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					1:30 pm I May 5, 2010
April 28, 2010


To:          Chairman Cavazos and Members of the Rail Management Committee

From:        Stephen R. Banta, Chief Executive Officer

Date:        May 5, 2010

Time:        1:30 p.m.

Location: METRO
          101 N. First Ave., 13th Floor Board Room
          Phoenix, AZ 85003

Please park in the garage in the US Bank Building (enter from Adams Street) and bring
your parking ticket to the meeting as parking will be validated. Transit passes will be
provided to those using transit. For those using bicycles, please lock your bicycle in the
bike rack in the garage. Rail Management Committee members may attend the
meeting by teleconference. If you have any questions or need additional information
regarding attendance by teleconference, please contact Gina Frackiewicz at
(602) 322-4455.


                                                                             Action
  Item
                                                                             Requested

 1.      Call to Order
 2.      Call to the Audience                                                Information
         A 15-minute opportunity will be provided to members of the public
         at the beginning of the meeting to address the Rail Management
         Committee (RMC) on all agenda items. The Chairman may
         recognize members of the public during the meeting at his/her
         discretion. Up to three minutes will be provided per speaker.
 3.      Minutes                                                               Action
         Summary minutes from the February 17 and April 7, 2010 RMC
         meetings are presented for review and approval.
 4.      Chief Executive Officer’s (CEO) Report                              Information
         Stephen R. Banta will brief the RMC on current light rail issues.
Rail Management Committee Agenda
April 28, 2010
Page 2 of 3


                                                                               Action
  Item
                                                                               Requested

                                    Regular Agenda
 5.      Fiscal Year 2011 Public Meeting Results Regarding Potential           Information
         Service Changes
         Staff will provide a summary of input from the two public
         meetings and comments received via email on potential METRO
         FY 2011 service change options. Please see information
         attached for Agenda Item 5 for additional information.

 6.      Fiscal Year 2011 Operating and Capital Budget and Fiscal                Action
         Year 2011 – 2015 Operating Forecast and Capital Program
         The Fiscal Year (FY) 2011 Proposed Operating and Capital
         Budget and the FY 2011-2015 Operating Forecast and Capital
         Program for Valley Metro Rail, Inc. (METRO) are presented to
         the RMC to seek recommendation to the METRO Board for
         approval and acceptance, respectively. Please see information
         attached for Agenda Item 6 for additional information.

 7.      U.S. Airways Center Fare Agreement                                      Action
         Staff is requesting that the RMC recommend that the Board
         authorize the Chief Executive Officer to transfer the pilot program
         agreement with Phoenix Arena Development Limited Partnership
         (PADLP), operator of U.S. Airways Center (USAC), into a five (5)
         year program that integrates light rail ridership into USAC events
         by combining event and light rail ticketing. Please see
         information attached for Agenda Item 7 for additional information.
 8.      METRO Advertising Policy Restrictions                                 Information
                                                                                   and
         Staff is providing information to the RMC related to the METRO          Possible
         Advertising Policy restriction related to the advertising of beer,       Action
         wine, and/or alcohol on METRO assets approved for advertising
         displays. The option exists for the RMC to make a
         recommendation to amend the advertising policy related to the
         advertising of alcohol. Please see information attached for
         Agenda Item 8 for additional information.
 9.      Future Rail Management Committee Agenda Items                         Information
         The RMC may request consideration of future agenda items.
         No additional information is attached.
Rail Management Committee Agenda
April 28, 2010
Page 3 of 3


                                                                         Action
  Item
                                                                         Requested

 10.     Adjournment                                                        Action

With 24-hours notice, special assistance, including provision of materials in alternate
formats, can be provided for persons with sight and/or hearing impairments.
Call 602-254-9896 (voice) or 602-322-4499 (TTY) to request accommodations.
AGENDA ITEM 3
         Minutes
                                   February 17, 2010
                                 101 North First Avenue
                                13th Floor – Board Room
                                    Phoenix, Arizona


Management Committee Members Present

 Ed Zuercher, City of Phoenix
 Carlos DeLeon, City of Tempe
 Mike James, City of Mesa
 Jamsheed Mehta, City of Glendale
 Dan Cook, City of Chandler
 Susan Daluddung, City of Peoria
 Dave Boggs, Regional Public Transportation Authority

1.    Call to Order

      Chairman Zuercher called the meeting to order at 1:37 p.m.

2.    Call to the Audience

      There were no public comments.

3.    Minutes

      IT WAS MOVED BY CARLOS DELEON AND SECONDED BY JAMSHEED
      MEHTA AND UNANIMOUSLY CARRIED TO APPROVE THE JANUARY 6, 2010
      MEETING MINUTES.

4.    Chief Executive Officer’s (CEO) Report

      Meeting with Federal Transit Association (FTA) Region IX Administrator: Mr.
      Banta met with Leslie Rogers to discuss the status of upcoming projects. Mr.
      Rogers conveyed to METRO the development of the federal 2011 budget and
      the proposal to cap discretionary spending at these levels for the next three
      years. This is consistent with what is happening at the state and local level and
      we are looking at ways to cut costs and at the same time move the projects
      forward.

      Mr. Rogers spoke about urban circulator funding, which is not applicable to
      METRO, but may be of interest to our member cities.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 2 of 10

      Mr. Rogers discussed changes in New Starts and ways to approve federal
      projects that bring livability into the project, economic development, and
      connections to the community. He noted that the cost effectiveness measure is
      no longer a pass/fail measure as it has been in the past.

      Rail transit safety is affected nationally and the Obama administration is in the
      process of creating a Rail Transit Safety Oversight Committee to set standards
      for mass transit. The administration is looking for 25 committee members from
      around the country. METRO will propose a member to serve on the Committee.

      Mr. Rogers announced Burns Engineering as the Project Management Oversight
      Contractor for the Central Mesa project.

      Regional Planning Responsibilities Memorandum of Understanding (MOU) and
      Legislation Update: METRO staff has been working with the member cities and
      regional entities in developing a MOU related to planning responsibilities. The
      issue has been discussed with member city representatives and both the MOU
      and SB 1460 will be moving forward.

      Proposition 400 Performance Audit Update: The Auditor General’s Office is
      performing the audit to ensure that the Prop 400 funds are used for their intended
      purpose. Staff attended a kickoff meeting and also discussed the Request for
      Proposal to assign a consultant to perform the audit.

      U.S. Airways Center Pilot Program Update: The U.S. Airways Center and the
      Phoenix Suns are looking for a longer-term ticketing commitment with METRO.
      METRO will evaluate the costs and the ridership related to the pilot program and
      present the information to the RMC and the Board in the near future. The
      Phoenix Suns are nearing next season’s ticketing packages and would like to
      announce the long-term commitment with METRO.

      Ridership/Revenue: Ridership continues to exceed expectations. Over 1 million
      riders again last month, which continues to exceed last year’s ridership for the
      same time period.

      Chairman Zuercher stated that METRO should present the recommendations related
      to the results of the cost and ridership analysis related to the U.S. Airways Center
      and the Phoenix Suns directly to the Board considering the time-sensitivity.

5.    Consent Agenda

5a.   Valley Metro Rail, Inc. FY2009 Comprehensive Annual Financial Report and
      Single Audit Act Report

      IT WAS MOVED BY CARLOS DELEON AND SECONDED BY DAN COOK AND
      UNANIMOUSLY CARRIED TO RECOMMEND THAT THE BOARD ACCEPT THE
      COMPREHENSIVE ANNUAL FINANCIAL REPORT AND SINGLE AUDIT ACT
      REPORT FOR THE PERIOD ENDED JUNE 30, 2009.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 3 of 10

5b.   Passenger Station Power Washing Services Contract

      IT WAS MOVED BY CARLOS DELEON AND SECONDED BY DAN COOK AND
      UNANIMOUSLY CARRIED TO RECOMMEND THAT THE BOARD AUTHORIZE
      THE CEO TO EXECUTE A TWENTY-FOUR (24) MONTH CONTRACT WITH
      THREE OPTIONAL ONE (1) YEAR EXTENSIONS TO SHELTERCLEAN OF
      ARIZONA, INC. FOR TOTAL BUDGETED AMOUNT NOT TO EXCEED
      $272,895.00 THAT INCLUDES A FIVE (5) PERCENT CONTINGENCY.

Regular Agenda

6.    Section 5309 Project Budget Adjustments

      Mr. John McCormack, Director of Finance and Administration and Mr. Brian
      Buchanan, Director of Design and Construction, presented information regarding
      Section 5309 contract budget adjustments to various project elements. The report
      focused on the specific cost savings in certain budget areas being transferred to
      cover other project costs. The overall project budget remains within the overall Full
      Funding Grant Agreement (FFGA) budget.

      Ms. Daluddung asked if budget line items are interchangeable. Mr. McCormack
      stated that the FFGA allows for line items budget adjustments.

      IT WAS MOVED BY MIKE JAMES AND SECONDED BY SUSAN
      DALUDDUNG AND UNANIMOUSLY CARRIED TO RECOMMEND THAT THE
      BOARD AUTHORIZE THE FOLLOWING CHANGES TO THE SECTION 5309
      PROJECT BUDGETS:

      •   INCREASE THE         LINE   SECTION      3    BUDGET     BY    $1,500,000    TO
          $106,596,850;

      •   INCREASE OTHER FACILITY CONTRACTS BUDGETS BY $28,396 TO
          $159,420,370;

      •   INCREASE PRIOR RIGHTS UTILITY RELOCATIONS BUDGET BY
          $400,000 TO $29,900,000;

      •   DECREASE OWNER FURNISHED MATERIALS BUDGETS BY $264,563
          TO $33,195,541;

      •   DECREASE TRACTION ELECTRIFICATION BUDGET BY $400,000 TO
          $61,252,003;

      •   DECREASE COMMUNICATIONS/SIGNALS BUDGET BY $555,000 TO
          $43,704,762;

      •   INCREASE THE          RIGHT-OF-WAY           BUDGET     BY    $8,143,055     TO
          $141,893,055;
Rail Management Committee Meeting Minutes
February 17, 2010
Page 4 of 10

     •    INCREASE THE PE/FEIS BUDGET BY $114,762 TO $25,169,700;

     •    INCREASE THE ENGINEERING BUDGET BY $850,000 TO $108,497,240;

     •    DECREASE THE CAC BUDGET BY $119,713 TO $57,161,747;

     •    INCREASE THE MANAGEMENT/ADMINISTRATION                         BUDGET       BY
          $3,488,028 TO $64,597,326;

     •    DECREASE       START-UP/TESTING          BUDGET       BY     $1,000,000     TO
          $22,000,000;

     •    DECREASE THE FINANCING COSTS BY $12,047,702 TO $98,850,000;

     •    DECREASE THE PROJECT RESERVE BY $137,263 TO $1,204,106.

7.   2010 Light Rail/High Capacity Transit Life Cycle Program (TLCP) Update

     A modified memo was provided to the RMC.

     Mr. Wulf Grote, Director of Project Development presented an update regarding the
     TLCP. Since the last update to the Board, several proposed changes and revisions
     have been proposed including:
      •   a reduction in regional Public Transportation Fund (PTF) revenue forecast
          (approximately $62 million through the life of the tax);
      •   a reduction in local jurisdiction funding ($298 million);
      •   an adjustment to the Arizona Department of Transportation (ADOT) inflation
          rates; and
      •   a lower cost per mile assumption for the Northwest Extension due to deflation in
          the consumer price index and lower material and construction costs.
     In addition, significant progress has been made to the HCT/LRT corridors:

     Central Mesa – The approval of the Locally Preferred Alternative (LPA) for LRT on
     Main Street to Mesa Drive was approved by Maricopa Association of Governments
     (MAG)

     Tempe South – Analysis is now focused on Modern Streetcar on Mill Avenue from
     Third Street to Southern (recommendations anticipated spring 2010).

     Phoenix West – LRT and Bus Rapid Transit (BRT) options; narrowed to one
     alignment between I-17 and Central Avenue (recommendations anticipated spring
     2010 and early action program recommended which includes Cityscape garage
     structural modifications and I-10/I-17 transit ramp).
Rail Management Committee Meeting Minutes
February 17, 2010
Page 5 of 10

     Glendale Corridor – Initiated Phase I of Alternatives Analysis in February 2010.

     Mr. McCormack stated that the TLCP funding sources are divided between capital
     (PTF, federal and local) and operations (local and farebox) sources.

     METRO met with member cities to confirm the funding availability for capital and
     operating contribution required to build and operate the projects. The City of Phoenix
     is experiencing significant reduction in availability of funds affecting the Northwest
     Extension Phase I and II as well as the Glendale Extension. City of Glendale funding
     has been confirmed to support the implementation of the Glendale Corridor. There
     were no anticipated changes for the cities of Mesa and Tempe.

     Mr. Grote stated that the most significant changes for the completion of the LRT/HCT
     corridors due to current market conditions are the Northwest Extension Phase I
     (2012 to 2017), Northwest Extension Phase II (2018 to 2026), Glendale (2019 to
     2026), and Northeast Phoenix (2030 to beyond the planning horizon for the RTP).

     Mr. McCormack presented an overview of the capital project costs, comparison of
     revenues and expenses, and operating expenditures through fiscal year 2026.

     Mr. James asked if there are opportunities to use CMAQ funds to start design for the
     I-10/I-17 transit ramp to be ready for ARRA funding. Mr. Grote replied that currently
     METRO is engaged in discussions with ADOT and METRO is moving forward with
     the environmental analysis under the current contract and conceptual engineering.
     The program allows for CMAQ and PTF funds to continue with the design element.

     Mr. James asked if the two to three percent gap in the highest ridership months for
     the reported 26 percent farebox recovery used to fund operations is a concern. Mr.
     McCormack stated that an estimated fare increase forecast was performed for every
     third year (25 cent) for the next three cycles and assumed a three percent growth
     going forward. The costs are estimated at three percent inflation rate.

     Mr. Cook asked what happens to the program if we do not get the ADOT 13 to 15
     percent growth in some years of the program. Mr. McCormack stated that he
     created an alternative revenue forecast by assuming the starting point of 2012 to the
     end of the program using 6.5 percent growth. The impact was a reduction of $184
     million of PTF revenue with an overall reduction impact of the fund balance at the
     end by $220 million. Mr. Cook asked if this was compared to the ADOT projection.
     Mr. McCormack stated that if compared to the ADOT projection it would reduce
     revenue from $1.6 billion to $1.416 billion. It was stated that the $355 million fund
     balance is predicated on the ADOT forecast.

     Mr. Mehta stated and provided a written statement for the record.

     “First, I would like to commend METRO staff for an excellent job putting out a
     balanced life-cycle program. We are used to looking at five-month long
     processes, so getting this one done in a month I am sure has been a challenge.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 6 of 10

     There are two concerns regarding the Glendale Corridor. One is timing and the
     other is funding. We understand that the two are related with time usually
     compensating for the lack of funding.”

     Mr. Boggs leaves the meeting at 2:40 p.m.

     Mr. Mehta continued: “Every segment in last year’s life-cycle was adjusted
     backward. We were all impacted with delays ranging from one year to five years.
     Last year’s projected shortfall in the life-cycle was $438 million.

     This year’s projected shortfall is $62 million for the remaining years up to 2026.
     This year’s adjustments are affecting two cities; Phoenix and Glendale. The East
     Valley extensions continue to be fully funded and on track. The I-10 Phoenix
     West Extension is also on track. The Northwest Extension that Phoenix had
     indefinitely held back last year, is back on the table - and with more funding for
     2017.

     A couple of years ago, the Northwest Extension was not proving to be cost-
     effective from an FTA criteria, but now if it is once again a cost-effective route,
     then we fully support Phoenix in the three-mile extension to extend light rail to
     Dunlap. If the money is there, we absolutely want to see this next extension in
     line to be funded as proposed by METRO staff.

     What is quite interesting and I commend Steve Banta, John McCormack, and
     Wulf Grote that you turned a $62 million deficit in the life-cycle into a surplus or
     funding balance, or an unallocated fund of $353 million or $135 million,
     depending on which growth projection you use.

     You have identified PTF funds for Phoenix’s share of miles on the Glendale
     Corridor, and you still show a healthy balance. We are all hurting financially, so
     we support the allocation of PTF funds to reduce the burden on the local
     community.

     The Glendale Corridor is now being shifted by seven years; the only corridor to
     have such a setback in a single update, and especially when the magnitude of
     the problem is a deficit of $62 million, a fraction of last year’s deficit.

     After talking with METRO staff, I now understand why it is necessary to shift the
     Glendale corridor by seven years. Mr. Chairman, METRO’S proposal to shift the
     timeline for the Glendale Corridor is mostly acceptable. However, we know there
     is financial capacity in the life-cycle program. Phoenix is benefiting from that
     capacity or positive balance, and my recommendation is that we optimize the use
     of PTF funds because we too are hurting. Although the slide we just saw reflects
     Glendale’s commitment to its share of funds, we are providing our share at a very
     high cost by forgoing other street and transit projects in Glendale. The TLCP
     process that we just got done with at the RPTA did not help us either.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 7 of 10

     I am proposing that we keep the life-cycle program process moving forward, with a
     direction to METRO staff to do some additional work between now and when the
     Board meets in March.” Mr. Mehta added that staff present what the financial
     capacity and fund balances being available from the PTF for absorbing the local
     funding for the city of Glendale as well.

     Mr. McCormack stated that the level of funding in the plan for the Glendale Corridor
     is $57 million and to absorb that METRO can do an analysis to see if it will have an
     impact on the amount of borrowing and provide an answer. Mr. Mehta stated that he
     would like to see that analysis done to determine to best way to adopt the life cycle.

     Chairman Zuercher confirmed Glendale’s request by stating that Glendale is
     requesting the $57 million currently attributed to Glendale’s local funding moved to
     PTF funding. Mr. Mehta concurred.

     Chairman Zuercher asked how this compared to other corridors. Phoenix is using
     primarily local funding for Northwest Extension with a small portion using PTF for
     regional costs, is that similar to Phoenix West or Mesa Extension where there is no
     local funding available. Mr. Mehta stated that for all the projects that have been on
     target, Tempe, Mesa, Phoenix West, with 50/50 PTF and federal funding. The
     Glendale corridor originally had very little PTF, 50 percent federal and the remainder
     local. Today there are no monies in the capital program in 2026, which is beyond the
     ten-year cycle. To help in developing this corridor it does take both Phoenix and
     Glendale to participate. Phoenix does not have that share and it is predicated on the
     fact that there is a precise definition of reasonably available. It is reasonably
     unavailable for three-miles of funding under the Phoenix side of the segment.
     Glendale is trying to keep their share in place; however, it is at a cost of other
     sacrifices. The staff analysis will be helpful in determining what it will take to absorb
     the costs.

     Mr. Grote stated that Northwest Extension Phase I, the street project does not
     change in terms of city funding and regional funding, however the transit portion is
     now using regional PTF to match the federal grant. In the Glendale corridor
     agreement, Phoenix was going to find funds for the mile and a half and Glendale was
     going to fund the other three and a half miles. Now we are showing Glendale to fund
     only the two miles in Glendale and PTF for capital portion would pick up the entire
     balance in Phoenix. Phoenix would be paying for the operation but not for the
     capital.

     Chairman Zuercher asked if there is a point where there will be a change in the
     Glendale corridor from Glendale Avenue to an extension from I-10 West that would
     require reconsideration of all costs. Mr. Mehta stated that there is a METRO initiated
     study with Phoenix and Glendale participating to examine these two significant
     corridors. The study will take approximately 12-months and the life cycle program is
     identifying the basis for five miles from the original concept for the extension toward
     downtown Glendale (three miles in Phoenix and two miles in Glendale). The 12 to
     15 month study will determine to either maintain the original corridor or to proceed
Rail Management Committee Meeting Minutes
February 17, 2010
Page 8 of 10

     with the I-10 extension and then we will need to determine how to add the three miles
     into the plan. Currently the five miles is being considered. Mr. Grote added that if the
     additional three-mile change (Glendale Avenue to the 101) should occur, it will
     require a major amendment to the plan.

     Mr. DeLeon stated that he supports the analysis and requests to include historical
     background information to understand the basis for decision making for funding of
     the Glendale corridor. Also, it would be appropriate to understand the funding
     commitments made by each of the jurisdictions and policy consequences of shifting
     from local commitment to a regional commitment. Is the fund capable of handling the
     Glendale extension and should PTF funds be used to fund this corridor.

     Chairman Zuercher stated that Glendale is asking to perform an analysis to
     determine how much fund balance is left to bring the Glendale corridor into full PTF
     funding.

     Mr. Cook stated that an analysis is needed to understand it. He mentioned his
     concern with what the sales tax revenue will be going forward. Any type of change to
     the funding creates potential risks to the overall program. The sales tax risks should
     be included as part of the analysis.

     Mr. James stated that this is a cash flow exercise and these projects take seven to
     nine years to develop. He is not comfortable shifting any funds for a project that does
     not have an LPA with an undefined technology or project definition.

     Ms. Daluddung asked whether there is a desired fund balance. Mr. McCormack
     stated that we have not set a desired fund amount in an analytical analysis. We will
     look at a couple reasonable sales tax forecasts, develop some sensitivity, and
     potentially set a lower limit. The projects will be changing over the years and we
     need to put together a plan that is reasonable based on today’s assumptions. We
     could look at a five percent growth rate. The program, as presented, is reasonable
     given the potential volatility. Mr. McCormack recommended doing the analysis as
     requested by Mr. Mehta in conjunction with the alternative growth rate of six and a
     half percent in addition to the Arizona Department of Transportation (ADOT) forecast.

     Mr. James stated that we are showing a two percent positive growth in 2011 and
     Mesa is at negative eight percent. That equates to a ten percent difference in one
     year. He feels that this may be unrealistic.

     Chairman Zuercher stated that he is supportive of evaluating a conservative five
     percent forecast with an overlay of the Glendale corridor analysis requested by Mr.
     Mehta and asked the Committee if they concurred with this approach. Mr. Cook
     stated that he defers the growth rate analysis to Mr. McCormack. Mr. Mehta stated
     that the analysis should include the official ADOT forecast to be consistent with the
     TLCP and a six and a half percent growth rate.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 9 of 10

     IT WAS MOVED BY JAMSHEED MEHTA AND SECONDED BY ED ZUERCHER
     (MESA VOTED NO) THAT WE KEEP THE LIFE CYCLE PROGRAM MOVING
     FORWARD AND RECOMMENDED THAT STAFF PREPARE FURTHER
     ANALYSIS OF FOR THE FY 2010 LIGHT RAIL/HIGH CAPACITY TRANSIT LIFE
     CYCLE PROGRAM FOR THE FOLLOWING SCENARIOS: (1) REPLACE
     GLENDALE’S LOCAL FUNDING PORTION WITH PTF FUNDS, AND (2)
     PREPARE AN ALTERNATIVE PTF SALES TAX PROJECTION WITH A SIX AND
     A HALF PERCENT GROWTH RATE, AND (3) ADOT’S PROJECTED RATES.

8.   METRO Advertising Policy Restrictions

     Mr. John Farry, Director of Community and Government Relations stated that the
     METRO advertising program is underway and a Grand Canyon University train
     wrap has been sold. He noted that in December, the City of Phoenix changed its
     advertising restrictions to allow the sale of advertising related to alcohol on the
     bus system and at selected transit furniture. Mr. Farry discussed a possible
     amendment to the METRO Advertising Policy to remove the restriction of
     advertising beer/wine/alcohol to be consistent with the City of Phoenix
     advertising policies.

     Any change to the advertising policy restriction on alcohol, would include an
     adherence to the rules and regulations as set forth by the Arizona Department of
     Liquor Licenses and Controls guidelines. Further, the separation requirement
     would be 600 feet in instances where light rail station platforms are located near
     schools or churches. Additionally, station platform advertising is currently only
     authorized in the City of Phoenix.

     Chairman Zuercher stated that the decision to allow the advertising was
     considered around the bus system and was due to revenue. The City of Phoenix
     policy excluded interior advertising of beer/wine/alcohol.

     Mr. Carlos DeLeon asked why Phoenix changed their policy. Chairman Zuercher
     stated that it was strictly due to revenue.

     Chairman Zuercher recommended that staff present this item to the Board as an
     informational item to allow the members to discuss further.

     Mr. DeLeon concurred and requested for additional information regarding
     revenue collection stemmed from the advertising of beer/wine/alcohol. Mr. Farry
     stated that our advertising contractor, CBS Outdoor, has indicated that the
     additional advertising would bring in additional revenue; however, METRO does
     not have experience or history to compare it to.

     Mr. Daluddung leaves the meeting at 3:07 p.m.

     Chairman Zuercher stated that examples of other transit systems would be
     beneficial for the Board members to review.
Rail Management Committee Meeting Minutes
February 17, 2010
Page 10 of 10

9.    Future Rail Management Committee Agenda Items

      There were no requests for future agenda items.

10.   Adjournment

      The meeting adjourned at 3:10 p.m.
                                       April 7, 2010
                                 101 North First Avenue
                                13th Floor – Board Room
                                    Phoenix, Arizona


Management Committee Members Present

 David Cavazos, City of Phoenix
 Carlos DeLeon, City of Tempe
 Jeff Martin, City of Mesa
 Jamsheed Mehta, City of Glendale
 Dan Cook, City of Chandler
 David Moody, City of Peoria
 Dave Boggs, Regional Public Transportation Authority

1.    Call to Order

      Chairman Cavazos called the meeting to order at 1:32 p.m.

2.    Call to the Audience

      There were no public comments.

Regular Agenda

3.    2010 Light Rail/High Capacity Transit Life Cycle Program (TLCP) Update

      Mr. Steve Banta, Chief Executive Officer, stated that at the February RMC meeting
      staff recommended a draft TLCP for approval. The RMC approved the TLCP and
      requested staff to provide additional analysis as follows:

          1. Look to utilize the PTF balance at the end of the program to fund the local
             share of the Glendale extension in Glendale, and

          2. Look at assumptions made by ADOT as it relates to revenues over the next
             20 to 25 years using a straight line growth.

      That information was developed and discussed at the Rail Staff Working Group.
      Additional issues were raised related to the movement of PTF to corridors that
      were traditionally funded locally.

      Mr. Wulf Grote, Director of Project Development, provided the RMC with a
      handout of summary of options requested by the RMC that were discussed at the
      Rail Staff Working Group. The handout outlined the following:
Rail Management Committee Meeting Minutes
April 7, 2010
Page 2 of 3

        •   Option 1 – The original RMC recommendation with PTF replacing local
            funds for Northwest Extension and three miles of Glendale Extension.

        •   Option 2 – PTF replaces local funds for Northwest Extension and all of
            Glendale Extension.        Also, two assumptions in revenue changed:
            availability of additional CMAQ funds and ability to program regional PTF
            beyond the 2026-2031 years of the program.

        •   Option 3 – PTF distribution per existing TLCP.

        The handout also provided PTF fund balance calculations requested by the
        RMC: ADOT forecast (official forecast for the Plan) and 5.8% straight line
        forecast.

        Mr. Mehta stated that the RMC recommended approval of the TLCP as
        presented at the February meeting. All of options presented indicate that
        financially the TLCP model is sound and healthy without affecting any other
        city or any other line that is within this time frame. The test of reasonably
        available funds has been met. There is a positive surplus based on
        conservative growth factors. He added that the surplus should be used in the
        appropriate years so as not to defer the projects as much as seven years.
        The surplus should be applied so we don’t defer projects to such a great
        extent.

        Chairman Cavazos confirmed with Mr. Mehta his proposal of approval of
        Option 2. Mr. Mehta concurred.

        IT WAS MOVED BY JEFF MARTIN AND SECONDED BY CARLOS DELEON
        TO RECOMMEND THAT THE BOARD APPROVE OPTION 3, THE USE OF
        PTF CORRIDOR DISTRIBUTIONS CONSISTENT WITH THE ADOPTED TLCP
        AND THE APPROVAL OF THE FY 2010 LIGHT RAIL/HIGH CAPACITY
        TRANSIT LIFE CYCLE PROGRAM UPDATE AS IDENTIFIED IN THE
        ATTACHED REPORT. THAT PROGRAM INCLUDES THE SCHEDULE OF
        PROJECTS, THEIR COMPLETION DATE, COSTS AND REVENUE
        SOURCES.

        Mr. DeLeon stated that the issue is not necessarily financial balance, but
        rather commitments made by the region for funding certain corridor
        extensions. He stated that further discussions and policy decisions need to
        be made regarding commitments to offsetting local funds that were not
        originally part of the plan.

        Mr. John McCormack, Director of Finance and Administration, stated that one
        of the concerns METRO had was the financial capacity of each of the local
        member cites to fund the operating costs as it relates to Option 2. We have
        been informed that the Northwest Extension Phase I operating funds would
Rail Management Committee Meeting Minutes
April 7, 2010
Page 3 of 3

        not be sufficient for a 2017 completion. Time is needed to evaluate the sales
        tax rebound in order to commit to moving forward with the project.

        Mr. Grote added that the fund balance is a capital fund balance and it does
        not look at operating funds.

        Mr. Cook stated that under Option 2 the $16 million fund balance is less than
        ½ of 1% for the total program for the capital side. He stated that it is
        dangerous and possibly irresponsible to use such a low fund balance. Option
        3 is closer to 4.3% even with the assumption that 5.8% is correct. Normally
        you would expect a 10% fund balance reserve.

        Mr. McCormack stated a healthy fund balance should be maintained;
        however, a policy identifying the level of balance has not been established as
        of today, but recognize that even with a 5.8% growth rate there is a margin for
        error and how quickly taxes rebound is an unknown.

        Mr. Grote stated that the fund balance is for 2026, the end of the TLCP. The
        regional plan goes to 2031. The fund balance still provides us an ability to
        fund the Northeast Extension beyond the 2026 horizon. If the fund balance is
        depleted it would take the ability to fund it.

        THE MOTION WAS APPROVED BY A VOTE OF 4 TO 2 (GLENDALE AND
        PEORIA VOTED NO).

4.   Future Rail Management Committee Agenda Items

     There were no requests for future agenda items.

5.   Adjournment

     The meeting adjourned at 1:50 p.m.
         AGENDA ITEM 5
     FY 2011 Public Meeting Results
Regarding Potential Service Changes
                                                                      AGENDA ITEM 5

To:          Chairman Cavazos and Members of the Rail Management Committee

Through:     Stephen R. Banta, Chief Executive Officer

From:        John Farry, Director of Community and Government Relations

Date:        April 28, 2010

Re:          Fiscal Year 2011 Public Meeting Results Regarding Potential Service
             Changes



PURPOSE
The purpose of this item is to provide a summary of input from the two public meetings
and comments received via email on potential METRO Fiscal Year (FY) 2011 service
change options.

BACKGROUND
As a result of the economic downturn and a decline in available city funding for transit
operations, METRO is considering service change options for the FY 2010-11. Seven
possible service change options were developed by METRO staff. These options were
developed following internal cost-cutting efforts and with the customer in mind.
Attached you will find a summary of the input received from the public input
opportunities.

To understand customer priorities, METRO staff conducted two public meetings – one
in Phoenix and another in the East Valley. A presentation providing an outlook on the
national and local transit climate and discussing the service change options was
delivered, followed by a question-and-answer period. Surveys were handed out and
completed by many of those in attendance. The public was also offered information
online, through printed material, the news media, and the ability to comment
electronically via email.

METRO received 26 completed surveys and 42 emailed comments. The survey and
email responses were consistent.

The service change options that create the least impact or received the greatest support
are:

   Reducing peak service frequency from 10 to 12 minutes.
   Shortening the peak service period by two hours.
   Adding holiday service level to fine additional days.
Rail Management Committee Memo
April 28, 2010
Page 2


The service change options that create the most impact or received the greatest
opposition are:

   Shortening service day by two hours, an hour on each end.
   Eliminating late-night service on Friday nights/Saturday mornings.
   Eliminating late-night service on Saturday nights/Sunday mornings.

RECOMMENDATION
This item is for information only.
                       FY 2011 Service Change Public Involvement Summary

Public Meetings

METRO conducted two public outreach meetings in March 2010 to review the service change
options with riders and understand their priorities via a meeting survey. The meetings were
conducted on Tuesdays, March 2 and 9, from 6 – 8 p.m. at light-rail accessible locations in Phoenix
and the East Valley.

Changes to the operation are being considered to help address a decline in sales tax revenue
as a result of the slow economy. Sales tax revenue is the largest funding source for transit
service Valleywide; fare revenue supports the balance of operating costs at approximately 25
percent

March 2, 2010 meeting | METRO Boardroom, Phoenix

Twenty citizens were in attendance ranging from experienced to new transit users.

Staff in attendance:

Steve Banta             Ray Abraham
Hillary Foose           John McCormack
John Farry              Kristin Roberts
Coral Balcazar

March 9, 2010 meeting | Tempe Transportation Center, Tempe

Twenty-two citizens were in attendance, also ranging in transit use experience. More student
participation was had at this meeting.

Staff in attendance:

Steve Banta             Jay Harper
Hillary Foose           Ray Abraham
John Farry              John McCormack
Andrea Libey            Wulf Grote
Coral Balcazar          Sue Taaffe (Tempe)
Jodi Sorrell (Mesa)

In addition to capturing their insights on possible service changes, the meeting survey asked
questions regarding the attendees’ use of the light rail system.

Forty-four percent of respondents use light rail as their primary mode of transit, followed by local bus
and a combination of light rail and local bus.
FY11 Service Change Public Meeting Summary
Page 2 of 5


Sixty-three percent of survey respondents use light rail more than three days a week; three to five
days being the majority.

Thirty-eight percent of survey respondents ride light rail for primarily work purposes followed by 33
percent who use the system for entertainment. A handful of respondents selected “school” and
“other” as their primary purpose for using light rail. “Other” was noted as going to the supermarket,
bank and other errands.

Meeting Notification Method

Multiple efforts were undertaken to notify the public of the opportunity for public comment including:

   Production of printed piece detailing meetings and other ways to comment distributed inside the
    vehicle.

   Creation of a webpage dedicated to providing service change information in detail.

   Communication through METRO Facebook and Twitter.

   Sending of broadcast emails.

   Sending of a news release to media.

   Communication through partners including member cities, RPTA, Friends of Transit and ASU.

Meeting Agenda

6 – 6:15 p.m.           Open house; surveys handed out.

6:15 – 6:20 p.m.        H. Foose conducts welcome, reviews housekeeping items, initiates PowerPoint
                        presentation.

6:20 – 6:40 p.m.        S. Banta discusses transit climate, service change options and rationale and
                        next steps.

6:40 – 7:10 p.m.        Q&A moderated by H. Foose; staff provides answers and listens to
                        comments/suggestions.

7:10 – 8 p.m.           Open house; surveys collected; staff discusses one-on-one with attendees.
FY11 Service Change Public Meeting Summary
Page 3 of 5


Survey Results

Attendees were asked to complete a survey to understand which of the seven service change
options had the most to least impact on their lives. The 26 completed surveys have been tallied to
give an understanding of rider priorities.

Note: For the purposes of this document only, the options are numbered to allow for easy reference.

Service Change Option                        No                  Some                Significant
                                             Impact              Impact              Impact

1. Reduce peak service frequency from        65%                 23%                 12%
   10 to 12 minutes

2. Reduce peak service frequency from        14%                 50%                 35%
   10 to 15 minutes

3. Shorten the peak service period by        42%                 39%                 19%
   two hours

4. Shorten the service day by two hours      15%                 27%                 58%

5. Eliminate late-night service on Fridays   15%                 31%                 54%

6. Eliminate late-night service on           15%                 31%                 54%
   Saturdays

7. Implement holiday service on five         42%                 50%                 8%
   more days

The top three service change options that create the MOST impact for customers are items 4
(service day) and 5 and 6 (late-night weekend service) respectively. The options that create the
LEAST impact are items 1 (12-minute peak frequency), 7 (additional holidays) and 3 (shorten peak
period).

Online Feedback

In addition to the public meetings, METRO provided citizens the opportunity throughout the month of
March 2010 to comment on the service changes options electronically. METRO received 42
comments via email.

Online Results

The feelings expressed through the online feedback align with those from the meeting surveys.

The top two options that create the MOST impact for customers are items 5 and 6 (late-night
weekend service). From these respondents, there was a split between those customers that use the
late-night weekend service and those who do not use it directly, but feel it is a positive generator for
the cities.
FY11 Service Change Public Meeting Summary
Page 4 of 5


The top two options that create the LEAST impact are items 1 (12-minute peak frequency) and 7
(additional holidays).

Sampling of Comments

These comments are a sampling of those received via the meeting surveys and email. They
are representative of general rider sentiment.

Re: Service Changes

   If any service cuts have to happen, I think it makes sense to reduce to every 12 minutes, but
    not every 15. Five minutes added to the frequency would be noticed.

   Maintaining late-night weekend service is very important.

   I am strongly against shortening the service day; it would impact people’s ability to get to
    work.

   Instead of eliminating late-night service altogether, could service be reduced slightly? For
    example, to 1 a.m. rather than 3 a.m.

   Consider altering the frequency of late-night weekend service to every 30 minutes and use
    smaller trains.

   Cutting service is a better option than raising fares.

   As you reduce service and/or increase fares, the riding public will leave transit and go back
    to their cars.

   During rush hours, the trains are really busy; service reductions would make them more
    busy. Consider the number of trains used when service changes take effect. Single trains
    should only be reserved for truly off-peak periods.

   Consider running more service/greater capacity during peak times of day, including when
    schools let out (i.e. Central High School).

Miscellaneous

   Why are not all agencies present? Rather than making piecemeal cuts, need to merge
    agencies. We need a regional system, not one where each element is managed
    independently.

   Fare hikes are unpopular, but sometimes it is better to act unpopular than imprudently.

   Need to find a stable revenue source that should come from general funds.

   Consider re-negotiating with private contractors to achieve lower costs.

   Consider other, non-operational alternatives to bring in revenue, like advertising sales,
    naming rights and permit parking.
FY11 Service Change Public Meeting Summary
Page 5 of 5


   More fare enforcement needed – you are loosing money.

   Why so much waste on paper passes? They system should be using rechargeable passes.

   Need more retail locations and vending machines for purchase of fare media.

   All students, no matter their age, should qualify for a reduced fare.

   Consider instituting a citizen volunteer program to help educate passengers and report
    issues.

   Trains need to be timed better with the airport shuttle.

   Consider using the air-conditioning in the trains more conservatively.

   Consider instituting a “night owl” ticket to support late-night service ($2.00 charge). Or allow
    the “bars” benefiting from the late-night hours to sponsor the service.

   Consider opening up the Platinum Pass program to individuals.

   Consider a family pass. With the recent fare increase, it’s less affordable for families to ride.
                           AGENDA ITEM 6
            FY 2011 Operating and Capital Budget and
FY 2011 – 2015 Operating Forecast and Capital Program
                                                                         AGENDA ITEM 6

To:          Chairman Cavazos and Members of the Rail Management Committee

Through:      Stephen R. Banta, Chief Executive Officer

From:        John P. McCormack, Director of Finance and Administration

Date:        April 28, 2010

Re:          Fiscal Year (FY) 2011 Annual Operating and Capital Budget and
             FY2011 – 2015 Operating Forecast and Capital Program

PURPOSE
The Fiscal Year (FY) 2011 Proposed Operating and Capital Budget and the FY 2011-2015
Operating Forecast and Capital Program for Valley Metro Rail, Inc. (METRO) are presented
to the Rail Management Committee (RMC) to seek recommendation to the METRO Board
(Board) for approval and acceptance, respectively. Attached you will find a copy of each
document.

BACKGROUND/DISCUSSION
FY 2011 Proposed Operating and Capital Budget. METRO’s continuing goal is to
provide the highest quality services to our customers and member communities in the
most cost effective manner. The METRO budget process is a key piece of the strategy
to achieve these results in a coordinated manner and to make fiscally responsible
decisions that will ultimately produce a premier rail transit system in the Phoenix
metropolitan area.

Given the current economic conditions, METRO has taken actions in the current fiscal
year (FY09-10) to reduce costs including a reduction in staff and the deferral of hiring of
authorized positions and no wage increases.

For FY 2011, METRO has incorporated the following internal cost saving measures:
   • Zero wage increases for the year
   • Continued deferral of hiring authorized positions
   • Reduce marketing costs by 50%
   • Reduce consultant contractor hours

The addition of these internal cost savings measures did not provide the necessary
savings to accommodate for the loss in revenues. Service reductions are needed to
meet the available revenues. It is METRO’s goal to take action related to service cuts
that have the least impact to the customer. After a public meeting process, METRO has
included the following service reductions:
Rail Management Committee Memo
April 28, 2010
Page 2

   •   Reduce peak service frequency from 10 to 12 minutes.
   •   Reduce peak service by 2 hours (1 ½ hours in the a.m. and ½ hour in the p.m.).
   •   Implementation of holiday service levels to five additional days.

METRO’s budget process serves two principal purposes. Within the agency,
development of the budget provides a forum for joint planning of objectives and tasks,
with managerial and board review of programs. It sets the expectations for performance
in the coming year(s). For the agency’s members and partner agencies, the budget
reports on the status of projects and services, detailing the agency’s operational
objectives, capital improvements, and funding plans.

The annual budget is prepared on the modified accrual basis and adopted by the Board
each fiscal year. With respect to Capital Budgets, project contingency accounting is
used to control expenditures within available project funding limits. With respect to
Operating Budgets, encumbrance accounting is not used and all appropriations lapse at
the end of the year. METRO staff positions are listed and approved as part of the
annual budget process. Prior to final adoption, a proposed budget is presented to the
Board for review. Final adoption of the budget must be on or before June 30 of each
year.

The FY 2011 budget has been prepared in a collaborative effort with input from member
city representatives of the Rail Staff Working Group and the Financial Working Group.

               FY 2011 Proposed Operating and Capital Uses of Funds

    Uses of Funds                                      ($,000)
                                                                    FY 2010
                                                       FY 2011     Amended      Change

    Operating Activities:
     Revenue Operations                       37.6%      33,497        33,733      (236)
     Future Project Development               10.7%       9,565        12,685    (3,120)
     Agency Operating Budget                   1.1%       1,016         1,254      (238)
                                              49.5%      44,078        47,672    (3,594)

    Capital Projects:
     20-Mile METRO Initial Segment            20.5%      18,272        41,274   (23,002)
     Northwest Extension                       5.8%       5,125        31,924   (26,799)
     Non-Prior Rights Utilities Relocations    3.1%       2,806         5,250    (2,444)
     Other Capital Projects:                                                        -
       Central Mesa Extension                 15.7%      14,001           827    13,175
       South Tempe Extension                   0.0%         -              59       (59)
       Phoenix West Extension                  0.1%           45           91       (46)
       CNPAs - 20-Mile Initial Segment         2.4%       2,167         3,775    (1,608)
       ARRA - Phoenix P& R Improvements        2.5%       2,261         3,900    (1,639)
       ARRA - RPTA Ariz Avenue BRT             0.0%          -            250      (250)
       Systemwide Improvements                 0.4%         350         2,229    (1,879)
                                              50.5%      45,027        89,578   (44,551)

    Total Uses of Funds                       100.0%     89,105       137,250   (48,145)
Rail Management Committee Memo
April 28, 2010
Page 3


             FY 2011 Proposed Operating and Capital Sources of Funds


    Sources of Funds                                    ($,000)
                                                                      FY 2010
    Operating Activities:                              FY 2011       Amended        Change
     Fare Revenue                            10.2%         9,099           8,985         114
     Advertising Revenue                      0.3%           250             350        (100)
     Federal 5339                             1.6%         1,400             950         450
     Federal CMAQ                             0.8%           750           1,000        (250)
     Member Cities                           28.5%        25,410          25,770        (360)
     MAG / RPTA (RARF)                        1.1%         1,000           1,000         -
     PTF Bond - Capital Project Planning      6.9%         6,170           9,617      (3,447)
                                             49.5%        44,079          47,672      (3,593)
    Capital Projects:
     FTA - Section 5309                       68.7%        61,250        126,882     (65,632)
     Federal CMAQ                             12.3%        11,000          5,978       5,022
     Federal ARRA                              2.5%         2,261          4,150      (1,889)
     Member Cities                           -94.4%       (84,101)      (116,060)     31,959
     PTF Bond Revenue                         15.0%        13,395          9,569       3,826
     PTF Sales Tax Revenue                    46.3%        41,221         59,058     (17,837)
                                              50.5%        45,026         89,578     (44,552)

    Total Sources of Funds                  100.0%        89,105        137,250      (48,145)

Note: Negative sources of funds reflect reimbursements to Member Cities for the CPEV 20-Mile
Initial Segment Capital Project. Sources of funding include federal grant proceeds and Public
Transportation Fund revenues to reimburse regional assets.
Rail Management Committee Memo
April 28, 2010
Page 4

FY 2011 – 2015 Operating Forecast and Capital Program

The Five-Year Operating Forecast and Capital Program are intended to provide mid-range
financial planning information for our member cities. Budget authority resides in the annual
fiscal year document, which authorizes staffing and sets spending limits.

The Five-Year Operating Forecast and Capital Program covering fiscal years 2011 through
2015 has been developed in conjunction with the annual budget process. The five-year
document provides a detail of projected capital costs and revenues summarized as follows:


  Uses of Funds Five Year Total                                            YOE ($,000)
   LRT Operations & Maintenance                                  21.6%     $ 181,607
   Project Development Planning                                   3.6%         30,130
   Agency Operating Budget                                        0.6%          5,396
        Subtotal - Operations and Proj Dev                       25.9%             217,133
   CP/EV LRT Project                                              2.8%              23,632
   Northwest Extension Phase 1                                   13.5%             113,039
   Central Mesa                                                  21.5%             180,954
   Tempe South                                                    8.8%              73,945
   Phx West                                                      14.6%             122,998
   14 LRV's                                                       1.9%              15,897
   CNPA and ARRA Projects                                         0.5%               4,428
   Non-Prior Rights Utilities                                     3.8%              31,679
   Systemwide Improvements                                        0.3%               2,190
   PT F Debt Service                                              6.4%              53,827
        Subtotal - Capital                                       74.1%             622,589
  Total Uses                                                    100.0%     $       839,722



 Sources of Funds Five Year Total                                               ($,000)
  LRT Fares                                                         5.8%       $   49,028
  Phoenix                                                           5.6%           47,034
  Tempe                                                             1.2%           10,394
  Mesa                                                              0.4%            3,349
  Glendale                                                          0.0%              162
  Chandler                                                          0.0%              252
  PTF Sales Tax Revenue                                            28.0%          235,378
  PTF (Reserve) / Borrowing                                        13.8%          116,241
  FTA Section 5309                                                 23.4%          196,583
  FTA Section 5339                                                  0.2%            1,800
  CMAQ / STP                                                       10.6%           88,979
  Other Federal                                                    10.2%           85,306
 Total Sources                                                    100.0%       $ 839,722
Rail Management Committee Memo
April 28, 2010
Page 5

                           METRO FIVE-YEAR OPERATING FORECAST

Forecasted operating costs and revenues over the five-year period are detailed in the report,
including a projection of rail passenger operational costs, fare collections, and Member City
contributions.   Project Development costs include alternatives analysis, design criteria
studies, and environmental impact studies leading up to selection of a project to enter
preliminary engineering. A summary of sources and uses of funds is shown below:



                                        2011     2012     2013     2014     2015      TOTAL
USES OF FUNDS
 Operations and Maintenance             33,497   35,402   36,464   37,558    38,685   181,607
 Project Development Planning Support    9,565    6,576    5,673    5,116     3,200    30,130
 Agency Operating Budget                 1,017    1,047    1,078    1,110     1,144     5,396
   Total Uses                           44,079   43,025   43,215   43,784    43,029   217,133

SOURCES OF FUNDS
 LRT Fares:
  Phoenix                                5,659    5,936    6,114    7,066     7,517    32,293
  Tempe                                  2,592    2,719    2,801    2,606     2,481    13,200
  Mesa                                     847      889      915      453       431     3,535
    Subtotal Fares                       9,098    9,544    9,831   10,126    10,429    49,028
 Other Revenues
  Phoenix                               16,706   17,593   18,018   17,790    18,085    88,192
  Tempe                                  7,617    8,135    8,379    8,909     9,380    42,419
  Mesa                                   1,102    1,182    1,218    1,744     1,832     7,079
  Glendale                                  31       31       32       33        34       162
  Chandler                                 121       31       32       33        34       252
  Peoria                                    86       31       32       33        34       217
    Subtotal Local Revenues             25,662   27,005   27,711   28,543    29,400   138,321

 Capital Planning Funds - PTF            6,170    5,076    4,673    4,116     2,200    22,235

 MAG                                       500      500      500      500       500     2,500
 RPTA                                      500      500      500      500       500     2,500
 FTA 5339                                1,400      400      -        -         -       1,800
 CMAQ                                      750      -        -        -         -         750
 Total Sources                          44,079   43,025   43,215   43,785    43,029   217,133
Rail Management Committee Memo
April 28, 2010
Page 6


                         METRO FIVE-YEAR CAPITAL PROGRAM FORECAST


                                     Pre 2011         2011          2012           2013           2014          2015           Total
USES OF FUNDS
 CP/EV LRT Project                   1,388,493         18,272         5,360             -            -              -        1,412,125
 Northwest Extension Phase 1            78,000          5,125        51,049         56,866           -              -          191,039
 Central Mesa                              -           14,001        22,531         37,069        51,222         56,131        180,954
 Tempe South                               -              -           5,118         15,181        24,874         28,772         73,945
 Phx West                                  -                45       34,277         19,794        32,952         35,930        122,998
  Subtotal HCT Corridors             1,466,493         37,443       118,335        128,910       109,048        120,833      1,981,061
 14 LRV's                               42,186            -             -               -         15,897            -           58,083
 CNPA and ARRA Projects                122,216          4,428           -               -            -              -          126,644
 Non-Prior Rights Utilities             80,561              56       13,671         16,743         1,209            -          112,240
 Systemwide Improvements                   570            350           357            500           483            500          2,760

PTF Bond Debt Service:
 Principal Payments                      1,186          2,664         2,771          2,910        10,749         10,880         31,159
 Interest Payments                       2,755          2,748         2,724          3,400         7,675          7,308         26,609
Total Capital Costs                  1,715,967         47,688       137,858        152,462       145,060        139,520      2,338,557


SOURCES OF FUNDS
 Phoenix                               685,522        (49,968)         9,558        11,438        (12,186)           -         644,364
 Tempe                                 173,796        (30,627)        (1,398)           -             -              -         141,771
 Mesa                                   31,376          (3,506)         (224)           -             -              -          27,646
 Glendale                                  -               -             -              -             -              -             -
 All Others                                -               -             -              -             -              -             -
  Subtotal                             890,694        (84,101)         7,935        11,438        (12,186)           -         813,780

Public Transportation Funds            239,573         57,279        50,679         55,729         99,134        66,563        568,958
    Sales Tax Proceeds                 217,691         41,221        44,515         47,096         49,828        52,718        453,069
    Bond Proceeds                       21,882         16,058         6,164          8,632         49,307        13,845        115,888

Federal Revenues:
 FTA                                   525,950         61,250        17,799         35,000        35,507         47,027        722,533
 CMAQ                                   59,750         11,000        13,827         14,869        22,605         25,930        147,980
 Other Federal                             -            2,261        47,618         35,427           -              -           85,306
   Subtotal Federal                    585,700         74,511        79,244         85,296        58,112         72,957        955,819
Total Revenues                       1,715,967         47,688       137,858        152,463       145,060        139,520      2,338,557


Note: Negative sources of funds reflect reimbursements to Member Cities for the CPEV 20 Mile Initial Segment Capital Project. Sources of
funding include federal grant proceeds and Public Transportation Fund revenues to reimburse regional assets.




Working in collaboration with the METRO member cities, a series of public meetings were
conducted to discuss funding constraints and service reduction options. The consensus
from customer comments was that the reduction of peak service frequency from 10 to 12
minutes and reduction of two peak service hours each weekday were preferred versus other
alternatives presented. In addition, as a cost saving measure to be coordinated with
regional bus service, five weekdays have been converted to holiday service levels. Staff
met with the Rail Financial Working Group on April 15 and with the Rail Staff Working Group
on April 23 to review the preliminary budget assumptions and fiscal impacts.
Rail Management Committee Memo
April 28, 2010
Page 7

FISCAL IMPACT
The FY 2011 Operating and Capital Budget has been prepared with the goal of delivering a
fiscally prudent, balanced budget. Member City contributions have been held to agreed
upon targets with the service reductions for fiscal year 2011. The annual budget details and
five year plan are been updated in accordance with the comments received by city staff
members.

RECOMMENDATION
Staff requests that the RMC recommend that the Board adopt the FY 2011 Operating
and Capital Budget and accept the FY 2011 through FY 2015 Five-Year Operating
Forecast and Capital Program.
             PRELIMINARY FY 2011 OPERATING
                  AND CAPITAL BUDGET
                          July 1, 2010 – June 30, 2011




Adopted FY 2008-09                     0                 May 2008
Operating and Capital Budget
METRO
                               Valley Metro Rail, Inc.
                                      Phoenix, Arizona




                        Preliminary Operating and Capital Budget
                                  Fiscal Year 2010/2011




                                   Board of Directors
                       Chairman – Councilman Tom Simplot, Phoenix
                       Vice Chairman – Vice Mayor Kyle Jones, Mesa
                                 Mayor Bob Barrett, Peoria
                               Mayor Hugh Hallman, Tempe
                           Councilman Rick Heumann, Chandler

                               Mayor Elaine Scruggs, Glendale


                             Executive Management Team
                        Stephen R. Banta, Chief Executive Officer
                       Raymond Abraham, Chief Operations Officer
                    Brian Buchanan, Design and Construction Director
                John Farry, Community and Government Relations Director
                        Wulf Grote, Project Development Director
                         Jay Harper, Chief of Safety and Security
                              Mike Ladino, General Counsel
                  John McCormack, Finance and Administration Director




Preliminary FY 2010-2011                     i                            May 2010
Operating and Capital Budget
                                                Table of Contents
METRO Organization ................................................................................................................1
METRO Vision ...........................................................................................................................2
FY 2010 Accomplishments .......................................................................................................2
FY 2011 Goals and Objectives .................................................................................................3
Rail Operations Service Plan ..................................................................................................5
Total Financial Program ...........................................................................................................6
Staffing Requirements ..............................................................................................................8
FY 2010-2011 Budgets:
          Overall Operating and Capital Budget .......................................................................10
                     Budget Analysis ...............................................................................................11
          Overall Operating Budget ...........................................................................................12
                     Revenue Operations Budget ...........................................................................13
                     Future Project Development Budget ..............................................................14
                     Agency Operating Budget ...............................................................................15
                     Agency Overhead Allocation ..........................................................................16
          Overall Capital Budget ................................................................................................17
                     20-Mile METRO Initial Segment Budget..........................................................18
                     Northwest Extension Phase I Budget .............................................................19
                     Central Mesa LRT Extension Budget..............................................................20
                     South Tempe, and I-10 HCT Capital
                     Project Budgets ...............................................................................................21
                     20-Mile METRO Initial Segment CNPA Budget............................................... 22
                     Non-Prior Rights Utilities Relocation Budget ................................................ 22
                     ARRA Funded Construction Project – Systemwide Improvements ............. 23
CP/EV Project Budget Overview ............................................................................................24
Funds Flow FY 2011................................................................................................................26
Pay Grades and Ranges .........................................................................................................27
Full-Time Equivalent (FTE) Allocated by Project ..................................................................29
METRO Agency Organizational Chart ...................................................................................31




Preliminary FY 2010-2011                                           ii                                                       May 2010
Operating and Capital Budget
METRO ORGANIZATION

Valley Metro Rail, Inc. (METRO) is a public non-profit corporation whose members are
the cities of Chandler, Glendale, Mesa, Peoria, Phoenix, and Tempe. METRO was
created to manage the design, construction, and operation of the Light Rail Transit
(LRT) System within the Metropolitan Area. The Board of Directors includes the mayors
of the member cities or their designated representatives. The Board of Directors
establishes overall policies and provides general oversight of the METRO agency and
its responsibilities.

The Chief Executive Officer (CEO) is responsible for implementing the agency vision
and the day-to-day management of the organization. The CEO plans, coordinates, and
directs the activities of the Management staff in carrying out the organization’s
responsibilities. The Management Staff includes a limited number of core agency
employees, augmented by consultant personnel with specialized expertise and
experience in light rail planning, design, construction, and operations on a project-by-
project basis. The following chart depicts the policy organization for METRO and the
relationships to key stakeholders.

                               METRO Policy Organization




Preliminary FY 2010-2011                   1                                   May 2010
Operating and Capital Budget
METRO VISION

In June of 2004, the METRO Board of Directors adopted a Vision Statement to describe
what METRO will be when it has achieved a high level of success. The Vision was
developed by volunteers of the METRO staff as part of the strategic planning effort that
began with the development of the Vision statement and continued throughout this fiscal
year. The Vision Statement of METRO is:

       “METRO will be recognized as a trusted and respected community
       partner and visionary leader that provides a premier regional rail transit
       system with a commitment to customer service, quality and safety,
       which enhances quality of life and is a point of pride for our
       community.”

FY 2010 ACCOMPLISHMENTS

   •   METRO ridership success
           o Exceeded projections by 45% in 2009 (projected ridership – 7.8
              million/actual ridership – 11.1 million)
           o Projected weekday rides 26,000/actual rides 40,530 (Jan- Mar 2010)
           o Single day ridership surpassed 50,000 on nine occasions since the
              inception of revenue service.
           o METRO Rail is delivering 19.7% of total bus/rail rides in the region.
   •   Continued the safety awareness campaign to ensure the delivery of safety
       messages to drivers and METRO passengers.
   •   Information and system improvements were implemented to better serve METRO
       passengers.
   •   Implementation of the “Rail Ride” program with U.S. Airways Center that provides
       patrons to use event tickets as fare media.
   •   Implementation of the “Adopt-A-Station” program that further integrates METRO
       into the community.
   •   Board adoption of a policy permitting limited advertising on METRO vehicles and
       stations.
   •   Continued progress on Alternatives Analysis for three future high capacity transit
       corridors including the adoption of a Locally Preferred Alternative on the Central
       Mesa extension.

Awards Received by METRO

   •   ADA Liberty Progress Award to METRO and Valley Metro – Arizona Disability
       Advocacy Coalition
   •   Outstanding Transit Organization Excellence Award – Arizona Transit
       Association


Preliminary FY 2010-2011                    2                                   May 2010
Operating and Capital Budget
     •   President’s Award, Crescordia Award and two Awards of Merit – Valley
         Forward’s Environmental Excellence Awards
     •   Silver Telly Award for METRO safety video
     •   Project of the Year – Associated Minority Contractors of America
     •   Public Works Project of the Year – American Public Works Association, Arizona
         Chapter
     •   Certificate of Achievement for Excellence in Financial Reporting for Fiscal Year
         2008 CAFR – Government Financial Officers’ Association awards METRO.

FY 2011 GOALS AND OBJECTIVES

Goals are based on the following keys to a successful transportation system that
connects people to life:

            •   A quality human resource
            •   A system in a state of good repair
            •   Customer oriented service
            •   Coordinated and cost-effective system expansion
            •   Sound relationships with public and private stakeholders

1.       Operate a safe, efficient, customer-oriented, reliable METRO system.
         • Maintain an efficient operation that meets established schedules and
           operational baselines.
         • Manage an effective safety and security program.
         • Ensure timely and effective customer communication.
         • Maximize fare revenues through continued coordination with regional and
           local entities to ensure effective fare policies across all public transportation
           modes.
         • Continue development of information systems to support rail operations.

2.       Maintain sound and trusted relationships with public and private
         stakeholders including improved coordination with all public transportation
         operators.
         • Work with other public transportation operators in the region to optimize
            passenger usage of the entire public transportation system.
         • Maintain professional relationships with the media resulting in objective news
            coverage.
         • Successful implementation of marketing strategies that maximize ridership
            from event venues (e.g. Phoenix Suns, AZ Diamondbacks, ASU Sun Devils,
            etc.)
         • Continue public involvement activities related to future METRO extensions.
         • Continue to improve and maintain a sound relationship with the FTA to foster
            federal support for future rail projects.


Preliminary FY 2010-2011                      3                                    May 2010
Operating and Capital Budget
       •   Maintain sound relationships with Congressional leaders and Arizona
           delegation members that maximizes federal funding for the METRO system,
           especially related to the annual appropriations process and the
           reauthorization of SAFETEA-LU.

3.     Expansion of the METRO system through effective planning, design, and
       construction of the high capacity/light rail transit element of the Regional
       Transportation Plan.
       • Advance the development of the Central Mesa, Tempe South, and Phoenix
          West high capacity/light rail transit corridors that is consistent with agreed
          upon schedules.
       • Actively pursue regional, state, and federal funding opportunities to facilitate
          implementation of the region’s high capacity transit program.
       • Actively explore ways to reduce future project costs to address shortfalls in
          regional funding for the transit program.
       • Develop corridor planning studies as assigned through the regional planning
          process.

4.     Maintain organizational sustainability and a sound human resource.
       • Provide appropriate level of professional development and training
         opportunities consistent with budgetary times.
       • Assure strict compliance with state, local and federal laws, regulations and
         procedures including the application of federal best practices in all
         procurement activities
       • Maintain technical skillsets related to the operation, planning, design, and
         construction of light rail, including those management skills related to financial
         management and procurement.




Preliminary FY 2010-2011                    4                                     May 2010
Operating and Capital Budget
Rail Operations Service Plan

Service Frequency FY 2011 Plan:
Weekday trains will run with two cars at 12 minute intervals during peak hours and 15 to
20 minute intervals off peak. Weekends do not require peak service trains and will
operate with one or two cars at 15 to 20 minute headways. Service headways and train
lengths will be adjusted over time to accommodate growth and service patterns.

                Time of Day                             Service Frequency
Monday - Friday 4:40 am to 7:30 am                         20 minutes
Monday - Friday 7:30 am to 6:30 pm                         12 minutes
Monday - Thursday 6:30 pm to 12:00 am                      20 minutes
Friday 6:30 pm to 2:00 am                                  20 minutes
Saturday 5:00 am to 11:00 pm                               15 minutes
Saturday 11:00 pm to 2:00 am                               20 minutes
Sunday 5:00 am to 11:00 pm                                 20 minutes

In addition, five days currently scheduled for weekday service frequency will be
converted to holiday schedule frequency (Sunday schedule).


Ridership and Fare Revenue:

Total Ridership is forecasted at 11.400 million passengers for the year with fare
revenues generating $9.098 million. Over the course of the fiscal year 2011, average
weekday boardings are forecasted at 36,317 exceeding the FFGA target ridership by
10.317 per day.     Saturday and Sunday average ridership are forecasted at 26,200
and 16,500 per day respectively.

 Average                                               Annual Ridership / Fares
  Daily Baseline Rides                                     Fare Assumption
  26,000  Weekday                                   6,552,000   $   0.80   $      5,241,600
  20,800  Saturday                                  1,081,600   $   0.80   $        865,280
  13,000  Sunday                                      676,000   $   0.80   $        540,800
           Total Baseline Rides                     8,309,600              $      6,647,680
           Additional Rides - Exceeding FFGA Target:
  10,317     Weekday                              2,599,898 $       0.80   $      2,079,918
   5,400     Saturday                                280,800 $      0.80   $        224,640
   3,500     Sunday                                  182,000 $      0.80   $        145,600
           Total Weekday Additional Rides           3,062,698              $      2,450,158


  31,243   Total Ridership and Fare Revenue        11,372,298   $   0.80   $      9,097,838




Preliminary FY 2010-2011                       5                                          May 2010
Operating and Capital Budget
TOTAL FINANCIAL PROGRAM

The FY 2011 Operating and Capital Budget has been prepared with the goal of delivering a
fiscally prudent, balanced budget. Last year, the Board approved a total of $137.3 million for
the FY 2010 Operating and Capital Budget. Total expenditures for FY 2011 are estimated
to be $89.1 million. The unexpended balance for FY 2010 capital expenditures has been
reprogrammed in the project cash flow for expenditure in future years.


Uses of Funds - The FY 2011 Budget includes anticipated operating and capital
expenditures in the amount of approximately $89.1 million to support thirteen program
elements during the period of July 1, 2010 through June 30, 2011, as follows:



     Uses of Funds                                             ($,000)
                                                                             FY 2010
                                                               FY 2011      Amended       Change

     Operating Activities:
      Revenue Operations                           37.6%          33,497         33,733       (236)
      Future Project Development                   10.7%           9,565         12,685     (3,120)
      Agency Operating Budget                       1.1%           1,016          1,254       (238)
                                                   49.5%          44,078         47,672     (3,594)

     Capital Projects:
      20-Mile METRO Initial Segment                20.5%          18,272         41,274    (23,002)
      Northwest Extension                           5.8%           5,125         31,924    (26,799)
      Non-Prior Rights Utilities Relocations        3.1%           2,806          5,250     (2,444)
      Other Capital Projects:                                                                  -
        Central Mesa Extension                     15.7%          14,001            827     13,175
        South Tempe Extension                       0.0%             -               59        (59)
        Phoenix West Extension                      0.1%              45             91        (46)
        CNPAs - 20-Mile Initial Segment             2.4%           2,167          3,775     (1,608)
        ARRA - Phoenix P& R Improvements            2.5%           2,261          3,900     (1,639)
        ARRA - RPTA Ariz Avenue BRT                 0.0%             -              250       (250)
        Systemwide Improvements                     0.4%             350          2,229     (1,879)
                                                   50.5%          45,027         89,578    (44,551)

     Total Uses of Funds                          100.0%          89,105        137,250    (48,145)

Note: Negative Sources of Funds reflect reimbursements to Member Cities for the CPEV 20 Mile Initial
Segment Capital Project. Sources of funding include federal grant proceeds ant PTF revenues forecasted to
fund Regional Assets.




Preliminary FY 2010-2011                           6                                           May 2010
Operating and Capital Budget
Sources of Funds - The FY 2011 Operating and Capital Budget will be funded with a
combination of Fare Revenues, Member City contributions, Public Transportation Funds,
Federal 5309 New Starts and Congestion Mitigation and Air Quality (CMAQ) funding, and
other local funding.     For the CPEV 20 mile construction project, full Federal 5309
reimbursement is expected to be received in August 2010. The FY 2011 Budget includes
anticipated capital and operating sources of funds in the amount of approximately $89.1
million, as follows:



     Sources of Funds                               ($,000)
                                                                  FY 2010
    Operating Activities:                           FY 2011      Amended        Change
     Fare Revenue                          10.2%        9,099          8,985         114
     Advertising Revenue                    0.3%          250            350        (100)
     Federal 5339                           1.6%        1,400            950         450
     Federal CMAQ                           0.8%          750          1,000        (250)
     Member Cities                         28.5%       25,410         25,770        (360)
     MAG / RPTA (RARF)                      1.1%        1,000          1,000         -
     PTF Bond - Capital Project Planning    6.9%        6,170          9,617      (3,447)
                                           49.5%       44,079         47,672      (3,593)
    Capital Projects:
     FTA - Section 5309                     68.7%      61,250        126,882     (65,632)
     Federal CMAQ                           12.3%      11,000          5,978       5,022
     Federal ARRA                            2.5%       2,261          4,150      (1,889)
     Member Cities                         -94.4%     (84,101)      (116,060)     31,959
     PTF Bond Revenue                       15.0%      13,395          9,569       3,826
     PTF Sales Tax Revenue                  46.3%      41,221         59,058     (17,837)
                                            50.5%      45,026         89,578     (44,552)

    Total Sources of Funds                 100.0%      89,105       137,250      (48,145)




Preliminary FY 2010-2011                    7                                       May 2010
Operating and Capital Budget
STAFFING REQUIREMENTS

Rail Operations Personnel – In light of current year funding constraints related to
economic conditions and resulting reductions in sales tax collections, METRO is
proposing to reduce and defer existing positions and add others to ensure system
reliability. The proposed changes are as follows:

                   Authorized Positions FY 2010                         96

                   Positions Reduced :
                                    Real Estate Program Manager         -1
                                       Rail DBE Program Manager         -1
                                    Finance and Budget Manager          -1
                                       METRO Marketing Manager          -1
                                         Administrative Assistant       -1

                   Positions Deferred:
                                                     Track Maintainer   -2
                                   Traction Power Systems Technician    -2
                                 Signals & Comm Systems Technician      -2
                                              Network Support Analyst   -1
                                               Maintenance Scheduler    -1
                               Rail Operations & Maintenance Director   -1

                   Positions Added:
                                         Chief Maintenance Engineer     1
                                                     Budget Analyst     1

                   Revised Positions for FY 2011                        84

Reasons for Staffing Changes - The changes are intended to hold down FY 2011 costs
by deferring positions needed as the system matures.

   1.     In the first fifteen months of operations, METRO has been able to keep pace with
          Preventative Maintenance requirements by crews foregoing vacations and sick
          time. With the new system still covered by warranty, repairs are limited in the first
          year.

   2.     Elements of the system are now over two years old and maintenance requirements
          are increasing. Safety requirements do not allow any work to be performed along
          the rail corridor without a watchperson. Many maintenance activities, such as
          repairing overhead catenary systems, require a minimum of two and often three-
          person crews. These needs necessitate additional technicians and maintainers for
          track, power and signal control systems. In response to budget constraints staff is
          currently meeting these needs with overtime. The deferred maintenance staff
          positions related to maintenance will be requested in FY 2012 timeframe..


Preliminary FY 2010-2011                           8                                  May 2010
Operating and Capital Budget
          Two positions are being added to enhance METRO’s ability to control costs of
          operations in the coming years. The Chief Maintenance Engineer will provide
          technical support and oversight over maintenance activities and contractors. The
          Budget Analyst will develop budgets, forecast and track costs as well as
          investigate budget variances and cost savings opportunities.


Fiscal Impact – Since there are no proposed cost-of-living or merit increases for FY 2011,
the overall decrease relates to lower actual costs versus the costs anticipated in the FY
2010 Adopted Budget.

All duties related to the 14 reduced and deferred positions are being assumed by other
personnel. As the system becomes more mature, it may become necessary to reinstate
positions to hiring status.

Staff Listing A listing of the existing METRO full-time equivalent positions by project is
included on page 30 and 31. A listing of the METRO FY 2011 Pay Grades and Ranges is
included on page 28 and 29.

Staffing Costs

The FY 2011 Budget includes salary, benefit, and corresponding overhead costs assuming
a 0% increase. In FY 2011, salary adjustments will be made only for changes in job
responsibility. The funding for METRO staff authorized in the FY 2011 Budget will be used
to reimburse RPTA for their costs to support METRO staffing requirements. Pages 11-24
provide line-item salary and benefit cost information applied to the various FY 2011 budgets.

Organizational Chart
The organization chart attached at the end of this document illustrates the METRO
management organization. It includes the proposed position included in the FY 2011
Budget.

FIVE-YEAR OPERATING AND CAPITAL PROGRAM

The By-Laws of the Corporation call for the Board of Directors to approve a Five-Year
Operating and Capital Program (Program) annually, which identifies anticipated
operating costs, capital projects and costs, and the associated funding sources. The FY
2011 – FY 2015 Five-Year Operating and Capital Program will be completed and
submitted to the Board of Directors for approval along with the FY 2011 Operating and
Capital Budget.




Preliminary FY 2010-2011                     9                                      May 2010
Operating and Capital Budget
          Valley Metro Rail, Inc.
          FY 2010-11 Proposed Overall Operating & Capital Budget


                                                                    2010/2011              2009/10             Amount        Budget
                                                                    Proposed              Amended             Increase/      Analysis
                                                                     Budget                Budget            (Decrease)       Note #
          Sources of Funds
          Fare Revenue                                          $      9,097,839      $     8,985,159    $        112,680          1
          Advertising Revenue                                            250,000              350,000            (100,000)         2
          FTA - Section 5309                                          61,250,000          126,881,999         (65,631,999)         3
          FTA - Section 5339                                           1,400,000              950,000             450,000
          Federal - CMAQ                                              11,750,000            6,978,000           4,772,000          4
          Federal - ARRA                                               2,261,200            4,150,000          (1,888,800)         5
          Chandler                                                       120,477               50,000              70,477
          Glendale                                                        30,477               37,627              (7,149)
          Mesa - See Note below                                       (2,416,412)          (9,107,315)          6,690,903          6
          Peoria                                                          85,477               92,627              (7,149)
          Phoenix- See Note below                                    (33,430,401)         (57,503,641)         24,073,240          6
          Scottsdale                                                         -                 50,000             (50,000)
          Tempe - See Note below                                     (23,080,524)         (23,909,773)            829,249          6
          MAG / RPTA Planning Funds                                    1,000,000            1,000,000                   -
          PTF Revenue Bonds                                           19,565,761           34,536,843         (14,971,083)         7
          PTF Revenue - Sales Tax                                     41,221,021           43,708,444          (2,487,423)         7
                                                                $     89,104,915      $   137,249,970    $    (48,145,055)

          Expenditures
          Salaries and Fringe Benefits                          $         8,445,470   $     8,550,190    $       (104,720)         8
          RPTA Overhead                                                     607,919           990,379            (382,461)         8
          Transportation Contractors Labor & Materials                    8,572,923         9,901,532          (1,328,609)         9
          Fare Inspection & Security                                      3,745,400         3,492,809             252,591
          Propulsion Power                                                2,623,866         2,532,851              91,015         10
          Vehicle Maintenance Contractor Labor & Materials                5,526,719         5,407,373             119,346
          Systems & Facilities Maintenance Contractors                    1,683,336         1,544,962             138,374
          SFM Material / Supplies / Other Direct Costs                    1,420,800           846,000             574,800         11
          Utilities                                                       1,513,880         1,052,700             461,180         10
          Fare Collection Material/Security                                 343,302           388,386             (45,084)         1
          Regional Customer Services                                        150,515           150,258                 257          1
          Safety Consultants                                                476,450           417,050              59,400          1
          Consulting COP Liaison                                            125,000           125,000                   -
          Consultants - General/Final Engineering                         5,200,000         1,550,000           3,650,000         12
          City management & administration                                      -           1,875,000          (1,875,000)        13
          Consultants - Construction Admin.                                 200,000         1,906,000          (1,706,000)        13
          Consultants - Art Design                                          250,000            15,000             235,000         12
          Consultants - Planning/Environmental                            7,523,450         8,431,000            (907,550)
          Consultants - Other                                             1,923,753         1,404,583             519,170
          Pothole Program                                                   750,000               -               750,000         12
          Facilities construction                                         9,177,909        11,016,000          (1,838,091)
          Light rail vehicles                                             1,500,000         3,500,000          (2,000,000)
          Systems                                                           858,007         1,700,000            (841,993)        13
          Real estate acquisition                                        10,836,239        31,100,000         (20,263,761)        14
          Project reserve                                                   563,413           367,413             196,000
          Training & seminars                                                42,670             8,050              34,620
          Advertising                                                        98,250           158,000             (59,750)
          Printing                                                           39,000            38,750                 250
          Postage                                                             6,000            12,450              (6,450)
          Public meetings & information                                      50,500            54,500              (4,000)
          Other direct expenditures                                         607,820           479,970             127,850
          LRT project office expense                                        290,800             5,900             284,900
          LRT audit and accounting costs                                     33,500            26,250               7,250
          LRT risk management                                                   -                 -                     -
          LRT legal services                                                363,000           626,500            (263,500)
          Liability Insurance                                             1,350,000         1,800,000            (450,000)
          Local meetings & mileage                                            6,400             1,800               4,600
          Travel expenses                                                    35,650            29,750               5,900
          LRT startup cost                                                      -           1,000,000          (1,000,000)        13
          Interest expense                                                9,522,000        28,360,327         (18,838,328)        13
          Non-Prior Rights Utility Relocation                                25,000         2,500,000          (2,475,000)        13
          14 LRV's                                                              -           1,635,840          (1,635,840)
          LRT project capital outlay                                        758,025           618,028             139,997
          Agency Overhead Allocation                                      1,857,950         1,629,370             228,580
                   Grand Total                                  $        89,104,915   $   137,249,970    $    (48,145,055)


          Note: Negative Sources of Funds reflect reimbursements to Member Cities for the CPEV 20 Mile Initial Segment
          Capital Project. Sources of funding include federal grant proceeds and PTF revenues forecasted to fund Regional
          Assets.


                                                  See Page 11 for Budget Analysis Notes.

Preliminary FY 2010-2011                                            10                                                             May 2010
Operating and Capital Budget
Valley Metro Rail, Inc.
Proposed FY 2010-11 Operating and Capital Budget



BUDGET ANALYSIS
The following is an analysis of the major changes in the FY 2011 Proposed Budget over the FY 2010
Adopted Budget. The number in the "Note" column corresponds to the "Note" column of the "Adopted FY
2010/11 Overall Operating & Capital Budget." See Page 11.


 Note    Budget Analysis
     1   Fare revenues are based on ridership estimates and average fares per ride. See Page 5 for
         details.
     2   Advertising revenues are forecast for light rail vehicle advertising wraps and station platform
         advertisements. Current economic conditions have reduced the overall advertising market and
         created greater price competition.
     3   The capital construction phase of the CP/EV LRT initial 20-mile segment is coming to a close
         with the beginning of revenue operations on December 26, 2008. Federal Section 5309 funding
         is expected to be completed in August 2010.
     4   The FY 2010 revenue for CMAQ is the forecast for the Central Mesa LRT extension. The $11.0
         million CMAQ fund request is part of the 2010 Regional Transportation Plan Update and the TIP.

     5   Federal ARRA project funding is to expand and construct shade canopies for Phoenix Park and
         Ride locations serving the LRT alignment.
     6   Negative Revenues represent reimbursements to Member Cities for capital contributions on the
         CPEV 20 mile project. Funding is from FTA grants and Regional PTF sales tax proceeds.

     7   PTF sales tax revenues are forecast to be $41.2 million for FY 2011. The first phase of PTF
         bonding was completed in June 2009. Of the 2009 Series Bonds, $19.6 million will be expended
         in FY 2011 to fund capital projects.
     8   Overall salaries, benefits and RPTA overhead are down for FY 2011 and do not include any cost-
         of-living or merit increases. Refer to staffing discussion on Pages 8 and 9.
     9   Transportation contract costs are down with the reduction of peak service frequencies and
         durations. See page 5 for description of Rail Operation Service Plan.
    10   Propulsion Power and Utilities are up based on forecasted power rate increases as well as
         recognition of actual costs experienced in the first 15 months of operations
    11   Materials for system maintenance costs increase as many system components are beyond
         warranty coverage period.
    12   Engineering and preconstruction costs are up with the commencement of Central Mesa LRT
         design.
    13   With the conclusion of the CPEV 20 mile project, and deferral of the NW Extension project,
         general construction and project management costs are down.
    14   Real Estate Acquisitions for CPEV and NW Extension projects are concluding, while the Central
         Mesa ROW acquisitions are commencing.




Preliminary FY 2010-2011                           11                                          May 2010
Operating and Capital Budget
          Valley Metro Rail, Inc.
          FY 2010-11 Proposed Overall Operating Budget


                                                                  2010/2011           2009/10            Amount
                                                                  Proposed           Amended            Increase/
                                                                   Budget             Budget           (Decrease)
          Sources of Funds
          Fare Revenue                                        $      9,097,839   $     8,985,159   $        112,680
          Advertising Revenue                                          250,000           350,000           (100,000)
          FTA - Section 5309                                               -                 -                    -
          FTA - Section 5339                                         1,400,000           950,000            450,000
          Federal - CMAQ                                               750,000         1,000,000           (250,000)
          Chandler                                                     120,477            50,000             70,477
          Glendale                                                      30,477            37,627             (7,149)
          Mesa                                                       1,090,116         1,471,563           (381,447)
          Peoria                                                        85,477            92,627             (7,149)
          Phoenix                                                   16,537,632        16,489,869             47,763
          Scottsdale                                                       -              50,000            (50,000)
          Tempe                                                      7,546,231         7,577,916            (31,685)
          MAG / RPTA Planning Funds                                  1,000,000         1,000,000                  -
          ASU/Others                                                       -                 -                    -
          PTF Capital Project Planning Bond Revenue                  6,169,649         9,617,399         (3,447,750)
                                                              $     44,077,898   $    47,672,159   $     (3,594,261)

          Expenditures
          Salaries and Fringe Benefits                        $      7,120,026   $     7,362,025   $       (241,999)
          RPTA Overhead                                                515,946           933,429           (417,483)
          Transportation Contractors Labor & Materials               8,572,923         9,901,532         (1,328,609)
          Fare Inspection & Security                                 3,745,400         3,492,809            252,591
          Propulsion Power                                           2,623,866         2,532,851             91,015
          Vehicle Maintenance Contractor Labor & Materials           5,526,719         5,407,373            119,346
          Systems & Facilities Maintenance Contractors               1,683,336         1,544,962            138,374
          SFM Material / Supplies / Other Direct Costs               1,420,800           846,000            574,800
          Utilities                                                  1,513,880         1,052,700            461,180
          Fare Collection Material/Security                            343,302           388,386            (45,084)
          Park & Ride Lots / Contingency                                   -                 -                    -
          Regional Customer Services                                   150,515           150,258                257
          Safety Consultants                                           476,450           417,050             59,400
          Regional Office Center                                           -                 -                    -
          Consultants - Planning/Environmental                       5,263,450         8,431,000         (3,167,550)
          Consultants - Other                                          888,500           882,346              6,154
          Project reserve                                              563,413           367,413            196,000
          Employee development                                             -                 -                    -
          Training & seminars                                           27,670             7,050             20,620
          Advertising                                                   78,250           158,000            (79,750)
          Printing                                                      10,500            33,750            (23,250)
          Postage                                                        2,500            11,200             (8,700)
          Public meetings & information                                 42,000            54,500            (12,500)
          Other direct expenditures                                    560,320           464,860             95,460
          LRT project office expense                                       -               3,800             (3,800)
          LRT audit and accounting costs                                33,500            26,250              7,250
          LRT risk management                                              -                 -                    -
          LRT legal services                                            80,000            75,000              5,000
          Liability Insurance                                        1,350,000         1,800,000           (450,000)
          Local meetings & mileage                                       3,450             1,700              1,750
          Travel expenses                                               17,950            28,750            (10,800)
          LRT project capital outlay                                    28,300            22,000              6,300
          Agency Overhead Allocation                                 1,434,933         1,275,167            159,766
                  Grand Total                                 $     44,077,898   $    47,672,159   $     (3,594,261)




Preliminary FY 2010-2011                                     12                                                     May 2010
Operating and Capital Budget
              Valley Metro Rail, Inc.
              FY 2010-11 Proposed METRO Revenue Operations Budget




                                                                     2010/2011              2009/10              Amount
                                                                     Proposed              Amended              Increase/
                                                                      Budget                Budget             (Decrease)
             Sources of Funds
             Mesa Fare Revenue                                  $           847,000    $        439,374              407,626
             Phoenix Fare Revenue                                         5,658,672           6,027,245             (368,572)
             Tempe Fare Revenue                                           2,592,166           2,518,540               73,626
             Mesa Advertising                                                12,225              17,115               (4,890)
             Phoenix Advertising                                            167,700             234,780              (67,080)
             Tempe Advertising                                               70,075              98,105              (28,030)
             Mesa Base Cost Contributions                                   637,063           1,071,696             (434,633)
             Phoenix Base Cost Contributions                             14,699,398          14,701,307               (1,909)
             Tempe Base Cost Contributions                                5,914,642           6,143,077             (228,435)
             Mesa Local Security                                            371,780             299,530               72,250
             Phoenix Local Security                                       1,230,280           1,161,452               68,828
             Tempe Local Security                                         1,296,340           1,020,946              275,394
                                                                $        33,497,342    $     33,733,168    $        (235,825)

             Expenditures
             Salaries and Fringe Benefits                       $         4,218,806           4,565,705    $        (346,898)
             RPTA Overhead                                                  305,711             429,220             (123,509)
             Transportation Contractors Labor & Materials                 8,572,923           9,901,532           (1,328,609)
             Fare Inspection & Security                                   3,745,400           3,492,809              252,591
             Propulsion Power                                             2,623,866           2,532,851               91,015
             Vehicle Maintenance Contractor Labor & Materials             5,526,719           5,407,373              119,346
             Systems & Facilities Maintenance Contractors                 1,683,336           1,544,962              138,374
             SFM Material / Supplies / Other Direct Costs                 1,420,800             846,000              574,800
             Utilities                                                    1,513,880           1,052,700              461,180
             Fare Collection Material/Security                              343,302             388,386              (45,084)
             Regional Customer Services                                     150,515             150,258                  257
             Advertising                                                     77,000             150,000              (73,000)
             General & Administrative Costs                                 460,620             338,360              122,260
             Consultants                                                    476,450             417,050               59,400
             LRT legal services                                              80,000              75,000                5,000
             Liability Insurance                                          1,350,000           1,800,000             (450,000)
             Contingency Reserve                                            563,413             367,413              196,000
             Agency Overhead Allocation                                     384,602             273,551              111,051
                                                                $        33,497,342    $     33,733,168    $        (235,825)



             Allocation of Operating Costs


                Phoenix
                  Base Costs                                    $        19,958,281    $     20,342,321    $        (384,041)
                  Regional Security                                         567,490             621,010              (53,520)
                  Local Security                                          1,230,280           1,161,452               68,828
                                                      64.949%            21,756,051          22,124,784             (368,733)
                  Less Fares and Advertising Distributed                 (5,826,372)         (6,262,025)             435,652
              Phoenix Net Contribution                                   15,929,678          15,862,759               66,919

                Tempe
                  Base Costs                                              8,339,724           8,500,196             (160,472)
                  Regional Security                                         237,160             259,527              (22,367)
                  Local Security                                          1,296,340           1,020,946              275,394
                                                      29.475%             9,873,224           9,780,669               92,555
                  Less Fares and Advertising Distributed                 (2,662,241)         (2,616,645)             (45,596)
             Tempe Net Contribution                                       7,210,982           7,164,024               46,959
               Mesa
                  Base Costs                                              1,453,938           1,481,842              (27,903)
                  Regional Security                                          42,350              46,344               (3,994)
                  Local Security                                            371,780             299,530               72,250
                                                       5.577%             1,868,068           1,827,715               40,353
                  Less Fares and Advertising Distributed                   (859,225)           (456,489)            (402,736)
             Mesa Net Contribution                                        1,008,843           1,371,226             (362,382)

              Total Operating Costs                             $        33,497,342    $     33,733,168    $        (235,825)
                                                    100.000%




Preliminary FY 2010-2011                                            13                                                          May 2010
Operating and Capital Budget
    Valley Metro Rail, Inc.
    FY 2010-11 Proposed Future Project Development Budget


                                                           2010/2011             2009/10              Amount
                                                           Proposed             Amended              Increase/
                                                            Budget               Budget             (Decrease)
    Sources of Funds
    FTA - Section 5339                                $        1,400,000    $        950,000    $        450,000
    Chandler *                                                    90,000              12,373              77,627
    Glendale                                                         -                   -                   -
    Peoria *                                                      55,000              55,000                 -
    Phoenix *                                                    100,000                 -               100,000
    Scottsdale                                                       -                50,000             (50,000)
    MAG                                                          500,000             500,000                 -
    RPTA (RARF/Other)                                            500,000             500,000                 -
    PTF Revenue Bonds                                          6,169,649           9,617,399          (3,447,750)
    FHWA - CMAQ                                                  750,000           1,000,000            (250,000)
                                                      $        9,564,649    $     12,684,772    $     (3,120,123)

    Expenditures
    Salaries and Fringe Benefits                      $        2,477,787    $      2,356,823    $        120,964
    RPTA Overhead                                                179,552             463,105            (283,553)
    Consultants - Planning/Environmental                       5,263,450           8,431,000          (3,167,550)
    Consultants - Other                                          654,500             461,846             192,654
    Training & seminars                                           11,000               3,000               8,000
    Advertising                                                    1,000               7,500              (6,500)
    Printing                                                       8,500              32,500             (24,000)
    Postage                                                        2,500              10,700              (8,200)
    Public meetings & information                                  9,000              10,000              (1,000)
    Other direct expenditures                                     14,100               4,200               9,900
    LRT project office expense                                         -                 800                (800)
    Local meetings & mileage                                       3,450               1,700               1,750
    Travel expenses                                                6,000              11,500              (5,500)
    LRT project capital outlay                                    28,300              22,000               6,300
    Agency Overhead Allocation                                   905,510             868,098              37,412
                                                      $        9,564,649    $     12,684,772    $     (3,120,123)



    * City of Chandler funding for Arizona Avenue HCT analysis is to be funded from existing cash reserve.
    * City of Peoria funding for Transit Oriented Development is to be funded from existing cash reserve.
    * City of Phoenix funding provides local match for South Central Corridor study.

    Note: Future Project Development includes expenditures funded by the Public Transportation Fund for the
    development of capital projects as listed in the Regional Transportation Plan. These expenditures include
    environmental and alternatives analysis studies necessary to qualify the capital projects for federal funding.




Preliminary FY 2010-2011                              14                                              May 2010
Operating and Capital Budget
   Valley Metro Rail, Inc.
   FY 2010-11 Proposed Agency Operating Budget



                                           2010/2011            2009/10            Amount
                                           Proposed            Amended            Increase/
                                            Budget              Budget           (Decrease)
   Sources of Funds
   Chandler                           $           30,477   $        37,627   $         (7,149)
   Glendale                                       30,477            37,627             (7,149)
   Mesa                                           81,273           100,338            (19,065)
   Peoria                                         30,477            37,627             (7,149)
   Phoenix                                       507,954           627,110           (119,156)
   Tempe                                         335,249           413,892            (78,643)
                                      $        1,015,907   $     1,254,220   $       (238,313)

   Expenditures
   Salaries and Fringe Benefits       $          423,433   $       439,497   $        (16,064)
   RPTA Overhead                                  30,683            41,104            (10,421)
   Consultants - Other                           234,000           420,500           (186,500)
   Training & seminars                            16,670             4,050             12,620
   Advertising                                       250               500               (250)
   Printing                                        2,000             1,250                750
   Postage                                           -                 500               (500)
   Public meetings & information                  33,000            44,500            (11,500)
   LRT project office expense                        -               3,000             (3,000)
   Other direct expenditures                      85,600           122,300            (36,700)
   LRT audit and accounting costs                 33,500            26,250              7,250
   Travel expenses                                11,950            17,250             (5,300)
   Agency Overhead Allocation                    144,821           133,518             11,303
                                      $        1,015,907   $     1,254,220   $       (238,313)




Preliminary FY 2010-2011                  15                                          May 2010
Operating and Capital Budget
   Valley Metro Rail, Inc.
   FY 2010-11 Proposed Agency Overhead Allocation



                                               2010/2011            2009/10            Amount
                                               Proposed            Amended            Increase/
                                                Budget              Budget           (Decrease)
   Allocation of Costs
   Agency Overhead Allocation:        $                    -   $             -   $              -
    Revenue Operations                               384,602           273,062            111,540
    CP/EV                                             87,685           183,810            (96,125)
    Northwest Extension                                    -           170,392           (170,392)
    Central Mesa                                     320,723                              320,723
    Tempe South                                            -                                    -
    Phoenix West                                       6,684                                6,684
    Agency Operating                                 144,821           133,518             11,303
    Future Projects Baseline                         905,510           591,315            314,195
    NPR Utilities                                      7,925           276,783           (268,858)
    ARRA FUNDING                                      14,358            70,145            (55,787)
    RPTA Bus Capital FUNDING                               -            60,484            (60,484)
                                      $            1,872,308   $     1,759,509   $        112,799

   Expenditures
   Salaries & Fringes                 $              38,113    $             -   $         38,113
   RPTA Overhead                                      2,762                  -              2,762
   Building Rent                                  1,281,237          1,284,000             (2,763)
   Building Rent Sublease                                 -                  -                  -
   Parking                                           21,564             42,000            (20,436)
   IT Services                                      333,402            203,754            129,649
   Equipment Leases                                  45,874             59,433            (13,559)
   Equipment Maintenance                              5,779             20,115            (14,336)
   Office Supplies                                   58,050             51,358              6,692
   Telecommunication Services                        37,140             34,812              2,328
   Employee development                               6,000             16,500            (10,500)
   Other Office Expense Contingency                       -             33,798            (33,798)
   LRT project capital outlay                        42,386             13,740             28,646
                                      $           1,872,308    $     1,759,509   $        112,799




Preliminary FY 2010-2011                  16                                           May 2010
Operating and Capital Budget
   Valley Metro Rail, Inc.
   FY 2010-11 Proposed Overall Capital Budget


                                                           2010/2011             2009/10             Amount
                                                           Proposed             Amended             Increase/
                                                            Budget               Budget            (Decrease)
   Sources of Funds
   Fare Revenue                                        $               -    $             -    $              -
   FTA - Section 5309                                         61,250,000        126,881,999         (65,631,999)
   Federal - CMAQ                                             11,000,000          5,978,000           5,022,000
   Federal - ARRA                                              2,261,200          4,150,000          (1,888,800)
   Mesa - See Note below                                      (3,506,528)       (10,578,878)          7,072,351
   Phoenix                                                   (49,968,033)       (73,993,511)         24,025,478
   Tempe - See Note below                                    (30,626,755)       (31,487,689)            860,933
   PTF Revenue Bonds                                          13,396,112         24,919,444         (11,523,332)
   PTF Sales Tax Revenue                                      41,221,021         43,708,445          (2,487,424)
                                                       $      45,027,017    $    89,577,810    $    (44,550,793)

   Expenditures
   Salaries and Fringe Benefits                        $      1,325,444     $     1,188,165    $        137,279
   RPTA Overhead                                                 91,973              56,951              35,022
   Consulting COP Liaison                                       125,000             125,000                   -
   Consultants - General/Prelim Engineering                   5,200,000           1,550,000           3,650,000
   City management & administration                                 -             1,875,000          (1,875,000)
   Consultants - Construction Admin.                            200,000           1,906,000          (1,706,000)
   Consultants - Art Design                                     250,000              15,000             235,000
   Consultants - Planning/Environmental                       2,260,000                 -             2,260,000
   Consultants - Other                                        1,035,253             522,238             513,015
   Pothole Program                                              750,000                 -               750,000
   Facilities construction                                    9,177,909          11,016,000          (1,838,091)
   Light rail vehicles                                        1,500,000           3,500,000          (2,000,000)
   Systems                                                      858,007           1,700,000            (841,993)
   Real estate acquisition                                   10,836,239          31,100,000         (20,263,761)
   Training & seminars                                           15,000               1,000              14,000
   Advertising                                                   20,000                 -                20,000
   Printing                                                      28,500               5,000              23,500
   Postage                                                        3,500               1,250               2,250
   Public meetings & information                                  8,500                 -                 8,500
   Other direct expenditures                                     47,500              15,110              32,390
   LRT project office expense                                   290,800               2,100             288,700
   LRT legal services                                           283,000             551,500            (268,500)
   Liability Insurance                                              -                   -                     -
   Local meetings & mileage                                       2,950                 100               2,850
   Travel expenses                                               17,700               1,000              16,700
   LRT startup cost                                                 -             1,000,000          (1,000,000)
   Interest expense                                           9,522,000          28,360,326         (18,838,326)
   Non-Prior Rights Utility Relocation                           25,000           2,500,000          (2,475,000)
   14 LRV's                                                         -             1,635,840          (1,635,840)
   LRT project capital outlay                                   729,725             596,028             133,697
   Agency Overhead Allocation                                   423,017             354,202              68,815
           Grand Total                                 $     45,027,017     $    89,577,810    $    (44,550,793)


   Note: Negative Sources of Funds reflect reimbursements to Member Cities for the CPEV 20 Mile Initial Segment
   Capital Project. Sources of funding include federal grant proceeds and Prop 400 revenues forecasted to fund
   Regional Assets.




Preliminary FY 2010-2011                             17                                               May 2010
Operating and Capital Budget
      Valley Metro Rail, Inc.
      FY 2010-11 Proposed 20-Mile METRO Initial Segment Budget




                                                               2010/2011            2009/10           Amount
                                                               Proposed            Amended           Increase/
                                                                Budget              Budget          (Decrease)
      Sources of Funds
      FTA - Section 5309                                $           61,250,000 $ 126,881,999 $        (65,631,999)
      FTA - CMAQ                                                           -        5,618,000          (5,618,000)
      Local Match - Mesa                                            (3,506,528)   (10,668,878)          7,162,350
      Local Match - Phoenix                                        (47,110,033)  (102,728,243)         55,618,210
      Local Match - Tempe                                          (30,776,755)   (31,637,689)            860,934
      PTF Revenue - Sales Tax                                       38,415,000     53,808,445         (15,393,445)
                                                        $           18,271,684 $ 41,273,634 $         (23,001,950)

      Expenditures
      Salaries and Fringe Benefits                      $              238,275 $        111,291 $         126,984
      RPTA Overhead                                                     17,266           10,409             6,857
      Consultants - General/Prelim Engineering                         200,000          300,000          (100,000)
      Consultants - Program Management                                     -                -                 -
      City management & administration                                     -                -                 -
      Consultants - Construction Admin.                                    -            495,000          (495,000)
      Consultants - Art Design                                             -                -                 -
      Consultants - Planning/Environmental                             560,000           90,000           470,000
      Consultants - Other                                               46,203          357,238          (311,035)
      Facilities construction                                        3,871,909        4,242,000          (370,091)
      Light rail vehicles                                            1,500,000        3,500,000        (2,000,000)
      Systems                                                          858,007        1,700,000          (841,993)
      Real estate acquisition                                        3,770,239        3,100,000           670,239
      Training & seminars                                                  -              1,000            (1,000)
      Printing                                                             -              1,500            (1,500)
      Postage                                                              -              1,250            (1,250)
      Other direct expenditures                                            -             15,110           (15,110)
      LRT project office expense                                           -              2,100            (2,100)
      LRT legal services                                               283,000          551,500          (268,500)
      Local meetings & mileage                                             -                100              (100)
      Travel expenses                                                      -              1,000            (1,000)
      LRT startup cost                                                     -          1,000,000        (1,000,000)
      Interest expense                                               6,772,000       25,610,326       (18,838,326)
      LRT project capital outlay                                        67,100              -              67,100
      Agency Overhead Allocation                                        87,685          183,810           (96,125)
                                                        $           18,271,684 $     41,273,634 $     (23,001,950)



      Note: Negative Sources of Funds reflect reimbursements to Member Cities for the CPEV 20
      Mile Initial Segment Capital Project. Sources of funding include federal grant proceeds and
      PTF revenues forecasted to fund Regional Assets.




Preliminary FY 2010-2011                                18                                             May 2010
Operating and Capital Budget
  Valley Metro Rail, Inc.
  FY 2010-11 Proposed Northwest Extension Phase I Budget



                                                 2010/2011             2009/10             Amount
                                                 Proposed             Amended             Increase/
                                                  Budget               Budget            (Decrease)
  Sources of Funds
  PTF Revenue                                $              -     $      8,000,000   $     (8,000,000)
  Phoenix - Water Services                                  -                  -                  -
  Phoenix - T2000                                     5,125,000         23,923,892        (18,798,892)
                                             $        5,125,000   $     31,923,892   $    (26,798,892)

  Expenditures
  Salaries and Fringe Benefits               $              -     $        450,000   $       (450,000)
  RPTA Overhead                                             -               30,000            (30,000)
  Consulting COP Liaison                                125,000            125,000                -
  City management & administration                          -            1,875,000         (1,875,000)
  Consultants - General/Prelim Engineering                  -              470,000           (470,000)
  Consultants - Construction Admin.                         -            1,210,000         (1,210,000)
  Consultants - Art Design                                  -               15,000            (15,000)
  Consultants - Other                                       -               75,000            (75,000)
  Facilities construction                                   -                  -                  -
  Real estate acquisition                             5,000,000         27,500,000        (22,500,000)
  Training & seminars                                       -                  -                  -
  Advertising                                               -                  -                  -
  Printing                                                  -                3,500             (3,500)
  Postage                                                   -                  -                  -
  Public meetings & information                             -                  -                  -
  Other direct expenditures                                 -                  -                  -
  LRT project office expense                                -                  -                  -
  Local meetings & mileage                                  -                  -                  -
  Travel expenses                                           -                    -                -
  LRT project capital outlay                                -                    -                -
  Agency Overhead Allocation                                -              170,392           (170,392)
                                             $        5,125,000   $     31,923,892   $    (26,798,892)




Preliminary FY 2010-2011                         19                                          May 2010
Operating and Capital Budget
 Valley Metro Rail, Inc.
 FY 2010-11 Proposed Central Mesa HCT Capital Project



                                               2010/2011              2009/10             Amount
                                               Proposed              Amended             Increase/
                                                Budget                Budget            (Decrease)
 Sources of Funds
 PTF Revenue Bonds                         $         3,001,414   $        826,568   $      2,174,846
 FTA Section 5309                                          -                                     -
 CMAQ                                               11,000,000                            11,000,000
                                           $        14,001,414   $        826,568   $     13,174,846

 Expenditures
 Salaries and Fringe Benefits              $          973,988    $         41,671   $        932,317
 RPTA Overhead                                         70,578               3,897             66,681
 City management & administration                                                                -
 Consultants - General/Final Engineering             5,000,000            780,000          4,220,000
 Consultants - Program Management                                                                -
 Consultants - Construction Admin.                     200,000                               200,000
 Consultants - Planning/Environmental/PE             1,700,000                             1,700,000
 Consultants - Art Design                              250,000                               250,000
 Consultants - Other (7200)                            989,050                               989,050
 Pothole Program                                       750,000                               750,000
 NPR Utility Relocations                             1,000,000                             1,000,000
 Facilities construction                                   -                                     -
 Real estate acquisition                             2,000,000                             2,000,000
 Systems                                                                                         -
 Training & seminars                                    15,000                                15,000
 Advertising                                            20,000                                20,000
 Printing                                               28,500                                28,500
 Postage                                                 3,500                                 3,500
 Public meetings & information                           8,500                                 8,500
 Other direct expenditures                              22,500                                22,500
 LRT project office expense                            290,800                               290,800
 Local meetings & mileage                                2,950                                 2,950
 Travel expenses                                        17,700                                17,700
 Vehicle Related Expense                                25,000                                25,000
 LRT project capital outlay                            312,625              1,000            311,625
 Agency Overhead Allocation                            320,723                               320,723
                                           $        14,001,414   $        826,568   $     13,174,846




Preliminary FY 2010-2011                       20                                          May 2010
Operating and Capital Budget
 Valley Metro Rail, Inc.
 FY 2010-11 Proposed South Tempe HCT Capital Project

                                                 2010/2011                2009/10            Amount
                                                 Proposed                Amended            Increase/
                                                  Budget                  Budget           (Decrease)
 Sources of Funds

 PTF Revenue Bonds                          $                -       $        58,810   $        (58,810)
 CMAQ                                                        -                   -                  -
                                            $                    -   $        58,810   $        (58,810)

 Expenditures
 Salaries and Fringe Benefits               $                    -   $        52,866   $        (52,866)
 RPTA Overhead                                               -                 4,944             (4,944)
 Consultants - General/Prelim Engineering                    -                   -                  -
 LRT project capital outlay                                  -                 1,000             (1,000)
 Allocated OH                                                -                                      -
                                            $                    -   $        58,810   $        (58,810)




 FY 2010-11 Proposed Phoenix West HCT Capital Project

                                                 2010/2011                2009/10            Amount
                                                 Proposed                Amended            Increase/
                                                  Budget                  Budget           (Decrease)
 Sources of Funds
 PTF Revenue Bonds                          $          44,698        $        91,038   $        (46,340)
                                            $          44,698        $        91,038   $        (46,340)

 Expenditures
 Salaries and Fringe Benefits               $          35,446        $        82,337   $        (46,891)
 RPTA Overhead                                          2,568                  7,701             (5,133)
 Consultants - General/Prelim Engineering   $             -          $           -     $            -
 LRT project capital outlay                 $             -          $         1,000   $         (1,000)
 Allocated OH                               $           6,684        $           -     $          6,684
                                            $          44,698        $        91,038   $        (46,340)




Preliminary FY 2010-2011                    21                                                 May 2010
Operating and Capital Budget
Valley Metro Rail, Inc.
FY 2010-11 Proposed 20-Mile METRO Initial Segment--Concurrent Non-Project
Activities (CNPA) Budget
                                                                                    2010/2011               2009/10              Amount
                                                                                    Proposed               Amended              Increase/
                                                                                     Budget                 Budget             (Decrease)
Sources of Funds
Mesa                                                                                                   $         90,000    $        (90,000)
Mesa CMAQ Funding                                                                                               360,000            (360,000)
Phoenix                                                                                  2,017,000            3,175,000          (1,158,000)
Tempe                                                                                      150,000              150,000                 -
ASU, Others                                                                                                                             -
                                                                                $        2,167,000     $      3,775,000    $     (1,608,000)

Expenditures
Consultants - General/Prelim Engineering                                                               $            -      $            -
Consultants - Construction Admin.                                                                                   -                   -
Facilities construction                                                                  2,101,000            3,275,000          (1,174,000)
Systems                                                                                                             -                   -
Real estate acquisition                                                                     66,000              500,000            (434,000)
Project reserve                                                                                                     -                   -
                                                                                $        2,167,000     $      3,775,000    $     (1,608,000)




FY 2010-11 Proposed Non-Prior Rights Utilities Relocation Budget
                                                                                    2010/2011               2009/10              Amount
                                                                                    Proposed               Amended              Increase/
                                                                                     Budget                 Budget             (Decrease)
Sources of Funds
PTF Revenue Sales Tax                                                           $        2,806,021     $      5,250,000    $     (2,443,979)
                                                                                $        2,806,021     $      5,250,000    $     (2,443,979)

Expenditures
Salaries and Fringe Benefits                                                    $           21,535     $               -   $         21,535
RPTA Overhead                                                                                1,561                                    1,561
CP/EV NPR Utilities                                                                         25,000            2,000,000          (1,975,000)
Northwest Extension NPR Utilities                                                              -                500,000            (500,000)
Interest expense                                                                         2,750,000            2,750,000                 -
Agency Overhead Allocation                                                                   7,925                                    7,925
                                                                                $        2,806,021     $      5,250,000    $     (2,443,979)

* Note: 100% of PTF Bond funds required for the LRT Program are recorded to the NPR Utility Budget.
       Finance Costs will be collected in this budget and allocated to projects in future year budget presentations.



FY 2010-11 Proposed Systemwide Improvements
                                                                                    2010/2011               2009/10              Amount
                                                                                    Proposed               Amended              Increase/
                                                                                     Budget                 Budget             (Decrease)
Sources of Funds
City of Phoenix T 2000                                                          $      (10,000,000)    $      1,635,840    $    (11,635,840)
PTF Revenue Bonds                                                                       10,350,000              593,028           9,756,972
                                                                                $          350,000     $      2,228,868    $     (1,878,868)

Expenditures
14 Light Rail Vehicles - Phoenix                                                $                -     $      1,635,840    $     (1,635,840)
Systemwide Capital - Other                                                                 350,000              593,028            (243,028)
                                                                                $          350,000     $      2,228,868    $     (1,878,868)




     Preliminary FY 2010-2011                                           22                                                       May 2010
     Operating and Capital Budget
 Valley Metro Rail, Inc.
 FY 2010-11 Proposed RPTA CONSTRUCTION SUPPORT Budget

                                             2010/2011                2009/10            Amount
                                             Proposed                Amended            Increase/
                                              Budget                  Budget           (Decrease)
 Sources of Funds
 RPTA ARRA / PTF Revenue - Bus Capital   $                   -   $       250,000   $       (250,000)
                                         $                   -   $       250,000   $       (250,000)

 Expenditures
 Staff                                   $                   -   $       200,000   $       (200,000)
 Consulting                                              -                50,000            (50,000)
                                                             -               -                  -
                                         $                   -   $       250,000   $       (250,000)




 FY 2010-11 Proposed ARRA FUNDED CAPITAL PROJECTS Budget

                                             2010/2011                2009/10            Amount
                                             Proposed                Amended            Increase/
                                              Budget                  Budget           (Decrease)
 Sources of Funds
 Federal ARRA Funding                            2,261,200             3,900,000         (1,638,800)
                                         $       2,261,200       $     3,900,000   $     (1,638,800)

 Expenditures
 Staff                                   $          56,200       $       250,000   $       (193,800)
 Consulting                                            -                 151,000           (151,000)
 Construction                                    2,205,000             3,499,000         (1,294,000)
                                         $       2,261,200       $     3,900,000   $     (1,638,800)




Preliminary FY 2010-2011                         23                                                    May 2010
Operating and Capital Budget
                                                                  METRO

                                                         CPEV LRT Project

                                                     Project Budget Overview

                                                    FY 2011 and Total Project
                                                                        Adjusted March 2010 Cash Flow Forecast


                                                                         Projected         FY 11        Remaining
                               FFGA Original     March 2010         Expenditures         Projected     Forecasted
Description                    Project Budget Project Budget        Through FY 10         Budget       Expenditures         Total Forecast


Management/Administration       133,745,867.00   139,436,044.00     $    137,761,256 $       999,529 $    1,200,000     $      139,960,785
Real Estate/Right of Way          136,295,150      141,893,055      $    138,122,816       3,770,239            -              141,893,055
Engineering                       122,445,027      133,666,940      $    133,466,940         200,000            -              133,666,940
Owner Furnished Materials          29,671,419       33,195,541      $     33,195,541             -              -               33,195,541
Vehicles                          121,276,824      116,982,565      $    115,482,565       1,500,000            -              116,982,565
Facilities                        422,341,688      540,601,936      $    537,089,199       1,671,909            -              538,761,108
Systems                           119,790,902      113,481,312      $    112,623,305         858,007            -              113,481,312
Construction Administration        53,003,749       57,161,747      $     57,161,747             -              -               57,161,747
Archeology / HAZMAT removal                          7,372,689      $      7,072,689         300,000            -                7,372,689
Testing & Startup                  31,000,000       22,000,000      $     22,000,000             -              -               22,000,000
Arts Program                        6,283,133        6,283,133      $      6,283,133             -              -                6,283,133
Contingency Unallocated             7,575,241              -        $            -               -              -                      -
Project Reserve                    69,829,000        1,200,384      $            -         2,200,000      3,164,681              5,364,681

Subtotal                        1,253,258,000    1,313,275,346          1,300,259,191     11,499,684      4,364,681           1,316,123,556

Finance Costs                      158,867,346      98,850,000      $    89,229,790        6,772,000            -       $        96,001,790
Total CP/EV LRT Project        $ 1,412,125,346 $ 1,412,125,346      $ 1,389,488,981 $     18,271,684 $    4,364,681     $     1,412,125,346




Preliminary FY 2010-2011                                            24                                                May 2010
Operating and Capital Budget
                                                                                       METRO

                                                                            CPEV LRT Project

                                            Project Budget Overview – Management Administration

                                                                      FY 2011 and Total Project

                                                                                                      Projected           FY 11        Remaining
                                                               FFGA Original         March 2010     Expenditures        Projected     Forecasted         Total
            Description                                        Project Budget    Project Budget     Through FY 10        Budget       Expenditures    Forecast
            Consultants - Program Management                   $    53,053,279   $     52,653,279   $ 52,408,279    $        45,000   $   200,000    $ 52,653,279
            City Management                                         22,185,439         22,185,439      22,185,439               -             -         22,185,439
            ADOT Oversight                                             420,000          1,087,676         623,342               -             -            623,342
            Agency Insurance Cost                                    7,000,000          7,000,000       7,800,000               -             -          7,800,000
            RPTA Preliminary Eng MGMT                                4,363,526          7,851,554       8,388,002                                        8,388,002
            Construction Administration Services                     1,697,232          2,067,564       3,454,000            45,000           -          3,499,000
            CAB Program                                                    -            2,500,000       2,500,000               -             -          2,500,000
            Art Program Administration                                 414,632            414,632          35,699               -             -             35,699
            Administrative ROW Costs                                   696,712            557,660         791,139               -             -            791,139
            Administrative Management Contingency                          -              388,523             -                 -             -                -
            VMR Administration -see below detail                    43,915,047         42,729,717      39,575,356           909,529     1,000,000       41,484,885
              Management/Administration                            133,745,867        139,436,044   $ 137,761,256   $       999,529   $ 1,200,000    $ 139,960,785




            FY 2011 Budget Breakdown:
            Salaries and Fringe Benefits                                                            $ 16,154,228    $       238,275   $   227,000    $ 16,619,503
            RPTA Overhead                                                                           $  3,387,770             17,266        23,000    $ 3,428,036
            Consultants - Direct                                                                    $  2,914,312            232,286       500,000    $ 3,646,598
            Employee Development                                                                    $     82,140                -             -      $     82,140
            Conferences & Seminars                                                                  $    103,719                -             -      $    103,719
            Advertising / Safety Awareness                                                          $  1,435,789                -             -      $ 1,435,789
            Printing                                                                                $  1,086,956              6,363           -      $ 1,093,319
            Postage                                                                                 $    322,610              3,000           -      $    325,610
            Public Meetings & Information                                                           $    276,415                -             -      $    276,415
            Other Direct Expenditures                                                               $    606,722                -             -      $    606,722
            LRT Project Office Expense / Overhead Allocation                                        $  6,893,387             87,685           -      $ 6,981,072
            Contract Compliance Audit & Accounting Costs                                            $    195,922             15,616           -      $    211,538
            LRT Risk Management Costs                                                               $  1,365,736                -             -      $ 1,365,736
            LRT Legal Services                                                                      $  2,387,093            238,000       250,000    $ 2,875,093
            Local Meetings & Mileage                                                                $     11,772                938           -      $     12,710
            Travel Expenses                                                                         $    401,021              3,000           -      $    404,021
            LRT Project Capital Outlay                                                              $  1,949,765             67,100           -      $ 2,016,865
            Total VMR Administration                                                                $ 39,575,356    $       909,529   $ 1,000,000    $ 41,484,885




Preliminary FY 2010-2011                                                                    25                                                          May 2010
Operating and Capital Budget
                                                            Valley Metro Rail, Inc

                                                  Preliminary Funds Flow Fiscal Year 2011

                                                                   $ Thousands

                                   Central Phoenix/East Valley LRT Project               Other Costs Funded in Current FY

                               Costs Funded   Federal/Regional         Net CPEV
 Funding Sources                 Currently    Reimbursements            Sources      Central Mesa   Other Capital    Operations     Total Funding

 Fare Revenue:                 $        -     $             -      $            -    $        -     $         -      $        -     $         -
   Phoenix                                                                                                                  2,592           2,592
   Tempe                                                                                                                      847             847
   Mesa                                                                                                                     5,660           5,660
 Advertising Revenue:
   Phoenix                                                                                                                  168               168
   Tempe                                                                                                                     70                70
   Mesa                                                                                                                      12                12
 Phoenix                             16,048             (63,158)          (47,110)                         (2,858)       16,539           (33,429)
 Tempe                                1,882             (32,659)          (30,777)                            150         7,546           (23,081)
 Mesa                                   341              (3,848)           (3,507)                                        1,090            (2,417)
 Glendale                                                                                                                    30                30
 Chandler                                                                                                                   120               120
 Peoria                                                                                                                      85                85
 Scottsdale                                                                                                                 -                 -


 Federal 5309                                           61,250             61,250                                                          61,250
 Federal 5339                                                                                                               1,400           1,400
 Federal CMAQ                                              -                  -            11,000            -                750          11,750
 Regional PTF Sales Tax                                 38,415             38,415                          2,806                           41,221
 Regional PTF Revenue Bonds                                                                 3,001         10,395            6,170          19,566
 RPTA                                                                                                                         500             500
 MAG Arranged Funding                                                                                                         500             500
 Other Funding                                                                                             2,261                            2,261

 TOTAL FUNDING                 $     18,271   $             -      $       18,271    $     14,001   $     12,754     $   44,079     $      89,105



Preliminary FY 2010-2011                                                   26                                                 May 2010
Operating and Capital Budget
                         FY 2011 Proposed Pay Grades and Ranges

   Grade    RPTA Position Titles                                  Pay Range

     III    Administrative Support Assistant                $27,626   -   $41,439

     IV     Accounting Technician                           $30,696   -   $46,043
            Administrative Assistant                        $30,696   -   $46,043
            Lead Document Control Clerk                     $30,696   -   $46,043
            Materials Handler                               $30,696   -   $46,043

     VI     Paralegal                                       $37,142   -   $55,712
            Track Maintainer                                $37,142   -   $55,712

    VII     Accountant I                                    $40,856   -   $61,284
            Executive Assistant                             $40,856   -   $61,284
            Network Support Analyst                         $40,856   -   $61,284
            Signal/Comm Maintainer                          $40,856   -   $61,284
            Utility Relocation Specialist                   $40,856   -   $61,284

    VIII    Engineering Technician                          $44,942   -   $67,413
            Executive Administrative Coordinator            $44,942   -   $67,413
            Information Technology Systems Specialist       $44,942   -   $67,413
            Maintenance Scheduling                          $44,942   -   $67,413
            Materials/Warranty Coordinator                  $44,942   -   $67,413
            Signal/Comm Systems Technician                  $44,942   -   $67,413
            Traction Power Systems Technician               $44,942   -   $67,413

     IX     Area Coordinator                                $49,435   -   $74,154
            Budget Analyst                                  $49,435   -   $74,154
            Contract Administrator                          $49,435   -   $74,154
            Planner II                                      $49,435   -   $74,154
            Public Information Specialist                   $49,435   -   $74,154
            Supervisor, Facility Maintenance                $49,435   -   $74,154
            Supervisor, Track Maintenance                   $49,435   -   $74,154
            Network Systems Engineer                        $49,435   -   $74,154

     X      Program Control Specialist                      $54,390   -   $81,569
            Senior Contract Administrator                   $54,390   -   $81,569
            Signals/Communications Maintenance Supervisor   $54,390   -   $81,569
            TES Supervisor                                  $54,390   -   $81,569
            Engineer (Civil)                                $54,390   -   $81,569
            Planner III                                     $54,390   -   $81,569




Preliminary FY 2010-2011                          27                          May 2010
Operating and Capital Budget
                         FY 2011 Proposed Pay Grades and Ranges

   Grade    RPTA Position Titles                                      Pay Range

     XI     Public Arts Administrator                          $59,818    -    $89,726
            Public Information Officer                         $59,818    -    $89,726
            Accountant III                                     $59,818    -    $89,726
            Marketing Manager                                  $59,818    -    $89,726

     XII    Rail Public Involvement Manager                    $65,799    -    $98,698
            Rail Utility Manager                               $65,799    -    $98,698

    XIII    Finance and Budget Manager                         $72,379    -   $108,568
            Rail Design & Construction Manager                 $72,379    -   $108,568
            Rail Project Manager, Facilities Engineer          $72,379    -   $108,568
            Rail Project Manager, Planning                     $72,379    -   $108,568
            Manager, Procurement & Risk Mgmt Srvcs             $72,379    -   $108,568
            Rail Schedule Manager - CP                         $72,379    -   $108,568

    XIV     Chief Maintenance Engineer                         $81,992    -   $122,987
            Chief Safety & Security Officer                    $81,992    -   $122,987
            Chief System Engineering Officer                   $81,992    -   $122,987
            Chief Transportation Officer                       $81,992    -   $122,987

    XV      Rail Chief Operations Officer                      $111,202   -   $150,304
            Rail Community and Government Relations Director   $111,202   -   $150,304
            Rail Finance & Administration Director             $111,202   -   $150,304

    XVI     Rail Design & Construction Director                $112,627   -   $168,941
            Rail Project Development Director                  $112,627   -   $168,941
            Rail General Counsel                               $117,246   -   $175,870

    ED      Chief Executive Officer                                Salary Negotiated




Preliminary FY 2010-2011                           28                                  May 2010
Operating and Capital Budget
                                        Proposed Full-Time Equivalents (FTE) Allocated by Project

                                                Rev                      Future              Central     Other
      Position                                           Agency Ops                 CP/EV                        Grand Total
                                              Operations                Projects              Mesa      Projects
      Accountant I                                   1.15        0.10        0.35     0.05       0.35                     2.00
      Accountant III                                 0.35        0.10        0.25     0.05       0.25                     1.00
      Accounting Technician                          0.50        0.10        0.25     0.05       0.10                     1.00
      Admin Support Assistant                        0.15                                                   0.85          1.00
      Administrative Assistant                       1.90        0.40        2.11     0.07       1.20       0.33          6.00
      Area Coordinator                               0.25        0.15        0.93                0.55       0.13          2.00
      Budget Analyst                                 1.00                                                                 1.00
      Chief Maintenance Engineer                     1.00                                                                 1.00
      Chief System Engineering Officer               0.40                                        0.50       0.10          1.00
      Chief Operations Officer                       0.80                                        0.10       0.10          1.00
      Contract Administrator                         0.80                    0.20                                         1.00
      Contracts and Procurement Manager              0.25                    0.30     0.30       0.10       0.05          1.00
      Document Control Lead                          0.15                    0.20     0.25       0.40                     1.00
      Engineer Civil                                                         0.50                0.30       0.20          1.00
      Exec Admin Coordinator                         0.30        0.20        0.25                0.25        -            1.00
      Executive Assistant                            1.00                    0.50                0.35       0.15          2.00
      Facility Maintenance Supervisor                1.00                                                                 1.00
      Materials Handler                              1.00                                                                 1.00
      Materials/Warranty Coordinator                 2.00                                                                 2.00
      Metro Info Tech Sys Spec                       0.50                    0.30                0.20                     1.00
      Mgr, Sched & Cap Proj                          0.15                    0.50     0.05       0.30                     1.00
      Network Systems Engineer                       1.00                                                                 1.00
      Paralegal                                      0.80                    0.20                                         1.00
      Planner II                                                             0.79                0.11       0.10          1.00
      Planner III                                    0.05                    1.39                0.36       0.20          2.00
      Program Control Specialist                     0.05                    0.35     0.15       0.35       0.10          1.00
      Project Development Director                                           1.00                                         1.00
      Public Arts Administrator                      0.05                    0.05                0.85       0.05          1.00
      Public Information Officer                     0.30        0.20        0.45                0.03       0.03          1.00




Preliminary FY 2010-2011                                                29                                         May 2010
Operating and Capital Budget
                                       Proposed Full-Time Equivalents (FTE) Allocated by Project

                                                  Rev                       Future             Central      Other
 Position                                                  Agency Ops                 CP/EV                         Grand Total
                                                Operations                 Projects             Mesa       Projects
 Rail Chief Executive Officer                          0.30         0.20       0.50                             -           1.00
 Rail Community and Govt. Relations Director           0.18         0.22       0.55                 0.03       0.03         1.00
 Rail Design & Construction Director                   0.02                    0.82     0.02        0.10       0.04         1.00
 Rail Design/Construct Mgr                             0.03                    0.50     0.02        0.25       0.20         1.00
 Rail Engineer Technician                              0.04                             0.04        0.85       0.07         1.00
 Rail Finance & Administration Director                0.35         0.15       0.50                                         1.00
 Rail General Counsel                                  0.15                    0.55     0.25        0.05                    1.00
 Rail Project Manager, Facilities Engineer                                     0.90                 0.10                    1.00
 Rail Project Mgr Planning                                                     0.97     0.03                                1.00
 Rail Public Involvement Manager                       0.15         0.05       0.65                 0.10       0.05         1.00
 Chief of Safety and Security                          0.75                    0.25                                         1.00
 Rail Utility Manager                                                          0.05                 0.85       0.10         1.00
 Senior Contract Administrator                         0.95                    0.40     0.60        0.05                    2.00
 Signal Comm Sys Maintain                              6.00                                                                 6.00
 Signal Comm Sys Supv                                  1.00                                                                 1.00
 Signal Comm Sys Tech                                  4.00                                                                 4.00
 Track Maintainer                                      6.00                                                                 6.00
 Track Maintenance Supervisor                          1.00                                                                 1.00
 Traction Elec Supervisor                              2.00                                                                 2.00
 Traction Power Sys Tech                              10.00                                                                10.00
 Utility Relocation Specialist                         0.10                                         0.70       0.20         1.00

 Total FY 2011 FTE Positions                         49.92        1.87       17.50     1.93        9.72       3.06        84.00




Preliminary FY 2010-2011                                             30                                        May 2010
Operating and Capital Budget
VALLEY METRO RAIL ORGANIZATION – FY11 BUDGET
                      PRELIMINARY
             FIVE-YEAR OPERATING FORECAST
                  AND CAPITAL PROGRAM
                                     FY 2011 - FY 2015




Five-Year Operating Forecast and Capital                 June 2010
Program - FY 2011 through FY 2015
                              Valley Metro Rail, Inc.
                                           Phoenix, Arizona




              Five-Year Operating Forecast and Capital Program
                                  FY 2011 through FY 2015
                            (July 1, 2010 through June 30, 2015)




                                   Board of Directors
                       Chairman – Councilman Tom Simplot, Phoenix
                                Mayor Bob Barrett, Peoria
                              Mayor Hugh Hallman, Tempe
                           Councilman Rich Heumann, Chandler
                              Vice Mayor Kyle Jones, Mesa
                             Mayor Elaine Scruggs, Glendale


                              Executive Management Team
                        Stephen R. Banta, Chief Executive Officer
                      Raymond Abraham, Chief Operations Officer
                     Brian Buchanan, Design & Construction Director
                 John Farry, Community & Government Relations Director
                         Wulf Grote, Project Development Director
                         Jay Harper, Chief of Safety and Security
                              Mike Ladino, General Counsel
                   John McCormack, Finance & Administration Director




Five-Year Operating Forecast and Capital                             June 2010
Program - FY 2011 through FY 2015
                                             Table of Contents
1. Executive Summary
      METRO Organization ........................................................................................... 1
      METRO Vision and Mission .................................................................................. 3
      METRO Services .................................................................................................. 4
              •    Project Development.................................................................................. 4
              •    Design & Construction Management ......................................................... 4
              •    Operations & Maintenance ........................................................................ 5
           • Five-Year Budget Summary....................................................................... 6
2. Goals and Objectives
       FY 2010 Accomplishments ................................................................................... 9
       Annual Goals and Objectives (FY 2011 thru FY 2015) ....................................... 10
3. Five-Year Operating Forecast
       Sources & Uses of Funds ................................................................................... 14
       Passage Operations & Maintenance Cost Assumptions .................................... 16
       Operations & Maintenance Cost Estimate FY 2011-2015 .................................. 18
       Five Year Fares, Costs and Member City Funding ............................................. 19
       Project Development Planning ........................................................................... 19
       METRO Five-Year Staffing Plan ......................................................................... 21
4. Five-Year Capital Program
       All Projects.......................................................................................................... 22
       CP/EV LRT Project ............................................................................................. 26
       High Capacity Transit Projects ........................................................................... 28
       Northwest Extension........................................................................................... 29
       Central Mesa Extension ..................................................................................... 30
       Tempe South Corridor ........................................................................................ 31
       Phoenix West Extension ..................................................................................... 33
5. Appendix
       A-Budget Process............................................................................................... 36
       B-Listing of CNPAs ............................................................................................. 38
       C-Glossary of Terms and Acronyms................................................................... 40




Five-Year Operating Forecast and Capital                  i                                              June 2010
Program - FY 2011 through FY 2015
METRO Organization
Valley Metro Rail, Inc. (METRO) is a public non-profit corporation whose members are
the cities of Chandler, Glendale, Mesa, Peoria, Phoenix, and Tempe. METRO’s
mission is to manage the design, construction, and operation of the Light Rail Transit
(LRT) System within the Metropolitan Area. The Board of Directors includes the mayors
of the member cities or their designated representatives. The Board of Directors
establishes overall policies for management and administration of the LRT System,
provides oversight over the design, construction and operation of light rail, and oversees
the receipt and disbursement of funds and grants from federal, state, local, and other
funding sources.

The Rail Chief Executive Officer (CEO) is responsible for the day-to-day management
of the organization. The CEO plans, coordinates, and directs the activities of the
Management Staff in carrying out the organization’s responsibilities. The Management
Staff includes a limited number of core agency employees, augmented by consultant
personnel with specialized expertise and experience in light rail planning, design,
construction, and operations on a project-by-project basis. The following chart depicts
the policy organization for METRO and the relationships to key stakeholders.

                          METRO POLICY ORGANIZATION




Five-Year Operating Forecast and Capital    2                                   June 2010
Program - FY 2011 through FY 2015
METRO Vision and Mission
Vision:

       “METRO will be recognized as a trusted and respected community partner
       and visionary leader that provides a premier regional rail transit system with a
       commitment to excellence and safety, which provides value, enhances quality
       of life and is a point of pride for our community.”

Mission:

       “METRO provides a premier regional rail system that enhances mobility
       and strengthens the viability of our community.”


METRO Five-Year Organizational Goals

   •   Operate a safe, efficient, customer-oriented, reliable METRO system.

   •   Maintain sound and trusted relationships with public and private
       stakeholders including improved coordination with all public transportation
       operators.

   •   Expansion of the METRO system through effective planning, design, and
       construction of the high capacity/light rail transit element of the Regional
       Transportation Plan.

   •   Maintain organizational stability and a sound human resource.




Five-Year Operating Forecast and Capital      3                                     June 2010
Program - FY 2011 through FY 2015
METRO SERVICES
METRO was formed to plan, design, construct, and operate the METRO Light Rail
Transit System. The Approved Light Rail Alignment (the initial 20-mile segment) was
completed on time and commenced serving passengers in Phoenix, Tempe, and Mesa
in December 2008. An additional 37 miles of High Capacity Transit, to be funded by
local taxes, Proposition 400 revenues, and Federal Funds, is planned for future years.
See “Future Projects” for further information.




Five-Year Operating Forecast and Capital   4                                 June 2010
Program - FY 2011 through FY 2015
METRO SERVICES (continued)
Operations & Maintenance: METRO is responsible for overseeing the day-to-day
operations of the METRO system with the ultimate goal of providing a safe, reliable and
customer focused transit system.

In December of 2008, revenue operations began and METRO now provides
comprehensive management of rail passenger services including safety, security, public
information and marketing, risk management, fare collection, finance, transportation
service delivery and LRT systems maintenance. METRO is self-performing core
systems maintenance including track, power, signals and communication systems.
METRO has contracted services for light rail vehicle operators, vehicle maintenance,
and facilities maintenance.

Project Development: The proposed light rail/ high capacity transit system will include
over 57 mile of high capacity transit service in four cities within the next 20 years.
Before any specific transit corridor is initiated, MERO will study and configure the
system to better understand how corridors connect, determine facility requirements, and
define operating parameters. System planning is the first step in developing the high
capacity transit. It is followed by the corridor planning for individual corridors. Once
technologies and alignments are determined in each corridor, preliminary engineering is
engaged.

A key objective during project development is to define all aspects of each high capacity
transit corridor project, identify the appropriate transit technology, the alignment,
stations, park-and-rides, maintenance facilities, traction power substations, and bus
interface. METRO staff is committed to working closely with policy makers, public
agencies, businesses, community stakeholders, utility companies to assure an early
and complete understanding of their needs and issues, before design begins.
METRO is responsible to assure that adequate funding is in place to implement,
maintain and operate the light rail program. METRO staff works closely with federal,
state, regional and local agencies that provide present and future funding for the light
rail system. METRO, in coordination with all affected agencies, annually updates the
HCT element of the Transit Life Cycle Program, which defines light rail projects,
funding, and schedule. Finally, METRO assists with light rail station area planning by
actively engaging to support member cities’ efforts to facilitate Transit Oriented
Development (TOD).

Design & Construction Management: METRO is responsible for the design and
construction of regional rail transit system. Efforts include design for guideway,
passenger stations, LRV traction power, signals and communications systems and
maintenance facilities. METRO coordinates right-of-way acquisitions and public and
private utility relocations to make way for construction.     Construction contract
specifications are developed and competitive procurements executed. Construction is
managed to meet planned budget and schedule requirements. Emphasis is placed on

Five-Year Operating Forecast and Capital   5                                    June 2010
Program - FY 2011 through FY 2015
delivering a high quality product focused on meeting the long-term needs to operate and
maintain systems for rail passenger services.



Five-Year Budget Summary

Uses of Funds: The high-level details of the overall operating and capital budget for
Valley Metro Rail is attached as Table 1, Budget Summary. The cumulative uses of
funds, FY 2011 through FY 2015, may be summarized as follows:

Uses of Funds Five Year Total                                         YOE ($,000)
 LRT Operations & Maintenance                                21.6%    $ 181,607
 Project Development Planning                                 3.6%        30,130
 Agency Operating Budget                                      0.6%          5,396
      Subtotal - Operations and Project Development.         25.9%       217,133
 CP/EV LRT Project                                            2.8%        23,632
 Northwest Extension Phase 1                                 13.5%       113,039
 Central Mesa                                                21.5%       180,954
 Tempe South                                                  8.8%        73,945
 Phx West                                                    14.6%       122,998
 14 LRV's                                                     1.9%        15,897
 CNPA and ARRA Projects                                       0.5%          4,428
 Non-Prior Rights Utilities                                   3.8%        31,679
 Systemwide Improvements                                      0.3%          2,190
 PTF Debt Service                                             6.4%        53,827
      Subtotal - Capital                                     74.1%       622,589
Total Uses                                                  100.0%    $ 839,722




Five-Year Operating Forecast and Capital   6                                  June 2010
Program - FY 2011 through FY 2015
Sources of Funds: The cumulative sources of funds, FY 2011 through FY 2015, may
be summarized as follows (see Table 1, Five-Year Capital Program and Operating
Forecast Summary):


Sources of Funds Five Year Total                                 ($,000)
 LRT Fares                                               5.8%   $   49,028
 Phoenix                                                 5.6%       47,034
 Tempe                                                   1.2%       10,394
 Mesa                                                    0.4%        3,349
 Glendale                                                0.0%          162
 Chandler                                                0.0%          252
 PTF Sales Tax Revenue                                  28.0%      235,378
 PTF (Reserve) / Borrowing                              13.8%      116,241
 FTA Section 5309                                       23.4%      196,583
 FTA Section 5339                                        0.2%        1,800
 CMAQ / STP                                             10.6%       88,979
 Other Federal                                          10.2%       85,306
Total Sources                                          100.0%   $ 839,722




Five-Year Operating Forecast and Capital   7                           June 2010
Program - FY 2011 through FY 2015
Table 1 – Five-Year Capital and Operating Budget Summary ($000)
                                                                                                                         Cumulative
                                                 2011         2012          2013          2014            2015           2011 - 2015
USES OF FUNDS
 LRT Operations & Maintenance                    33,497        35,402       36,464        37,558            38,685           181,607
 Project Development Planning                     9,565         6,576        5,673         5,116             3,200            30,130
 Agency Operating Budget                          1,017         1,047        1,078         1,110             1,144             5,396
   Subtotal - Operations and Proj Dev            44,079        43,025       43,215        43,784            43,029           217,133
 CP/EV LRT Project                           $   18,272     $   5,360    $     -       $     -       $         -        $     23,632
 Northwest Extension Phase 1                      5,125        51,049       56,866           -                 -             113,039
 Central Mesa                                    14,001        22,531       37,069        51,222            56,131           180,954
 Tempe South                                        -           5,118       15,181        24,874            28,772            73,945
 Phx West                                            45        34,277       19,794        32,952            35,930           122,998
 14 LRV's                                           -             -            -          15,897               -              15,897
 CNPA and ARRA Projects                           4,428           -            -             -                 -               4,428
 Non-Prior Rights Utilities                           56       13,671       16,743         1,209               -              31,679
 Systemwide Improvements                            350           357          500           483               500             2,190
 PTF Debt Service                                 5,411         5,495        6,310        18,424            18,187            53,827
   Subtotal - Capital                            47,688       137,858      152,462       145,060           139,520           622,589
     Total Uses                                  91,767       180,883      195,678       188,845           182,549           839,722

SOURCES OF FUNDS
 Phoenix                                         (33,262)      27,151        29,456         5,604           18,085      $     47,034
 Tempe                                           (23,010)       6,736         8,379         8,909            9,380            10,394
 Mesa                                             (2,404)         959         1,218         1,744            1,832             3,349
 Glendale                                             31           31            32            33               34               162
 Chandler                                            121           31            32            33               34               252
 Peoria                                               86           31            32            33               34               217
 MAG / RPTA                                        1,000        1,000         1,000         1,000            1,000             5,000
   Subtotal                                      (57,440)      35,940        40,149        17,357           30,400            66,407

PTF Sales Tax Revenue                            41,221        44,515        47,096        49,828           52,718      $    235,378
PTF (Reserve) / Borrowing                        22,227        11,240        13,305        53,423           16,045           116,241
                                                                                                                                 -
 LRT Fares                                        9,098         9,544         9,831        10,126           10,429            49,028
                                                                                                                                 -
 FTA Section 5309                                61,250        17,799        35,000        35,507           47,027           196,583
 FTA Section 5339                                 1,400           400           -             -                -               1,800
 CMAQ / STP                                      11,750        13,827        14,869        22,605           25,930            88,979
 Other Federal                                    2,261        47,618        35,427           -                -              85,306
    Subtotal                                     76,661        79,644        85,296        58,112           72,957           372,668
     Total Sources                               91,767     $ 180,883     $ 195,678     $ 188,845     $    182,550      $    839,722


Note: Cost and revenues reported on accrual basis. Negative sources of funds reflect reimbursements to Member Cities for federal grant
funding and PTF revenues funding Regional Assets. PTF Sales Tax Revenues are forecasted at FY 2010 base plus 2% in FY11 and 5.8%
annual growth thereafter. The Rail PTF (Reserve) / Borrowing represents forecasted expenditures from bond proceeds.




Five-Year Operating Forecast and Capital                       8                                                     June 2010
Program - FY 2011 through FY 2015
FY 2010 ACCOMPLISHMENTS

   •   METRO ridership success
           o Exceeded projections by 45% in 2009 (projected ridership – 7.8
              million/actual ridership – 11.1 million)
           o Projected weekday rides 26,000/actual rides 40,530 (Jan- Mar 2010)
           o Single day ridership surpassed 50,000 on nine occasions since the
              inception of revenue service.
           o METRO Rail is delivering 19.7% of total bus/rail rides in the region.
   •   Continued the safety awareness campaign to ensure the delivery of safety
       messages to drivers and METRO passengers.
   •   Information and system improvements were implemented to better serve METRO
       passengers.
   •   Implementation of the “Rail Ride” program with U.S. Airways Center that provides
       patrons to use event tickets as fare media.
   •   Implementation of the “Adopt-A-Station” program that further integrates METRO
       into the community.
   •   Board adoption of a policy permitting limited advertising on METRO vehicles and
       stations.
   •   Continued progress on Alternatives Analysis for three future high capacity transit
       corridors including the adoption of a Locally Preferred Alternative on the Central
       Mesa extension.

Awards Received by METRO

   •   ADA Liberty Progress Award to METRO and Valley Metro – Arizona Disability
       Advocacy Coalition
   •   Outstanding Transit Organization Excellence Award – Arizona Transit
       Association
   •   President’s Award, Crescordia Award and two Awards of Merit – Valley
       Forward’s Environmental Excellence Awards
   •   Silver Telly Award for METRO safety video
   •   Project of the Year – Associated Minority Contractors of America
   •   Public Works Project of the Year – American Public Works Association, Arizona
       Chapter
   •   Certificate of Achievement for Excellence in Financial Reporting for Fiscal Year
       2008 CAFR – Government Financial Officers’ Association awards METRO.




Five-Year Operating Forecast and Capital    9                                   June 2010
Program - FY 2011 through FY 2015
Annual Goals & Objectives (FY 2011 through FY 2015)
Project Development Division Goals:
   •   Complete environmental analysis and reporting for the initial 20-mile LRT project
       and continue to provide environmental support to system operations.

   •   Complete an analysis of LRT rider characteristics to support future planning
       efforts.

   •   Resolve the proper location for a high capacity transit investment to serve
       Glendale and west Phoenix and define the next steps for this high capacity
       transit corridor

   •   Complete the Light Rail/High Capacity Transit system configuration for high
       capacity transit corridors in the Regional Transportation Plan (RTP)

   •   Determine the Locally Preferred Alternative for Tempe South and Phoenix West
       Corridors

   •   Complete environmental analysis and preliminary engineering for the Central
       Mesa, Tempe South Corridors and Phoenix West Corridors

   •   Develop and implement an early action bus program for the Phoenix West
       Corridor

   •   Define funding and prepare an environmental analysis to complete street
       improvements for the future Northwest LRT Extension

   •   Annually update the Rail Element of the Transit Life Cycle Program and seek
       ways to fund and accelerate projects in the RTP

   •   Continue the implementation, administration and utilization of an effective
       agency-wide Geographic Information System

   •   Actively participate in and provide management assistance for regional transit
       planning studies conducted by MAG, RPTA and ADOT

   •   Support city efforts to encourage transit oriented development and work with
       cities to develop TOD opportunities

   •   Prepare planning studies for potential future transit corridors as requested by
       METRO member agencies (e.g. Chandler, Peoria)




Five-Year Operating Forecast and Capital   10                                  June 2010
Program - FY 2011 through FY 2015
Design & Construction Division Goals:

   •   Support the operation of the existing system

   •   Continue to closeout the Central Phoenix/East Valley project

   •   Begin the design of the Mesa Extension

   •   Provide technical support to the Project Development Division on future
       extension studies

   •   Develop and implement sustainable "green" elements and enhancements to
       passenger mobility


Operations & Maintenance Division Goals:

   •   Deliver rail operational service within budget

   •   Achieve or exceed LRV mean-time-between-failures’ objective

   •   Maintain on time performance at 95% or above

   •   Preventative maintenance inspections and tasks will be performed on time
       (includes systems and vehicle)

   •   Perform all corrective maintenance tasks necessary to ensure world class
       service

   •   Continue to search for cost saving measures in operations and maintenance


Safety & Security Division Goals:

   •   Provide a framework for the implementation of safety policies and the
       achievement of the system safety goal and objectives on a system wide basis

   •   Provide a medium through which the METRO system will display its commitment
       to safety

   •   Adhere to FTA compliant Drug and Alcohol Testing Program for all Operations
       and Maintenance Employees (O & M)

   •   Satisfy federal and state requirements

Five-Year Operating Forecast and Capital    11                              June 2010
Program - FY 2011 through FY 2015
   •   Meet accepted transit industry standards and audit provisions

   •   Eliminate, minimize, or control identified critical and catastrophic hazards

   •   Perform all necessary safety analyses to identify and assess safety hazards

   •   Evaluations of accident data to improve safe interaction with the driving public

   •   Minimize the threat to and vulnerability of patrons, employees and assets.

   •   Maintain an awareness of the need for security in the METRO organization.


Community and Government Relations Division Goals:


   •   Ensure that customer service is paramount in METRO activities.

   •   Implement marketing strategies, safety campaigns, customer education for future
       light rail projects and revenue operations.

   •   Continue to foster relationships with the business and residential communities
       related to future projects and revenue operations.

   •   Ensure cooperative relationships are maintained with METRO member cities and
       regional stakeholders.

   •   Work effectively with the FTA and Congress to maximize federal funding for rail
       extensions.

   •   Maintain positive relationships with the media resulting in objective news
       coverage.

Legal Services Division Goals:

   •   Maintain lawful, fair and cost-efficient procurement practices to support METRO’s
       passenger operations, future planning, business and construction needs.

   •   Provide on-going legal advice to senior METRO management in the areas of risk
       management, litigation avoidance, statutory compliance and corporate
       governance.

   •   Manage and fine-tune the Owner Controlled Insurance Program as METRO’s
       operational experience develops.



Five-Year Operating Forecast and Capital    12                                    June 2010
Program - FY 2011 through FY 2015
   •   Fully integrate the corporate risk management function into METRO’s core
       business.

   •   Streamline the delivery of in-house legal services so as to reduce the overall cost
       to METRO.

   •   Strengthen internal controls; respond promptly to audit oversight findings.

   •   Maintain compliance with FTA requirements and best practices in order to better
       position METRO for future funding opportunities.


Finance and Administration Division Goals and Objectives:

   •   Manage fare revenue and ridership accounting controls
         o Work with fare enforcement and public information to improve Smart Card
            revenue
         o Fully implement ridership reporting system
         o Hold contractors accountable to improve equipment and services
           o Maintain PCI compliance for TVM’s

   •   Manage financial aspects of rail operations costs
         o Maintenance work order cost system
                 Manage accurate labor and material costs
                 Maximize Warranty recoveries
         o Inventory Cost reporting
         o Contract control management
                 Identify cost savings and initiate actions to reduce cost
         o Complete NTD reports accurately and On-time

   •   Develop annual budget and five-year capital and operating forecasts integrated
       with Member City objectives and funding, Transit Life Cycle Plan and Regional
       Transportation Plan.
   •   Manage financial reporting and controls system to deliver projects on-time and
       within budget.

   •   Manage IT systems to maximize user computer capabilities
           o Update system servers and desktops
           o Implement SharePoint network system
           o Improve help desk services




Five-Year Operating Forecast and Capital    13                                   June 2010
Program - FY 2011 through FY 2015
Five-Year Operating Forecast
The Operations & Maintenance (O&M) costs for the CP/EV LRT Project were
projected by METRO to reflect current costs and with an escalation factor of 3.0% and
anticipated staffing and administrative overhead requirements. In the five year plan, the
deferred maintenance staff positions, maintenance materials and contingency are
forecasted to be restored in FY 2012. (Totaling 5.7% increase over FY 2011) A cost
“build-up” approach was used to develop the O&M costs based on assumptions as to
headways, running times, vehicle miles, staff requirements, power and utilities,
materials and supplies, casualty and loss, police, and other contract services.

System-wide and specific corridor LRT Project Development Planning activities are
included in the operating budget. Once a project has been approved for preliminary
engineering, the costs are thereafter capital in nature.

Agency Operating costs include those costs not directly allocable to capital projects or
to passenger operations. Included are costs of annual audit, federal and state
legislative representation, memberships to transportation related organizations.


Five-Year Operating Sources and Uses of Funds: Operating costs and funding
planned for the FY 2011 through FY 2015 planning horizon may be summarized as
follows (See Table 5, Five-Year Operating Budget):

    Uses of Funds - Operating Budget                                          ($,000)
     Operations & Maintenance                                  83.6%    $    181,607
     Project Development Planning Support                      13.9%          30,130
     Agency Operating Budget                                    2.5%           5,396
       Total Uses                                             100.0%    $    217,133



    Sources of Funds - Operating Budget                                      ($,000)
     Fare Revenues                                             22.6%    $    49,028
     Member Support
       Phoenix                                                 40.6%          88,192
       Tempe                                                   19.5%          42,419
       Mesa                                                     3.3%           7,079
       Glendale                                                 0.1%             162
       Chandler                                                 0.1%             252
       Peoria                                                   0.1%             217
         Subtotal                                              63.7%         138,321
     FTA 5339                                                   0.8%           1,800
     RPTA/MAG/ CMAQ / STP                                       2.6%           5,750
       Total Sources                                          100.0%    $   217,133


Five-Year Operating Forecast and Capital   14                                   June 2010
Program - FY 2011 through FY 2015
Table 2 – Five-Year Operations and Maintenance
                                      - - - - - - - - - - - - - - - - - - - -Year of Expenditure ($,000) - - - - - - - - - - -
                                   2011          2012             2013            2014             2015           TOTAL
O&M COSTS
  Phoenix                           21,756        22,906           23,593           24,301          25,030         117,587
  Tempe                              9,873        10,509           10,824           11,149          11,483          53,838
  Mesa                               1,868         1,987            2,047            2,108           2,171          10,182
   Total Operating Costs            33,497        35,402           36,464           37,558          38,685         181,607

O&M REVENUES
 Fares
  Phoenix                            5,659          5,936           6,114           7,066            7,517           32,293
  Tempe                              2,592          2,719           2,801           2,606            2,481           13,200
  Mesa                                 847            889             915             453              431            3,535
    Subtotal, Fare Revenue           9,098          9,544           9,831          10,126           10,429           49,028

  Other Revenue *                                                                                                      -
   Phoenix                          16,097        16,970           17,479           17,235          17,513          85,294
   Tempe                             7,281         7,789            8,023            8,542           9,002          40,638
   Mesa                              1,021         1,099            1,132            1,655           1,740           6,647
      Subtotal, Other Revenue       24,400        25,858           26,634           27,433          28,256         132,579
Total O& M Revenues                 33,497        35,402           36,464           37,558          38,685         181,607

* Includes Advertising Revenue




Five-Year Operating Forecast and Capital            15                                                          June 2010
Program - FY 2011 through FY 2015
Passenger Operations & Maintenance Cost Assumptions
Service Frequency FY 2011 Plan:
Weekday trains will run with two cars at 12 minute intervals during peak hours and 15 to
20 minute intervals off peak. Weekends do not require peak service trains and will
operate with one or two cars at 15 to 20 minute headways. Service headways and train
lengths will be adjusted over time to accommodate growth and service patterns.

                Time of Day                            Service Frequency
Monday - Friday 4:40 am to 7:30 am                        20 minutes
Monday - Friday 7:30 am to 6:30 pm                        12 minutes
Monday - Thursday 6:30 pm to 12:00 am                     20 minutes
Friday 6:30 pm to 2:00 am                                 20 minutes
Saturday 5:00 am to 11:00 pm                              15 minutes
Saturday 11:00 pm to 2:00 am                              20 minutes
Sunday 5:00 am to 11:00 pm                                20 minutes

In addition, five days currently scheduled for weekday service frequency will be
converted to holiday schedule frequency (Sunday schedule).

Ridership and Fare Revenue:

Total Ridership is forecasted at 11.372 million passengers for the year with fare
revenues generating $9.098 million. Over the course of the fiscal year 2011, average
weekday boardings are forecasted at 36,317 exceeding the FFGA target ridership by
10.317 per day.     Saturday and Sunday average ridership are forecasted at 26,200
and 16,500 per day respectively.

 Average                                                Annual Ridership / Fares
   Daily Baseline Rides                                     Fare Assumption
   26,000  Weekday                                   6,552,000   $   0.80   $      5,241,600
   20,800  Saturday                                  1,081,600   $   0.80   $        865,280
   13,000  Sunday                                      676,000   $   0.80   $        540,800
            Total Baseline Rides                     8,309,600              $      6,647,680
            Additional Rides - Exceeding FFGA Target:
   10,317     Weekday                              2,599,898 $       0.80   $      2,079,918
    5,400     Saturday                                280,800 $      0.80   $        224,640
    3,500     Sunday                                  182,000 $      0.80   $        145,600
            Total Weekday Additional Rides           3,062,698              $      2,450,158


   31,243   Total Ridership and Fare Revenue        11,372,298   $   0.80   $      9,097,838




Five-Year Operating Forecast and Capital       16                                      June 2010
Program - FY 2011 through FY 2015
Rail Transportation Service Delivery:
Rail Transportation is responsible for ensuring the overall safety and reliability of the
METRO system. This includes the Rail Control Center, Field Supervision and Train
Operators. Rail Transportation will be responsible for monitoring the METRO system on
a 24/7 basis.

LRV Maintenance:
LRV Maintenance will be responsible for the preventive and corrective maintenance
required to ensure a high level of LRV availability and reliability. In addition, each LRV
will be cleaned on a daily basis.

System Maintenance:
Systems Maintenance is responsible for maintaining all METRO systems and facilities,
including: track, communications, signals, stations, traction power distribution and
overhead centenary systems.

Administration:
Rail transportation and maintenance operations will be supported by administrative
activities including public safety and security, marketing and customer service, legal and
procurement, finance and accounting, risk management, and information systems.




Five-Year Operating Forecast and Capital   17                                    June 2010
Program - FY 2011 through FY 2015
Fares:
Effective July 2009, the current Regional Fare Policy is as follows:




 Reduced - ADA Certified, Youth (6-18) and Seniors (age 65 and over)




Table 3 – Rail Operations and Maintenance Cost Forecast                                      FY 2011 through 2015

                                                         - - - - - - - - - - - - -Year of Expenditure Dollars - - - - - - - - - -

Annual Cost Projection                        Extended Cost        FY 2011      FY 2012        FY 2013           FY 2014            FY 2015
Transportation
Labor and Materials                           $   8,572,923
Labor - Fare Inspection & Security                3,745,400
Propulsion Power                                  2,623,866
Emergency Contingency (Bus Bridges, etc.)           196,000
   Transportation Total                                        $ 15,138,189   $ 15,592,335   $ 16,060,105    $ 16,541,908     $ 17,038,165
Vehicle Maintenance
Labor and Materials                           $   5,797,467
Maintenance Other                                  (270,749)
  Vehicle Maintenance Total                                    $ 5,526,719    $ 5,692,520    $ 5,863,296     $    6,039,195   $      6,220,371
Systems and Facilities Maintenance
Track/Station/Facility Maintenance            $   2,296,600
Traction Power System Maintenance                   968,569
Signals/Communications/TVMs                         993,419
Material/Supplies/Other Direct Costs              1,759,660
Utilities                                         1,513,880
Fare Collection Material & Security                 343,302
   Systems and Facilities Maintenance Total                    $ 7,875,429    $ 8,861,692    $ 9,127,543     $    9,401,369   $      9,683,410
Administration
Property and General Liability Insurance      $   1,350,000
VMR Management                                    1,754,305
General & Administrative Costs                    1,485,287
Contingency Reserve                                 367,413
   Administration Total                                        $ 4,957,005    $ 5,255,715    $ 5,413,387     $    5,575,788   $      5,743,062

                                                               $ 33,497,342   $ 35,402,262   $ 36,464,330    $ 37,558,260     $ 38,685,008



Five-Year Operating Forecast and Capital                      18                                                    June 2010
Program - FY 2011 through FY 2015
Table 4 – Rail Operations Fares and Member City Funding FY 2011 to FY 2015 ($000)

Fiscal Year                                                FY 2011 Annual Ridership / Fares                               FY 2011            FY 2012            FY 2013             FY 2014            FY 2015
Baseline Rides                                                      Fare Assumption
   Weekday *                                              6,552,000 $           0.80 $            5,241,600         $       5,241,600   $      5,398,848   $      5,560,813    $      5,727,638   $      5,899,467
   Saturday                                               1,081,600 $           0.80 $              865,280         $         865,280   $        891,238   $        917,976    $        945,515   $        973,880
   Sunday                                                   676,000 $           0.80 $              540,800         $         540,800   $        557,024   $        573,735    $        590,947   $        608,675
 Total Baseline Rides                                     8,309,600                    $          6,647,680                 6,647,680          6,847,110          7,052,524           7,264,099          7,482,022
No change to rides, Average Fare based on new fare policy
Additional weekday Rides - Exceeding FFGA Target
   Weekday                                                 2,810,556 $             0.80 $       2,248,445            $      2,248,445   $      2,315,898   $      2,385,375    $      2,456,936   $      2,530,644
   Saturday                                                  280,800 $             0.80           224,640                     224,640   $        231,379   $        238,321    $        245,470   $        252,834
   Sunday                                                    182,000 $             0.80           145,600                     145,600   $        149,968   $        154,467    $        159,101   $        163,874
 Total Weekday Additional Rides                            3,273,356                            2,618,685                   2,618,685          2,697,245          2,778,163           2,861,508          2,947,353
Rides up based on first nine months actual ridership, Average Fare based on FY10 experience adjusted for fare increase
Lost Rides - Due to Serv ice Cut
3% Estimated Weekday Rides                                  (210,658) $            0.80 $        (168,526)           $       (168,526) $               -   $              -    $              -   $              -

                                                                -
Total for Service Changes                                  (210,658)                              (168,526)         $        (168,526) $               -   $              -    $              -   $              -

TOTALS                                                   11,372,298    $            0.80   $     9,097,839          $       9,097,839   $      9,544,356 $        9,830,686 $        10,125,607 $       10,429,375
                                                                                                                                                  104.9%             103.0%              103.0%             103.0%

OPERATING REVENUES                                                                                                        FY 2011            FY 2012            FY 2013             FY 2014            FY 2015
Fare Revenues
   Phoenix                                             62.1980%                                                            $5,658,672 $        5,936,397 $        6,114,489 $        7,066,417 $        7,517,114
   T empe                                              28.4921%                                                            $2,592,166 $        2,719,389 $        2,800,970 $        2,606,275 $        2,481,099
   Mesa                                                 9.3099%                                                              $847,000 $          888,570 $          915,227 $          452,915 $          431,162
 Total Fare Revenues                                                                                                       $9,097,839         $9,544,356         $9,830,686         $10,125,607        $10,429,375

Fare Recovery Ratio                                                                                                               27%                27%                27%                 27%                27%

Advertising Revenue                                                                                                          $250,000           $257,500           $265,225            $273,182           $281,377
   Phoenix                                                                                                                   $167,700           $172,731           $177,913            $183,250           $188,748
  T empe                                                                                                                      $70,075            $72,177            $74,343             $76,573            $78,870
   Mesa                                                                                                                       $12,225            $12,592            $12,970             $13,359            $13,759
Gross Operating Costs
   Phoenix                                             64.9486%                                                     $     21,756,051         $22,906,289         $23,593,478        $24,301,282        $25,030,321
  T empe                                               29.4746%                                                     $      9,873,224         $10,508,752         $10,824,015        $11,148,735        $11,483,197
   Mesa                                                 5.5768%                                                     $      1,868,068          $1,987,221          $2,046,838         $2,108,243         $2,171,491
Total Operating Costs                                                                                                     $33,497,342        $35,402,263         $36,464,331        $37,558,260        $38,685,008
Member City Funding
   Phoenix                                                                                                          $     15,929,678 $ 16,797,161 $              17,301,076 $       17,051,614 $        17,324,459
  T empe                                                                                                            $      7,210,982 $   7,717,186 $              7,948,702 $        8,465,887 $         8,923,228
   Mesa                                                                                                             $      1,008,843 $   1,086,060 $              1,118,641 $        1,641,970 $         1,726,569
Total Member City Funding                                                                                                 $24,149,504  $25,600,407               $26,368,419        $27,159,472        $27,974,256


TOTAL OPERATING REVENUE                                                                                                  $33,497,342        $35,402,263        $36,464,331         $37,558,260        $38,685,008




Project Development Planning

Project development planning consists of the following subcategories of System
Planning and Corridor Planning activities:

      •      Light rail/high capacity transit system planning.

      •      Alternatives analysis, environmental analysis, and conceptual engineering for
             future light rail/high capacity transit corridors.



Five-Year Operating Forecast and Capital                                                   19                                                                                  June 2010
Program - FY 2011 through FY 2015
   •    Developing and updating LRT design criteria, standards and specifications.

   •    Working with the Maricopa Association of Governments and the Regional Public
        Transportation Authority to participate in their regional transit planning studies
        and to update regional project programming documents.

   •    Support of Transit Oriented Development initiatives by Member Cities.

   •    Development of a comprehensive Geographic Information System (GIS) for the
        agency.




The projected uses and sources of funds in connection with Capital Project
Development over the next five years are summarized as follows:

Table 5 – Capital Project Development FY 2011 to FY 2015
                                                    - - - - - - - - - - - - - - - - - - - - - (YOE $,000) - - - - - - - - - - - - - - - - - - - - - -

                                                2011              2012               2013                2014                2015               Total
USES OF FUNDS
 CPDA                                             1,233             1,531               1,567              1,660               1,709        $ 7,701
 Tempe South AA / DEA / CE / PD (Pre-NEPA)          885               -                   -                  -                   -              885
 Phoenix West AA / DEIS / CE / Early Action       1,941             2,280                 -                  -                   -            4,221
 Glendale AA                                        750               596               1,219                627                 -            3,192
 Northeast Phoenix AA / DEIS / CE                   -                 -                 1,254              1,289                 -            2,543
 South Central                                      500               500                 -                  -                   -            1,000
 System Studies                                   1,245               750                 750                750                 750          4,245
 Design Criteria                                    -                   50                  50                 50                  50           200
 Project Development                              3,011               869                 833                740                 691          6,143
   Total Uses                               $     9,565       $     6,576        $      5,673        $     5,116         $     3,200        $30,130
SOURCES OF FUNDS
 Chandler                                  $            90   $        -          $        -         $        -          $        -          $    90
 Glendale                                           -                 -                   -                  -                   -              -
 Peoria                                              55               -                   -                  -                   -               55
 Phoenix                                            100               100                 -                  -                   -              200
 FTA 5339                                         1,400               400                 -                  -                   -            1,800
 CMAQ                                               750               -                   -                  -                   -              750
 PTF                                              6,170             5,076               4,673              4,116               2,200         22,235
 MAG                                                500               500                 500                500                 500          2,500
 RPTA                                               500               500                 500                500                 500          2,500
   Total Sources                           $      9,565       $     6,576        $      5,673        $     5,116         $     3,200        $30,130




Five-Year Operating Forecast and Capital                     20                                                                     June 2010
Program - FY 2011 through FY 2015
METRO FIVE-YEAR STAFFING PLAN
Staffing levels are planned to optimize the appropriate relationship of internal staff
versus contractor labor. Internal staffing provides a lower cost solution so long as
project activities require full-time effort throughout the lowest period of design and
construction project cycles. Pictured below are the project schedules and the level of
effort stated in Full-Time Equivalent employees (FTE). Authorization of positions by the
METRO Board is executed by adoption of the Annual Budget.

                LRT / HIGH CAPACITY TRANSIT PROJECT SCHEDULE




          * Projected Full-Time Equivalents – FY 2011 through FY 2015 * * *




Note: Staffing estimates are preliminary. Authorization of positions by the METRO Board is
executed by adoption of the Annual Budget.


Five-Year Operating Forecast and Capital   21                                    June 2010
Program - FY 2011 through FY 2015
Five-Year Capital Program – FY 2011 through FY 2015
Capital projects included in the five year program include:

   •   Central Phoenix / East Valley (CP/EV) – the initial 20-mile METRO spanning
       Phoenix, Tempe and Mesa
   •   Northwest Extension – 5 mile alignment in Phoenix with 3.2 mile Phase I
       proceeding north and terminating in the vicinity of Dunlap Avenue and 25th
       Avenue
   •   Central Mesa – 3.1 mile alignment extending eastbound to downtown Mesa
   •   Tempe South – 2.5 mile alignment extending southward in the vicinity of Rural
       Road to the Superstition Freeway;
   •   Phoenix West – 11.0 mile alignment from downtown Phoenix westward to the
       vicinity of 79th Avenue.

METRO is currently in alternative analysis for additional high capacity transit corridors
(extensions to CP/EV LRT), developing an overall systems configuration plan, and is
also managing Concurrent Non-Project Activities (CNPA), in connection with the
construction closeout of CP/EV LRT. Costs for the alternative analyses, systems
studies and CNPA are part of the Proposed FY 2011 Operating and Capital Budget.

The Capital Program report is a multiple year (five fiscal years) forecast of the capital
projects managed by Valley Metro Rail. Costs and revenues are reported on an accrual
basis. Actual cash flow impacts may lag pending receipt of contractor billings and
receipt of federal funding.




Five-Year Operating Forecast and Capital    22                                  June 2010
Program - FY 2011 through FY 2015
All Capital Projects -- Uses of Funds: Valley Metro Rail currently has a number of
transit projects in various stages of planning, design or construction. The overall uses of
funds associated with these projects and activities are projected to be $623 million
through the five-year planning horizon. These uses of funds are summarized as follows:



    Uses of Funds - Capital Projects              FY 2011-15          YOE ($,000)
     CP/EV LRT Project                               3.8%           $     23,632
     NW Ext Phase 1                                 18.2%                113,039
     Central Mesa                                   29.1%                180,954
     Tempe South                                    11.9%                 73,945
     Phx West                                                            122,998

       14 LRV's                                       2.6%                   15,897
       CNPA                                           0.7%                    4,428
       NPR Utilities                                  5.1%                   31,679
       Systemwide Improvements                        0.4%                    2,190
                                                                                -
    PTF Bond Debt Service:                            0.0%                      -
     Principal Payments                               4.8%                   29,973
     Interest Payments                                3.8%                   23,854
    Total Capital Costs                              100.0%         $       622,589




Five-Year Operating Forecast and Capital    23                                   June 2010
Program - FY 2011 through FY 2015
All Capital Projects -- Sources of Funds: Funding is derived from two primary
sources: Regional Sales Taxes (Public Transportation Fund), and Federal Grants.
These sources of funds are summarized as follows (see also Table 2, Five-Year Capital
Program / All Projects):


    Sources of Funds - Capital Projects             FY 2011-15          YOE ($,000)
     Phoenix                                              -6.6%       $    (41,158)
     Tempe                                                -5.1%            (32,025)
     Mesa                                                 -0.6%              (3,730)
     Glendale                                              0.0%                 -
     All Others                                            0.0%                 -
    Public Transportation Funds                          52.9%             329,384
    Federal Revenues:                                      0.0%
     FTA Sec 5309                                        31.6%                196,583
     CMAQ                                                14.2%                 88,230
     Other Federal                                       13.7%                 85,306
    Total Capital Revenues                              100.0%        $       622,589


Note: Negative sources of funds reflect reimbursements to Member Cities for the CPEV 20 Mile
Initial Segment Capital Project. Sources of funding include federal grant proceeds and Public
Transportation Fund revenues to reimburse regional assets.




Five-Year Operating Forecast and Capital     24                                    June 2010
Program - FY 2011 through FY 2015
Table 5 – Five-Year Capital Budget / All Projects ($000)
                                     Pre 2011         2011          2012           2013           2014          2015           Total       FY 2011-15
USES OF FUNDS
 CP/EV LRT Project                   1,388,493         18,272         5,360            -             -              -        1,412,125          23,632
 Northwest Extension Phase 1            78,000          5,125        51,049         56,866           -              -          191,039         113,039
 Central Mesa                              -           14,001        22,531         37,069        51,222         56,131        180,954         180,954
 Tempe South                               -              -           5,118         15,181        24,874         28,772         73,945          73,945
 Phx West                                  -                45       34,277         19,794        32,952         35,930        122,998         122,998
  Subtotal HCT Corridors             1,466,493         37,443       118,335        128,910       109,048        120,833      1,981,061         514,569
 14 LRV's                               42,186            -             -              -          15,897            -           58,083          15,897
 CNPA and ARRA Projects                122,216          4,428           -              -             -              -          126,644           4,428
 Non-Prior Rights Utilities             80,561              56       13,671         16,743         1,209            -          112,240          31,679
 Systemwide Improvements                   570            350           357            500           483            500          2,760           2,190

PTF Bond Debt Service:
 Principal Payments                      1,186          2,664         2,771          2,910        10,749         10,880         31,159          29,973
 Interest Payments                       2,755          2,748         2,724          3,400         7,675          7,308         26,609          23,854
Total Capital Costs                  1,715,967         47,688       137,858        152,462       145,060        139,520      2,338,557         622,589


SOURCES OF FUNDS
 Phoenix                               685,522        (49,968)         9,558        11,438        (12,186)           -         644,364         (41,158)
 Tempe                                 173,796        (30,627)        (1,398)          -              -              -         141,771         (32,025)
 Mesa                                   31,376         (3,506)          (224)          -              -              -          27,646          (3,730)
 Glendale                                  -              -              -             -              -              -             -               -
 All Others                                -              -              -             -              -              -             -               -
   Subtotal                            890,694        (84,101)         7,935        11,438        (12,186)           -         813,780         (76,914)

Public Transportation Funds            239,573         57,279        50,679         55,729         99,134        66,563        568,958         329,384
    Sales Tax Proceeds                 217,691         41,221        44,515         47,096         49,828        52,718        453,069
    Bond Proceeds                       21,882         16,058         6,164          8,632         49,307        13,845        115,888

Federal Revenues:
 FTA                                   525,950         61,250        17,799         35,000        35,507         47,027        722,533         196,583
 CMAQ                                   59,750         11,000        13,827         14,869        22,605         25,930        147,980          88,230
 Other Federal                             -            2,261        47,618         35,427           -              -           85,306          85,306
   Subtotal Federal                    585,700         74,511        79,244         85,296        58,112         72,957        955,819         370,119
Total Revenues                       1,715,967         47,688       137,858        152,463       145,060        139,520      2,338,557         622,589


Note: Negative sources of funds reflect reimbursements to Member Cities for the CPEV 20 Mile Initial Segment Capital Project. Sources of
funding include federal grant proceeds and Public Transportation Fund revenues to reimburse regional assets.




Five-Year Operating Forecast and Capital                                   25                                                              June 2010
Program - FY 2011 through FY 2015
CP/EV LRT Project: The Central Phoenix/East Valley Light Rail Transit (CP/EV LRT)
project, as defined in the Full Funding Grant Agreement (FFGA), is a 20 mile LRT
project that will connect north central Phoenix, Tempe, and Mesa. The project was
identified as the Minimum Operable Segment of the Locally Preferred Alternative
selected in the Central Phoenix/East Valley Major Investment Study completed in 1998.

As the initial starter segment, the CP/EV LRT project extends from 19th Avenue and
Bethany Home Road in Phoenix to Main and Sycamore Road in Mesa. Phoenix,
Tempe, and Mesa will share responsibility for funding the non-federal share of the
capital costs and the ongoing operations and maintenance (O&M) costs of the project.

Construction of the CP/EV LRT began in FY 2005, with revenue operation commencing
in December 2008. The total capital costs of the CP/EV LRT project over the period in
which funds would be received through the FFGA (FY 1999 to FY 2012) is $1.412 billion
in year of expenditure dollars.




Five-Year Operating Forecast and Capital   26                               June 2010
Program - FY 2011 through FY 2015
CP/EV LRT Sources and Uses of Funds: The total capital cost of the CP/EV LRT
project over the FY 1999 to FY 2015 period is $1.412 billion in year of expenditure
dollars. Capital costs planned for this project are summarized as follows:

                                                                                         - - - - - - - ($,000) - - - -
CPEV Initial 20 mile Segment       Pre-2011     2011            2012      2013    2014    2015           TOTAL
CAPITAL COSTS
 Project Costs                 $ 1,388,493     $18,272      $ 5,360       $   -   $-      $-         $ 1,412,125
Total Capital Costs            $ 1,388,493     $18,272      $ 5,360       $   -   $-      $-         $ 1,412,125

CAPITAL REVENUES
 FTA Section 5309              $     525,950   $61,250      $      -      $   -   $-      $-         $     587,200
 CMAQ                                 59,750       -               -          -    -       -                59,750
   Total Federal                     585,700    61,250             -          -    -       -               646,950

 Phoenix                             467,829   (47,110)         (2,352)       -    -        -              418,367
 Tempe                               158,700   (30,777)         (1,398)       -    -        -              126,524
 Mesa                                 25,263    (3,506)           (224)       -    -        -               21,533
 PTF Revenue                         151,001    38,415           9,335        -    -        -              198,751
  Total Local                        802,793   (42,978)          5,360        -    -        -              765,175
Total Capital Revenue          $ 1,388,493     $18,272      $ 5,360       $   -   $-      $-         $ 1,412,125




Five-Year Operating Forecast and Capital               27                                                June 2010
Program - FY 2011 through FY 2015
High Capacity Transit Projects: The Regional Transportation Plan (RTP), adopted by
the Maricopa Association of Governments (MAG) and financed under the one-half cent
sales tax extension, identifies 57 miles of major light rail/high capacity transit corridors
to be implemented by 2026. Currently the 3.2 mile Phase I extension to serve the
Northwest area is in final design and right of way acquisition. Under the plan additional
service areas are identified; a 3.1-mile light rail extension east into downtown Mesa,
2.5-miles into south Tempe, 5-miles west into Glendale, 11-miles into west Phoenix and
12-miles into northeast Phoenix. METRO is the agency charged with planning,
designing, building and operating the light rail transit (LRT) system in the area.

The timing of the projects in the program is depicted on the following schedule shown below




Planning was completed on the Central Mesa LRT Extension in FY 2010. Design will begin
by the beginning of FY 2011. Additionally, planning will be completed on the Tempe South
and Phoenix West corridors in early FY2011. The Glendale corridor began planning in FY
2010 and will continue through FY 2011.

Funding for future projects has two phases:

       1) Planning Budget Phase: Alternative Analysis and the draft environmental
          document are funded from Federal Section 5339 funds, Member City
          contributions, and PTF.

       2.) Capital Budget Phase: After entry into Preliminary Engineering, costs are
           included in the capital budget and funded by Federal, regional, and local sources.




Five-Year Operating Forecast and Capital      28                                   June 2010
Program - FY 2011 through FY 2015
Northwest Extension -- The Northwest area is a major employment and activity center
located in northwest Phoenix. The corridor continues to experience significant growth in
population with an expected growth of 24 percent by 2025. Along with this growth,
Vehicle Miles of Travel (VMT) is expected to increase by 21 percent. Traffic congestion
and capacity deficiencies are expected to increase despite planned transportation
improvements. Inadequate transit service has hampered access to this area and to
other Valley destinations.

A Locally Preferred Alternative (LPA) was adopted by the Phoenix City Council and
Valley Metro Rail Board of Directors in 2005. On March 6, 2007, the Council approved
the Northwest Corridor Light Rail Transit (LRT) Extension as a phased project; the first
3.2-mile phase, along 19th Avenue from Montebello Avenue to Dunlap Avenue, will be
funded entirely from locally funds.

As a result of the economic downturn, construction of the Northwest Extension will be
completed in phases. Transit funding comes from sales tax revenue, of which
collections have experienced significant decreased. This decrease has caused the city
of Phoenix to adjust the project schedule. The first phase will complete all right-of-way
real estate acquisition and construction of the planned landscaping elements to buffer
the surrounding neighborhoods by early 2011. The economic situation will be closely
monitored and light rail construction will begin as soon as it is financially feasible.




Five-Year Operating Forecast and Capital   29                                   June 2010
Program - FY 2011 through FY 2015
Northwest Extension Sources and Uses of Funds: The total capital cost of the
Northwest Extension project over the FY 2005 to FY 2015 period is budgeted to be
approximately $191.0 million, excluding financing costs.

                                                                                         - - - - - - - ($,000) - - - -
Northwest Extension           Pre-2011         2011         2012         2013     2014        2015           TOTAL
CAPITAL COSTS
 Project Costs                $ 78,000     $ 5,125      $51,049      $ 56,866     $ -        $ -         $ 191,039
Total Capital Costs           $ 78,000     $ 5,125      $51,049      $ 56,866     $ -        $ -         $ 191,039

CAPITAL REVENUES
 FTA Section 5309             $      -     $     -      $      -     $      -     $ -        $ -         $       -
 Other Federal                       -           -          29,139       35,427     -          -              64,566
   Total Federal                     -           -          29,139       35,427     -          -              64,566

 Phoenix T 2000 Transit Tax       74,500       5,125           210          438     -           -             80,273
 PTF Revenue                       3,500         -             -            -       -           -              3,500
 Phoenix Water                       -           -          21,700       21,000     -           -             42,700
                                     -           -             -            -       -                            -
   Total Local                    78,000       5,125        21,910       21,438     -           -            126,473
Total Capital Revenue         $ 78,000     $ 5,125      $51,049      $ 56,865     $ -        $ -         $ 191,039




Central Mesa LRT Extension -- The Central Mesa LRT Extension will improve mobility
and provide additional capacity in the Main Street corridor in Mesa. In addition, the
project will connect the Central Mesa corridor with major activity and employment
centers located east and west of the project corridor, such as Downtown Phoenix,
Downtown Tempe, Sky Harbor International Airport, Arizona State University, proposed
Mesa Gateway Area, and the ASU East Polytechnic campus. The project will also
enhance connectivity to the Mesa Link BRT (with in-street mixed traffic operations) that
currently operates as a feeder to the end-of-line Sycamore LRT station in Mesa and
serves East Mesa including Superstitions Spring Mall.

 Planning for the Central Mesa corridor began spring 2007 with an Alternatives Analysis
(AA). The AA gathered technical data and community input to help determine which
route and transit technology would best serve Mesa. Eight transit options were
evaluated. Through analysis, the locally preferred alternative (LPA) was identified. The
recommended alternative is to extend light rail on Main Street to Gilbert Road. Phase I
implementation is to extend light rail east of Mesa Drive to LeSueur by 2016. Phase II is
to extend to Gilbert Road at a future date. Currently, the extension to Gilbert Road is not
financed or programmed in the Proposition 400 plan. The LPA was approved by the
Mesa City Council, METRO Board of Directors, and the Maricopa Association of
Governments in mid 2009. This extension is part of the Regional Transportation Plan
and funded by Proposition 400 regional sales tax and a federal grant that has been

Five-Year Operating Forecast and Capital               30                                                 June 2010
Program - FY 2011 through FY 2015
applied for by METRO. Design for the Central Mesa LRT Extension will begin in FY
2011.

                          Central Mesa LRT Extension Alignment




Central Mesa Extension Sources and Uses of Funds: The total capital cost of the
Central Mesa Extension project over the FY 2011 to FY 2015 period is budgeted to be
approximately $181 million, excluding financing costs.

                                                                                 - - - - - - - ($,000) - - - -
Central Mesa Extension            2011      2012             2013      2014        2015             TOTAL
CAPITAL COSTS
 Project Costs                $14,001      $ 22,531        $ 37,069   $ 51,222   $ 56,131        $ 180,954
Total Capital Costs           $14,001      $ 22,531        $ 37,069   $ 51,222   $ 56,131        $ 180,954

CAPITAL REVENUES
 FTA Section 5309             $      -     $ 10,799        $ 20,000   $ 17,007   $ 19,027        $     66,833
 CMAQ                             11,000      5,210           7,319      8,205      9,180              40,914
   Total Federal                  11,000     16,009          27,319     25,212     28,207             107,747

  PTF Revenue                      3,001     6,522            9,750    26,010      27,924              73,207
   Total Local                     3,001     6,522            9,750    26,010      27,924              73,207
Total Capital Revenue         $14,001      $ 22,531        $ 37,069   $ 51,222   $ 56,131        $ 180,954




Tempe South Corridor -- The Tempe South Corridor project will improve mobility and
provide additional capacity in the corridor. Tempe had the second highest percentage of

Five-Year Operating Forecast and Capital              31                                             June 2010
Program - FY 2011 through FY 2015
vehicle miles traveled (VMT) on streets under congested conditions in the metropolitan
area, higher than the regional average. Congestion is expected to worsen in the future.
About 282,200 vehicle miles or 39% of the total VMT was on freeways that were over
capacity within the study area compared to 30% (or 1,944,150 vehicle miles) of the
same in the region in 2004. By 2030, the corresponding percentages for the study area
and the region respectively will be 45% and 51%. In addition, the project is intended to
connect the Tempe South corridor with major activity and employment centers located
west and east of the project corridor, such as Downtown Phoenix, Sky Harbor
International Airport, Arizona State University and Downtown Mesa through the 20 mile
LRT starter.

Planning for the Tempe South corridor began summer 2007 with an Alternatives
Analysis (AA). The Tempe South corridor study has evaluated a range of high capacity
transit technologies (e.g. bus rapid transit, commuter rail, light rail transit and modern
streetcar) and potential north-south alignments (e.g., Mill Avenue/Kyrene Road, Rural
Road and McClintock Drive). METRO and the cities of Tempe and Chandler are
continuing to evaluate the high capacity transit alternatives for the Tempe South
corridor. The schedule calls for the completion of an Alternatives Analysis and the
selection of a Locally Preferred Alternative (LPA) that will determine technology and
alignment for the Tempe South Corridor in the fall of 2010. This extension is part of the
Regional Transportation Plan and funded by Proposition 400 regional sales tax and a
federal grant that will be applied for by METRO. Design for the Tempe South Corridor
project will begin in FY2011.



Tempe South Extension Sources and Uses of Funds: The total capital cost of the
Tempe South Extension project over the FY 2011 to FY 2015 period is budgeted to be
approximately $73.9 million, excluding financing costs.
                                                                                  -    - - - - - - ($,000) - - - -

Tempe South Extension             2011      2012              2013      2014          2015            TOTAL
CAPITAL COSTS
 Project Costs                $     -      $ 5,118          $ 15,181   $ 24,874   $ 28,772        $     73,945
Total Capital Costs           $     -      $ 5,118          $ 15,181   $ 24,874   $ 28,772        $     73,945

CAPITAL REVENUES
 FTA Section 5309             $     -      $     -          $ 5,000    $ 8,500    $ 18,000        $     31,500
 CMAQ                               -          5,000          7,550      9,400       3,750              25,700
   Total Federal                    -          5,000         12,550     17,900      21,750              57,200

  PTF Revenue                       -           118            2,631     6,974         7,022            16,745
   Total Local                      -           118            2,631     6,974         7,022            16,745
Total Capital Revenue         $     -      $ 5,118          $ 15,181   $ 24,874   $ 28,772        $     73,945




Five-Year Operating Forecast and Capital               32                                             June 2010
Program - FY 2011 through FY 2015
Phoenix West Extension -- The Phoenix West Extension will improve mobility and
provide additional capacity in the I-10 corridor in West Phoenix. In addition, the project
will connect the West valley with major activity and employment centers located near
Downtown Phoenix, such as State Capitol, Maricopa County and City of Phoenix
governmental mall. The project will also enhance regional connectivity by connecting
with the METRO starter line.

Planning for the Phoenix West corridor began spring 2007 with an Alternatives Analysis
(AA). The AA is evaluating possible routes to connect the METRO starter line with 79th
Ave in the vicinity of I-10 and the type of transit mode (either Light Rail Transit or Bus
Rapid Transit) to make that connection. In July 2008, MAG Regional Council approved
the recommendation for high capacity transit improvements (BRT or LRT) in the median
of I-10, west of I-17. METRO is currently evaluating the various LRT and BRT
alternatives that would connect the alignment along I-10 freeway to Downtown Phoenix.
This extension is part of the Regional Transportation Plan and funded by Proposition
400 regional sales tax and a federal grant that has been applied for by METRO. Locally
Preferred Alternative is anticipated to occur in Fall 2010 which will identify a route,
transit mode and some station locations. Following the formal adoption of the LPA,
METRO will generate detailed engineering designs of the selected alignment and
station layouts and begin the environmental evaluation phase in compliance with the
National Environmental Policy Act.


Phoenix West Extension Sources and Uses of Funds: The total capital cost of the
Phoenix West Extension project over the FY 2011 to FY 2015 period is budgeted to be
approximately $123.0 million, excluding financing costs. The early action program,
forecasted for FY 2012, is contingent upon award of federal grants currently being
investigated in conjunction with the City of Phoenix.
                                                                                  -     - - - - - - ($,000) - - - -

Phoenix West Extension           2011        2012             2013      2014          2015             TOTAL
CAPITAL COSTS
 Project Costs               $         45   $ 34,277        $ 19,794   $ 32,952   $ 35,930         $ 122,998
Total Capital Costs          $         45   $ 34,277        $ 19,794   $ 32,952   $ 35,930         $ 122,998

CAPITAL REVENUES
 FTA Section 5309            $     -        $ 7,000         $ 10,000   $ 10,000   $ 10,000         $     37,000
 Other Federal                     -         18,479              -          -          -           $     18,479
 CMAQ                              -          3,617              -        5,000     13,000               21,617
   Total Federal                   -         29,096           10,000     15,000     23,000               77,096

  PTF Revenue                          45     5,181            9,794    17,952        12,930             45,902
   Total Local                         45     5,181            9,794    17,952        12,930             45,902
Total Capital Revenue        $         45   $ 34,277        $ 19,794   $ 32,952   $ 35,930         $ 122,998




Five-Year Operating Forecast and Capital               33                                              June 2010
Program - FY 2011 through FY 2015
Appendix A -- The Budget Process
METRO’s continuing goal is to provide the highest quality services to our member
communities in the most cost effective manner. The METRO budget process is a key
piece of the strategy to achieve these results in a coordinated manner and to make
fiscally responsible decisions that will ultimately produce a premier transit system in
Maricopa County.

METRO’s budget process serves two principal purposes. Within the Corporation,
development of the budget provides a forum for joint planning of objectives and tasks,
with managerial and board review of programs. It sets the expectations for performance
in the coming year(s). For the Corporation’s Members and partner agencies, the budget
reports on the status of projects and services, detailing the agency’s operational
objectives, capital improvements, and funding plans.

The annual budget is prepared on an accrual basis and adopted by the Board of
Directors each fiscal year. With respect to Capital Budgets, project contingency
accounting is used to control expenditures within available project funding limits. With
respect to Operating Budgets, encumbrance accounting is not used and all
appropriations lapse at the end of the year. METRO staff positions are listed and
approved as part of the annual budget process. Prior to final adoption, a proposed
budget is presented to the Board of Directors for review and public comment is
received. Final adoption of the budget must be on or before June 30 of each year.

METRO also develops a Five-Year Capital Program and Operating Forecast as part of
the annual budget process. The five-year budget focuses on the capital improvements
that are planned to occur within the planning horizon, and includes:

   •   projected costs of LRT capital expenses,
   •   projected amounts to be paid by each Member to METRO,
   •   projected amounts to be paid directly for LRT expenses by each Member
       (for example, for acquiring rights-of-way), and
   •   projected revenues to be received from Federal funds or other funding
       sources.

METRO future staffing estimates are also provided. However, only adoption by the
Board of the annual budget authorizes new METRO staffing positions.

The internal process is a collaborative and iterative one, with the agency’s senior
management providing strategic direction and critical review, managers and project
managers preparing resource proposals, and financial staff (Including the Financial
Working Group) providing feedback and technical support for the process. A review by
the Rail Staff Working Group and Rail Management Committee will precede drafting of
the proposed budget. Once the proposed annual budget and five-year capital plan have
been published, the METRO Board provides final review and adoption.

Five-Year Operating Forecast and Capital   34                                  June 2010
Program - FY 2011 through FY 2015
Budget Timelines: The 2010/2011 process is outlined below, with preliminary planning
beginning in February and with budget adoption scheduled for May 2010. Major phases
of this process are outlined below:

    •     Feb 15th -- Budget Templates to City Staff for Revenue Forecast
    •     April 22nd -- Draft Budget to Rail Management Committee, Rail Staff Working
          Group, and Financial Advisory Group for Review.
    •     April 30th – Comments due to METRO Budget Group
    •     May 5th – Budget Submitted to RMC
    •     May Board Meeting – Budget Adopted by Board


                                      METRO Budget             METRO Directors /
                Members' Staff           Group                 Advisory Groups            METRO Board
Feb 1st thru
                                      Prepare Templates
 Feb 15th
Feb 15 thru                          Respond to Questions        Provide Input and
                Revenue Forecast
  Mar 15                              and Issues Raised              Direction

                                        Compile Budget        Respond to Questions and
Mar 15 thru
                                    Information and Prepare   Issues Raised and Provide
 Mar 31                                   Draft Budget                Direction
                                                                Review Draft Budget
     st
Apr 1 thru                           Respond to Questions       Package and Provide
               Review and Comment
 April 30th                           and Issues Raised         Feedback to METRO
                                                                   Budget Group
  May 1st                                                       Review and Approve
                                    Compile Revisions and
 thru May                            Prepare Final Budget
                                                              Budget for Submission to
    7th                                                              the Board

 May 7 to                            Respond to Questions
                                                                                              Review
 May 15th                             and Issues Raised

May Board                                                                                 Budget Formally
 Meeting                                                                                     Adopted




Five-Year Operating Forecast and Capital             35                                          June 2010
Program - FY 2011 through FY 2015
                   Appendix B –Listing of CNPA by City – March 2010

             Phoenix Public Transit                             ($,000)
             Bus Pullouts on Central Avenue                            756
             Phoenix Art Museum Left Turn Lane                          66
             19th / Montebello Transit Center                        6,084
             Central / Camelback Transit Center                     12,180
             Washington / 44th Street Transit Center                 4,467
             Washington / 44th-56th Street Bike Lanes                  803
             Civic Plaza Expansion                                     338
             COP Add'l Water Svcs to Pueblo Grande Museum               82
             CNPA COP Central/Camelback Bus Bays Relocation             62
             COP CNPA LScape Irrigation Resto Central Ave               92
             PPT CNPA Additional Point of Interest Signs                67
             Fiber Optic COP                                           419
             Washington/Jefferson 16 to 26 St Property Access        2,438
             11th Street Loop Track                                  5,097
             PPT CNPA-3rd St/ Wash Station APS Medallions                7
             M4-PPT Taylor Street Ped Crossing                          11
                Sub Total                                           32,969

             Phoenix Streets
             6th Lane on Camelback                                  10,453
             Additional Street & Pedestrian Lighting                   515
             Rubber Overlay LS 1                                       219
             Rubber Asphalt LS 3                                     1,544
             Rubber Asphalt LS 4                                       379
             PST CNPA-Additional 3/8" AC Leveling Course               166
             CNPA COP Red Light Cameras                                 50
             PST CNPA Removable Steel Curb at 7th/Jeff                   6
             5F - LRT Signals/Communications                            80
                Sub Total                                           13,412

             Phoenix Aviation
             Washington / 44th Street Transit Center                  2,995
             APM Utility Connections                                     23
             People Mover Foundation - 44th Street                      756
             People Mover APS Ductbank @ 40th Place                     357
             10" Water Line 42nd/Washington                              57
             Archaelogical/Hazardous Material testing                    57
                Sub Total                                             4,245

             Phoenix Water
             COP Water/Sewer LS 1                                   13,947
             COP Water/Sewer LS 2                                    7,778
             COP Water/Sewer LS 3                                   19,904
             COP Water/Sewer LS 4                                    6,962
             COP Water/Sewer 48th Street Bridge                        143
             LS1 Cathodic Protection                                   634
             LS2 Cathodic Protection                                   445
             LS3 Cathodic Protection                                   -
             LS4-COP, Cathodic Protection                                86
               Sub Total                                            49,899

             Total - City of Phoenix                               100,525


Five-Year Operating Forecast and Capital           36                         June 2010
Program - FY 2011 through FY 2015
           Appendix B –Listing of CNPA by City – March 2010 (Continued)

            City of Tempe                                      ($,000)
            5th / College Transit Center                              746
            COT SRP Prior Rights TC Relo                               20
            COT Waterline                                              48
            COT Add'l Comm Conduits: Dorsey Lane LS5 CO13              28
            COT ASU Pedestrian Signal                                 109
            Parking Facility at 5th/Farmer                            109
            COT Wtrline @ Cremery Rt,Stadium Dr, Apache Blvd           82
            COT Additional Street Lighting                            280
            COT Add'l Conduit @ McClintock/Apache                        8
            Rubber Asphalt LS 5                                       522
            Storm Drain Extension                                     115
            Rubber Asphalt - Tempe                                    464
            McClintock Park and Ride - COT                          5,581
            Tempe Other Admin Costs                                   723
            COT CNPA-Misc Changes Directed by City of Tempe             16
            COT CNPA-Apache/McClintock Park & Ride Garage             315
            Fiber Optic COT                                           436
            LS4-COT, Cathodic Protection                              140
            University Drive Station Bus Interface                    -
            Veteran's Way (5th) / College TC Misc Revisions              7
            CNPA COT Bus Shelter Electrification (LS4 CO#89)            10
            CNPA COT Wash/Ctr Pkwy Station                          4,057
            TLB Lighting Change Orders                                  12
            COT CNPA-Add'l Mill/Overlay: Apache, Rural-Price          569
            COT CNPA-Price/Apache PnR Modifications (PNR-RB)            58
            COT CNPA - Price/Apache PnR Waterline                     102
            COT CNPA-Landscape Island at Terrace /Apache                 8
            COT CNPA-Replace Bougainvilleas on Stadium Drive            22
            Tempe Market Analysis                                       44
            Relocation of LS5 Field Offices                             86
               Total City of Tempe                                 14,717

            City of Mesa
            Main / Sycamore Transit Center                          4,559
            Fiber Optic COM                                           735
            M2 - Mesa Add'l Grind & Overlay                           247
            M3 - Mesa Add'l Grind & Overlay on Dobson                 204
            Mesa Market Analysis                                        19
            CNPA - Local Work Jurisdiction                            -
               Total City of Mesa                                   5,764
            Various
            ASU Logo Additions - Station Finshes                       72
            ASU Steam Line                                              8
            Fiber Optic ASU                                           991
            CNPA-Rojo Lofts Property                                   20
            CityScape CNPA in LS3                                      24
            APS Archaeological Support at 48th Bridge                  58
               Total ASU                                            1,173

            Grand Total All CNPAs                                 122,179


Five-Year Operating Forecast and Capital          37                         June 2010
Program - FY 2011 through FY 2015
Appendix C – Glossary of Terms and Acronyms


 TERM /
 ACRONYM                DEFINITION
 5309                   A reference to FTA New Starts Program, Title 49 U.S.C., Section 5309
                        providing funding for the design and construction of transit systems
                        including the CP/EV LRT METRO system.
 5339                   Section 5339 allows FTA to make grants and agreements, under criteria
                        established by the Secretary, to States, authorities of the States,
                        metropolitan planning organizations, and local governmental authorities to
                        develop alternatives analyses as defined by section 5309(a)(1). Eligible
                        study sponsors must be able to incorporate the results of this work into an
                        ongoing alternatives analysis study or must commit to initiate an
                        alternatives analysis study within 12 months of the grant approval.

 ADOT                   Arizona Department of Transportation
 CADD                   Computer aided design and drafting
 CMAQ                   Federal funding program intended for Congestion Mitigation and Air
                        Quality improvement.
 CNPA                   Concurrent Non-Project Activities
 CP/EV LRT              Central Phoenix/East Valley Light Rail Transit - the initial 20 mile project
                        segment of light rail in Maricopa County - with scope definition provided as
                        part of the Full Funding Grant Agreement dated January 24, 2005.
 DEIS                   Draft Environmental Impact Statement - Submitted in advance of
                        application for the FFGA, the DEIS identifies impacts anticipated by the
                        prospective construction and operation of an LRT system including
                        impacts on traffic, noise, air quality, historic and archeological sites, as
                        well as impacts to properties along the alignment.

 FEIS                   Final Environmental Impact Statement- Submitted in advance of
                        application for the FFGA, the DEIS identifies impacts anticipated by the
                        prospective construction and operation of an LRT system including
                        impacts on traffic, noise, air quality, historic and archeological sites, as
                        well as impacts to properties along the alignment.

 FFGA                   Full Funding Grant Agreement - Inter-Governmental Agreement between
                        the F T A and the Grantee responsible for the design and construction of a
                        transit project. In the case of the CP/EV project, the City of Phoenix is the
                        Grantee and METRO is acting as a sub-recipient.
 FTA                    Federal Transit Administration
 Headways               The time interval between arriving trains or busses along a transit route.
                        (Service Frequency)
 HCT                    High Capacity Transit – includes heavy rail, Light Rail Transit, Bus Rapid
                        Transit modes of urban transportation.




Five-Year Operating Forecast and Capital           38                                           June 2010
Program - FY 2011 through FY 2015
Appendix C – Glossary of Terms and Acronyms (Cont’d)


 TERM /
 ACRONYM                DEFINITION
 LPA                    The Locally Preferred Alternative alignment for a transit route among a set
                        of options which have been analyzed.
 LRT                    Light Rail Transit
 LRV                    Light Rail Vehicle
 MAG                    Maricopa Association of Governments
 Member Cities          METRO equity members, currently Phoenix, Tempe, Mesa and Glendale
 METRO                  The light rail system to be designed, constructed and operated by
                        METRO.
 O&M                    Operations and Maintenance activities required for rail passenger service.
 Proposition 400        Legislative initiative to create a Public Transportation Fund passed into
                        Arizona law in November 2004 providing roadway and public transit
                        improvements in accordance with the Regional Transportation Plan.
 PTF                    Public Transportation Fund. See Proposition 400.
 ROW                    Right-of-Way- real property required for the LRT alignment
 RPTA                   Regional Public Transportation Authority the designated agency to receive
                        and distribute public transit improvement funding under Proposition 400
 RTP                    Regional Transportation Plan - for Maricopa County, a comprehensive,
                        performance-based, multi-modal and coordinated regional plan providing a
                        blueprint for future regional transportation investments.
 TIP                    Transportation Improvement Program
 TOD                    Transit Oriented Development - real property development typically
                        incorporating residential and commercial uses into the areas adjacent to a
                        transit route.
 METRO                  Valley Metro Rail, Inc.
 VMT                    Vehicle Miles of Travel for each LRT vehicle operated




Five-Year Operating Forecast and Capital          39                                          June 2010
Program - FY 2011 through FY 2015
         AGENDA ITEM 7
U.S. Airways Center Fare Agreement
                                                                         AGENDA ITEM 7

To:           Chairman Cavazos and Members of the Rail Management Committee

Through:       Stephen R. Banta, Chief Executive Officer

From:          John Farry, Director of Community and Government Relations

Date:          April 28, 2010

Re:            U.S. Airways Center Fare Agreement



PURPOSE
The Rail Management Committee (RMC) is being requested to recommend that the
Board authorize the Chief Executive Officer (CEO) to extend the program agreement
with Phoenix Arena Development Limited Partnership (PADLP), operator of U.S.
Airways Center (USAC), into a five (5) year program that integrates light rail ridership
into USAC events by combining event and light rail ticketing.

BACKGROUND AND DISCUSSION
In September of 2009, the METRO Board approved a one-year program with PADLP to
integrate light rail ridership into US Airways Center events by combining event and light
rail ticketing. The agreement was established to cover the 2009-2010 Phoenix Suns
season as well as other events at US Airways Center such as concerts. Please refer to
the attached agreement.

The program is now six months old and has been successful from the perspective of
PADLP, METRO, and the customers being served by the agreement. Over the course
of the Suns regular season, approximately 11 percent of Suns fans attending games
used light rail as their transportation choice. In April alone, more than 16 percent used
light rail to travel to the game.

From the METRO perspective, the benefits of the agreement include:

   •    Guaranteed income from a reliable source;
   •    Ease of fare inspection;
   •    Ease of boarding after events;
   •    Elimination of lines at fare vending machines; and
   •    Further integration of light rail into community and downtown life.

As the Suns begin to communicate with ticket purchasers for next season, staff is
recommending that we move forward with a more permanent agreement at this time in
order to allow adequate planning and education efforts.
Rail Management Committee Memo
April 28, 2010
Page 2

To accommodate the longer term agreement, it is also recommended that a provision
be included that would allow an annual review to ensure that the agreement is revenue
neutral from a fare collection perspective. Issues to be considered in the annual review
to determine fare neutrality would include:

   •   Comparable rail average fares including mix of full fares and reduced fares.
   •   Administrative cost savings related to cash processing, TVM maintenance, and
       the elimination of free rides.

The establishment of the average fare revenue collection provision as a basis for
payment will also serve to set a standard for future agreements for additional venues
along the alignment, such as Chase Field and Sun Devil Stadium. Revenue neutrality
from a fare collection perspective will allow METRO to establish a cost per attendee that
will vary from venue to venue, but be equitable to all participants.

The provisions in the agreement are:

   •   Term. The agreement would be amended to extend the term to June 30, 2015.
       Either party may terminate the agreement without cause upon 30 days written
       notice. A provision to review the terms and conditions of the agreement on an
       annual basis is included in the amendment.
   •   Fares. PADLP will pay METRO 31-cents for each event ticket scanned upon
       entrance to the USAC. In exchange, METRO will recognize USAC event tickets
       as valid light rail fare on the day of the event; tickets will be honored four (4)
       hours prior to the event until the end of the transit day. This amount will be
       reviewed annually to ensure revenue neutrality.
   •   Verification and payment. PADLP will provide semi-monthly reports showing
       the number of tickets scanned at each center event during the previous two-week
       period. PADLP will pay METRO the amount due based on total tickets scanned
       within ten (10) days of each report date.
   •   Fare recovery verification. During the agreement term, METRO will verify
       event ridership using the light rail vehicle Automatic Passenger Counter
       technology to ensure fare revenues are revenue neutral.

FISCAL IMPACT
Revenues to date from the existing program have been revenue neutral based on the
criteria identified above. Revenues vary depending on event attendance, but have
averaged $41,194 per month since the inception of the pilot program. This amount
exceeds the estimated range of revenues. To date, the 31-cent per ticket has exceeded
the region’s adopted farebox recovery goal of 25 percent.

RECOMMENDATION
Staff recommends that the RMC recommend that the Board authorize the CEO to
execute the attached amendment to the Light Rail Ticketing Agreement with
Phoenix Arena Development Limited Partnership (PADLP) to extend the term of
the program to June 30, 2015.
                              FIRST AMENDMENT TO
                        LIGHT RAIL TICKETING AGREEMENT

       This First Amendment to Light Rail Ticketing Agreement ("First Amendment") is
entered into as of April ___, 2010, by and among Valley Metro Rail, Inc. (“METRO”), and
Phoenix Arena Development Limited Partnership ("PADLP").

                                         RECITALS

       A.     The parties to this First Amendment have previously entered into that certain
Light Rail Ticketing Agreement dated as of August 24, 2009 (the “Original Agreement”). The
Original Agreement and this First Amendment are herein collectively referred to as the
“Agreement”.

       B.      The parties wish to further amend the Agreement in order to extend the Term, as
more specifically set forth herein.

       NOW THEREFORE, the parties hereto agree as follows.

                                       AGREEMENT

      1.      Definitions. All capitalized terms used herein without definition shall have the
meanings assigned to them in the Agreement.

       2.      Term. Section 1 of the Agreement shall be deleted and replaced in its entirety
with the following language:

              “1.      Term; Termination. The term of this Agreement will begin as of October
              1, 2009, and end on June 30, 2015 (“Term”), unless sooner terminated as provided
              in this Agreement. Notwithstanding the foregoing, either party may terminate this
              Agreement without cause upon thirty (30) days written notice to the other party of
              its intention to terminate.

              The parties to this Agreement agree to meet to review its terms and conditions on
              or before May 1st for each year under the Term of this Agreement.

        3.      Counterparts. This First Amendment maybe signed in counterparts, and the
parties may exchange facsimile copies of their respective signature pages, all of which taken
together shall constitute one and the same agreement.

        4.     Binding Effect. This First Amendment shall be binding upon the parties hereto.
Except as expressly set forth herein, the Agreement shall not be amended or modified in any
respect, and shall continue in full force and effect.

                  [SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date first above
written.

       METRO:


                                   By:
                                          Stephen R. Banta
                                   Its:
                                          Chief Executive Officer

       Approved as to form:

       Michael J. Ladino


___________________________
      METRO General Counsel


       Operator:                   PHOENIX ARENA DEVELOPMENT LIMITED
                                   PARTNERSHIP



                                   By:
                                          Ralph Marchetta
                                          General Manager




                                             2
           AGENDA ITEM 8
METRO Advertising Policy Restrictions
                                                                                  AGENDA ITEM 8

To:              Chairman Cavazos and Members of the Rail Management Committee

Through:         Stephen R. Banta, Chief Executive Officer

From:            John Farry, Director of Community and Government Relations

Date:            April 28, 2010

Re:              METRO Advertising Policy Restrictions



PURPOSE
The purpose of this memorandum is to provide information to the Rail Management
Committee (RMC) related to the METRO Advertising Policy restriction related to the
advertising of beer, wine, and/or alcohol on METRO assets approved for advertising
displays. The option exists for the RMC to make a recommendation to amend the
advertising policy related to the advertising of alcohol.

BACKGROUND
In February, METRO staff presented information to the RMC and Board related to the
restriction on the advertising of alcohol on the METRO system. The Board requested
that staff provide survey information related to the advertising of alcohol on other peer
transit systems. Of the nine agencies interviewed that allow advertising, two of them
allowed the advertising of alcohol. Results of that survey are shown in the following
table.

                                                               Advertising Restriction on
                 Agency                  Location
                                                                        Alcohol
        BART                        San Francisco, CA                      Yes
        DART                             Dallas, TX                        Yes
        Metro Transit                Minneapolis, MN                        No*
        SDMTS                         San Diego, CA                        Yes
        SACRT                         Sacramento, CA                       Yes
        Sound Transit                   Seattle, WA                        Yes
        TriMet                         Portland, OR                         No
        UTA                          Salt Lake City, UT                    Yes
        VTA                            San Jose, CA                        Yes
        * Beer and wine only with requirement to include “drink responsibly” message.
Rail Management Committee Memo
April 28, 2010
Page 2

Advertising sales on METRO are underway. Committed sales through April 26 indicate
that advertising revenues to METRO through the end of December 2010 are
approximately $109,700.

As reported in February, should the METRO advertising policy restriction on alcohol be
changed by the Board, staff would adhere to the rules and regulations as set forth by
the Arizona Department of Liquor Licenses and Controls guidelines. Further, the
separation requirement would be 600 feet in instances where light rail station platforms
are located near schools or churches. Additionally, station platform advertising is
currently only authorized in the City of Phoenix.

FISCAL IMPACT
Due to the economic conditions and the newness of the advertising program, the
METRO advertising sales market is still being established. Allowing beer, wine, and/or
alcohol advertising would broaden the market and the revenue base for METRO
advertising.

RECOMMENDATION
This item is for information and possible action to recommend that the Board
amend the METRO Advertising Policy.
ADVERTISING POLICY

Valley Metro Rail, Inc. (METRO) believes that advertising on the light rail system is best
performed using a standard set of established criteria. Therefore, the following criteria
are established for advertising:

Vehicle Advertising
That advertising on the exterior of the vehicle will be limited to no more than ten (10)
vehicles at any one time. METRO reserves the right to wrap four (4) additional vehicles
for its own purposes.

That advertising on the interior of the vehicle allow for floor decals. In vehicles that
have exterior wraps, the floor decals must match the theme of the wrap. In unwrapped
vehicles, only one decal design per vehicle will be allowed.

That advertising on the interior of the vehicle allow for the installation of LCD-TV in
vehicles.

Station Advertising
That station advertising be limited to wraps and display case posters. That station
wraps occur in participating cities only and be limited to backdrop banners, vertical
banners and paver decals. That any advertising at stations not be attached to, or
obscure, station art.

That display case station posters occur in participating cities only and be limited to no
more than 50% of map cases at any given station.

That advertising at station platforms allow for the installation of electronic or standard
kiosks.

General Advertising
That any future METRO advertising policy be consistent with the City of Phoenix Public
Transit Department’s policy that establishes the following standard:

Advertising Standard
The subject matter of METRO system advertising is limited to speech that proposes a
commercial transaction.
ADVERTISING POLICY
Page 2


METRO policies prohibit the display of advertising copy or graphics that:

   1. Are false, misleading, or deceptive
   2. Relate to an illegal activity
   3. Are explicit sexual material, obscene material, or material harmful to minors as
      these terms are defined in Title 13, Chapter 35, Arizona Revised Statues
   4. Advertise alcohol or tobacco products
   5. Depict violence and/or anti-social behavior
   6. Include language which is obscene, vulgar, profane or scatological
   7. Relate to instruments, devices and items, products or paraphernalia which are
      designed for use in connection with “specified sexual activities” as defined in the
      City of Phoenix Zoning Ordinance.

All advertising is subject to approval by METRO and/or its designated representatives.

Adopted by Valley Metro Rail Board of Directors on July 15, 2009.

				
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