds how tenuous the
funding structure of Metrolink is.
There is a growing need to discuss a dedicated funding source to relieve the strain placed
on the member agencies.
We've presented several options to you in the past, and we can bring them to you again
if you wish.
Right now the immediate focus should be on resolving the FY27 budget issue, but it might
be good to follow up soon with a robust discussion on the long-term solution that will preserve
Metrolink as the essential regional amenity for nearly 20 million Southern California
residents.
Next slide.
That concludes my discussion of the operating budget.
I have a single slide on the capital budget.
I anticipated most of the discussion today
would be on the operating budget.
Next slide.
Very simply, the capital program is
comprised of state of good repair projects
and new capital projects.
Our initial request for state of good repair
is 152.1 million and 10.9 million for new capital.
However, just a couple of days ago,
SBCTA informed us that their share of this request
is not affordable. So we will now sharpen our pencils and make the required reductions.
The final proposed capital budget will come to the committee and the board in July for
transmittal with adoption planned in August. Next slide. That one was supposed to be pulled
out in the revised presentation. It pretty much says the same thing I just said. So next
you. Next slide. Okay That
concludes my presentation. I
will do my best to answer any
questions you may have.
Questions directors. Yes
Absolutely. Speak from the
public. How would you like to
handle that? Oh, do we have a
custom public to speak? Yes.
Can we do that so we can hear
to take public comments during items?
How many do we have pending?
One.
Well, let's take it.
No more than three minutes.
Let's get the public comment out of the way.
Okay, I will call on Mr. Brown.
Hi, can you hear me okay?
Yes. We can, thank you.
Great, thank you, Chair, and thank you, members,
and staff for the great presentation here.
I live in the San Gabriel Valley
and I am a user of the San Bernardino line.
I also use the ocean side line
or OC line to visit beautiful Anaheim quite frequently.
I'm obviously very concerned about the service cuts
but really I wanted to focus on the budget presentation.
One thing I did not see in there was any estimates
of how much money is lost from fair evasion.
And I do think that that's something
that I would encourage the committee
and the wider board to take a look at, perhaps an audit.
I would note that at one of the public hearings
of the LA Metro board,
when their budget was under discussion,
there were a number of people commenting
on the contribution of MetroLink, which...
sure of anything, which was great. But a number of writers
noted that they don't see a lot of checks for fair enforcement
on board the trains, sometimes nobody comes by to check. And I
think really, it's a matter of fiscal responsibility that
especially if Metrolinx is asking for money up in
Sacramento that Metrolink be able to show, hey, we've got our own fiscal house in order here on
the revenue side, we're making sure that people that are writing like myself are actually paying.
So I think that is something I would encourage maybe an audit or maybe direction at some point
to staff, please, you know, check everybody that's on board, make sure they're paying, make sure we
don't have money streaming out riders that are not paying. Secondly, I'm just wondering if
it might be possible to get information about the bill number that's pending that was discussed up
in Sacramento. As a rider, I'm happy to chime in with my assembly member and my senator about that,
but it would be helpful to have the actual number of the legislation there. And thirdly,
Los Angeles, we're supposed to be world-class. We deserve a world-class transit system,
including within the greater LA region, and Metrolink is what we've got. So I think whatever
we can do to preserve service, let's do it. We've got the eyes of the world coming on us.
last time the Olympics were in Paris world-class system there and we need to step up to the plate.
Thank you for the chance to comment. Thank you for your comments, very good comments,
and anyone else you can encourage to support the legislative request? Can we get those bill
numbers that makes it easier to write a letter of support? Let's go ahead and sort that out if we
can by the time we end our meeting we could bring that back toward the end of the meeting if we have
that information. Mr. Chair briefly again the budget process is going under underway right now
there is no bill number we have an official ask into the legislature so and for the public commenter
to certainly advocate before their their representatives their state senator or assembly
member on our behalf is of course greatly appreciated, but the budget ask is very well
known throughout Sacramento at this point, so just supporting our effort would be appreciated.
All right, Director Najarian. Yes, hi, thank you. I have several comments,
maybe a few questions, and I'd like the committee to know that these are issues that have been
discussed within the Metro staff and with some Metro members as well. So, it's not just me,
you know, speaking off the top of my head. Much more sophisticated minds have given input to this
discussion. So, let us start with the, let me just go through your slides, I guess, and address those
issues as they come in. So on slide 17, where you are detailing and itemizing the fixed
costs versus variable operating costs, there is a thought, there is a belief that there
There may be more savings to be obtained from those blue boxes, whether it's the maintenance
of way, whether it's the equipment maintenance and others.
There's nothing that we currently have to put our finger on, but would very much like
to encourage Metrolink staff to go through and scrub a little bit more and see if there
are some additional savings that can be obtained from that. That's a big chunk of money, $227
million, and a few percent, only a savings of a few percent from any one of those categories
may definitely help us and put us in the right direction.
Let me move on to the next slide, which is slide 18, which is the timeline.
There is concern that this is a very – seeing as – and we understand the reason that we're
in this position and the delays and the support reductions and the forecast errors, that despite
that this development timeline is still very aggressive and it may, we're concerned, Metro
is concerned that this might not be able to present to the Metro board before the continuing
resolution time period runs out, which I believe we said was going to be September 30th. We
We only meet once a month and there's just a concern out there that there's a lot of
things that you've discussed that you're going to be working on to resolve, to negotiate.
There is a concern that we're going to be spilling over even past our three-month continuing
resolution proposal.
Let me skip down to item 21.
any time in 2021?
I'm directed to Jaren real briefly.
We share on that last one, we share that concern.
We know that we have an aggressive timeline here
and it was the, we were trying to balance
the concern of member agencies and the savings
we need to get to and trying to keep that timeline there.
There's an acknowledgement on the part of Metrolinx staff
that there is a real possibility of needing to add a month
to the continuing resolution.
We just want to do this eyes wide open
that that means we lose another month's worth
of opportunity for whatever savings we might find.
So if we end up there,
we do see the potential of an additional month.
Like I said, just want to make sure that we are doing that
with full knowledge of what that means on the backend.
But we share that, we share that concern.
And I certainly can tell you our CFO has reminded me
of this because of the time, how aggressive we're trying
to be with the timeline.
Okay, very good.
And, you know, just to sort of relate back to,
I think one of Tom's comments that you may not have
all the tools that you need to deal with these budget
process especially when we're going through service scenarios that I don't
know if that's a software issue or a manpower issue but I hope that we can
give him the tools in the whole finance department the tools necessary to make
make those that process timely I'm gonna move to 21 I'm gonna call this the
Rolaid's chart because this is what has given a metro I believe the most
heartburn, because once this, and I've discussed this with you Darren, that once this got out there,
there was a clearly an outcry from the transit advocates and many objections based on the
reduction in the service that is listed and delineated. We would have hoped, I guess,
Metro would have hoped that this would have been kept within at the staff level and not
put out to the public because this clearly is a work in progress and although we want
to fix the problem and it may involve some service adjustments we were not thrilled that
this went out and received the level of panic and attention that we have received in light
of this process that that is currently ongoing. So that's just you know that's just a comment.
This is already out there obviously but but we would have hoped that that this could have been
done in a more informal basis rather than putting it out to the public. On number 22
You know, the big item that we don't have here is the Alston crew reductions.
And I don't see it, our Metro staff didn't see that it was an itemized line there. And clearly,
I think you said that we have to give them notice and only at that point will they be able to
pursuant to our contract with them be able to make those reductions, which would
result in some savings. I think we needed to get, we needed to raise that flag to Alston
months ago while these initial cuts we assumed were going to be temporary, but I think we should
have played a worst case scenario and let them know that hey these are going to be permanent.
If in fact this perfect storm didn't brew the way we were thinking, we could have maybe always gone
back and re-up the service. So we believe that there should be some Alston cuts, and
we're hoping that Alston, as our biggest contractor and service subcontractor or provider, is
on board with us. I want them to know if Alston's listening, we want you to be helping us in
solving this problem. You're our biggest line item, and you're in it with us. If we go down,
all go down. Nobody wants to go down. We want you to be with us in helping us find a way
to solve this situation. And again, that's a comment. It's certainly not anything you
can perhaps answer at this point. But I think those are the main points that I wanted to
bring out on behalf of LA Metro to this meeting. Thank you.
And thank you, Director Najarian, and very briefly that the process that we're working
on with Alstom is exactly where we find more savings based on whatever service reduction
we ultimately end up with.
So when we had the, I'll call it the worst case or doomsday scenario, which was going
to require a 40% approximate, 40% reduction in service.
What that translated to was about a 25% reduction in cruise.
So the reductions that we see on this page are, as you indicate, are all non-train operations.
We have looked at these multiple scenarios to find out where we get more savings on the
if we have service reductions,
where we see reductions in crews.
So that is a big part of it.
And then secondarily, the fuel number you see there
is based on we had prior fuel costs
that we knew we could make some adjustments to.
The other large reduction we would see
from service reductions is also reductions in fuel costs.
So that number would likely go up
if we reduce service, that number of the savings from fuel.
So that is the exercise we are underway with right now
with Alstom is, and where they're helping us
to get to the savings we need.
So that is, as you know, not clearly on here
because we're looking at right now
three different service scenarios that will then be,
that is Alstom is now costed out for cruise.
And in some cases we're finding,
And we are finding various degrees of savings
from reduced crew costs.
So fair question,
but that is what that scenario development's all about
is where we find those reductions in crews.
All right, thank you.
Thank you, excellent comments.
Do you have any other questions?
I do have one on fair increases.
What's our history of that?
Maybe if you could fan out where we've been over years
and how much is that going to be?
And I have no idea what that does to ridership.
So Mr. Chair, we have not done,
we have not had fair increases in more than a decade.
I believe it's like 13 years
that we've had any sort of a fair increase.
The idea here is to identify those two
that we would see increase that makes it,
we're gonna make recommendations for increases.
And there will be a slight reduction
in ridership from that,
but it is more than made up from the revenue
that it comes from the fare increase.
It is pretty standard in the transit sector
that if you see fare increases,
you will see some drop-off in ridership.
But in the analysis that we've done through our own team,
we see that we will more than make up for that.
We have elasticity in that number so that we will see growth in revenues with a minimal
loss in ridership.
Well, I appreciate that and look forward to the analysis itself.
You know, going 13 years is, you know, not a very business-like way of looking at fairs.
So hopefully we can look at this annually going forward and see if there is, because
at least the COLA needs to be talked about in here somewhere. I think people understand
the costs are going up. And so I look forward to seeing that analysis. I appreciate it.
All right. Are there any other questions? Is this a receive and file item? If there
are none, let's go on to our next item, which is 6B. I see Director McCallum is going to
need to lead the meeting. We still have a quorum, I believe. Do we not? We do. We will
still have a quorum, but this is an action item. So if we can, while we have
Director McAllen, it would be great to keep that one moving. So but I'll throw that to you, Mr. Chair.
All right, let's move on to that next item. This is a three months continuing
appropriation and resolution. And again, Tom, you're on.
Yeah, I'm here again. Sorry, guys. So several factors were
encountered, as we just discussed, in developing of the
FY 27 budget that slowed our progress. The situation rendered
us unable to deliver a budget that could be adopted by June
30. Next slide. Next slide.
So staff reviewed the budget and reduced
nearly $11 million in costs as we just spoke about,
but that was not sufficient to remedy the shortfall.
We then started on those three scenarios
and we just recently received some information
back from Alstom that we're sorting through.
We are trying to shorten our timeline in any way we can.
the bringing ridership forecast in-house, for instance.
But still, we know we're not going
to make the June 30 deadline, and we
know we need funding authority to begin spending on July 1.
So in this situation, the board must pass a continuing
appropriation resolution for the first quarter of the year
to be equal to the first quarter of support in FY26.
The board approved transmittal of this continuing appropriation resolution to member agencies
on April 24th and we have received word that SBCTA has also adopted a continuing resolution
for ARRO.
Next slide.
Next slide.
Okay.
So, staff recommends that the committee recommend that the board approve the continuing appropriations
resolution, including for ARRO, and that at the appropriate time, the member agencies will be
billed accordingly. Next slide. That concludes my report. I'm happy to answer any questions.
Director, is there any questions? All right, Madam Clerk, any public commenters?
Let me check. I do see two hands raised. I can't allow them to speak if the chair would like.
Well, I think we need to have public input, so let's see if we can move on.
We have other action items need to finish up before we lose some of our attendees.
Okay. Hello, everybody. My name is Adriana Rizzo. I'm a Riverside resident. I ride the 91 Paris
Valley line, IEOC line, and San Bernardino line, also a member of California's Electric Rail.
Just wanted to emphasize that these service cuts are really bad news. This is going to
hurt ridership, increase cost per rider at a time when we need to get ready for the Olympics and
to deal with rising gas prices. I think it is really important that the public do know about
these cuts as well as legally required through the Title VI process as my understanding is that I'm
my frustration is that some of the info I think this is a really excellent presentation so I'm
actually responding to 6A I wasn't able to get in the queue for that one. I think there's a lot of
really great information in these slides I'm really happy it's being made public and my concern is that
this information does not seem to be reaching like the board members of our OCTA and metro in
particular like like at the earlier OCTA meeting it seemed like metro OCTA board members weren't
even like aware that service cuts were happening we weren't really getting or potentially on the
table weren't really getting a lot of information about what's happening and I think you know I'm
I'm not sure whose responsibility it is to correct that,
but I really, there needs to be a lot better communication
between the agencies and encourage Metrolinx staff
and the board members here at the meeting today
to really correct that.
Cause we need cooperation to fix this issue
and we need to find another source of revenue
and you know, we all need to work together
to make that happen.
I also encourage the board to really seriously consider
these question of alternate funding sources.
You know, it's my opinion that we need a regional source
of revenue that is not dependent on the sort
of individual counties.
And we need, encourage Metrolink to explore
a regional revenue measure or other sources
of regional funding that are, you know,
controlled by Metrolink forward and not on the counties.
And as well as legal changes needed
to make that possible.
Thanks, have a great day.
Thank you, do we have one more commenter?
I don't see any hands raised.
Jason.
Does Jason?
I see a hand there.
Jason, are you able to unmute yourself?
He's still remaining muted, so maybe he
can unmute himself at some further point.
All right, we need a motion here and a second.
Then a roll call vote.
I'll move it, Bergson.
Chafee will second.
Second, Najarian.
Majorian you get a second. All right medical could you call the roll?
Certainly. Vice Chair Bergson? Yes.
Director Hennagerian? Yes. Chair Chafee? Aye.
That motion carried. Did we lose Director McCallum?
Yes. He left the meeting at 956. Okay so he's gone. All right let's move on to our
next action item which I think is 6C is that our most yeah and 6D has been
deleted so 6C is our next item let's move on to that this is a request for
approval of continuation of spending on FY 27 carry forward of capital projects
as approved in prior years again Tom you're still on we love your
presentation. Thank you. Thank you. Next slide please. So in April staff was
directed to separate the FY 27 capital budget from the operating budget so it
could be adopted by June 30th. In May we requested to transmit the capital
budget but there was concerns from the board that the member agency Advisory
committee had not yet had time to fully digest that information and so that
transmittal was delayed. We are still in development of this capital budget based
on new requests from SBCTA to make some reductions and so the FY 27 capital
budget transmittal has been pushed until after the beginning of the fiscal year.
So, as a result of this delay, the ongoing capital projects from previous years must
be separately reappropriated to allow continued spending as of July 1st.
Without this approval, work for ongoing projects would have to be stopped, causing costly delays.
Next slide.
The amount of the carried forward for state of good repair projects is $377.9 million.
The carryover for new capital is $52.2 million for a total carry forward of $430.1 million.
Next slide.
Staff recommends that the committee recommend that the board approve the capital project
carry forward of $430.1 million.
concludes my report I'm happy to answer any questions directors any questions I
don't see any hands now clerk to have any public commentors I don't see any
hands raised all right I'll move the item treffi do I have a second second
will second moved and seconded madam clerk would you call the role I sure
Joe Bergson?
Yes.
Director Najarian?
Yes.
Chair Chafee?
Yes.
That motion carried.
All right, thank you.
Now, I believe 6D has been deleted from this agenda,
or pulled off it,
not being ready for all the data that we needed on that one.
So now we go to 6E,
which is a report of financial resorts
or the 10 months so far in the year,
they ended as of April, 2026.
And Tom, you're at the start, you're still on.
This is the last one for me, I promise.
Next slide.
So this slide shows our actual ridership through April.
April ridership exceeds the refreshed forecast.
Year-to-date budgeted ridership was 7.8 million.
the refreshed forecast being 5.7 million
and the actuals are 6.2 million.
This is under the original forecast by 1.6 million
but over the refresh by 400,000.
Next slide.
Once again, actual fair revenue roughly tracks
to the refreshed forecast for April
and is very close to the year to date refreshed forecast.
Year to date the budget is 48.1 million.
the refreshed forecast is 35.8 million
and the actual is 36.2 million,
under budget year-to-date by 11.9 million,
but over the refreshed forecast by 405,000.
Next slide.
Here we have ridership by month compared to last year.
As you can see, recent trends show both unsubsidized
and total fair revenue outperforming last year.
Next slide.
Here we have FY26 year-to-date ridership by line.
All lines exceed the refreshed forecast.
All but two lines exceed last year.
Next slide.
This is a look at system-wide fair revenues by month
compared to last year,
the adopted budget and the refreshed forecast.
In April of last year, the reimbursement rate
for the Student Adventure Pass increased,
and that is the reason you see the jump
in the prior year bar under April.
Next slide.
This is fair revenues by line compared to last year,
the adopted budget and the refreshed forecast.
Most lines are performing fairly close
to the refreshed forecast.
Next slide.
The financial results for April through April, I should say.
Operating revenue is 52.8 million under budget
by 10.8 million or 17%.
Expenses are 270 million under budget
by 23.8 million or 8.1%.
And member agency support is currently in surplus
by 13 million, but forecasted to be five million
by the end of the fiscal year
due to continued revenue underperformance
and department estimates of spending through year end.
Categories under budget are detailed and on the slide below.
Next slide.
Also, a copy of the operating statement
was included in your packet for a more detailed review.
Moving on to Aero service.
Next slide.
This is Aero writership by month compared to last year
and to the original forecast and the refreshed forecast,
ridership exceeds both the refreshed and budgeted forecasts.
Next slide.
Arrow service fare revenues are shown by month
and increase in the reimbursement rate for arrow,
similarly to Metrolink, increased,
the rate increased in April
and that's why you see the bump in the prior year.
It was also affected by SBCTA offering
a $1 per ride promotion in that month for arrow service.
Unsubsidized fair revenues show growth since February.
Next slide.
Arrow financial results.
Operating revenue is 430,000 under budget
by 134,000 or 23.7%.
Expenses are 12.6 million under budget
by 2.5 million or 16.6%,
and support is 12.2 million under budget
by 2.4 million or 16.3%.
Next slide.
And that concludes my presentation.
I'm happy to answer any questions.
Director has questions.
I don't see any hands.
Do we have any public commenters, Madam Clerk?
I don't see any hands there either.
I do not see any hands raised, no.
All right, this is a receive and file item.
That objection, it will be so received and filed.
All right, now let's go on to our last action item,
which is the annual renewal of insurance
for our upcoming 26-27 fiscal year.
And that's gonna be presented by Raymond Herrera,
our senior council risk manager.
I see Raymond's icon, but I don't see the,
He's still muted, Raymond, there you go.
There we go.
Good morning, Chair, Chafee, and committee members,
Raymond Barreras, Senior Counsel and Risk Manager
along with Sharon Castaneda,
Legal Counsel and Associate Risk Manager
to present the update on the annual renewal
on the insurance program.
Also with us today are Craig Morris and Jackie A
from Marsh USA, our long-time insurance broker.
Next slide.
The authority requires insurance to mitigate its operating
and other major risks, and board approval
is needed to renew the insurance program policies of insurance
for fiscal year 26-27.
Next slide.
This year, we have successfully negotiated insurance coverage
for the insurance program at a total cost
not to exceed $17,678,205, a 4.7% increase
from last year's premium and within the budget
and amount for fiscal year 26-27.
That total cost consists of the cost
for operating general liability and other liability-related
coverage is in the amount of $10,143,418, which represents a 6.6% increase in cost from last year
and is largely due to the increase in the federal passenger liability cap.
The increase to the cap will be discussed further on the next slide.
The next part of the cost for the program is the all property risk coverage.
That came in at the amount of $5,838,682, and that cost is flat compared to last year's premium.
Third part is the cost for miscellaneous coverages, including auto, workers' comp,
crime, public officials, arrows and emissions, and cybersecurity, and that came in at $1,696,105.29.
and that is a 12.7% increase in cost for those coverages. Next slide. The operating general
liability insurance part of the program, it's the largest part of the program, protects the
authority in the event of a catastrophic incident causing bodily injuries and or property damage to
third parties. This year, the Federal Rail Passenger Liability Cap is set to adjust upward
for inflation from $323 million to $402 million in the next 60 days to comply with federal law
and contractual obligations to maintain operating general liability limits up to the cap. We are
being proactive on this front and procuring at this time the additional limits needed to meet
the new cap amount. Next slide. This slide depicts the operating general liability tower
and the amount of coverage all the way up to $402 million with the primary layer of insurance
at the bottom of $20 million that sits above a $5 million self-insured retention,
followed by four excess layers of insurance getting us up to the 402 amount. Next slide.
Market conditions, somewhat similar to what we've had in the past,
reinsurance market costs have increased due to the frequency and severity of insured casualty losses
and has led to insurance carriers reducing capacity and leaving the market.
we continue to see extreme jury awards and increased litigation costs pushing up claim
values, plus having to procure the additional liability insurance pursuant to the expected
increase to the liability cap means that we may have to deal with non-incumbent insurers
to meet that additional demand, and that typically commands higher pricing. Next slide.
The other liability coverages include terrorism, employment practices, and pollution.
Costs for these coverages are shown in the slide. Terrorism liability costs increased 14 percent
after several years of nearly flat increases. Employment practices costs came in nearly
flat from last year, and pollution liability came in nearly flat as well. Next slide.
Next part of the insurance program consists of property insurance coverage which protects the
authority's assets such as its maintenance and office facilities and rolling stock in the event
of significant damage or destruction. The property insurance market is favorable to buyers at this
time due to increased competition, expanded capacity of insurers, and growing flexibility
with terms and conditions. At this time the authority's property coverage of 100 million
dollars. It's not yet complete, but will be in place for timely renewal on the best terms and
conditions at a not to exceed cost of $5,600,000, nearly flat compared to last year's cost.
And next slide. Additional property, here we are, additional property insurance
coverages include standalone terrorism. Can we go back? Sorry about that. Yeah.
Additional property insurance coverages include standalone terrorism in a cost of 101,448 and
boiler and machinery also known as equipment breakdown coverage at a cost of 137,233. The
total knock to see premium for all property coverage is 5,838,682. Next slide. The final
part of the insurance program includes coverages for fleet automobile workers comp, public officials,
errors and omission, commercial crime insurance, and cybersecurity and privacy risks.
The total cost for these five coverages is $1,696,105.29. Next slide.
It is recommended that the committee recommend the board authorize the purchase of insurance for the
26-27 insurance year for a total premium cost not to exceed 17,678,205 dollars consisting of
the liability related insurance at a not to exceed cost of 10,143,418, property related insurance
for not to exceed costs of 5,838,682 and other insurance coverages identified at a cost of
1,696,105.29. Next slide. Thank you. That concludes my presentation and I'm happy to
take any questions you may have. Director's questions. A question I'd have if we reduce
the service level, can that be translated into a reduction in any of the premiums because
the risk is less? I don't know that you can answer that today, but that would be an inquiry
If we come up with a reduced schedule, I would hope we would make
Yes, I'd vice chair go ahead yeah, my question was basically the same kind of thing you keep saying that the
The rates are flat compared to last year, but is it based on?
our full service or the reduced service because if it's based on the reduced service then it's
Then it it's not really flat. It's gone up
that and I also say, you know, have the same question as Chair Chafee on if our service gets restored or further reduced, then how does the rate get modified or does it?
And if I could real quickly, Mr. Chair, I'll take this and then Ray can jump in. So as Mr. Berger was saying, we are required under federal law now to have insurance for the organization.
have insurance coverage regardless of the number of trains we run at 402 million dollars. So even
if that is the federal cap, so regardless of the number of trains we run that is the that we have
to be insured to that level. The other elements of insurance are I'll call it non-railroad general
liability and are just our sort of I'll call it our business insurance as compared to railroad
liability insurance. So it's, unfortunately, service levels do not drive the insurance
coverage we have to have when it comes to railroad. That is set by federal law.
So Ray, correct me if I've got any of that wrong, but that's the case.
That was well stated. I don't expect the premiums to change as a result of reduced service.
we have had a decrease in ridership, of course, since post-pandemic. We were supposedly receiving
a credit for that situation, but now the market is seeing that our ridership remains where it's at
for the last several years. So they look at the risk, they evaluate it. They do look at ridership.
That is a key metric. We have to supply that information as part of our application process.
But I will check to that's a very good question though. If we're going to have this reduction
in service, what effect that would be on on the cost of insurance. So I will get together with
our brokers and have that information available because of course, if there's a cost savings,
We've been looking for those in putting this power together,
and so we will address that as well.
Thank you.
Thank you.
I don't see any other hands raised.
So it is an action item.
Chafee will move it.
Do I have a second?
Bergson a second.
Moved and seconded.
All right, Madam Clerk, would you do the roll call?
Vice Chair Bergson?
Yes.
director Najarian. Yes. Chair Chafee. Yes. Motion carried. All right thank you and we look forward to
hopefully a good answer to the question maybe. And then we now come to a receiving file item
which is our inventory obsolescent controls and a performance audit if I understand it
by Elizabeth Lazardi, our Director of Audit.
Good morning, Chair and committee members.
Next slide, please.
The audit of inventory obsolescence controls
was included in the board approved fiscal 26 audit plan.
The audit objective is to evaluate the adequacy of processes
and controls in place to identify and manage obsolete,
excess or inactive inventory in a timely manner.
There are three findings and three recommendations.
Management agreed with the findings
and developed corrective actions.
Next slide, please.
So this concludes my item.
Happy to answer if you have any questions.
Any questions?
I don't see any either from directors
and no member of the public either.
This is a receive and file item.
Thank you for presenting it.
And if no objection, it'll be received and filed.
All right, now we go on to Mr. Kettle.
Thank you, Mr. Chair.
I'll keep this brief right now.
Our focus is on World Cup service.
It's along with our partners.
LA Metro is doing a fantastic job
moving people around the region as well.
We had a number of riders yesterday on all of our lines,
clad in green and red and white
on their way to the LA Coliseum
for the fan zone at LA Coliseum.
So we did, we've seen some positive movement.
Today is the day that of course USA plays.
So we will have our first extra train service
during these five weeks of World Cup.
So we will have additional trains, particularly at night
to get people home should they take our trains
get to LA Union Station and then the Metro Shuttle Bus to Los Angeles Stadium that we know more as
SOFI. So that's really been our focus. We've had a lot of really positive response and our staff
is excited about being a part of the Viva World Cup. We look forward to continuing to move people
and we'll be reporting back at the board level on that progress.
And just as a quick reminder, board meeting at the fourth Friday, keep in mind, is a 9 a.m. start
time to account for the fact that there will be the LA Union Station, LA Metro sponsored
fan zone on that Friday, so we are starting a bit early to get everybody in and out if at all
possible. So just keep that in mind. That's all I have, Mr. Chair. Thank you.
Thank you. Directors, your time to comment. Any suggestions, requests? Now's the time.
Well, I think we all are anxious for the weekend, so I don't see any hands up.
I would go to my comments. I think the record of no fair increase for 13 years is outstanding.
I don't know if we can attract people
then let them know this is a bargain.
Try it and see what that's all about.
And I would like to, I know I wrote a letter
previously on the, to the legislature.
Now I have people, if you could share that with us.
I remember the previous request was $30 million.
That was 35, has that gone up?
It's yeah, our request that we put together,
Chairman is 35.
So that, as you heard from Mr. Shambur's report,
we are at a, what looks to be a third,
about a $34 million in round numbers,
operational deficit from,
if we wanted to continue service levels.
So we are using 35 as that number now.
Well, I encourage everyone,
and now that we have specific sponsors,
don't you know they'll say thank you and go forward,
and what else do you need?
So if I could have that by way of an email or text or something so I have the names correct
in their district and all where they're from, not just the name, but can more specifically
address them, that would be great.
And I appreciate all the thoughts that I heard today, a little concerned about the scoff
laws that maybe you don't pay, and I don't know what we can do about that.
staff can think about that a little bit because that's revenue we're losing and
shouldn't and appreciate that comment that was made. And with that I have
nothing further. I just wish you all a happy weekend. I think the waves are still
pretty good but watch safely from distance if you go to the beach. And with
that all stay safe. Thank you.