KCATA2017 Approved Operating and

Capital Budgets

December 9, 2016

TO: Chairman and Board of Commissioners Kansas City Area Transportation Authority FROM: President/CEO SUBJECT: Year 2017 Financial and Management Plan The attached plan is presented somewhat differently from previous years. The format is designed to promote transparency and accountability through established goals and objectives. This is the first presentation of the Operating Budget since the implementation of the Board Committee participation. KCATA would like to thank all of our stakeholders for their input and engagement in this year’s process. This budget is supporting a regional transportation initiative to provide access to jobs, educational opportunities, medical needs, shopping and local events. It also supports economic development and other major initiatives and provides a lifeline to those with cars in a growing population. The budget was built on five strategic priorities:

Regional stakeholder engagement Structural redevelopment of the organization Initiatives to increase ridership Financial sustainability Innovative solutions

The proposed Operating Budget for 2017 is $96,540,411. This reflects a growth of 4.1% from the 2016 Expense Budget of $92,714,767. The 2016 Operating Budget was balanced through the use of self-generated revenues, community contributions, sales tax collections and the use of reserves. The 2017 Operating Budget will be structurally balanced by the end of the year without any use of reserves. Subsequent budgets will also be structurally balanced to ensure the fiscal sustainability of the organization. Planned expenditures for the 2017 capital improvement program are $52,467,412, compared to $35,611,362 in 2016. This growth is primarily related to vehicle replacement, implementation of Prospect MAX, and facilities improvements. Economic conditions and consumer sales play a major role in the generation of our sales tax revenues which the primary revenue source for the KCATA. The economic forecast for Kansas City, Missouri is stable and sales tax revenues for that period are projected to increase 1.5% per year based on prior year trends. There are still uncertainties at the KCATA that could have a significant economic impact including:

Federal funding related to changes in the current administration Volatility of fuel prices Transit ridership Personnel costs

The KCATA will be focusing on performance goals to deliver seamless regional transportation for everyone. The KCATA will control costs, redesign unproductive service, and accelerate technology and innovation to enhance delivery of service. The Board of Commissioners, regional partners, key leaders

and all of our employees will continue to be engaged to control our operational costs and increase our revenues. Safety, service quality and customer satisfaction remains our top priorities. Strategic Direction During the past year, KCATA has made significant strides toward fulfilling its mission as the Regional Transportation Authority. Early this year, the Commission endorsed the vision of “Quality Seamless Regional Transportation for Everyone” and challenged the organization with these three goals:

1. Position KCATA to be a recognized leader in regional transportation and related development.

2. Position the organization to meet current and future needs and opportunities. 3. Communicate KCATA’s value in the vitality and economic growth of the community and

the region.

These goals create a fundamental shift from an inward focus of providing transportation services to the global focus of ensuring that transportation needs of all stakeholders in the Kansas City region are met. To accomplish this transformation, KCATA needs to grow and change as follows:

Forge strong regional partnerships through organizational stakeholder engagement. Structural redevelopment of the organization to be fully focused on being a regional provider of transportation services. Leverage the expertise of members of the Commission and leaders in partner organizations through committee involvement in the areas of Finance, Marketing, Human Resources and Economic Development.

2016 Regional Initiatives Along with continuing support for traditional operations, 2016 expense growth is a direct result of KCATA’s commitment to innovation and investment in new initiatives. For example, KCATA partnered with Jackson County, Mo., to purchase the Rock Island Rail Corridor, committing to future transit service and development. KCATA also initiated a Transit Oriented Development project that includes mixed-use development on its property at 3rd & Grand in the River Market. This past March, KCATA began a Micro-Transit Pilot Program (Bridj) to learn first-hand how to integrate new and innovative ways to better serve the community. In August, free fares were implemented on fixed routes for qualified ADA passengers. Also, KCATA partnered with KCPD to dedicate two commissioned officers to public transit security. 2017 Budget Impacts Building on the innovative initiatives begun in 2016, continuing to innovate in 2017 will require increased resources that will translate into future cost savings or revenue opportunities. As stated previously, the proposed Operating Budget for 2017 is $96,540,411 which is a growth of 4.1% from 2016’s Expense Budget of $92,714,767. Conversely, passenger revenues nationwide have been declining throughout 2016. Current KCATA forecasts project a 7% shortfall compared to 2015 actual. The 2017 budget anticipates a 2% growth to 2016 projected revenues. Attached, you will find two charts showing expense and revenue distribution for the 2017 budget. 2017 initiatives include:

RideKC Freedom, a new on-demand app-based service with potential added revenue generation. Seeking other opportunities to identify alternative revenues through Planning and TOD. Increasing public and stakeholder involvement in route planning and structure to identify and implement regional fixed route efficiencies. Agency-wide effort to maximize efficiencies and minimize costs. Build awareness and support through strategic community partnerships.

Funding Sources A portion of the expense growth related to these initiatives will be covered with federal funding and other local sources for operations and capital. However, the remaining budget growth resulting from these new initiatives will require use of $1,784,790 from the reserve balance in 2017. In the coming year, leadership will propose changes to the reserve usage policy to limit use to innovative or new programs or operating emergencies. Further, the revised policy will recommend that the minimum reserve balance will be 20% to 30% of the annual operating budget expense. Organizational Directives The Commission’s approval of this budget will ensure that KCATA has the resources in place to meet its regional service goals. Specifically, KCATA leadership intends to:

Engage existing and potential partners and communities to build relationships, trust and credibility throughout the region. Manage change through transformation of the KCATA to create a seamless regional operation. Accurately and proactively target appropriate areas for service, innovation, transit oriented development and operational improvement. Manage business through effective communication, regional partnerships, improved processes, compliance with statutory regulations and fiscal sustainability.

With a strong and continued commitment to the Mission, Vision and Guiding Principles in service to our regional citizens and stakeholders, I respectfully submit KCATA’s 2017 Operating Budget for your approval.

Robbie Makinen, President/CEO RM/mg

Section 3

KCATA ORGANIZATIONAL PROGRAM

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Section 17