Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
MARCH 19, 2026
Subject
SUBJECT: FISCAL YEAR 2027 BUDGET DEVELOPMENT STATUS UPDATE
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE the Fiscal Year 2027 (FY27) Budget Development Status Update.
Issue
ISSUE
This report continues the monthly updates to the Board on the FY27 Budget Development process, culminating in a planned May 2026 Board Adoption. This report focuses on the following programs:
• Transit Infrastructure Development
• Highway Multimodal Development
• Regional Rail Programs
• Regional Allocations & Pass-Throughs
Additionally, an update on Metro’s comprehensive budget outreach efforts is included.
Metro’s diverse portfolio of major infrastructure projects is included in Transit Infrastructure Development, Highway Multimodal Development, and Regional Rail Programs. The projects in these programs rely on federal and state funding as well as the local funds generated through the four local sales taxes. Amidst the fiscal uncertainty in FY27, Metro remains committed to delivering projects that expand the region’s transit network, provide better connectivity, broaden access to destinations, and reduce travel times.
The FY27 Budget Development process is on-going even as this report is being generated. All FY27 budget amounts presented in this report are preliminary and are subject to change as additional information unfolds.
Background
BACKGROUND
The annual budget request reflects the twelve-month financial cash flow needs required for advancing through each project’s development phase. It serves to monitor the cash flow requirements for activities in each project phase and considers factors such as the existing level of Board authorization, the respective project delivery schedules, and the identification of eligible and available funding sources. These sources may include federal, state, and local grants, sales taxes, and various financing mechanisms.
Most of the projects within the major capital programs adopt a multiyear Life of Project (LOP) Budget. For projects utilizing the alternative delivery methods, a multiyear Pre-Construction Budget is adopted prior to establishing a full LOP Budget. The purpose of the multiyear budget is to establish the financial resources necessary for the duration of a particular project phase in the case of Pre-Construction budget, and for the completion of the project in the case of a full LOP Budget. The LOP budget encompasses the Pre-Construction Budget and planning phase expenditures. These multi-year budgets require Board approval independent from the annual budget process.
Discussion
DISCUSSION
Major Infrastructure Capital Investment
LA County’s infrastructure expansion plan is one of the nation’s most ambitious and transformative transportation construction and enhancement programs, enabled by the sales tax revenues from the voter approved Measure R and Measure M Ordinances along with funds from state and federal grants. Major infrastructure projects are subject to market conditions, environmental conditions, and natural disasters which pose financial and schedule risks. While FY27 Preliminary Budget assumes no change in the funds obligated to these projects, the uncertainties surrounding these funds exacerbate the situation. Should any of these factors be realized, they must be evaluated and mitigated for a successful project delivery.
The following programs are covered in this report:
Transit Infrastructure Development: The FY27 Preliminary Budget primarily provides funding for planning and constructing new transit projects for LA County per the voter approved Measure R and Measure M sales tax ordinances.
Highway Multimodal Development: The FY27 Preliminary Budget primarily provides funding from voter approved Measure R and Measure M sales tax ordinances to advance design and construction activities for highway, streets and multimodal infrastructure projects in LA County, along with HOV and ExpressLanes and Bus Only Lane projects.
Regional Rail: The FY27 Preliminary Budget supports commuter rail projects such as Metro-led commuter rail projects and ongoing subsidy support for Metrolink’s operating and SGR/capital components.
The major infrastructure capital projects typically make up one third of the annual budget. The FY27 Preliminary Budget represents the funding needed for the year to advance these capital projects based on the phase of each project.
Transit Infrastructure Development
The Transit Infrastructure Development (TID) Program consists of expansion and enhancement of transit lines outlined in the Measure R and Measure M Ordinances, as well as those capital projects critical to operating these expansion lines once in service. These initiatives progress through three stages of project development: planning, construction, and program support and administration.
Typically, the planning phase commences with a feasibility study followed by alternative analyses, ultimately leading to environmental clearance and selection of Locally Preferred Alternative by the Board. Subsequently, the project moves into the project development and construction phase. Once completed, it is transferred to Operations. Annual program expenditure and cash flow are largely influenced by the project’s phase during the fiscal year.
Fig 1:
For FY27, the Preliminary Budget for the Transit Infrastructure Development (TID) Program totals $2.1 billion, reflecting a decrease of $123.1 million, or 5.6%, compared to the FY26 budget, as shown in Figure 1. The decrease is primarily attributable to the wind-down of construction activities following the opening of the LAX/Metro Transit Center and the A Line extension to Pomona, as well as the anticipated opening of D Line Section 1.
The FY27 budget supports continued construction and revenue service readiness for the D Line Extension Sections 2 and 3, which are anticipated to open in phases before the 2028 Games. Funding is also provided for early construction of the East San Fernando Valley Light Rail Transit (LRT) and the Southeast Gateway Line, as well as design activities for the A Line Foothill Extension from Pomona to Claremont.
Transit Construction
Construction funding for Bus Rapid Transit (BRT) projects increases by approximately $142.2 million in FY27. The G Line BRT Improvements project is in heavy construction, while the North Hollywood-Pasadena BRT and Vermont Avenue BRT projects are advancing into construction, with schedules aligned to support readiness for the 2028 Olympic and Paralympic Games.
Transit Planning
Transit Planning totals $221.4 million in FY27 to support ongoing studies, development activities, and environmental certification for major corridor projects, including the Sepulveda Transit Corridor, the E Line Eastside Extension Phase 2, and the K Line Extension to Torrance. The FY27 budget also includes funding for design of an upgraded Metro Command and Control Center (formerly the Rail and Bus Operations Center), which will accommodate expanded service as new projects enter operation.
Program Support and Administration
Program Support and Administration include funding for the Business Interruption/Solutions program and other activities supporting the planning and delivery of TID projects. All FY27 Preliminary Budget figures remain under development and may be updated prior to publication of the Proposed Budget Book.
A more detailed project discussion can be found in Attachment A.
Highway Multimodal Development
The FY27 Preliminary Budget of $887.1 million represents a $249.3 million or 39.1% increase over the FY26 Budget as shown in Figure 2. The FY27 Preliminary Budget reflects Metro’s ongoing investments in HOV and ExpressLanes construction, the expansion of bus-only lanes, subregional street improvements, as well as safety enhancements to freeways, interchanges and arterial streets. As the Highway Multimodal Development program evolves, Metro will continue to integrate pedestrian oriented and multi-modal components into freeway and surface street projects and advance an equity-focused approach that restricts displacement and emphasizes community participation.
In FY27, the Highway Multimodal Development budget supports the construction phase of the I-105 ExpressLanes project, expansion of bus-only lanes and bus infrastructure throughout LA County, including customer-oriented amenities to bus stop shelters and bus-lane implementations in preparation for the 2028 Olympics. The Preliminary FY27 Budget also supports the re-imagining of the I-710 South and I-605 Hot Spots projects, the construction start for several “hotspot” projects, and ongoing construction for the I-5 North (North County) and the SR-57/SR-60 Interchange Improvement Project.
Fig 2:
See Attachment B for additional Highway project details.
Highway capital projects are subject to the same market conditions generating cost escalations in our TID program, namely rising labor and material costs. Unforeseen site conditions and extreme weather impacts also pose financial risk to highway construction projects by triggering work stoppages, change orders, emergency remediation provisions, and mitigation provisions to offset emissions impacts from expanded roadways. All these risk factors could impact construction costs and available funding resources.
Metro Regional Rail
Metro oversees the planning, programming, and implementation of commuter rail projects in LA County that are or will be operated by external agencies such as the Southern California Regional Rail Authority (Metrolink), Amtrak, California High Speed Rail Authority, and commercial freight carriers. Metro also manages and coordinates capital improvement projects along approximately 150 miles of Metro owned, and Metrolink operated railroad right-of-way.
The FY27 Preliminary Budget of $241.0 million is $126.5 million or 110.4% increase from the FY26 Budget. The increase is primarily driven by an increase in funding for the Link Union Station project to support the advancement of the Construction Manager / General Contractor (CM/GC) contract in FY27. Other increases are attributable to an acceleration in construction activities for the Brighton to Roxford Double Track project as well as the Doran Street Grade Separation project.
Other major activities include closeout activities for the Rosecrans/Marquardt Grade Separation Project, ongoing funding to support preliminary engineering for a high-speed rail service from Palmdale via the High Desert Corridor to the future Apple Valley station of Brightline’s privately funded high-speed rail line to Las Vegas, and design efforts for an in-fill Metrolink station at the LA General Medical Center. Additionally, the Lone Hill to White Double Tracking Project in the San Gabriel Valley will develop a full funding plan in preparation for the construction phase.
Fig 3:
Metrolink Commuter Rail
At the time of this report, Metrolink is developing its FY27 operating and capital budget. Metro will work with Metrolink and the other partner agencies to align subsidy levels with eligible financial resources. Final budget amounts for Metrolink will be based on a separate board report brought forward later this year.
All modes of transportation in LA County are experiencing funding challenges due to the slower than anticipated growth of sales tax revenues and persistent increases in costs for labor, fuel, construction materials and other operating and capital costs.
The financial impact on commuter rail agencies has been particularly acute, as telecommuting has eroded commuter rail’s core ridership and fare revenues.
Whereas urban transit ridership has significantly rebounded, Metrolink’s ridership has plateaued at 60% of pre-covid levels. As a result, Metrolink’s subsidy requirement will be evaluated based first on eligible funding sources for commuter rail in LA County followed by the funding capacity of the other four member agencies.
Regional Allocations and Pass Throughs
The Regional Allocations and Pass Throughs program represents resources distributed to regional partners to carry out local transportation needs. This program is directly tied to locally imposed and collected sales taxes as well as Metro oversight and distribution of local, state and federal pass-through grant funding, which includes:
• Pass-through funding awarded to local jurisdictions and municipal and local transit operators through Local Agency Programs (i.e. Local Return) and Regional Transit Funding (i.e. Regional Transit Formula and Access Services)
• Pass-through funding for Major Projects being implemented by local agencies, including Antelope Valley Metrolink Line Projects, and Inglewood Transit Connector
• Grants allocated to local agencies through Other Local Programs such as the Congestion Reduction Demonstration (CRD) Toll Revenue grant program, Open Streets grant program, Active Transportation Program (ATP), Federal Pass-Throughs, and the Transit Oriented Development (TOD) Planning grant initiative
The FY27 Preliminary Budget totals $1.8 billion, representing a $49.4 million (2.7%) decrease compared to the FY26 Budget, as shown in Figure 4. Approximately 91% of this program consists of Local Agency Programs and Regional Transit Funding. Current economic conditions indicate a 1.8% increase in projected sales tax revenues for FY27 over the FY26 Budget. This will benefit subprograms that are funded with local and state sales tax revenues and is driving a projected increase in Local Agency Programs that directly allocate subsidies to local jurisdictions. While Regional Transit is also tied to sales tax revenues, allocations for transit agencies are expected to decrease in FY27 primarily due to lower projected state revenues.
Fig 4:
Local Agency Programs
Local Return and Transit Development Act (TDA) Article 3 and Article 8 funding comprise this subprogram. Local Agency Programs is projected to increase by $17.0 million, or 2.0% compared to the FY26 budgeted amount. This increase is driven by projected sales tax revenues for FY27.
Regional Transit Funding, Including Access Services
In contrast to Local Agency Programs, Regional Transit Funding programs are projected to decrease by $31.6 million (4.1%) in FY27. This subprogram consists of formula-based transit funding allocated to Los Angeles County municipal and local transit operators, as well as Access Services, the Los Angeles County’s ADA Complementary Paratransit service provider. Regional Transit formula funding includes Proposition A Discretionary, Measure M 20%, Measure R 20%, STA, SB1, TDA Article 4, and other related fund programs. The projected budget decrease is primarily due to lower State Transit Assistance (STA) and Senate Bill 1 (SB1) revenues once adjusted for lower than anticipated FY25 revenue receipts. The revised projection of lower State revenue estimates is an update to what was reported in the February Budget Development Board report on Resources and Parameter
Access Services: Access Services’ budget is funded with both federal and local funding and their adopted FY26 Budget was $370 million. The Regional Transit subprogram includes the local funding sources to support Access Services’ annual budget for operating and capital expenses as well as the Free Fare program with Metrolink. The agency’s primary federal grant source is secured through SCAG’s competitive federal Surface Transportation Block Grant (STBG)process. A preliminary estimate of $213.8 million in Proposition C Discretionary and Measure M funding is proposed for Access Services in FY27 through the Regional Transit subprogram. This equates to a $10.6 million or 5.4% increase over FY26.
Metro provides this local subsidy to bridge the gap between Access Services' total annual budget and the federal operations grants they receive. For example, while Access Services requested $283.1 million for FY27 and FY28 through SCAG’s competitive grant process consistent with past federal funding amounts, they were awarded only $131.8 million, 47% of their request. The resulting shortfall will need to be offset by Metro's Regional Transit subprogram allocation. Metro is currently working with Access Services to refine their final budget request and secure the additional funds necessary to cover this federal funding gap.
Major Projects
This subprogram is comprised of the Antelope Valley Line Projects, and Inglewood Transit Connector and is decreasing by $49.2 million, or 67.9% compared to the FY26 Budget as depicted in Figure 5. This is due to reduced cash flow needs in FY27 for these two projects. The reduction is primarily due to the Inglewood Transit Connector’s rephased plan for early delivery of less capital-intensive improvements by the 2028 Olympic games.
Fig 5:
Other Local Programs & Regional Federal Grant Programs
Other Local Programs is increasing by $14.0 million or 19.7% primarily due to increased activity in the Call for Projects and ATP-related grant programs. The increases are offset by no change in the Congestion Relief Demonstration Toll Revenue Grant Program, and decreased project activity in the Federal Earmarks and TOD Planning Grant programs.
Regional Federal Grant Programs is proposed to increase by $0.2 million or 1.0% due to a slight increase in activity for the Section 5310 Seniors and Disability grant program.
Fare Assistance - Low Income Fare is Easy (LIFE) Program
The LIFE program is anticipated to continue to grow during the coming year, and the budget request has increased accordingly to $35.3 million to support the Board approved expansion and improvements to the program. This represents a 0.5% increase over the FY26 budgeted amount for the program.
FY27 Public Budget Outreach Update
Moving into the third month of the Budget Outreach and Engagement cycle, Metro continues to see strong participation for the FY27 Budget development. While outreach began with youth-focused and public activities in late 2025, focus has shifted to synthesizing the high volume of feedback received to date.
As of mid-February, the My Metro Budget Activity has received over 5,400 responses and My Metro Priorities has generated over 1,100 responses, resulting in over 4,600 unique written comments. This 6,500+ response count between the two activities exceeds last year’s base participation. Consistent with feedback from prior years, public safety, service frequency, and system cleanliness remain the most prominent themes.
To ensure this input directly impacts the budget, OMB has compiled this feedback into an internal dashboard. This tool is now being used by departments to inform the public’s priorities and tradeoffs as part of the FY27 budget development process. Attachment C includes a summary of this month’s program comments, how they are being addressed, and additional information on outreach efforts.
Equity_Platform
EQUITY PLATFORM
Budget equity is an integral part of the budget development process. For FY27, Metro will uphold its commitment to equity through the continued application of the Equity Zero-Based Budgeting (EZBB) evaluation process. Guided by Metro’s Equity Platform Framework, the FY27 Budget process prioritizes equitable outcomes for everyone while addressing key organizational priorities such as public safety, system cleanliness, system expansion, labor equity, and environmental sustainability. The overarching goal is to deliver a transit system that is efficient, safe, inclusive, and equitable for all Los Angeles County residents and riders.
To enhance inclusivity, Metro will actively engage with underserved communities across Los Angeles County through targeted outreach efforts. In addition, Metro will continue its dialogues with a broad spectrum of stakeholders, ensuring that the public has ample opportunity to provide input on the agency’s infrastructure planning and construction projects. The feedback received will be carefully documented and integrated into the budgeting process, helping to shape budgetary priorities that reflect the collective needs and values of the community. Metro will assess the budget for the effectiveness of these initiatives and ensure the system remains equitable, sustainable, economically productive, safe, and ADA accessible.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
Vehicle Miles Traveled (VMT) and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with the declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
The budget invested in Transit and Regional Rail Infrastructure Development projects supports reduction in VMT within LA County. These projects promote reduction of single-occupancy vehicle trips and increase accessibility to destinations by expanding the public transportation network within Los Angeles County.
Investments made in Multimodal Highway projects such as highway capacity enhancements and HOV improvements, will ease congestion for cars and trucks, or expand vehicle capacity, resulting in the possibility of increased VMT. However, these projects also provide for carpooling infrastructure, which is intended to reduce VMT. Projects such as I-105 ExpressLane will contribute to increased VMT while toll revenues generated by this project when completed can be used to fund future transit projects. Specific VMT outcome of various projects will be provided in subsequent Board reports.
Overall, the budget discussed in this status report supports Metro’s systemwide strategy to reduce VMT through planning, constructing and funding activities that will improve and further encourage transit ridership, ridesharing, and active transportation. Metro’s Board-adopted VMT reduction targets were designed to build on the success of existing investments, and the FY27Preliminary Budget identified in this report aligns with those objectives.
*Based on population estimates from the United States Census and VMT estimates from the highway performance monitoring system data between 2001 - 2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports the following Metro Strategic Plan Goal:
Goal #5: Provide responsive, accountable, and trustworthy governance within the Metro Organization.
Next_Steps
NEXT STEPS
Next month’s budget development update will address Metro Transit Operations & Maintenance, Metro Transit Capital Improvements, Congestion Management, and Planning & Administration Programs.
Attachments
ATTACHMENTS
Attachment A - Transit Infrastructure Development
Attachment B - Highway Multimodal Development
Attachment C - My Metro Budget Activity
Prepared_by
Prepared by: Shelly Han Senior Director, Finance, (213) 418-3473
Robert Gutierrez, Deputy Executive Officer, Finance, (213) 922-4496
Marie Kim, Executive Officer, Finance, (213) 418-3472
Cosette Stark, Executive Officer, Local Programming, (213) 922-2822
Giovanna Gogreve, Senior Director, Finance, (213) 922-2835
Reviewed_By
Reviewed by: Michelle Navarro, Chief Financial Officer (Interim), (213) 922-3056
