Our 2009 budget and capital plan was released to the media over the weekend, and it’s resulted in some prominent news stories today. I thought we’d take a little time to talk about the highlights and answer some questions you might have. Here’s the official press release  that was sent out, if you’d like to read it as well.
What the budget and capital plan mean for 2009
The budget and capital plan outline what we’ll be spending in 2009, and just what projects we’re planning to spend on next year.
We’ve adopted a $1.3 billion budget for 2009, which delivers on projects we committed to in the 2005–2007 Three-Year Plan and 10-Year Outlook .
The 2009 Capital Plan will invest nearly $28 million to add seven more cars to the West Coast Express by September of 2010, to meet ever-growing demand for service.
The budget also forecasts a gap of $103 million between revenues and expenditures that TransLink will cover from its reserve. The reserve was created over the last four years to sustain road and transit expansion and operations while TransLink seeks additional funding. There will be $268 million remaining in the reserve at the end of 2009.
Major projects will be delivered in 2009
It’s a big year for us in 2009, what with many major projects reaching completion. So the budget and capital plan will stay the course from past years and support the delivery of the following major projects:
- Opening the Canada Line rapid transit service linking Richmond the Airport to and downtown Vancouver
- Opening the new Golden Ears Bridge between Langley Township/ Surrey and Pitt Meadows/Maple Ridge
- Adding 48 more SkyTrain cars to the current Expo and Millennium Lines
- Launching the third SeaBus serving North Vancouver
- Increasing the bus fleet by 129 more vehicles, including more trolleys and new electric/diesel hybrids, and replacing 220 buses
Where our funds will be going in 2009
Here are the specific funding commitments that we’ve made for 2009:
- $781 million for transit service including the launch of the Canada Line, the third SeaBus, increases to the conventional bus fleet as well as improved HandyDART custom transit services for the disabled
- $33 million to municipalities to operate and maintain major arterial roads in TransLink’s Major Road Network
- $81 million in funding for municipalities to support TransLink’s 2009 contribution toward major new road projects:
– $11 million for the next phase of the Fraser Highway Widening project
– $21 million for the Coast Meridian Overpass in Port Coquitlam
– $2.5 million in cost sharing for bicycle infrastructure projects
– $3 million toward preliminary work on the Roberts Bank Rail Corridor
– $4 million toward work on the Murray-Clark Connector in Port Moody
– $40 million in cost sharing for Major Road Network improvement projects
- $28 million for the Transit Police, an increase of almost $5 million, which will fund new programs and an estimated 15 more officers.
- $55 million for TransLink’s functions, including financial and transportation planning and the management of capital projects to expand and improve the road and transit networks. This is a slight reduction over the 2008 budget.
Our revenues for 2009
TransLink’s 2009 budget will see total revenues increase by $167 million to $1.176 billion.
- $27 million more in transit revenue from higher ridership and increased advertising revenue
- $13 million from tolls, due to be collected beginning in August on the Golden Ears Bridge
- $8 million in additional property tax revenue. The increase is due to growth in the number of properties and a rate increase of between 1.5 per cent and a two per cent as permitted by legislation
- Fuel tax revenue is projected to fall by $3 million due to a decline in diesel fuel sales
- Parking sales tax revenue will rise by $4 million as a result of favourable adjustments by the provincial government
In 2009, TransLink will collect an $18 million ‘replacement tax’ on properties that was authorized when the provincial government discontinued the Parking Site Tax at the end of 2007. While the full amount of this replacement tax was budgeted for 2008, TransLink opted to collect only $9 million.
Wait, wait, wait. Let’s back up a minute. Did you say we have a $103 million deficit in this budget?
Yes. Here it is again, in case you missed it:
The budget forecasts a gap of $103 million between revenues and expenditures that TransLink will cover from its reserve. These reserves were developed over the last four years to sustain road and transit expansion and operations while TransLink seeks additional funding. There will be $268 million remaining in the reserves at the end of 2009.
And I’m going to crib the rest of my answer from my earlier blog post on our quarterly financial report .
We’re committed to expanding transit capacity and delivering better service to our customers. But since 2005, we’ve known that our future budgets will be unable to keep up with the services we’re offering.
We’ve had a lot of great support from the federal and provincial governments to pay for capital costs—buying buses and building train systems and so forth—but the enormous costs of operating the system fall solely to us.
Operating expenses such as wages, fuel and parts account for the majority of the lifecycle cost of running a bus, with capital costs accounting for about 10 per cent. But the support from senior governments has helped immensely in renewing and expanding the fleet and we are very grateful for the help.
Without new sources of revenue, or increases to the sources we already use such as fares, fuel tax or property taxes, TransLink is expecting to start drawing into its $400 million reserve fund starting in 2009. By 2010, we’re expecting a shortfall of $145 million. Then by 2011, we will have used up all of our reserves and we will have to start cutting service.
We don’t want to cut service – not only do we want to continue providing our region with good public transportation, it also puts us in a destructive cycle that could see much more service clawed back really quickly. (Reduced transit service means reduced revenues, which means more reduced transit service, and so on and so forth.)
But TransLink has already raised executive salaries! Can’t you cut back your own budget to address the deficit?
Let me assure you that belts are definitely tightening around here in anticipation of the deficits – we are putting tight controls on spending and are trying to make more happen with less.
As to the discussion on salaries, we should provide some context to those salary increases. TransLink media spokesperson Ken Hardie wrote a full response to the outcry that we published here on the blog .
Among his comments are that many good staff have been ‘poached’ by municipalities and other agencies, and that these people led programs that resulted in a massive transit expansion that now offers 1.1 million more hours of service per year and delivers 68 million more rides per year than it did in 2002. They are now managing bigger and more complex initiatives to improve the transportation system, and the increased salaries reflect the increasing challenges of their jobs.
What is TransLink doing about the future deficits?
Well, we’ve already taken some action. Foresight from our financial team in 2005 prompted us to create the reserve fund, which lets us continue the expanded service demanded by our region until at least 2011.
But now, we’re trying to find more revenue sources to shore up the system and keep service going. As outlined, to maintain the transit system at the status quo, we need an extra $150 million every year. If we want to expand the system, we need an extra $500 million annually. So, needless to say, we’ll be doing a lot of public outreach on this issue in the coming year.
As well, if you want more background on the financial challenges we will face in the future, as well as the transportation challenges that we have identified for the next 30 years, please check out this backgrounder on our long-term plans .