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ORDINANCE AMENDING ORDINANCE NO. 02-116 GOVERNING USE OF CHARTER COUNTY TRANSIT SYSTEM SURTAX; AMENDING MAINTENANCE OF EFFORT REQUIREMENT AND MODIFYING EXHIBIT 1 TO THE PEOPLE'S TRANSPORTATION PLAN; PROVIDING SEVERABILITY AND AN EFFECTIVE DATE

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WHEREAS, this Board wishes to properly fund the unified transit system by allowing Charter County Transit System Surtax funds to support transit services in existence as of November 5, 2002 and requiring annual increases to Miami-Dade Transit from Miami-Dade County's General Revenue Funds and Local Option Gas Tax,
NOW, THEREFORE, BE IT ORDAINED BY THE BOARD OF COUNTY COMMISSIONERS OF MIAMI-DADE COUNTY, FLORIDA:
Section 1. Section 5 of Ordinance 02-116 is hereby amended to read as follows:1
Maintenance of Effort. It is the intention of the Board of County Commissioners that the amount of general fund support for MDTA in fiscal year ending September 30, 200[[3]]>>5<< [[and each subsequent fiscal year]]>>shall be no less than<< [[$111,800,000 which is the budgeted amount of general fund support for MDTA in fiscal year ending September 30, 2002]] >>$123,171,000. It is the intention of the Board of County Commissioners that for each subsequent fiscal year, the amount of general fund support for MDTA shall be increased by 3.5 percent over that provided in the
preceding fiscal year. Should in any year the general fund support for MDTA not be increased as set forth, surtax proceeds shall not be used to fund prospectively services in existence as of November 5, 2002. It is the intent of the Board that, subject to the annual appropriation process, a rebate of surtax revenues will be made to the Surtax Fund on an annual basis equivalent to the general fund repayment amount for that year. <<
Section 2. Exhibit 1 to the People's Transportation Plan (PTP) is amended to include those transit services in existence as of November 5, 2002 under the terms and conditions detailed in the attached Manager's Memorandum "People's Transportation Plan Amendment" incorporated herein.
Section 3. The Ordinance may only be amended or repealed by a two-thirds vote of the Board. Any amendment or repeal of this Ordinance shall further require a minimum of six (6) weeks between first and second reading.
Section 4. If any section, subsection, sentence, clause or provision of this ordinance is held invalid, the remainder of this ordinance shall not be affected by such invalidity.
Section 5. This ordinance shall become effective ten (10) days after the date of enactment unless vetoed by the Mayor, and if vetoed, shall become effective only upon an override by this Board.

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Date:

To: Honorable Chairman Joe A. Martinez
and Members, Board of County Commissioners

From: George M. Burgess
County Manager

Subject: People�s Transportation Plan Amendment

STAFF RECOMMENDATION
It is recommended that the Board approve the attached Ordinance amending the People�s Transportation Plan (PTP) to restore the general fund support to Miami-Dade Transit (MDT), also referred to as the maintenance of effort (MOE), to the pre-surtax level of $123.171 million and annually increase the MOE by 3.5%. Included in the amendment is compliance with the terms of the attached Line of Credit Obligation Letter which outlines a loan approved by the Citizens� Independent Transportation Trust (CITT) for up to $150 million in Charter County Transit System Surtax (surtax) funds to support MDT services in existence as of November 5, 2002. However, the revised repayment schedule accompanying this memorandum only envisions the need to access $118.9 million as a result of my recommendation to exclude the $23.9 million FY 2001-02 shortfall existing prior to the passage of the surtax.

MANAGER'S BACKGROUND
On January 27, 2005, the Board approved an amendment to the PTP authorizing the use of surtax funds to support existing transit service. This amendment had also been approved unanimously by the Citizens� Independent Transportation Trust (CITT). The item approved by the Board made the use of surtax funds for existing transit service contingent upon increasing the general fund support to MDT (or the MOE) by 3.5% per year and increasing the Local Option Gas Tax (LOGT) revenue support to MDT by 1.5% (or the proportionate share increase in LOGT revenues for such fiscal year in accordance with Resolution No. R-614-03). That item also increased the MOE in FY 2004-05 by $2 million. Mayor Alvarez vetoed this action on February 5, 2005.

While the original plan approved by the Board was, in my view, a sound solution to MDT funding issues, Board Members expressed reservations concerning the plan, which were echoed by the Mayor in his veto message. Consequently, I continued to work with my staff to determine other potential solutions to address the costs of the existing transit service. As explained below, I have developed a modified approach which provides for a loan of surtax funds (line of credit) at a 3% interest rate to fund those services existing as of November 5, 2002 contingent upon restoring the MOE to the pre-surtax level of $123.171 million and annually increasing the MOE by 3.5% and the Capital Improvement Local Option Gas Tax (LOGT) by 1.5% (or the proportionate share increase in LOGT revenues for such fiscal year in accordance with Resolution No. R-614-03, whichever is greater). My modified approach would be memorialized through the attached Ordinance and Line of Credit Obligation Letter and is exclusive of the $23.9 million FY 2001-02 shortfall that existed prior to the passage of the surtax. This approach strengthens our opportunities for federal funding, more properly funds the cost of our unified transit system, and helps ensure we are able to address the projects outlined in the PTP.

Maintenance of Effort

In order to restore the MDT maintenance of effort to the pre-surtax level, I recommend increasing the FY 2004-05 general fund support by $5.129 million, to $123.171 million. This is the same general fund support originally budgeted for MDT for FY 2002-03, prior to passage of the surtax. The plan approved by the Board on January 27, 2005, included a $2 million increase to $120.042 million. The additional $3.129 million will reduce the countywide general fund carryover into FY 2005-06, but will increase MOE funding to the level that would have existed if the surtax referendum had not passed in 2002.

Resolution of Pre-existing Shortfall

MDT ended FY 2001-02 with $23.9 million more in expenditures than it received in revenues. The FY 2001-02 books were closed primarily by booking a receivable against future federal funding. Although this action was allowable by federal guidelines, it had the effect of reducing revenues in the following year and was therefore only a temporary solution to the problem. My approach does not include this $23.9 million in the amount to be borrowed or repaid to the surtax. After careful deliberation with my staff, I am recommending that this amount be addressed separately, outside of this repayment schedule and without the use of surtax funds. MDT will be required to pay back this $23.9 million over a ten year period within their own budget by obtaining savings through recurring efficiencies and savings and one time revenues such as land sales.

With regard to land sales alone, MDT has surveyed its inventory of property throughout the County. MDT owns various lots adjacent to existing stations slated for potential future expansions for parking or further joint development. However, many of these parcels, specifically parcels at the Palmetto, Okeechobee, Brownsville, Brickell, and Douglas Road stations, and a site along the Busway at US 1 and 296 Street, are currently vacant and unencumbered. An actual disposal plan for these properties requires a detailed analysis, but preliminary estimates of the value of these properties could generate a significant one-time sum for MDT. Any properties considered for sale would be sold through a competitive bid process (with the possible exception of certain properties currently under negotiation), with the disposal process taking a minimum of 12 to 18 months to complete. MDT also has an inventory of encumbered properties (Coconut Grove, Dadeland North, and Dadeland South) which are also being evaluated. However, a detailed analysis of the cost-benefit is being performed, since the department would be foregoing long-term revenues from existing leases as a result of any sale of these parcels. Legal issues related to these existing leases must also be evaluated.

The recent update of the Pro Forma outlined a number of efficiency projects currently underway at MDT. The department is committed to continuous improvement and demonstrates this commitment through on-going management and operational assessments that critically review current practices. These assessments are being used to either verify that the agency is managing prudently or to help identify cost savings. The agency has employed the services of state university transportation centers to objectively analyze organizational structures and processes. The value of this kind of on-going self-assessment is in helping to ensure that the dollars allocated to providing public transportation are being spent wisely.

One of the efficiency projects outlined in the January 27, 2005, Pro Forma report included the recently completed Comprehensive Bus Operations Analysis (CBOA) which analyzed bus service on every route now being provided by the County. The study is providing the information needed to position our resources more wisely. Recommendations from the CBOA have been incorporated in recent line-ups and will continue to be incorporated in future line-ups. Recent updates of the Metrorail & Metromover Fleet Management Plans assessed current and future vehicle maintenance needs, resulting in improved maintenance scheduling and improved forecasting of associated costs. MDT also developed the Federal Transit Administration (FTA) mandated Metrorail Action Plan to enhance performance of vehicles and other systems. This resulted in the reallocation of staff for maintenance, repair and tracking and the restructuring of preventive maintenance intervals. The Mechanic Manpower Analysis helped MDT develop a methodology for determining future vehicle maintenance needs and benchmarks for mechanic time allocations per operated mile of service, thus assisting in more realistic assessment of staffing needs. A work time standards manual for bus maintenance tasks at MDT has also been developed. These labor time standards will allow MDT to establish performance measures for specific repair tasks.

In addition to the efficiencies outlined in the Pro Forma report, MDT has since initiated additional efficiency measures:

o Metrorail vehicle mileage was analyzed and a new policy to rotate the use of vehicles to help normalize, or �even out�, the use across the fleet was instituted. This new program will help to extend the service life until the mid-life rehabilitation can begin.

o The recently completed Facilities and Equipment Maintenance plan resulted in preventive maintenance procedures being developed for all equipment and building systems. When fully implemented, the plan will assist in reducing costs for repairs and potentially result in relocation of maintenance staff to reduce travel time and increase productivity.

o A task force that examined labor practices relating to promotions of union employees, led to the streamlining and tightening of rules relating to the use of seniority. Changes resulted in a more efficient process while at the same time provided new career opportunities.

o An on-going review of Metrobus maintenance practices includes a review of productivity and performance, a manpower needs assessment, development of an action plan, and plans for an annual review to ensure follow up on recommendations.

These are just a few of the initiatives now underway within MDT. Each activity has an established target and performance measure. As MDT begins to meet these targets and efficiencies are gained, their financial impacts will be incorporated into future Pro Formas. With each annual update, we have an opportunity to share information and make knowledgeable decisions. Each year, we should view this process as a chance to take a fresh look at exactly where we are heading under the given financial circumstances.

Internal vs. External Financing

Extensive consideration was given to the appropriate structure to finance the cost of funding existing service through 2016. After due diligence, it was concluded that an internal line of credit was most advantageous and in the best interest of both MDT and the CITT since the internal line of credit carries a lower interest cost and significant savings which can be invested in service needs.

It should be noted that the County budgets to appropriate debt from legally available non ad valorem revenues on a regular basis. Rating agencies and the marketplace view this credit in a very favorable manner. In fact, these pledges carry an A+ rating, a notch below the County�s General Obligation Bond rating of AA-. I bring this to your attention since so much discussion has surrounded the question of whether an internal loan carries the same commitment as an external financing. I believe that our track record speaks for itself in that the County has never reneged on an obligation whether internal or external. Additionally, an external issuance for the purposes of this amendment would increase our level of outstanding debt when we have a better solution available to resolve this issue.

When the CITT considered this amendment on April 27, 2005, it had before it two proposals. One proposal outlined an external loan, which would have forced the general fund MOE to assume payments on a bond issuance currently assigned to the surtax for the Earlington Heights/Miami Intermodal Center (EH/MIC) Connector construction schedule. This plan would have diverted payment of a significant interest sum to a third party. Growth in the general fund MOE would have been used to pay this external debt, thus detracting from available operating funds for existing services at MDT. In addition to costs related to this financing, the diversion of funds to a third party could have served to further aggravate the MDT deficit, since monies were going towards third party interest payments instead of being reinvested in our own operations. While this plan would have had a more favorable impact on the surtax funds alone, the shifting of the debt payment to the general fund MOE would detract significantly from MDT�s available operating funds.

The other proposal incorporated the Line of Credit Obligation Letter as attached. It should be noted that the CITT has struggled with this question for the last two months, and spent the entire day in various committees prior to its full Trust meeting debating the merits of both options. After lengthy and thoughtful discussions, the Trust approved the attached resolution on an 8-1 vote. I want to take this opportunity to thank Chairman Buoniconti and all of the Members of the CITT for taking the time to grapple with these considerable issues over the last several months, and for showing their faith in this County by supporting my proposal.

Line of Credit Obligation Letter and Penalty

With the exclusion of the FY 2001-02 $23.9 million, it is now estimated that MDT will require $118.9 million in additional support to cover existing service shortfalls through 2011, at which time non-surtax revenues should be adequate to cover existing services based on the implementation of new fare collection equipment, additional fare increases, cost containment, and an increase in ridership assumed in the Pro Forma. In addition, the recently adopted fare increase contributed $25.1 million to help reduce the FY 2004-05 and 2005-06 deficits. One of the concerns expressed regarding the original plan I proposed was the lack of a binding instrument upon the surtax loan, similar to that which is constructed when borrowing funds from an outside agency, and the absence of any penalty should the pledged general fund increases not be appropriated in the future. In order to address these concerns, a loan and repayment structure has been outlined in the attached Line of Credit Obligation Letter (Attachment 3) that specifically allocates a portion of the annual 3.5% general fund MOE growth towards repayment of the surtax loan.

As Attachment 1 shows, for the ten years prior to the approval of the surtax, the general fund subsidy to MDT increased by an average of 2%. It should be noted that Ordinance 02-116, enacted July 9, 2002, which authorized the levy of the surtax, established a general fund MOE allocation to MDT of no less than $111.8 million annually. However, through 2016 as detailed in Attachment 2, the difference between the 3.5% growth and the historical 2% growth would allow for payments to be made with a 3% interest to amortize the use of surtax funds to support the unified transit system. To the extent that MDT can adopt efficiencies that reduce future expenditures, or other cost reductions or revenue enhancements can be identified, additional payments toward this plan would be made from the liberated maintenance of effort subsidy to accelerate this payment schedule. Furthermore, on an annual basis, a rebate of surtax funds equal to the repayment amount for that year will be made to the surtax fund.

Pursuant to this structure, should in any year the commitment of increasing general fund support to MDT not be maintained, surtax revenues could not be used prospectively to fund existing services. This penalty effectively voids the amendment in the attached Ordinance, since funding of existing services through the surtax is cancelled.

Note to Financial Statements

Upon adoption of the proposed plan, a detailed note to the County�s financial statements will be prepared annually which will describe this transaction along with an accompanying schedule depicting the annual payments made on this obligation. Failure to make the annual payments will be disclosed to all parties receiving these statements. The County�s financial statements are filed annually with State and Federal regulatory agencies, as well as the three rating agencies and bond insurers. It should be noted that rating agencies traditionally review the County�s financial statements on an annual basis.

Federal Funding Process

The FTA requires MDT to annually review its operating budget and discuss the agency�s overall financial state. New Starts applications are due in August, 2005. The New Starts submittal is the document that FTA uses to determine its ratings on transit projects. The document requires a detailed assessment of the financial and operating plans of the submitting agency. The New Starts applications are reviewed and judged on a national level. MDT is competing with other transit agencies across the nation for limited funds. By rule, if an agency fails to submit a solvent financial plan, the agency�s proposed rail project will not be rated and is not eligible for funding. By practice, an agency that fails to submit for a New Starts cycle permits other agencies to move ahead in the process. The financial plan is used as justification for special project funding and for comprehensive budget review. Project specific funding is often discussed at the FTA required quarterly meetings.

In accordance with the People�s Transportation Plan, MDT is seeking federal matching dollars for the Orange Line (North and East-West Corridors). To receive federal funds, MDT must annually submit a New Starts package for each corridor. The New Starts submittal is rated based upon a land use component and the cost effectiveness of the project. The cost effectiveness of the project is determined by the soundness of the financial plan.

FTA looks at all transit applicant fiscal data � capital, operating resources, dedicated funding sources, fare revenue estimates, and a 25-year projection � in assessing the ability of a New Starts applicant to properly build, operate and maintain the entire transit program associated with the New Start. For MDT this means all financial aspects, including existing and future bus service, Metrorail and Metromover cost projections, Special Transportation Services, and existing and future corridors need to be included in the financial review. This financial report is a separate document submitted to FTA by the County to address all federal New Start reporting requirements.

Federal legislation expressly requires MDT to show that it can operate and maintain not only the new proposed corridor, but also its current transit system. The Transportation Equity Act for the 21st Century (TEA-21) requires FTA to ensure that proposed New Starts projects are supported by an acceptable degree of local financial commitment and resources, including evidence of stable and dependable funding sources to construct, maintain, and operate the fixed guideway capital investment, as well as the rest of the transit system.

Properly Funding the Cost of Transit Service

The annual cost of existing transit services has exceeded recurring non-surtax MDT revenues for several years. The solution has been to use one-time revenue sources and in 2002 to borrow from future federal funds. The Pro Forma presented to the Board on January 27, 2005, continues to show the need to borrow surtax cash through 2011 to fully fund those services in existence as of November 5, 2002. Should the Board choose to continue to increase the MOE by 3.5% annually through 2034, an additional $3 billion over the original Pro Forma of 2002 will be generated over the life of the Pro Forma, which exceeds the loan payment by $2.8 billion. With this additional funding, we believe the expectations of our community as reflected in the original PTP Pro Forma can certainly be met.

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The actions outlined above will correct the unrealistic limitations on the maintenance of effort support to transit operations, eliminate the pre-surtax shortfall, and properly fund the cost of transit service into the future. The reinvestment schedule that has been developed establishes the commitment of the general fund and significant penalties if we fail to meet that commitment. Should the Board and the Mayor approve neither the original plan nor the modified plan to fund existing services, an immediate reduction in MDT service would have to be implemented. In addition to the outlined land sales, major service adjustments, administrative reductions, and staffing reductions, as outlined in the January 27, 2005, Board item, would have to be considered.

This approach, as well as the original plan, obligates future general fund dollars for support of our transit system, reducing the countywide general fund dollars that would be needed to support the growth of other County services. It is critical that additional funding be identified to entice federal funding necessary to accelerate all PTP projects, including the Orange Line (North, EH/MIC Connector, and East-West (MIC to FIU segment) Corridors) and Bay Link, all of which can be delivered sooner than envisioned at the time of the PTP vote in 2002, as long as required federal funding is allocated. I want to reiterate the fact that the figures outlined in the Line of Credit Obligation Letter are based on assumptions. I have committed to this Board in the past that the Pro Forma will be updated annually, and this process will be critical to future projections for support from the surtax. Assumptions in the Pro Forma that do not materialize will be corrected annually, and these corrections will certainly affect some of the figures forecasted today. Any adjustments from anticipated levels of support will be clearly delineated in future Pro Forma reports and in the MDT annual budget.

Provided for your information is the CITT resolution forwarded to the Board with a favorable recommendation at the meeting of April 27, 2005, which amends the draft resolution distributed by my office on April 25, 2005. The amendment states that the total amount of surtax funds used to support those MDT services in existence as of November 5, 2002, shall not exceed $150 million. Surtax funds may be utilized to support those MDT services in existence as of November 5, 2002, through the expiration of Fiscal Year 2011-2012. The CITT also modified the original resolution distributed to you by conditioning this PTP amendment on its approval by the Board in the form of an Ordinance. Additionally, the CITT modified the original resolution to clarify that failure by the County to meet any of its obligation shall result in surtax funds no longer being eligible to pay prospectively for those MDT services existing as of November 5, 2002. The above mentioned CITT recommended modifications are hereby incorporated into my recommendation. While no action of the Board of County Commissioners is irreversible, this plan will ultimately be approved in the form of an ordinance, so this ongoing commitment is codified. Updates to the Line of Credit schedule will be reported in annual updates of the Pro Forma.

FISCAL IMPACT

The attached Ordinance amending the PTP restores the general fund MOE support to MDT to the pre-surtax level of $123.171 million and annually increases the MOE by 3.5%. Included in the amendment is compliance with the terms of the attached Line of Credit Obligation Letter which outlines a loan of up to $150 million, although the repayment schedule only envisions the need to access $118.9 million as a result of the exclusion of the $23.9 million FY 2001-02 shortfall existing prior to the passage of the surtax.