1. LEAN TRANSIT

2. Presenters Kevin Craig – Director, Finance & Corporate Controller
Megan Hill – Director, Budgeting & Forecasting
Kevin Schubert – Director, Regional Transit Systems

3. Overview Budget Preparation Timing BC Transit Funding
3 Year Service Plan Summary
Major Cost Drivers
Next Steps
1st Group Activity
Lean Transit – Cost Efficiency Strategies
2nd Group Activity
Comments? Questions?

4. Budget Preparation Timing
Fiscal versus calendar year ends:
Province has a fiscal year end (March 31st)
Local Government’s have a calendar year end (December 31st)
Communication and information timeline discussed at RTS roundtable
September is a key date to keep in mind as 3 year draft budgets are sent out to LG to assist in their budget preparations.
Do not receive confirmation from Province for 3YR budgets until Budget day in Feb.
In addition, it is important to remember that significant service changes need to be decided up to 16 – 18 months in advance of the change.

5. BC Transit Funding
Operating and capital contributions based on cost sharing formula:
BC Transit Act & Regulations
Specific Funding Formulas
Victoria Region gets 3.5¢ per litre in gas tax.
-The difference between Victoria and RTS cost sharing formula due to the fact that Victoria receives 3.5 cents per litre and therefore the provincial share has been reduced.
In addition, this is a matching funding formula. One partner cannot choose to pay more without the other partner agreeing to fund their portion. Conversely, if one partner chooses to fund less, the other partner’s contribution will go down as well.

6. BC Transit Funding (continued)
Funding Components
Provincial transfers
Operating
Deferred capital contributions
Operations
Passenger fares
Advertising
Local transfers
Property taxes
You can see from the pie chart, that the province contributes approx 50% towards the cost of transit and the local government funds the other 50% through revenue, adv and property tax (and in the case of Victoria, fuel tax).
All operations revenue belongs to local government partner and is used to offset local share of operating and capital cost of transit.
Fare strategies and structures are the responsibility of the local government.
Fare Strategy: Improving Yield – Today at 3:00pm

7. BC Transit Budget Funding (continued)
Strong Provincial financial contribution compared to other Provinces

8. BC Transit’s Service Plan
Provincial operating funding over the 3 year service plan period is relatively flat
Funding sufficient to cover inflationary pressures in 2015/16 and maintain current service levels
Use of asset costs increase due to vehicle replacements, major capital repairs and other capital projects.

9. Projected Local Lease Fees
Asset Funding (based on legislated cost sharing formula)
Local government – Responsible for lease fee payments over the life of the asset
Province – Responsible for funding the asset cost upfront
1095 buses in fleet as at Feb 2015
608 (>50%) need to be replaced over the next 5 years
Estimated $225.1 million replacement program over 5 years
Relates to vehicles only
$225.1 includes TED and refit programs
35% increase in lease fees

10. BC Transit 2015/16 Operating Costs

11. Next Steps Cost Containment
Review operational and administrative efficiency opportunities
Service Optimization Strategies
Identify, describe and value all services within each transit system
Prioritize service options to identify saving opportunities
Fleet Management and Right Sizing – Tomorrow at 8:30am
The Relationship of Scheduling to Costs – Tomorrow at 1:00pm

12. Group Activity
Drivers’ Wages/Benefits
Maintenance
Fuel
Insurance
Major Repairs
Information Systems
BCT Shared Services
Municipal Admin
Training
Taxi Programs
Property Maintenance
Marketing/Fare products/Guides
Lease Fees
Please discuss at your table what opportunities or initiatives you would propose to help reduce costs. (10 – 15 min)
Decide what the top 3 initiatives your table would propose.

13. Lean Transit - Cost Efficiencies
Procurement strategies
Contracting strategies
Maintenance strategies
Use of Asset strategies
Administrative strategies
Articulate
Thank everyone for participation in group activity
Purpose:
Share with you BCT Strategies

14. Procurement strategies
Economies of scale
Fuel
Bulk purchasing (24 million litres each year)
Volume rack discount
Forward buy program
TransLink joint diesel procurement discussions underway
Goal = Reduce operating costs and provide budget stability
Policies in place to mitigate volatility in price
Long term view – lock in where appropriate
Average locked in % = 40% million litres
15/16 – 15.6% locked in - $1.24 (wait and see approach
– Budget $1.25
- Actuals $1.03

15. Procurement strategies (continued)
Economies of scale (continued)
Vehicle Replacement Program
Typical Discount
Heavy Duty: 10-11%
Light Duty: 3%
Inventory (parts and consumables)
Typical discount:
20.5% bus parts
Reduction in lengthy procurement lead times
Insurance
Sophisticated insurance program in place
Seeks to balance cost and efficiency with the potential impacts of financial shock
Vehicle Replacement Program
Goal – Reduction in capital costs and lease fees
Shared services model - economies of scale
Provide volume discounts – RFP process
Inventory
Goal – Reduction in parts costs and lengthy lead times
Volume discounts with bus part vendors
Insurance
Goal – Reduction in insurance premiums while providing a sophisticated insurance program
Self insured – no collision
Corporate excess policy

16. Contracting strategies
Service Provision
Term of Agreement
Master operating agreements in place for 9 years with option to extend for two 3 year terms
Incentivize opportunity for investment
Minimize administrative burden
Regionalize Service Provision
Maximizes opportunity for economies of scale
Maximizes potential for competition
Budget Predictability
Rates negotiated for 3 year periods (aligned with 3 year service plan)
Implemented operations reviews (including service experience evaluation reviews) in February 2015
Goal: Reducing our contracted service costs while providing a robust transit service
Budget predictability
Lengthen the term – up 15 years
Economies of scale
Maximize investment and planning
Minimize admin burden
Operational auditing
Seminar : Measuring and Promoting Operator Performance – Wednesday 10:30

17. Maintenance strategies
Vehicle strategies
Reassessing fleet mix (right fleet, right amount) to consider future needs (right sizing) and improve operational costs
Maximize lifecycle/minimize costs
Vehicle useful life aligned with its duty cycle
Replacing major components before failure to ensure asset reliability and longevity (transmissions, engines, differentials –TED Program) and to smooth costs
Performing mid life, and life extension refits on wearable components related to body and HVAC systems to maintain life and smooth costs
Goal: Provide the right fleet, right amount, maximize lifecycle and minimize operational and capital costs
Diagram – Balanced in the middle, can lead to reduction in operational, maintenance and capital costs
Right Sizing seminar – Tuesday 8:30am
Maximize lifecycle/minimize costs
Component life determines duty cycle (13 years)
TED’s – Asset reliability, longevity, smooth lease fee cost spikes
Midlife refits – Maintain life for older 20 year fleet

18. Maintenance strategies (continued)
Facilities strategies
Facility master plans
Facility major component replacement plan initiated (owned and leased)
Alternative revenue opportunities (CNG refueling, bus washing, sanidump)
Lighting (LED) upgrades
Water consumption audit initiatives
Goal: Reduce our capital and maintenance costs associated with facilities while being cognisant of the operational needs
Facility master plans – Future operational needs

19. Use of Asset Strategies
Asset componentization
Shorter useful life for TED and refit program assets
Helps to avoid cost spikes over the assets duty cycle
Average lease fees
Lease fees similar by vehicle type and year
Assists with fleet mobility and equality
Standardized lease fee strategy initiative
Initiative to reduce step functions associated with vehicle replacements
Reviewing reserve options:
Preventative maintenance
Catastrophe's (insurance, accidents)
Vehicle write-off’s
Goal: Provide budget stability and to minimize cost spikes associated with lease fees.

20. Administrative strategies
BC Transit Shared Services
Review of all administrative costs during annual budgeting process
Salaries & Benefits
Compensation based on collective agreements and provincial mandate
Provincial salary freeze for all supervisory staff for last 5 years
Tracking full time equivalents on a quarterly basis
BC Transit Share Services
Goal: Demonstrate the value of our shared services while being prudent with the costs that go into it
Annual increase contained within the 3% threshold
Less than the 8% ceiling under the regulations
Trend is BCT Admin is decreasing compared to operating costs
Salaries & Benefits
Goal: Stabilizing cost
Drivers wages/benefits largest cost driver
BCT – Settled COPE, CUPE in progress and CAW ongoing

21. Administrative strategies (continued)
Rider Guides, Fare Products
15% reduction in printed materials including Rider Guides
Simplified fare strategies to reduce productions costs and maximize fare yields
Safety, Training
Safety management and return-to-work programs have contributed to lower experience ratings and Worksafe premiums.
Certificate of recognition program resulting in lower Worksafe premiums
Custom registration pilot
Pilot conducted to assess potential costs savings. Recommendations expected in 2015/16.
Rider Guides, Fare Products
Goal: Move to digital content/new website/less fare product alternatives
Seminar – Fare Strategy: Improving Yield – 3:00pm
Safety Training
Goal: Reduction in costs and safe and healthly working environment
$1.5 million in savings Worksafe premiums due to return to work and safety programs
Custom registration project
Goal: Review Handy Dart Service application processes to stablize operating costs and mitigate expansion pressures.
Pilot has engaged Occupational Therapists to assist with application reviews in person or over the phone and impact this has on the service – stayed tuned.
Custom Roundtable: Today 3:00pm

22. Group Activity # 2
Please review your top 3 recommendations from the first group activity.
Would you change, add, or delete any of these recommendations?

23. Comments? Questions?
Kevin Craig – Director, Finance & Corporate Controller
Megan Hill – Director, Budgeting & Forecasting
Kevin Schubert – Director, Regional Transit Systems