Report 95121 Summary - February 1996

Orange County Transportation Authority

:

An Analysis of Its Financial Resources and Obligations

HIGHLIGHTS

We found that:

Results in Brief

The Orange County Transportation Authority (OCTA) was established in 1991 by state law as the consolidation of several agencies responsible for providing transportation planning and services within Orange County (county). OCTA oversees transportation services throughout the county.

Since its inception, OCTA has received more than $2.1 billion from various revenue sources and spent approximately $1.7 billion on operations, capital projects, long-term debt, and possible losses resulting from the county's bankruptcy. The use of approximately 98 percent of OCTA's fiscal year 1994-95 revenues is limited to transportation purposes. Interest earnings and miscellaneous revenues not restricted by statutes, contracts, and official statements of debt previously issued make up the remainder of the revenues.

As of June 30, 1995, OCTA's outstanding long-term debt was approximately $698 million with annual debt service requirements of approximately $69 million.

Based on legislation approved by the governor in October 1995, OCTA and the county exchanged revenue sources that can be used only for various transportation purposes. The purpose of the legislation was to aid in the county's recovery from bankruptcy. The net result over the 17 years of the mandated exchange will be a $202 million loss in revenues to OCTA.

The OCTA Board of Directors (board) approved a plan to address both the $38 million initial revenue loss in fiscal year 1996-97 and the $15 million annual loss that begins in fiscal year 1997-98. The board proposes covering the initial revenue loss primarily with $33 million from previously received Transportation Development Act (TDA) sales tax revenues. It proposes covering the annual $15 million loss for fiscal years 1997-98 through 2010-11 with an annuity funded by a onetime transfer of $68 million from TDA funds from its commuter rail programs and $5.7 million from other unrestricted revenues. Principal plus interest from this funding will provide $8 million annually. Another $4.4 million represents cost savings and funding allocation reductions. The remaining $2.6 million annual shortfall will be addressed as part of OCTA's long-range financial plan update in November 1996.

After addressing the revenue loss, approximately $69 million remains from OCTA's $174 million in unrestricted funds as of June 30, 1995, that may be used for various transportation purposes. TDA funds comprise $48 million of the $69 million. However, OCTA has outstanding contracts for future services against TDA funded operations totaling $57 million. Most of the $48 million was on deposit in OCTA's urban rail fund for future projects. On July 24, 1995, the board authorized the transfer of more than $50.6 million in cash and collateral from the urban rail fund to other funds with short-term operating needs. The transfer removed all cash from the urban rail fund. The urban rail fund, which is not projected to have a need for operating cash until after the year 2000, received settlement secured and repayment claims in return for the cash and collateral. Moneys used to account for OCTA's internal risk management activities comprise the remaining $21 million of the $69 million.

Agency Comments

OCTA agrees with our report.