Review of 2018 2023 Strategic Budget Plan Development

Review of 2018– 2023 Strategic Budget Plan Development Process and 2018 Budget Assumptions Financial Administration and Audit Committee April 11, 2017

Agenda • • Purpose of Strategic Budget Plan (SBP) Overview Development Process Operating Elements Capital Elements Assumptions Issues and Challenges Next Steps

Purpose of the SBP Provides overall guidance for RTD Base System service delivery, debt, and capital expenditures • Six year capital and operating plan • Identifies anticipated revenues and expenditures • Must be financially constrained (balanced budget) Provides input for other planning efforts • DRCOG six-year Transportation Improvement Program (TIP) • RTD Annual Budget • Long-term Financial Plan Aligns with Board top strategic goals for 2018 • Fiscal Sustainability • Workforce/Human Capital • State of Good Repair Incorporates approved performance measures Sets target for development of fund balances 3

Overview of the SBP includes only service and projects funded from the Base System 0. 6% sales and use tax Fas. Tracks expenses and projects are included in the Fas. Tracks Annual Program Evaluation (APE) financial plan • Cost allocation to Fas. Tracks operations for existing corridors and services for annual budget Goal is to combine SBP and APE in one longrange plan going forward 4

2018 – 2023 SBP Development Process 2017 -2022 SBP capital program used as baseline for current SBP • Start with projects approved in 2017– 2022 SBP • Existing projects with costs in future years are rolled into the current cycle 20182023 SBP • Requests for new projects are brought into current cycle 2018 -2023 SBP • Projects are prioritized and evaluated using mission statement criteria and 2018 strategic goals Revenue forecasts updated to incorporate most recent available information Ongoing operating cost forecasts updated to 2017 Budget, using current information and current cost trends 5

2018 – 2023 SBP Operating Elements Bus Service • Fixed route bus service levels – – Service hours in 2018 being developed, expected to be stable to 2017 Budget of approximately 3. 0 million hours (RTD + private carrier) Future bus service improvements dependent on service efficiencies and financial capability • ADA service to meet demand – per federal regulations – 2017 Budget of approximately 121, 000 hours Rail Service • Service hours in 2018 being developed − Expected to be higher than 2017 Budget of 362, 000 – Future train service capacity improvements dependent on ridership and financial capability • • Light Rail to be higher due to full year of I-225 Rail Line Commuter Rail to be higher due to full year of Eagle lines Operating and Passenger Facilities • Projects to maintain facilities in State of Good Repair 6

2018 – 2023 SBP Capital Elements Capital projects have a cost greater than $5, 000 and useful life greater than one year Fleet Plan • Bus replacements to meet service needs – – Replacements with clean diesel or other clean fuel buses when costeffective Base system fleet plan to include replacement and expansion of 40 -ft. transit buses, and replacement of ADA cut-away buses • Rail fleet expansion to meet service needs – – I-225 Rail Line requirements, Minimum maintenance requirements and spare ratio Operating and Passenger Facilities and Equipment • Projects to replace and improve assets and facilities • Maintain SOGR 7

2018 – 2023 SBP Revenue Assumptions • Sales and use tax growth rate • Annual sales and use tax growth • Baseline scenario assumptions • Low (below baseline) growth is more pessimistic – – – 2017: CU-Leeds School of Business currently forecasts 4. 0% increase over 2016 2018 -2023: based on semi-annual forecasts from CU-Leeds School January 2017 actual sales/use tax is 3. 0% over January 2016 Federal Reserve will steadily increase short-term rates through 2020, U. S. dollar will remain strong, deficit spending will increase, and oil prices will slowly rise Wage increases are slower than in the baseline, resulting in lower consumption and heightened uncertainty among households and businesses due to new federal administration, exports are limited, unemployment around 5% for next few years, GDP growth slows to 2. 1% in 2017 and 1. 9% in 2018 Difference of $188 million between Baseline and Low forecast over 2018 -2023 8

2018 – 2023 SBP Revenue Assumptions (cont’d) • Federal grants • Fare revenue – – – Based on actual 2017 appropriations Recognized as awarded Assumed to increase at rate of inflation or as identified Assume flat ridership and fare revenue in 2017 over 2016 actual for the Base System Fare revenue for 2018 will be established with formulation of 2018 Budget Per policy, Board will consider a fare rate increase every 3 years, next scheduled increase is for 2019 and then 2022 9

2018 – 2023 SBP Sales/Use Tax Forecast (Base System) Source: CU-Leeds School – Baseline Forecast RTD Sales and Use Tax Base System 500. 0 [CELLRANGE][VALUE] 450. 0 [CELLRANGE][VALUE] Forecast [CELLRANGE][VALUE] 400. 0 [CELLRANGE][VALUE] 350. 0 [CELLRANGE][VALUE] [CELLRANGE] 300. 0 [CELLRANGE][VALUE] 250. 0 Millions of dollars Actual 200. 0 1 201 2 201 3 201 4 201 5 201 6 201 7 201 Years 8 201 9 201 0 202 1 202 2 202 3 10

2018 – 2023 SBP Sales/Use Tax Forecast (Base System) Source: CU-Leeds School – Baseline vs. Low Forecast RTD Sales and Use Tax Base System 10. 0% 8. 0% 5. 5% Percent Growth 6. 0% 4. 3% 4. 0% 4. 1% 3. 8% 4. 5% 3. 3% 3. 0% 2. 6% 2. 3% 3. 0% 2. 4% 2. 0% 0. 0% -2. 1% -4. 0% 7 201 9 201 8 201 Baseline Low 0 202 Years 1 202 202 3 11

2018 – 2023 SBP Cost Assumptions • Operating and maintenance costs – – • Based on 2017 proposed Amended Budget Costs escalated at rate of inflation Diesel fuel costs – – Locked at $1. 69 per gallon in 2017 Current futures estimate is $1. 80 for 2018 • extremely volatile commodity Conservative cost assumptions and escalated at national inflation rate Provide monthly updates • Debt service • Inflation rates – – Interest payments on existing debt and any assumed financing Based on Moody’s forecasts Denver-Boulder inflation rate: 2. 8% in 2018 National inflation rate: 2. 5% in 2018 12

Annual Program Evaluation (FT) Comprehensive annual evaluation process for the Fas. Tracks program Same time period as SBP Provides input for other planning efforts Only service and projects funded from Fas. Tracks sources • RTD Annual Budget, Financial Plan • 0. 4% sales/use tax + fare revenue + grants Provides overall guidance for Fas. Tracks build-out, service delivery, debt, and capital expenditures Annual update of: • Project capital and operating cost estimates to current baseline • Revenue estimates to current forecasts • Overall plan to current conditions Separate Board presentation on APE 13

2018 – 2023 SBP Issues and Challenges Board Priorities for 2018 • Fiscal Sustainability • Workforce/Human Capital • State of Good Repair Continue refunding of reserve balances • Board-appropriated fund, capital replacement fund, operating reserve Maintain adequate unrestricted fund balance • Targeted balance on combined basis Fuel prices/fuel volatility Increased O&M costs Competing projects/prioritization Funding constraints Cost allocation for Fas. Tracks Operations CBA negotiations 14

2018 – 2023 SBP Next Steps Further review fuel options Review and prioritize SBP departmental requests for capital and expense projects • Mission statement criteria and 2018 strategic goals Develop funding strategies Calibrate ridership/fare revenue estimates Key dates (tentative): • • • April 11 – SBP overview at FAAC meeting April 25 – Update SBP variables at Budget Study Session May 16 – First draft SBP at FAAC meeting June 20 – SBP update July 18 – Second draft SBP at FAAC meeting August 8 – Final SBP to FAAC for recommendation to Board August 22 - Presentation of 2018 Requested Budget October 17 – Update to 2018 Requested Budget November 28 – Adoption of 2018 Budget 15