At 43 million twoyear shortfall we needed to close. This is just a little context of kind of where that baseline comes from. On the revenue side, it assumes all of the indexing of the fees, fares and fines per board policy. There are some funds that come in that flow through the operating budget for capital use such as prop b, the population baseline as well as Development Fees and state capandtrade funds. We are assuming that the sb1 funds that i referred to earlier will be there. We have made other assumptions you can see here in terms of the revenue side, including the continuation of free fares. Were going to walk through fare proposals. One thing that i dont think i mentioned last time and were not currently showing, we have received requests from a couple of members of the board of education that we consider expanding our free muni for Youth Program to all youth, not just low or moderate income youth. What this budget assumes is continuation of the free budget fare programs as they are. What really drives the expenditure numbers are that we have already negotiated 3 increase in the first fiscal year of this 2year budget. And were using 3. 4 number in the second year based on numbers that we get from the controllers office. So those, as well as the pension numbers and the other indexing that lays on top of that for nonpersonal services is what drives our expenditure growth. So since we first developed that 43 million baseline, there have been some adjustments that we have been able to make. One is the general fund baseline. The 9month report i believe will come out in march and we may get further, hopefully further good news from the general fund. But well continue to update the general Fund Projections that we get from the city. But weve been able to do so since we created our first baseline. There are some changes, such as the change we made with the stockton garage that impacts the revenue and the expenditure side. And there is weve Just Incorporated other more current estimates on revenue and expenditures than we had when we first created the baseline. Thats brought the projected shortfall down to just shy of 31 million. We need to close the 31 until million gap, but there is other stuff we would like to or need to do. One is to integrate the Muni Service Equity strategy into our Service Programs and i think well have another slide on that. But this is per board policy that we implement whatever comes out of the the process. There are a number of Service Changes were poised to make, such as the opening of the central subway in december of 2019. The expansion of the rail fleet. We should have 24 in service by the summer. And 68 through the end of this twoyear budget cycle. We have a new bus division that well be opening up this summer to address the expansion and the bus fleet in the bus service were putting in place over the last two years. We will need to continue to invest in maintenance and modernizing the maintenance practices. And as weve talked about before, continuing to train our workforce as the demands on the workforce change as technology and other factors come into play. So depending on how you look at that, its on order of 60 million a year of things wed like to do on the transit side that are not included in the baseline. Just to spend a minute on this. Youll recall the muni equity strategy charged us to look at these eight neighborhoods, look at their Transit Service relative to the systemwide average and where we saw deficiencys to make changes. That process is currently under way. Well come to the board next month with the recommendations from the muni strategy as per the board policy and will need to incorporate those and make space for those into the budget. I did want to note for you, that our fund balance remains healthy. We have a policy that we keep 10 of the operating budget in reserve, which is getting toward 110 million. Our current projected balance is nearly double that. We did that dip down you see in the last year, was because i recommended and you authorized expenditure of fund balance dollars for onetime needs. But it still leaves us in a Pretty Healthy position and thats 13 million of good news we have on the general fund, just 13 million thadz goes into the fund balance because we dont have the authority to spend those funds. You can expect that we will again be proposing some strategic use of fund balance for onetime purposes but still leaving us with a healthy reserve and above the 10 reserve requirement. So i guess i just hinted on the first thing on the revenue side, weve not yet assumed any use of fund balance. So thats one tool we have in the kit. And any other new or increased revenue that weve not captured is still out there. As i said, when the general fund report comes out next month there could be more good news on their projections for the next two years in terms of amount of general fund we have available that there are other items at play that could positively or negatively impact us as well. On the expenditure side, aside from the transit issues that we discussed that are not in the baseline, there are a number of different items here we have not fully incorporated that we will either need to incorporate or need to make changes. I wont go through all these, but these are the things that as we get closer to Getting Better numbers on what our needs are going to, internally and from other agencies, these are going to impact the gap that we have to close. So, we will be looking at fund balance. As possibly part of the solution. For example, right now, we take some ongoing operating dollars and put them in the Capital Budget to use as reserves. So one thing we might do, rather than direct those dollars to the Capital Budget, use fund balance for the onetime needs in the Capital Budget and keep the operating funds in the operating budget. Likewise, the Population Based general fund baseline increase that prop b created is a source that has been fully going capital, but given that the biggest drivers of the gap in our budget is due to the increase service that we need to provide because of the growing population, it seems like potentially an apt use of the funds that are driven by population growth to direct those to ongoing muni Service Needs. On the expenditure side, ive already asked the divisions to identify ways they can trim their budgets without actually reducing staff. So we have a number of puzzles there and the transit division, the largest part of the budget, has come up with a number of different ways they might be able to better use the funds allocated or redirect some of the things, rather than buying parts that sit on a shelf, redirect those fund through better inventory and maintenance management. I do want to flag. I talked about the june ballot in the director report, but on the November Ballot will be a measure that will repeal senate bill 1 for us thats 27 million a year on the operating budget side. Somebody made comment about the condition of the streets, 23 million a year for street paving goes to public works from sb 1 as well as direct Capital Funds we get and other funds that we can compete for. So if were assuming that sb1 is not repealed and its passed, thats our assumption in the budget, that is a risk that would change what were programming these funds for if the funds go away. There are potential risks. The biggest one is the economy. Its a risk that we would have to manage once the budget is under way as we would an sb1 repeal or whatever we end up negotiating with our labor partners for that second year for which we have just place holder amounts right now. So we walked through a number of proposed fare policy changes. These would be deviations from the standard indexing. And so ive asked again our revenue manager Diana Hammonds to update you on the thinking and answer questions about the proposals that you all raised back in january. Good afternoon. Members of the board, as director mentioned, a lot of the information will be familiar to you from the budget workshop, but well go more in depth on some of the items. Just a reminder of the pricing of the fares. There should be goals that we look at in addition to just generating revenue. What were looking at is incentivizing transit ridership, prepayment, promoting equity. I just wanted to remind everyone that there is a title 6 Equity Analysis done in conjunction with fare increases so that will come at a later date. On the next slide, this is just a reminder of the great work that has been done over the last five years, really making the sfmta a leader across the country in terms of providing low income access to Transit Service by reducing many of our fares, providing free muni for seniors, people with disabilities, youth. And on the other side of that, we also have tried to equalize our fares for folks who are not lowincome, so weve done that through establishing discounts for all nonfree muni customers. Maybe didnt achieve the goals that we hoped for. And on the single fare increases we talked about where we are seeing movement, eliminating the cash transactions, have an update on that information. I think the packet may include that. Were seeing progress over the last six months. That is encouraging and were recommending consideration of holding that discount for clipper and muni mobile customers and increasing that differential. And then in terms of monthly passes, as i mentioned, the apass is where weve seen some transition of customers away from the product which provides a Great Service of options for customers within the city to use bart instead of muni. As noted, 28 drop in sales over the last five years which is pretty significant. So we are a couple of options, establishing a dollar amount as a cap, maybe a percentage at a cap. Another option could be a dollar amount with a percentage increase on that. This shows, if you have a percentage, its going to grow at a high are rate, we may be in the same place we are right now at some point. And then the next slide responds to questions. I believe director borden, you may have asked what the pass members are doing right now . We dont want to put policies in place that push people out of the prepayment options. This shows that most of our customers are kind of within a 2536 area. The folks who may not be using maybe as many trips as you think there is, some convenience that comes with purchasing the monthly pass and you dont have to think about it. That could be one reason. And then if you look at the numbers there, so currently what our pass is priced at is the equivalent of 30 trips. 15 round trips a month. Our indexing proposal for the monthly passes would bring that to 31 and then back down to 29. But the overall majority of the customers take more than 36 trips. Weve looked at the numbers for the last five years and dont see within the ranges where weve been, that there is really any transition of customers. Once you get kind of above the 3640, we might see that, but i think were in a safe place right now. On the visitor passports and cable cars, last time we brought to you a proposal that would have the significant reduction shown on the muni mobile and clipper side. What were showing is alternative here is potentially having that discount also for the in person sales, so again, its another option to look at. We really do want to encourage prepayment on this area. So be looking for direction from you folks on this. What this new alternative shows is using that cash fare differential model for the single trips as the basis for those, thats why you see a little bit of a difference there. We are looking at these fares in terms of how we think the customers are using the passes. Maybe not assuming that people in one day are taking cable car trims and three or four muni trips, but pricing them at a rate that makes them a benefit for people to use. One of the questions that did come up on the visitor passport was the idea of a family pass. We did find that at least on our muni mobile side that 98 of folks are purchasing three or less passes. And also, with the significant change were proposing, there is actually a discount already embedded in what were proposing because it would lower oneday passport from 92 to 48 for a family of four. So at this point, you know, the discounts are pretty significant even if we still do the single products. Again, we talked about introducing the lowincome single ride fare that is under discussion in the regional level. This would allow the existing lifeline customers to have the option of using single ride discounts instead of what we have now which is a monthly pass. It can be difficult for people to come up with the money at one time, so having single rides does benefit a larger percentage of customers. This is at the regional level. Were hopeful that this will be an option. And looking at maybe 1218 months that Something Like this would be implemented. And then something new that we want to try out, we have heard a lot from the cac and other stakeholders, about having a oneday pass that would not only does it make it more attractive of a product to folks who may not ride enough to use a monthly pass, but also if you already paid for that pass and maybe youre taking a third trip, youll go ahead and use muni instead of other options because its already paid. What we were looking at here is what is the right pricing for it . There was a question also that came up bebudget workshop, will we be losing money if we price it at a certain point . But what we found is 98 of the customers are using two or less trips on clipper with their purchasing single rides. So we feel still that between the 22andahalf multiplier that would be a good place for that. A couple of things we didnt talk about was bulk sales discount, this goes to the point of prepaid fares. Right now we have third party vendors, we have a commission, 75 cents for every item they sell. Its on consignment and there is a lot of account management, but we also have large tour groups and other conventions or things like that that call us and ask us, what kind of discount, if they want to buy a thousand tickets and we dont have a process for discounting that. And i think that would be a huge benefit because its easier to do one transaction, have them distribute them instead of having folks wait in line at our kiosk. This would go a long way in helping with the prepayment. The next one is the institutional pass program which you may be familiar as the class pass. That is the model where it exists right now. Basically its a revenue neutral model where you take the population, figure out how many people are riding muni and distribute the cost out across everyone. The requirement is that everyone has to pay. An example of this is the expansion to sf state which is probably, it is our Biggest Program to date. We have 30,000 students that participate, they pay this fee as part of their registration. Although there is an assumption that some folks wont use it, there is the hope that if they have it paid, theyll decide to use it. And so what were looking at Going Forward is that instead of having a very strict monthly rate that were able to work with different institutions, organizations, maybe even special events to use that model and to be able toll have that flexibility to enter into agreement with them. Again, this is just a summary of the options that weve talked about. And then the next. Page, we have questions. I answered some of them in the presentation, but just highlight some of the other ones someone had asked. We have about half of the monthly pass holders. Half of the trips are made by monthly pass holders. It does detail how many rides were assuming for the pricing, it makes a little more sense in terms of what the customers are doing. Then there was questions about working with hotels and other organizations to build that cost in. And there are relationship there was are built definitely have talked with communications and theyre looking at expanding that role. Its not kind of the target group weve worked a lot with, so hopeful that those relationships will continue to grow. Again, i answered the question about that already. Lowincome single ride fares, we have a great system in place to process lowincome eligibility, partner with the Human Services agency. So thats not a problem. In terms of fiscal sponsor, a question that came up, i think we probably all could understand that its not something that could be depended on, it would take a very significant effort to try to keep culminating that and its not guaranteed so that could lead to a sizeable gap in the budget if it didnt come through. So not something that our agency is focused on. I think the rest of the questions were answered already in the presentation. Thank you. Director, would you like to go on with the rest of the presentation, or like me to pause for board input on the fares . Why dont we finish up with at least the cable cars, just responding to the last part of the fare conversation and then it would good if the board had questions. Excellent, lets do that then. During the budget workshop we heard loud and clear from all of you youre very interested in our agency moving toward a place where we eliminate the cash from the cable car. Internal stakeholders, transit communication, revenue, we have got together and feel like this is something we can do. Laying out a timeline for this. Hopeful for maybe an early fall 2019 rollout. It will take a significant commitment. Primarily on the communications side, so working to develop budget, resource. What that would look like. Really enhancing our relationships with the Tourism Industry and hotels. These are the important things to make sure folks know what the rules are before they get here. So we felt pretty confident about that. Were going to continue to meet. And that will be our goal. 18, 24 months to get something in place. Chairman brinkman thank you, i think that is wonderful. I think we did hear that clearly from the board that moving toward cashless cable cars would be something we would definitely all support. I want to just pause here so we can go through these. If we flip back to page 37 where we have the fare change options all laid out. I think it might be a Goo