with that we will go ahead and call the budget and finance committee meeting for July 10th,
2026 to order and the first order of business is for Hillary the chief safety and security and
compliance officer to conduct the safety briefing. Good morning committee chair directors we're just
going to cover a few housekeeping items I know the meeting is remotely but just be aware of
your surroundings and the locations that you're tuning in from. In the event of an evacuation,
follow your location's evacuation routes. Just be mindful of tripping hazards, bags, chairs,
that sort of thing. If you're at a large location, if somebody needs a medical emergency,
please assign somebody to meet the emergency responders and escort them back up to where the
person is ensure that you know 911 is called obviously and if your facility is equipped with
an AED just make familiarize yourself with the location of the AED in the event of an earthquake
we'll take cover under the desks wait for the rumbling to stop and then we can see a further
evacuation is necessary and in the event of an active shooter event we'll deploy the run high
fight tactic thank you all right very good thank you for that next item is pledge of allegiance
If you'd all please stand and place your right hand over your heart and repeat.
I pledge allegiance to the flag of the United States of America and to the
Republic for which it stands one nation under God indivisible with liberty and
justice for all.
All right.
Thank you for that as well.
We will move to roll call, Madam Clerk.
All right.
Director Tennevar.
Present.
Dr. Tremendly?
Director Najarian?
Here.
Director McAllen?
Here.
Director Spiegel?
Here.
And Vice Chair Bergson?
Here.
We do have a quorum present.
And as a reminder, because we are streaming out virtually,
there will be a roll call vote after each action item.
And as established by Vice Chair Bergson
and our legal counsel,
Director Spiegel will be the voting member for our CTC
since she is in our jurisdiction.
So anytime we do a roll call vote,
I'll be calling on Director Spiegel.
Sounds good.
Okay.
We're in, you owe me.
I appreciate it.
I didn't know there was gonna be an issue with that
until about a minute before we started the meeting.
So thank you for jumping in, I appreciate that.
Okay, any public comments today received?
I haven't received any written public comment
addressed to the committee, and I'm checking our attendee list to see if there are any
hands raised for anyone requesting to speak, and I don't see anyone with their hand raised.
Perfect, and we'll move past that and to the regular calendar.
First item is the approval of the meeting minutes from June 12th, 2026.
Do any of my colleagues have any comments or want any modifications, Ara?
Thank you.
I'm good. Okay. Anybody else? Okay. Can we get a motion to approve?
Move approval. Second. Good. Can we please have a roll call?
Director Tedimer. Hi.
Director Najarian.
Yes.
Director McAllen. Yes.
Director Siegel.
Yes.
They do that motion passed.
the 1527 budget development update presented by our chief executive officer, Darren Cowell.
Thank you, Mr. Chair, and good morning, everyone. In honor of I'm coming to you today from our
downtown Riverside station in recognition of the fact that we have our chair and then
Director Spiegel very much taking one for the Metrolinx team to join us this morning.
So thus, that is the sunrise, the sunrise over downtown Riverside Station.
So thank you, Mr. Chair.
And Tom Shamber is on vacation this week.
So I will be doing a brief update and providing a bit of a timeline on our budget development.
As the committee will call, the board gave guidance and direction to staff at our last
board meeting to focus our budget development efforts on what we refer to as Scenario 4.
Scenario 4 is the level of service that we are operating today on the system.
It's about a 20% reduction in service from what we were operating under the optimized
schedule.
So the finance team has been in actually two efforts, looking at where we might find additional
savings within the Metrolink agency itself, but also the efforts to, once we have a dollar amount,
how we distribute the costs through our all-share formulas to the five member agencies. So they are
in the throes of that as we speak. I presented yesterday, so we are looking at two different
alternatives, although we may have to be cognizant of a third, and I'll get to that in a second.
In an effort to try to be done
by the end of our continuing resolution,
which is September 30 of this year,
we have developed a schedule.
And if I could ask, I think,
Sam, you may be driving the alternative one.
So alternative one is a timeline directors
that allow us to have an adopted budget
so that we get ahead of or beat the October 1st
or September 30th continuing resolution.
What I'm gonna focus on really is the fact that
we will, at the end of next week,
we will have numbers that we can present
to the member agencies based on scenario four.
So July 18th, although I may have some information
by July 17th, when the regional CEOs convene,
we meet on the third Friday of every month.
I should have numbers that I can share with the CEOs.
The following day, we will be providing those numbers
to all the member agencies and at the MAC members
and CFOs from the five counties.
We are giving them a reasonable amount of time
to conduct a review on what that number looks like.
So we're asking that no later than July 30th,
we have feedback from the member agencies
on the Scenario 4 budget.
Now all of this, the alternatives one and two
is gonna be based on the assumption
that there is consensus amongst the five counties
that the budget developed for scenario four is good.
That was what has been presented.
That is what the finance team and budget team
has been working on solely and with no other focus.
If we're able to continue that assumptions,
we have these alternative one and two.
You can see the timeframe.
We would have a special board meeting on August 14th,
where we would transmit the budget as proposed
to the member agencies.
And then we would have another special board meeting
on September 11,
where we would do the public hearing and adopt the budget.
That gives us the timeframe we need
to beat the end of the continuing resolution of September 30.
And so the new budget would take effect October 1st.
Again, so we would have the one year,
the one quarter, a continuing revolution
and we'd have a budget effective October 1.
What that does mean is that board members,
all board members are involved
in the deliberations on the budget.
You will note in here that there would be no August
budget audit and finance committee
because we are using that date for us to be able
to transmit the budget to the member agencies.
Similarly, we would not have a budget audit and finance
in September because we are using that date
for a special board meeting to ultimately adopt the budget
so that we have the timeframe in which to,
and then we have the September 25th board meeting
for all other business.
But we wanted to give ourselves a few weeks
between adoption of the budget
and the effective date of the budget of October 1.
So that's alternative one.
Alternative two is a modification
that if this committee desires to continue
to have budget audit and finance committee meetings,
we would have a special BAFCOM in August, on August 14th.
And then a special board meeting on September 11,
and a regular board meeting on September 25.
What this means, though, is that turning the crank
on having a budget in the system by October 1
is impossible.
We would have it adopted, but we would not
have it in the system.
So this would necessitate a continuing resolution extension
of one month.
So instead of it being October 1,
we would need to do a continuing resolution.
We would need to take action on a continuing resolution
on at our July 24th board meeting
and I'm gonna give you a proviso on that here in a second
so that we would have the one month extension
of the continuing resolution
so we continue to have the operating budget.
So those are the two options
that I presented to the Mac yesterday.
Now, what came up in the Mac however was, well, what if?
What if there's not agreement on the scenario
for budget as it's presented
and we need to make other adjustments?
I communicated to the Mac that if we have to make adjustments
to the scenario for budget,
that really is, we have to go back to the drawing board
on looking at schedules, potentially crewing
and running numbers back through the All Share
formula. That likely adds at least another two months to the overall process because
we would have to consult with Alstom and run the numbers ourselves as it relates to. Because
again, where we find savings in our budgets are really in two areas, cruise and fuel.
We get some savings if we're not running as many trains on the freight rail lines, but
the savings really does come from cruise and fuel at this point.
We certainly will have sharpened our pencil to the point where there won't be anything
more that we can take out of the MetroLink agency side budget.
And I'm hopeful that we'll find a bit more there.
But nonetheless, if we do have to go back to the drawing board, it is going to be require
level of effort on coming up with another schedule and then trying to
calculate the fuel savings and crew savings and that can be an iterative
process because we will have to go back to Alstom because again we would have to
see reductions in crews. So that would be alternative three which I really really
really hope we do not get to, but it is something that the MAC members raised.
So that lays things out at this point. What I'm asking of this committee is, do we believe,
and I hope our staff preferences, again, to try to meet the need to do an extension of
a continuing resolution. We will probably need to go to the July 24th board meeting
with a potential of a tentative approval
of a continuing resolution
because we would otherwise be dark in August.
Or if the member agencies come back to us
and say scenario for budget doesn't work
for whatever reasons,
we would need to have a longer term continuing resolution.
The idea here is to try to avoid any special meetings
being called that kind of thing
beyond what we would have a calendar.
So our preference of course is that we go with the alternative one where we use the full board
so that there can be full board deliberations on all budget-related actions and not
to dismiss the importance of this committee, but given the nature of the budget,
having all members participate in those deliberations I think is very transparent and helpful
and everybody gets to hear of the various opinions of board members.
So that's what we're laying out before you, and again, the proviso in this is
that we get member agency feedback that says scenario for budget will work,
and at which point the member agencies would need to go back to their respective boards.
So Mr. Chair, I will turn it back to you.
I see Mr. Tenimer has, Director Tenimer has his hand raised
as does Director Najarian.
All right, very good.
Director Mark, go ahead first.
Thank you very much.
So Darren, in your work to present the scenario four
relative to the budget that you know you have,
how closely are they aligned?
what I was imagining and thinking about this before the meeting is what's the likelihood
that the budget you have available in Scenario 4 are basically aligned, in which case, you
know, that has a pretty clear path forward. My concern is that they are not in good alignment,
in which case we do have an iterative process that we need to go through. So can you share
with this committee where we are with scenario four relative to the available budget.
So Director, yes, Director Chenner, I'm going to be more fully briefed on where we are on
those numbers next week. But I will give you my gut feel, if you don't mind, based on what
I think we know. We have a 20% reduction in our service that we're operating under today.
But I think we struggle where we will see questions is we have $15 million in unrealized
fare revenue from last year that we don't make up in the next year.
We have realized that the ridership forecast and fare forecast was off from last year.
So we have re-baseline that.
So that's money that's not coming back anytime soon.
We also know we have annual escalators.
And so based on some preliminary analysis, I am, and again, I will have more information
next week, but preliminary analysis is I think we are going to be somewhere around the budget
that we had from last year.
in that ballpark, which you will recall, Director Tedimer, the guidance from OCTA is a desire
to find a $5.2 million reduction from the prior year. I think we may get, we may find
some, but I don't know that we get to the 5.2 number in the case of OCTA. In the case
of LA County Metro, it may be, we may be closer to that savings, but I'm even a little, until
I've been fully briefed by the Budget and Finance team, I don't want to, I don't want
to be absolutely, you know, 100% certain on that one, but because of the nature of how
the LA system works, we are, we may find more savings as compared to OCTA and the All Share
formula. So Director Tedimer it's very much possible that the iterative process will be
the case and we will need more time. So Chair if I could have a follow up. So I'm doing this
from memory but I think last year with the full funding our contribution, OCTA's contribution
was around 52 million and we paired that back to round numbers 46 ish. So that's a six million
because of the fact that we
got a $1 million reduction.
What I'm hearing you say is in
fact the reduction that we
asked for could not be
realized based on the cutbacks
that you're seeing today.
Partly because of contractual
increases and other things.
Is that a fair summary?
Yes and only, you know, again,
I haven't been fully briefed
on the budget and finance team
is doing a lot of work.
member agency executive director about how this stuff generally plays out from a budget perspective
so I'm going off of I'll call it my professional experience and slightly more informed because of
what we've seen in these last few months of the reduced service but I there are some realities
that we have to face and the biggest one is fair revenues that didn't align with how we built the
budget last year and that's just a reality. So I'm hedging myself on that.
Okay, well it sounds like we are maybe headed toward an iterative process. At least that's
my sense for OCTA given that the reduction that we asked we were going to proceed with is now
not going to be in this first round scenario for discussion. That's what I think I'm hearing.
I would say it's certainly in question. Yeah, that's fair. No, I understand there's still a
crystal ball component here. I get it. Yes. Okay. Thank you. Thank you,
Mark. Ara, you're next. Yeah, thanks. A couple questions and a comment. First off,
with regard to the initial item before us, alternative one and alternative two,
I want to do this quickly, but I don't want to rush it.
Okay, who said that? John Wooden, I guess. Be quick, but don't rush. I don't want this to drag out
too far to the end of the year. I'm okay with bypassing the BAFCO, us, and going to the full
board because I think our colleagues are all going to want to have a say in it, and I don't think we
we should be duplicative in our discussions on that.
So that's number one.
Number two, back to the comments that we just heard,
this is gonna be, we said we want scenario four.
Forget everything else, we want four.
And you're going out now, and I guess looking at those
scenarios, and I don't want to get too far into the weeds, but you presented there's
really only a few variables and that's the crewing and the fuel.
So are you essentially going through and costing out those lines that we're running and seeing
which ones are the most productive and considering the ones that are least productive to be,
know, put away. We're sort of coming from both sides. We had our optimal, which was
last year. We had doomsday, which we heard a few months ago that we turned away from.
So I imagine you're costing that out. Now, the question is, as in the case of, let's
say, the Orange County proposition, they've got a budget. OCTA has a budget and they're
only, no matter what we say in scenario four, they're only going to be able to fund so much
of that. So there is going to be a lot of back and forth, I presume, in this, not just
to the board, but also to the MAC, to the member agencies to, I guess, make a proposal.
I can imagine you coming to Metro and saying, well, your board members wanted this. This
is what it's going to cost, and you're going to have to kick in a little bit more or not.
And in that process, are we being realistic about the time and the back and forth? Let's
call it negotiation. It's not really negotiation, but the discussion of the costing and the
savings to meet these, either alternative one or alternative two. That's my concern.
And my second, I know that was a big question, but a smaller question is, let's say we do make
adjustments, how long does it take us to realize cost savings? Let's say we tell Alstom, hey,
guys, guess what? We don't want this line or we want to double on this line. How quickly does that
take to go through, through our contractual relationship with them, notification to the crew,
the collective bargaining agreements and all that before we actually save something. Because I know
it's not like clicking your finger and saying, okay, these are our savings. They're in place today.
So let me answer the second question first. It will depend on how deep a cut we have to go with
cruise. We have time limits in which to give Alstom notice on crew reductions. So there's a 60 day
clock and I think a six month clock or something there abouts where we have to give certain amount
of time. It all depends on how deep the cuts are. Now one of the things that has already happened
somewhat organically sadly to a degree but maybe to our benefit is Alstom has lost cruise
already, due to the uncertainty of our financial position. So they have had people go back to
their old jobs, in some cases freight railroads and elsewhere in the country.
So maybe that number is slightly reduced. So it will depend on how deep the cuts are
Director Najarian. To your first question, while it was a long one, I can actually,
there's a short answer. So when we and we're happy to share this information with the board,
when we did the reductions back in March, in March, the end of March, because of the mechanical
challenges, our team went through and did exactly that exercise. What are our, what are the least
productive, least written, least efficient trains and we cut them out. We did it based on a very
thoughtful, rational analysis be based on passenger counts, loads, how we get the most
efficiency out of a crew, try to reduce transport and hotel costs, those kinds of things.
So we've done that exercise. Similarly, with the doomsday scenario that has been completely
shelved, we did a similar analysis for that. And that is where that's how we got to the
the savings that met the conditions of the two agencies,
as well as the conditions of LA Metro and OCTA,
and the larger global situation of Metrolink in general
of reduced ridership and revenue
and our annual escalators in our contracts.
So we have done that,
and if we have to go through an iterative process,
we would, through our operations side of the house,
we would presumably go to the next tier.
However, we can find savings.
Here's the rub real quickly.
Our Orange County Line trains are by far our most productive.
So between ridership and revenue from those,
those lines yield the greatest benefit.
So we have to maybe throw the question
of what is the most productive which we're all talking about
which makes complete business sense and say okay,
well even with that we have a budgetary constraint
that means we have to reevaluate that.
So we've provided that data to OCTA staff
so they can see how that works
but there is the very real budget issue that's out there
that has to be factored into it
regardless of how well aligned performs.
And so while we have the San Bernardino line
is our highest ridership line,
and it followed then by Orange County and Antelope Valley,
the amount of fare paying passengers,
full fare paying passengers on the Orange County line
make it the most productive.
So that will go back to how we have to play this out
and we will have to work with OCTA to get to that number,
but keep in mind, as soon as we start reducing service
to meet that number for Orange County,
we end up likely having to modify service levels
that support LA and Riverside in particular,
because those two counties have lines
that go better part of the Orange County,
of you over our Orange County network. So that's that and so we end up not it would be a in some
cases a three-party back and forth between where LA would be where Riverside would be in Orange
County would be. I hope that answers your question Director Najarian. Yeah thanks it was a loaded
question, but take my best sir. And a complicated answer, so there you go. Other questions Larry
or Karen? I want to go back to Darren's gut. Darren it doesn't make sense to me what you said
because we reduced the schedule that we're operating in now from what we were doing
and that did not significantly reduce any ridership is my understanding. Therefore,
you said that if we that the tier for the number four budget would be about the same as what we
have now, and that just doesn't seem to be make sense. So I will um um Director McAl I'll try to
explain it this way. We built the FY26 budget based on a revenue of an initial 15 million dollars
that didn't that doesn't exist. So a big part of the impact looking forward is we're not
counting on that revenue. And so that revenue goes away and so it doesn't exist in the FY27
budget because it didn't exist in the FY26 budget. We built it in there but it didn't materialize.
So it's not the expenditures for FY27 will be reduced for sure. It won't make up for the
loss, the revenues that we did not get in FY26 that we now have to factor in to FY27.
it also we have six to seven million dollars in the annual escalators. So we're at 20 to 22 million
and if we had gone back to FY26 it would have been that that was the operate that was this
scenario we're under then. Now we have to account for for a lack of revenue so that reduces it the
the revenue side, but the expenditure side
probably will be less.
It just won't be made up by the,
the revenue will not have the revenue
that we had built in FY26 because it never materialized.
And then I'd be on the annual escalators.
So that, I think it's counterintuitive on that,
but it's because we, I hate to put it this way,
but we kind of built the FY26 budget on funny money.
It was revenue that didn't exist on the fair side.
We thought it would, it didn't,
and so we can't count on it going into the next year.
Okay, well, I'm hopeful that Orange County
will see that we've right-sized now,
we've cut everything down,
and we've got a schedule that's working
and it didn't reduce our revenue that much,
and hopefully they'll be able
to find the money to support it.
All right.
Very good.
Any other questions from board members?
Do we have any public comments on this item?
I'm not seeing anyone with their hand raised and I haven't received any
written public comments on this item.
Okay.
So, um, Darren, you're looking for, uh, this committee to provide you an
answer to which of those three alternatives that you've shown us that
we would want you to move forward with.
correct? Yes, and so Director Bergson or Chair Bergson, let me sort of, I'll boil it down
a little bit. I think I heard from Director Najarian. There's a willingness to look at
alternative one, but alternative one, which gets us done before the continuing resolution
expires and we would be doing it in place of, we'd have special board meetings in place
of BAFCOM. However, scenario three is a reality. Alternative three is a reality that we have
to anticipate. So, in the intervening period between when we hear back from the, we will
likely because otherwise we have to call a special meeting to do a continuing resolution
and extension, I will need to have a conversation
with legal counsel and the finance team.
We may have to look at a tentative continuing resolution
at our July 24 board meeting,
so that there is a continuing resolution
for up to an additional quarter,
because that would be the time we would need
to do the iterative process.
And I don't want to try, I want to try to avoid doing that
a month to month to month.
That's hard to do if we were going to look at that,
but it would be as long as a quarter long
until we adopted a budget.
So we'd give ourself a little bit of flexibility,
but I would anticipate the iterative process,
should it be required, is going to take some time.
I mean, it takes us a good six to eight weeks
with every budget cycle to do this.
And that takes our, again, our scheduling team
time to go through and find out where we would make some adjustments.
So we would look at our July 24 board meeting, a up to three-month continuing resolution
extension to get us through the second quarter, not preferred by any means, but it gives us
the time to make sure we've addressed the issues from member agencies that may not be
satisfied with the scenario for budget.
So those would be the two paths forward and we may have a very good idea by the July 24
board meeting if it's going to be necessary or not because at that point we will have
shared if we look at alternative one we will have shared with the MAC starting on the 18th
through the 30th, they will have had a few days,
they will know what the number is,
they will know what the bottom line number is
of what the member agency shares would be
and whether that's gonna be,
can be accommodated and supported
to the respective member agency boards.
Chair Bergson, so I really, I mean,
we should have a hint of what things look like on July 24
and we will be able to convey that
when we would take action on a,
should we need to take action on a continuing resolution?
I will be able to communicate back to the full board
what we have heard as an initial takeaway.
So, Darren, what is in the event that
once the numbers come out and if we realize that OCTA
based on the service that you guys put together,
the service schedule, the cost analysis
and all that great stuff.
If Orange County still at that point
with this level of service is still short
from what they're willing to put out
and obviously would have to go back to them
a couple of times possibly for their board
to review alternatives
and if they wanna put any more money into it.
and if they don't put any additional funding into it,
then it almost seems like the whole effort is for nothing,
for the most part, because we still wouldn't have
an approved, a budget that we could approve
because we would still be short.
So how does that element fit into these alternatives?
So that's my back to the drawing board remark,
Chair Bergson, the scenario would be scenario three.
We would need that full three-month extension
of the continuing resolution to work with OCTA,
but not just OCTA.
The other member agencies on,
and I feel bad for Director Tedimer
because I don't want this to sound
like we're dogpiling on OCTA.
That's the last thing we were doing.
I promise you, Director Tedimer.
The, we would need to go back
and have the conversation with OCTA,
but because of the nature of our system.
RCTC and LA County Metro are integral in a process
to determine how we're going to find reductions
that will get us to the target established,
whatever the current target or a modified target for OCTA.
And that will take time and a meeting of the minds.
The last meeting of the minds we had was scenario four.
And so that's what we're putting our time and effort into.
But if it doesn't get us there,
we will have to take that time, Director Bergson.
Which is why we would need probably a extension of the CR
for another quarter to give us that time to do it.
I certainly hate for us not to approve a budget
until we have to approve the following year's budget.
Let's not do that.
You and me, Bolzer.
OK, so what is the flavor from the directors
that are on as to which alternative you
are thinking about?
Mr. Chair, McAllen, I would move item 1, the alternative one.
Right.
OK, and that's replacing a couple
of the BAFCOM meetings with regular board meetings
and still gives the MAC members and the CEOs
of the five member agencies enough time to evaluate
and look at the documents they need.
And it gets us to the finish line possibly
without a continuing resolution versus alternative
to that is most likely has a continuing resolution.
Is that correct?
That's all right.
Yeah.
We have a motion.
I will second it.
Is that also do we have?
Is that a motion, Larry?
Yes, it is.
Do we have a second?
I'll second it with the understanding that.
These are all aspirational goals and.
Things.
Could pop up at any moment.
I will second it with that understanding.
I think that's a good caveat.
please call for the vote.
Director Bergson, sorry, Chair Bergson,
director Tettimer has a remark.
My apologies, I missed your hand up, go ahead.
No, no problem, thank you.
I have concerns around this alternative
because it really, it sort of lays out
that OCTA is gonna have to essentially go
to the $52 million amount, which was last year's amount.
And I'm one board member, obviously I have a large board,
but I feel like I'd rather we spend the time
to get this right, and I appreciate the director's comment
about the quote he attributed to John Wooden,
but I'd rather spend the time to get it right.
I presume all the board members here know
that OCTA, when we look forward
in terms of the available funding for Metrolink,
if we were to do what this trajectory lays out,
we will run out of money before the end of M2.
And that seems not to be a prudent approach.
That's what informed our reduction is to say
we're trying to stretch those dollars as far as possible.
And so I understand both sides of this argument.
I feel like it's better to,
it's better to do this right because I'm absolutely seeing
that iterations are going to play out.
And if we just stayed with alternative one,
it basically has me going back to OCTA board and saying,
hey, I know we asked for 46,
but we're gonna have to go to 52 anyway.
It feels inconsistent with the direction
that our board has wanted.
So.
Using the measure dollars.
Yeah.
And I would only in response, Director Tedimer,
we will, I mean, the, my sense is based on,
I think Director Najarian's remark was,
Well, one, allows us to get the timeline.
But if we hear feedback, and I think what will happen,
Director Ted Amrito, we have worked really closely,
tried to work really closely with the CEOs of the agencies,
the CFOs, and the member agency staff.
If we get feedback in this period,
the last thing we wanna put is our directors
of any of our member agencies at a point
where you don't feel that there is a compelling case
for Metrolink back at your member agencies.
That is the last place we want to put you.
I suspect your staff do not want to put you
in that place either.
So if we hear that there is not a path forward
from any of the staffs of the Men of Burr agencies,
I think that does trigger the need to go
to the longer-term continuing resolution
to give us that time.
There are a variety of reasons, Director Tedimer,
between putting you in a place with your board,
putting you in a place with your constituents,
and transit advocates that just wanna see Metrolink
continue to grow service.
We will have that communication with the various staffs
across the agency and member agency
so as not to put you in that predicament.
I think we work very, so we work so closely
with the member agency staffs,
we would have that indication.
I don't know if that gives you any piece Director Tedimer,
but it is something where it's,
we don't wanna put anybody in that place.
Thank you.
Yeah, well, just, I won't support this
only because what I'm hearing
of the board that we were
talking about.
When I realize it's preliminary is that.
That the $6 million reduction that we called for.
We'd have to essentially.
Resin that.
And I'm not sure if that's something that our board would generally
support. I don't know.
But what you were telegraphing is that that's what we would need to
do to.
To.
To see alternative went through fully.
And that seems like a.
and my educated guess is that, that may not be successful
back at OCTA, it could be wrong.
I think the best look will be when you have a meeting
with the CEOs on the 17th of week from today,
you'll have a hopefully a lot better sense
of not only the budget, but they're very plugged
into the board members and will have a better sense
as to where you need to go.
But my sense is that we are gonna be
in an iterative process as much as I don't want there to be.
I feel like that's what's probably inevitable.
And so respectfully, I won't support.
Thank you.
All right.
There is a motion on the floor.
Madam Clerk.
The director said remember that was a no.
No.
No.
Director Najarian, do you think you muted yourself?
Yes.
Yes.
Director McAllen.
Yes.
Director Spiegel?
Yes.
The motion carried with the Director Tuttomer voting no.
Okay.
Hopefully we can make this work
and get this budget finally approved.
With that, we will move to item 6C,
report of financial results for the 11 months ending in 20,
May of 2026, Christine Wilson, Assistant Director of Finance.
Yes, good morning.
Chairman Bergson and members of the committee.
This are the financial results for May of 2026.
Next slide, please.
That's what was on the agenda.
This slide shows ridership system-wide
through the 11 months ended May.
I remind you that the blue columns are
the ridership for each month, while the blue line
is the original forecast and the orange line
is the refresh forecast we obtained in January.
Ridership was budgeted at 8.6 million
or a 78% recovery.
The refresh forecast shows 6.3 million in ridership
or a 58% recovery.
Actual ridership for the 11 months was 6.8 million
or a 62% recovery.
And thus while the budgeted ridership is under budget by 1.8 million, ridership compared
to the refreshed forecast is 0.5 million greater than the refreshed forecast.
Next slide, please.
This slide shows revenue system-wide through May.
The green columns are the revenue for each month, while the blue line is the original
forecast which we used for the FY26 budget.
And the orange line is a refresh forecast we obtained in January.
As you can see, the refresh forecast is quite close to the actuals.
Revenue through May was budgeted at 53.0 million or a 70% recovery, while the refresh forecast
shows 39.4 million in revenue or a 52% recovery.
Actual revenue was 40.0 million or a 53% recovery.
So while the budgeted revenue is under budget by $13 million, revenue compared to the refreshed
forecast is $0.7 million greater than the refreshed forecast.
Next slide, please.
Here you see them each month of ridership, both subsidized and unsubsidized, with comparisons
to last year and the original and refreshed forecasts.
The columns are actuals, brown last year, blue this year.
The darker portion of the column in each case
is the non-subsidized ridership,
while the lighter top portion is subsidized ridership.
The black line at the top is the original forecast,
while the lower blue line is the refreshed forecast.
Please note that totals for most of the last six months
exceeded last year.
Next slide.
This slide shows year-to-date ridership by line.
Once again, last year is brown, this year is blue.
The original forecasted ridership is the green bar
and the refreshed forecast from January is pink.
As you can see, only two lines
are not exceeding last year in ridership.
These two lines were those most dependent
upon the Student Adventure Pass subsidies.
Next slide, please.
This slide shows year-to-date revenue system-wide by month.
This shows that even with the elimination
of the student adventure pass,
revenue has exceeded last year, most of the last six months.
The last two months of the year reflect the increased draw
on the student adventure pass to utilize all given funds.
Next slide.
Here is the year-to-date revenue by line.
Brown column is last year, actual, blue is this year.
Green is the original forecast and budget,
and the pink is a refresh forecast.
Five of the seven lines are exceeding year-to-date revenue
as compared to last year.
Next slide.
As to the overall financials for Metrolink,
total operating revenue is 58.5 million
under budget by 11.6 million or 16.6%.
Total expenses are 297.9 million under budget
by 25.3 million or 7.8%.
Overall support required is in surplus by 13.8 million.
Major categories under budget are as shown on the slide.
I just wanna point out to you that although through May,
we have a $13 million still surplus,
many, many extra expenses come in at the end of the year.
In fact, last year,
compared to the average expenses each month,
the last month of the year, June,
had $11 million in additional expenses compared to average.
So we should not think that there's $13 million coming
because there's not, okay?
The mail-out packet you received includes supplementary information showing monthly ridership and revenue compared to budget by month by line.
Your packet also includes a full Metrolink operating budget for your review.
Next slide.
Next, we have arrow.
This slide shows arrow ridership increasing steadily over the last year.
Next slide.
Fair revenues should not follow the same pattern as a result of the student adventure pass ending.
Next slide.
Operating results for error service.
Operating revenue is $478,000 under budget by $148,000 or 23.7%.
Expenses are 13.9 million under budget by 2.8 million or 16.5%.
Support is 13.4 million under budget by 2.6 million or 16.2%.
Your packet included an arrow operating statement for your review.
That concludes my report. May I answer any questions?
All right. Thank you very much for the report.
Any of the board members have any comments or questions about this?
Ara? So what are we going to do with that 13.8 million, Chris?
You are getting better. It's going to be spent.
Okay. So my question is, it looks like in the past few years we've been
under our projected expenses in our budgets. Now, as we're looking forward and projecting
this next year, are we adjusting those expense figures? I mean, are we just going with an
escalation from our previously conservative expense figures, or are we rehashing them
and maybe coming in at a lower number.
Oh, yes.
Help us.
Yeah.
Director Najarian, let me chime in here.
I'm sorry.
But so my direction to our team was
we looked over the last five years at those trends
about how we budgeted and then buy cost code
and what our trend has been based budget and trend.
And I said, wherever you're at, I want you cutting
the difference by half.
So if we were at a million, but we're only
spending half a million, put a number of 750.
Gives us a little bit of wiggle room.
Maybe we could go more, but I wanted
to be careful that we didn't cut too deep.
But we've already done that.
We've done that across the board in every cost
center for the next fiscal year.
Places like travel, we've had travel
that we were budgeting higher.
We haven't hit our travel budgets by quite a bit.
So why are we budgeting that high?
Same thing with training and memberships
and stuff like that.
So we are absolutely doing that across the board
based on a five-year trend on budget
versus actual expenditures.
I mean, our all-stem numbers are fairly fixed
unless we do adjustments as we've done.
So we can't expect any savings in there,
any unexpected savings.
Fuel maybe is another question,
but we're hedging.
So that's fairly consistent as well.
So, okay, I just wanted to.
I mean, the fuel issue though
is another big wild card right now.
Yeah, we hedge and we're under good contracts right now,
but the diesel fuel has gone through the roof.
And so the next contracts make, you know,
we don't know where we're gonna see that.
Another one is insurance.
You'll recall the board just approved our next year's
liability tower and it was $600,000 or so higher,
partly because of the change in the liability cap
at the federal government.
So we have these things that are, they're kind of set,
but so anyhow, there's some of those factors
that might swing the pendulum a little bit,
but the team was clearly directed to look at trends
And let's cut that Delta by 50%.
All right.
Okay, any other questions or comments?
Yeah, Mark, go ahead.
Thank you.
I just wanted to follow up a little bit
on a director to Jerry and may not be quite where you're going
but it inspired a thought.
I think, Darren, in the past you,
during some of our full board meetings
talked about how the budget is developed
and that you provide some cushion in some of those numbers
to give yourself some additional capacity,
financial capacity, I guess is one way to say it.
I don't wanna complicate this year's budget
with this concept, but I just wanna throw it out
for future discussion possibly.
And that is rather than having you provide
that cushion on your own, I would say,
do the best job you can to provide
the most precise number you can
as to what the budget need is.
And then there can be a conversation
about a contingency that the agencies can consider.
It may help reduce some of the surpluses
if we are working with a more precise forecast
and then have a contingency.
So if it does, if you need more,
there is a contingency component.
So if you have any initial thoughts, great.
If not, it can be picked up another time,
but I just wanted to put that out there.
Yeah, it's an interesting concept, Director Tedomer.
Let me think on it.
There may be a way to approach it
with member agencies.
Thank you.
Thank you.
Okay, this is a receiving file
and unless there's any objection,
we'll go ahead and do that.
All right, then move to item 60,
the internal audit proposed fiscal year
2027 annual audit plan
by presented by Elizabeth, Elizabeth Swarti.
Good morning, Chair and Board members.
It is recommended that the committee recommend the Board
to approve the proposed 27 audit plan.
Next slide, thank you.
The internal audit charter requires the internal audit
department to submit an annual audit plan to the Board
each year for approval.
And the five step process we use to develop
the audit, an audit plan is summarized here.
Next slide, please.
The slides highlights our newly proposed audits.
And next slide.
And we cared for a few audits we started in fiscal 26,
which we will complete in fiscal 27.
Following board approval, we will provide the board
with the status of the audit plan on a quarterly basis.
Next slide.
This concludes my item.
Happy to answer if you have any questions.
All right, very good.
Any comments or questions for the audit committee?
Larry.
Thank you very much.
I see that the delay in transmitting the FY27 budget
is identified as a high-risk area.
However, it's not recommended in the FY27 audit plan.
The report cites OCTA and LA Metro subsidy reductions
as contributing factors, but it does not
acknowledge the ridership and revenue forecasting gaps
that also contributed to a larger shortfall.
And the report notes that the creation
of multiple service scenarios combined
with limitations in the financial models
that prevented running multiple budget scenarios
contributed to the delay.
While it is positive that a ticket-based ridership
estimation process is included in the audit plan,
which may support Metrolinx ridership forecasting,
These other processes and limitations also contributed to the delay and SBCTA recommends
that these areas be revisited in the budget development guidelines or audited ahead of
future budget developments.
Thank you for your comment, Director McKellan.
To your point, yes, there are a lot of high risk areas identified in our report that are
not selected for the next year's audit annual audit. And essentially not all high risk areas
were selected, partly because of our available resources. And also on top of that, in the meantime,
some of the areas we understand that management is currently in the process of working toward
addressing the issues, but should the board choose to direct until audit to perform certain
audits anytime in the future, we have allotted a number of hours for special requests audit
like this or others? My comments weren't necessarily directed to the audit,
but primarily to the budget process and the budget guidelines, development guidelines.
And Director McAllen, I'll just real quickly chime in.
We have already started working on identity.
We have been meeting with vendors for a new budget
and finance tool that modernizes our system.
Because we know how antiquated ours is,
it requires a tremendous amount of manual effort
to produce various budgets.
And so that is something that Tom Shamber is already a CFO.
Tom Shamber is already digging into.
And then through this committee, in fact,
we will be looking at how we modify
budget development guidelines.
That's one of the reasons why this committee
has been made a standing committee,
is that the budget is not a spring exercise,
but is a year-round exercise.
And part of that will be making sure
that the budget development and its guidelines
start early in our throughout the year
in hopes that we can reduce that level of risk
in both factors, the budget development guidelines
but also the tools we use.
So both are underway already.
And again, we believe we may already have a budget
and finance tools on the technology side selected
going through a process
that will ultimately select a product.
you. All right. You're muted. Thank you. So a couple of questions. How regularly and to what
extent do we audit Alstom and their contractual obligations across the board? Thank you for your
questions, Director Najarian. We haven't performed any audit in Alstom, but we did perform an audit
on the Amtrak contract. Maybe two years ago, if I'm not mistaken, and we track the corrective
actions related to that. We haven't performed any audit because last year it was a fairly new
contract. And we indicated in our report an audit will be considered sometimes in the future.
Again, however, yes, so if the board choose to direct us to audit this upcoming fiscal,
we're happy to do that too. I mean I would suggest that we consider that at least you know
there's many parts to the audit obviously but just begin auditing certain components of the
of our contract just to make sure we're we're up to speed with that. The other question I have and
And it goes back to the parts issues that we had
with the spider gear.
Spider shaft.
Spider shaft.
I think we need to figure out how we got caught
unaware of supply chain issues
and failure of that component
that led to our reduction of service back in March.
just to do a post-mortem, how did it happen?
And what can we do going forward?
Is perhaps Alstom in a better position
to monitor the failure rates and the supply chain
and the inventory rather than us in-house?
Because there would appear to be some, you know,
separation between Alstom with their immediate knowledge
and us who get it maybe secondhand
that don't understand the full ramifications of a failure.
Oh, that gear or that shaft broke in six months
and that's very unusual.
It should be lasting two years.
We wouldn't necessarily get that information immediately
but Alstom would have it pretty soon
because hey, the engine is down.
So maybe we can think about a way to,
we talked about the obsolete stuff last month.
Let's talk about going forward proactively
to make sure that we do have a solid supply chain
and we're notified of any unusual failures
that would disrupt the service.
Yes, thank you for your comment.
And going back to the audit that you referred to,
the obsolete audit, there is a finding related
to technology and that's really critical
in terms of the process for improving process
related to identifying parts.
But I don't know if you want to,
you have additional comment, Darren,
on the specific on the spider shaft,
but that's at least a critical area
that we noted in our report that is not there.
Just briefly, so the spider shaft is a component
that is manufactured by Progress Rail,
the builder of the F125 locomotive.
It has had what we believe to have been material problems,
the quality of the material that makes the part.
Allstom has come in and brought in some of their own engineers,
and had been working with Progress Rail to try to
improve the reliability of the part.
Our own team has been working with Progress Rail to get inventory.
Again, this is a challenge of being the proud owners of the only 40 that exist.
Progress Rail has much improved their availability of this spider shaft, and now they're working
with the Alstom engineers, which is Alstom also manufactures equipment, besides providing
service and operations, they also manufacture equipment.
So they have a wealth of engineers that are looking at the actual material design of the
spider shaft and are in consultation between the two.
So it's a two-fold answer to Director Najarian's question is it relates to spider shaft and
that is we need inventory and we need better quality component.
And so that is being worked on right now with Alstom and then ourselves.
Airshafts would have not been our problem child
for a number of months.
Our problem child had been fuel manifold canisters
that were cracking.
They're a caterpillar part.
And caterpillars already come out with a redesign
of that part.
And it's too early to say,
but they're being installed now into all of our local,
all the F125 locomotives.
And they seem to be performing exceptionally well
and without the same problems
we are dealing with the other design.
So, and Kat has done this on their own,
so with this redesign.
So we're getting better there,
but it is one of those things where those fuel manifold,
that fuel manifold really came out of nowhere
about eight months ago, nine months ago,
with failure and necessitating replacements
sooner than had been anticipated.
So it is something that we learned with the F125
is because it's the only game in town.
We're the only owner.
We experience things that the first two experience
and the last two experience,
and then we have to sort of try to resolve it on the fly.
It's a byproduct of being a one-off.
But Director Najarian, your points are spot on
and as a quick follow up, we have just yesterday,
we are one year into the new contract with Allstom,
just a little over one year, 10 days in one year.
And we did put Allstom on notice by letter yesterday
of issues related to availability of fleet and the importance of them staffing the mechanical
and maintenance team to get down to to get past the backlog of some equipment that's
been parked. So it is it is something that the operations and mechanical team are hitting
head on.
Thanks, thanks. Let's just keep an eye on it and make sure we have it under control.
Thank you for the answers, Liz and Darren.
All right, Mark, thank you.
So as I understand it, the materials management
and equipment maintenance is not part of the audit.
Is that correct?
Correct.
We just recently performed an inventory obsolescence audit
on that.
And we work closely with management.
We have ongoing monthly meetings and Darren and the team
on a regular basis also provide status on where we are at
in terms of mature management
and management has recently established
their own working group
to evaluate the whole process improvement.
So what I'm hearing is that whatever might have been addressed
in this full audit,
that's sort of been pulled out
because of the ongoing discussions
to address some of the issues, is that a fair summary?
Right, yes, and yes.
to be an audit of the item.
So I guess what I'm asking is
instead of saying we're not going to address it because we've got these other
things, rather, can that be that that can come back as a standalone audit item?
It won't ride with a full audit, but it's still be an audited item.
Once staff gets through the process and those discussions, et cetera,
So there is a deeper discussion on those issues.
So, Director Tenner, if I could,
what I've talked with Liz about this
is we have some new leadership involved
on the management side that are involved.
And we have this new, we call it a Tiger team
that is laser focused on this parts inventory
and mechanical issue that was just established
about two months ago,
and in fact is being led by our chief technology officer.
And so what I'd like to do is let's,
given this effort that management's working on,
I wanna see if we can get this in order,
and then if we continue to be hampered
on some of these things,
I think it's more than appropriate
for the board to come back and say,
hey, we want internal audits to dig a little bit deeper.
I'd like to give our new leaderships
an opportunity to perform.
And I've seen that to start.
And then given Liz's resource limitations,
it may rise to the occasion of a high risk next year,
but I feel pretty positive
that we're gonna get this house in order on that side.
And we won't have those issues that we've been hampered
with for the last 18 months.
Yeah, no, I hope that's the case.
And I certainly understand giving staff time
to get their feet underneath them
and navigate the issues for sure.
I guess to push this off for an entire year,
given the impact on this subject,
feels like having something that may lag a couple months
or a few months behind the full audit that still says,
this is what we've learned kind of thing.
So it doesn't wait for the whole year to pass
because it's been a big impact on the Metro link.
And yeah, I would like to see something done
in a few months or whatever.
Again, it can lag the full report.
But that's my suggestion.
And I think Director Tederberg, one of the things that we can do is that this committee,
and of course the full board has a fairly broad level of jurisdiction for things that
mention like, we can even quarterly report back on this to see, you know, to provide
that information to see if, you know, where we need to go with it.
and then at least that way the board's got a constant check-in of how we're doing.
Thank you.
All right.
Very good.
Larry, Karen.
All right.
Anything else?
Any public comments on this item?
I have not received any written public comments and I don't see any hands raised to speak on
this item.
Okay.
Let's see this.
I think we have to approve this one.
So I have a motion to approve the drawing of the calendar back and I think OK, that
yes.
All right.
Or click vote please.
Director Sinemer.
Hi.
Director Najarian.
Hi.
Director McCallum.
Yes.
Director Spiegel.
Hi.
That motion carries.
Excellent.
With that we move to Darren's reports.
Just really briefly, directors and Chair Bergson,
I wanted to share, you know, today is the last day
of the World Cup in Southern California.
And unfortunately, the USA did not do
what we'd hoped they'd do,
that they would actually have been playing
in Los Angeles today at noon, but they're not.
So, but we did have a very positive experience
running special trains.
We had a number of employee volunteers,
including myself in the tunnel during game days.
It was just, it's been a really great opportunity
for us to sort of get outside our normal routine.
And so I wanted to just make sure that this committee,
I'll share the same news with the board
with a little bit more updates,
but we've had a real positive experience with our staff.
Really, it was sort of a mini test case
in anticipation of a little more than two years from now
to how do we operate?
The team really rallied together
and it was great to be a part of that.
In one of those days,
my wife Carrie got a wild, crazy idea
the day before the Spain-Austria match
that we should get tickets.
So we served as a customer throughout the system.
We took a MetroLink train from Moore Park
to LA Union Station, at which we got on
a lovely LA Metro bus that was clean, air conditioned.
And the only slight fear we had is we had a city bus
doing 65 miles an hour on one of those freeway flyovers
between the 110 and the 105.
my wife was scared to death that the bus was gonna break up.
But it was a great experience.
We got to, it was a bit of a short walk.
Well, maybe a little bit longer walk
from the bus depot at SoFi to the stadium.
But we caught a train, caught the bus back,
caught our 430 train back to Moore Park
and had a absolutely amazing experience and day.
So kudos to LA Metro for the enhanced bus service.
It was a great experience.
Again, clean air conditions, smooth.
And other than downtown LA traffic,
that took us 40 minutes to get through
to get back to the MetroLink station, the LA Union Station,
it was a great experience.
But so our well done by your Metro team
And by the Metrolink team, it went really, really well.
So Mr. Chair, just thought I'd share
that last little bit of news and we'll share more
at the board meeting in a couple of weeks.
Perfect, thank you for that.
Any committee members wishing to make any comments?
Just to follow up on yours, Darren, I also went to the,
not to a game, but to the LA Metro,
I don't remember what they exactly called it,
but at Union Station, they had all those TVs and-
Fan Fest or something.
Fan Fest, whatever it was.
I thought that was a really good experience.
And also I felt like that was a precursor to the Olympics
and kind of a good test run.
I have to say that the staff that was running it
from LA Metro were extremely nice and very, very engaging.
It was a really great experience too.
And I went with a couple of the other board members
from MetroLink after our board meeting.
But it was definitely something that I expect
we'll see again during the Olympics.
And it was really a very good time
and I just saw lots of smiles.
So very well done, LA Metro.
With that, I think we're adjourned at 10, 20.
Thank you everybody for being here.
And thank you, Karen, for stepping up.
Thank you, everyone.
All right.
Bye now.