Adopting New Business Models
The endurance of the national recession continued to impact the regional economy in FY 2010. The downward trend in spending and related unemployment affected both sales tax revenue and passenger fares.
In Spring 2010, DART asked two independent economists, to re-examine sales tax projections supporting the agency's 20-year Financial Plan.
An analysis showed that despite an eight percent growth in population, DART sales tax receipts had not increased over the last decade. Coupled with changing demographics and growth outside the DART Service Area, the agency is in a long-term limited revenue growth phase.
Trimming the Budget
"The paradox is that DART will have to grow bigger and get smaller simultaneously," says Leininger. "Fiscal Year 2011 is a time of major transition that requires a profound, fundamental change to the agency's business model, affecting all aspects of DART's expenditures: operating, capital, and debt service."
Agency officials conducted a comprehensive review of its operations, administrative and future capital expenses based on the new projections.
A revised 2030 Transit System Plan includes the following measures:
- Deferring construction of future capital projects
- Widening light rail headways
- Restructuring bus routes to match lower ridership demand
- Reducing the workforce through programmed vacancies, normal attrition, early retirements, and a planned reduction in force
Issuing Debt for Future Growth
Instead of issuing $400 million in debt in FY 2011 and FY 2012 respectively, the agency accelerated the entire sale to take advantage of the interest-rate subsidy for the BABs program before it expired at the end of 2010.
"We were able to get an excellent long-term interest rate of 3.27 percent by issuing the bond package through the BABs program," says Leininger, "and DART will save approximately $200 million in interest as a result."
In preparation for this offering, DART earned a AA-plus rating from Standard & Poor's and an Aa2 rating from Moody's Investors Service.
Sales Tax Receipts Comparison by Financial PlanRevised projections for the next 20 years suggest a slower rate of growth in revenues from the DART sales tax.
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