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                               Fourth Quarter FY2010




                                                           Year End Financial &
                                                           Management Report
                                                           Fiscal Year Ending September 30, 2010
             FY2010 Year End Financial & Management Report
                 Fiscal Year Ending September 30th, 2010

                                         Table of Contents

Highlights .................................................................................................... 1

  METRO Welcomes New Harris County Board Member............................................... 1
  Federal Support for Light-Rail Expansion Renewed ...................................................... 1
  METRO Rail Expansion: ROD Received and Appropriations Funds Secured ................ 1
  Business Assistance Fund Helps Small Businesses ....................................................... 2
  METRO Granted $2.9M from FTA’s State of Good Repair Program .............................. 2
  New Initiative Targets Downtown Diamond Lanes ...................................................... 2
  Lost & Found Moved to a More Convenient Location .................................................. 2
  METRO Q® Fare Card Provides Benefits to Riders ....................................................... 2
  Efforts to Bolster Student Riders Well Received ........................................................... 3
  All Board Meetings Now Streamed Live ...................................................................... 3
  METRO Declared “Grand Winner” at APTA’s AdWheel Awards .................................. 3
  METRO Police Earns ‘Flagship Agency’ Status ............................................................. 3
  Bus Operator Named No. 1 in North America ............................................................ 4
  TEAM Picnic Brings Friends and Family Together ........................................................ 4
  New Services Rolled Out in FY2010 ........................................................................... 4
  New Employee Training Developed ........................................................................... 5
  Official Records Retention Policy Adopted .................................................................. 5
  District Attorney’s Report Concludes Allegations to be Unfounded .............................. 5
  The Authority Is Reviewed for Compliance with State Law .......................................... 5
  Board Approves Continuation of Fleet Replacement Program ...................................... 6
  METRORail Hours for Bike Riders Extended................................................................ 6
  METRO Debuts on Facebook and Twitter ................................................................... 6
  Crime Prevention Initiatives in FY2010 ....................................................................... 7
  Community School Safety Education Program (CSSEP) in FY2010................................ 7
  METRO Reaches Out to Spanish-speaking Riders ........................................................ 7
  Reliant Park Events in FY2010 Set Rail Ridership Records ........................................... 8
Ridership Trends ......................................................................................... 9

Financial Performance .............................................................................. 14
  Revenues.................................................................................................................. 14
    Fares ................................................................................................................................... 14
    Sales Tax Revenue ............................................................................................................ 15
    Grant Revenue .................................................................................................................. 16
  FY2010 Operating Budget, Expenses, and Variance .................................................. 17
  General Mobility Expenditures.................................................................................. 22
  Capital Expenditures ................................................................................................. 23
  Debt Service ............................................................................................................. 24
  Composite Operating & Capital Statement ................................................................ 25
  Balance Sheet ........................................................................................................... 26
  Operating Ratio ........................................................................................................ 27

Key Performance Indicators ...................................................................... 28
                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

                                         Highlights
METRO Welcomes New Harris County Board Member

A new Board member, Gary Stobb, representing the Harris County Commissioners court, was
officially sworn in on October 13th, 2010. Mr. Stobb comes from a background as a
professional engineer and has had previous work experience with Harris County working in
public infrastructure including the Executive Director’s position in the Harris County Toll Road
Authority. He will serve as one of the two Harris County appointed nominees on METRO’s
nine-member Board of Directors. Stobb replaces Jackie Freeman, who served on the Board
since 2002, until his term expired recently.

Comprised of a total of nine members, the METRO Board of Directors consists of five members
appointed by the City of Houston, two members representing Harris County, and two other
members representing the 14 multi-cities in the Authority’s service area.

Federal Support for Light-Rail Expansion Renewed

On September 8th, 2010, the Administrator of the Federal Transit Administration (FTA) met
with key METRO staff, the Mayor of Houston, and a congressional delegation of proponents
for METRO’s light-rail expansion to outline the required steps needed to make federal funds
available. This meeting occurred after a four-month investigation into METRO’s procurement
practices. At its conclusion, the FTA confirmed its support for METRO’s light-rail expansion
and laid out a clear plan of corrective action and compliance involving future procurements
and other pertinent federal laws.

METRO Rail Expansion: ROD Received and Appropriations Funds Secured

METRO’s Rail Expansion program continued on its path forward throughout FY2010 as critical
milestones were reached. In July, METRO was granted a Record of Decision (ROD) from the
FTA for the University line. This advancement in the process for obtaining federal funds clears
the way for METRO to continue work on the corridor’s design, engineering, utility coordination
and other pre-construction elements of the program. The University Corridor is an 11.3-mile
double-track, 19-station light-rail line which is projected to generate approximately 47,000
boardings per day by the year 2030.

Also in July, METRO with the support of its congressional delegation was successful in securing
$150 million for the North and Southeast lines as included in the FY2011 Transportation,
Housing and Urban Development Appropriations bill. This is the second consecutive year the
two projects were budgeted in the appropriations bill as $150 million was secured in the
FY2010 bill as well.



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                        FY2010 Year End Financial & Management Report
                            Fiscal Year Ending September 30th, 2010

Business Assistance Fund Helps Small Businesses

In order to mitigate the obstructive impacts of the light-rail construction on local businesses,
METRO continues to utilize its Business Assistance Fund. Approved by the METRO Board in
December 2009, the fund provides financial aid to qualifying small businesses in the areas of
light-rail construction in the form of grants. To date, practically all of the potentially eligible
businesses within the corridors (approximately 470) have had face-to-face briefings about the
program, and over $275,000 has been dispersed to provide financial relief to impacted
businesses.

METRO Granted $2.9M from FTA’s State of Good Repair Program

In early October, the FTA announced that METRO would be the recipient of a $2.9 million
grant as part of the administration’s State of Good Repair Program. The program is an initiative
to address the repair and maintenance backlogs in the nation’s transit system infrastructures.
METRO will use the funds along with $728,000 of the Authority’s own local (matching) funds
to make repairs to its Kashmere and Hiram Clarke Bus Operating Facilities.

New Initiative Targets Downtown Diamond Lanes

METRO began implementing its bus accident reduction initiative in mid-September of 2010 as
a targeted effort to enforce diamond lane traffic laws. Because 32% of all FY2009 downtown
bus accidents (representing 23% of all FY2009 bus accidents on the system) occurred in
diamond lanes, the Authority sees this initiative as an effective way to increase safety and
decrease accidents. METRO Police have concentrated that effort to streets with the highest
number of incidents (Louisiana, Milam, San Jacinto, Travis, and Smith). Since its
implementation, bus accidents in diamond lanes have decreased to 16 by the end of
September 2010 versus 24 a month before in August 2010.

Lost & Found Moved to a More Convenient Location

At the start of October 2010, METRO moved the Lost & Found to its more centrally located
1900 Main RideStore. The move came in response to customer requests for a more accessible
location. Previously, the Lost & Found was located at METRO’s Central Distribution Center at
1220 McCarty Road. Now, customers can locate their lost items at this new location from 8
a.m. to 5 p.m., Monday thru Friday. They can also call the Lost & Found line at 713-658-0854.

METRO Q® Fare Card Provides Benefits to Riders

In June 2010, METRO introduced its new Q Star program for its patrons that use the METRO
Q® Fare Card. By simply showing the METRO Q® Fare Card to any participating business
along the rail line (from restaurants to theaters), METRO patrons receive discounts or free


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                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

items. To date, Q Star has a roster of 34 participating businesses which can be viewed online
at www.ridemetro.org.

Efforts to Bolster Student Riders Well Received

METRO conducted nine onsite campus visits to nine local universities and colleges during
FY2010 in order to raise awareness of METRO’s transit services as well as promote the student
use of the METRO Q® Fare Card. At the close of FY2010, this effort targeting students garnered
over 1,430 new student METRO Q® Fare Cards and approximately 560 student fare card
renewals. METRO conducted one onsite campus visit to a local high school during FY2010 as
well and rendered close to 200 additional new student fare cards.

All Board Meetings Now Streamed Live

Since Thursday, September 16th, 2010, METRO has begun streaming live video of all Board
committee meetings, Board meetings and public hearings held in METRO’s Boardroom at
1900 Main on its website www.ridemetro.org. In addition to streaming video of these
meetings live, METRO has also begun archiving the video footage of these meetings on its
website for those who wish to view them at later dates.

Currently, METRO’s Board meetings are also televised on Comcast’s HTV Channel 16 at
midnight and noon on Sundays, and on Comcast’s HCCTV Channel 17 at midnight and noon
on Saturdays.

METRO Declared “Grand Winner” at APTA’s AdWheel Awards

METRO was named a “Grand Winner” at this year’s AdWheel awards held in San Antonio,
Texas during APTA’s (American Public Transportation Association) 31st Annual Meeting in
October. The annual AdWheel awards recognize excellence in advertising, communications,
marketing, and promotions among public transportation systems and APTA business members.
This year, there were nearly 650 entries, with each entry categorized as either print, electronic,
campaigns, or special events; and each submitting transportation system divided among four
groups based on size. Within its group of transportation systems with “more than twenty
million annual passenger trips,” METRO not only garnered first place in the “print” category,
but it also edged out the competition in the “print” categories amongst all the other
transportation sizes – thus, awarded “Grand Winner” for its “print” submission, “Changing the
Art of Travel,” a series of posters promoting METRO’s Bellaire Quickline service. Earlier this
year, METRO also garnered two Crystal Awards from the American Marketing Association for
its FY2010 marketing efforts.

METRO Police Earns ‘Flagship Agency’ Status

On July 31st, 2010, the METRO Police was selected as a ‘Flagship Agency’ by the Commission
on Accreditation for Law Enforcement Agencies, Inc. (CALEA). This recognition was bestowed
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                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

as the police department received its third consecutive reaccreditation as a law enforcement
agency from CALEA’s tri-annual reaccreditation process. This process involved a complete
onsite assessment by a 2-person team regarding compliance to approximately 450 standards
during a two-year period (in this case, 2007-2009). The process also required an official public
hearing (which was held in April) to invite any public comments regarding the reaccreditation.

CALEA’s accreditation program is designed to improve the delivery of public safety services by
law enforcement agencies, primarily by maintaining a body of standards that have been
developed by public safety practitioners and cover a wide range of current public safety
initiatives. METRO Police is one of only 30 accredited police agencies in Texas, and one of
only five accredited transit police agencies in the U.S. Because METRO Police has been
reaccredited three times and thus recognized as a ‘Flagship Agency,’ it not only holds a
superior track record but it is also exemplified as a role model for other agencies.

Bus Operator Named No. 1 in North America

METRO bus operator Frank Gonzales earned the title of No. 1 Bus Driver in North America at
the 35th International Bus Roadeo event in Cleveland, Ohio in May 2010. Gonzalez, a METRO
bus operator for almost 20 years, not only received first place for his driving, but also received
the first place award in Customer Service. Combined with other awards garnered by METRO’s
maintenance team, the Authority as a whole won second place amongst other transit agencies
nationwide.

TEAM Picnic Brings Friends and Family Together

On Saturday, August 28th, 2010, approximately 1,400 METRO employees accompanied by
family and friends attended the annual TEAM Picnic. The event was held at the H&H Ranch
from 11 a.m. to 5 p.m. and offered a day packed full of fun activities including a softball game,
bingo, a domino tournament, and carnival-style rides (merry-go-round, etc.) for children. The
event also included a barbeque lunch and an official awards ceremony to honor the winners of
the day’s activities.

TEAM is METRO’s internal employee association with the objectives of coordinating and
sponsoring events and activities which promote goodwill among its members and the
furtherance of METRO’s goals and objectives. Membership in TEAM is open to all full-time
and part-time METRO employees.

New Services Rolled Out in FY2010

METRO launched two new bus services in FY2010, the 352 Swingle Shuttle and the 75 Energy
Corridor Connector.

Beginning June 1st, METRO launched its new route, the 352 Swingle Shuttle. This fixed-route
service links the existing 52 Scott route to the newly opened Harris County Hospital District’s
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                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

Martin Luther King Jr. Health Center in the Sunnyside community. The service also operates as
a temporary connector as construction (expected to continue through 2011) on an extension of
Scott Street prevents a natural continuation of the 52 Scott route. Since its debut, the route has
exceeded expectations and has averaged 130 boardings a day.

The 75 Energy Corridor Connector, which began operations on January 25th, 2010, runs along
Eldridge between the Katy Freeway and Richmond Avenue and provides employees and
residents in the area a quick, convenient ride to various local stores, restaurants, and
businesses. Buses on the route run every 10 minutes from 9 a.m. to 2 p.m. and every 15
minutes between 6 a.m. to 9 a.m. and 2 p.m. to 6 p.m. The route also connects to the Addicks
Park & Ride as well as other popular routes like the 53 Briar Forest, 82 Westheimer, and the
131 Memorial. The route is currently averaging 250 boardings per day.

New Employee Training Developed

Throughout FY2010, METRO made concerted efforts to bolster its employee training to both
its bus operators and mechanics. Starting October 2010, METRO began instituting online
training courses for its mechanics, allowing training to be available at every garage and
scheduled to the specific pace of the individual trainee. In June, METRO also implemented its
Line Instructor Program (LIP), which has created a more formal, structured curriculum with
which to train and equip bus operator trainers as they instruct new bus drivers. To date, the LIP
program has produced about 120 trained line instructors ready to assist new bus operators as
they come onboard.

Official Records Retention Policy Adopted

METRO adopted an official records retention policy effective April 21st, 2010. The policy both
complies with all the State requirements and ensures access and openness in regard to the
Authority’s operations. Also included in the policy is a provision to retain all email messages
generated by METRO employees.

District Attorney’s Report Concludes Allegations to be Unfounded

In July 2010, the Public Integrity Division of the Harris County District Attorney’s Office
reported on its nearly five-month investigation of alleged document destruction at METRO.
The investigation found no evidence of wrongdoing and stated in a letter to METRO that the
allegations of document destruction were unfounded.

The Authority Is Reviewed for Compliance with State Law

Representatives from the law firm Fulbright & Jaworski presented a management review to the
Board in August 2010 on how METRO’s policies and procedures conform to Texas law. This
review, issued by the Board in April 2010, examined four specific areas of the Authority:
meetings and records, financial management, ethical management, and business management.
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                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

The review found no significant violations from the Authority but offered some
recommendations for further openness and transparency. Among the recommendations: more
documentation of decisions made at the committee and subcommittee level, more clarity on
METRO’s adoptions of resolutions, and more detail of subjects that are of public interest in the
postings of open meetings.

Board Approves Continuation of Fleet Replacement Program

In July of FY2010, the METRO Board approved a $53 million purchase of 100 hybrid-electric
buses in a continuation of METRO’s long-range fleet replacement program. This program
replaces older, diesel-powered buses with new hybrid-electric vehicles at a steady pace over a
12-year period.

Compared to diesel-powered buses, the hybrid-electric buses, using an advanced ‘green’
technology, are able to reduce fuel consumption, reduce emissions of nitrous oxide by 50%
and other pollutants by 90%. In addition, these new buses also offer bus patrons a better riding
experience as they are quieter and designed with more passenger leg room.

During FY2010, METRO received 73 new Orion hybrids to be used for local transit and 20
new 45-ft MCI commuter hybrid buses for Park & Ride services. To date, METRO has over 300
hybrid vehicles – serving both local and commuter routes – in its fleet.

METRORail Hours for Bike Riders Extended

On July 19th, METRO, together with the local bicycling advocacy group BikeHouston,
celebrated the extension of service hours in which riders can board METRORail trains with
their bikes. This media kick-off event drew a crowd of approximately 20 bicyclists and featured
a commemorative “’till full” ride from the University of Houston- Downtown rail platform to
the Downtown Transit Center rail platform. The ride challenged attendees to fill a METRORail
train with as many bike riders (with their bikes) as is safely allowable. Patrons with bikes can
now board the train throughout all hours of service except for weekday peak hours (6:30 a.m.
to 9 a.m. and 3 p.m. to 6 p.m.).

Bike boardings on the system increased 37% in FY2010 over boardings in FY2009 (i.e.,
63,186 versus 86,286). Since 2007, METRO has made an active attempt to encourage the use
of bikes as a transit option when it began installing bike racks on buses. The Authority has also
incorporated bike lanes into its mobility plans; most recently, METRO created new and
improved bike lanes, Irvington Bike Lanes, in the area of its North line light-rail expansion.

METRO Debuts on Facebook and Twitter

In October of 2009, METRO added the social media tools Facebook and Twitter to its
communications portfolio. Twitter, the Web-based communications tool, allows riders to get
service alerts as well as information about other developments at METRO with the simple click
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                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010

of a mouse or the push of a button on a cell phone or other electronic device. Through Twitter
patrons can also get real-time short messages, or ‘tweets,’ about bus or rail service
interruptions and changes plus the latest light-rail construction news for the East End, North
and Southeast corridors. Facebook gives METRO another avenue to quickly share transit news
and information about upcoming events with its customers, while also giving riders an
opportunity to communicate with METRO. This addition of social networking sites
complements METRO’s current communications efforts, which include the distribution of fliers
and brochures on buses and trains, online materials, a monthly newsletter, periodic electronic
bulletins, cable-access programming and other media.

Crime Prevention Initiatives in FY2010

Throughout FY2010, METRO took steps to further advance its proactive approach to crime
prevention on the transit system. METRO’s Adopt-a-Stop/Shelter program, which partners with
community volunteers in order to combat vandalism and watch for suspicious or criminal
activity, increased its number of adopted stops and shelters in FY2010 by 35% (from 688 in
September 2009 to 926 by the end of September 2010). The Authority also continued its
report card program where leaflets (“report cards”) are placed under the windshield wipers of
patron vehicles parked at Park & Ride lots. The report card grades the extent to which the
vehicle has no visible vulnerabilities to crime (i.e. open windows, valuables in plain sight,
etc.). For FY2010, there has been an 11.6% decrease in reported Park & Ride crimes compared
to FY2009.

Community School Safety Education Program (CSSEP) in FY2010

FY2010 was a successful year for METRO’s Community School Safety Education Program
(CSSEP), the Authority’s outreach effort with the Houston Independent School District (HISD)
to educate and instruct a range of audiences about the various aspects related to safety in or
around the rail construction areas. By the year’s end, METRO was able to work with 23 HISD
schools, each within a mile radius of the anticipated North, East End, and Southeast lines, and
educate more than 15,000 students about rail safety. The program was also able to train a
diverse group of HISD employees (from teachers, to crossing guards, to school bus drivers) on
how to train and educate others (i.e., “train the trainer”) on issues of rail safety. To date,
twenty-two teachers, nine crossing guard supervisors, and over a thousand bus drivers have
received this “train the trainer” instruction. In addition, throughout the year METRO
representatives have continued to communicate all construction updates to the administrators
of each school as well as attend each school’s Parent Teacher Organization (PTO) meetings.

METRO Reaches Out to Spanish-speaking Riders

As part of an increased effort to reach out to Spanish-speaking riders, METRO debuted on
October 15, 2009, its new Spanish talk show “Enfoque METRO” (“Focus on METRO”) which
aims to keep riders in tune with METRO projects, services and other Authority developments
and initiatives. Each 15 minute show airs on Houston Media Source’s cable access channels
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                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010

(Channel 17 on Comcast) and runs up to 12 times in a 30-day period. One can also watch
each episode on the METRO website, YouTube, or download the podcast video through
iTunes. In addition, on October 22, 2009, METRO released the Spanish version of its website
RideMetro.org.

Reliant Park Events in FY2010 Set Rail Ridership Records

Throughout FY2010, several events held at Reliant Park made METRORail history as previous
ridership records were surpassed. On Sunday, September 26th, METRORail set a new record of
16,000 incremental boardings (versus the previous record of 11,200) for a non-Super Bowl
professional football game as the Houston Texans faced the Dallas Cowboys. On Saturday,
September 4th, METRORail also set a new record of incremental boardings (12,000) for a
collegiate football game as Rice University played the University of Texas. Additionally, the
Red Line experienced its highest ridership ever to the Houston Livestock Show & Rodeo in
March of 2010 with over 340,000 boardings associated with the event - an almost 19%
increase from the METRORail rodeo ridership from the previous year. During the last weekend
in March 2010, the NCAA Men’s South Region Basketball Finals held at Reliant Stadium
generated over 12,600 boardings on METRORail, a nearly 50% increase over the last time
Houston hosted this event in 2008.




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                                      FY2010 Year End Financial & Management Report
                                          Fiscal Year Ending September 30th, 2010

                                                                      Ridership Trends
System Ridership

Total system ridership for FY2010, which includes fixed-route bus, METRORail, Special Bus,
and HOV Carpools / Vanpools was 105 million.

                                                                         FY2010 System Ridership
                                                         120



                                                         80
                                              Millions




                                                                             112.6                 105.0
                                                         40



                                                          0
                                                                      FY2009 Actuals          FY2010 Actuals



                                                               YTD Monthly System Ridership
                12.0
                10.0
                 8.0
     Millions




                 6.0
                       10.8                                                         9.7 9.6
                 4.0
                              9.4   9.1 8.3   9.1 8.3          9.4 8.3    9.2 8.2             9.3 9.0   9.1 8.6   9.3 8.9   9.2 8.6   9.2 8.9   9.3 9.0

                 2.0
                 0.0

                         Oct         Nov       Dec              Jan        Feb     Mar         Apr   May      Jun             Jul      Aug       Sep
                                                                         FY2009 Actuals        FY2010 Actuals



                                                          FY2010 Total System Ridership
                                                                                      FY2009                        FY2010                      Change
    Fixed-Route Bus Service                                                          72,795,011                    66,538,890                    -8.6%
    METRORail Service                                                                11,613,720                    10,627,331                    -8.5%
    Subtotal Fixed Route Service                                                     84,408,731                    77,166,221                    -8.6%

    Special Bus Service                                                               4,126,660                     4,041,718                    -2.1%
    Subtotal Bus & Rail Services                                                     88,535,391                    81,207,939                    -8.3%

    HOV Carpools, Vanpools &
                                                                                     24,112,235                    23,761,231                    -1.5%
    Non-METRO Buses
    TOTAL RIDERSHIP                                                                 112,647,626                   104,969,170                    -6.8%

Fixed-route ridership shown here is from the data reported to the National Transit Database
(NTD).

                                                                                       9
                                     FY2010 Year End Financial & Management Report
                                         Fiscal Year Ending September 30th, 2010

Fixed-Route Service

                                                     Fixed-Route Bus & Rail Service
             10.0
              8.0
              6.0
  Millions




              4.0   8.6
                          7.0   7.0 6.3   6.5 5.8   6.9 6.0    6.8 6.0   7.3 7.1   6.9 6.6   6.9 6.4   6.9 6.4   6.7 6.1   6.9 6.6   6.9 6.8
              2.0
              0.0
                     Oct        Nov        Dec       Jan        Feb       Mar       Apr      May        Jun       Jul       Aug       Sep
                                                              FY2009 Actuals         FY2010 Actuals



                                                        Fixed-Route Ridership
                                                                           FY2009                       FY2010                       Change
  Local Bus Service                                                       63,806,230                   58,553,039                      -8.2%
  Park & Ride Bus Service                                                  8,988,781                    7,985,851                    -11.2%
  Subtotal Fixed-Route Service                                            72,795,011                   66,538,890                      -8.6%
  METRORail Service                                                       11,613,720                   10,627,331                      -8.5%
  Total Fixed-Route Service                                               84,408,731                   77,166,221                      -8.6%

Fixed-route ridership shown here is from the data reported to the National Transit Database
(NTD).

Local unemployment has been the consistent major contributor to the decrease in ridership
throughout FY2010. In regard to the fourth quarter of FY2010, heavy rainfall in July and
September as well as record high temperatures in August this year relative to last year also
contributed to the decrease in ridership. Looking forward, a consistent high unemployment
rate may continue to affect ridership negatively.

Park & Ride ridership declined at a higher rate than local bus due to its greater dependence
on work trips, which are being negatively affected by unemployment.




                                                                           10
                          FY2010 Year End Financial & Management Report
                              Fiscal Year Ending September 30th, 2010


                                                                                         Fixed-Route Bus Service
                                                         8.0
Other factors which had an impact on
ridership throughout FY2010:                             6.0




                                              Millions
                                                         4.0   7.5
                                                                     6.1 6.1               6.0             6.1 5.9 5.9 5.7 6.0
                                                                               5.4 5.7 5.1     5.2
                                                                                                   5.9
                                                                                                       5.1                     5.6 5.9 5.5 5.8 5.3 5.9 5.8 6.0 5.8

  The introduction of the TMC SwiftLine                  2.0

  (Aug-2009), the Energy Corridor                        0.0

  Connector (Jan-2010), and the Swingle                        Oct Nov Dec Jan Feb Mar Apr May Jun                                                          Jul Aug Sep

  Shuttle (Jun-2010) resulted in more
  than 50,000 additional boardings                                                        FY2009 Actuals                               FY2010 Actuals

  during the fourth quarter of the fiscal                                                      METRORail Service
  year, compared to the same period of
                                                         1.5
  the previous year.
                                                         1.2

  METRORail’s ridership decreased due                    0.9
                                             Millions




  to the higher unemployment at the                      0.6   1.1
                                                                     1.0 0.9                               0.9
                                                                                                                       1.2 1.2
                                                                                                                                 1.0               1.0     1.0             1.0 0.9
                                                                             0.9 0.9           0.9                                     0.9 0.9 0.8             0.8 0.9 0.9
  Texas Medical Center (TMC) and the                                                     0.8         0.8         0.8                                   0.8
                                                         0.3

  enhanced fare enforcement undertaken                   0.0

  by METRO Police.                                             Oct Nov Dec Jan Feb Mar Apr May Jun                                                          Jul Aug Sep


                                                                                          FY2009 Actuals                               FY2010 Actuals

                                                                                                 Local Bus Service
                                                         8.0

                                                         6.0
                                             Millions




                                                         4.0
                                                               6.6
                                                                     5.3 5.4                               5.3 5.1 5.1 5.0 5.2 4.9 5.2 4.8 5.0
                                                                               4.8 5.1 4.5 5.3 4.6 5.1 4.5                                     4.7
                                                                                                                                                   5.2 5.1 5.2 5.2
                                                         2.0

                                                         0.0
                                                               Oct Nov Dec Jan Feb Mar Apr May Jun                                                          Jul Aug Sep


                                                                                          FY2009 Actuals                               FY2010 Actuals

                                                                                         Park & Ride Bus Service
                                                         1.0

                                                         0.8

                                                         0.6
                                             Millions




                                                               0.9
                                                         0.4                                                           0.8 0.7 0.8
                                                                     0.8 0.7                   0.7         0.8                         0.7 0.7 0.6 0.8 0.7 0.7 0.6 0.7 0.7 0.8 0.7
                                                                               0.6 0.6               0.6         0.6
                                                                                         0.5
                                                         0.2

                                                         0.0
                                                               Oct Nov Dec Jan Feb Mar Apr May Jun                                                          Jul Aug Sep


                                                                                          FY2009 Actuals                               FY2010 Actuals


                                                         11
                     FY2010 Year End Financial & Management Report
                         Fiscal Year Ending September 30th, 2010

Industry-Wide Ridership Trends

On September 21st, 2010, APTA released its Transit Ridership Report for the second quarter
of calendar year 2010 (April to June). Listed below are the key findings from the report:

Bus Ridership

Bus ridership at properties serving 2,000,000+ people had a ridership change of -1.7%
during April through June 2010 relative to April through June 2009.

Atlanta, Cincinnati, Cleveland, Dallas, Miami, Milwaukee, Orange County, Phoenix,
Portland, Seattle, and Washington, D.C. all showed ridership losses of greater than 5.0%
during this time period.


Light-Rail

Light-rail ridership had a ridership change of +4.2% during April through June 2010 relative
to April through June 2009.

Baltimore, Cleveland, Dallas, Pittsburgh, Sacramento, St. Louis, San Francisco, and San Jose
all showed ridership losses on light-rail during this time period.




                                             12
                           FY2010 Year End Financial & Management Report
                               Fiscal Year Ending September 30th, 2010



Special Bus Services
                                                                                                Special Bus Services
                                                            400
Special Bus Services have two primary
components: METROLift (paratransit                          300

service on-demand) and METRO STAR




                                              Thousands
                                                            200   381                                           358 361 357 344
                                                                        355                                                             352 346 352 332 342 356 347 350
Vanpool Service (vanpooling utilizing
                                                                                                349 326 335                     328 328
                                                                              306 313 318 313               318

                                                            100
non-METRO operated vans). These
services do not have fixed routes or set                      0

schedules.                                                        Oct Nov Dec Jan Feb Mar Apr May Jun                                                      Jul Aug Sep


                                                                                             FY2009 Actuals                       FY2010 Actuals
Total ridership for Special Bus Services in
FY2010 was 4.0 million.                                                                          METROLift Service
                                                            150
In FY2010, METROLift ridership was
                                                            120
6.1% above its ridership for FY2009. In
                                                             90
                                                Thousands




the fourth quarter of FY2010, METROLift                                                                               137         134         133 130 137 131 133 130
                                                                                                                                                                        142         140
                                                                  132 133                                                                                                     128
                                                             60
ridership had 415,000 boardings. This                                               122 115 123 117 120 117 120 125         123         123
                                                                              112


represents a 6.5% increase over the                          30

fourth quarter of FY2009.                                     0
                                                                  Oct Nov Dec Jan Feb Mar Apr May Jun                                                      Jul Aug Sep

Currently, there are approximately 700
                                                                                             FY2009 Actuals                       FY2010 Actuals
vanpools in the METRO STAR Vanpool
program. In FY2010, the METRO STAR                                                           METRO STAR Vanpool
Vanpool program saw a decrease in                           300
ridership, posting a 6.7% decline from                      240
FY2009.     METRO      STAR    Vanpool
                                                            180
                                                Thousands




ridership is highly influenced by the
                                                            120   249
unemployment rate which continues to
                                                                                                232               233 224 231
                                                                        220
                                                                              194 190 204 190         206 218 198             209 204 195 222 209 220 199 212 213 218 206

                                                             60
be high.
                                                              0
                                                                  Oct Nov Dec Jan Feb Mar Apr May Jun                                                      Jul Aug Sep


                                                                                             FY2009 Actuals                       FY2010 Actuals




                                                            13
                                FY2010 Year End Financial & Management Report
                                    Fiscal Year Ending September 30th, 2010

                                            Financial Performance
This section of the report is based on a preliminary closing of the year-end financials for
FY2010.

Revenues

                                         FY2010 METRO Revenues
                                                    ($ millions)
                                                  Budget            Actual       Differences
                    Fares                         67.941            62.599      -5.342    -7.9%
                    Sales Tax (Cash Basis)       481.721           484.420       2.699     0.6%
                    Interest & Miscellaneous       2.315             2.765       0.450 19.4%
                    Subtotal                     551.977           549.784      -2.193    -0.4%
                    Grants                       228.095            68.379   -159.716 -70.0%
                    TOTAL                        780.072           618.163   -161.909 -20.8%

Fares
                                                              The FY2010 fares, compared to FY2009,
                             FY2010 Fares                     are down by $3.06 million, or 4.7%.
            $75.0
                                                              Compared to the budget, FY2010 fares are
            $60.0                                             running under by $5.34 million        or
            $45.0                                             7.9%.
 Millions




            $30.0           $67.9       $62.6
            $15.0                                             This underrun reflects both the fare
             $0.0                                             increase programmed for January 2010
                             Budget     Actual                not taking place and the decline in
                                                              ridership.


                                    FY2010 Monthly Fare Revenue
                     $6.0
                     $4.5
  Millions




                     $3.0
                     $1.5
                     $0.0
                             Oct Nov Dec Jan Feb Mar Apr May Jun               Jul Aug Sep

                                      FY2009 Actuals         FY2010 Actuals


                                                        14
                       FY2010 Year End Financial & Management Report
                           Fiscal Year Ending September 30th, 2010

Sales Tax Revenue

                                          FY2010 Sales Tax Revenue
                                                (Cash Basis)
                                   $500
                                   $400
                        Millions
                                   $300
                                   $200       $481.7          $484.4
                                   $100
                                     $-

                                                Budget       Actual

Sales tax revenue (cash basis) for FY2010 is $484.4 million, $2.7                  million or 0.6% over
budget; and $39.1 million or 7.5% lower than the actual in FY2009.

Although a year-to-year comparison in sales tax revenue shows a decrease, METRO
anticipated this decline due the economy and budgeted accordingly.



                     FY2010 Monthly Sales Tax Revenue
                              (Cash Basis)
               $75
               $60
               $45
    Millions




               $30
               $15
                $-
                     Oct Nov Dec Jan Feb Mar Apr May Jun                     Jul    Aug Sep
                                   FY2009 Actuals           FY2010 Actuals




                                                       15
                          FY2010 Year End Financial & Management Report
                              Fiscal Year Ending September 30th, 2010

Grant Revenue


                                              FY2010 Grant Revenue
                                     $240.0

                                     $180.0
                          Millions
                                     $120.0    $228.1
                                                              $68.4
                                      $60.0

                                        $-

                                                 Budget      Actual


Grant revenue for FY2010 is $68.4 million compared to $228.1 million budgeted due to
the delay in the Full Funding Grant Agreement approval.



                                      FY2010 Monthly Grant Revenue
                 $75.0
                 $60.0
                 $45.0
      Millions




                 $30.0
                 $15.0
                  $0.0
                         Oct Nov Dec Jan            Feb Mar Apr May Jun   Jul   Aug Sep
                                                 Budget      Actual




                                                        16
                   FY2010 Year End Financial & Management Report
                       Fiscal Year Ending September 30th, 2010

FY2010 Operating Budget, Expenses, and Variance


                                    FY2010         FY2010        $ Variance      % Variance
Expense Category                   Budget ($)    Expenses ($)     (favorable) / unfavorable

Wages                             100,097,409     96,903,023       (3,194,386)      -3.2%
Fringe Benefits Union              51,734,062     50,811,068         (922,994)      -1.8%
Total Union Labor                 151,831,471    147,714,091       (4,117,380)      -2.7%

Salaries and NonUnion Wages        73,618,955     71,391,447       (2,227,508)      -3.0%
Fringe Benefits Non-Union          36,215,555     34,602,283       (1,613,272)      -4.5%
Total Non-Union Labor             109,834,510    105,993,730       (3,840,780)      -3.5%

Total Labor and Fringe Benefits   261,665,981    253,707,821       (7,958,160)      -3.0%

Services                           18,373,664     24,429,676        6,056,012        33.0%
Materials and Supplies             19,081,797     18,211,521         (870,276)        -4.6%
Fuel and Utilities                 49,057,729     47,163,946       (1,893,783)        -3.9%
Casualty and Liability              2,614,230         (95,086)     (2,709,316)    -103.6%
Purchased Transportation           72,833,365     70,972,584       (1,860,781)        -2.6%
Leases, Rentals and Miscellaneous   2,918,949      2,506,404         (412,545)      -14.1%
Total Non-Labor                   164,879,734    163,189,045       (1,690,689)        -1.0%

Total Labor and Non Labor         426,545,715    416,896,866       (9,648,849)      -2.3%

Cost Recovery                      (7,839,775)    (7,193,868)         645,907        8.2%
Contingency                         5,733,358              0       (5,733,358)    -100.0%

Total Operating Expenses          424,439,298    409,702,998     (14,736,300)       -3.5%

Capitalized Operating Expenses    (53,811,936)   (59,038,262)      (5,226,326)       9.7%
Allocation to Capital & GMP       (40,627,362)   (24,382,668)     16,244,694        40.0%
Total Allocation to Capital       (94,439,298)   (83,420,930)     11,018,368        11.7%

OPERATING BUDGET                  330,000,000    326,282,068       (3,717,932)      -1.1%




                                         17
                              FY2010 Year End Financial & Management Report
                                  Fiscal Year Ending September 30th, 2010

Operating Expenses


                                           FY2010 Operating Expenses

                                    $350
                                    $300
                                    $250
                         Millions




                                    $200
                                    $150       $330.0          $326.3
                                    $100
                                     $50
                                      $0

                                                 Budget          Actual

Operating expenses for FY2010 are $326.3 million compared to                  $330.0   million
budgeted, $3.7 million or 1.1% under budget.


                                      FY2010 Operating Expense by Category

                  $110
                  $100
                   $90
                   $80
                   $70
                   $60
       Millions




                   $50
                   $40
                   $30
                   $20
                   $10
                   $-




                                                 Budget      Actual



                                                        18
                         FY2010 Year End Financial & Management Report
                             Fiscal Year Ending September 30th, 2010


                                   FY2010 Monthly
                                Labor & Fringe Benefits
                 $25
                 $20
                 $15
     Millions




                 $10
                  $5
                 $-
                       Oct Nov Dec   Jan    Feb   Mar     Apr   May   Jun   Jul   Aug   Sep
                               FY 2010 Budget            FY 2010 Actuals

                                   FY2010 Monthly
                                  Non-Labor Expenses
                 $24
                 $20
      Millions




                 $16
                 $12
                  $8
                  $4
                 $-
                       Oct Nov Dec    Jan   Feb    Mar    Apr   May   Jun   Jul   Aug   Sep
                               FY 2010 Budget            FY 2010 Actuals


Preliminary FY2010 year-end operating expenses are $3.7 million or 1.1% under budget.

Wages are under budget by $3.2 million or 3.2%. The majority of this variance in FY2010 is
driven by an average of 26 full-time vacancies in mechanics and cleaners throughout bus,
rail, and facilities maintenance. Additionally, Sick Leave Cash Out is $69,000 below budget
and Bus Operator wages are $1.7 million under budget primarily as a result of reduced
overtime, less new operator training than planned and an under accrual of wages that will be
corrected in the post-close.

Union Fringe Benefits are $923,000 or 1.8% under budget due to lower expenses in wage-
related benefit items such as F.I.C.A., savings in Workers’ Compensation from a lower level
of claims filed than anticipated, and savings in Union health benefits associated with the
wage vacancies discussed above. Resulting primarily from the government extension of
unemployment benefits, METRO experienced a FY2010 budget overrun of $169,000 in
unemployment compensation expense (this item applies to both Union and Non-Union
employees).


                                                  19
                     FY2010 Year End Financial & Management Report
                         Fiscal Year Ending September 30th, 2010

Salaries and Non-Union Wages are under budget by $2.2 million or 3.0% primarily
reflecting vacancies. At the end of the fiscal year there were over 65 salaried vacancies in
the Authority and the hiring freeze is still in effect for non-critical salaried personnel.

Non-Union Fringe Benefits expenses are under budget by $1.6 million or 4.5% primarily
reflecting underruns in fringe benefits associated with the vacancies discussed above and an
underrun of $1.2 million in non-union pension resulting from revised actuarial estimates.
This is partially offset by unbudgeted severance payments of $630,000.

Services end the year over budget by $6.1 million, primarily due to expense adjustments
associated with stricter accounting guidelines for IT services, as well as expenses associated
with extraordinary repairs to the 1900 Main Street facility (fully offset by insurance recoveries
discussed in the Casualty and Liability category of expenses). In FY2010, $5.5 million in
expense was recognized to reflect the stricter accounting guidelines, $944,000 was spent to
repair the 1900 Main St. building after an electrical fire, and $762,000 was spent to repair
windows damaged in Hurricane Ike. Absent those extraordinary items, Services would have
ended the year $1.1 million or approximately 6.2% under budget. Major variance items in
FY2010 include:
        Advertising expenses are under budget by approximately $432,000, primarily
        reflecting a reduction in ad campaigns.
        An IT contract for servicing communications equipment at Park & Rides (break-fix)
        was not required - saving just over $400,000.
        A lagging invoice for METRO Q® Fare Card Support creates an underrun of $291,000
        that will be corrected in the post-close.
        The current hiring freeze for non-essential salaried personnel and less union hiring
        than budgeted has resulted in a savings of $250,000 in Human Resource related
        services.
        A program to target unsafe operator behavior was not implemented, saving $240,000.
        Printing fees are $223,000 below budget, reflecting the lower cost of producing work
        in-house.
        Legal fees resulting from unplanned employment and other legal matters arising in the
        fiscal year are $1.3 million over budget.

Materials and Supplies are under budget by $870,000 or 4.6%. Driving the underrun are
Facilities Maintenance parts which are $460,000 under budget ($280,000 is in public
facilities areas such as Park & Rides and Transit Centers). Rail parts are $116,000 under
budget, a large portion of which represents a major accident repair being performed by a
contractor rather than in-house (expenses for this repair hit the Services category of
expenses). Bus parts are $103,000 under budget.

Fuel and Utilities are under budget by $1.9 million or 3.9%. In the months of October,
November, and December, fuel from off-site storage with a lesser cost than budgeted was
used. This is the primary reason for the $1.1 million savings in diesel fuel. Power expenses
(including propulsion power) are $378,000 below budget, primarily resulting from a lower

                                               20
                    FY2010 Year End Financial & Management Report
                        Fiscal Year Ending September 30th, 2010

unit rate associated with the interim power contract earlier in the year. Telephone expenses
are $154,000 under budget primarily reflecting reduced usage of cell phones and blackberry
devices.

Casualty and Liability expenses are $2.7 million below budget, primarily reflecting recent
insurance recoveries of $2.4 million related to Hurricane Ike and the electrical fire at 1900
Main Street (discussed above in the Services category of expenses), as well as a subrogation
recovery of $200,000 related to damage caused to a rail platform.

Purchased Transportation expense is $1.9 million or 2.6% under budget. Vanpool expenses
are $1.1 million under budget, resulting from reduced marketing and outreach activities by
the contractor earlier in the fiscal year as well as lesser expenses associated with lower
vanpool ridership (related to the economic downturn). METROLift paratransit purchased
transportation is $315,000 under budget, primarily due to the favorable settlement of an
engine defect claim made by the service provider (METRO had accrued funds for this claim,
but the accrual was reversed as the claim was settled with no payment by METRO). The
remaining METROLift underrun represents higher productivity in providing service by
scheduling in a more efficient manner and utilizing more of the less expensive minivan
service. In addition, there were also savings in minivan bonus payments (for not meeting a
complaints goal), and penalties assessed to the contractor for lower fuel efficiency than
contractually established for METROLift vans. Fixed-route purchased transportation is
$485,000 under budget, resulting in part from performance bonus payments in December
and June that were less than anticipated (for not meeting a roadcall goal).

Leases, Rentals & Miscellaneous expenses are $413,000 or 14.1% under budget. Tight fiscal
control of soft items such as travel, memberships and subscriptions drives the underrun and
represents a $278,000 savings. In addition, a reduction in the amount of small non-
capitalized equipment purchased yields a savings of $141,000.

Cost Recovery is $646,000 or 8.2% less than budget, primarily reflecting lower vanpool
costs as discussed above in Purchased Transportation; however, fare evasion cost recovery is
$82,000 greater than budget for the year.

Capitalized Operating Expenses are $5.2 million or 9.7% greater than budget and reflect
higher than budgeted grant receipts for bus and rail preventative maintenance.

Allocation to Capital & GMP is $16.2 million or 40.0% less than budget. In FY2010,
expenses formerly categorized as capital will be recognized as operating expenses reflecting
stricter accounting guidelines ($14.1 million).




                                             21
                    FY2010 Year End Financial & Management Report
                        Fiscal Year Ending September 30th, 2010

General Mobility Expenditures

                                            FY2010 GMP Expenditures
                                   $160.0


                                   $120.0




                        Millions
                                    $80.0
                                                 $151.7           $140.8
                                    $40.0


                                     $0.0
                                                    Budget       Actual


FY2010 General Mobility Program expenditures were $140.762 million compared to
$151.694 million budgeted, $10.932 million or 7.2% less than budgeted.

                                        General Mobility Budget
                                          FY2010                 FY2010
                                                                              Variance    Variance
                                          Budget                  Actual
                                        ($ millions)           ($ millions)  ($ millions)   (%)
        City of Houston                       94.798               106.885       12.087    12.7%
        Harris County                         33.453                   9.786    (23.667) -70.7%
        Multi-Cities                          17.575                16.455       (1.120)   -6.4%
        Area-Wide                               5.868                  7.636      1.768    30.1%
        Total General
                                              151.694             140.762      (10.932)    -7.2%
        Mobility Program

City of Houston expenditures were $106.885 million, 12.7% more than the $94.798
million budgeted. This was due to the dramatic increase in the rate of City of Houston
project implementation and its related invoicing during the fiscal year.

Harris County expenditures were $9.786 million, 70.7% less than the $33.453 million
budgeted. This was due to both: County project implementation and related invoicing being
less than anticipated and pipeline relocation causing delay in the construction start of the
METRO-managed Katy-Ft. Bend County Road project.

Multi-Cities expenditures were $16.455 million, 6.4% less than the $17.575 million
budgeted. This was due to Congestion Mitigation Program sales tax revenue rebates to
Humble, Katy, and Missouri City being less than anticipated.

Area-Wide expenditures were $7.636 million, 30.1% more than the $5.868 million
budgeted. This was due to overly aggressive budgeting in projects / programs within this
category.

                                                          22
                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010

Capital Expenditures

                                          FY2010 Capital Expenditures

                                 $800.0

                      Millions   $600.0

                                 $400.0
                                                $683.2
                                 $200.0
                                                                 $339.6
                                   $0.0
                                                 Budget       Actual

Capital expenditures for FY2010 were $339.6 million, and are 50.3% or $343.7 million
below budget. Major variances in the Capital Budget are identified and discussed below.

                                                Capital Budget
                                            FY2010          FY2010
                                                                          Variance       Variance
                                            Budget           Actual
                                          ($ millions)    ($ millions)    ($ millions)     (%)
           METRO Rail
                                           498.221            268.452      (229.769)     -46.1%
           Expansion
           Capital
           Improvement                     185.017            71.109       (113.908)     -61.6%
           Program
           Total Capital
                                           683.238            339.561      (343.677)     -50.3%
           Budget

METRO Rail Expansion

The primary reason for the underrun is the delay in the Full Funding Grant Agreement (FFGA).
METRO is now executing a plan to resolve the issues causing the delay, primarily the re-
bidding of the rail vehicles to comply with the "Buy America" guidelines. METRO is going
forward with the rail expansion project very conservatively in anticipation of receiving the
FFGA in the second quarter of FY2011.

Capital Improvement Program (CIP)

The CIP underrun is a result of the pending High Occupancy Toll (HOT) Lanes tolling
agreement which has delayed construction, slow development of the Clear Lake/El Dorado
Park & Ride, the METROLift Van procurement, SAFEBus, as well as Harris County radio
procurement delays. Additionally, the $39 million in capital contingency was unused as fiscal
constraints prohibited undertaking any new projects.
                                                         23
                            FY2010 Year End Financial & Management Report
                                Fiscal Year Ending September 30th, 2010

Debt Service

                                     FY2010 Debt Service
                    $100.0

                          $80.0
               Millions



                          $60.0
                                       $99.0
                          $40.0

                          $20.0
                                                            $30.5
                           $0.0
                                          Budget        Actual

FY2010 Debt Service expenditures were $30.492 million compared to $99.000 million
budgeted, $68.508 million or 69.2% less than projected.


                                           Debt Service
                                      FY2010              FY2010
                                                                       Variance       Variance
                                      Budget               Actual
                                    ($ millions)        ($ millions)   ($ millions)     (%)
      Total Debt
                                      99.000             30.492         -68.508       -69.2%
      Service

       Note: Effective December 2009, Debt Service is reported on an accrual basis.


The underrun is primarily due to changes in the plan of finance and scheduled issuances due
to delays in the Full Funding Grant Agreement.




                                                   24
                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010



Composite Operating & Capital Statement


                                                              FY2010   ($000's OMITTED)
                                                            Budget        Actual    Variance
Gross Income
  Fares                                                     67,941      62,599        (5,342)
  Sales Tax Income                                         481,721     484,420         2,699
  Interest Income                                            1,993       1,916            (77)
  Other Operating Income                                       322         849           527
  Inter Government Revenue                                      -        1,166         1,166
Total                                                      551,977     550,950        (1,027)
Operating Expenses
  Transit: Department & Support Expenditures               324,915     318,240        (6,675)
  Traffic Management: Department & Support
                                                             4,935       8,033         3,098
                        Expenditures
  Expensed Small Capital Purchases                             150           9           (141)
Total                                                      330,000     326,282         (3,718)
Gross Income - Total Operating Expenses                    221,977     224,668          2,691
          +Federal/State Capital Grants Collected          228,095      68,379      (159,716)
Current Year Cashflow Available for Capital Expenditures   450,072     293,047      (157,025)
           - Capital & GMP Expenditures Made               834,932     480,323      (354,609)
Current Year Cashflow for Future Capital Expenditures      (384,860)   (187,276)    197,584
Including Replacements and Operating Expenses

All data in year-of-expenditure dollars.
Sales Tax reported here is on a cash basis.




                                               25
                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010



Balance Sheet


                                        As of September 2010
                                        September 2009 ($)   September 2010 ($)    Change ($)
Assets
 Cash                                          11,639,141            1,871,718        (9,767,423)
 Receivables                                  116,521,804          103,482,394      (13,039,410)
 Inventory                                     20,605,558           22,419,885         1,814,327
 Investments                                  345,881,857          212,403,982    (133,477,875)
 Other Assets                                  32,830,362           32,824,184             (6,178)
 Debts Issuance Costs                           5,154,642            5,943,091           788,449
 Property Net of Depreciation               1,504,682,590        1,753,631,637     248,949,047
 Land & Improvements                          465,130,695          478,400,403     13,269,708
    Total Assets and Other                  2,502,446,649        2,610,977,294    108,530,645

Liabilities
  Trade Payables                             115,799,760            99,383,637     (16,416,123)
  Accrued Payroll                             27,094,159            26,111,365        (982,794)
  Short-Term Debt                            143,000,000           190,000,000      47,000,000
  Long-Term Liabilities                      401,096,739           472,745,482      71,648,743
  Other Liabilities                           34,529,879            37,531,296       3,001,417
    Total Liabilities                        721,520,537           825,771,780    104,251,243

                          (1)
 Net Assets - Retained                      1,780,926,112        1,785,205,514       4,279,402

     Total Liabilities and Net Assets       2,502,446,649        2,610,977,294    108,530,645



(1) On a year-to-year basis, net assets increased by 0.2% or $ 4.3 million.




                                                 26
                     FY2010 Year End Financial & Management Report
                         Fiscal Year Ending September 30th, 2010



Operating Ratio




          22%
          21%
          20%
          19%
          18%
                               21%
          17%                                           18%
          16%
                            FY2010 Goal                FY2010 Actual


In FY2010, METRO’s Operating Ratio is 18%, falling short of the FY2010 annual goal of
21%.

The fare increase programmed for January 2010 did not take place. As a result of this as well
as the decline in ridership, fare revenue is lower than budgeted (which negatively affects the
Operating Ratio). In addition, stricter interpretation of accounting rules re-categorized
expenses from capital to operating in FY2010, which also negatively affects the Operating
Ratio.




                                             27
                         FY2010 Year End Financial & Management Report
                             Fiscal Year Ending September 30th, 2010

                                Key Performance Indicators

Mean Distance Between Failures (MDBF)

Effective October 2006, Mean Distance Between Failures (MDBF) mechanical roadcalls are
defined as any mechanical issue encountered during operation of the vehicle in revenue
service that requires a maintenance action resulting from a mechanical failure. Mechanical
failures include warranty and fleet defects but exclude accidents. This indicator is for the bus
system but excludes METROLift.

                              Mean Distance Between Failures (MDBF)
         10,000
                                                                                           6,350
          7,500
 Miles




          5,000

          2,500

             -
                  Oct   Nov   Dec   Jan   Feb   Mar    Apr   May   Jun   Jul   Aug   Sep

                                FY2010 Actual          FY2010 Minimum Goal


In the fourth quarter, the bus fleet performed above the FY2010 minimum performance
standard of 6,350 MDBF each month. Actual performance was 15% better in July than the
MDBF minimum, 11% better in August, and 33% better in September. METRO attributes the
performance of the bus fleet to its continuing focus on improved preventative maintenance
practices and positive results from maintenance campaign initiatives.

On-Time Performance (Service Reliability)

Service Reliability assesses the quality of the delivery of bus service by measuring how often
the bus meets the scheduled timepoints within the set parameters. There are different goals
and measures for Local and Park & Ride services. Service Reliability is measured by the
Integrated Vehicle Operations Management System (IVOMS), which automatically monitors
vehicle locations and compares the actual times that buses depart from all timepoints.




                                                      28
                     FY2010 Year End Financial & Management Report
                         Fiscal Year Ending September 30th, 2010

               FY2010 Local Bus On-Time Performance (Service Reliability)
  80%


  70%
                                                                                           66%

  60%


  50%
         Oct   Nov   Dec    Jan    Feb    Mar       Apr     May    Jun   Jul   Aug   Sep

                                   Local Bus OTP          FY2010 Goal


A Local bus is considered on-time if it does not depart early or departs less than 6 minutes
late. Data is calculated using all IVOMS scheduled timepoints (except the last timepoint of a
trip) for all days and hours of service. In the fourth quarter, Local buses were on-time an
average of 69% of the time, which exceeded the goal of 66%.

                       FY2010 Park & Ride On-Time Performance
                                 (Service Reliability)
  90%

  80%
                                                                                           70%
  70%

  60%
         Oct   Nov   Dec    Jan    Feb    Mar       Apr     May    Jun   Jul   Aug   Sep

                                  Park & Ride OTP          FY2010 Goal


An inbound Park & Ride bus during the morning peak is considered on-time if it departs
from the Park & Ride lot as scheduled, no more than 5 minutes before the scheduled time if
full, or less than 6 minutes late if not full. An outbound Park & Ride bus during the PM peak
is considered on-time if it does not leave scheduled downtown timepoints early or less than
6 minutes late. In the fourth quarter, Park & Ride buses were on time an average of 77%,
which exceeded the goal by 7 percentage points.

METRO continues to analyze routes in order to define and resolve issues having a negative
impact on On-Time Performance (OTP) such as service restoration, system defects, layovers,
and proper IVOMS training among Operators. In July 2010, the Authority began distributing
a weekly detailed OTP report to Superintendents, Street Supervision, and Bus Control for
early detection of schedule deviations. In addition, METRO continues to communicate with
the IVOMS vendor for further understanding on various technical aspects of the system (data
capturing, for example).



                                                29
                      FY2010 Year End Financial & Management Report
                          Fiscal Year Ending September 30th, 2010



                             FY2010 Rail On-Time Performance
                                    (Service Reliability)
  100%
                                                                                          96%
   95%


   90%
          Oct   Nov    Dec   Jan   Feb   Mar    Apr      May      Jun   Jul   Aug   Sep

                                    Rail OTP        FY2010 Goal


Rail On-Time Performance is based on automated actual arrival and departure times at the
terminal stations. A train is considered on-time if it departs a terminal station less than 5
minutes late or arrives at a terminal station less than 5 minutes past the scheduled arrival
time. In the fourth quarter, rail was reliable an average of 98% of the time, which surpassed
the goal of 96%.




                                               30
                         FY2010 Year End Financial & Management Report
                             Fiscal Year Ending September 30th, 2010

Accidents
An accident is a transit incident with passenger injuries that require immediate medical
treatment away from the scene or a collision between a revenue vehicle and an object such that
the amount of damage exceeds $1,000. Bus accidents (which include METROLift) and rail
accidents are reported separately and in terms of the absolute number of accidents and the
relative number of accidents per 100,000 vehicle miles. Rail accidents only reflect collisions
between METRORail and other vehicles.

           FY2010 Bus Accidents                                         Bus Accidents by Month
 600                                                75
                                                                                                                46
 550                                                50

 500           552                                  25
                           502                          -
 450                                                            Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

                  Goal   Actual                                FY2009 Actuals      FY2010 Actuals       FY2010 Goal


Bus accidents for the fourth quarter of FY2010 are 128, an increase of 3.2% from the third
quarter of FY2010 (124). However, the annual goal for accidents (under the threshold of 552)
was achieved at 9% under, with a total of 502 for the fiscal year. Throughout FY2010, METRO
staff continued to monitor the entire system through ride checks, radar checks and monthly
route hazard analyses. Because these tasks are performed out in the field, this increased visibility
lets the operators know that support is there for them, giving them a better sense of awareness
when safely performing all daily operations. The goal is to work towards continuous
improvement and to never risk the safety of customers, employees and the general public.
Rail accidents for the fourth quarter of FY2010 are 5, down from 7 accidents reported for the
third quarter of FY2010.

           FY2010 Rail Accidents                                       Rail Accidents by Month
 48                                                 8


 36                                                 6


                                                    4
 24
               41
 12                           30                    2


                                                -
 -                                                          Oct Nov Dec Jan Feb Mar Apr May Jun   Jul Aug Sep

                  Goal   Actual                               FY2009 Actuals     FY2010 Actuals       FY2010 Goal


METRO is committed to curtailing accidents by stationing motorcycle officers on the rail
alignment as well as by keeping METRO Safety Officers highly visible. In addition, the Authority
continually monitors train operations with ride checks and radar checks.

                                                        31
                          FY2010 Year End Financial & Management Report
                              Fiscal Year Ending September 30th, 2010

Complaints
Complaints represent contacts made via telephone and over the internet which result in a
complaint record being generated in the Public Comment System. In FY2010, METRO
received 17,919 complaint calls from customers. This is 10.8% below the annual goal or
maximum number of complaints calls for the fiscal year.

                                             Complaint Calls by Month
           2,500
           2,000                                                                                         1,674
           1,500
           1,000
             500
               -
                    Oct Nov Dec           Jan    Feb Mar Apr May Jun                     Jul   Aug Sep
                                   FY2009 Actuals           FY2010 Actuals       FY2010 Goal



Compared to FY2009, overall                                         FY2009      FY2010    Change %
complaints increased 3.8%. Though      Operator Behavior             5,654       6,286      11.2%
complaints regarding timeliness and    Timeliness & Reliability      4,089       4,041      -1.2%
reliability declined 1.2%,             Driving Safety                2,383       2,737      14.9%
                                       METROLift                     1,555       1,745      12.2%
complaints about operator behavior
                                       Equipment Problems             658         578      -12.2%
increased 11.2%, complaints about
                                       Crowded Bus or Rail Car        239         188      -21.3%
operator driving increased by          Other                         2,679       2,344     -12.5%
14.9%, and complaints regarding        COMPLAINT TOTALS             17,257      17,919       3.8%
METROLift increased by 12.2%.
However, complaints regarding equipment problems decreased 12.2%, reflecting METRO’s
focus on preventative maintenance. This focus is further illustrated in the Authority’s FY2010
MDBF statistics.

METRO continues its process of identifying recurring unacceptable operator behavior for
coaching and additional training with focus on customer service and driving safety. In the area
of METROLift, the 12.2% increase in complaints was anticipated as METROLift’s ridership has
grown by 6.1% in FY2010. Importantly, METROLift’s Customer Commendations significantly
increased in FY2010 as well.

                                            Complaint Calls by Category
           7,000
           6,000
           5,000
           4,000
           3,000
           2,000
           1,000
               0
                   Operator   Timeliness & Driving Safety     METROLift      Equipment   Crowded Bus    Other
                   Behavior    Reliability                                    Problems    or Rail Car

                                                     FY2009        FY2010


                                                             32
                            FY2010 Year End Financial & Management Report
                                Fiscal Year Ending September 30th, 2010

Major Security Incidents

  The total “Major Security Incidents” is based on two industry standards: the Federal Bureau
  of Investigation (FBI) Uniform Crime Report and the National Transit Database (NTD) Report
  issued by the Federal Transit Administration (FTA). The eight categories included are:
  homicide, forcible rape, robbery, aggravated assault, burglary, larceny and theft, motor
  vehicle theft, and arson.

  In the fourth quarter of FY2010, Part I Crimes totaled 76, compared to 82 in the same quarter
  of FY2009. This represents a 7% decrease.

                                         Major Security Incidents by Month
      60                                                                                                                  50
      40

      20

      -
              Oct    Nov     Dec      Jan     Feb     Mar    Apr     May        Jun         Jul         Aug        Sep

                             FY2009 Actuals            FY2010 Actuals               FY2010 Goal


                                      Major Security Incidents by Category
     250
     200
     150
     100
      50
       0
               Larc/Theft   Robbery      Auto Theft Agg. Assault   Burglary         Arson          Homicide         Forc. Rape

                                                    FY2009         FY2010

                                                                                                                          FY2010
    Part I Crime    OCT     NOV    DEC       JAN     FEB    MAR     APR       MAY     JUN         JUL     AUG       SEP
                                                                                                                          TOTAL
    Homicide         0      0       0         0      0       0       0         0      0            0          0       0      0
    Forc. Rape       0      0       0         0      0       0       0         0      0            0          0       0      0
    Robbery          6      8       9         4      9       4       5        11      6            2          11      6      81
    Agg. Assault     0      0       1         2      1       0       0         0      1            2          1       5      13
    Burglary         1      0       0         0      0       0       0         0      0            0          0       0      1
    Larc/Theft      25      31     22        19      23      17      11       16      16          18          12     15     225
    Auto Theft       0      3       4         1      1       1       2         0      3            0          2       2      19
    Arson            0      0       0         0      0       1       0         0      0            0          0       0      1
    TOTAL           32      42     36        26      34      23      18       27      26          22          26     28     340



  During the fourth quarter of FY2010, Part I Crimes against property (Burglary, Larceny/Thefts,
  and Auto Thefts) decreased by 21% compared to the fourth quarter of FY2009.

                                                            33
                     FY2010 Year End Financial & Management Report
                         Fiscal Year Ending September 30th, 2010

Part I Crimes

                     FY2010 Crime by Location - METRO Properties

  40
                                                                                           32
  30
  20
  10
   0
        Oct   Nov    Dec    Jan     Feb     Mar   Apr   May     Jun    Jul     Aug   Sep
                Part 1 Crime: Bus         Rail     P&R, Transit Ctrs         FY2010 Goal



The total “Major Security Incidents – METRO Properties” is the number of incidents that
occur at Park & Ride lots, Transit Centers, onboard buses and trains, and on Light Rail
Vehicle (LRV) platforms. This metric is reported both in terms of the absolute number of
incidents and the number of incidents per 100,000 boardings.

During the fourth quarter of FY2010, Part I Crimes onboard bus, rail car, rail platforms, at
transit centers and at Park & Rides averaged 15 incidents per month, a 12% decrease in
average monthly incidents when comparing it to the fourth quarter of FY2009, which
averaged 17 incidents per month. There were zero reported Part 1 Crimes onboard rail
vehicles during the fourth quarter. Onboard bus crimes also remained low with only 8
reported crimes during the quarter with only three of those crimes against persons.

Park & Ride Part I Crimes showed a 29% reduction in the fourth quarter of FY2010, with 27
reported crimes compared to 38 during the fourth quarter of FY2009. Investigators are
aggressively following up on reported Park & Ride incidents and made three felony arrests of
Park & Ride suspects during this quarter. In addition seven juvenile arrests were made at the
Cypress Parking Garage as a result of reported thefts and criminal mischief at that location.

METRO has made many proactive enforcement efforts to focus on Park & Ride crime. With
the assistance of video surveillance, investigators have aggressively followed up on reported
incidents. At high incident Park & Ride lots, officers have also begun inspecting parked
vehicles and placing theft reduction report cards on them in order to encourage awareness
and educate patrons with crime prevention measures for securing their vehicles.

METRO’s focused initiatives and proactive policing efforts continue to attack crime trends
that affect the system and change the conditions that impact the community




                                                  34
                                                                  FY2010 Year End Financial & Management Report
                                                                      Fiscal Year Ending September 30th, 2010

Customer Service Center

                                                                             Customer Information Center Key Indicators
                                        450                                                                                                                                        108
                                                                                                                                                                       99
                                        400                                                                                                                                        96
                                                                                                                                                                      354
                                        350                                                                                                                                        84
   Total Calls & Routed Calls (000's)




                                                                                                                                                                                         Average Wait Time (seconds)
                                        300                                                                                                                                        72




                                                                                                                                                                                             Goal = 60 Seconds
           Service Level (%)




                                        250                                                                                                                                        60

                                        200                                                                                                                                        48
                                                                                                                                                                      191
                                        150                                                                                                                                        36

                                        100                                                                                                                                        24

                                         50    91%        92%       95%       93%        92%        92%        93%        90%     89%           89%        87%        85%          12

                                          0                                                                                                                                        0
                                               Oct-09    Nov-09     Dec-09    Jan-10     Feb-10    Mar-10      Apr-10    May-10   Jun-10        Jul-10     Aug-10     Sep-10


                                              Service Level (%)       Calls Received and Routed to Customer Service (000's)       Total Calls            Average Wait Time (sec)




The Customer Information Center (CIC) has recently experienced a higher than normal
Average Wait Time for customers due to a number of reasons, most of which reflect an
increased focus on the quality of customer calls and service. Training efforts, the formation of
the Customer Care Team, the relocation of METRO's Lost and Found, and preparations for
the introduction of the METROLift Outreach Centers have all contributed to this increased
wait time. In addition, recurring technical difficulties with the telephone system, a 4.5%
increase in customer calls (when comparing FY2009 to FY2010), and a higher than expected
employee turnover have also contributed to this increase in hold times.

METRO management and staff have made adjustments and over the next few months
customer hold times are expected to normalize.




                                                                                                         35

				
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