Major Investment Study / Draft Environmental Impact Statement   7. Financial Analysis

7.5 RESULTS OF THE SOURCES AND USES OF FUNDS ANALYSIS

Table 7.5-4 also summarizes several financial performance measures that reveal SEPTA's underlying capacity to undertake the SVM and successfully complete construction and operate the project:

• Operating Indicators

• Cash Balance as Months of Operating Expense: The initial level of working capital (the FY 2000 year-end cash balance) amounts to $81 million or approximately 1.2 months of operating expenses. Absent any additional funding than that assumed for the operating budget, this value is projected to zero in FY2008 through FY 2010. SEPTA will need to develop near-term strategies to maintain this ratio (and the level of working capital) to meet its immediate business requirements. The longer-term prospects for this measure are more favorable if the assumed levels of funding from the Commonwealth of Pennsylvania occur. 
• Operating Ratio: This is the ratio of operating revenue divided by operating expense: 

• Baseline System: SEPTA currently recovers close to 50 percent of operating expenses from operating revenues, a level mandated by the Commonwealth. Because operating expenses are projected to grow at 3.7 percent per year, but fare revenues are projected to grow at only 2.5 percent per year, this ratio will decline over time. By FY 2020, absent any changes in service level, the value falls to 39.3 percent. 

This results in a growing requirement for additional operating funding. This structural deficit has been acknowledged by SEPTA in its operating budget for many years. The continuing pressure to contain costs and increase revenues pushes management and the Board to cautiously deploy new transit services and to seek periodic fare increases. This projection demonstrates that such prudent efforts to balance the operating budget must continue. 
• SVM: In the first full year of operation, the SVM operating ratio is projected to be 48.0 percent; this is projected to fall to 40.0 percent in FY 2020. This is the result of costs growing somewhat faster than revenues, as in the case of baseline services: 

• Supplemental Operating Subsidy as % of Budget: The additional operating subsidies required to fill the gap between growing expenses and more modestly growing revenues are projected to be as high as 7.7 in FY 2005 percent of the operating budget, but never higher than 5.6 percent of the operating budget from FY 2006 through FY 2020. These measures are based on assumptions regarding the magnitude and timing of future PTAF funding initiatives that, while consistent with prior funding growth, are not as yet clearly established. 

• Capital Indicators:

• Baseline Additional Funding Required as % of Baseline CIP: The analysis revealed that no additional funding will be required beyond sources already in place or anticipated to yield revenues. 
• Total Additional Funding Required as a % of Total Capital Program: This measure includes the impacts of the SVM project. Additional funding will be required to fund the continuing rehabilitation and replacement requirements as the SVM ages. The impact is relatively small, beginning in FY 2017 and growing to 10 percent of the capital program. 

• Clean Fuels Formula Program: This $500 million program finances the purchase or lease of low polluting fuel buses and facilities and the improvement of existing facilities to accommodate clean fuel buses. 
• Intelligent Transportation Systems (ITS) Program: This program is authorized at $1.3 billion and is intended to promote the development and deployment of advanced ITS technologies to improve safety, mobility, and freight shipping. 
• Job Access and Reverse Commuting Program: This $750 million program finances the development of additional transportation services needed to connect welfare recipients and other low income persons to jobs and needed support services. This program requires reauthorization. 

SVMetro.com Copyright © 2006 Lucius Kwok