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George F. Dixon, III, President,
and Members, Board of Trustees
Greater Cleveland Regional Transit Authority
and Residents of Cuyhoga 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, 2008. This is the twenty-first 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 statements 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, 2008.

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, 2008. 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 2,577 employees as of December 31, 2008. The system delivered 20.8 million revenue miles of bus service and 2.8 million revenue miles on its heavy and light rail systems. The service fleet was composed of 556 motor bus coaches, 60 heavy rail cars, 48 light rail cars, and 86 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 1999, manufacturing employment has dropped significantly from 16.5% of the total workforce to 10.9%, while wholesale and retail trade has significantly decreased from 24.2% since 1999 to 14.4% in 2008. The professional and related services sector work force has steadily grown from 32.2% of the total workforce since 1999 to the present rate of 44.9%, of the workforce. Our local economy took a big hit, resulting in less of our workforce being employed. The County's 2008 unemployment was 6.8%, compared to the national rate of 7.2%.

During 2006, 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 $31.9 billion.

CURRENT YEAR REVIEW

In 2008, issues such as global warming, the slowing economy, and energy dependence on oil were on the minds of people here and around the world. Through a focus on providing outstanding, cost effective public transportation, GCRTA demonstrated that it was part of the solution in addressing these problems, and in the process, improved the quality of life in Northeast Ohio.

While oil companies were posting record profits, the public was spending more than 20 percent of their income getting to work. Frustration over the high oil prices led to a positive protest in downtown Cleveland. GCRTA hosted this event, blocking parts of the downtown area with oil barrels and buses, and allowing commuters to voice their opinions through picket signs and megaphones. The lunchtime rally captured a significant amount of media attention across the country. It also caught the eye of downtown office workers, giving GCRTA a chance to show off new highway motor coaches servicing our Park-N-Ride network.

High oil prices also put hybrid vehicles in demand. Among the hybrid offerings at the 2008 Cleveland Auto show, GCRTA’s 63 foot long Rapid Transit Vehicle (RTV) designed to service the Euclid Avenue was also on display. This hybrid vehicle was unveiled with a special graphics package featuring the Healthline logo as GCRTA’s naming rights partnership with the Cleveland Clinic and University Hospital was announced.

Hybrid technology helped ease the pain, but completely escaping the high cost of energy was impossible, even for a transit authority. Skyrocketing diesel fuel costs forced GCRTA to hold public hearings on service cuts and fare increases to offset a projected $20 million budget deficit. Appeals were made for additional state funding. And thanks to support from the Ohio Governor, $9 million was allocated from the Northeast Ohio Areawide Coordinating Agency, service cuts and surcharges fees were minimized.

Even with the changes, commuters still found transit to be a better option than driving. Ridership was up for a sixth straight year. It’s trend that is the envy of other transit systems across the country. Overall, nearly 58 million rides were provided in 2008, an increase of 650,000 rides.

The biggest ridership gains came from the work trip commuters, who received their own version of an economic stimulus package by taking transit. Ridership on rail grew by 2.56 percent, and the Park-N-Ride network was equally popular. Adding to the savings was a spike in employees and employers participating in Commuter Advantage. This pre-tax program was utilized by 430 Northeast Ohio organizations and more than 10,000 employees in 2008.

Many commuters boarded trains and buses not only to save money, but also to avoid traffic. This accelerated, as road construction and expected lane closures on the Innerbelt Bridge caused major backups. Others chose to combine transit with alternative forms of travel, such as walking and biking, for personal health and the health of the planet. This was evidence by a healthy increase in bike use, which exceeded 50,000 in 2008.

Trolleys were also a place of refuge for commuters. The downtown routes were used with regularity for arriving at meetings in the morning, escaping the office at lunch, and taking a break with friends after work. The Trolleys celebrated the boarding of the millionth annual rider, with ridership growing by more than 30 percent.

It’s not just our downtown that’s getting a second look. Residents are discovering their neighborhoods on board GCRTA’s Community Circulators. The 12 routes make frequent stops at libraries, drug stores and local shops. Unlike some of the large family vehicles, these buses are an economical choice for completing daily errands. In 2008, a local supermarket chain continued to make the Circulator even more attractive with free 2-Trip Farecards on grocery purchases of $15 or more.

Projects like the Healthline spotlight the importance of transit in solving the problems that lie ahead. The 21st Century Transportation Priorities Task Force, formed by Governor Strickland in 2008, is searching for new ways to address transportation needs in the state. It’s an honor to have GCRTA’s General Manger to serve on this committee. And it was humbling to have GCRTA’s General Manager named the 2008 Outstanding Public Transportation Manger in North American by the American Public Transportation Association.

In summary 2008 was a year when new solutions were offered to old problems. It was a time when transit was seen as part of the answer to surging oil prices and global warming, and when a new formula for economic growth and development was introduced with the opening of the GCRTA Healthline.

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:

• Community Circulators - A total of 38 Community Circulators were operational in 2008. These small buses provide neighborhood services throughout the City and the suburbs, including transfers to mainline bus and rail services over ten routes.
• 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 six existing Transit Centers at Fairview Park, Euclid, North Olmsted, Maple Heights, Parma Mall and 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 2009 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 $420.9 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 - $149.9 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 $56.7 million, overhaul of the heavy rail vehicles of $16.4 million, rehabilitation of the rail tracks of $26.0 million, upgrade of Catenary electrical system of $31.8 million, upgrade of our train control and signal systems of $19.0 million.

Local Capital Projects - $ 16.3 million

Classified as Routine Capital Projects ($7.5 million) and Asset Maintenance Projects ($8.8 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 - $13.2 million

Funding has been provided for the rehabilitation of six track bridges and three street bridges.

Bus Purchases, Paratransit Vehicles and Circulator Buses - $50.6 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 - $39.7 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 - $2.0 million

This project calls for the upgrade of our security equipment of $1.0 million and the replacement of the operator dispatch system of $1.0 million.

Operating Expenses and Other Expenses - $149.2 million

Certain operating costs are budgeted as capital items as designated by the Federal Transportation Administration (FTA) to be incurred over the next several years and are reimbursable by the Federal and State governments totaling $137.1 million. These costs are recorded as operating costs in the enclosed financial statements. Included in this category is $12.1 for fare collection equipment lease.

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 Coats, 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.