Finance and Audit Committee Meeting   12/22/2022

Due to unforeseen circumstances, we're not going to have a quorum of finance committee members today.

Something happened overnight, and that being said, we're not going to be transacting public business, so we're not going to be taking any actions.

That was never the plan for this committee meeting.

We will move forward, however, with treating this

as an informational briefing with the two finance committee members that are on with us and any other board members that may be joining online.

Thank you Steve.

Morning everyone.

I'm going to call the December 22nd meeting of the VPRA Finance Committee to order then touch briefly on the agenda.

We're going to hear from our auditors on the audit of the fiscal year 2022 books and then we're also going to have an extensive discussion on the 2024 draft budget where folks on the call here can certainly ask any questions and weigh in and take the opportunity to

Make sure your voice is heard.

I understand that the schedule now is for January 24th will be a meeting of the full board and at that time we'll be asked to approve the budget for submission to the Commonwealth Transportation Board for their weighing in.

That has to happen by February 1 so we're still on schedule to accomplish that but I just want to make clear plenty of opportunities for board members to weigh in before we take that action in late January.

Yes, thank you.

Your control on the slides.

So I do, we're going to start with our annual audit communication.

And before I introduce the team, I just, I gave you all a briefing, the last finance committee on our draft financial statements, and there were no significant changes from those.

So I'm not going to go back through those statements.

You've been sent the statements.

They've been online for over a month now, I believe.

So unless there are questions I'll be glad to answer.

I'm not going to go back through our statements at this time.

So with that being said, I would like to introduce Mr.

Rob Churchman.

He's with Cherry Becker.

He is the partner in charge for our audit here at the passenger rail authority.

Each year he has some required sets of communications to provide to the finance committee and also allow y'all to ask questions about the job that Mr.

Rob Churchman, he's with Cherry Backyard, he is the partner in charge for our incident here at the Virginia Rail Authority.

As Steve mentioned, the requirements of what type of entity it is, whether it be a large corporation, multinational, or a smaller non-for-profit hospital.

There are required communications from an audit tour to an auditee at the end of each audit.

They can either be written or oral, as we're doing here.

Obviously, we're going to talk orally about these communications.

Next slide, please.

One of the, and you're going to say, Rob, if you sit in other capacities on other boards, other organizations, you may have heard this before.

You say, Rob, what you're telling me, a lot of this stuff is, we know this, this is obvious.

Well, the standards don't presume that somebody has been part of the entire equation from start to finish or from year to year.

So I have to still reiterate certain things each year, regardless of how obvious it could be.

like my engagement team, or if they are not relevant to you because they're more relevant to a commercial entity or so forth, I still need to positively affirm to you that they aren't relevant and because the standards presume that they don't want you to think that if I don't talk about something that it's not important to you or it's not relevant, I have to positively affirm them each year.

So some of this is going to be very boring, straightforward, and not relevant to you, some of it's going to be very relevant to you in this environment.

One of the first things they want me to make sure you understand is, who are my core team members as part of our engagement?

Well, obviously, I'm the partner in charge of all services to the authority.

And I have on each of my jobs, regardless of what type of entity it is, I have a second partner.

He or she is our quality review partner, who is deemed with being at higher level, above the fray of an audit, above the

every day machinations of an audit to look at our work and our and the presentation of the financial statements and disclosures to make sure that they are meeting all the standards of audit standards, government audit standards and so forth.

And that was Scott Anderson.

Mike Reinhardt was my manager again this year, along with Ryan Evans was our senior again this year.

Next slide, please.

High level, these are the areas we're going to walk through.

Some of them look kind of ominous.

What do you mean misstatements?

Well, as I go through here, the key areas I talk about, the terminology is what is set in the standards.

So misstatements sounds ominous.

It's not in your case, but they require me to talk about anything we had suggested you adjust and things that we suggest you adjust.

Either you did correct or whether you decided and we decided they were immaterial

for corrections and so forth.

And then we have at the very end, one slide on some reporting changes that are happening to the overall government environment that are coming down the pike that I just like to make people aware of when I have an audience such as yourselves.

Next slide, please.

Okay, so this is the slide you want to have from your auditor.

This is the most important slide in the whole deck.

And it tells you that we audited your financial statements for fiscal year end of 2022.

and we found that they were fairly presented in all material respects in accordance with General Accepted Accounting principles.

We call it unmodified opinions.

It's a clean opinion.

And that's what you want to have from your auditors.

What you want to take home from school, put on your refrigerator with a big smiley face and a big old magnet that says, hey, look at me, I did a great job.

Well, you should be proud.

Not every set of financial statements are unmodified.

We also audited in accordance with government auditing standards because of the nature of your funding and so forth.

and we found we had no instances there of non-compliance or other matters to report.

Again, the perfect report you want to have from your auditors.

Next slide, please.

Under the audit standards, we're required to think of things, consider I should say better, areas where there could be a risk that a material misstatement could occur.

and what could cause that funding and so forth.

And we found we had new instances there of non-compliance rather than matters of report.

Again, the perfect report you want to have from your auditors.

Everything's going on great, but management decides to make this entry and make that entry and so forth.

Under the auditors, we're required to think of things and consider the results.

And they would develop areas where there could be a risk that a materialist could occur.

But we're required to consider that as we go through our testing and so forth.

By doing that, what did we do to make sure that that didn't occur, that we didn't see any evidence of that occurring?

Well, first of all, our professional judgment.

All the evidence we get from management, discussions on variances, control testing and so forth, we consider that.

We attain supporting documentation.

Management may say this, but then we get something that corroborates it from an external source or some other source.

We perform a test for suspicious activity.

In the standards, we have a term called professional skepticism.

And so whenever we're told something or seen something, we have to consider that we need to make sure we corroborate that, be skeptical.

So we make sure we do that.

We test journal entries to make sure journal entries aren't being made on a capricious basis, on a weird time of the month, the year.

consistently on every day or every like Saturday, every third Saturday, every month something's being made.

Does that look weird?

Does that appear proper?

And also consider that there could be bias in the estimates that Mayesh is making.

We consider all those items as we're going through our test where we found nothing of those occurring.

But just to make you aware that we do consider that as we go through our audit process.

Next slide, please.

This is strictly

from the standards.

I like to put this slide in here in my slide deck to make people aware of the control considerations and the definitions within the standards that we have to abide by.

And this is simply straight out of there.

I should have said earlier, my slide deck is made to be fairly usable by somebody who wasn't even sitting in on this conversation.

So I put information in here for background and to frame things.

And so this is strictly just a discussion of internal control

and what we have to do and what a deficiency is.

A deficiency is something that where people doing their normal course of business and their normal functions, it wouldn't allow them to prevent or detect a misstatement on a timely basis and so forth.

Next slide, please.

And having said that, there are two greater levels of weakness of deficiencies, material weakness and significant deficiency.

They're very similar.

Material weakness is, OK,

Did your controls not prevent or detect something that's material to the financial statements or could be material?

So the efficiency is same thing, except they aren't, it's not material, but something that those charge of governance really should be should be made aware of and so forth.

Well, the most important part of this slide is the bottom part.

We know that no deficiencies that we believe to be material weaknesses in our testing of your controls.

and again, this would be along with slide four, would be the slide you want to put on your refrigerator as a great A from your auditor at the end of the process.

Next slide, please.

As I mentioned on the second slide, the word misstatement, that sounds very ominous.

Well, we're required under the auto standards, unless something is very trivial, and that's not defined, in fact, that's auditor judgment, but unless it's trivial,

We're required to tell you about items that were A, either corrected, proposed by us and corrected by the client, or A, weren't corrected by the client, and we both agree that they're not material to impact the interpretation of the financials by an outside person.

In both cases, we had nothing to report in those categories for you.

Again, I guess like I said before, a slide you want to have that says yes,

The team over at the Authority is doing a great job.

They provided everything to us.

You've got statements that are fairly presented in all material respects.

Next slide, please.

I'm going to go into four slides here, and the four slides are going to depict the four items here on the slide.

And there are some things that are, again, these are required areas of communication under the standards, and some are very relevant and some aren't throughout the next four or five slides.

But the first one is, I need to make you aware that you implemented some generally accepted county principles this year for the first time.

Now, 87 here for leases, that was required by the entire government environment for the first time.

So that's nothing that's new just to you.

It was requiring to put on any leases you had on your books under the new standards.

Now, the other ones listed here, 68 and 75,

Those are new to you, not new to the overall government environment.

They were required back in 15 and 18, but they were new to you because of the newness of the organization.

And last year, in your first year, they weren't relevant because they didn't kick in with regards to the actual science methods and so forth.

So you had to report for the first time some pension and OPEB information in your statements.

We found also that the application of

As part of every audit, we're required to look at our clients and understand the related parties they may have, the transactions they have going on and so forth.

to make sure that they make sense, that they have what you would call a normal business purpose for happening, and that there is no transaction going between you and related parties that aren't properly disclosed or reflected in financial statements.

We found none of that happening.

We found that your relationships make sense and that they are properly disclosed and accounted for in the overall financial statement package.

Next slide, please.

We're also required to look at, from year to year, entities could get into some significance, maybe it's a bond refunding, maybe it's something else, or unusual transactions, maybe it's a public-private partnership or something that would be unusual for an entity like yourselves.

We're required to look into those and make sure we understand them, make sure they've been recognized properly in the statements, make sure they are properly disclosed and so forth.

We know to know, during our testing, we know to know items that we thought were significant and unusual that were outside the normal core business of your entity that aren't reflected in the financial statements and aren't properly disclosed.

Next slide, please.

Unless I'm talking to a school board, for example, for the funds of the individual students of the school,

and those are called the activity funds.

Those are on a cash basis.

There's no accrual accounting.

Unless I'm talking to someone like that, almost every set of statements is going to have some kind of estimate in it.

You can't, in full accrual accounting, you can't have something that's tied down to everything.

You can't have, everything doesn't have a bank deposit slip, something that's tangible you can tie to.

So you're going to have estimates.

In your case, you have estimates of

The allocation of your land and depreciable assets.

You have the capital asset lives for your assets.

OPEB and pension, as I mentioned in the previous slides.

Those are all estimates, especially the last ones, based on actuarial sciences.

We're required to look at those estimates and make sure that makes sense.

Make sure that they are comparable and consistent from year over year.

Make sure that they appear to be in accordance with general accepted accounting principles.

Actuarial Sciences, and so forth.

If you had an estimate for return on investments that was 12% but everybody else in the world is making six, we would have to say, we need to understand this.

Does that make sense?

That doesn't seem proper in your circumstance.

We're also required to make sure that your estimates make sense, frankly, in how your peer group looks.

Again, your OPEB and pension estimates are calculated the same as everybody else in Virginia for BRS.

but is your depreciable lives estimate makes sense based on what the asset is, what we've seen in other entities and so forth, your peers and so forth.

So I'm here to tell you that we found that your estimates make sense, that they appear consistently applied, that they weren't changed year over year to quote unquote, cook the books.

If you're a commercial entity, they can change your estimates for income taxes, they can change your estimates for inventory shrinkage.

because they want to have their net income be extra wide one year over year or they want to make themselves look great because they're trying to get some venture capital and so forth.

None of that happened here.

We found that they were consistently implied and they made sense from a prudent person's perspective that they were reasonable.

And again, I'm required to positively affirm that to you each year, even if this slide doesn't change for the next five years, I still have to tell you that

things are, things look reasonable and the estimates have not been, have been consistently applied.

Next slide please.

I'm required to tell you, for people that don't do this for a living, they think an audit is X and an audit is X but it's not Y and Z.

We perform an audit which is defined under the standards

procedures or standards and so forth tell us what to do, how to report.

There's other things that an accountant can do for you that aren't audit related.

One thing that we don't have it for you, but I'm required to let you know that we don't have it, is if we ever perform any non-audit services.

Those could be for a city or county that has federal funding that there's one step we have to do for some reporting to the federal government.

For an entity that is

that needs help with their financial statement preparation.

That would be a non-attest service, helping them get their numbers compiled and auditable and so forth.

So I'm required, if it ever happened with you, to let you know that we did have non-attest services.

We didn't have any this year, but from your view, this could change.

Again, I have an entity that just recently I've been serving for, oh, the better part of over a decade, and this year they needed some non-attest services to help them.

They had some departures.

in their core management.

They helped them pull some of their numbers together and so forth.

If that occurred, I'd make you aware that we did that work, that we still kept our independence with different safeguards in place and so forth.

But again, because the state is requiring me to let you know if this didn't happen, it didn't happen, I have to positively affirm to you it didn't happen.

The more important part of this slide is the right-hand side.

I give you several pieces of paper each year that go into your financial package.

The core part of that is they're not my financials, they're your financials.

And if I gave you those pieces of paper and I was not independent of you, they'd be useless.

If I wasn't sure that my firm, people that serve you, so forth, did not have any either, in fact, independence issues or appearance of independence.

That's an important thing to reiterate.

Independence is, in reality, I'm not independent of you.

Is my wife your controller?

No.

Okay, great.

That's not an issue.

Do I appear that I could be not independent?

Is my sister your marketing person?

That could give somebody the appearance that Rob may not be independent, may not be objective.

And so both those key factors have to be considered.

And I'm here to positively affirm to you that we're not aware of any circumstances, relationships,

activities that would cause us to either be in reality not independent or in appearance not independent of the authority.

So again, I have to positively affirm that to you each year.

We do have steps we take each year to make sure that that occurs, whether it be our staffing, whether it be making sure, this is not your case, but if we are auditing a public company and make sure no members of my team have stock ownership in your company and so forth.

Next slide, please.

Okay, now these next couple slides, I'll go through them quickly because I've already taken up the better part of 20 minutes of your agenda.

Some of this looks ominous, it's not, but each one of these is not your case, but if we are auditing a public company and make sure no members of my team have stuck ownership in the company and so forth.

Next slide, please.

Next slide, please.

Because I have difficulties getting information, or I have disagreements with many of these on how to record and report something.

Well, I'm here to let you know, positively affirm to you, we do not have any difficulties getting information from

the staff, and we had no disagreements on how to report stuff.

Again, very positive reflections from your auditor.

I required to let you know if there was anything that, any consultation I needed to take outside of my team for audit reporting, audit accounting for disclosure and so forth.

I required to let you know if that occurred, if it did not occur.

And then each year, as part of the required sufficient evidential matter, the standards require

We get a letter from you to us, and that's called the representation letter.

And what that is, is it says to you, again, as I mentioned earlier, I'm going to give you a piece of paper, everything else is your financial statements.

Management has to represent to me that they first agree with that, that they are their financials, that management has the control structure in place, it's their control structure.

that management has let me know of all legal matters they need to know about, any fraud that has occurred, any reports maybe from an outside regulator where they come in and look at your numbers, so forth.

It's a very standard and boring letter.

It's depending on whether or not you have federal compliance work.

It's 50-some-odd representations long, very boilerplate.

It will put you to sleep if you need some help reading it on a late night.

Important thing is it's so boring and so straightforward that if a client ever asked me to change one of them, change number seven, change number 24, they can't represent me to me about that, then I'd have to pause and say, well, why can't you?

This is so straightforward.

Is there something I don't know that would impact my opinion?

And I'm here to tell you that manager did not request any changes to my letter, did not request that anything be removed.

And so they provided that to me, dated on the date of our financial statements.

and it's available for you to look at.

Again, it's very boring, but it is an important matter, an important part of our overall sufficient evidential matter in the audit process.

Next slide, please.

Okay.

Again, the far right looks kind of ominous.

I'll get to those in a second.

I'm required to note this is an item, an example on the far left, a perfect example of something where it's part of the overall standards, but doesn't relate to governments.

I've had my colleagues have this happen to them in the commercial area.

If I ever had any understanding that the authority was going to another audit firm to try and get them to agree to a disclosure or an accounting entry that I didn't agree to, because I didn't think it was the accounting principles, and they're trying to quote-unquote shop the opinion, go find Bernie Madoff's firm,

Go find FTX's audit firm.

They'll give you the answer you want to hear so you can report it, even though you don't think it's GAAP.

If that ever occurred, I have to tell you that.

And again, it's never happened to me in government arena.

I have colleagues it's happened to in the commercial arena and so forth.

But again, the standards positively require me to affirm to you that that didn't occur here.

Also, our retention as your auditor has not been dependent upon

us talking about things during the year and giving you the right answer you want to hear.

We talk about accounting and reporting matters throughout the entire year to understand what's going to be needed at 630 or maybe for interim disclosures you're making to the board and so forth.

Those discussions are normal.

They were not a determinant of whether or not we got retained as your auditor, but are required to make you aware of that.

These far too right ones

We're required to let you know that as part of our audit, we didn't identify any fraud or legal acts that were going on.

But also, again, for those who don't do this for a living, I think the general populace probably believe when a fraud does come out at an entity, for example, they think, well, the auditor should have found that.

Well, we're not required to go hunting for fraud, for lack of a better phrase.

We're required to be professionally skeptical.

So if something comes up during our voucher testing or our analysis of year over year or something else that looks a little unusual at the start, we're required to understand it better and make sure that it doesn't have some kind of improperness to it.

But we're not required to go unless you hire me and say, Rob, come in.

We know something's going on.

Come perform some steps.

Help us understand whether or not we have something going on.

I did not find anything or test work that would tell me that there is a fraud or legal act happening.

But again, I'm required to positively affirm that to you.

And on the far right, going to turn, this is something that's not very relevant to governments.

It does happen.

If you look, if you recall, in the last three to five years in California, certain towns and cities went bankrupt.

because of their very, well, as newspapers say, very opulent retirement programs that they just couldn't sustain.

And so that does happen.

But it's more commercial related as we're talking going concern.

I didn't find anything that makes me think that the authority is going to go out of business within the next 12 months, for one reason or another, but I'm required to positively affirm that to you.

Next slide, please.

Okay.

Those are my required communications under the standards.

As I have people together that are charged with governance, I'd like to give them a slide or two, this case is only one, on what's happening in the future for journalists of the county principals.

What did those in power up in Connecticut who set the standards put in place for us to consider?

They may or may not be relevant to you.

101 is going to be relevant to you.

It's basically an update of compensated absence, which is quote unquote vacation and sick and other benefits.

It hasn't been changed.

I think I just barely got out of school in the early 90s when the last time they could put out some guidance on it.

And as you can imagine, benefit programs and so forth for personnel have changed since then quite dramatically.

So there's some new requirements out there for that.

96 is basically

What we did this year for 87 for leases, but it's quote unquote the cloudy, the cloudy thing because everybody has license and so forth for information technology ranges.

If you have those, there's some requirements on how to report those and such.

The other two, 91 won't be relevant to you at all, but I'm just making you aware it's out there.

And then 100 hopefully will never be relevant to you because it gives guidance and structure to when there is a change in accounting or an error correction in accounting and so forth.

But I just want to make you aware those are out there.

We will talk with management about these items throughout the year to make sure when we get back to next year's 630 that if they are applicable, if there are items that are material and applicable,

then we'll make sure that the reporting disclosure is appropriate at that time.

Next slide, please.

And those are my communications.

I like to leave the slide here all the time.

My wife will tell you that my phone is available 24-7-365.

My email is available at that time.

If you ever have a question or a need, let me know.

I have clients in this environment that will

call me and say, hey Rob, I just saw, I just attended a conference and heard this or heard that, or read an article on this or that, can we talk about it?

Great, just give me a holler.

I'm happy to talk to you if any questions or needs arise throughout the entire fiscal year.

I'd be happy to, as it says there, I'd be happy to answer any questions or if I've numbed you into a sense of complacency with these 27 odd minutes of

Before any board members jump in with any questions, I'm not sure we got an echo on here.

I was just going to add that I have seen my team doing a great job based on your report,

and we appreciate working with y'all.

So with that, if there are any questions that board members may have for Rob, I think the floor is open for you.

All right, well, I think we can move on then in the agenda and

And Rob, once again, thanks.

You're welcome to continue joining us.

I will scoot away because nobody wants otters around any longer than they have to be.

And I certainly don't take that personally.

But I would like to say it's been a pleasure serving the authority and the team has been awesome to deal with.

We belong to and Rob, once again, thanks for getting a certification and so forth, and we look forward to continuing to serve in the authority.

Be safe and have a great holiday season.

All right, so the next item we were going to talk about today and spend a little time and hopefully I want to say before we jump into the budget, the point here was to have a back and forth discussion.

So if any of the board members online, I see we have a few more that have joined.

If you have questions, please feel free to ask those.

That's what this whole intent of this is to get out information,

One of the first things I wrote here is it's an iterative process, the budget is, but at a macro level in that all our projects are moving through from a rough order of magnitude estimate and going through design and engineering and then ultimately to construction where we have a really solid level of estimate of the project budget and then even on the micro level

We still have quite a bit of work we're still doing, even though we're presenting a budget to you today, we're still, since the materials we even put together five days ago, we've gotten more information that we weren't able to put into those materials.

And so even at a micro level, there's this iterative process going on where we're getting better and better data and more analysis being performed between now and I think we talked about

January 13th, sort of having a cut off for our January 24th presentation on the budget.

So that being said, let's move along.

Can you move on?

Yes.

So I'm going to just take a moment and take you through the high level of the process and the real high level of what you're going to see.

And then Shane is going to take you through the details.

And before I jump in, I also want to introduce Selma Nahanovic.

She's a new analyst that we have, Senior Manager of Financial Planning and Analysis here at VPRA and been a welcome addition, especially in putting together this budget.

It's very timely.

So that being said, so this slide represents our budget process.

And I'm going to try to hit a few key points that may not be written on this slide, but

We're going to recommend to you projects and based on the board's direction the past two years, you want us to recommend projects that only projects that we have the ability to fund.

So when we ask for your approval of our budget, it will be you're giving us approval of funded projects that we have the ability to fund.

We're also going to provide this year a list of projects that

We do not have funding to actually complete, to either do the project in its entirety or to do a phase of that project.

Because we're providing you that list because you may have a different priority as far as what you would like to have funded versus not.

Also there are the two different areas of financial planning that you see here on the slide.

the resources, the sources of funds, and then the budget estimates, the cost.

Those are constantly being reevaluated.

So as I said, we're going to get some more information.

We already have some more information, some positive, some negative.

So things will change a little bit, but this will give you a macro idea of where the budget is currently.

The next step after we look at the current

Revenues, the current cost.

The next step for us was to determine the funding constraints, essentially, the capacity that those sources of funds, whether they are not sufficient enough to fund the projects that our operational team and our different management team here recommended to us.

After determining that, there is a funding constraint and then

Because of that, we actually have to work through a budget prioritization process.

And at a high level, Shannon will go into a little more detail.

At a real high level, essentially, we want to fund our operational costs first and foremost.

We want to keep the existing services up and running.

And any new service that we start in FY26, we want to be able to operate that if we're going to build projects in order to start new service.

We need to be able to pay for it.

So that was priority one.

And then really from there, priority two was on our capital projects was looking at that new service in fiscal year 2026 to fully fund those projects to get us to that new service.

There's new service increments on both our Western Rail corridor and our I-95 corridor.

And then from there to advance

are other projects that have later service windows resulting from them to fund them in phases of doing the design and engineering and then either fully fund construction if we had the funds or partially fund or don't fund construction at all.

So moving along to the next slide.

I do want to make one more broader point before I jump into this next slide.

When we're doing the financial planning for our budget, as I just described about operations, we're looking at the operations for the full window of while renewing capital construction.

We're going to only be asking you to approve the operating budget for FY24.

I do want to make when we go through these first few slides, we did the planning as far as funding constraints.

looking at operations over that entire window of time.

So that being said, this next slide is a real high level of where we were last year and where we are this year as far as sources of funding and then planned uses of funding.

And this is that macro level of the entire budget of capital projects.

as well as the operating window to match to that capital project timing.

Last year, you can see we were in balance.

This year, you can see we're not in balance.

And two things have occurred.

First, our revenue sources.

There have been a few things that have happened that have caused a slight decline in our sources.

I will add here that we got information just two days ago

indicated that we do have an increase in our Commonwealth rail funds, that when we get back together, you'll see that this decrease is actually going to turn around and be a slight increase.

On the cost side, you see that there's actually been a significant increase in cost, I think, at a real macro level, based on where we are coming out of the pandemic and with the economy, I think,

We all were expecting this.

And once again, as the projects advanced down that design and engineering to construction, we're still going to be refining these estimates.

And then the last point before we move along, we're handing over to Shannon.

Once again, we're only going to recommend to you what we at this current time can fully fund.

That's what the recommendation and that's what your approval will be.

when we get to January 24th is for projects that we currently can fund.

I know we're in a virtual format.

Feedback and comments, questions throughout is welcomed.

There is an ability to raise your hand in Teams through one of the dropdowns.

We'll note it if we see somebody's hands is raised and we'll stop or if you unmute yourself, we'll make sure that we get to you and we can have that dialogue even though we're in this virtual format.

So like Steve mentioned, we're going to dive into the details now.

We're going to kind of start higher level.

We are going to get into the individual projects later on.

So starting with the changes in our sources through FY30,

We've outlined here the big changes that are driving that decrease of $82 million, starting with the removal of I-66 inside the Beltway PAGO.

We have seen that toll revenues are not at the levels we'd expect at this time, and we are not reasonably assured that this revenue will be coming to us.

We'll note that the financing capacity that goes along with this has been left in the plan.

Because that financing was set to happen in a few years, there is a chance that that's going to be coming back.

So at this time,

This is the approach we have taken to right-sized amount of revenues coming from the I-66 inside the Beltway Total Financing and PAYGO.

Next, we have a decrease related to the Amtrak ticket revenues.

I know the Board has heard this from a couple different angles.

The intra-Virginia ticket revenues and the Northeast Corridor ticket revenues, we've seen a decrease in the revenues.

While ridership is up, we are not quite back to that 2019 revenue level.

Currently, we are working with Amtrak to adjust that to find that price point where we are getting good ridership on good revenues.

But at this point in time, this is a forecast we are using with actuals that we've seen in 22 and year-to-date 23 for a net decrease of $56 million in our Amtrak revenues.

The Crock Bond financing, everyone's aware when that went out the door, interest rates were rising.

So the capacity on that financing was less than we had expected with a $22 million decrease related to that debt financing.

On the positive side, so we got two grants this year.

We have the Chrissy Ettrick grant that came in the door and then the RAISE grant on the Ped Bike Bridge.

Additionally, we have some local contributions on the Ped Bike Bridge that were committed to VPRA.

On the other side of the interest swing, we are now programming interest for the next three years, taking an approach that we are reasonably sure that will have significant cash flow for the next three years.

And we do not have a crystal ball.

We don't know the 10-year forecast for interest earnings.

So we have decided that this is a healthy number to put in here, but not something that we are potentially going to miss.

So $33 million of interest.

And then other is a lot of different things, but it did end up in a net positive of $14 million.

Offsetting all of this, we have the CRF revenues that we'll be pushing through the next version of this.

Like Steve mentioned, every day you put your pencil down and then you pick it right back up because circumstances are changing.

So revenues will end up being slightly positive.

But as we jump into uses, you'll see that there may be some increases not reflected here that could be coming in the pipeline as well.

So as we jump over to the high level overview of our uses through FY30,

I'll note that this is an overview.

We are going to dive into the projects in some next slides.

So as we go through these, know that there's going to be more details to come.

We were just trying to take a broad brush to tiptoe into what changed.

So first is the I-95 corridor.

You'll see the $408 million increase, a majority of this related to increase in base budget.

VDOT recently did something similar where they did a study to quantify what the economic conditions, inflation, supply chain issues, labor shortages, labor costs increase and were able to quantify what

what capital projects in the transportation field may be increasing.

So we took that and took the same methodology and did that to our current projects in the I-95 corridor.

So that is that $355 million increase you see here.

And there's also a new item related to King and Commonwealth Bridges, which we'll jump into more detail and a slide here with Mike giving more color to that project.

Next is the Western Rail Corridor.

$65 million increase due to the refinement through product development.

You guys know we just brought these projects into the VPRA program through our 22 amendments.

So as we continue to work through the preliminary evaluation of what those projects entail, there is an increase that we have captured in this budget cycle.

Next, we have other capital projects.

The base increase that you see there of $15 million is our continual funding of our management reserve.

And then the new budget item, it relates to a grant match, bringing the S-Line design from 30% to 60%, which would be considered a new project.

And again, we're going to talk about that in detail on the slide here.

Next section being our capital and operating grants with a total increase of $12 million

The net base increase relates to continued obligations on VRE track lease payments where we cover 84% of those payments to the host railroads.

And then there is a new budget item related to a grant that VRE got through VDOT and we've been tasked with administering.

So we were going to pay the expense.

We also got the revenue for that one.

So net zero impact really to our financial plan on that increase there.

and the last one here on the list is operations with a total increase of $83 million to our core operational costs related to primarily Amtrak train operations and then administrative needs.

So this is going to be the total increase we're seeing across our budget.

Next step, obviously, we have a shortfall, we have increases, so we had to go, as Steve already prefaced, we had to apply a methodology of what becomes a funded project with VPRA, where do we put our dollars and how do we approach this

and a set methodology to make sure we apply it consistently across our portfolio.

I don't see any hands up, so we're going to keep on going here.

So this is a depiction of how we went through this, the methodology we applied for our priorities.

As Steve noted, we have our operations, capital and operating grants, and capital projects.

Operations, we have to run our service.

That's what we're here to do.

We have to keep the lights on in our building so that we can do all the things we've been tasked to do as VPRA.

Operations, we had to fund.

The increases had to be funded.

That was automatic.

We are going to go ahead and fund an $83 million increase for operations.

Next is capital and operating grants.

Some of you are probably more familiar with how these work than others.

Most of our capital and operating grants are pass-through grants.

VDOT has awarded a grant to VRE.

They have the money that will go along with that grant, but because VPRA has the expertise in rail, we are tasked with administering it.

That's one side of it.

There's also agreements that we have for grants that are executed agreements.

The genesis here is that if the money were to be freed up, we didn't do the project.

You can't put this money anywhere else.

We have to continue to fund our grants.

So this one automatically went in as a funding priority within this methodology, which leaves us with capital projects.

As Steve mentioned, we tried to pin this to new service.

So in I-95 corridor, when we complete our phase one projects in 2026, we get two new trains.

Similarly in the western rail corridor, when we are able to drop our service down to the New River Valley, we get to extend our service to New River Valley.

So that's where we drew the line in the sand and said these projects will be our priority.

We're going to fully fund them through that phase one or that timeline of completion in FY26.

And then phase two, those projects are further out, allows us more time to identify funding and still make those projects whole.

Good morning.

Thanks, Shannon.

So we did talk at the last board meeting about King and Commonwealth projects, but just to remind everyone, this is the King Street project right next to the Alexandria, V-Re, and Amtrak station right next to the King Street metro station.

There are two bridges, the King and Commonwealth Bridge, that are 100 or so years old.

And they're also part of the Fortruck project area.

They're not part of the Fortruck project.

But we have determined, along with CSX and VRE and others, that it'll be best to rebuild these bridges that go over King, Commonwealth Avenue's key portals into Old Town Alexandria.

undergoing the knife on the Alexandria 4-track project.

So as Shannon mentioned, we're adding $53 million to the budget for the King and Commonwealth project.

It just makes more sense to do it now than have to do it a few years after construction of the Alexandria 4-track project.

We don't want to inconvenience the neighbors more than need be.

Let's get it all done while we're rebuilding the 4-track and while VRE is rebuilding their station at King Street, the VRE and Amtrak station at King Street.

They have a project to do so.

So that's the King Commonwealth Project.

Happy to answer any questions on that.

Again, we have talked about it at previous board meetings.

I'm sure we'll be talking about it at future meetings.

S Line 60% Design Grant Match, also called Richmond to Raleigh.

I think a lot of you are familiar, we've also talked about this in the past, with the Richmond to Raleigh project.

It'll speed up travel times up to an hour and a half between Richmond and Raleigh, making train travel competitive with the car.

Part of our

Agreements with CSX include a 75-mile purchase of abandoned right-of-way from Petersburg to just across the border in North Carolina.

And North Carolina is working with us.

They're taking the lead on the Richmond to Raleigh design.

As Shannon mentioned earlier, we did receive, along with North Carolina, a $15 million grant for 30% design.

There is an effort to bring that to 60% design and to provide local match

North Carolina provided the vast majority of the local match for the first round, and this will help with some local match for this next round to get up to 60%.

I should mention this project doesn't just help the Richmond and Raleigh area, it also very much helps Norfolk trains.

Because for those who are familiar, like Director Drake, with the Norfolk trains, they come in and meet the Richmond and Raleigh segment.

and a key project there for the Norfolk trains is the Appomattox River Bridge.

We believe by contributing a match toward the Richmond Rally Project we'll be able to have a bigger stake in the Richmond Rally design and project and ensure projects like the Appomattox River Bridge are done the right way to help not just the Richmond Rally trains but the Norfolk trains because that is one area where there's a single track

for the most part that is a double track area, but there's a single track going over the Appomattox River.

And that's just one example of one of the projects and what is really a mega project of the Richmond Rally Project.

Thank you, Mike.

And I know you and I have a meeting scheduled in January to talk about this.

Oh no, I just wanted to see what happened with that original one.

That original study was the EIS for Richmond to Raleigh, R2R as they called it.

It's to bring the project up to 30% design and then 60% design.

But you're right, that Richmond to Raleigh study, I think the record of decision was

give or take a year, 2016 or so, it was before I started in Virginia, but it was in that timeframe.

And yes, they're using that to help lead them.

And the other question I have is, and we are very grateful about Appomattox River Bridge, thank you, I'm glad that's a priority, but the question I have is, what does this actually mean for trains in that corridor?

Will the Norfolk train, when it comes in and meets up with this North Carolina train,

will we still continue on?

Remember, we're same seat either to Washington, either to New York or to Boston.

No, our plan is to very much keep the Norfolk trains moving northward.

And Newport News?

Newport News comes in north of there.

Newport News comes in at Main Street.

We have no plans to change any of the Newport News and Norfolk trains.

And in fact, I think as you know, we're adding a

a third Newport News Train in coming years upon completion of Phase 1 projects.

There will be three in Newport News, three in Norfolk.

And all of our discussions with Amtrak in North Carolina, there are no plans, there has been no discussion to replace any of the Norfolk or Newport News trains with Carolina trains.

There's been talk about adding Carolina trains.

As you know, there's the one Carolinian and there's also some trains that travel from Charlotte to Richmond, sorry, Charlotte to Raleigh that we might, that we were looking to possibly extend up to Richmond up to Northeast Corridor.

So we're looking at this as an addition.

The beauty of adding more capacity, more infrastructure is you can look to add trains, and that's our plan with this, and that's been 100% our discussions with North Carolina and Amtrak to add trains.

We're not looking to replace the Norfolk or Newport News train.

There could always be some schedule changes to make sure everything fits smoothly, but

We're going to fight like heck to make sure that they're a plus.

And that's our plan with this.

And that's been 100% our discussion with North Carolina and Amtrak to add trains.

We're not looking to replace the Norfolk or Newport News.

There could always be some schedule changes to make sure everything fits smoothly.

But bringing those North Carolina trains up, it's not all just about going north.

But people from Norfolk will be able to come in,

to the Ettrick-Petersburg station and have more connections going south.

So if bringing those more North Carolina trains north will also bring those North Carolina trains going south, if you will.

Which is good news for Norfolk.

A lot more options.

And I'm realizing that I skipped over a quick talking point on the last slide that I was going to also ask Mike to elaborate on.

As some of the uses are, as some of the projects are coming into a design milestone, we're seeing that there is some cost estimate changes that may be able to be pushed into this budget cycle if the knowns are there.

So we wanted to preface that along with the increase in CRF revenues.

Yeah, so we have, as Shannon mentioned, we have some projects that are getting up to these 30% design levels.

We're going to have, within the next couple weeks, 30% design plans for, say, Franconia Bypass.

That's one example.

And we are determining, and I should mention that Franconia Bypass is one project that, when we signed our deal with CSX, was a new project.

It hadn't had any design or any environmental

complete yet, whereas most of the other projects, I-95 corridor, similar to what Mr. Drake just talked about with the North Carolina Environmental and how there were plans there.

For the most part, there were plans for most of the projects we have in the I-95 corridor and something called DC to RVA.

An environmental document record decision was complete about three years ago before we signed the preliminary agreements with CSX.

So most of the projects had up to 15% or 30% design.

One that did not was the Franconia Bypass and that's a project of Franconia that carries passenger trains as they sweep the platforms at the stations that are in the east side south of Franconia and they transfer over and they move over to the west side north of Franconia, Alexandria Station, Crystal City and L'Enfant Station are prime examples of the station in the west down there and Brook and Leland are examples of stations on the east south of Franconia.

We're getting a 30% design and we're expected to see a cost increase due to a scope increase on the bypass.

We originally thought it was about 0.9 miles, but now that we've done some real design, again, getting up to 30% design within the next couple of weeks, we should have reports soon from our contractor.

We're looking to go to about 1.3 miles on that bypass.

Now, again, these are potential.

These could be tweaked until we receive the report, but those are preliminary findings our engineers are seeing.

in the project.

So there could be some increase again in that Franconia bypass and possibly other projects as we get to these key 30% or other design milestones.

Yes, sir.

That was it.

We wanted to just preface that because we want to make sure that when we bring the budget to the full board in January, it's got the best data available at that time.

So that may be another change that we'll be pushing through at that time.

So I'm going to go ahead and we'll jump into what the methodology that we've laid out looks like on each of the individual

pieces of our budget.

So starting with the I-95 corridor, each of the slides in this section are going to look really similar.

So it's going to have the prior approved budget, FY 23 approved budget, the 24 budget changes, and over to the left to the right hand side, you'll see that we have the total project budget, which is what we expect to fund, and then the unfunded portion.

So here in the I-95 corridor that

Over a $400 million increase brings the total price to $4.3 billion.

And we are going to be proposing to fund $3.6 billion of the I-95 corridor projects.

Consistent with our methodology, you'll see on the far right that we are going to be funding all phases of the phase one timeline projects.

So all components are funded.

Moving into the phase two timeline, there's a little bit more discussion that we can have.

So Long Bridge project, the design is fully funded.

and part of construction is funded.

How this shook out is that we are able to fund Long Bridge all the way through FY 28, 28-9, and 30 is where we'll have to identify funding to bring this to completion.

Similarly, the Phase 2 sightings, Route 1 Bridge and Lawrence Route 1 Third Track, the design is funded, construction is not funded, and we will have to find funding to complete those projects.

Total unfunded portion on the I-95 corridor, as it stands in our recommendation, is $672 million.

This is a big shift.

I just want to add for people with a doubt that we're not going to enter into Russian contracts unless we know where the money is coming from.

I know that's a common thing in other states that they'll say, hey, we're going to sign the contract and

we can get out of it if we don't have money.

That's not the intent here.

Go through design and then hopefully between now and then we'll have much more detailed estimates.

And at that point, we'll know where the money's coming from.

And I was just going to add also, if I may, that when we're looking at the phase two projects, you know, Long Bridge and the three sightings

Those projects actually have to be completed for us to get the service, the additional service in FY30 that came along with the comprehensive rail agreement with CSX.

Shannon, can I ask a question here on the overall I-95 project?

Okay, so you said we're at funding $3.6 billion of the I-95 corridor.

What was the budget last year?

So you see here, Patty, it's $3.9 billion in the bottom of the second column.

Okay, and that's now going to

And the $0.3 billion is shifting to Phase 1 projects?

Or is it shifting to non-I-95?

Its first priority was to fund operations, which that had an increase of, I think it was $82 million.

So operations first,

We did have a revenue decrease.

And then within the second real priority, take capital grants and out of the equation, because as Shanna said, they're pass-throughs.

So the next priority was fund the projects that have FY26 service tied to them so that we can keep them moving to make those dates and then fund design and engineering for the phase two, the FY30 service.

So you're right.

It did go down.

So there was some shifting of funding, so to speak, to operations.

And then I think when we move forward, you'll see the Western Rail corridor, which has an FY26 date.

There was an increase in costs there, which we wanted to preserve that FY26 service.

Okay, thanks.

Hey, I do want to point out that as we've talked about at past board meetings, just the last board meeting where we're talking about it again in January, we are in the process of applying for multiple federal grants.

One of which is the FTA's Capital Investment Grant Program for Long Bridge and Fortrack and some train sets for VRE.

That is continuing to move forward.

Also, all the IAJ grants that are out there, there's a notice of funding opportunity for the Fed State Partnership, which is the largest of the rail grants.

under the Bipartisan Infrastructure Law.

So people probably are aware of these, just want to point out though we're not just standing pat and having these projects being funded, of course, that we're aggressively going after federal funds.

Shannon mentioned federal funds that we went after in this year's budget.

We're continuing to do so and we have other grants currently out there now and other grants that we are in the process of applying for.

So happy to talk about that.

We've talked about last board meeting and there'll be a

Just to add briefly on that and happy to talk about that more and I have great confidence Mike in your ability to get CIG funds and

I'm interested in knowing how much we're going to be going after.

And then the Federal State Partnership, it's enormous, that's $12 billion that's available.

Biggest pot of intercity rail money literally in the history of the country.

And so I think that this would, I'd like to think that this would be a very robust candidate for those fundings.

But another question I have is, do we have any reason now to change the schedule for Long Bridge Project?

No, not at this point, no.

We're continuing to move forward.

And until we have final design or at least 60% design, that's when those kinds of decisions will be made.

Okay.

Good.

And to answer your question about CIG, we're looking at a $600 to $800 million range for CIG.

As you know, the higher the local match, the better the cost rating often looks.

but a lot of projects go up to 50% of federal funding that are eligible transit projects.

We still have to determine, so the Amtrak portion of this can't be funded, but the VRE portion can, but the vast majority of rush hour trains are VRE trains, so we're still in the process of figuring that out with FTA, but it'll be a sizable request, and this next year will be key for the CIG grants, and I know, Director Dorsey, you know the CIG process well, and we'll be,

putting in our numbers for the ratings and really that starts with next August and then could be in the President's budget as soon as, proposed budget as soon as a year from February.

So we're well into that process.

As we've talked about at past board meetings, we're not assuming any of those in our budget and I think that's the correct thing to do to be conservative and not assume future federal funds.

didn't want to leave here and have people think that we weren't actively and aggressively pursuing federal funds because of course we are.

So I think I answered your questions.

No, it's excellent.

Thank you.

So we'll push on here.

So next we're going to be talking about the Western Rail corridor changes.

So as you can see, year over year change is $65 million, bringing us to $274 million.

The big changes relate to the New River Valley platform and connector track, which increased $45 million, and then additional capital improvements that were identified for the V-line that we just purchased.

And then we were able to offset that, releasing some of the transaction costs that we had budgeted.

So that gets us to the total increase of $65 million.

Consistent with our methodology, this is fully funded, anticipating getting the extended service in 2026.

Next, we have a new section that's coming into our budget.

Last year, some of the projects in this section were classified as grants.

As we grow and understand really what's in our portfolio, we determine that, oh, we are actually going to be owning some of these platforms and be required to capitalize the improvements, state of good repair, and ADA on them.

So they have come into this section here.

So we'll now have a new section in our budget called other capital projects.

You'll see the year-by-year change.

One of them Mike already briefed you on is the S-line 60% design grant match.

Consistent with our methodology of bringing new service in 26, this is not going to be funded.

The one portion of this is unfunded in our projects.

The other increase being the management reserve.

If any of you are familiar with this, well, it's called management reserve.

This is truly a board reserve that we'd like to continue to fund down the road when we get into construction and we uncover something we really weren't aware of.

Board would have the ability to pull from this pot of money to complete that project or if an opportunity arises and we want to have the ability to come in with a match, this is that bucket of money.

Management doesn't necessarily have the ability to tap these funds.

It would be the Board needing approval to release this funding here.

Continuing to fund that here is that $15 million.

Capital and operating grants.

Really some minor changes here, some changes to the past two grants that we administered to VRE, continued commitments as we mentioned for the VRE track lease.

Those increases were offset by the Amtrak train equipment that we no longer needed.

Yeah, exactly, DJ, exactly.

We thought that when we started the new service, we'd have to refurbish train sets, and luckily we didn't, so it was helpful for our budget.

Here is our snapshot of our 10-year operations plan.

As Steve mentioned,

Every time we update our financial plan, we also will forecast our operations, the huge piece of what we do here at VPRA.

So in order to understand the full financial picture, we look at this holistically all the way to FY30 and in many cases beyond to see that we can fund our operations once everything is built.

Big changes here related to our capital use charge for the Amtrak equipment that runs our trains and our service.

Increases related to liability insurance, really understanding that we actually are going to have to pull more of that into our coverage for VPRA, and then administrative costs.

A lot of what feeds these assumptions is going to be within our FY24 operations budget, because that's how we forecast, we base it on actuals that we've had to date, and then our FY24 budget.

So we'll dive into that next.

If we have no questions, this is going to round out kind of the financial planning section of the presentation, and we'll dive into the 24 operations.

I do want to pause to see if there's any more discussion on what we presented so far.

Wonderful.

We'll push on along to the FY24 operations budget.

So here you're going to see our change from 23 to 24.

Starting with revenues, as we've mentioned before, our train revenues are not quite back to 29 revenues.

That has been reflected in this budget here.

Throughout the middle of 2022, you guys are well aware of this.

Amtrak changed their pricing model and while ridership soared, revenues were not quite coming back at the same level.

We have been working with them diligently.

We have a great team that's been helping us go through this and figure out what that mix of ridership and revenues are.

Based on 22 and year to date 23, we would like to stick with what we have as knowns.

We will note in October, our revenues did tick back up and they did beat 2019 levels.

We're moving into slow winter months.

It's really hard to know if that's going to continue.

So this is our best estimate at that time.

And we'd like to move forward with this as our 24 operations budget.

In the expense side, you'll see that there is the largest increase in our train operations relates to the NEC.

Bring this up because this really directly correlates to the revenues.

If you take the NEC through revenue of $32 million and take out the through credit expense of $30 million, you'll see a net benefit of $2 million on the NEC.

This revenue comes to us from our passengers getting on, say in Virginia, going all the way to New York.

When they pass DC, they're technically riding on the NEC corridor.

Amtrak gives us a portion of that revenue and we pay a per mile charge.

In the recent months, we've seen that our margin on this has dwindled significantly.

Previously, we were between $5 to $7 million a year.

Right now, we're forecasting to be $2 million a year.

As we don't know where this will go, we have put that into the budget that we are going to be forecasted to get that $2 million a year net revenue.

Again, we are working diligently with Amtrak.

They have been a great partner to figure out what is going on and what needs to change in the pricing model to bring this back to the pre-pandemic levels.

We've had quite a few calls with Amtrak.

They've been very amenable to us adjusting the fare.

They use airplane pricing model with nine different tiers of availability.

They've worked with us.

We've adjusted the adjustments so far, look like they're working, but we just don't have enough data yet to revert back to

I'd say we were looking at that.

They've been very amenable.

This will actually be a positive going forward that from where we're going to plan to put the budget that it will actually turn out better.

So moving down to the other operating expenses.

As you saw in the previous slide, we are seeing an uptick in the capital equipment maintenance that we are paying on our train, so two million euro per year increase there.

Other minor increases you can see down the side leading us to the admin budget, $6.4 million increase, which we're going to take a deep dive into in a couple slides, so we'll table that for a minute if that's okay.

If you were to compare this to the prior year budget, you will note that depreciation has been stripped out of this portion of the operations budget.

From what the board is approving and what we're being asked to deliver, depreciation is a non-cash item related to purchases, capital projects that have already been approved in some other section of our budget.

So in order to have a true cost recovery ratio that we can trend, we felt it would be best to kind of rip that out and have a fully loaded cost recovery and then have our true cost recovery of cash items and then look at the fully loaded separately.

Our overall cost recovery will now be this base cash impact of what our train revenues are and how much of that we're recovering in correlation to our expenses.

So as you can see, year over year from 23 to 24, we're increasing and estimating an increase of about 2%.

Seeing that in a trend of where we've been with our Amtrak train service.

So back in pre-pandemic days, we were about 70%.

We are ticking back up to that.

It is important to note that we are incurring a lot more administrative costs related to all the capital projects.

The fact that we are now our own entity owning rail corridors.

So figuring out where this needs to be long term is a top priority for us right now.

We're trying to think about it strategically and where we expect this to go.

The 2% increase considering just put on two new trains and incurred all the costs related to that.

Revenues are still coming back till that capacity is being achieved.

So 2% is still a positive impact for our overall cost recovery.

Moving on to the fully loaded train operations that I mentioned just a second ago.

So we do still want to look at what is the all-in cost for running our trains, which is including depreciation.

It's all the assets that we built in order to run our train service.

So we will continue to look at this.

From a trending perspective, it's going to be very hard to take this and really have a well-thought-out goal and metrics, seeing as how the assets will come on to service at certain schedules and this number will jump considerably in 26.

So

And I'm just going to add, this is, we do full accrual accounting here.

And so to know the true cost of all of our service, which is ultimately what we're here to do is run passenger service as we do these capital projects, we're going to have depreciation expense in our audited financials every year.

Moving on to that deep dive into the administrative budget.

So starting with payroll and benefits, you're going to see the increase being $1.8 million.

It's important to note that $4 million of our payroll and benefits actually does get capitalized to the projects.

Anyone directly impacting that project, it's a bettering that asset.

So that actually gets put into that capital projects budget and capitalized, which explains why we're going from a 39

Full-time employee average to a 70, full-time average employee.

So the increase really is a bigger span than just that 1.8.

I know this came up earlier, so we wanted to make sure it was fully captured here.

Professional Services, as we've gone through fiscal year 22 and even 23, we're understanding that we are needing a lot more assistance with consultants getting ourselves up and running to really run this service, own the corridor.

So we've increased this budget $2.6 million.

I think a great example of that is the asset management that we'll have to undergo.

And 24, really getting a

plan in place of how we're going to be tracking our assets, our maintenance plans, what system might need to come along with that.

So that's why that budget has increased significantly year over year.

Information and technology.

Increase relates to the continual maintenance of our IT environment.

Additional employees means more hardware.

And then also we're bringing on more systems to run our entity.

So IT has gone up $559,000 as a result.

Building and office related.

The increase here primarily relates to the fact that we're going to be having an office lease begin in the NOVA area in 24.

There's also going to be one-time costs in outfitting that office, cubicles, desks, chairs, all of that's included here.

I will note that of this increase, about half of it, so $500,000, does relate to that one-time office build-out, so that would not be recurring.

retraining and travel, CPE, all of that cost that goes with just having a bigger organization as captured in the other employee costs.

That brings us to the $6.3 million increase and a total budget of $16.6 million for admin.

You have a hand up.

Thank you.

I just have a question while we're on this slide about, you mentioned the operating the service and owning the corridor.

Now, if I'm remembering right, it's about 40 some percent

I believe you cut out.

Oh, I said I think we own in the range of 40 some percent of the CSX 95 corridor.

So what does that mean?

Does that mean we pay 41 percent of a charge if there's improvement and they pay a portion or do

We get a credit of the 41% for trains that we run and pay them.

Whatever that percentage in 40 is, we would pay the difference to them.

So on our, so in essence, we've divided the corner and it's not east-west because that bypass at Franconia that Mike spoke on earlier, that's where

It switches from west to east that we own half of the corridor.

And so though I think to answer your question, the best way to answer it is on our half of the corridor, when we have to maintain it, we have to pay for those maintenance expenses.

And if we make improvements on our own earlier, that's where we're going to pay for those improvements.

It switches from west to east that we own half of the corridor.

which we call the Phase 1 and Phase 2 projects, which led to getting the additional service, which we will pay for those projects.

And some of them actually are building track on the CSX half of the corridor.

And when we do that, CSX will then give to us the tracks that are actually on our half of the corridor now.

So just to throw that last tidbit in there to make it even more confusing.

But essentially, I think the best way to look at it is

If it's on our piece of the corridor, we will be responsible for either the capital improvements or the capital maintenance.

Also keep in mind that during, and I don't know if Michael Westerman is on as well, he remembers the Gumpers Agreements with CSX, we have agreed that during the Phase 1 and

CSX will continue to maintain.

And one way we pay for that for them is through the VRE access fees.

And I see Director Dalton Zahn as Executive Director of VRE.

And we help, we assist VRE with track access fees that helps pay for that maintenance.

And we negotiated that with CSX during our Conference of Rail Agreement that, in a sense, that is a way to help and maintain the corridor.

And since, as we mentioned, still next quarter now through phases one and two,

That's how one way we'll continue to help pay to maintain the corridor.

Alma Aldra, I'm going to jump up here.

So you'll see in this slide, we have the I-95 corridor maintenance, which is in brackets there.

It's the VRE access rate in accordance with that JOMA.

Yeah.

So we're improving the east side of whatever you just said.

So that's where the 40% comes in.

The west side is bigger.

So we're doing our tracks that we're going to be running passenger rail on

without them being able to say, no, you can't run this new train.

Is that right?

Well, I'm not positive on the 40%.

I just thought it was somewhere in the forties.

And I just want to clarify for you, the east part is after you get past Franconia, the bypass.

So it's coming down to Richmond from Franconia to Richmond.

It's east, Franconia to the Potomac, it's west.

Okay, well, then I may have more questions about that in the future just to try to understand what that means to us to own a portion of a railroad.

It makes more sense to me that it's a geography thing, and that we know exactly what we own.

It's not mixed in, if that makes any sense to you with CSX.

All right, so we're going to jump into a summary and recap here.

I know we've talked about a lot, so we're going to try and bring it all around.

Any and all questions are welcome through this part.

So I'm just going to do a real quick summary.

And once again, if you have other questions and we're going to have this session has been videotaped, we're going to put it out there as we do with all of our board meetings and committee meetings.

So

People are welcome to look through this video again.

And then we are gonna plan the first two weeks of January to reach out to all our board members to offer one-on-one briefings on the budget.

So if there are other questions, you can also consider that opportunity to ask other questions too.

So with that being said, this is just real quick, an overview on the I-95 corridor

As we discussed, there was some cost increases due to coming out of the pandemic and the economic situation that we're in.

And then on top of that, adding that sport and key Commonwealth bridge project that just makes a lot of sense.

If we put in a third track across those two bridges and then come back

in five years or eight years or 10 years, we're going to be spending a lot more money redoing a lot of work, essentially.

So it just, it makes sense.

It's a heavily congested area.

The other thing I want to point out here is once again reiterate that we are fully funding everything in phase one, and that's really driving service outcomes.

So in fiscal year 26, planned service in the I-95 corridor

plan service increase out to Christiansburg in the Rornau corridor or the western corridor and that's what's driving our budget decision here is to fully fund those new service opportunities.

Phase 2 with the I-95 corridor, fully fund design and engineering to its completion and then

Fund, partially fund construction on Long Bridge to the best, as far as we can go.

And then that was around 28.

So we're looking at 28, 29, 30, those years where we need, we're actively pursuing other funding.

On the other phase two projects, construction is not funded at this time.

Next slide is the Western Rail corridor, once again, showing the increases there.

and once again reiterate the FY26 service start, which is driving funding that those changes in their entirety.

Next slide is really just a high level overview of where we are today with the budget.

Once again, we've talked a couple of times today about their changes that we already know about in the last couple of days that we weren't able to get into this.

and some changes that Mike and his team, I think we're looking at early January.

So a few of these, these numbers are going to change to some degree, but we want to get the best information we can.

And finally, the last slide we have, just once again, it's talking through what we've talked about before, but we're bringing to you, we made these recommendations based on the prioritization we've laid out.

We're also showing the unfunded projects, which gives you the opportunity to potentially give us direction, maybe on a different set of prioritization.

On the operations side, just looking at the FY24 activity, and anything that we asked you to approve on the capital project side, it's as DJ, I'll reiterate what DJ said earlier,

We're only going to go to contract, only going to proceed with projects on a different set of priorities.

And then we get to the potential projects section, which are the projects that are unfunded that we are going to put in our budget document.

Before we proceed with those, we would come back to you, indicate where we got the funding, and then ask for your approval to take that funding and move forward with those projects.

Once again, it gives you the chance.

prioritization has changed, you can give us different direction.

And that is the height to close of our presentation.

Once again, if there are other questions, be glad to entertain that right now.

And once again, we will be reaching out.

I don't think it'll be today.

But in the next next week, we'll be reaching out trying to schedule

Some one hour, 30 minute to one hour sessions with each of the board members individually to try to also give you further briefing, further detail, answer any other questions you may have.

Thanks.

Just one more thing.

And Mike, you and I have talked about this briefly.

The idea of $39 million, and I know I'm in the wrong spot doing this, should have done it sooner, $39 million for the layover at Main Street Station to start a train from downtown Richmond.

And we talked about what if we use the new Newport News Station that's going to open in a year and configure that like it needs to be instead of spending the $39 million.

But I've thought about it and you said, well, you'd have to leave at three o'clock in the morning.

And so you didn't think it would be popular.

But I'm wondering, can't we think about starting a bus from Newport News to Main Street Station where the train would also service Main Street Station?

Because if you've got an 8 o'clock meeting in Washington, DC, you're probably in your car by 2 a.m. to drive, or you're going up the day before.

and paying for a hotel.

So I just think it might be important to think about what would be the demand for that train.

So just food for thought, and I know we're all going to talk, and then you and I will talk in January.

I wanted to throw that out there, because I think it offsets the operating costs by not building the $39 million and gives us an additional train out of Newport News, which they're very excited about the opening of their new station next year.

and the third train that's coming.

And I know you know this, just to be clear, there is a third train coming to Newport News, I know you know that.

There's also a train currently that leaves Main Street, and there's another Richmond train coming in 2026 as well.

Right.

And I know the issue is that you're taking a train to Main Street Station where if it could just be coming through.

Thank you.

Thank you.

So, so if there are no other questions, I do want to just say one more time that, you know, we did not have the quorum of the finance committee and we had never intended to have any action out of this committee meeting.

And so we're treating this meeting essentially as an information, providing information type meeting to everybody.

I believe they're out there, but we will make sure that they're out there

and then the next hour, the latest.

Is there anything further?

I don't have anything else.

I don't know if anyone else has any other items.

Does anyone have a safe and happy holiday?

Thank you all.

Thank you.

Happy holiday.