Capital Metro’s outlook improves heading into new fiscal year

Last summer, Capital Metro strongly signaled it was in for a rough fiscal 2012 when directors approved the agency’s budget. Austin’s transit agency faced an aging bus fleet, dwindling reserves and expenses that were driving up the cost of the MetroRail line.

 

A year later, interim Chief Financial Officer Billy Hamilton can say the agency is going into the fiscal year that starts Oct. 1 with better-than-expected sales tax revenues and a bit more money in the bank.

 

On Wednesday, Hamilton presented a budget overview to Capital Metro’s board of directors, which in September will vote on whether to approve it.

 

The pending $264 million fiscal 2013 budget includes an additional $35 million in spending. Grants to implement MetroRapid buses added to that total, as well as a bump of $10 million in sales tax revenues from last year.

 

“We’re really in a much better position at the end of 2012 than we anticipated, mainly because of lower fuels and the fact sales taxes have been booming,” Hamilton said. “A lot of people were worried about the national and the world economy, but it doesn’t seem to have done anything yet to us.”

 

The $26.3 million in reserve funds is nothing like the pre-rail halcyon days at Capital Metro, but it is an increase of $5.4 million from last year. The agency also use old grant funds in place of newer federal grants, the result of what Hamilton called a combination of “good luck” and “good fortune.”

 

Capital Metro also had some gains in forecasting and planning, Hamilton said. For the first time, the transit agency has a long-term strategy to replace its aging bus fleet, albeit through loans. The agency also has a long-term financial plan, which gives Hamilton more certainty about the future and the ability to map out capital outlays, which will amount to $63 million.

 

Capital Metro came into the year with two strikes against it: spending large chunks of its reserve at a time that sales tax revenues had cratered. Hamilton said steady ridership and a bump in sales tax revenue moved the agency forward.

 

“We’re making really good progress, but it’s slow and steady,” Hamilton said. “You don’t break a leg and then run a marathon a month later. We’re probably going to be in the zone where we really need to be (financially) in 2014, 2015.”

 

Capital Metro will see savings by shifting its personnel contracting and eliminating Star Tran Inc., the private entity that acts as the authority’s agent in managing its unionized workforce. But that won’t happen this year, Hamilton said. The transition from one system to another made any financial gains this year a wash.

 

An audit from the Comptroller’s office predicted tens of millions in savings by eliminating Star Tran, Hamilton said long-term savings of $20 to $30 million will take some time to materialize.

 

“With all due respect to those the people at my former job, they were estimating the savings based on a set of fairly simple assumptions,” said Hamilton, who is the comptroller’s former chief deputy. “They basically assumed the world was easier and less populated with people in the sense, that you can immediately throw everybody out at Star Tran, and you’d save a lot of money.”

 

That’s not how the world works, nor should it work that way, Hamilton said. Eventually, contracting costs will go down from 4 percent of the overall budget to 1 percent of the budget, once the labor structure is in place.

 

“Early on, you’re not going to see much, but it will get better with each year that goes by,” Hamilton said. “In 2014-15, the outlook will look much better because we’ll start to see some savings.”

 

A big chunk of the agency’s capital budget this year will be used to implement the new MetroRapid buses. Additional projects include relocating track at the Saltillo plaza, replacing a bridge, making bus stops handicapped accessible and implementing a multitude of technology upgrades. Funding for the projects will come from a mix of $27 million in local funding and $36 million in grants.

 

A budget hearing for Capital Metro is slated for Sept. 17, with the full board expected to vote on the budget on Sept. 24.