2023 Annual Comprehensive Financial Report

2023

Paul A. Koomar, 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 Annual Comprehensive Financial Report (Annual Report) of the Greater Cleveland Regional Transit Authority (“GCRTA” or “Authority”) for the years ended December 31, 2023, and 2022. This is the thirty-sixth such report issued by GCRTA. In the first year, there was no Government Finance Officers Association (GFOA) Certification. It has become the standard format used in presenting the results of the Authority'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 controls that has been established for this purpose. Because the cost of internal controls 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.

Keith Faber, Auditor of State of Ohio, has issued an unmodified opinion on the Authority’s financial statements for the years ended December 31, 2023, and 2022. 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 Authority. 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. The 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 Annual Comprehensive Financial Reports earned the recognition of the GFOA in the form of its Certificate of Achievement for Excellence in Financial Reporting. This award evidences the fact that the previous annual reports 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 Authority 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 (“GCRTA” or “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 Authority 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 Authority. Four of the members are appointed by the Mayor of Cleveland with the consent of the City Council; three members, one of whom must reside in the City of Cleveland, are appointed by the Cuyahoga 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 Authority is considered to be a jointly governed organization.

Responsibility for the line administration rests with India L. Birdsong Terry, General Manager/Chief Executive Officer (CEO). She supervises six Deputy General Managers who head the Operations, Finance, Engineering & Project Management, Legal Affairs, Human Resources, and Administration & External Affairs divisions. 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 Authority had 2,091 employees as of December 31, 2023. The system delivered 17.7 million revenue miles of bus service and 4.1 million revenue miles on its heavy and light rail systems. The active service fleet was composed of 311 bus coaches, 39 heavy rail cars, 29 light rail cars, and 80 Paratransit vehicles.

The annual cash-basis operating budget is proposed by management, at the division and department levels, 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 inter-divisional 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 Authority 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 Authority'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 1.2 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 2023 were in the following industries:

Healthcare/Education
Professional/Business services
Government
Insurance
Trade/Transportation/Utilities

Real property, consisting of agricultural, commercial, industrial, and residential real property is reappraised every six years. The current assessed value is estimated to be $35.4 billion. This process is the foundation for property taxation, and it sets the debt limitation for the Authority.

CURRENT YEAR REVIEW

As an essential service, GCRTA provided a vital public service that connected customers to medical appointments, pharmacies, grocery stores, and essential jobs. The Authority continued its pursuit to provide Greater Clevelanders with unparalleled connectivity, along with high quality service design and delivery.

This included:

The Board of Trustees approved the purchase of 30 new rail vehicles, beginning the process of replacing our nearly 40-year-old rail fleet.
The Waterfront rail line reopened after a lengthy rehabilitation project to repair and strengthen a bridge.
Conducted customer experience surveys.
Started a Civilian Oversight Committee to proactively improve the relationship between the community and the Transit Police.
Started a Community Advisory Committee to review, monitor and recommend service program improvements to GCRTA.
Launched a second Micro Transit program that connects people from GCRTA stops to the front door of their workplace.

During 2023, GCRTA:

Was awarded a $130M grant under the Infrastructure Investment and Jobs Act (IIJA) to assist in the replacement of our aging rail cars.
Continued to replace buses as outlined in the Authority’s Bus Improvement Plan, replacing older diesel buses with compressed natural gas (CNG) fueled buses.
Awarded numerous grants, for CNG buses and various infrastructure projects.
Received the Ohio Auditor of State Award with Distinction. This award was presented for excellence in financial reporting relating to the Annual Comprehensive Financial Report and compliance with applicable laws for the fiscal year ended December 31, 2022.
Received the Certificate of Achievement for Excellence in Financial Reporting from the GFOA.
Received the Distinguished Budget Presentation Award from the GFOA.

PRESENT AND FUTURE PLANS

Present and future plans include:

Continue planning for the Railcar replacement and related rail infrastructure improvements.
Executing plans to replace buses and trains that have exceeded their useful lives.
Completing work on the 25Connects project, which focuses on the future of the West 25th Street corridor.

CAPITAL IMPROVEMENT PLAN

The development of the 2024 budget included the 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 2028. Totaling $686.80 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 Car Program - $125.49 million

This project is to replace the aging fleet of the heavy and light railcars along with rail infrastructure modifications for the new fleet.

Rail Projects - $175.22 million

This commitment of funds includes the replacement/improvements of several substations, rail station and track rehabilitation, electrical systems upgrades, and train control signals.

Bus Improvement Program, Equipment & Vehicles - $207.32 million

This project continues to replace buses as part of the Bus Improvement Plan by replacing buses and other vehicles that have exceeded their useful life, as defined by the Federal Transit Administration (FTA). This category also includes the plan to repair or replace aging infrastructure at the bus garages.

Facility Improvements and Bridge Rehabilitation - $88.54 million

Funding has been committed for facility improvements along with the rehabilitation of track bridges, which includes State of Good Repair projects.

Preventive Maintenance and Operating Reimbursements - $26.99 million

Certain operating costs are budgeted as capital items as designated by the FTA or the State government to be incurred over the next several years and are reimbursable by the Federal and State governments.

Other Projects and Local Capital Projects - $63.24 million

Other projects include various transportation studies depending upon the availability of grant funds. Local 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 annual allocations of sales tax receipts.

OTHER INFORMATION

Certificate of Achievement for Financial Reporting

It is management's intention to submit this and future Annual Comprehensive Financial Reports 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.

Acknowledgments

The GCRTA expresses thanks to the staff of the Accounting Department directed by John Togher for their work in preparing this report. Michael So, Megan Cornelius, Zardik Haruthunian, Marianne Hodges, Joshua Klabik, Tyrone Lampkin, Ibrahim Masoud, and Kiara Scarver assisted with this report. In addition, appreciation goes out to the Cuyahoga County Fiscal Officer for providing supporting demographics and other statistics.

India L. Birdsong Terry
General Manager and CEO

Rajan D. Gautam, CPA
Deputy General Manager, Finance
Secretary-Treasurer