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Dennis M. Clough, President, and Members, Board of Trustees, Greater Cleveland Regional Transit Authority, and Residents of Cuyahoga County, Ohio:
It is a pleasure to submit to you the Comprehensive Annual Financial Report (CAFR) of the Greater Cleveland Regional Transit Authority (“GCRTA” or “Authority”) for the year ended December 31, 2017. This is the thirtieth such report issued by GCRTA. In the first year, there was no GFOA certification. It has become the standard format used in presenting the results of the GCRTA's operations, financial position, cash flows and related statistical information.
Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.
Dave Yost, Auditor of State of Ohio, has issued an unmodified opinion on the GCRTA’s financial statements for the year ended December 31, 2017. The Independent Auditor’s Report is located at the front of the financial section of this report.
GCRTA also participates in the federal single audit program, which consists of a single audit of all federally funded programs administered by the GCRTA. As a requirement for continued funding eligibility, participation in the single audit program is mandatory for most local governments, including GCRTA.
Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it.
GCRTA takes great pride in the fact that each of the previously issued Comprehensive Annual Financial Reports earned the recognition of the Government Finance Officers Association (“GFOA”) in the form of its Certificate of Achievement for Excellence in Financial Reporting. This award evidences the fact that the previous CAFRs complied with stringent GFOA standards for professional financial reporting. GCRTA was the first public transit agency in Ohio to earn this important recognition and has consistently done so since 1988.
The GCRTA also submits its annual operating and capital budgets to the GFOA and has been doing so since 1990. Each of these budget documents has won the Distinguished Budget Presentation Award, having satisfied the most stringent program criteria and proven its value as (1) a policy document, (2) an operations guide, (3) a financial plan, and (4) a communication device.
PROFILE OF GOVERNMENT AND REPORTING ENTITY
The Greater Cleveland Regional Transit Authority is an independent political subdivision of the State of Ohio. It was created in December 1974 by ordinance of the City of Cleveland, Ohio, and by resolution of the Board of County Commissioners of Cuyahoga County, Ohio. Operations at GCRTA began in September 1975. The GCRTA provides virtually all mass transportation within the County. It is a multimodal system delivering bus, paratransit, heavy rail, light rail and bus rapid transit services.
A ten-member Board of Trustees (Board) establishes policy and sets direction for the management of the GCRTA. Four of the members are appointed by the Mayor of Cleveland with the consent of City Council; three members, one of whom must reside in the City of Cleveland, are appointed by the County Executive; the remaining three members are elected by suburban mayors, city managers, and township trustees. Board members serve overlapping three-year terms. Under the provisions of General Accounting Standards Board
(“GASB”) Statement No. 61, the GCRTA is considered to be a jointly governed organization.
Responsibility for the line administration rests with the CEO, General Manager/Secretary-Treasurer. He supervises five Deputy General Managers who head the Operations, Legal Affairs, Finance & Administration, Engineering & Project Management and the Human Resources divisions. Additionally, the Office of Management and Budget, Information Technology and the Office of Marketing and Communications function outside of the divisional configuration and report directly to the General Manager. The Internal Audit
Department reports to the Board of Trustees and maintains a close working relationship with the General Manager. An organizational chart, which depicts these relationships, follows later in this introductory section.
The GCRTA had 2,196 employees as of December 31, 2017. The system delivered 13.4 million revenue miles of bus service and 3.3 million revenue miles on its heavy and light rail systems. The service fleet was composed of 402 motor bus coaches, 40 heavy rail cars, 48 light rail cars, and 170 Paratransit vehicles.
The annual cash-basis operating budget is proposed by management, at the department level, and adopted by the Board of Trustees after public discussion. The budget for each division and department is represented by appropriation. The Board must approve any increase in the total Authority appropriations. The General Manager must approve any interdivisional budget transfers. The appropriate Deputy General Manager may modify
appropriations to applicable departments within a division and to accounts within a department.
Budgetary control is maintained at the department level. It is the responsibility of each department to administer its operations in such a manner as to ensure that the use of funds is consistent with the goals and programs authorized by the Board of Trustees. The GCRTA also maintains an encumbrance accounting system for budgetary control. Unencumbered appropriations lapse at year-end. Encumbered appropriation balances are carried forward to the succeeding year and need not be reauthorized.
ECONOMIC CONDITION AND OUTLOOK
The GCRTA's service area is contiguous with the boundaries of Cuyahoga County, Ohio. The County includes the City of Cleveland, two townships, and fifty-six other jurisdictions. This is the largest metropolitan area in Ohio and one of the largest counties in the United States. The population of this area is approximately 1.25 million people.
Historically, the foundation for Greater Cleveland's economic vitality had been heavy industry with the largest employment sector being manufacturing. The largest employment areas in 2017 were in the following industries:
- Healthcare/Education
- Trade/Transportation/Utilities
- Professional/Business services
- Government
- Insurance
Real property, consisting of agricultural, commercial, industrial, and residential real property is reappraised every six years. The current assessed value is estimated to be $27.6 billion. This process is the foundation for property taxation, and it sets the debt limitation for GCRTA.
CURRENT YEAR REVIEW
In 2017, RTA continued its pursuit to provide Greater Clevelanders with unparalleled connectivity, along with high quality service design and delivery.
This included:
- RTA purchasing new buses that will emit fewer greenhouse gases and less nitrous oxide pollution than the current diesel buses while contributing to RTA’s sustainability commitment to the community-at-large.
- RTA launched a new van pool service which is a county-wide service to help customers who do not live on fixed route service. This service, VanShare, is a revenue neutral program.
- RTA began a new partnership with Metro-Health System. Metro-Health bought the naming rights to re-brand the 51 family of routes as bus rapid transit. The new Metro-Health line will offer commuters an upgraded ride on 20 new specifically designed vehicles.
- RTA branded museum stops to make it safer for customers on the Health-line to know which stops to use when they want to visit museums and gardens around the University Circle area.
Due to lower gasoline prices which led to an increase in individual automobile use, RTA experienced a decrease in its system-wide ridership in 2017, delivering 39.61 million passenger trips, a decrease of 9.47%, from 2016. The heavy rail service finished the year by serving 5.9 million customers, a 7.99% decrease from 2016. The light rail service decreased 1.65% to 2.1 million trips. Paratransit showed a 6.5% decline; the HealthLine, a bus rapid transit line the runs along Euclid Avenue connecting the downtown Cleveland to the Louis Stokes Station at Windermere, declined by 6.5%.
During 2017, RTA:
- Received the Partnership for Excellence (Baldridge Award) - Gold Level Certification.
- Received the Smart Business 2017 Customer Service Award
- Received the Campus District 2017 Infrastructure Award – East 34th Street Campus Station
- Received recognition, in “Who’s Who in Northeast Ohio” – CEO and General Manager Joseph Calabrese, for impact on the region
The year 2017 also presented a new challenge: modifications to the Sales & Use Tax went into effect on July 1. Unless the state of Ohio addresses these changes, RTA will lose upward of $20 million in revenue annually. Despite some challenges, we have worked to provide the best possible transit system for the region, and we will continue to do so for years to come.
PRESENT AND FUTURE PLANS
The Authority has continued to implement its Long-Range Plan. This Long-Range Plan serves as a blueprint for building tomorrow’s public transit by addressing shifts in our area’s population and employment centers, as well as changing travel patterns. This plan includes:
Transit Centers - Transit centers are strategically located where bus routes intersect and service is timed to provide easy transferring. Larger centers include indoor waiting areas and concessions. GCRTA has existing Transit Centers at Fairview Park, Euclid, North Olmsted, Maple Heights, Parma Mall and the Stephanie Tubbs Jones center in downtown Cleveland.
Park-N-Ride Lots - Parking lots are strategically located at freeway or other major intersections. Commuters leave their cars and ride express service to and from their destinations. GCRTA provides more than 8,300 parking spaces at 21 of the rapid transit stations. In addition, the Authority operates seven Park-N-Ride lots in Berea, Brecksville, Rocky River, Strongsville, North Olmsted, Euclid and Westlake with more than 1,680 parking spaces combined.
Paratransit Facility – The Paratransit Facility was built in 1983 and houses all Paratransit functions including scheduling, dispatching and both revenue and nonrevenue repairs. In 2014, a propane fueling station was installed at the Paratransit Garage. In 2015, related propane related building enhancements and a 24-month rehabilitation project, including various facilities and equipment upgrades were completed.
CAPITAL IMPROVEMENT PLAN
The development of the 2017 budget included preparation of a five-year Capital Improvement Plan (“CIP”). This document is an outline for rebuilding and expanding services by the Authority through the end of 2021. Totaling $383.92 million, the CIP constitutes a significant public works effort aimed at remaking the transit network and
positioning the Authority, not just for the short-term, but also for the long-term future. Significant capital improvements planned for the five-year period include:
Rail Projects - $95.16 million
This commitment of funds includes the replacement of several substations, stations and track rehabilitation, bridges, train control systems, rail vehicles overhaul, signage and rail expansion. Major significant projects include the rehabilitation of rail stations for $3.4 million, $9.17 million for various track rehabilitation projects, and $7.92 million for substation, electrical, and train signal improvements throughout they system.
Bridge Rehabilitation and Other Facility Improvements - $33.44 million
Funding has been provided for the rehabilitation of track bridges and includes State of Good Repair projects and other facility improvements totaling $12 million.
Bus Purchases, Paratransit Vehicles and Circulator Bus- $106.5 million
The useful life of a standard bus, as defined by the Federal Transit Administration (“FTA”) is twelve years, or five hundred thousand miles. The Authority is aggressively reducing its fleet's average age by replacing its oldest vehicles.
Transit Centers and Shelters and Other - $1.52 million
The Authority will make an investment in the construction of Transit Centers over the next five years of $1.52 million. These centers will be designed to provide our riders with convenient connections between local, regional and downtown transit lines. Comfortable waiting areas and time-coordinated service will make it easier for riders to transfer between routes.
Equipment and Other- $19.54 million
This project calls for the on-going upgrades to the Management Information System throughout the Authority including Data Center, internet development and network improvements.
Local Capital Projects - $27.61 million
Classified as Routine Capital Projects ($8.30 million) and Asset Maintenance Projects ($8.84 million), these initiatives are funded entirely from local resources. Routine Capital Projects are typically equipment requested by various departments and not funded through grants. Asset Maintenance funds are used to maintain, rehabilitate, replace, or construct assets of a smaller scope or cost than those typically supported with grants. These projects are authorized within the Authority's Capital Fund and are supported with the annual allocations of sales tax receipts.
Operating Expenses and Other Expenses - $100.00 million
Certain operating costs are budgeted as capital items as designated by the Federal Transportation Administration (FTA) or the State governemnt to be incurred over the next several years and are reimbursable by the Federal and State governments totaling $100 million. These costs are recorded as operating costs in the enclosed financial statements.
OTHER INFORMATION
Certificate of Achievement for Financial Reporting
It is management's intention to submit this and future CAFRs to the Government Finance Officers Association of the United States and Canada for review under its Certificate of Achievement for Excellence in Financial Reporting Program. We believe the current report conforms to the program requirements, and we expect that participation will result in improvements to our reports in coming years.
Acknowledgements
The GCRTA expresses thanks to the staff of the Accounting Department for their work in preparing this report. Marsha Laney Pettus, David Pfeiffer, John Togher, Michael So, David Reynolds, Zardik Haruthunian, Cora Vlacovsky, and Milton Lagos assisted with this report. In addition, appreciation goes out to the Cuyahoga County Fiscal Officer for providing supporting demographics and other statistics.
Joseph A. Calabrese
Chief Executive Officer
General Manager/
Secretary-Treasurer
Rajan D. Gautam
Deputy General Manager
Finance & Administration