2015 – 2020 Strategic Budget Plan Financial Administration & Audit Committee June 10, 2014

SBP Components SBP includes only service and projects funded from the Base System 0.6% sales and use tax, and FasTracks operations activity (West Line, Denver Union Station, Free MetroRide) allocated to FasTracks funded by 0.4% tax FasTracks expense and projects (non- operational) are included separately in the FasTracks Annual Program Evaluation (APE) financial plan 2

SBP Parameters Fiscal management, including requirements to operate per specified performance measures, strategic goals for the General Manager, and to maintain a balanced budget Continued development of Board-appropriated fund and capital replacement fund Continued implementation of Fiscal Sustainability Task Force recommendations and Board priorities Optimization of service levels for bus and light rail systems –service hours expected to be slightly higher for bus and flat for rail in

SBP Parameters (cont’d.) Baseline is 2014 Amended Budget Fuel lock for budget certainty in 2015 –monitor futures for opportunity, use 2014 lock price of $3.12/gallon and escalate by national CPI over SBP SOGR of facilities and equipment Prioritization of capital and expense projects –deferral of up to $37M in projects to outlying years to balance SBP CBA negotiated costs through 2017 Planned fleet expansion/replacement with COP financing and associated debt service 4

SBP Variables Uncontrollable factors Sales/use tax revenue Fuel price volatility Inflation rate Continued nature of economic growth Interest rates on debt Controllable decision areas Fare rate increases/decreases Service levels Operating costs/expense projects Capital investment in projects Fund balance development 5

SBP Revenue Assumptions Passenger Fares –Per RTD Board policy, a 10% fare rate increase is considered by Board every 3 years –Assumption in SBP is 10% fare rate increase every 3 years beginning 2016 –0% ridership increase Sales and Use Taxes – SBP includes forecasted data from CU Leeds School of Business based on the March 2014 forecast –Next CU-Leeds updated forecast June 2014 –Actual ytd March collections: 9.2% over prior year –Annual sales and use tax growth rates per CU-Leeds Federal Grants –Recognized as awarded and assumed to increase at rate of inflation or as identified 6

Base Sales and Use Tax 7

SBP Expenditures Assumptions Operating and Maintenance Costs –Inflated at area CPI rates of 2.5% in all years (CLC) –National CPI rate of 2.1% applied to fuel costs (CLC) –Includes one-time expense projects –Includes CBA Fuel Costs –Diesel budgeted at $3.12/gallon (2014 lock price) and escalated at national CPI Futures estimate for 2015 is $3.16/gallon at this time –Gasoline budgeted at $3.54/gallon, same as 2014 Amended Budget, and escalated at national CPI Debt Service –Interest and debt payments based on debt amortization schedules –Proposed interest payments on future debt issues based on municipal rate forward curves –Debt issuance based on rolling stock COPs, both bus and rail Capital Expenditures –Based on replacement schedule and prioritization/scoring methodology –Up to $37M of projects may need to be deferred to when funding is adequate to support 8

Diesel Fuel Cost per Gallon 9

SBP Summary Cash Flow - Base 10

2015 Base Sources of Funds $610.0M 11

2015 Base Uses of Funds $606.6M 12

Base Fund Balances 13

SBP Opportunities and Challenges Opportunities Fiscal Sustainability Task Force recommendations Board strategic goals and GM tactical plans Sales/use tax compliance reviews Challenges Sales/use tax volatility Fuel price uncertainty State of Good Repair commitments and needs Project prioritization and project deferral Continued development of fund balances FasTracks in-service costs and cost allocation 14

Next Steps June 24 – Board adoption of 2014 Amended Budget July 8 – Presentation of final SBP to FAAC for Board adoption July 15 – Adopt SBP August 26 – 2015 Budget Study Session 15