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

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

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

4. Goal is to combine SBP and APE in one long-range plan going forward
Overview of the SBP
SBP includes only service and projects funded from the Base System 0.6% sales and use tax
FasTracks expenses and projects are included in the FasTracks Annual Program Evaluation (APE) financial plan
Cost allocation to FasTracks operations for existing corridors and services for annual budget
Goal is to combine SBP and APE in one long-range plan going forward

5. 2018 – 2023 SBP Development Process
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 SBP
Requests for new projects are brought into current cycle 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

6. 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
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
Future train service capacity improvements dependent on ridership and financial capability
Operating and Passenger Facilities
Projects to maintain facilities in State of Good Repair

7. 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 cost-effective
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

8. 2018 – 2023 SBP Revenue Assumptions
Sales and use tax growth rate
2017: CU-Leeds School of Business currently forecasts 4.0% increase over 2016
: based on semi-annual forecasts from CU-Leeds School
January 2017 actual sales/use tax is 3.0% over January 2016
Annual sales and use tax growth
Baseline scenario assumptions
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
Low (below baseline) growth is more pessimistic
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

9. 2018 – 2023 SBP Revenue Assumptions (cont’d)
Federal grants
Based on actual 2017 appropriations
Recognized as awarded
Assumed to increase at rate of inflation or as identified
Fare revenue
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

10. 2018 – 2023 SBP Sales/Use Tax Forecast (Base System) Source: CU-Leeds School – Baseline Forecast

11. 2018 – 2023 SBP Sales/Use Tax Forecast (Base System) Source: CU-Leeds School – Baseline vs. Low Forecast

12. 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
Interest payments on existing debt and any assumed financing
Inflation rates
Based on Moody’s forecasts
Denver-Boulder inflation rate: 2.8% in 2018
National inflation rate: 2.5% in 2018

13. Annual Program Evaluation (FT)
Comprehensive annual evaluation process for the FasTracks program
Same time period as SBP
Provides overall guidance for FasTracks build-out, service delivery, debt, and capital expenditures
Provides input for other planning efforts
RTD Annual Budget, Financial Plan
Only service and projects funded from FasTracks sources
0.4% sales/use tax + fare revenue + grants
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

14. 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 FasTracks Operations
CBA negotiations

15. 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