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TO: |
Board of Trustees |
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THROUGH: |
Jay Fox, Executive Director |
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FROM: |
William Greene, Chief Financial Officer |
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PRESENTER(S): |
William Greene, Chief Financial Officer |
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Brad Armstrong, Director, Budget and Financial Strategy |
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Megan Waters, Community Engagement Director |
TITLE:
title
UTA 2023 Final Budget and Public Engagement Report
end
AGENDA ITEM TYPE:
Discussion
RECOMMENDATION:
Informational report for discussion
BACKGROUND:
Each year, the Authority is required to prepare an operating and capital budget for the succeeding year. After consultation with the Board of Trustees, and in accordance with Utah Code 17B-1-702 and 17B-2a-801, the Executive Director has prepared the Final 2022 Budget and draft Public Comment Report for Board review.
DISCUSSION:
The Board of Trustees and UTA staff discussed and set 2023 budget priorities and timelines earlier this year. Long-term financial planning assumptions were reviewed by the Board of Trustees.
Over the first half of 2022, the Board of Trustees and UTA staff reviewed 2022 program delivery, and current operating environment including economic conditions, revenue projections, and the organization’s budget development framework to support near and long-term public transportation needs in the Region.
Using 2022 existing operating budgets as a starting point, the organization updated inflationary assumptions for labor, fuel and other expenses, eliminated one-time 2022 costs, and annualized the cost of mid-year budget adjustments (Board approved 2022 service changes, technical budget adjustments, etc.). The resulting 2023 base budget or budget target was developed at the department and object of expenditure level.
Using the new budget development framework and informed by discussions with the Board of Trustees, the organization built on the 2023 base with the selection of prioritized initiatives focused on:
• Reducing agency costs
• Making UTA a more efficient organization
• Improving/enhancing service delivery
• Improving UTA culture
At the October 26 2022 Board of Trustees’ meeting, the Board approved the Tentative 2023 Budget. The Local Advisory Council reviewed and was consulted on the Tentative Budget at their November 2, 2022 meeting. A public hearing was held on November 10, 2022 and the public comment period will run through December 10, 2022.
All public and stakeholder comments received to date regarding the 2023 budget have been provided to the Board of Trustees and a draft report will be presented at the December 7, 2022 Board Meeting.
Since adoption of the Tentative Budget and based on the most recent economic forecasts, staff has updated revenue forecasts impacting sales taxes and fares and has modified assumptions on 2023 fuel prices.
Changes to the Tentative Budget are as follows:
Revenues
Sales Taxes
Based on the updated November forecast from the University of Utah, sales taxes are $49.3 million lower than projected in the Tentative Budget for 2023. Over the 5-year forecast period (2023-2027), sales taxes are project to be $9 million lower than the 5-year forecast in the Tentative Budget. The Tentative Budget sales tax projections were based on an April 2022 forecast that anticipated a mild recession in 2024. The updated November forecast incorporates current economic conditions and assumes a mild recession in 2023 with no sales tax revenue growth in 2023 and then modest growth thereafter.
Passenger Revenue
No change in passenger revenues for 2023. However, the 5-year forecast has been adjusted downward by $7.6 million to reflect slower growth than projected in the Tentative Budget.
Operating Budget
Fuel
The Final Budget for 2023 is $4.4 million higher than projected in the Tentative Budget. The increase is almost entirely attributable to a change in the budgeted diesel price for 2023. The 2023 budgeted diesel price in the Final Budget is $3.90/gallon as compared to $3.20/gallon in the Tentative Budget. The increase was based on rising fuel costs and increases in forward pricing projections for diesel.
The changed assumption on the price of diesel results in a net increase in the 2023 Fuel/Power budget of $4.2 million as compared to the Tentative Budget - a total budget of $40 million.
Capital Budget
2023 Capital Budget
The 2023 Capital Budget increased by $200,000 in the Final Budget as compared to the Tentative Budget. The increase was due to a movement of $200,000 from projects in the out-years of the 5-year plan to 2023 to fund updated estimates to complete the TRAX Operational Simulator Project.
2023-2027 5-Year Capital Plan
The 5-year Capital Plan realized a $15 million increase over the Tentative Budget in the last two years of the plan. The increase was due to increased cost assumptions for the Light Rail Vehicle Replacement project. The increase is anticipated to be funded entirely from grants and state/local match and does not impact UTA fund balances.
ALTERNATIVES:
Discussion Item
FISCAL IMPACT:
Proposed changes would increase Operating Costs by $4.4 million, in 2023 as compared to the Adopted Tentative Budget, and approximately $11.6 million over the 5-Year Financial Plan. The 2023 Capital Budget has an increase of $200,000.
Sales tax revenues are significantly lower in 2023 (minus $49.3 million) but recover over the 5-year financial plan. The net 5-year sales tax revenue loss is about $9 million. No change in passenger revenue in 2023, however the 5-year forecast for passenger revenues is about $7.6 lower than reported in the Tentative Budget.
The increased costs and lower revenue forecasted in the Final Budget 5-year plan can be absorbed within fund balance.
The differences in the Tentative and proposed Final Budgets are detailed in the attachments to this memo.
ATTACHMENTS:
2023 Final Budget Exhibits
2023 Final Budget Document
Preliminary Public Comment Summary