CA Remarks January 29, 2018 Draft for Discussion & Policy Purposes Only Governor’s Budget (House 2 FY19): Two key MBTA budget items included 1 • ADDITIONAL STATE ASSISTANCE › $127 million in operating budget support, in combination with $60 million in capital funding that will be included in the FY19 capital budget › Consistent with current budget year (FY18) 2• OUTSIDE SECTION ON CAPITAL EMPLOYEE TRANSFER › MBTA permitted to keep the costs of employees who work on the design and construction of capital projects on the capital budget › Consistent with government accounting standards and with federal reporting requirements for capital labor › Final transfer of remaining capital employees (~$27M annual spend) to operating budget not required for FY19 Draft for Discussion & Policy Purposes Only 2 Executive Summary: Own Source Revenue Update NOVEMBER 2015: Set strategy to maximize own source revenues, reach $100M within 5 years KEY ACHIEVEMENTS TO DATE • New advertising contract: Focus on digital and improved revenue sharing › Includes one of the highest transit advertising revenue shares in the country • New parking contract: New vendor, Republic Parking, took over in 2017 › Enforced terms on previous vendor, LAZ, and received one-time $4M settlement › Future potential for dynamic pricing • Enforce real estate contracts: Collected rent from station tenants and operating funds owed by Massport • South Station Lease: Renegotiated agreement nets MBTA one million dollars in revenue per year FISC AL YEAR 2018: 77% growth in own source revenues projected over 3 years Draft for Discussion & Policy Purposes Only 3 FMCB goal: Deliver a balanced MBTA operating budget Under Section 203 of Chapter 46 of the Acts of 2015, the FMCB may: “Establish 1- and 5-year operating budgets, beginning in fiscal year 2017, which are balanced primarily through a combination of internal cost controls and increased own-source revenues” Draft for Discussion & Policy Purposes Only 4 Own-Source Revenue: Projected to grow by $33M or 77% from FY15 to FY18P* * FY18P comprised of 5 months (Jul – Nov) actual results and 7 months (Dec – Jun) budgeted results ** FY18P Parking revenue excludes one-time LAZ settlement of $4.5M Draft for Discussion & Policy Purposes Only 5 Real Estate: Revenues projected to grow 52% over three years REAL ESTATE FINANCIAL PERFORMANCE KEY ACHIEVEMENTS AND PROJECTS Key Achievements: • South Station Amended and Restated lease generating additional $1M per year • Increasing existing tenant rents to market rate generates an additional $250K per year • Approximately $500K collected through audit and reconciliation of existing portfolio • Increased short term licensing revenue by $300K What’s Next: • Government Center Green & Blue line retail concession leases generating $160K per year once fully implemented • Seven new Bank of America ATM’s generating $195K per year once fully implemented • $100K for North Quincy TOD. This project will generate $244K per year at the completion of phase I and $552K per year at the completion of phase II * FY18P comprised of 5 months (Jul – Nov) actual results and 7 months (Dec – Jun) budgeted results Draft for Discussion & Policy Purposes Only 6 Parking: Revenues projected to grow 87% over three years PARKING FINANCIAL PERFORMANCE KEY ACHIEVEMENTS AND PROJECTS Key Achievements: • $4.5M^ recovered from LAZ parking settlement • New parking vendor contract implemented in 2017 with Republic Parking • Revenues at record highs, and FYTD 18 Republic expenses remain on budget ^ • Completed three surface lot facility reconstructions in Fall 2017 (Montserrat, Campello, and Norwood Central) What’s Next: › Greater facility automation and technology implementation (IT, collection, etc.) › Fees have not been raised since 2008 › Technology allows dynamic pricing options › Continue with capital improvements to transform the customer experience » Quincy Adams and Braintree (South Shore Garages) » Continued surface facility reconstructions * FY18P comprised of 5 months (Jul – Nov) actual results and 7 months (Dec – Jun) budgeted results ^ FY18P Parking revenue excludes one-time LAZ settlement of $4.5M Draft for Discussion & Policy Purposes Only 7 Advertising: Revenues projected to grow 71% over three years ADVERTISING FINANCIAL PERFORMANCE KEY ACHIEVEMENTS AND PROJECTS Key Achievements: • New advertising contract implemented in 2016 with Outfront Media › Includes one of the highest transit advertising revenue shares in the country › Focus on digital media, with 700 panels to be installed by December 2018 (~$10M+ in capital at no cost to MBTA) › 225 digital panels (in-station and urban) installed to date at no cost to MBTA › Digital currently accounts for over 30% of revenue and growing › New analog formats like Ultra Super King (bus and train wraps) introduced • FY18 monthly revenues are at historic peaks What’s Next: › Implementation of revised advertising policy (out in market) › Continue build-out of digital advertising network › Aggressively pursue market-leading terms for other advertising programs (billboards, bus shelters) * FY18P comprised of 5 months (Jul – Nov) actual results and 7 months (Dec – Jun) budgeted results Draft for Discussion & Policy Purposes Only 8 Advertising: Digital panels provide MBTA customers with service updates MBTA can update digital panels across system to share critical information and updates for riders Draft for Discussion & Policy Purposes Only 9 Fare Revenue: 10% Growth from FY15 – FY18 FARE FINANCIAL PERFORMANCE KEY ACHIEVEMENTS AND PROJECTS Key Achievements: • Fare increase at beginning of FY17 contributed to revenue increase • Corporate Pass Program subscriptions continue to grow (revenue +16% FY15-18P) • Commuter Rail revenue is strong (+21% FY15-18P), especially mTicket • Non-subscription sales show less growth What’s Next: • Staff exploring ways to market and further improve the Corporate Pass program • Staff examining new fare products and sales channels as we look towards AFC2 • Continued commitment to State of Good Repair investment in order to improve service * FY18P comprised of 6 months (Jul17 – Dec17) actual results and 6 months (Jan18 – Jun) projected results Draft for Discussion & Policy Purposes Only 10