>> good morning. good morning.

thank you all so much for coming out to give us some feedback about our next two-year operating capital budgets. my name is ed reiskin. i'm the director of transportation with the sfmta, and very glad to see you out here this morning. actually given the drought conditions we're upped, we're hoping for rain, also hoping that would have brought more people out. ~ under i'm especially appreciative of those of you who did choose to come here. it's a beautiful day outside. i know there are other things you could be doing, but your feedback is very important so i appreciate you taking the time to come. i'm going to try to go through a presentation fairly quickly. it's information that has been out in the public realm a number of times before, including at a couple hearings at my board of directors. so i can leave as much time as possible at the end for your feedback, comments, recommendationses.

the purpose of this meeting and the others that we've had is really to make sure that you understand what we're ~ faced with fiscally and so that you can give us some recommendations on how to get to a balanced budget, which is our requirement and goal. so, i'll quickly walk through this presentation and then the rest of the time is yours. so, this is what we're going to cover. i'm going to -- just a little bit about the agency and our strategic plan and what we're doing and then really get into the budget and we'll let you know kind of what the process is moving forward. a i think you're probably fairly well familiar with our agency, we're somewhat unique in the country in term of the range of services we provide and responsibilities that we have. we he obviously, as i think everybody knows, we operate muni, which is the nation's seventh largest transit system. we also do transportation planning and engineering, parking and traffic management,

bike and pedestrian safety. we regulate the taxis here he in san francisco. so, it's a lot of different services. with muni alone, we deliver a tremendous amount of service. we have a lot of assets that we're responsible for maintaining, not just the muni buses and scope that is the broad context here today. ~ really wanted to start out with the strategic plan, the board of directors of the sfmta adopted this plan, i guess it was about two years ago now and was meant to guide the agency over a six-year period, three fiscal cycles because we do budgeting every two years. and the strategic plan is meant to be a document that guides

what we do as an agency. as i said, we have a lot of different responsibilities, very broad set of responsibilities so i thought it was all the more important that we have an organizing framework within which we make policy decisions, operating decisions, resource deployment decisions, all of which really roll up under budget decisions. so, this is the small excerpt from that strategic. the division is san francisco, the great city with excellent transportation choices and meaning we want to make sure there's lots of good options for feev people in terms of how they get around the city. the four goals and support of that vision, the first being safety, the number one thing that we he want to do as an agency is make sure that the transportation system is safe no matter how you are choosing to get around ~. the second goal is essentially the goal that would actual eyes the city's transit first policy, which is a policy that

was ~ adopted by the san francisco board of supervisors 41 years ago. we are now charged in the charter with executing that policy. the third goal has to do with the role that we in the transportation system play in impacting the environment of san francisco, the quality of life, the economy of the city which, because we are a small, dense city, the transportation system plays a large role with regard to those things. and then finally the fourth goal is about our own workplace, about our employees, about making the agency a great place to work, about making it an effective organization so that we can achieve those other three goals. so, that's the frame within which we look at everything we do and most importantly, the budget. so, with regard to the plan, some things that we have been doing, are doing to advance the

plan, the core of the agency is the muni service that we provide. just this morning we're hosting the last of the series of workshops on the transit effectiveness project which has been a kind of first in the generation effort to look at the entirety of the muni system and figure out how we can make it work better, be more efficient, move more people more reliably more quickly. we've also been investing a lot, not so much money, but energy and effort into communications, communicating with riders, communicating with the public. we have text alert system, e-mail alert system. we have a very active twitter feed. we have rebuilt our website. so, investing a lot in making sure that muni riders, the customers, the people that use our services have many different good ways of getting information and providing feedback back to us.

and what we're doing right now is about the fiscal management of the agency. today we're talking about primarily the two-year operating capital budgets that we do start our capital planning looking much longer term, looking at a 20-year time horizon, identifying all the needs that we would have over those 20 years that take our current assets to bring them into a state of good repair, to anticipate additions that we may need to do, enhancements to the existing bike, pedestrian, transit, taxi networks. from that 20-year financial plan, we develop a five-year capital improvement program. and then what we'll cover a little bit today, the two-year capital budget. and then the operating budget which is really the main thing we're here to talk about. we're right now in the process of developing and finalizing that. the other modes of transportation are very much complementary to transit and to

the realization of the transit first policy. so, we've been working hard to make improvements in the taxi service, getting more taxis on the street, improving some of the amenities and services that they provide and make them easier to access. we have been advancing the bike and pedestrian strategies which are geared towards making those networks safer. we've been hearing a lot, in particular, about pedestrian safety lately, a lot of good progress that we're making as a city in that regard, but a lot of necessary progress because we have far too many people getting seriously hurt and killed in our streets as they're just trying to walk around the city and that shouldn't be. so, there's a lot of good work from these two strategies aimed primarily at making the city safer for people biking, walking and biking and making those modes of transportation more attractive for at least some of the trips that people make to get around the city. and we've been working hard to improve how we engage with the public as we're rolling out new

programs, changing existing programs, developing capital projects. we're completely reworking the way we engage with the public so that we can do so in a much more collaborative way and i a way we can receive feedback ~ so we can adjust any plans or programs or ideas and benefit from all the good input of the people who use the services, who use the streets, who live and work in the city. so, those are just some highlights of things we're doing to advance our strategic plan. so, on to the budget. the budget, i think, as everybody pretty much knows, is basically a policy document because it governs how the resource he that we have are going to be spent over, in our case, the next two years. we do two-year budgeting for our agency. so, the budget is basically made up of -- we look at the revenues we anticipate coming in, and i'll show you what some

of those are, the main categories. we look at the expenditures, what it's going to cost to provide the services, to maintain our assets. and then we need to bring them together and balance them, and that is what my task is under the charter to present to my board, a balanced budget proposal that they can then weigh in on and eventually send on to city hall for a final approval. so, this is the operating budget from a revenue perspective. the two different circles show the two different years. the order of magnitude is about $950 million annual operating budget, and the main revenue sources, about a quarter of the budget comes from transit fares, and this is not just the muni bus. this is the entire agency budget. muni is, you'll see on the next slide, muni operation alone is more than half of the budget,

but the transit riders base about a quarter of the overall mta budget. the general fund, we have in the charter a provision, that's a formula that directs general city ex revenues to the transportation system that accounts for about a quarter of the revenues of the agency. and then about a third of the revenues of the agency come from parking, and that's from parking meters, it's from parking citations, it's from parking garages, and it's also from the city's parking tax, the off-street parking lots and the city pay a 25% tax. we get 80% of those revenues as well. so, all of those parking revenues together account for about a third of the revenues that we receive. and then the balance, there's some small things, the advertising that you see on the buses brings in some money. our taxi regulation, their permit fees that bring in some money. we do get some operating grants

from the state and also from the half cent sales tax we have here in san francisco that only part of the half cent sales tax we use in the operating budget funds the fare transit service. all the rest of the tax money goes on the capital side. those are some of the other slices, but the big things are the general fund which comes to be a formula. the transit fares which we establish and the parking fees and signs that we establish. so, there's some parts of the revenues that we can control, there's other parts that we can't. so, that's the revenue side of the budget. on the expenditure side, you can see that muni accounts for the lion's share of the budget. and then the other kind of main operating function of the agency is what we call sustainable streets, and that has many of the functions that used to be under what people knew as department of parking and traffic. so, that's where the bike and

pedestrian safety work gets done, the traffic engineering, the parking control officers as well as the folk who maintain the traffic signals, the parking meters, the stop signs, the striping on the streets that's within the sustainable streets division thev and really all of the other divisions, from finance and human resources, those are really all supporting muni and sustainable streets. the finance division, which is the other pretty good size division, is where we manage our procurement, our information technology, our real estate and, of course, all the budgeting and financing activities. and you'll see one other big slice, which is agency ride, and those are services such as insurance, such as some of our legal costs, and also some of the services that we buy from the city that support the entire agency. so, we pay for services of the city treasurer and the city comptroller and the city's hr

system, the city's technology. that's more or less what's in that slice. so, there is a picture of the operating budget. first the revenue side, then the expenditure side. so, the numbers that i just showed you were baseline numbers, and baseline basically means taking what we're currently doing and just really rolling it forward into the next year without making really any changes, except for a few small things that we've assumed in the baseline which are these we anticipate, some reductions in our costs for legal claims, and for worker comp claims. we'd like to think that some of the efforts we've been making to invest in the safety of the system are responsible for those numbers, for being able to forecast that those costs will be coming down a little bit. and then what we have been doing in the past is our board has adopted a policy that we need to keep in reserve and amount equivalent to about 10%

of our operating budget. so, about 90, $5 million available for emergencies ~ 95 million. we dipped in the reserve. the last three years we've been funding that reserve. now that it's back up to that 10% level, we no longer need to be putting $10 million a year in. that's been [speaker not understood] because of that general fund pass through we get with the strength of the and growth of the economy, a lost of the benefits of that flow right into our budget. also assumed in the budget are things that we know about, and these are these. these are continuing costs associated with past labor agreements such as annualization of partial year raises, increases, and fringe benefit costs and health and other costs that are going up pretty significantly.

the other big chunk is some contracts that we've entered into or agreements we've entered into over the past few years that were not fairly funded in our baseline budget, but that create obligations for us in the out years such as payments, small payments to bart and caltrain, some other contracts that we've entered into to improve the services that we deliver. so, there have been some adjustments. there's also $60 million in both the revenue side and the expenditure side of the operating budget, and these are largely from development fees that during the recession really were just trickling in. now that the growth is starting to happen again be are coming in more substantially and we're showing those in the operating budget. and last, i should mention because i know it's a topic that's of interest to some people, we do buy services from city department order of $65 million from city services, everything from legal services to police services, as i mentioned before, the

controller's office, the hr department, it infrastructure of the city we pay for. and we assumed in our baseline budget a 5% increase just based on the growth of the cost of labor and services that they provide. so, that's estimated in the baseline. what's not in the baseline, though, are -- because, in part, we don't know what these are going to look like yet are some of the things on this slide. most significantly, we're right now negotiating new collective bargaining agreements with the unions that represent the great majority of our work force. we have about 5,000 people in the agency, probably more than 4900 of them are represented by unions that are currently in negotiations. the outcome of that in term of how much wage increase, how much savings, we just don't know at this point. we actually won't know at the

time our budget is submitted because of the timelines in the charter that comes after our budget submission. so, that's not included. structural deficit, a phrase that we use to describe things that we believe we should be doing commensurate with the level of service we're delivering. for example, for every he bus driver and bus that's out there, you need maintenance mechanics, you need the people who clean the buses, park cleaners, you need fare enforcement staff, you need custodians to clean the facilities that they use. you need trainers, you need supervisors, and we don't believe that we have been resourcing those at the level we should for the level of service that we deliver. same when we're looking at the streets. if you look at the miles of striping that we have to maintain, the 12,000 signs we have to maintain, 11 85 traffic signals we have to maintain, we don't feel that we've had the level of resources we should to

maintain those ~ that we need in order to keep them all in good working condition. so, when we're looking at the baseline numbers, know that we have not included any [speaker not understood] to that structural deficit. we were able to close that gap somewhat in the last fiscal cycle, but we haven't yet assumed any of those fixes in this budget. ~ fixes we have, i mentioned, the work orders which is the phrase we use for the services that we buy from other city agencies. we haven't assumed any reductions in those. we haven't assumed any transit service increase, and i'll talk about that in a minute. and we haven't assumed any other increases from the other operating divisions, for example, our communications division has not been resourced relative to the size of the agency and the scope of what we do. so, that's an example of where we might want to add communications staff and communication services that we don't have today, but those are not assumed in the baseline.

so, keeping in mind everything that's in the base and that's not in the base, this is what the picture looks like. right now the baseline budget shows revenues that exceed expenditures, which is great, on a 900 something million dollar budget, they don't exceed the expenditures by much. 22 million in the first year, 50 in the second year. but it's a far better starting point than we've had in many, many years in recent memory, as every year recently we've been starting off in the negative in term of the projections for the baseline for the upcoming two years. so we're starting from a good point. i want to emphasize there are a lot of thing we need to do that are not included in those numbers. for example, the structural deficit we estimate to be $45 million right now. you can see here if we tried to increase our expenditures by

$45 million to close that gap, we'd quickly be in the red. so, we're at a good starting point, but there's a lot of needs that we're going to be trying to address. so, in terms of issues and opportunities, so, what are thing we might want to think about changing in that baseline expenditure budget, either on the revenue side or the expenditure side? first one i'll touch on is fare policy. as i mentioned, the two parts of the revenues that we control are the transit fares and the parking fees and fines. with regard to transit fares, the sfmta board of directors adopted a policy back in 2007 to index transit fares and actually all of our fares, fees, and fines to index them all based on inflation because our organization, our costs grow over time. as labor increases, come into place, gasoline, the fuel that we use to fuel the vehicles gets more expensive.

insurance, health insurance in particular, gets more expensive. the equipment that we use to maintain our vehicles and our other assets gets more expensive. so, the board adopted this policy to allow the fares to somewhat automatically, although they have to adopt the fare schedule every two years, put it on the predictable course of increase so that we wouldn't be in a position that we used to be in here at muni and in many other city agencies where the fares stayed flat for a long time. you all remember the $45 fast past which was $45 for a really long time until the mta found we were in a really big hole and had to jump it up to $60 in a single year. that was a really big increase, and this indexing fair policy is meant to eliminate those. so, just keep things steadily increasing. it is a formula. there is some rounding that happens. so, the $2 single ride fare,

for example, we only index that up in 25 cent increments. so, up until this year there hasn't been a need to index that up or i guess it has rounded down to $2. this coming year, the indexing policy would index that up to 2.25. the last point i just wanted to make here is that the voters gave us authority in prop a that was adopted in 2007 to issue debt, and that was based on a recognition that just using ongoing revenues to try to address that large asset base that we have of vehicles and rails and traffic signals, that that would be inadequate. so, we got the authority to issue debt so that we could basically bond on future revenues so that we could bring more capital forward to invest in our assets now to get them into a state of good repair. so, we've done that. and in order to do that, we needed to get a credit rating. and when we went out to talk to

the credit rating agencies, they cited this indexing policy as one of the thing that made us a financially strong organization that then in turn contributed to very strong, pretty strong credit rating that in turn allow us to borrow at a lower cost. so, there's real dollar benefit that we get as a result from the indexing policy. it's seen as a good factor and provides a good stream of revenue. so, the default is that we let everything index up as per the indexing policy, but there are some thing that we might want to consider with regard to deviationses from that policy. one of them is that we could increase certain fares above indexing based on specialized nature of the service that they offer. a couple things that we have suggested at the f line,s historic streetcars which at least for some people is a

specialized service. almost can do the cable cars. one of the recommendations was to increase that up intedest 2.25 bring it up to $$3, 4 or 5 or $6 for single ride fare. leaving it ~ as accessible via fast pass for those who have it. in other words, no impact if you have a fast pass, but if you're paying cash, it would go up beyond the 2.25. i will say that we've gotten really strong negative reaction to that proposal, including from my own board, so i don't think we'll be advancing that one. another idea, express routes, which make stops in the outer parts of the city and then expressed in, which could get you to where you're going a lot faster than your regular muni route. an idea was to put some kind of surplus or surcharge on those. hasn't gotten a lot of feedback

on that. any interested folks here have feedback? and then finally the visitor passport, these are one-day, three-day or 7-day passes that are predominantly if not exclusively used by people from out of town. they use them a lot to ride the cable cars. it's an easier way than having to figure out clipper card or use cash. the idea here is maybe increase those a little bit beyond inflation. give them a robust tourist trade we have here in the city ~ given. so, those are some essential deviations with regard to increasing fares. with regard to reducing fares that the mayor has called on all city agencies to look for ways through which we can address other ford ability issues, reading, hearing, probably experiencing we have somewhat of an affordability crisis right now, other prices, cost of living really going through the roof. so, we've been looking at ways

that your transportation budget could help offset some of those other costs. so, you've all heard of the free muni for low and moderate income youth program. that was one of the things on the table that's actually now been funded thanks to the mayor making a deal with google to pay for that for the next two years. so, that's been addressed. what's still on the table is expanding that to 18 year olds. right now our youth fares are for kids 5 to 17. many kids have still 18 when they're in high school. ~ are still some of the other transit agencies around the region consider youth to be a youth up to the age of 18. so, extending the free muni for low and moderate income youth to 18 is one idea. expanding that to seniors and people with disabilities who are of low and moderate income is another idea. and offsetting idea to that would be increasing the discounted fare which is currently 67% discount, reducing it to be just the 50%

discount for youth that are not low and moderate income ~. so, higher income youth. and if we were to make muni free for low and moderate income seniorses and people with disabilities, then seniors and people with disabilities with higher incomes would pay half fare instead of one-third of the fare would be a possible ~ complementary proposal to the free to low and moderate income folk. also another affordability with idea, we have what we call life line pass, which is a half price pass for low-income adults and we could either freeze that, not index it up or even reduce it. so, though are some of the ideas with regard to affordability. we have some others such as removing a customer service fee that you have to pay if you go to the customer service center for a transaction or pay for a parking ticket online, removing some of those fees, some other ideas. and then the final fare idea is

to -- in order to encourage people to move from paper cash or coins on to clipper, whether a clipper monthly pass or just electronic cash on clipper, let the paper cash increase to 2.25, single ride clipper $2. something many other systems have done we would need to make sure people have access to clippers and the ability to reload them, that it doesn't create any disproportionate impact to any communities. but that would be a way to try to encourage more people to not use cash because the cost to us as an agency, the more cash we have in the system. so, the more we can move people to electronic payment, the better. and then the other big opportunity we have in the operating budget has to do with muni service. the transit effectiveness

project, which i mentioned which is really looking at restructuring and improving muni service, is recommending pretty significant increase in muni service. any of you who know who ride muni, a lot of our lines are crowded. there is a lot more demand for muni service than we have currently service plan to deliver. so, tep proposes 10% increase in muni service. so, more service, particularly on the routes that carry the most people. but i think of the 75 or so muni routes that tep proposes some increased frequency on about 60 of them. so, it's almost a system wide increase focused on the most heavily traveled routes. but pretty significant bump up in muni service proposed to reduce crowding to make it a faster and more efficient to move through the city, which also would make it a more attractive means to travel for more trips for more people.