George F. Dixon, ill, 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, 2013. This is the twenty-sixth such report issued by GCRTA. It has become the standard format used in presenting the results of the GCRT A'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, 2013. 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 ofthe 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 organ ization.
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 2,033 employees as of December 31, 2013. The system delivered 14.4 million revenue miles of bus service and 3.2 million revenue miles on its heavy and light rail systems. The service fleet was composed of 391 motor bus coaches, 60 heavy rail cars, 48 light rail cars, and 146 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 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 1.3 million people.
Historically, the foundation for Greater Cleveland's economic vitality has been heavy industry with the largest employment sector being manufacturing. Since 2004, manufacturing employment has increased from 11.7% of the total workforce to 12.7%, while wholesale and retail trade has significantly decreased from 14.9% since 2004 to 13.4% in 2013. The professional and related services sector work force has steadily grown from 42.2% of the total workforce since 2003 to the present rate of 44.3%, of the workforce. Our local economy continues to grow, resulting in more of our workforce being employed. The County's 2013 unemployment was between 9.0-12.0%, compared to the national rate of 11%.
Real property, consistmg of agricultural, commercial, industrial, and residential real property is reappraised every six years. The current assessed value is estimated to be $27.7 billion. This process is the foundation for property taxation, and it sets the debt limitation for GCRTA.
CURRENT YEAR REVIEW
In 2013, RTA continued its pursuit to provide Greater Clevelanders with unparalleled connectivity, along with high quality service design and delivery. This includes a two-fold plan to purchase new buses that will emit 30% fewer greenhouse gases and 85% less nitrous oxide pollution than the current diesel buses while contributing to RTA's sustainability commitment to the community-at-Iarge. RTA launched a new website to more easily help current and potential customers ride RTA. Whether customers are looking to plan a route, check the status of major projects, or get the latest RTA news, the new website offers vast amounts of information. RTA launched an iWatch app that allows riders to text, call, or send emails anonymously to Transit Police in response to any safety concerns on RTA. As a result, 2013 was a great year for RTA, marked by ridership gains, increased service,
infrastructure improvements, customer service enhancements, and a strong fiscal position. RTA experienced a third consecutive year of system-wide ridership growth in 2013 delivering 49.2 million passenger trips, an increase of 1 million rides over 2012. The Red Line rail service finished the year by serving 6.4 million customers, a 3% increase over 2012. Paratransit boasted an 8.9% gain; the Healthline marked its five-year anniversary in October with a 4.9% increase and the first year of the extended Trolley service saw a 101% year-over-year growth.
The Healthline has become the world-class standard of Bus Rapid Transit (BRT). Since opening in October of 2008, the Healthline has far exceeded expectations in ridership, economic development and world recognition. The Healthline has served more than 22 million riders since its inception with a current annual ridership of 5 million - a 60% increase since 2008.
Further growth was also a result of the third consecutive year of increased service, including the first full year of extended Trolley service and the rejuvenation of the Waterfront line. The Trolley service now boasts five lines serving Downtown Cleveland every day. And the response has been overwhelming, serving more than 1.4 million customers with all five lines experiencing double-digit year-over-year growth. Another addition occurred on the Waterfront Line with the opening of the new $145 million Ernst & Young complex on the East Bank of The Flats. Rail service, which had previously only been available on weekends and during special events, now operates seven days a week to serve employees and visitors of this growing development.
In 2013 RTA also made a number of investments to ensure public transportation remains an attractive driving alternative well into the future. In June 2013, RTA completed a seven month construction project on the Red Line which included the reconstruction of the Airport Tunnel and rehabilitation of the S-Curve resulting in safety improvements and extended system longevity. In October 2013, RTA broke ground on a new $17.5 million Little Italy-University Circle Red Line Station. Upon completion in 2015, it will replace the E. 120th Station and provide a direct link from Little Italy and University Circle to Tower City and the airport.
GCRTA has established a comprehensive set of financial policies and monitors its performance against those financial policies. For 2013, none of the financial policies had a significant impact on the financial statements.
GCRTA was recognized in 2013 for other reasons as well. A recent study conducted by the Institute for Transportation & Development Policy proves the growth extends beyond ridership-finding the HealthLine delivered more than $5.8 billion in economic development, which translates to a staggering $ 114.54 of economic development in the Euclid Corridor for every $1 invested in the HealthLine project. As a result, it now boasts the best ROI for transit development in North America. These impressive stats have resulted in prestigious accolades, have drawn international attention, and have given RTA the opportunity to host informational tours with official representatives from Disney World, Brazil, France, and Australia, who are interested in replicating the HealthLine's success in their hometowns. The overwhelming growth of the HealthLine, in only five years, is a great sign of encouragement as we look toward the future development of Cleveland.
By all measurements, 2013 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-Rides 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 nonrevenue 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 ("ClP"). This document is an outline for rebuilding and expanding service by the Authority. Totaling $334.3 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 - $84.5 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 stations totaling $30.9 million, overhaul of the light rail vehicles of $1.4 million, upgrade of signal system of $5.9 million, replacement of electrical substations of $18.6 million, track rehabilitation of $17.6 million and the extension of the Blue Line of $10.1 million.
Local Capital Projects - $18.6 million
Classified as Routine Capital Projects ($10.7 million) and Asset Maintenance Projects ($7.9 million), these initiatives are funded entirely from local resources. Routine Capital Projects an: 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 - $8.3 million
Funding has been provided for the rehabilitation of two track bridges of $7.2 million and includes replacement of Hayden parking lot repaving and other facility improvements totaling $1.1 million.
Bus Purchases, Paratransit Vehicles and Circulator Bus- $92.2 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 - $1.4 million
The Authority will make an investment in the construction of Transit Centers over the next five years of $1.4 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- $16.7 million
This project calls for the upgrade to the Management Information System of $4.1 million, planning studies of $0.5 million, and Fare Equipment Lease of $12.1 million.
Operating Expenses and Other Expenses - $112.6 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 $92.5 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 $3.6 million for Job Access Reverse Commute Program (JARC) expenses and $0.9 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 directed by Rajan D. Gautam, for their work in preparing this report. Marsha Laney Pettus, Pamela Blackwell, Glenville Manning, Theresa Johnson, David Reynolds, Zardik Haruthunian, John Togher, and Joseph Ivan assisted with 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