June 13 Discussion on Long-Term Financial Plan


Agenda Item No. 5

To:         Finance-Auditing Committee/Committee of the Whole
Meeting of June 13, 2002

From:         Joseph M. Wire, Auditor-Controller
Celia G. Kupersmith, General Manager

Subject:         DISCUSSION OF PLAN FOR ACHIEVING A LONG-TERM SUSTAINABLE FINANCIAL CONDITION

Recommendation

No specific action is recommended at this time. This item will be finalized and brought back to the Committee for consideration at the June 27 Finance-Auditing Committee meeting.

Background

As you know, the District is facing a serious financial crisis. We are already in the process of considering a toll increase as well as future bus and ferry fare increases for 2003 and beyond. However, it has become clear that toll and fare increases alone will not raise enough revenue to meet our financial needs over the next five years. Additionally, we do not have enough money in our reserves to carry us through this time period. We find ourselves needing to slow down spending in order to balance our budgets.

Facing this magnitude of problem, the Board has directed staff to begin work on several pathways to achieve long-term financial viability. This report is an attempt to identify the options under consideration and preliminary time frames for each.

NEW AND ENHANCED REVENUE STRATEGIES:

Staff is now looking at new revenue sources such as Bridge sidewalk access fees, further bus and ferry fare increases, additional grant funds, and ideas that focus on making money through non-traditional means:

  • An initial report on a proposed procedure for collecting a Bridge sidewalk access fee and an estimate of the costs and revenues associated with such a fee will be brought to the Board for review in late August. A voluntary donation program such as a "milk-jar by the check out register" is also being examined as an alternative to a mandatory fee for sidewalk access.


  • A continuation of the program of annual bus and ferry fare increases is underway. Staff is also investigating the feasibility of a supplemental fare increase in January. The analysis of fare increases will include consideration of continuing the current incremental increase program for the next several years with various rates of increase per year examined. Staff will also factor in consideration of private ferry operator prices. The Board has previously approved a timeline for this project that calls for initial reports to come to the Board in late fall, a spring Public Hearing, and implementation next July. Staff is reviewing this timeline in light of other opportunities for revenue generation and cost savings and may recommend a modification of the timeline.


  • Work is underway on development of a strategy for collecting parking fees at Larkspur Ferry Terminal. This project may be slightly delayed due to the medical leave of absence of the Ferry Manager but will proceed in coordination with the ferry fare increase analysis due to the direct interrelationship between parking fees and ferry service fares.


  • Staff believes that providing extra staff resources within the Grants Department would enable the District to more aggressively pursue both traditional and non-traditional grant funds. We are reviewing the potential impacts of transferring an existing employee into the grants area. It is likely that additional training for this individual would be necessary and there may be an offsetting decrease in staff level somewhere else in the organization. We anticipate having a proposal for Board consideration later this summer.


  • Staff is already investigating opportunities to expand concession opportunities at the Bridge. Initial ideas have included bike rentals and audio tours. In both cases, the revenue-generating potential was much smaller than expected and the staff support necessary to implement and monitor the programs was significant. We are continuing to examine other concepts, including Bridge tours that may have the most significant revenue generation potential.


  • Staff has begun work on expanding the parking meter program at the Bridge so that staff are not penalized and visitor revenue is increased. We are also looking at ways to maximize revenues from visitor-related services through reduced operating costs for the gift shop and café and through increased revenue generation. The Fiscal Year 2003 budget includes funds for marketing of the gift shop to local residents in addition to visitors.


  • Staff is pursuing opportunities for one-time and on-going revenue streams from the Metropolitan Transportation Commission and Caltrans. It is our intent to approach both organizations for assistance in funding on-going activities such as annual bridge maintenance, tow truck services, and transit operations. It is not possible to estimate the impact of this initiative but staff believes that funds can be made available in partnership with the District.


  • Staff will work to ensure that the District¹s needs are included in any state-wide or county-level funding initiatives.


  • Staff will review arrangements with local agencies to determine if the District¹s interests and needs are adequately addressed in light of our financial crisis.


EXPENSE REDUCTION STRATEGIES:

The Board has also discussed several methods for attaining cost reductions and cost containment in addition to revenue enhancement. These discussions have included a wide range of ideas for further consideration.

  • Over the past three years, staff has incrementally downsized the bus service by judiciously trimming non-productive trips from the system. Thus far, this trimming has impacted less than 25% of the service on any individual route. Staff is now developing a program for significant, system-wide service reductions intending to reduce costs in a sustainable manner. This expansion of the service reduction activities is likely to result in impacts that exceed the 25% level. Public outreach and a public hearing will be necessary before these more significant service changes can be approved and implemented. Staff intends to approach the system downsizing in an incremental fashion with implementation dates tied to the driver sign-up dates in December 2002 and March 2003. Reports will be made to the Board at several key points throughout the process as we work towards downsizing. The process will also include multiple opportunities for public input and a public hearing.


  • Ferry services have grown during the past four years with the introduction of two fast ferryboats. Staff now intends to review the effectiveness of each trip and the cost savings associated with elimination of individual trips. This review will look at non-peak service and weekend service. We will also examine the seasonality of ridership to determine if certain services should be offered only some months of the year. Non-core services that do not fully cover their costs will also be subject to elimination.


  • In addition to these significant cost reduction strategies, staff is examining opportunities to reduce costs through increased efficiencies and cost sharing. Recent examples of this include partnering with MTC to reprint FasTrak brochures and materials to include TransLink information also. This saves the District $200,000 in the upcoming budget year. Administrative costs for the workers compensation program are also reduced by $90,000 per year due to better management of cases and a reduced number of outstanding cases.


  • Staff intends to approach the Union Coalition negotiations that will get underway in approximately nine months with a program of cost containment strategies for discussion and consideration. These will be followed by discussions with the bus operator union as well. It is not our intention to open negotiations at this time but instead to take advantage of the upcoming window of opportunity to development sustainable solutions that maintain the District¹s reputation as a good place to work.


  • Staff is also working on developing proposals for employee "early-outs." This program will take advantage of the recently approved "2% at 55" retirement option and does not envision further improvements to that aspect of our retirement program. Other inducements, however, will be examined with the goal being a financially sound approach to downsizing that minimizes the need for layoffs. It is important to understand that an "early-out" program applied across the Board may leave the District without employees in key positions. Our goal is not to end up needing to hire people as a result of any "early-out" program. Therefore, staff is taking a deliberative approach to development of such a program so that it works to the benefit of the organization and the employees who choose to take advantage of this potential window of opportunity.


  • A comprehensive staff suggestion program is being implemented that expands upon the success of such program in some of our departments. Suggestion boxes are being placed throughout the District and an email mailbox that is available from work or home email systems is in the works as well. District employees have received a letter from the General Manager outlining our financial problem and encouraging them as the front-line job expert to submit any idea they may have for reducing costs. These ideas will be reviewed first by the Auditor-Controller¹s office to determine their potential for cost savings and to ensure that all ideas are looked at with fresh perspective.


Staff recognizes that the District does not have the reserves necessary to fully fund the shortfall expected over the next several years. Our goal is to develop a system of revenue enhancements and cost reductions that eliminate the need to spend from our greatly reduced reserves in the following fiscal year. It will take several months for all of the strategies listed above to be fully implemented but we are committed to working with you to achieve this financial goal.