AGENDA ITEM 9-A
ACTION ITEM
TO:
CHAIRMAN COVINGTON AND THE VRE OPERATIONS BOARD
FROM:
DALE ZEHNER
DATE:
JUNE 15, 2012
RE:
FY 2014 BUDGET GUIDELINES
_____________________________________________________________________
RECOMMENDATION:
The VRE Operations Board is being asked to provide budget guidelines for the
development of the FY 2014 budget for train operations and capital projects.
BACKGROUND:
VRE has adopted a financial planning process that provides for early consideration of
budget issues and assumptions. Each year, VRE staff meets numerous times with the
member jurisdictions’ Chief Administrative Officers (CAO) Budget Taskforce to develop
the annual proposed budget. An independent CAO recommendation is provided to the
Operations Board and Commissions in conjunction with the final budget submission at
the December Operations Board meeting.
As part of the process, the jurisdictional CAO Budget Task Force met on June 12, 2012
to begin the review of various budget issues, including the cost of fuel, contract
services, insurance, the fleet management plan, ridership projections, fuel tax
projections, and subsidy. The goal is to permit the Budget Task Force to focus on
material issues early in the budget process.
In July 2011, the Operations Board held a retreat to discuss future growth scenarios for
VRE. The recommendations from that exercise are included in the budget guidelines
below.
PROPOSED FY 2014 BUDGET GUIDELINES
GUIDELINE #1: The priority in the FY 2014 budget will be to sustain the current level of
overall service to the riders. In addition, various capacity expansion and/or growth
scenarios to expand service will be developed and presented, in conjunction with their
cost implications.
GUIDELINE #2: The total jurisdictional subsidy has decreased over the past four years,
from $17,275,499 in FY 2009 to $16,428,800 in FY 2013, with decreases from FY 2009
to FY 2012 and a 3% increase in FY 2013. Subsidy increases or decreases in FY 2014
and future years will be evaluated based on changes to state and federal funding levels
and the jurisdiction’s ability to replace grant funding with fuel tax revenue or other
sources of funding.
GUIDELINE #3: VRE had three fare increases between July 2008 and July 2009 and
another increase in FY 2013. Fare increases will be evaluated as the budget process
continues, with consideration given to changes in grant funding levels, a preference for
biennial increases, and comparison to relevant indices.
GUIDELINE #4: The first priority for capital improvements will be to adequately maintain
equipment and facilities to support current service levels. The Capital Improvement
Program (CIP) will be developed to ensure the most efficient use of all funding sources
(federal, state, and local) and to emphasize high priority capital projects to maintain
current assets and prepare for growth as funding allows.
GUIDELINE #5: Fuel hedging strategies will continue in order to provide greater
predictably in budgeting for diesel fuel costs.
GUIDELINE #6: Funding will be provided to maintain VRE’s level of working capital at
an amount no less than two months of operating costs. This level is consistent with the
reserve goals of other transit agencies and will allow VRE to efficiently meet its
obligations during the course of the year as well as make orderly accommodation for
significant shortfalls. In addition, a capital reserve will be maintained to provide local
match for earmarks and to fund smaller capital projects and/or those for which grant
funds are unavailable. Funding for the reserves will be provided by surplus funds at
year-end and, for the capital reserve, proceeds from the sale of capital assets.
GUIDELINE #7: The review of VRE’s debt levels will be continued in order to develop
debt parameters and guidance as to the appropriate balance between debt and “pay as
you go” financing for major capital acquisitions.
OTHER FY 2014 BUDGET ISSUES AND ASSUMPTIONS
 State Funding: DRPT is now undertaking a review of the funding process for
state transit assistance, as directed by the General Assembly (SJR 297). The
current schedule is for DRPT to provide their recommendations to the General
Assembly in September 2012. The impact of changes to the funding process is
not known at this time, but they could be substantial. VRE staff will continue to
monitor this during the budget cycle.

Access Fee grants: In prior years, VRE received reimbursement through federal
Surface Transportation funds, allocated by the State, for 80% of railroad access
fee costs. In FY 2013, VRE’s access fee costs of $14M exceeded the amount of
Surface Transportation funds available and reimbursement was only at 70%,
resulting in a budget shortfall of $630,000, net of state capital match funds. The
apparent cap on Surface Transportation funds will have a larger impact as
access fees increase each year and will make new service more costly.

Federal funding: Currently, federal FY 2012 funding (VRE FY 2013) is approved
for nine months at the same level as federal FY 2011. Future funding is in flux,
with the possibility of modifications to 5309 funding, and staff believes there may
be some reduction in future awards.

Wireless communication for VRE operations and passenger use: A white paper
on the costs and uses of wireless communication for the VRE system has been
prepared for discussion by the Operations Board. Based on that discussion, the
cost of wireless solutions will be included in the prioritization of capital projects
for the six-year plan.

Number of Trains. The FY 2013 Budget called for a gradual increase from 32
daily trains to 34 daily trains over the period ending in FY 2018. Additional trains
will be considered, as noted in the guidelines, based on availability of funding
and ridership needs. Levels of service will depend on procurement of additional
equipment.

Cost Recovery Ratio. The budget forecast will ensure the cost recovery ratio
remains in the 50% to 60% range.

2.1% Motor Fuels Tax: VRE staff is aware of jurisdictional concerns related to
fuel tax revenue projections and the ability to continue to support current VRE
expenses and other transit projects.
NEXT STEPS:

Continue discussing FY 2014 budget scenarios with the CAO Budget Task
Force.

Present preliminary budget forecasts/options to the Operations Board in August
2012

Begin review of FY 2014 revenue and cost assumptions in September 2012 with
CAO Budget Task Force.
FISCAL IMPACT:
There is no fiscal impact related to the development of the FY 2014 budget.
TO:
FROM:
DATE:
RE:
CHAIRMAN COVINGTON AND THE VRE OPERATIONS BOARD
DALE ZEHNER
JUNE 15, 2012
FY 2014 BUDGET GUIDELINES
RESOLUTION
9A-06-2012
OF THE
VIRGINIA RAILWAY EXPRESS
OPERATIONS BOARD
WHEREAS, effective financial planning for the Virginia Railway Express is based on
budget development with guidelines approved by the VRE Operations Board; and,
WHEREAS, the VRE Operations Board has directed that the development of each
annual budget involve consultation and cooperation with the Chief Administrative
Officers of VRE’s participating and contributing jurisdictions; and,
WHEREAS, the proposed budget guidelines will be discussed and possibly modified, or
guidelines may be added or removed.
NOW, THEREFORE, BE IT RESOLVED THAT, the VRE Operations Board directs VRE
staff to develop budget options for the FY 2014 operating and capital budget in
accordance with the following potential guidelines:
GUIDELINE #1: The priority in the FY 2014 budget will be to sustain the current level of
overall service to the riders. In addition, various capacity expansion and/or growth
scenarios to expand service will be developed and presented, in conjunction with their
cost implications.
GUIDELINE #2: The total jurisdictional subsidy has decreased over the past four years,
from $17,275,499 in FY 2009 to $16,428,800 in FY 2013, with decreases from FY 2009
to FY 2012 and a 3% increase in FY 2013. Subsidy increases or decreases in FY 2014
and future years will be evaluated based on changes to state and federal funding levels
and the jurisdiction’s ability to replace grant funding with fuel tax revenue or other
sources of funding.
GUIDELINE #3: VRE had three fare increases between July 2008 and July 2009 and
another increase in FY 2013. Fare increases will be evaluated as the budget process
continues, with consideration given to changes in grant funding levels, a preference for
biennial increases, and comparison to relevant indices.
GUIDELINE #4: The first priority for capital improvements will be to adequately maintain
equipment and facilities to support current service levels. The Capital Improvement
Program (CIP) will be developed to ensure the most efficient use of all funding sources
(federal, state, and local) and to emphasize high priority capital projects to maintain
current assets and prepare for growth as funding allows.
GUIDELINE #5: Fuel hedging strategies will continue in order to provide greater
predictably in budgeting for diesel fuel costs.
GUIDELINE #6: Funding will be provided to maintain VRE’s level of working capital at
an amount no less than two months of operating costs. This level is consistent with the
reserve goals of other transit agencies and will allow VRE to efficiently meet its
obligations during the course of the year as well as make orderly accommodation for
significant shortfalls. In addition, a capital reserve will be maintained to provide local
match for earmarks and to fund smaller capital projects and/or those for which grant
funds are unavailable. Funding for the reserves will be provided by surplus funds at
year-end and, for the capital reserve, proceeds from the sale of capital assets.
GUIDELINE #7: The review of VRE’s debt levels will be continued in order to develop
debt parameters and guidance as to the appropriate balance between debt and “pay as
you go” financing for major capital acquisitions.