Meeting_Body
BUDGET PUBLIC HEARING
FINANCE, BUDGET, AND AUDIT COMMITTEE
MAY 15, 2025
Subject
SUBJECT: FISCAL YEAR 2026 (FY26) PROPOSED BUDGET
Action
ACTION: APPROVE RECOMMENDATIONS
Heading
RECOMMENDATION
Title
CONSIDER:
A. ADOPTING the proposed FY26 Budget as presented in the budget document (provided in a separate transmittal and posted on metro.net <https://www.metro.net/about/financebudget/>);
1. AUTHORIZING $9.4 billion annual consolidated expenditures to achieve goals and objectives set forth by the Board adopted mission and goals;
2. AUTHORIZING a total of 11,821 FTEs, of which 9,616 are Represented FTEs and 2,205 are Non-Represented FTEs;
3. AUTHORIZING an average 4% performance-based merit increase for Non-Represented employees. The wage increases for Represented employees, in accordance with the pre-negotiated Collective Bargaining Agreements, is an average 4.0%;
4. AUTHORIZING a 5% adjustment to current Non-Represented job pay grade levels to reflect best practice. (see Attachment A);
5. APPROVING the Life of Project (LOP) budgets for new capital projects; new capital projects with LOP exceeding $5.0 million are presented in Attachment B;
6. AMENDING the proposed budget to include any Board approved actions currently under consideration from now to the end of the fiscal year (June 30, 2025);
B. APPROVING the Reimbursement Resolution declaring Metro’s intention to issue debt in FY26 for capital projects, as shown in Attachment C, with the provision that actual debt issuance will require separate Board approval; and
C. RECEIVING AND FILING response to Board Motion 25 - Addressing Rider Feedback from Telephone Hall.
Issue
ISSUE
California Public Utilities Code Section 130105 requires Metro to adopt an annual budget to manage the revenues and expenses of the Agency’s projects and programs. The budget is the legal authorization to obligate and spend funds and to implement Board policy. It includes all operating, capital, planning and programming, subsidy funds, debt service requirements, and general fund activities for the fiscal year. The legal level of control is at the fund level. Total annual expenditures cannot exceed the final appropriation by the Board at the fund level except for capital expenditures, which are authorized on a life of project basis.
On April 30, 2025, the FY26 Proposed Budget was made available to the public at www.metro.net <http://www.metro.net>, in printed copies through the Records Management Center (RMC) at RMC@metro.net <mailto:RMC@metro.net>, and on the plaza level of the Gateway building. The public hearing is scheduled for May 15, 2025. On April 15, 2025, advanced public notifications of the Budget Public Hearing were issued through advertisements posted in more than ten news publications and in various languages.
Background
BACKGROUND
In preparation for the FY26 Budget development process, the Office of Management and Budget (OMB) initiated early engagement by presenting an oral report to the Finance, Budget, and Audit Committee on November 21, 2024. This presentation provided a thorough overview and evaluation of key drivers of Metro Transit cost growth, Transit Infrastructure Development (TID), other programs, revenue assessments, and the forthcoming steps in the budget development process.
Since February 2025, staff have kept the Board, and the public consistently informed on the progress of the FY26 Budget development through an extensive public outreach campaign that was launched in October 2024 with the introduction of the My Metro Budget Activity Tool & Dashboard. Additionally, a Budget Telephone Town Hall was convened on Tuesday, February 4, 2025, to gather public input for incorporation into the budget development process.
Continuing transparency regarding the proposed allocation of public transportation funds, staff has conducted a series of briefings and discussions with Board Staff and key stakeholder groups, including:
• Community Advisory Council
• Regional Service Councils
• Technical Advisory Committee
• Policy Advisory Committee, and
• Accessibility Advisory Committee
For further details, please refer to Attachment D, which provides the Early, Expanded, and Improved Public Outreach Report.
This represents the final series of monthly updates to the Board on the FY26 Budget development process, culminating with the FY26 Budget recommendation for Board Adoption. This report concludes the framework for the annual budget development, with the primary objective of advancing Metro’s transit and transportation goals in a fiscally responsible manner, while embedding an equity-centered approach throughout the process led by the Office of Equity and Race (OER).
Discussion
DISCUSSION
Metro's Commitment to Equity and Fiscal Responsibility
Metro has fostered a culture grounded in equity, fiscal responsibility, and cost containment. As we progress, Metro staff will steadfastly adhere to robust financial planning principles, ensuring the effective execution of both transit capital investments and operational strategies.
The Equitable Zero-Based Budget (EZBB) Process
The Equitable Zero-Based Budget (EZBB) process remains a cornerstone of this year’s annual budget development, serving as a pivotal cost control mechanism while embedding an equity-focused framework to create a fiscally responsible budget. This methodology promotes cross-departmental collaboration, ensuring that all Board approved initiatives are harmonized with the Agency’s strategic priorities.
Public Input and Alignment
By integrating feedback obtained through Metro’s expanded public outreach efforts, each department is empowered to allocate resources in alignment with Metro’s mission, core objectives, and strategic imperatives ensuring that the final budget reflects a shared vision shaped by meaningful public input. Key investments continue to elevate the customer experience-improving station conditions, safety, and cleanliness-while reaffirming Metro’s commitment to keeping transit accessible and affordable for all. Investments include:
• Lighting Retrofit
• Elevator/Escalators
• Mobile ADA Accessible Restrooms
• Tap-To-Exit/Taller Faregates Pilot
Weapons Detection Phase 2 Pilot Metro is focused on putting people first - redefining how we serve our communities through care, connection, and accessibility. That vision is taking shape through a care-based safety and security approach grounded in community values. In FY26, Metro will expand its safety presence by adding 46 Transit Security Officers (TSOs) for the A and D Line extensions, enhanced homeless outreach, and continuing the development of the new the Transit Community Public Safety Department (TCPSD), beginning with key leadership and the foundation for sworn officer recruitment. The proposed FY26 budget does not reflect any expansion of the Ambassador Program at this time, as staff is currently in negotiations with our union partners on the collective bargaining agreement. Upon successful completion of these negotiations, staff will return to the Board to present the finalized agreement, associated costs, and a proposal to expand the program to support staffing needs over the next year.
Capital Development and Infrastructure Growth
Alongside this, Metro is entering a major growth phase in capital development, led by ordinance projects and a significant expansion of the Transit Infrastructure Development (TID) program. These efforts reflect our ongoing commitment to building a safe, inclusive, and world-class transit system for the region.
FY26 Proposed Budget Overview
The proposed budget for FY26, totaling $9.4 billion, is both balanced and strategically oriented. The budget is crafted to sustain the ongoing expansion of the system, elevate the customer experience through enhancements in safety and cleanliness, and preserve assets in a state of good repair. Furthermore, this budget strengthens Metro’s core business operations, encompassing planning, operations, and construction, thereby ensuring the organization is well-positioned to meet the evolving needs of its community while advancing its long-term goals.
Risks and Uncertainties
While the FY26 budget is presented as balanced, there are risks and uncertainties as we look ahead to the coming years.
Metro remains committed to mitigating the key drivers contributing to rising costs, while closely monitoring risks and uncertainties which may affect the Agency in the near-term. These challenges include potential fluctuations in federal funding, the impact of tariffs on procurement pricing, and persistent inflationary pressures. In addition, internal financial considerations such as the expansion of the rail system, rising capital costs, and preparations for the mega events continue to exert pressure on the Agency’s fiscal outlook.
FY26 Budget Summary & Proposed Budget can be accessed at:
<https://budget.metro.net/budget-book.html>
Resources Summary
The FY26 Proposed Budget ensures that resources are available to meet the planned Metro program and project delivery schedules for the upcoming fiscal year. Revenue projections are informed by the following socio-economic factors:
• Uncertainty surrounding tariffs and inflation, impacting overall economic stability
• Rising insurance and housing costs, which constrain consumer spending on taxable goods
• Slowing economic growth projections for FY26
• Insights from leading regional economic forecasting sources
The total FY26 Proposed Budget planned resources are $9.4 billion, which are a 2.0% increase from the FY25 Budget. The 7.4% projected decrease in sales tax revenues is due to the lower than budgeted FY25 year to date actual receipts, reflecting a slowdown in consumer spending.
Figure 1
Figure 2
Expenditure Summary
The proposed budget of $9.4 billion is strategically aligned with the Board's priorities, reflecting the public's feedback on enhancing customer experience and service quality. It emphasizes the provision of reliable daily service and public safety, all through an equity lens. This budget also supports the ongoing expansion of Metro's Transit Infrastructure and addresses the evolving countywide mobility needs. Each program, function, and department's budget has been carefully developed to align with the current economic realities while reflecting the progress made on various projects.
The table below illustrates the expenditures by program type in the FY26 Proposed Budget, providing a detailed breakdown of the allocation of funds across various sectors.
Figure 3
Figure 4
Full-Time Equivalent (FTE) Summary
The FY26 Proposed Budget includes 11,821 FTEs, an increase of 400 FTEs from FY25. FTE additions include 182 Non-Represented (67 are mostly cost-neutral by shifting from temporary to permanent) and 218 Represented (net of Metro Micro transition).
Non-Represented FTEs for FY26 total 2,205; which includes an additional 182 new positions (67 are mostly cost neutral), to serve the following areas:
• Enhance the Transit Rider Experience
• Mega Project Resource Model
• Valuing the Workforce
• Transit Expansion - A and D Line
• Administration, Financial Sustainability, and Legal Compliance
• Operational Efficiencies
• Capital Project Support
• Complete Streets and Highway
Figure 5
Represented FTEs for FY26 total 9,616; which includes 218 new positions (net of Metro Micro transition) for the following:
• Transit Expansion for the A and D Line: cleaning, maintenance, public safety and technology support.
• Increased Operational Needs: System, Station and End of Line Cleaning; Maintenance of Way training; Bus and Rail Fleet Reliability; Paint and Repair of Non-Revenue Fleet and Rail Body; and Zero Emission Bus Fleet oversight.
• Technical Support for Public Safety, inventory management to support agency growth, Employment Processing Center, and Customer Information.
Figure 6
Labor Summary
The FY26 Proposed Budget includes contract wage increases of an average of 4.0% according to the pre-negotiated Collective Bargaining Agreements (CBAs) with the represented union groups AFSCME, ATU, SMART, TCU, and Teamsters. An average 4.0% performance increase is included for non-represented employees which will be distributed on a merit-based system.
Health and welfare benefits for represented employees are determined by their respective CBAs. Non-represented employees receive medical and dental benefits at the carrier contract rates previously approved by the Board.
Non-Represented pay grade levels were last updated by 2.5% in January 2024. To remain competitive with the external market, the Chief People Office will adjust the current compensation pay grade levels by 5.0%. There will be a minimal impact of $136,000 to the budget and current employees’ salaries. Please refer to Attachment A for more details.
Budget Amendments through June 30, 2025
The proposed budget shall include any Board approved actions currently under consideration, from now to the end of the fiscal year (June 30, 2025).
Life of Project (LOP) Budgets
The Board must approve new capital projects with LOP budgets exceeding $5.0 million as separate Board actions.
Attachment B includes a detailed listing of new capital projects for FY26 with LOP budgets over $5.0 million. These new capital projects in the FY26 Proposed Budget include: Metro A Line (Blue) North and E Line (Expo) East Communication Transmission System (CTS); FY26 Non-Revenue Vehicle Equipment Replacement; Metro B (Red) and D Line (Purple) to NOHO CTS Replacement; Advanced Transportation Management System II (ATMS) System Integration; A650 Door and Heating, Ventilation & Air Conditioning (HVAC) Overhaul; FY26 Non-Revenue Vehicle Equipment Expansion; Metro D Line (Purple) Track & Tunnel Intrusion Detection (TTID); High Security Fencing and Installation; Union Station Fencing; Payroll Cloud Integration; Rail Fleet Services (RFS) Wheel Measurement Machine; Logistics Equipment Replacement Phase 2; Union Station Gateway (USG) Plaza and East Portal Floor; Metro Operations Downtown Hub; Tap Plus (Capital); Non-Revenue Fleet Electric Vehicle (EV) Charging; LA Union Station Americans With Disabilities Act (ADA) West; LA Union Station Plumbing Infrastructure Phase 3; LA Union Station Parking Equipment; and LA Union Station Stationwide HVAC Upgrades.
Reimbursement Resolution
Per Federal tax law, bond proceeds can only be used for capital expenditures incurred after the issuance of bonds. Metro must pass a resolution indicating the intent to issue bonds at a later date in order to reimburse expenditures incurred prior to the bond issuance. See Attachment C for Reimbursement Resolution.
Debt Program
Debt financing is a cash management and budget tool Metro uses to help deliver projects. Debt issuance is authorized by applicable state and federal legislation and the local sales tax ordinances. The Board-adopted Debt Policy establishes prudent guidelines for the issuance and management of debt following industry best practices and ordinance-specific affordability limits.
Debt is not an additional source of revenue. It must be paid back with interest using existing and predetermined funding sources, in most cases, local sales tax revenues. However, it is a way to spread out the impact of large spikes in capital costs over multiple years. For this reason, most of Metro’s large projects have been utilized or are expected to use debt financing to facilitate project delivery.
As of July 1, 2025, Metro has approximately $4,542.9 million in outstanding long-term debt. The annual debt service cost in FY26 is estimated at $477.7 million, a decrease of 3.2% over the FY25 Budget of $493.8 million, according to the debt service schedule. In FY26, it is anticipated that the I-105 Express Lanes will utilize TIFIA loan proceeds and other projects such as Westside D Line (Purple) Sections 3, Gold Line Foothill Extension, E Line Eastside Light Rail Phase 2, East San Fernando Transit Corridor, Southeast Gateway Line, Metro G Line Bus Rapid Transit (BRT) Improvements, and various other projects will utilize bond proceeds from the issued debt.
Motion 25: Addressing Rider feedback from Telephone Town Hall
On February 4, 2025, Metro hosted a live Telephone Town Hall (TTH) to gather input from LA County residents on the annual budget. This TTH serves as a forum for gathering public feedback on cleanliness, bus and rail service, and riders’ overall transit experience. The feedback highlighted interest in enhanced lighting for safety, increased cleaning frequency of buses and trains, and better promotion of Small Business Enterprise and Disadvantaged Business Enterprise (SBE/DBE) opportunities, and more. Metro continues to focus efforts in these areas and assures riders and stakeholders that their feedback is valued and shapes the agency's goals and budget.
On February 20, 2025, the Board approved Motion 25, directing Metro to report back in 90 days on how the community feedback is being addressed. Metro's detailed response outlining these actions, promotional efforts, and planned improvements is provided in Attachment E.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
This recommendation will not have an impact on safety standards at Metro.
Financial_Impact
FINANCIAL IMPACT
The FY26 Proposed Budget (provided in a separate submittal) totals $9.4 billion and is balanced. This proposed budget underscores Metro’s steadfast commitment to fulfilling its capital and operational obligations-an essential factor in securing subsidies from both federal and state governments. Moreover, it ensures the effective administration of regional transportation funding to local cities and municipal operators.
Equity_Platform
EQUITY PLATFORM
Metro’s commitment to equity is embedded in the FY26 Budget development process through the continued application of Equity Zero-Based Budgeting (EZBB) and equity assessments to understand and quantify potential impacts on marginalized communities and highlight budget requests that advance equitable outcomes. Staff used the Equity Focus Communities (EFC) Budget Assessment and the Budget Equity Principles Next Step Equity Initiatives Pilot for the FY26 Budget; staff did not apply the Metro Budget Equity Assessment Tool (MBEAT). The Offices of Equity and Race (OER) and Management and Budget (OMB) are working with consultants to complete an Agencywide Budget Equity Assessment (ABEA) to identify opportunities for improvement to the MBEAT and budget equity approach overall. Recommendations from ABEA will be available later this summer and implemented in the FY27 and FY28 Budget development processes.
Per Board Direction, the EFC Budget Assessment was introduced in 2022 for the FY23 Approved Budget. It is a geographic equity analysis to identify the extent that Metro’s budget invests in EFCs, areas in very high and high need of mobility investment, which comprise approximately 40% of Los Angeles County’s population. The FY23 Approved Budget established a baseline of 67.3% EFC Benefits. The FY26 Proposed Budget exceeds this baseline by 11.9 percentage points, increasing EFC Benefits to 79.2% of the budget. This represents roughly $3.1 billion in targeted and $4.8 billion in indirect benefits. Year-over-year fluctuations in Benefits to EFCs in the table below can be attributed to an evolving understanding of how to quantify expenses and major transit projects being developed or coming online. OER and OMB are working on continued improvements to staff training to ensure consistent application over time. See Attachment F for more details on the EFC Budget Assessment, including the results of the EFC Budget Assessment for the FY24 Actuals, completed in December 2024.
Figure 7
Staff also aligned their FY26 department budgets towards Metro’s Budget Equity Principles, using the Next Step Equity Initiatives Pilot, in support of Metro’s Equity Platform. The Pilot was part of the ABEA and sought to engage Metro’s Senior Leadership Team (SLT) in identifying the initiatives that are moving the needle the most on equity at Metro in FY26. All SLT members and their staff established measurable outcomes and identified a point person for each initiative. OER will meet with departments regularly in FY26 to check in on the progress of the initiatives. Highlights from the Pilot are included in Attachment F and summarized on Page 6 of the FY26 Proposed Budget Book.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
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 these 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.
As part of these ongoing efforts, this item is expected to contribute to further reductions in VMT. This item supports Metro’s systemwide strategy to reduce VMT through investment activities that will improve/benefit and further encourage transit ridership, ridesharing, and active transportation. Although projects and programs in this budget have mixed outcomes, taken as a whole, most of the investments described in this report will likely decrease VMT in LA County. Within the suite of projects funded in this budget, Metro seeks to reduce single-occupancy vehicle trips, provide a safe transportation system, and increase accessibility to destinations via transit, cycling, walking, and carpooling. Some of the projects funded include items that will ease congestion for cars and trucks, or expand vehicle capacity, resulting in the possibility of increased VMT. However, the investments Metro is making into programs such as rail, bus, active transportation and shared mobility will result in an overall decrease in VMT. Metro’s Board-adopted VMT reduction targets were designed to build on the success of existing investments, and this item 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.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The annual budget serves as the legal authority to obligate and spend funds. Failure to adopt the budget would severely impact Metro’s goal of improving transportation in Los Angeles County.
Next_Steps
NEXT STEPS
Upon Board authorization and adoption of the FY26 Proposed Budget, Metro will make funds available for the planned transit and transportation programs outlined in the proposed budget document and program funding to regional transit/transportation partnering agencies, cities, and recipients.
Staff will closely monitor the financial situation and provide regular performance updates to the Board.
Attachments
ATTACHMENTS
FY26 Budget Summary & Proposed Budget can be accessed at:
<https://budget.metro.net/budget-book.html>
Attachment A - FY26 Compensation Adjustment
Attachment B - FY26 New Capital Projects
Attachment C - FY26 Reimbursement Resolution
Attachment D - FY26 Public Outreach (Public Comments)
Attachment E - Response to Motion 25: Addressing Rider Feedback from Telephone Town Hall
Attachment F - Metro EFC Budget Assessment Results Over Time
Prepared_by
Prepared by:
Tina Panek, Deputy Executive Officer, Finance (213) 922-4530
Timothy Chin, Deputy Executive Officer, Finance (213) 922-3082
Irene Fine, Deputy Chief Financial Officer (Interim), (213) 922-4420
Michelle Navarro, Deputy Chief Financial Officer (Interim), (213) 922-3056
Reviewed_By
Reviewed by: Nalini Ahuja, Chief Financial Officer, (213) 922-3088
