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Quarterly Financial Report <br />October 1 – December 31, 2017 <br />Page 3 of 7 <br />FY 2018 Actual versus FY 2017 Actual (6 months) <br /> Key scope changes for the FY 2018 Actual compared to the FY 2017 Actual include: <br />o Code Enforcement Officers transitioned from direct NCTD employees (salary and fringe budget <br />category decreased by $794,780 to Bombardier employees (purchased transportation budget <br />category) increased by $865,622 for the six months ended December 31, 2017 as compared to <br />the FY 2017 budget for the same period. Actual results for the six months show a savings in <br />salaries and benefits related to Code Enforcement of $743,255 while Bombardier costs for the <br />train attendants were $761,192. <br />o MV Transportation assumed revenue operations for BREEZE, LIFT, and FLEX service from First <br />Transit on July 1, 2018 results in an increase in the FY 2018 budget of $2,757 as compared to <br />FY 2017 budget for the same six-month period. Actual results for the first six months show an <br />increase of $1.3 million over FY 2017. <br />o A reduction in Bombardier administrative cost due to a negotiated reduction of profit and loss <br />ratio resulted in administrative expense related to the rail contract being $2.1 million less for the <br />first six months of FY 2018 as compared to the same period for FY 2017. <br />o Depreciation charge of $30 million for FY 18 compared to $0 for FY 17 based on internal change <br />in business process to accrue depreciation over the course of the fiscal year rather than at the <br />end of the year. <br /> Operating revenues decreased over prior year levels by $776,629 (5.40%), driven mostly by a decrease <br />in fare revenue of $646,368. Total ridership for the six months ended December 31, 2017 was lower by <br />4.17% compare to the prior period. In addition, the estimated loss of revenue due to the November 50% <br />discount on Coaster Monthly and 30-Day Passes was approximately $60K. <br /> The farebox recovery ratio for the six months ended December 31, 2017 was 16.3% compared to 18.2% <br />for the same period in the prior year. Total operating recovery ratio (which is defined as all non-grant <br />operating revenues divided by the total operating expense or $13,776,112 divided by $50,074,016) for <br />the six months ended December 31, 2017 was 27.5% compared to 29.3% for the same period in the <br />prior year. <br /> Operating expenses (not including depreciation) were higher by $430,763 (0.9%) compared to the prior <br />year. This net amount is comprised mostly from a decrease in salaries wages and benefits of $1 million, <br />an increase in services of $1.7million, and a decrease in materials and supplies of $250k. <br />The lower salaries, wages and benefits expense is due in large part to an approximately $700K <br />reduction in fringe benefit costs as compared to the prior period related to pension funding. The <br />District chose to reduce the pension liability in one annual payment instead of paying this expense <br />monthly to take advantage of the prepayment discount. The annual payment was accounted as <br />a reduction in the District’s pension liability. Other salary and fringe savings were related to open <br />positions and accounted for approximately another $300K reduction in expense. <br />The higher professional services expense of $1.7 million was mostly due to an increase of $574K <br />in law enforcement services from the San Diego Sheriff’s Department, and the Oceanside and <br />Escondido Police. In addition, on December 18, 2016 Supplemental Agreement No. 1 with <br />Bombardier took effect, which increased monthly costs for facilities maintenance by approximately <br />$120K ($720K over 6 months). <br />The lower materials and supplies expense were due to lower costs for diesel fuel and natural gas <br />as compared to prior year. <br /> Operating surplus (net of depreciation) is $2.4 million for the six months ended December 31, 2017 <br />as compared to $1.8 million for the same six months of the prior year.