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George F. Dixon, III, 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, 2009. This is the twenty-second such report issued by GCRTA. It has become the standard format used in presenting the results of the GCRTA's operations, financial position, cash flows and related statistical information.
This report enables the Authority to comply with State law that requires entities reporting on a GAAP (Generally Accepted Accounting Principles) basis to file unaudited basic financial statments with the Auditor of State within 150 days of fiscal year end. This report is submitted to satisfy that requirement for the fiscal year ended December 31, 2009.
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.
Ciuni and Panichi, Inc, Independent Auditors, have issued an unqualified ("clean") opinion on the GCRTA’s financial statements for the year ended December 31, 2009. 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. The North Olmsted and Maple Heights transit systems merged with GCRTA in March 2005 to form a single transit system that will meet the needs
of the public in Cuyahoga County. It is a multimodal system delivering bus, paratransit, heavy rail and light rail 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 Commissioners; 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. 14, 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 and the Office of External Affairs 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 2,374 employees as of December 31, 2009. The system delivered 17.1 million revenue miles of bus service and 2.6 million revenue miles on its heavy and light rail systems. The service fleet was composed of 506 motor bus coaches, 60 heavy rail cars, 48 light rail cars, and 129 demand responsive 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 appropriations. 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 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 1.3 million people.
Historically, the foundation for Greater Cleveland's economic vitality has been heavy industry with the largest employment sector being manufacturing. Since 2000, manufacturing employment has dropped significantly from 16.0% of the total workforce to 9.6%, while wholesale and retail trade has significantly decreased from 23.6% since 2000 to 14.1% in 2009. The professional and related services sector work force has steadily grown from 32.9% of the total workforce since 2000 to the present rate of 46.4%, of the workforce. Our local economy continues to take a big hit, resulting in more of our workforce being unemployed. The County's 2009 unemployment was 9.0%, compared to the national rate of 10.0%.
During 2009, the County Auditor completed the required reappraisal valuation of all commercial, industrial, and residential real property. This is the most recent valuation available. This process is the foundation for property taxation, and it sets the debt limitation for GCRTA. This appraisal valuation is currently at $31.5 billion.
CURRENT YEAR REVIEW
In 2009, GCRTA experienced the worst recession in decades, high unemployment, and a substantial drop in funding. In response, GCRTA initiated a number of maneuvers to better its position by cutting overhead and indirect expenses, but in the end, was force to reduce salaries, eliminate positions, raise fares, and cut valued transit services to its customers. Nearly every segment of our society from coast to coast, especially municipalities and transit agencies that rely on revenues generated from sales taxes, payroll taxes and property taxes were effected. For the first time in seven years, there was less demand for GCRTA services when work related trips, which historically represented over 60% of all GCRTA destinations, were impacted as unemployment increased.
In addition, GCRTA’s revenues dropped over $25 million in 2009 from reductions in sales tax receipts, passenger fares, and on-going reductions in funding from the State of Ohio. Unfortunately, it is not predicted that any turnaround in the economy will dramatically change this new financial reality for several years.
On a positive note, the American Resource and Recovery Act (ARRA), designed to stimulate our economy and create jobs, provided a needed boost to GCRTA’s capital program. With the vast majority of the funding designated for “bricks and mortar” projects, GCRTA was able to move ahead with the groundbreaking of several important construction projects such as the Stephanie Tubbs Jones Transit Center, the Puritas and E. 55th Street Rd Line Rail Stations, the design of the Brookpark Red Line Station, and the Clifton Blvd. Transit Enhancement Project. An amendment to this act later allowed GCRTA to use a portion of the funding to preserve 57 bus operator positions to the joy of our employees and the customers they serve.
Throughout 2009, GCRTA once again proved it is an industry leader though programs to enhance the safety and quality of its public transit service with ways to reduce the cost of service delivery. With new ways to buy fuel on the futures market and to better package our electrical usage, nearly $10 million dollars will be saved in 2010 in fuel and utilities purchases alone. In the area of safety, GCRTA exceeded its goal in both reducing vehicle preventable accidents to an impressive rate of .93 for each 100,000 miles of service. With enhanced customer service procedures and a new relationship with Google Transit, GCRTA handled more phone calls and handled more electronic requests for customer information than any time in history.
In its continued efforts to reduce costs, GCRTA entered into an innovative arrangement with NAPA Auto Parts to outsource a portion of its inventory management program to reduce both parts costs and inventory commitments.
GCRTA’s Commuter Advantage Program grew to new heights and now has over 500 participating companies representing over 11,000 employees, who can purchase their transit passes at a pre-tax discount and are now eligible for several very valuable GCRTA services like the Guaranteed Ride Home Program.
GCRTA was once again recognized for its diversity and diversity practices in 2009 by being honored by the Commission of Economic Inclusion for its Board, senior management and workforce minority representation, and for its contracting for supplies and services with minority organizations.
GCRTA has made sustainability a high priority. At the transit authority’s main office, everything that can be recycled is, from paper, batteries, and plastic. There are also friendly reminders to turn lights off when you leave and recycled paper centerpieces encouraging employees to think sustainability at work. Now, thanks to a $2.26 million grant from the Federal Transit Administration, GCRTA will be able to retrofit its major facilities to be more energy efficient. GCRTA was one of 43 transit systems to share $100 million provided through Economic Recovery Act funding. The goal is to support agencies pursuing cuttingedge environmental technologies designed to reduce global warming and increase the number of green jobs, while lessening America’s dependence on foreign oil. Light fixtures, HVAC control systems, and roof upgrades will be the focus of the facility energy retrofits. GCRTA will upgrade a total of eight facilities in all, including Central Rail, and Central Bus, its bus garages, its Paratransit center, and its main office. These facilities were selected because the retrofits will generate the greatest savings. GCRTA’s own internal analysis concluded that more than 60 percent of all facility-related energy usage occurred at these facilities.
GCRTA and its customers also celebrated the one year anniversary of the Healthline, which experienced a nearly 50% increase in ridership, exceeding all expectations. Euclid Avenue was one of the few corridors in the region where economic redevelopment continued at animpressive rate, in spite of the tightening credit markets.
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 one on the east side of town.
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 8,855 parking spaces at 21 of the rapid transit stations. In addition, the Authority operates bus Park-N-Rides at Strongsville (600 spaces) and Westlake (550 spaces). The objective of the GCRTA Park-N-Ride Development Plan is to provide rail and/or bus Park-N-Ride services for all major commuter corridors in Cuyahoga County.
CAPITAL IMPROVEMENT PLAN
The development of the 2010 budget included preparation of a five-year Capital Improvement Plan (“CIP”). This document is an outline for rebuilding and expanding service by the Authority. Totaling $436.4 million, the CIP constitutes a significant public works effort aimed at remaking the transit network and positioning the Authority, not just for the shortterm, but also for the long-term future.
Significant capital improvements planned for the five-year period include:
Rail Projects - $155.5 million
This commitment of funds includes the upgrade of the Catenary system, station and track rehabilitation, bridges, train control systems, rail vehicles overhaul, and signage. Rail projects include the rehabilitation of the rail stations totaling $47.0 million, overhaul of the heavy rail vehicles of $7.9 million, rehabilitation of the rail tracks of $24.9 million, upgrade of Catenary electrical system of $18.5 million, upgrade of our train control and signal systems of $8.1 million, and the extension of the blue line of $49.1 million.
Local Capital Projects - $12.8 million
Classified as Routine Capital Projects ($5.7 million) and Asset Maintenance Projects ($7.1million), 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 annual allocations of sales tax receipts.
Bridge Rehabilitation and Other Facility Improvements - $12.7 million
Funding has been provided for the rehabilitation of five track bridges.
Bus Purchases, Paratransit Vehicles and Circulator Bus- $57.8 million
The useful life of a 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 - $36.1 million
The Authority will be making a significant investment in the construction of Transit Centers over the next five years. 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 Non-Revenue Vehicles - $3.7 million
This project calls for the upgrade of lighting at two of the facilities of $2.3 million, the replacement of the operator dispatch system of $1.0 million and the upgrade of the management information system of $0.4 million.
Operating Expenses and Other Expenses - $157.8 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 $145.1 million. These costs are recorded as operating costs in the enclosed financial statements. Also, included in this category are $12.1 million for fare collection equipment and $0.6 million planning.
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 directed by Glenn Hendrix and assisted by Angela Coates for their work in preparing this report. Pamela Blackwell, Debra Benjamin, Louis Catalusci, Larry Ferrell and Joseph Ivan organized the project.Frances Barnett typed and proofread the entire document, and prepared it for printing. Cuyahoga County and Steven C. Letsky, Director of Accounting for the Cuyahoga County Auditor, provided supporting demographics and other statistics.
Joseph A. Calabrese
Chief Executive Officer
General Manager/
Secretary-Treasurer
Loretta Kirk
Deputy General Manager
Finance & Administration