AGENDA ITEM 9-D
ACTION ITEM
TO:
CHAIRMAN MILDE AND THE VRE OPERATIONS BOARD
FROM:
DALE ZEHNER
DATE:
SEPTEMBER 17, 2010
RE:
AUTHORIZATION TO ALLOCATE FY 2010 OPERATING SURPLUS
_____________________________________________________________________
RECOMMENDATION:
The VRE Operations Board is being asked to authorize the Chief Executive Officer to
allocate a positive variance from the FY 2010 budget, as presented at the Operations
Board meeting, and to recommend to the Commissions any actions resulting from this
allocation requiring their approval.
BACKGROUND:
Net income from operations for FY 2010 exceeded the amount budgeted by
approximately $5.1 million. The major reasons for this positive variance are as follows:
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Fare revenue exceeded the amount budgeted by $3.1 million, or 11.5%, as a
result of higher than anticipated ridership. Total fare revenue was slightly more
than $30 million and average daily ridership for the year was 16,673.
Operating expenses were less than the amount budgeted by $2.5 million or
4.7%. The major factors were fuel, which was less than budgeted by $900,000,
and train operations and equipment maintenance costs.
Other revenues and costs, including grant revenue for operations and debt
services costs, netted a negative variance of approximately $500,000.
A proposal for allocating the $5.1 million positive variance will be discussed in detail at
the Operations Board meeting.
REPORT ON OPERATING AND CAPITAL RESERVES
At a recent past Operations Board meeting, additional information on the VRE operating
and capital reserves was requested. That information is provided below:
During the period from FY 2006 to FY 2008, VRE’s working capital, calculated as
current assets less current liabilities, was reduced significantly due to several factors.
These factors include a precipitous rise in fuel prices, less than anticipated ridership
during a portion of that period, and a reduction in grant revenue.
For the last several years, VRE has sought to re-establish a reasonable level of working
capital, with a goal of 16.7%, or two months of operating costs. This is consistent with
or less than the level set by other similar transit agencies. At the end of FY 2010,
working capital was at $10.4 million, or 15% of operating costs. These funds are used
for multiple purposes, including: 1) local match for prior year grant funds, currently about
$3.8 million; 2) to accommodate delays in the receipt of grant revenue, which is often
substantial; and 3) as a cushion when annual revenue and expenses are less than
anticipated, as occurred during the period from FY 2006 and FY 2008.
VRE also has a small capital reserve which was funded primarily from the sale of
equipment and is reserved to assist in capital purchases. The balance at the end of FY
2010 was $3 million, with nearly all the funds committed to the locomotives already on
order.
At present, VRE has total cash on hand of approximately $5.7 million and is awaiting
federal grant reimbursement of $5.8 million for the locomotive purchase.
FISCAL IMPACT:
Funds are available from the FY 2010 operating budget.
TO:
FROM:
DATE:
RE:
CHAIRMAN MILDE AND THE VRE OPERATIONS BOARD
DALE ZEHNER
SEPTEMBER 17, 2010
AUTHORIZATION TO ALLOCATE FY 2010 OPERATING SURPLUS
RESOLUTION
9D-09-2010
OF THE
VIRGINIA RAILWAY EXPRESS
OPERATIONS BOARD
WHEREAS, net income from operations for FY 2010 exceeded the amount budgeted by
approximately $5.1 million; and,
WHEREAS, the major reasons for the positive variance are additional fare revenue in
the amount of $3.1 million and operating and other revenue/costs in the amount of $2
million; and,
WHEREAS, a proposal for the allocation of these funds has been presented and
discussed at the Operations Board meeting.
NOW, THEREFORE, BE IT RESOLVED THAT, the VRE Operations Board authorizes
the Chief Executive Officer to allocate a positive variance from the FY 2010 budget, as
discussed at the Operations Board meeting; and,
BE IT FURTHER RESOLVED THAT, the VRE Operations Board recommends to the
Commissions any actions resulting from this allocation requiring their approval.