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, 2012. This is the twenty-fifth 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.
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, 2012. 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 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 2,188 employees as of December 31, 2012. The system delivered 17.7 million revenue miles of bus service and 2.7 million revenue miles on its heavy and light rail systems. The service fleet was composed of 381 motor bus coaches, 44 heavy rail cars, 33 light rail cars, and 126 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 2003, manufacturing employment has increased from 11.9% of the total workforce to 12.5%, while wholesale and retail trade has significantly decreased from 15.3% since 2003 to 13.8% in 2012. The professional and related services sector work force has steadily grown from 41.6% of the total workforce since 2003 to the present rate of 43.1%, of the workforce. Our local economy continues to grow, resulting in more of our workforce being employed. The County's 2012 unemployment was between 9.0-12.0%, compared to the national rate of 11%.
Real property, consisting of agricultural, commercial, industrial, residential real property is reappraised every six years. The current assessed value is estimated to be $29 billion. This process is the foundation for property taxation, and it sets the debt limitation for GCRTA.
CURRENT YEAR REVIEW
Drivers in Northeast Ohio faced many obstacles in 2012 affecting their driving habits and their parking in their favorite spot in downtown Cleveland. The opening of the Horseshoe Casino in downtown Cleveland in May 2012 quickly limited the available parking spaces. Construction and the repaving of several of the roadways led to major traffic delays in getting to and from work. This includes the Innerbelt Bridge Project and the repaving of Interstate 90 in Cleveland, along with 30 other highway projects, making it difficult in getting to and from work. With the average price of gasoline at an all time high, limited parking and the congestive traffic, people of Northeast Ohio were ready to ride RTA.
In 2012, ridership was up. RTA provided 48.2 million passenger trips, an increase of more than 2 million over 2011. Overall, ridership grew by 4.3 percent in 2012. This is on top of a 3.6 percent increase in 2011. The Red Line rail service had 500,000 more riders, representing a 9.1 percent gain. The Blue and Green Lines rail service also grew by 4.1 percent, and the bus routes collectively increased by 3.5 percent. Since its introduction in 2008, the Healthline has had healthy growth. In 2012, the Healthline posted its fourth consecutive annual increase, up 3.0 percent. Finally, the Paratransit Service was even more vital to those needing assistance, increasing by 11.96 percent.
GCRTA’s Downtown Trolleys continue to be a major draw with the public. With all the new investment in Downtown Cleveland, time was right for the expansion of the trolley service for employees, residents and tourists. In September, three new trolley lines were introduced. The new C-Line Trolley offers late night service to the Horseshoe Casino and entertainment establishments. The new L-Line Trolley offers weekend service for visitors to the Rock Hall and other attractions. And to help alleviate growing parking concerns, the Nine Twelve Trolley was created. This line offers a shuttle during morning and evening rush periods between the Muny Parking Lot and offices along E. 9th Street. These new lines are the result of a strong private-public partnership, with funding support from 12 local organizations.
Besides the new Trolleys, GCRTA expanded service on 31 other routes and lines in December. The frequency on all rail lines was increased, with the Red Line operating at an 8-minute frequency and the Blue and Green Lines making stops at stations every 10-minutes during peak rush hour periods. Changes to peak and non-peak frequency improved rail service by 30 percent. Collectively, the bus route modifications have resulted in another 5 percent in service enhancement.
GCRTA continued to ensure public transportation remained attractive by making a number of investments in 2012. In September, ground broke on a new Cedar–University Rapid Station. Construction will span two years and cost $18.5 million. When completed, it will be one of GCRTA’s most vital stops, serving thousands of daily commuters traveling to and from the growing University Circle area. Plans also progressed on a new University Circle – Little Italy station. Construction is expected to start in 2013. The new station will serve as a gateway to the historic Little Italy neighborhood and will be funded through a $12.5 million Federal Transportation Administration (FTA) grant.
In October, the redesigned Buckeye-Woodhill Rapid Station officially opened. The new station offers riders ADA accessibility, added parking, and glass covered platforms for safety and protection against the elements.
Another important project also began to take shape in 2012. The $9.5 million Bus Rapid Transit Line (West Shore Express) will feature bus only lanes and consolidated stops to accelerate travel on the near west side of town.
GCRTA ended 2012 fiscally sound. This was accomplished through tight fiscal management, with actual 2012 expenses being $3 million less than those incurred in 2006. The transit authority continues to find ways to create added efficiencies through TransitStat, which has saved more than $48 million in operating costs over the past five years. Additional cost savings have been realized through GCRTA’s Energy Price Risk Management Program from initiatives like fuel hedging.
GCRTA has established a comprehensive set of financial policies and monitors its performance against those financial policies. For 2012, none of the financial policies had a significant impact on the financial statements.
GCRTA was recognized in 2012 for other reasons as well. The Healthline’s success made Cleveland a destination for 17 transit delegations from cites as close as Detroit and continents as far away as Australia. As an honor to the entire GCRTA team, Build Up Greater Cleveland named the Authority’s CEO, Joseph Calabrese, the recipient of the Senator Voinvich Award as the Outstanding Public Works Employee of the year.
By all measurements, 2012 was a good year both for the region and GCRTA. The future also looks bright, with the final pieces in place to create a new economy in Northeast Ohio.
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 8,800 parking spaces at 21 of the rapid transit stations. In addition, the Authority operates five Park-N-Ride lots in Berea, Brecksville, Rocky River, Strongsville, and Westlake with more than 1,200 parking spaces combined. An expansion project, added 250 additional parking spaces at the Westlake Park-N-Ride Lot.
Paratransit Facility – The Paratransit Facility was completed in 1983 and houses all Parartansit functions including scheduling, dispatching and both revenue and non-revenue repairs. It is undergoing an 18-month rehabilitation scheduled for completion in mid-2013. Additional work scheduled for 2013, funded from an anticipated Federal State of Good Repair grant, includes various facilities improvements and replacement of equipment.
CAPITAL IMPROVEMENT PLAN
The development of the 2013 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 $387.6 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 - $117.6 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. Rail projects include the rehabilitation of the rail infrastructure totaling $32.9 million, overhaul of the light rail vehicles of $5.5 million, upgrade of signal system of $.3 million, replacement of electrical substations of $14.2 million, track rehabilitation of $20.7 million and the extension of the blue line of $44.0 million.
Local Capital Projects - $16.9 million
Classified as Routine Capital Projects ($9.7 million) and Asset Maintenance Projects ($7.2 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 annual allocations of sales tax receipts.
Bridge Rehabilitation and Other Improvements - $17.1 million
Funding has been provided for the rehabilitation of four track bridges of $10.0 million and replacement of escalators and Bus & Rail State of Good Repair of $7.1 million.
Bus Purchases, Paratransit Vehicles and Circulator Bus- $107.4 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 - $2.5 million
The Authority will make an investment in the construction of Transit Centers over the next five years of $1.4 million and enhancements to the Park and Ride facilities of $1.1 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- $22.6 million
This project calls for the upgrade to the Management Information System of $5.4 million, purchase of event recorders, bus cameras, driver security enclosures, warning lights of $4.8 million, Fare Equipment Lease of $12.1 million and various other purchases of $.3 million.
Operating Expenses and Other Expenses - $103.5 million
Certain operating costs are budgeted as capital items as designated by the Federal Transportation Administration (FTA) or the State government to be incurred over the next several years and are reimbursable by the Federal and State governments totaling $85.0 million. These costs are recorded as operating costs in the enclosed financial statements. Also, included in this category is $15.6 million for Paratransit related expenses and $2.0 million for Job Access Reverse Commute Program (JARC) expenses and $.9 million for New Freedom Program expenses.
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.
The GCRTA expresses thanks to the staff of the Accounting Department in preparing this report. In addition, appreciation goes out to the Cuyahoga County Auditors for providing supporting demographics and other statistics.
Joseph A. Calabrese
Chief Executive Officer
Deputy General Manager
Finance & Administration