Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
MARCH 17, 2021
Subject
SUBJECT: FISCAL YEAR 2022 BUDGET DEVELOPMENT PROCESS UPDATE
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE the Fiscal Year 2022 (FY22) Budget Development Process Update
Issue
ISSUE
This report is the second in a series of monthly budget development updates leading to the FY22 Budget adoption for Board consideration in May 2021. The previous month laid the framework for the annual budget development. This report focuses on the preliminary budgets developed within that framework for the Transportation Infrastructure Development (TID) and Regional Rail Programs. Included in the TID Program are the Transit Expansion and Highway projects identified in the Measure R (MR) and Measure M (MM) Ordinances. This report also provides an update on the public outreach.
Discussion
DISCUSSION
The Transportation Infrastructure Development Program consists of new transit and highway projects listed in the MR and MM Ordinances. These project developments are divided into planning and construction phases, and the annual budget request reflects the annual increments of the project development phase. Starting with a feasibility study, alternatives analyses, the planning phase typically culminates in environmental clearance. Before major construction phase continues, the multiyear life-of-project (LOP) budget is adopted for each project through a separate board action. The annual budget monitors the cashflow requirement for the activities in each project phase, while considering the existing level of board authorization, respective project delivery schedule, and identified eligible and available funding sources from Federal/State/Local grants, sales taxes and financing.
For fiscal year 2022, the preliminary budget for combined TID and Regional Rail programs is $3.1 billion, an increase of $616.8 million or 25% from fiscal year 2021. The biggest factor for this increase can be attributed to a handful of projects moving into construction phase, the costliest phase of project delivery. As all projects in the TID program have dedicated funding streams through MR and MM, Metro leveraged these local funding sources to secure grants and additional federal and state funds. Debt and other financing options may be considered if needed. Separate board actions are required for issuance of new debt.
The preliminary FY22 TID and Regional Rail Program is reported under three major groups:
1) Transit Expansion: includes Light Rail, Heavy Rail, Bus Rapid Transit Construction and early planning efforts before construction;
2) Highways: includes the front-end planning, preliminary engineering and project implementation support for Highway Improvement as approved in MM, MR, as well as non-MR/ MM highway related projects;
3) Regional Rail: includes Metro Regional Rail projects and Metrolink Operations / Capital Program funding.
1) Transit Expansion
Metro continues to expand LA County’s transit network, and a full slate of transformational projects are advancing in the construction and planning pipelines across multiple years. The cash flow needs for Transit Construction in FY22 is proposed at $2.3 billion.
The Transit Planning budget of $148.9 million encompasses the first decade and beyond of Measure R and Measure M Projects per Ordinance. These studies advance transit projects through the early conceptual planning and environmental clearance stages to a state of readiness for future construction activities. In doing so, Metro leverages MR and MM funds to maximize the potential for additional funding sources.
D (Purple) Line Extension
This includes three sections of the subway extension westward from the current terminus of Wilshire / Western station, and the Division 20 Portal Widening which facilitates the headway requirements for the entire D Line, taking into account the shared trunk between Union Station and 7th/Metro. The FY22 preliminary budget of $1.3 billion supports the continued advancement of tunneling and station construction activities along the 9.1-mile extension. Section 3, in addition to the tunneling, will continue with its final design and advanced utility relocation. The Revenue Service Dates for Sections 1, 2, and 3 are 2023, 2025, and 2027, respectively. Portal widening project will continue with its site work and systems component in Downtown LA near the Arts District.
Regional Connector
The Regional Connector FY22 preliminary budget of $235.5 million supports station construction and tunneling activities within the 1.9-mile alignment in Downtown LA. Overall project completion is 74% with a planned Revenue Service Date in 2022 (Summer/Fall).
Crenshaw/LAX
The Crenshaw/LAX FY22 preliminary budget of $128.3 million are for critical systems integration testing and Pre-Revenue Operational activities within the 8.5-mile alignment from Crenshaw/Expo to LAX. Overall project completion is 98% with a planned Substantial Completion Date in 2021.
L (Gold) Line Foothill Extension 2A & 2B
The Gold Line Foothill Extension preliminary budget of $185.8 million supports improvements to Azusa Depot, final design effort, heavy construction activities beyond Azusa. A targeted Substantial Completion is planned for 2025.
Other Significant Transit Projects
The L (Orange) Line BRT Improvements FY22 preliminary budget of $12.4 million supports right-of-way acquisitions, final design and advanced utility relocations in the San Fernando Valley.
The East San Fernando Valley LRT FY22 preliminary budget of $257.3 million supports right-of-way acquisitions and advanced utility relocations.
The Airport Metro Connector FY22 preliminary budget of $143.5 million supports construction activities to connect the Crenshaw/LAX LRT to LAX at Aviation and 96th street.
Planning Studies for Measure R and Measure M Transit Projects
The Planning Studies FY22 preliminary budget of $148.9 million encompasses the first decade and beyond of MR and MM projects. This includes but is not limited to conceptual engineering, environmental clearance, and right-of-way acquisition. Some highlights include the Sepulveda Corridor project which embarks on predevelopment work to explore monorail and heavy rail concepts, and the West Santa Ana Branch Corridor project for continued Private Public Partnership developments. Completion of the planning phase of projects supports a state of readiness to advance the project into construction.
2) Highways
The Highway Program continues to grow year over year as a variety of projects enter construction phases. The Highway Program is different from the Transit Construction Program in that completed projects represent non-Metro owned capital assets despite similarities in delivery and construction phases. For most Highway projects, Metro oversees the planning and early engineering phases, then transfers the project over to Caltrans to execute right-of-way acquisitions and construction. Upon completion, Highway projects are capitalized as a Caltrans asset with Caltrans assuming primary responsibility for operations and maintenance.
The total Highway Program FY22 preliminary budget is $479.5 million, representing a $215.1 million or 81% increase from the FY21 adopted budget of $264.4 million (Figure 3), primarily due to construction activities projected for I-5 North Capacity Enhancements, I-605 Hot Spots, and SR-57 / SR-60 Interchange Improvements.
The preliminary Highway budget is largely comprised of the MR/MM funded projects and includes funding for the Sub-Regional Highway Program. A semi-annual report is also provided by Metro’s Highway Department to update the Board on the status of Sub-Regional Highway Projects.
3) Regional Rail
Metro’s Regional Rail program consists of Metro’s Operating and Capital support of the Metrolink commuter rail system as well as Metro managed regional rail capital expansion, development, construction, and corridor studies as shown in Figure 4.
Metro Regional Rail - Overview
Metro is responsible for overseeing the planning, programming and implementation of commuter rail projects in LA County that are or will be operated by other agencies such as Southern California Regional Rail Authority (Metrolink), Amtrak, California High Speed Rail Authority, and freight carriers. Metro also manages and coordinates capital improvement projects along approximately 150 miles of Metro owned and Metrolink operated railroad right-of-way.
Metro Regional Rail - Capital Improvements
The LINK US project at Los Angeles Union Station (LAUS) will expand the overall capacity and operational efficiency of LAUS for rail operations. The FY22 budget is driven by the anticipated procurement of the Construction Manager / General Contractor (CMGC) contract and ongoing acquisition of real estate parcels. Other major activities include the start of construction for the Rosecrans/Marquardt grade crossing project (the State of California’s top priority grade crossing separation project), and final design for the Brighton to Roxford double tracking project in the east San Fernando Valley. The Regional Rail group also supports a study to assess the feasibility of high-speed rail service from Palmdale via the High Desert Corridor to the Southern California terminus of the privately-funded high-speed rail line to Las Vegas.
Metrolink Commuter Rail
At the time of this report, Metrolink is developing their FY22 operating and capital budget. An update will be included in later monthly report to the Board.
FY2022 Budget Outreach Update
The FY22 Budget Outreach process is well underway with the first of several eblasts sent at the beginning of February to over 375,000 subscribers that directed them to the Metro.net/myvoice page. As of February 26, 2021, more than 8,000 responses to the budget questionnaire and 500 comments have been received. The responses and comments provide insight into customers transportation priorities and feedback to enhance the budget decision making process and promote equity, transparency, and accountability.
Staff will continue to partner with the Marketing and Communications teams in moving forward with engagement and education of the FY22 Budget and solicit input from the customers and stakeholders via budget briefings, community meetings, the Public Hearing, and public comments from Metro’s email comment line to ensure the greatest level of awareness about the budget and engagement possible.
The legally required public budget hearing scheduled on May 19, 2021, will culminate the public outreach process with final adoption of the FY22 budget slated for May 27, 2021. Staff will continue to provide monthly updates on the FY22 Budget Outreach activities.
Financial_Impact
FINANCIAL IMPACT
The assumptions described above are the budget planning parameters that will guide the development of the FY22 Budget. The preliminary budgets may be adjusted as more specific and updated information becomes available.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Recommendation supports the following Metro Strategic Plan Goal:
Goal # 5: Provide responsive, accountable, and trustworthy governance within the Metro Organization.
Next_Steps
NEXT STEPS
Metro staff will continue to develop the FY22 Budget Proposal and provide monthly receive-and-file update reports until board adoption in May 2021.
Prepared_by
Prepared by: Marie Kim, Deputy Executive Officer, Finance, (213) 418 - 3472
Robert Gutierrez, Senior Director, Finance, (213) 922-4496
OMB TEAM
Reviewed_By
Reviewed by: Nalini Ahuja, Chief Financial Officer, (213) 922-3088
