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Th <br /> Revenue and Cost Projections <br /> Baseline Cost Projections <br /> Cost projections for both operational and capital expenditures were developed to assess the implications <br /> for the Long Range Plan and future service levels. Operational cost projections applied growth rates for <br /> individual expenditure items on a revenue hour basis -such as wages, maintenance, professional services, <br /> and fuel expenditures - for each program through 2040. Capital cost projections are based on Everett <br /> Transit' six-year Capital Improvement Program (CIP) and assumptions about vehicle replacement and facility <br /> needs through 2040. Projected costs over the next twenty years are reflected in the "Baseline Scenario," <br /> where current operations and levels of service are assumed to remain unchanged. <br /> Operational cost projections assumed future annual growth rates mostly based on the expenditures for the <br /> previous 10-year period (2007-2016). However, some line items used rates from a five-year trend,or other <br /> assumptions, to account for large differences in 2007 and 2016 expenditures (positive and negative)that <br /> are not likely to continue over the next 20 plus years.Additionally, a minimum capital investment is required <br /> in order to replace the fleet as vehicles age out of service.Those capital costs are included in the annual <br /> operating costs. <br /> Overall, operational costs are projected to increase by about$51 million by 2040 with an average annual <br /> growth rate of 5.4 percent(including required capital investment such as fleet replacements).The large share <br /> of the growth in expenditures is from Fixed Route service due to assumed growth rate of wage and benefit <br /> expenditures. In 2016 Fixed Route wages and benefits totaled $8.5 million. By 2040 wages and benefits are <br /> projected to increase to $37.3 million, over half of all expenditures. <br /> Baseline Revenue Projections <br /> Everett Transit's sales tax revenues were projected over the planning period by regressing Everett Transit <br /> sales tax revenues against the Snohomish County sales tax base.This allows revenue projections to make <br /> use of a forecast of the Central Puget Sound economy that produces estimates of the Snohomish County <br /> retail sale tax base and other variables of interest.The regression model controls for changes in the Everett <br /> Transit sales tax rate,which also permits direct estimates of revenue yield from rate changes.The method <br /> also provides confidence intervals around the point estimates of the coefficients from the models.These <br /> confidence intervals were then employed in the development of low- and high-range estimates of revenue <br /> yield. <br /> The revenue projections estimate total operating revenue in 2040 of over$56 million in nominal dollars. <br /> Sales tax revenues grow to an even larger share of Everett Transit's revenue base. In 2016 sales tax revenues <br /> were 79 percent of total revenues. By 2040, sales tax revenues would be 85 percent of total revenues. <br /> 9 9 <br /> 16 Connecting Your Future <br />