VALLEY METRO RAIL, INC. Phoenix, AZ COMPREHENSIVE ANNUAL FINANCIAL REPORT Period Ended June 30, 2009 VALLEY METRO RAIL, INC. Phoenix, Arizona Comprehensive Annual Financial Report For the fiscal year ended June 30, 2009 Prepared by: Finance & Administration Division A METRO three-car train on the Tempe Town Lake Bridge Valley Metro Rail, Inc. Table of Contents Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2009 Page Introductory Section Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting Policy Organizational Chart List of Appointed Officials iii ix x xi Financial Section Independent Auditors' Report Management's Discussion and Analysis Basic Financial Statements Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows Notes to the Basic Financial Statements 9 10 11 12 Other Supplementary Information Schedule of Operations - Budget and Actual 24 Statistical Section Financial Trends Net Assets by Component Changes in Net Assets Demographic and Economic Information Growth in Regional Transit Usage – Bus and Rail Boardings by Fiscal Year Member Cities' Population Growth Top Employers in Maricopa County System Map - Initial 20-Mile Segment System Map - Northwest Extension Operating Information Full-Time Equivalent Positions Pay Grades and Ranges Schedule of Insurance Coverage Design & Construction Milestones 1 3 26 27 28 29 30 31 32 33 35 37 39 INTRODUCTORY SECTION The Introductory Section includes METRO’s transmittal letter, policy organizational chart, and list of appointed officials Train at Central/Washington Station ASU students boarding train VALLEY METRO RAIL, INC. Policy Organizational Chart Fiscal Year Ended June 30, 2009 x VALLEY METRO RAIL, INC. List of Appointed Officials Fiscal Year Ended June 30, 2009 Board of Directors Board Chairman Board Member Board Member Board Member Board Member Board Member Board Member Councilman Tom Simplot, Phoenix Mayor Hugh Hallman, Tempe Mayor Scott Smith, Mesa Mayor Elaine Scruggs, Glendale Mayor Boyd Dunn, Chandler Mayor Bob Barrett, Peoria Mayor Mary Manross, Scottsdale Executive Management Team Chief Executive Officer Director, Design & Construction Director, Safety, Security, and Quality Assurance Director, Community Relations Director, Project Development Director, Operations & Maintenance General Counsel Director, Finance & Administration xi Richard J. Simonetta Brian Buchanan Larry Engleman John Farry Wulf Grote Jay Harper Mike Ladino John McCormack FINANCIAL SECTION The Financial Section includes the independent auditor’s report, Management’s Discussion and Analysis (MD&A), the basic financial statements, notes to the basic financial statements and other financial schedules. Super Motor Cross Event at Chase Field INDEPENDENT AUDITORS’ REPORT To the Members of the Board of Directors Valley Metro Rail, Inc. We have audited the accompanying financial statements of the business-type activities of Valley Metro Rail, Inc. (METRO) as of and for the year ended June 30, 2009, as listed in the table of contents. These financial statements are the responsibility of Valley Metro Rail, Inc.‘s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the Valley Metro Rail, Inc., as of June 30, 2009, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 28, 2010 on our consideration of Valley Metro Rail, Inc.‘s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 LarsonAllen LLP is a member of Nexia International, a worldwide network of independent accounting and consulting firms. To the Members of the Board of Directors Valley Metro Rail, Inc. The management's discussion and analysis on pages 3-8 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise METRO’s basic financial statements. The introductory section, other supplementary information and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary has been subject subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. LarsonAllen LLP Mesa, Arizona January 28, 2010 2 Valley Metro Rail, Inc. Management’s Discussion and Analysis As management of Valley Metro Rail, Inc. (METRO), we offer this narrative overview and analysis of the financial activities of METRO for the fiscal year ended June 30, 2009. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii – viii of this report. This discussion and analysis is designed to (1) assist the reader in focusing on significant financial issues, (2) provide an overview of METRO’s financial activity, (3) identify changes in METRO’s financial position, (4) identify any material deviations from the financial plan (adopted annual budget), and (5) identify other issues or concerns. Financial Highlights • METRO’s total net assets increased $104.3 million in FY 2009. Total net assets for METRO were $1,187.9 million at June 30, 2009. • With the commencement of rail passenger operations, METRO's primary organizational focus has transformed from construction activities to transportation operation activities. The financial statement presentation in fiscal year 2009 reflects this change, with capital construction revenues and expenses now reporting to non-operating activities. In consideration of the fact that the newly completed light rail construction project ($1.4 billion) was one of the largest in Arizona state history, it is to be expected that operational revenues and expenses will drop sharply with the cessation of construction and the commencement of passenger service delivery. • METRO’s operating revenues for FY 2009 were $16.9 million, a decrease of approximately $185.6 million from the prior period. Operating revenues consisted of contributions from METRO member cities ($13.5 million) and passenger fares ($3.4 million). • Non-Operating expenses: With the reporting change this year of capital revenues and expenses to non-operating activities, this year's non-operating revenues/expenses report a net $20.1 million decrease in net assets, primarily distributions to Member Cities to reimburse construction expenditures. • Capital contributions totaled $150.9 million, an increase of approximately $20.4 million from the prior period. Capital contributions consisted of Member City Contributions of $25.4 million, Public Transportation Funds of $52.6 and Federal Transit Administration Capital Grants totaling $72.9 million. OVERVIEW OF THE FINANCIAL STATEMENTS METRO’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). GAAP requires that the financial statements be accompanied by a narrative introduction and analytical overview of the government’s financial activities in the form of “Management’s Discussion and Analysis” (MD&A). The financial section of the Comprehensive Annual Financial Report (CAFR) for METRO consists of this discussion and analysis and the basic financial statements. This report also contains other supplementary schedules presented after the basic financial statements. METRO’s basic financial statements include a statement of net assets; a statement of revenues, expenses and changes in net assets; a statement of cash flows; and the notes to the financial statements. METRO’s financial statements are prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America promulgated by the Governmental Accounting Standards Board (GASB). 3 Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued) Fund Financial Statements – METRO is presented as an enterprise fund. Enterprise funds are used for activities that primarily serve customers outside the governmental unit. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or conditions. Funds are used to ensure and demonstrate compliance with finance-related legal requirements as well as for managerial control to demonstrate fiduciary responsibility over the assets of METRO. The statement of net assets presents information on all of METRO’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of METRO is improving or deteriorating. The statement of revenues, expenses and changes in fund net assets presents information showing how the agency’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected grant revenues). Notes to the Financial Statements – The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements and should be read with the financial statements. The notes can be found beginning on page 12. Enterprise Operations – METRO was formed in October 2002 by the cities of Glendale, Mesa, Phoenix and Tempe as a public nonprofit corporation to manage design, construction and operation of the Light Rail Transit (LRT) System within the Metropolitan Area. The cities of Chandler and Peoria became the fifth and sixth contributing member cities in April and July of 2007 respectively, and the city of Scottsdale became the seventh member in April of 2008. The member cities pay for their share of METRO’s operating expenses based on expense allocation methods approved in the by-laws of METRO. See Note 1 for a summary of METRO’s significant accounting policies. FINANCIAL ANALYSIS OF METRO The following tables and analysis discuss the financial position and changes to the financial position for METRO as a whole as of and for the year ended June 30, 2009, with comparative information for the previous period. Net Assets – Net assets may serve over time as a useful indicator of METRO’s financial position. The following table reflects the condensed Statement of Net Assets as of June 30, 2009, compared to the prior period. VMR's Condensed Statement of Net Assets As of June 30, 2009 and 2008 Current assets Noncurrent assets Total assets Current Liabilities Noncurrent Liabilities Total liabilities Invested in Capital Assets, net of related debt Unrestricted Total Net Assets 2009 $ 159,051,762 1,221,349,623 1,380,401,385 2008 $ 247,783,659 1,083,561,843 1,331,345,502 Change $ (88,731,897) 137,787,780 49,055,883 Percent Change -35.8% 12.7% 3.7% 148,135,746 44,408,973 192,544,719 247,609,942 173,717 247,783,659 (99,474,196) 44,235,256 (55,238,940) -40.2% 25464.0% -22.3% 1,181,254,415 6,602,253 1,083,561,843 - 97,692,572 6,602,253 9.0% 100.0% $ 1,187,856,666 $ 1,083,561,843 $ 104,294,823 9.6% 4 Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued) Total net assets represent the sum of METRO’s unrestricted net assets plus investment in capital assets net of accumulated depreciation. The largest portions of the investment are capital assets for the Central Phoenix /East Valley Light Rail Transit Project (CP/EV LRT). At the mid-point of the fiscal year, METRO placed these capital assets into service for operation of the light rail transit system and in day-to-day operations of METRO. It is not METRO’s intention to sell these assets and they are therefore not available for future spending. Net assets increased $104.3 million largely due to construction progress on the system during the year funded through capital grants, PTF funds and member city deposits. Changes in Net Assets Total operating revenues, which consist of Contributions from Member Cities, Fare Revenues, and Other Revenues (advertising), decreased $185.6 million: Member City contributions were reduced by $129.8 million and Public Transportation Funds decreased by $58.3 million. This revenue decrease is directly related to the decrease in construction activities planned for the initial 20-mile LRT line, which commenced passenger operating service in January 2009. Operating expenses increased by $20.0 million to $43.4 million: The first six months of Passenger Operations generated $15.7 million in new expenditures. Administrative expenditures totaled $5.3 million compared with $5.4 million in the prior year. With the deployment of the LRT system, depreciation expense increased by $20.2 million over the prior period. Capital contributions, which consist of Member City Contributions, FTA capital grants and Public Transportation Funds, increased $20.4 million. The following table compares the revenues and expenses of METRO for the current fiscal year and the previous period. VMR's Changes in Net Assets Fiscal year ended June 30, 2009 and 2008 2009 Operating revenues: Contributions from Member Cities Passenger Fares FTA Operating Grants Public Transportation Funds Other Revenues Operating revenues Operating expenses: Administrative Passenger Operations Service Private Utilities Relocations Depreciation Operating expenses $ (129,785,636) 3,371,104 (953,877) (58,315,376) 40,000 (185,643,785) 5,278,901 15,678,389 22,437,891 43,395,181 5,396,474 15,750,886 2,231,538 23,378,898 (117,573) 15,678,389 (15,750,886) 20,206,353 20,016,283 Operating income (loss) (26,493,573) 179,166,495 (205,660,068) Non-operating revenues (expense) Deficiency before Capital Contributions (20,085,202) (46,578,775) 91,519 179,258,014 (20,176,721) (225,836,789) Capital Contributions Increase in Net Assets 150,873,598 104,294,823 130,496,339 309,754,353 20,377,259 (205,459,530) 1,083,561,843 773,807,490 309,754,353 $ 1,187,856,666 $ 1,083,561,843 $ 104,294,823 Net assets, June 30 13,490,504 3,371,104 40,000 16,901,608 5 $ Change 143,276,140 953,877 58,315,376 202,545,393 Net assets, July 1 $ 2008 Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued) With the transformation of operating expense reporting, with certain construction related expenditures and revenues now reporting to Non-operating activities, an analysis of specific account changes may be useful. The table below illustrates key account activities for the comparable periods: Comparison of Revenue and Expense Accounts Fiscal year ended June 30, 2009 and 2008 2009 Revenues: Contributions from Member Cities (Operations) Contributions from Member Cities (Capital) Contributions from Member Cities $ Federal Transit Administration Operating Grants Public Transportation Funds (Operations) Public Transportation Funds (Capital) Public Transportation Funds Operating Revenues 2008 13,490,504 25,381,955 38,872,459 143,276,140 (104,403,681) 650,492 953,877 (303,385) 10,945,204 52,627,944 63,573,148 58,315,376 (FY 08 reporting basis) Other Revenues - Expenses: Distributions to Member Cities Private Utilities Relocations Interest on Capital Lease Obligation Non-Operating Expenses (FY 09 Reporting basis) Change 5,257,772 $ 202,545,393 $ (99,449,294) $ $ (91,519) 91,519 $ 20,078,532 9,518,863 2,083,503 15,750,886 - $ 31,680,898 $ 15,750,886 20,078,532 (6,232,023) 2,083,503 $ 15,930,012 Contributions from Member Cities were down $104.4 million primarily due to reduced construction funding requirements for the 20 mile CPEV LRT project. FTA operating grants were down due to completion of the eligible work under the grant. In 2008, the Public Transportation Funds (PTF) received were reported on a combined basis with capital funding included into operations revenue. This year, PTF funds dedicated to capital project expenditures are shown as capital contributions. Overall PTF funds were up by $5.3 million over the prior year. Distributions to Member Cities report the net capital project cost reimbursements in excess of capital contributions for the initial 20-mile LRT line. Under the Design and Construction project agreements, the Member Cities provide project funding to METRO as expenditures are incurred. As federal and regional funding for the capital project is received by METRO, the members receive cash distributions to reimburse the prior expenditures. Net reimbursements for the year totaled $20.1 million. Private utility relocation expenditures are for construction activities which are reported in fiscal year 2009 as non operating expenses. Relocation expenditures are down from $15.8 to $9.5 million due to the wrap up of construction for the 20 mile LRT system. Acceptance and deployment of 14 light rail vehicles during the fiscal year triggered interest expense of $2.1 million. Under the lease obligation, no expense was incurred in FY 2008. 6 Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued) CAPITAL ASSETS AND LONG TERM DEBT Capital Assets: The following table provides a breakdown of capital assets of METRO at June 30, 2009, with comparative information for the previous period. Additional information on METRO’s capital assets may be found in Note 6. VMR's Capital Assets, Net of Depreciation As of June 30, 2009 and 2008 Buildings Guideway Bridges Operation Control Center Passenger Stations & Facilities Park and Ride Facilities Electric Power Substations Signal and Communication System Computers & software Furniture & fixtures Revenue Vehicles Support/Service Vehicles Non-Revenue Vehicles Equipment $ Construction in Progress Net Capital Assets $ 2009 97,611,148 545,989,800 60,491,115 11,536,240 96,272,225 34,769,334 86,707,115 45,202,398 574,791 531,100 204,127,101 587,896 958,053 8,214,895 $ 2008 67,108,795 852,789 692,090 116,875,456 646,471 209,605 1,222,755 27,776,412 895,953,882 1,221,349,623 $ 1,083,561,843 $ Change 30,502,353 545,989,800 60,491,115 11,536,240 96,272,225 34,769,334 86,707,115 45,202,398 (277,998) (160,990) 87,251,645 (58,575) 748,448 6,992,140 (868,177,470) $ 137,787,780 As of June 30, 2009, METRO had $1,221.3 million invested in capital assets, net of accumulated depreciation. There was a net increase in capital assets, net of accumulated depreciation, of $137.8 million from June 30, 2008; primarily resulting from the continuing acquisition of equipment and vehicles, the placement into service of the Light Rail System infrastructure with a corresponding reduction to Construction in Progress, and a depreciation charge of $22.4 million. Long Term Debt: During fiscal year 2009, METRO (as Lessee) completed the process of formally accepting 14 Light Rail Vehicles (LRV’s) under the terms of a Master Lease/Purchase Financing Agreement dated March 3, 2006, with the City of Phoenix (as Lessor). Under the agreement, the City financed the purchase of the vehicles with payments due from METRO commencing in 2011. The capital lease obligation at June 30, 2009 includes $42,186,000 principal and $2,083,503 accrued interest totaling $44,269,503. Refer to Note 9 on page 19 for more information regarding the lease. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET METRO’s adopted fiscal year 2010 total operating and capital budget is $192.6 million, down $66.6 million from fiscal year 2009’s Budget. The primary cause for the decrease is within the capital budget, due to the planned reduction of construction activities and expenditures for the 20 mile CPEV LRT Project (METRO Initial Segment). On the operating side, METRO’s FY10 budget is up with the first full year of passenger revenue operations in FY 2010 versus the inaugural six months of revenue operations in FY 2009. 7 Valley Metro Rail, Inc. Management’s Discussion and Analysis (Continued) Comparison of Annual Expenditure Budgets Fiscal Year 2010 vs. 2009 FY 2010 Adopted ($,000) Uses of Funds Capital Projects: 20-Mile METRO Initial Segment Northwest Extension Non-Prior Rights Utilities Relocations Other Capital Projects: Central Mesa Extension South Tempe Extension I-10 West Extension CNPAs - 20-Mile Initial Segment 14 LRV's Operating Projects: Revenue Operations Future Project Development Agency Operating Budget Total Uses of Funds FY 2009 Amended ($,000) Change ($,000) 39,886 83,268 15,816 151,614 42,226 16,290 (111,728) 41,042 (474) 927 939 971 1,012 2,229 145,047 16,085 7,142 233,358 927 939 971 (15,073) (4,913) (88,311) 33,733 12,798 982 47,513 15,762 8,863 1,217 25,843 17,971 3,935 (236) 21,670 192,560 259,201 (66,641) Due to current economic conditions, sales tax revenue collections are down causing funding limitations for the Northwest Extension capital project. In July 2009, the Phoenix City Council acted to suspend construction funding for the Northwest Extension project pending availability of funds. METRO worked with the Member Cities to reduce the FY 2010 capital expenditure and funding budgets in accord with the reduction of construction activities. FINANCIAL CONTACT The financial report is designed to provide a general overview of METRO’s finances and to demonstrate accountability for the use of public funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to METRO’s Director of Finance and Administration, Valley Metro Rail, 101 North 1st Avenue, Suite 1300, Phoenix, Arizona 85003. 8 BASIC FINANCIAL STATEMENTS Valley Metro Rail, Inc. Statement of Net Assets June 30, 2009 Assets Current Assets Cash and Investments Receivables, Net Due from Other Governments Inventory Restricted Assets Other Assets Total Current Assets Noncurrent Assets Capital Assets, not being depreciated Capital Assets, net of accumulated depreciation Total Noncurrent Assets Total Assets and Other Debits $ 6,995,518 473,252 137,790,315 10,958,640 2,090,792 743,245 159,051,762 27,776,412 1,193,573,211 1,221,349,623 1,380,401,385 Liabilities Current Liabilities: Accounts Payable Labor Compliance Withholding Compensated Absences Due to Other Governments Unearned Revenue Member Cities Deposits 19,100,909 18,194 593,770 374,160 1,581,474 126,467,239 148,135,746 Noncurrent Liabilities: Compensated Absences Capital Lease Obligation Interest payable 139,470 42,186,000 2,083,503 Total Liabilities and Other Credits 192,544,719 Net Assets Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets 1,181,254,415 6,602,251 $ 1,187,856,666 9 Valley Metro Rail, Inc. Statement of Revenues, Expenses, and Changes in Fund Net Assets Fiscal Year Ended June 30, 2009 Operating Revenues: Contributions from Member Cities Passenger Fares Other Revenues Total Operating Revenues $ Operating Expenses: Administrative Passenger Operations Service Depreciation Total Operating Expenses 13,490,504 3,371,104 40,000 16,901,608 5,278,901 15,678,389 22,437,891 43,395,181 Operating income (26,493,573) Non-Operating Revenue / ( Expense ): Federal Transit Administration Operating Grants Public Transportation Funds Distributions to Member Cities Private Utilities Relocations Interest on Capital Lease Obligation Total Non-Operating Revenue / ( Expense ): 650,492 10,945,204 (20,078,532) (9,518,863) (2,083,503) (20,085,202) Deficiency Revenues under Expenses (46,578,775) Capital Contributions: Capital Contributions from Member Cities Public Transportation Funds Capital Federal Transit Administration Capital Grants Total Capital Contributions: 25,381,955 52,627,944 72,863,699 150,873,598 Changes in Net Assets 104,294,823 Net Assets, Beginning of Period 1,083,561,843 Net Assets, End of Period $ 1,187,856,666 10 Valley Metro Rail, Inc. Statement of Cash Flows Fiscal Year Ended June 30, 2009 Cash Flows from Operating Activities Receipts from Member Cities Receipts from Maricopa Association of Governments - RARF Receipts from Fare Revenues Other Revenues Payments to Suppliers Net Cash Used in Operating Activities $ Cash Flows from Non-Capital Financing Activities Receipts from Maricopa Association of Governments - Federal Receipts from Regional Public Transit Authority Payments for Private Utility Relocations Other Non-Operating Expenses Net Cash Provided by Non-Capital Financing Activities 13,513,578 480,263 3,371,104 40,000 (19,425,115) (2,020,170) 650,492 9,958,629 (7,937,055) (1,581,809) 1,090,257 Cash Flows from Capital and Related Financing Activities Capital Contributions from Member Cities Distributions to Member Cities Receipts from FTA Capital Grants Receipts from Regional PTF for Capital Capital Lease Funding Payments for Inventory Payments for Capital Assets Net Cash Provided by Capital and Related Financing Activities 35,281,219 (20,078,532) 95,159,216 39,739,382 42,186,000 (10,958,640) (174,044,429) 7,284,216 Net Increase in Cash and Cash Equivalents 6,354,303 641,215 Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year $ 6,995,518 Reconciliation of Operating Income to Net Cash Provided by Operating Activities $ Operating Income Adjustments to Reconcile Operating Income to Net Cash Used in Operating Activities: Depreciation (Increase) Decrease in Assets: Accounts Receivable Due from Other Governments Other Assets Increase (Decrease) in Liabilities: Accounts Payable Compensated Absences Labor Compliance Withholding Due to Other Governments Unearned Revenue Member Cities' Deposits Net Cash Used in Operating Activities $ 11 (26,493,573) 22,437,892 (101,587) (1,100,678) (626,621) 3,648,625 129,024 10,826 38,583 14,265 23,073 (2,020,170) Valley Metro Rail, Inc. Notes to the Financial Statements Fiscal Year Ended June 30, 2009 1. Summary of Significant Accounting Policies The accounting policies of Valley Metro Rail, Inc. (METRO) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. a. Financial Reporting Entity In October 2002, the city councils of Glendale, Mesa, Phoenix and Tempe approved the formation of a public nonprofit corporation by the name of Valley Metro Rail, Inc. The nonprofit corporation was organized under A.R.S. 11-952 and 40-1152. The initial members entered into a Joint Powers Agreement which provides that this Corporation be organized as the instrumentality to plan, design, construct, and operate the Light Rail Transit Project (“LRT”). Prior to October 2002, the Regional Public Transportation Authority (RPTA) performed these roles. METRO contracts with the RPTA for certain administrative functions, including personnel, HR administration, and computer support services. All METRO staff is hired and employed by RPTA but works solely under the direction of Valley Metro Rail, Inc., and its Board of Directors, through a contractual arrangement with RPTA. The Board of Directors of METRO is solely responsible for the governance of LRT and METRO is not a component unit of RPTA; economic resources received by METRO are entirely for the direct benefit of METRO, and RPTA is not entitled to and has no ability to otherwise access any of the economic resources received or held by METRO. b. Basic Financial Statements These financial statements are presented in accordance with GASB Statement No. 34 – Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments (GASB No. 34). METRO is engaged only in business-type activities and is required to present the financial statements required for enterprise funds which are part of proprietary funds. METRO does not report any component units. c. Basis of Presentation Proprietary funds account for activities of METRO similar to those found in the private sector, where cost recovery and the determination of net income is useful or necessary for sound fiscal management. The focus of proprietary fund measurement is upon the determination of operating income, changes in net assets, financial position and cash flows. Currently, enterprise funds are the only type of proprietary fund that METRO uses. d. Measurement Focus and Basis of Accounting The Statement of net assets and statement of revenues, expenses and changes in fund net assets are reported using the flow of economic resources measurement focus and accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility 12 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 requirements imposed by the provider have been met. Such revenue is subject to review by the funding agency, which may result in disallowance in subsequent periods. All of METRO's activities are accounted for in a single proprietary or business-type fund. Proprietary funds distinguish operating revenues and expenses from non-operating items and capital contributions. Operating revenues and expenses generally result from providing services and producing and delivering goods in connecting with a proprietary fund's principal ongoing operations. Revenues and expenses not meeting this definition are reported as either non-operating revenues and expenses or capital contributions. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989 generally are followed in the proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments have the option of following subsequent private-sector guidance for the business-type activities, subject to this same limitation. METRO has elected not to follow subsequent private-sector guidance. e. Cash and Investments State statutes authorize METRO to invest in obligations of the U.S. Treasury and any of its agencies, corporations or instrumentalities, collateralized repurchase agreements, and certificates of deposit. METRO’s investments are stated at fair value. Fair value is based on quoted market prices as of the valuation date. METRO considers short-term investments in mutual fund-money markets, U.S. Treasury bills and notes with maturities of three months or less at acquisition date to be cash equivalents. f. Receivables Management analyzes receivables periodically to determine the adequacy of the allowance for doubtful accounts. There is no current provision required for possible bad debts. g. Inventory and Prepaid items Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the average cost method. Inventories are expensed when the resources are used. h. Capital Assets Capital assets are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life greater than one year. METRO changed its individual asset capitalization threshold from $1,000 to $5,000 as of July 1, 2005. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at the estimated fair value at the date of donation. 13 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 METRO capitalizes all costs incurred in connection with the construction of the Central Phoenix/East Valley (CP/EV) 20-mile alignment. The costs for the non-federal agency operating and the initial planning costs of additional extensions are recorded as annual operating expenses. METRO is not the legal owner of any land. The land required for the LRT system is acquired and owned by the Member Cities and is the subject of a long-term use agreement between each City and METRO. Land, subject to the above agreement, is recorded on the books of member cities. At year-end, the value of land acquisitions recorded by the member cities and subject to the use agreements was $133.4 million. Land costs are eligible for FTA Section 5309 reimbursement and are included in METRO’s grant requests for reimbursements from the FTA. The costs included as construction in progress consist primarily of project administration, engineering, construction management, utilities relocation, facility construction, equipment procurement, and other costs related to construction. No depreciation is provided on construction in progress until construction is completed and the assets are placed in service. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Buildings Guideway Bridges Operation Control Center Passenger Stations Park and Ride Facilities Electric Power Substations Signal Substations Revenue Vehicles Equipment Furniture and fixtures Pooled vehicles Computers and software i. Useful Life (Years) 40 50 30 30 30 15 25 20 25 7-15 7-15 4 3 Allocation of Costs to Member Cities Design and construction costs to be paid during the fiscal year are allocated to the member cities as follows: i) Regional design and construction costs are allocated based upon the Design and Construction Miles percentage method as stated in the bylaws of the corporation. The components of the LRT that are currently classified as “regional” are light rail vehicles, the maintenance and storage facility, operations control center, bridge structures, and regional park and ride lots. 14 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 ii) Local design and construction costs are allocated to the member cities within whose boundaries the LRT Component designed or constructed will be located. Design and construction costs that are not classified as regional are deemed to be local. iii) Under the Design and Construction project agreements, the Member Cities provide project funding to METRO as expenditures are incurred. As federal and regional funding for the capital project is received by METRO, the members receive cash distributions to reimburse the prior expenditures. If a member city’s share of the LRT costs for a fiscal year is determined to be less than $50,000, such member city’s share of the LRT costs shall be $50,000. The purpose of the Minimum Cost is so that all member cities will contribute to payment of the overhead expense of the Corporation for matters such as the cost of meetings of the Board of Directors, administrative support to the Board of Directors, and support to member cities by the Rail Program Staff. j. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenditures during the reporting financial period. Actual results could differ from these estimates. k. Net Assets METRO’s net assets consist of unrestricted net assets and net assets invested in capital assets. 2. Budgetary Basis of Accounting An annual budget of revenues and expenses is prepared and adopted by the Board of Directors each fiscal year. The legal level of budgetary control is the total annual appropriated budget. The annual budget is adopted on the modified accrual basis. Encumbrance accounting is not used and all appropriations lapse at year end. Depreciation expense is not included in the annual budget. Prior to final adoption, a proposed budget is presented to the Board of Directors for review and public comment is received. Final adoption of the budget must be on or before June 30 of each year. During the fiscal year, the Board of Directors modified the original budget. A schedule of operations versus original budget, final budget, and actual is presented as supplementary information. See Page 24. 15 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 3. Cash and Investments Cash deposits and investments at June 30, 2009, consisted of the following: Cash on hand Insurance Trust Fund Investments in repurchase agreements Total cash and investments $ $ 158,802 50,001 6,786,715 6,995,518 METRO has deployed Ticket Vending Machines (TVM’s) which contain coin and bill vaults to accommodate the purchase of fares. At June 30, 2009, the total cash contained in the coin and bill vaults totaled $162,249. METRO's bank deposits at June 30, 2009, had a carrying value of (3,447) and the bank ledger balance was $545,120. The difference of $548,567 represents deposits in transit and outstanding checks. Of the bank balance, $545,120 was covered by federal depository insurance. The Self Insurance Reserve Trust Account totaling $50,001 was covered by collateral held by the pledging financial institution in METRO’s name. Investment balances at June 30, 2009 were as follows: Repurchase agreements $ Fair Value 6,786,715 Interest Rate Risk. METRO does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. During FY 2009 all investment durations were shorter than 90 days. Credit Risk. State Statutes authorize METRO to invest in obligations of the U.S. Treasury and any of its agencies, corporations or instrumentalities, collateralized repurchase agreements and certificates of deposit. METRO has no investment policy that would further limit its investment choices. METRO’s repurchase agreement did not receive a credit quality rating from a national rating agency. Concentration of Credit Risk. METRO places no limit on the amount it may invest in any one issuer. Historically, METRO has limited its investments to collateralized repurchase agreements. METRO’s repurchase agreement is collateralized by $6,786,715 in securities held by the pledging financial institution in METRO’s name 16 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 4. Accounts Receivable and Due From Other Governments All receivable balances at June 30, 2009 are displayed on the financial statements and are expected to be collected in full; therefore, an allowance for uncollectibles has not been recorded. Due from other governments consists of Federal receivables ($108.2 million) due from the City of Phoenix as Grantee of Federal Funds, PTF receivable ($18.1 million) due from Regional Public Transportation Authority (RPTA), unbilled member cities’ contributions ($11.4 million), and miscellaneous receivables ($ .049 million). City of Phoenix (Grantee of Federal funds) Public Transportation Funding City of Mesa City of Phoenix City of Tempe City of Glendale Maricopa Association of Governments Arizona State University Regional Public Transportation Authority $ $ 108,200,822 18,057,786 259,193 9,799,882 1,369,811 12,710 42,912 5,670 41,529 137,790,315 Public Transportation Funding is discussed more fully in Note 16. The amount due from Regional Public Transportation Authority is discussed more fully in Note 13. 5. Restricted Assets Certain assets of Valley Metro Rail, Inc. are set aside for repayment due to outside restrictions imposed on those funds. Unspent capital lease proceeds in the amount of $2,090,792 are set-aside for use in the upcoming fiscal year for the acquisition of spare part accessories for fourteen light rail vehicles which are financed under the lease. The Capital Lease Obligation is discussed in Note 9. 17 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 6. Capital Assets Capital asset and construction in progress activity for the year ended June 30, 2009 were as follows: Balances, July 1, 2008 Nondepreciable assets: Construction in progress Depreciable assets: Buildings Guideway Bridges Operation Control Center Passenger Stations & Facilities Park and Ride Facilities Electric Power Substations Signal and Communication System Computers & software Furniture & fixtures Revenue Vehicles Support/Service Vehicles Non-Revenue Vehicles Equipment Total depreciable assets at historical cost Less accumulated depreciation for: Buildings Guideway Bridges Operation Control Center Passenger Stations Park and Ride Facilities Electric Power Substations Signal Substations Computers & software Furniture & fixtures Revenue Vehicles Support/Service Vehicles Non-Revenue Vehicles Equipment Total accumulated depreciation Total capital assets being depreciated Business-type activities capital assets, net $ $ Increases 895,953,882 $ 171,077,226 69,874,668 1,155,254 1,126,927 116,875,456 719,709 282,830 1,528,000 32,657,438 551,504,848 61,516,388 11,731,770 97,903,958 35,968,277 88,476,648 46,361,434 107,087 93,802,718 868,364 7,504,211 191,562,844 1,028,403,141 (2,765,873) (302,465) (434,837) (73,238) (73,225) (305,245) (3,954,883) 187,607,961 (2,155,085) (5,515,048) (1,025,273) (195,530) (1,631,733) (1,198,943) (1,769,533) (1,159,036) (385,085) (160,990) (6,551,073) (58,575) (119,916) (512,071) (22,437,891) 1,005,965,250 1,083,561,843 $ 1,177,042,476 Balances, June 30, 2009 Decreases $ (1,039,254,696) - $ 27,776,412 102,532,106 551,504,848 61,516,388 11,731,770 97,903,958 35,968,277 88,476,648 46,361,434 1,262,341 1,126,927 210,678,174 719,709 1,151,194 9,032,211 - 1,219,965,985 - (4,920,958) (5,515,048) (1,025,273) (195,530) (1,631,733) (1,198,943) (1,769,533) (1,159,036) (687,550) (595,827) (6,551,073) (131,813) (193,141) (817,316) (26,392,774) 1,193,573,211 - $ (1,039,254,696) $ 1,221,349,623 7. Member Cities’ Deposits The member cities advance monies to cover the federal share and local share of project costs. In addition, unpaid project expenses fundable by member cash deposit contributions are accrued for each city. A summary of member cities’ deposits at June 30, 2009 follows: City of Chandler City of Mesa City of Peoria City of Phoenix City of Tempe City of Scottsdale $ 65,264 9,479,140 55,074 91,635,022 25,200,163 32,576 $ 126,467,239 18 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 8. Operating Leases METRO leases office space under various operating lease agreements. Total rent expenditures for these leases were $1,193,902 for the fiscal year ended June 30, 2009. Future minimum lease payments under non-cancelable operating leases are: Operating Leases as of 6-30-09 Year Ending June 30 2010 2011 2012 2013 2014 Thereafter $ 1,205,868 1,204,603 1,178,688 1,197,147 1,225,651 2,536,812 8,548,769 $ 9. Capital Lease Obligation: During fiscal year 2009, METRO (as Lessee) completed the process of formally accepting 14 Light Rail Vehicles (LRVs) under the terms of a Master Lease/Purchase Financing Agreement dated March 3, 2006, with the City of Phoenix (as Lessor). The assets acquired through the capital lease are as follows: Asset: Unspent Lease Proceeds Revenue Vehicles Less Accumulated Depreciation Total $ 2,090,792 40,095,208 (801,904) $ 41,384,096 Amortization expense on the capital lease is included in depreciation expense. The following table presents the changes in the capital lease obligation for fiscal year 2009: July 1, 2008 Capital Lease Obligation $ - Increases $ 42,186,000 Decreases June 30, 2009 Amount Due in One Year $ $ $ - 42,186,000 - Acceptance of the LRVs commenced the term of this agreement and obligated rent payments totaling approximately $56,300,000, beginning with the first $10,000,000 payment due on June 1, 2011. 19 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 Schedule of Capital Lease Payable as of 6-30-09 Year ending June 30 2010 2011 2012 2013 2015 Principal Interest $ 4,167,007 2,083,504 2,827,876 1,954,759 1,013,886 $ 12,047,032 $ 10,000,000 10,000,000 10,000,000 12,186,000 $ 42,186,000 For Fiscal Year 2009, Capital Lease Interest expense totaling $2,083,503 was accrued under the Master Lease Agreement. The Capital Lease obligation at June 30, 2009 includes $42,186,000 principal and $2,083,503 accrued interest totaling $44,269,503. 10. Compensated Absences The following presents the changes in compensated absences for the fiscal year ended June 30, 2009: July 1, 2008 Compensated absences $ Increases Decreases 603,179 (474,154) 604,215 June 30, 2009 $ 733,240 The portion of compensated absences payable within one year is $593,770. 11. Contractual and Other Commitments METRO has entered into various contractual agreements for engineering services, project management, construction administration, light rail vehicles, construction, operations services, legal services and artists. At June 30, 2009, METRO had outstanding contractual commitments for these services aggregating approximately $88.5 million. These commitments have not been recorded in the accompanying financial statements. Only the currently payable portions of these contracts have been included in accounts payable in the accompanying financial statements. Subsequent to June 30, 2009, METRO entered into approximately $1.7 million additional contractual commitments. Contractor Parson Brinckerhoffer - Prelim Engineering PB Americas, Inc. - Final Design / DSDC HDR/S.R. Beard - Program Management PBS&J/PGH Wong - Construction Mgmt Various - Facilities Construction Various - System Elements Various - Public Art Program Various - Owner Furnished Materials Various - Operations & Maintenance Various - Misc. Construction & Services Sundt - NW Ext AE Com - NW Ext Various - Future Extensions Commitment $ 25,054,938 108,240,314 52,000,000 57,281,460 544,540,929 235,601,608 6,283,133 33,362,518 61,017,099 16,324,992 2,999,400 14,970,624 39,708,178 $1,197,385,193 20 Spent-to-date $ 25,054,938 108,108,688 51,323,121 57,072,396 539,209,569 219,991,864 5,864,811 33,180,624 19,674,892 7,168,523 767,959 12,570,398 28,901,387 $1,108,889,170 Remaining $ 131,626 676,879 209,064 5,331,360 15,609,744 418,322 181,894 41,342,207 9,156,469 2,231,441 2,400,226 10,806,791 $88,496,023 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 12. Risk Management METRO is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to contracted labor; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. METRO purchases insurance coverage for property, general liability, excess liability, automobile liability, umbrella liability, public entity employment practices liability, public entity management liability, boiler and machinery, crime, inland marine, owner’s protective professional indemnity, environmental site protection, contractor’s environmental protection and excess liability. In addition, the RPTA purchases workers’ compensation, employee life insurance, health and dental insurance coverage for all LRT full-time employees. Settled claims for these risks have never exceeded commercial insurance limits. METRO’s environmental site protection, contractors’ environmental protection and excess liability policies were purchased in June 2004 for coverage through 2009. See schedule of insurance on page 36. 13. Contingencies o In December 2008, METRO received a claim from one of its Line Section contractors (Herzog Contracting Corporation “HCC”.) in the amount of $18,682,126 for delays and disruptions to the project allegedly caused by METRO in the period between July 1, 2006 and April 30, 2008. On May 19, 2009 METRO issued a final decision in the matter finding that HCC was entitled to no more that $2,500,000 for METROcaused delays and disruptions through April 8, 2009 (the date the project was completed). The HCC claim involves complex questions of fact and law. After receiving a preliminary, independent analysis METRO believes that the HCC claim is without substantial merit. Settlement of the claim is to be funded by previously committed federal and member city funding sources. METRO believes that the further processing of the claim will not have a material effect on METRO’s financial affairs. o As a subrecipient of federal grant monies, amounts passed through or receivable from other agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although METRO expects such amounts, if any, to be immaterial. o Prior to the incorporation of METRO in October 2002, the RPTA made investment decisions on behalf of METRO. On November 22, 2002, the Arizona State Treasurer’s Office informed participants in the Local Government Investment Pool (LGIP) that it currently holds asset-backed securities administered by National Century Financial Enterprises (NCFE). These securities, which total approximately $131 million of the total $4 billion in the LGIP, are backed by payments from Medicare/Medicaid and other creditworthy issuers. RPTA’s proportional share of the $131 million was $223,150, of which $88,791 is invested on behalf of METRO. NCFE has filed bankruptcy and is under investigation by the Federal Bureau of Investigation and the Securities and Exchange Commission. RPTA has joined in a 21 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 lawsuit with 93 other Arizona governmental entities and 90 other plaintiffs against several parties in an effort to recover the investment. No collections were received from the NCFE receivable during fiscal year ended June 30, 2009. The $41,529 receivable is recorded as due from other governments with an offsetting reserve of ($41,529) recorded to due to other governments. 14. Related Party Transactions The seven members of METRO’s Board of Directors are also members of the fourteenmember RPTA Board of Directors. METRO has entered into contracts with the RPTA for certain administrative functions, including personnel, administration, financial and accounting services, purchasing, and computer support services. All METRO staff is hired and employed by RPTA but works solely under the direction of the METRO and its Board of Directors, through a contractual arrangement with RPTA. For the period July 1, 2008 through June 30, 2009, METRO paid $8,616,062 for services provided by RPTA. 15. Arizona State Retirement System Plan Description – METRO contributes to a cost-sharing multiple-employer defined benefit pension plan administered by the Arizona State Retirement System. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The system is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910 or by calling (602) 240-2000 or (800) 621-3778. Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and the METRO’s contribution rate. For the year ended June 30, 2009, active plan members and METRO were each required by statute to contribute at the actuarially determined rate of 9.45 percent (7.92 percent retirement, 1.03 percent health plan, and 0.50 percent long-term disability) of the members' annual covered payroll. METRO’s contribution to the System for the year ended June 30, 2009 and 2008 was $542,466 and $413,003 respectively, which was equal to the required contributions for the year. Schedule of Retirement and Long Term Disability Benefits Accrued Years ended June 30, 2009 2008 2007 Retirement Fund $ 454,638 346,320 291,548 Health Benefit Supplement Fund $ 59,126 45,172 39,669 22 Long-Term Disability Fund $ 28,702 21,511 19,257 Total Benefits $ 542,466 413,003 350,474 Valley Metro Rail, Inc. Notes to the Financial Statements (Continued) Fiscal Year Ended June 30, 2009 16. Public Transportation Funding In November 2004, the voters of Maricopa County approved Proposition 400, the continuation of the transportation tax, for a twenty year period beginning in calendar year 2006. On August 14, 2006, METRO and RPTA executed an intergovernmental agreement (IGA) that formally designated METRO as Lead Agency to plan, design, and construct the light rail transit (LRT) program. Among other things, the IGA specifies that RPTA will reimburse METRO, from the Public Transportation Fund, for eligible incurred expenses. Valley Metro Rail began receiving Public Transportation Funding (PTF) in March 2006. These monies are used to reimburse private utility companies for costs incurred in the relocation of non-prior rights utilities, to reimburse Member Cities for their share of local costs incurred in connection with the acquisition of certain regional transportation assets, and to fund the local share of future light rail extensions as designated in the Regional Transportation Plan. The components of the LRT system that are currently classified as “regional transportation assets” are light rail vehicles, the maintenance and storage facility, the operations and control center, bridge structures, and regional park and rides. Public Transportation Fund Expenses (LRT Portion) Fiscal Year ended June 30, 2009 LRT PTF Expenditures: Non Prior Rights Utility Relocations: 20 Mile Initial Segment Northwest Extension Phase I Regional Asset Reimbursements: CPEV - 20 Mile Initial Segment Phoenix Tempe Mesa Northwest Extension (Phoenix) Project Development and Planning Total LRT PTF Expenditures $ in Millions 7.64 1.47 26.66 11.14 1.94 0.42 0.95 50.22 In June 2009, the Regional Public Transportation Authority (RPTA) issued Transportation Excise Tax Revenue Bonds in the amount of $100,075,000. A portion of the bonds will pay or reimburse LRT capital expenditures as designated in the Regional Transportation Plan. 23 OTHER SUPPLEMENTARY INFORMATION This Section includes the Schedule of Operations – Budget and Actual. Price and 101 Riders Purchasing Tickets Valley Metro Rail, Inc. Schedule of Operations - Budget and Actual Fiscal Year Ended June 30, 2009 Operating Revenues: Contributions from member cities Passenger fares Federal Transit Administration grants Public Transportation Funds MAG/RPTA Grants Contributions from Others Total operating revenues Operating Expenses: Engineering and design consultants Project management consultants Construction administration consultants Art design consultants Planning and environmental consultants Facilities Construction Administrative Capital Outlay Real estate/ROW Acquisition Light Rail Vehicles LRT Startup Private Utilities Relocation Finance Costs Rail Operations Expense Total operating expenses $ Budgeted Amounts Original Final Actual Amounts (Budgetary Basis) Variance with Final Budget Over (Under) 57,552,081 4,494,963 96,806,000 83,784,282 1,500,000 450,000 244,587,326 $ $ 17,561,363 4,375,000 21,185,000 1,225,000 9,834,000 47,894,002 13,289,509 331,700 30,536,000 33,142,112 8,025,000 14,000,000 27,464,693 15,723,948 244,587,327 $ 32,598,369 4,494,963 96,806,000 123,501,481 1,350,000 450,000 259,200,813 18,061,363 4,375,000 23,485,000 2,333,000 7,734,000 63,187,000 14,531,509 331,700 25,900,000 27,164,112 10,471,029 18,400,000 27,464,693 15,762,407 259,200,813 72,357,325 3,371,104 95,809,708 63,573,148 650,492 40,000 235,801,777 12,116,692 3,300,087 23,377,790 1,541,662 4,120,241 59,659,307 13,091,530 1,272,405 41,652,886 17,742,332 6,958,846 10,724,423 24,543,004 15,700,572 235,801,777 39,758,955 (1,123,859) (996,292) (59,928,333) (699,508) (410,000) (23,399,037) (5,944,671) (1,074,913) (107,210) (791,338) (3,613,759) (3,527,693) (1,439,979) 940,705 15,752,886 (9,421,780) (3,512,183) (7,675,577) (2,921,689) (61,835) (23,399,036) Explanation of Differences between Budgetary Basis and GAAP Basis Total Operating Expenses - Budgetary Basis Total Operating Expenses - GAAP Basis Budgetary Operating Expenses in Excess of GAAP Operating Expenses 235,801,777 43,395,181 192,406,596 Change in Net Assets (capitalized on a GAAP basis and expensed on a budgetary basis) Less Net Asset additions Financed by Capital Lease (not expensed on a budgetary basis) Member funded finance costs (budgeted expenses not included in GAAP basis) Member-owned real estate/ROW acquisitions (budgeted expenses not included in GAAP basis) Concurrent Non-Project Activities (budgeted expenses not included in GAAP basis) Private Utilities Relocations (budgeted expenses not included in GAAP basis) All Other Adjustments Depreciation (GAAP expenses not included in budgetary basis) Total Reconciling Items 171,077,226 (40,095,208) 12,271,502 41,652,886 20,378,837 9,518,863 40,381 (22,437,891) 192,406,596 This schedule is prepared on a budgetary basis for the operating accounts of the proprietary fund and as such does not present the results of operations on the basis of generally accepted accounting principles, but is presented for supplemental information. In the current year, GAAP basis operating costs are $43.4 million, or $192.4 million less than the budgetary basis costs of $235.8 million. The primary differences between these two bases of reporting are: 1.) Capital project costs that are included in budgeted costs but added to construction-in-progress for GAAP purposes ($170.4 million) net of (-$40.1 million) net assets funded by lease; 2.) Finance and real estate/ROW acquisition costs that are budgeted but not booked for GAAP purposes ($12.3 and $41.7 million); 3.) Concurrent non-project activities and Private utility relocations that are included in the budget but not on a GAAP basis ($20.4 and $9.5 million); and 4.) Depreciation included for GAAP but not budget ($-22.4 million). 24 Interior of Vehicle with Riders STATISTICAL SECTION The Statistical Section includes selected financial and demographic information regarding METRO, including financial trends, revenue capacity, demographic and economic information, and operating information. Train at Sycamore and Main Station in Mesa, AZ Statistical Section Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2009 This part of METRO's comprehensive financial report presents information as a context for understanding what the information in the financial statements, footnotes, and supplementary information says about METRO's overall financial condition. METRO's prinicipal activities consist of planning, designing, constructing and operating the light rail transit system in Maricopa County, Arizona. Contents Financial Trends These schedules contain trend information to help the reader understand how METRO's financial performance and well-being have changed over time. Page 26 Revenue Capacity METRO's principal revenue source is contributions from Member Cities. N/A Debt Capacity METRO has no current bond indebtedness. N/A Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which METRO's financial activities take place. 28 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in METRO's financial report relates to the services METRO provides and the activities it performs. 33 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. METRO's first financial reporting as a separate entity was for the intial period ended June 30, 2003. Valley Metro Rail, Inc. Net Assets by Component FY 00/01 through FY 08/09 (1) FY 00/01 Business-type activities Invested in capital assets (2) Restricted Unrestricted Total business-type activities net assets $ $ 55,850 55,850 FY 01/02 $ $ 97,143 97,143 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 08/09 $ 255,143 $ 255,143 $ 57,341,840 $ 57,341,840 $ 235,905,852 $ 235,905,852 $ 460,380,300 $ 460,380,300 $ 773,807,490 $ 773,807,490 $ 1,083,561,843 $ 1,083,561,843 $ 1,181,254,415 6,602,251 $ 1,187,856,666 Source: Valley Metro Rail, Inc. Finance Division (1) Valley Metro Rail, Inc. was established in October 2002. All light rail activities prior to October 2002 were recorded in the financial records of the Regional Public Transportation Authority (RPTA). The amounts shown here for FY 02/03 were reported in both the RPTA and METRO financial records and were combined to show the complete rail transit amount. (2) CP/EV LRT project costs incurred prior to July 1, 2004, for project preliminary engineering and project management totaling $77.1 million paid for by member cities or federal grants were contributed to METRO during the fiscal year ended June 30, 2005. Prior to FY 04/05, these amounts were included in Administration and Planning Services. 26 Valley Metro Rail, Inc. Changes in Net Assets FY 99/00 through FY 08/09 (1) Operating Revenues Contributions from Member Cities Passenger Fares Federal Transit Administration Operating Grants Sales Tax (RARF) Public Transportation Funds Other Revenues Total operating revenues Operating Expenses Administration and Planning Services (2) Passenger Operations Service Private Utilities Relocations Depreciation Total operating expenses Operating income (loss) FY 00/01 FY 01/02 $ 3,739,531 $ 5,323,908 8,177,395 11,916,926 11,916,926 11,916,926 - Non-Operating Revenues (Expense) Federal Transit Administration Operating Grants Public Transportation Funds Interest on Investments Distributions to Member Cities Private Utilities Relocations Interest on Capital Lease obligation Total non-operating revenues (expense) Capital Contributions Federal Transit Administration Capital Grants Contributions from Member Cities Public Transportation Funds Capital Donated Engineering (3) Increase in net assets $ FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 28,353,274 $ 14,141,126 $ 27,692,841 $ 75,672,696 $ 156,033,959 $ 143,276,140 11,437,481 16,761,389 6,237,102 34,590,376 48,497,109 62,638,235 74,819,942 102,512,783 150,717,452 11,700,029 238,090,177 146,442,055 57,160,186 359,636,200 953,877 58,315,376 202,545,393 13,490,504 3,371,104 40,000 16,901,608 16,725,821 39,765 16,765,586 (4,197) 34,398,920 63,436 34,462,356 128,020 5,434,775 117,706 5,552,481 57,085,754 1,001,016 136,944 1,137,960 101,374,823 1,829,944 11,700,029 186,644 13,716,617 224,373,560 5,709,157 39,212,754 1,389,987 46,311,898 313,324,302 5,396,474 15,750,886 2,231,538 23,378,898 179,166,495 5,278,901 15,678,389 22,437,891 43,395,181 (26,493,573) $ FY 08/09 $ - 45,490 - 29,980 - 943 - 80,162 - 100,888 - 102,888 - 91,519 - 650,492 10,945,204 (20,078,532) (9,518,863) (2,083,503) - 45,490 29,980 943 80,162 100,888 102,888 91,519 (20,085,202) 55,850 - - - 55,850 $ 41,293 $ 158,000 $ 57,086,697 77,109,027 $ 178,564,012 $ 224,474,448 $ 313,427,190 130,496,339 - 72,863,699 25,381,955 52,627,944 - $ 309,754,353 $ 104,294,823 Source: Valley Metro Rail, Inc Finance Division (1) Valley Metro Rail, Inc. was established in October 2002. All light rail activities prior to October 2002 were recorded in the financial records of the Regional Public Transportation Authority (RPTA). The amounts shown here for FY 02/03 were reported in both RPTA and METRO financial records and were combined to show the complete transit amount. (2) Prior to FY 04/05, all CP/EV project costs, except for the cost of computers, equipment, and certain other capital assets, were recorded as operating expenses. (3) CP/EV LRT project costs incurred prior to FY 04/05 for project preliminary engineering and project management were contributed to METRO during FY 04/05. These costs, totaling $77.1 million, were originally paid for by member cities or federal grants and were included in Administration and Planning Services expenses for the year incurred. 27 Valley Metro Rail, Inc. Growth in Regional Transit Usage – Regional Bus and Rail Boardings Last Ten Fiscal Years Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Boardings 37,496,804 40,011,099 45,103,085 50,319,003 54,013,410 56,358,335 59,253,904 58,020,189 61,866,819 71,251,664 Change 0.35% 6.71% 12.73% 11.56% 7.34% 4.34% 5.14% -2.08% 6.63% 15.17% Valley Metro Regional Bus and Rail Boardings by Fiscal Year Fixed Route System Five Year Growth rate 26.4% 75,000,000 71,251,664 70,000,000 Rail Boardings 65,000,000 Bus Boardings 60,000,000 56,358,335 Annual Rides 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 2000 2001 2002 2003 2004 2005 Fiscal Year Source: Regional Public Transportation Authority 28 2006 2007 2008 2009 Valley Metro Rail, Inc. Member Cities’ Population Growth Last Ten Fiscal Years Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Chandler 176,581 189,498 201,263 211,984 224,644 238,930 241,910 247,100 247,100 244,376 Glendale 213,235 218,812 227,614 231,288 233,000 235,987 235,987 246,382 248,731 248,435 Mesa 410,797 420,525 431,874 434,585 445,354 451,223 455,151 460,155 463,397 459,682 Peoria 108,364 115,432 122,655 126,815 132,805 137,045 145,125 158,227 158,227 155,560 Phoenix 1,289,125 1,352,394 1,375,906 1,455,440 1,492,420 1,525,400 1,560,380 1,595,260 1,630,340 1,561,485 Scottsdale 202,495 211,280 215,320 218,940 222,880 225,680 237,510 240,410 242,790 242,337 Tempe 161,995 158,625 159,425 159,426 159,615 160,820 165,796 166,625 167,458 172,641 Valley Metro Rail, Inc. Member Cities' Population Growth 1,800,000 1,600,000 1,400,000 Population 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2000 2001 2002 Chandler 2003 2004 2005 2006 For the Years 2000 through 2009 Glendale Mesa Source: Maricopa Association of Governments 29 Peoria Phoenix 2007 Scottsdale 2008 Tempe 2009 Valley Metro Rail, Inc. Top Employers in Maricopa County For the Fiscal Year Ended June 30, 2009 Employer Employees State of Arizona Wal-Mart Banner Health Systems Cit off Ph City Phoenix i Maricopa County Wells Fargo Arizona State University Honeywell Aerospace US Postal Service Bashas' Inc. Motorola, Inc. Banc One Corp American Express Allied Signal 50,936 32,814 23,100 17 068 17,068 14,014 14,000 13,005 12,600 10,545 10,460 2009 Rank % of Total 1 2 3 4 5 6 7 8 9 8 2.44% 1.47% 0.83% 0 70% 0.70% 0.69% 0.68% 0.62% 0.52% 0.54% 0.57% 2000 Rank % of Total 63,961 11,900 9,000 13 300 13,300 12,963 1 5 7 3 4 4.19% 0.78% 0.59% 0 87% 0.87% 0.85% 10,772 6 0.71% 18,500 9,000 9,000 9,000 2 7 7 7 1.21% 0.59% 0.59% 0.62% Employees 2009 - Employees (000s) 10.5 10.5 12.6 50.9 13.0 14 0 14.0 32.8 14.0 14.4 23.1 State of Arizona Wal-Mart Banner Health Systems City of Phoenix M i C t Maricopa County W ll F Wells Fargo Ai St t University U i it Arizona State H ll A Honeywell Aerospace US Postal Service Fry's Food & Drug Source: Phoenix Business Journal Book of Lists; Greater Phoenix Economic Council; Arizona Department of Economic Security. 30 Valley Metro Rail, Inc. Initial 20-Mile Segment Initial 20-Mile Segment Source: Valley Metro Rail, Inc Project Development Division 31 Valley Metro Rail, Inc. Northwest Extension Northwest Extension Source: Valley Metro Rail, Inc Project Development Division 32 Valley Metro Rail, Inc Full-Time Equivalent Positions Source: Valley Metro Rail, Inc Finance and Administration Division Grade RPTA Position Titles FY 2006 Authorized FTEs FY 2007 FY 2008 FY 2009 III Administrative Support Assistant 1 1 1 1 IV Accounting Technician Administrative Assistant 1 5 1 6 1 6 1 6 VI Paralegal TES Worker 0 1 1 1 3 VII Accountant I Executive Assistant Materials Handler Network Support Specialist Planner I Procurement Specialist Systems Electronic/Communications Maintainer TES Maintainer Track Maintainer 1 3 1 3 1 3 1 1 1 1 1 1 1 2 1 1 0 0 6 3 6 Document Control Supervisor D tC t lS i Executive Administrative Coordinator Information Technology Systems Specialist Maintenance Scheduling Materials/Warranty Coordinator Sr Communications Specialist Utility Relocation Specialist Warranty Administrator 1 0 0 1 0 0 1 0 1 0 1 0 1 1 0 1 1 1 IX Accountant II Area Coordinator Contract Administrator Planner II Supervisor, Facility Maintenance Supervisor, Track Maintenance Systems Electronic/Communications Technician TES Lead 1 1 1 1 1 1 1 1 1 2 1 1 1 2 1 2 1 1 4 3 X Lead Technician Network Systems Engineer Program Control Specialist Senior Contract Administrator Signals/Communications Maintenance Supervisor TES Supervisor 0 0 1 1 2 1 2 1 2 1 1 1 2 1 1 1 1 1 1 1 1 VIII XI Public Arts Administrator Public Information Officer Rail DBE Program Manager 33 1 1 1 1 1 1 1 1 1 1 1 Valley Metro Rail, Inc Full-Time Equivalent Positions Source: Valley Metro Rail, Inc Finance and Administration Division Grade RPTA Position Titles FY 2006 Authorized FTEs FY 2007 FY 2008 FY 2009 XII Communications Manager Rail Marketing Manager Rail Public Involvement Manager Rail Real Estate Manager Rail Senior Engineer (PE) Rail Senior LRV Engineer (PE) Rail Senior Program Control Specialist Rail Utility Manager 1 0 1 1 1 0 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 0 0 1 0 1 1 1 1 0 0 1 XIII Contracts and Procurement Manager Finance and Budget Manager Manager of Construction Manager, Systems and Facility Maintenance Rail Capital Project Schedule Manager Rail Maintenance Manager Rail Operations Manager Rail Project Manager, Facilities Engineer Rail Project Manager, Planning Rail Quality Assurance Manager 1 1 0 0 0 1 1 2 1 1 1 1 0 0 0 1 1 2 1 1 1 1 1 1 1 1 1 2 2 0 1 1 1 1 1 1 1 2 2 0 XIV Rail O & M Startup/Activation Manager Rail Safety and Security Chief Rail Systems Engineering Manager 1 1 1 1 1 1 1 0 1 1 0 1 XV Rail Community Relations Director Rail Finance & Administration Director Rail Safety, Security, and Quality Director 1 1 0 1 1 0 1 1 1 1 1 1 XVI Rail Design & Construction Director Rail General Counsel Rail Operations & Maintenance Director Rail Project Development Director 1 1 1 1 1 1 1 1 1 1 1 1 1 ED Rail Chief Executive Officer 1 47 1 51 1 57 1 91 34 Valley Metro Rail, Inc. Schedule of FY 2009 Adopted Pay Grades and Ranges For the Fiscal Year Ended June 30, 2009 Grade Pay Range RPTA Position Titles III Administrative Support Assistant $27,626 - $41,439 IV Accounting Technician Administrative Assistant $30,696 $30,696 - $46,043 $46,043 VI Paralegal TES Worker $37,142 $37,142 - $55,712 $55,712 VII Accountant I Executive Assistant Materials Handler Network Support Specialist Planner I Procurement Specialist Systems Electronic/Communications Maintainer TES Maintainer Track Maintainer $40,856 $40,856 $40,856 $40,856 $40,856 $40,856 $40,856 $40,856 $40,856 - $61,284 $61,284 $61,284 $61,284 $61,284 $61,284 $61,284 $61,284 $61,284 VIII Document Control Supervisor Executive Administrative Coordinator Information Technology Systems Specialist Maintenance Scheduling Materials/Warranty Coordinator Utility Relocation Specialist Warranty Administrator $44,942 $44,942 $44,942 $ $44,942 $44,942 $44,942 $44,942 - $67,413 $67,413 $67,413 $ $67,413 $67,413 $67,413 $67,413 IX Accountant II Area Coordinator Contract Administrator Planner II Supervisor, Facility Maintenance Supervisor, Track Maintenance Systems Electronic/Communications Technician TES Lead $49,435 $49,435 $49,435 $49,435 $49,435 $49,435 $49,435 $49,435 - $74,154 $74,154 $74,154 $74,154 $74,154 $74,154 $74,154 $74,154 X Lead Technician Network Systems Engineer Program Control Specialist Senior Contract Administrator Signals/Communications Maintenance Supervisor TES Supervisor $54,380 $54,380 $54,380 $54,380 $54,380 $54,380 - $81,569 $81,569 $81,569 $81,569 $81,569 $81,569 XI Public Arts Administrator Public Information Officer Rail DBE Program Manager $59,818 $59,818 $59,818 - $89,726 $89,726 $89,726 Source: Valley Metro Rail, Inc Finance and Administration Division 35 Valley Metro Rail, Inc. Schedule of FY 2009 Adopted Pay Grades and Ranges For the Fiscal Year Ended June 30, 2009 Grade Pay Range RPTA Position Titles XII Marketing Manager Rail Public Involvement Manager Rail Real Estate Manager Rail Senior Engineer (PE) Rail Senior Program Control Specialist Rail Utility Manager $65,799 $65,799 $65,799 $65,799 $65,799 $65,799 - $98,698 $98,698 $98,698 $98,698 $98,698 $98,698 XIII Contracts and Procurement Manager Finance and Budget Manager Manager, Signals, Communications, and Traction Power Rail Manager of Construction Rail Schedule Manager - CP Rail Maintenance Manager Rail Operations Manager Rail Project Manager, Facilities Engineer Rail Project Manager, Planning $72,379 $72,379 $72,379 $72,379 $72,379 $72,379 $72,379 $72,379 $72,379 - $108,568 $108,568 $108,568 $108,568 $108,568 $108,568 $108,568 $108,568 $108,568 XIV Rail O & M Startup/Activation Manager Rail Systems Engineering Manager $81,992 $81,992 - $122,987 $122,987 XV Rail Community Relations Director Rail Finance & Administration Director Rail Safety, Security, and Quality Assurance Director $106,589 $106,589 $ $106,589 - $143,874 $ $143,874 $143,874 XVI Rail Design & Construction Director Rail Operations & Maintenance Director Rail General Counsel Rail Project Development Director $117,246 $117,246 $117,246 $117,246 - $165,355 $165,355 $175,869 $165,355 ED Chief Executive Officer Salary Negotiated Source: Valley Metro Rail, Inc Finance and Administration Division 36 Valley Metro Rail, Inc. Schedule of Insurance Coverage For the Fiscal Year Ended June 30, 2009 Source: Valley Metro Rail, Inc Contracts and Procurement Division Valley Metro Rail, Inc (METRO) employs the firm of Arthur J. Gallagher Risk Management Services, Inc. as its broker for the purchase of insurance. METRO's commercial insurance program consists of the following: Policy # KTKCMB2700C786 Coverage Commercial Propety QT6605832B527 Inland Marine - Rolling Stock QT6605831B008 Inland Marine - Town Lake Bridge 121112951002 DIC - Excess Flood and EQ Town Lake Bridge g Commercial Crime CCP00637982 1337270814 7251907 Auto Liability and Physical Damage Primary Excess Liability 71P3000014081 Excess Liability - 2nd Layer Quota Share with AWAC C011008001 Excess Liability - 2ne Layer Quota Share with Everest National ENU736241/01/2008 Excess Liability - 3rd Layer Limits 127,637,941 TIV 10,000 Deductible 5,000,000 Flood & EQ 100,000 Deductible 150,660,000 TIV 100,000 Deductible 22,581,224 TIV 5,000,000 Flood & EQ 100,000 Deductible 15,000,000 per Occurrence x/o 5,000,000 1,000,000 Limit 10,000 Deductible 250,000 CSL 2,000 Comp & Coll Deductible 10,000,000 per Occurrence 10,000,000 Aggregate 250,000 SIR 10,000,000 per Occurrence 10,000,000 Aggregate part of 25,000,000 x/o 10,000,000 and SIR Policy Term 12/18/08 to 12/1/09 Premium $128,614 Carrier Travelers Indemnity Co. 12/18/08 to 12/1/09 12/18/08 to 12/1/09 $143,643 Travelers P&C Insurance Co. Travelers P&C Insurance Co. 12/18/08 to 12/1/09 12/18/08 to 12/1/09 12/18/08 to 12/1/09 $39,924 ACE/Westchester Fire $2,582 Fidelity & Deposit Co. of Maryland United States Fire Insurance Co. 12/18/08 to 12/1/09 $389,570 Insurance Co. of the State of PA 12/18/08 to 12/1/09 $80,087 Everest National Insurance Co. 15,000,000 per Occurrence 12/18/08 to 12/1/09 15,000,000 Aggregate part of 25,000,000 x/o 10,000,000 and SIR $120,132 Allied World Assurance Co. 12/18/08 to 12/1/09 $153,497 AXIS Surplus Insurance Co. 25,000,000 per Occurrence 25,000,000 Aggregate x/o 35,000,000 and SIR 37 $34,432 $64,110 Valley Metro Rail, Inc. Schedule of Insurance Coverage For the Fiscal Year Ended June 30, 2009 Valley Metro Rail, Inc (METRO) employs the firm of Arthur J. Gallagher Risk Management Services, Inc. as its broker for the purchase of insurance. METRO's commercial insurance program consists of the following: Policy # MH720642 Coverage Excess Liability - 4th Layer Share with Great American Limits Quota 25,000,000 per Occurrence 25,000,000 Aggregate part of 40,000,000 x/o 60,000,000 and SIR EXC2195605 Excess Liabiity - 4th Layer Quota Share with Swiss Re 15,000,000 per Occurrence 15,000,000 Aggregate part of 40,000,000 x/o 60,000,000 and SIR 181623 BE2860717 C0036651001 6348122 37312354 EOC539601300 200181 200180 Workers Comp & Employers Liabiilty WC - Statutory EL - 1,000,000 Owners/Contractors Protective 15,000,000/Occurrence (Project Policy) x/o 10,000,000 10 000 000 SIR Owners/Contractors Protective 25,000,000/Occurrence (Project Policy) x/o 15,000,000 and SIR Owners/Contractors Protective 50,000,000/Occurrence (Project Policy) x/o 40,000,000 and SIR Pollution Legal Liability (Fixed-site 5,000,000 each Pollution coverage) Incident 5,000,000 Aggregate 25,000 Deductible Owners Protective Professional 20,000,000 each Claim Indemnity 20,000,000 Aggregate 20,000,000 SIR Contractors Environmental 25,000,000 per Accident Protection 50,000,000 Maximum Pollution Legal Liability (Fixed-site 25,000,000 per Accident coverage) 50,000,000 Maximum Policy Term 12/18/08 to 12/1/09 12/18/08 to 12/1/09 Premium $102,493 $61,469 3/1/07/08 Carrier Swiss Re International SE Great American SCF of Arizona 6/24/04 to 2/24/09 6/24/04 to 2/24/09 6/24/04 to 2/24/09 12/1/07-12 $1,050,000 $31,278 Chubb Custom Insurance Co. 12/16/02 to 5/1/09 $483,000 Steadfast Insurance Co. 6/24/08-09 $380,032 Quanta Specialty Lines 6/24/08-09 $432,893 Quanta Specialty Lines 38 $450,000 $450,000 National Union Fire Insurance Co Co. Allied World Assurance Co. Starr Excess Valley Metro Rail, Inc. Design & Construction Milestones PRE-INCORPORATION ACTIVITIES November 2000 - Final light rail alignment approved February 2001 - Project opens community office for the public September 2001 - City of Phoenix purchases first property for the light rail system at Camelback Road and 3rd Avenue. December 2001 - Project receives first Recommended rating from the Federal Transit Administration (FTA) in its New Starts Report. October 2002 - Valley Metro Rail, inc. is incorporated. VALLEY METRO RAIL, INC. ACTIVITIES July 2003 - METRO receives formal approval from the FTA for the light rail project to enter the Final Design phase. The approval allows designers to finalize the construction plans during the coming months, begin utility relocation, and request early approval to begin purchasing light rail vehicles and construction materials. August 2004 - The METRO board approves the METRO Business Outreach Plan to help minimize the impacts of light rail construction on businesses located along the light rail transit alignment. November 2004 - A groundbreaking ceremony is held for the reconstruction of an access bridge over the Grand Canal at 48th Street that leads to the light rail Maintenance and Storage Facility. January 2005 - Full Funding Grant Agreement signed for the Central Phoenix East Valley (CPEV) Light Rail Project. (20 mile initial operating segment) April 2005 - METRO Max program launched, business support program encouraging residents to patronize businesses impacted by light rail construction. May 2005 - First embedded track in downtown Phoenix is placed at Central and Van Buren. August 2006 - Tempe Town lake Bridge completed. March 2007 - Operations and Maintenance Center completed. Testing, training and Light Rail Vehicle final assembly activities commence. March 2007 - Structural steel is erected on the first METRO station at Van Buren Street and First Avenue. March 2007 - Phoenix City Council approves funding for Northwest Extension December 2008 - Central Phoenix East Valley Light Rail Project (Initial 20 Mile Segment) construction completes on-time and within budget. January 2009 - Rail Passenger Operations commence; Ridership planned for 26,000 passengers per day reaches over 40,000 daily passengers in April 2009. June 2009 - Award to METRO CPEV Light Rail Project: Public Works Project of the Year – American Public Works Association, Arizona Chapter Source: Valley Metro Rail, Inc. Finance and Administration Division 39