2023-101 Santa Clara Valley Transportation Authority

VTA will define and implement a cost threshold for when a cost-benefit analysis must be completed.

In addition, VTA will continue to follow Caltrans’ Value Analysis process and prepare value analysis studies for projects that are $25 million and higher.

Implementing the recommendation(s) is in process and on schedule.

In process and on schedule. The Project Administration Manual (PAM) is in its final stages of review and is on target to be completed by the end of December 2024. The PAM includes information on procedures for cost benefit analysis.

In addition, VTA performs cost benefit analyses to assess and determine funding for projects as part of its biennial budgeting process. The proposed projects are subject to these analyses based on criteria (that consider costs and benefits) as defined in Appendix A of the Strategic Capital Investment Plan (SCIP), starting page 49, that was approved by the VTA Board of Directors.

The Project Administration Manual (PAM) was completed and placed into use in January 2025. It is a living, evolving document, receiving minor enhancements as needed, the most recent being June 5, 2025. The PAM includes information on procedures for cost benefit analysis [pages 62 – 66].

In addition, VTA performs cost benefit analyses to assess and determine funding for projects as part of its biennial budgeting process. The proposed projects are subject to these analyses based on criteria (that consider costs and benefits) as defined in Appendix A of the Strategic Capital Investment Plan (SCIP), starting page 49, that was approved by the VTA Board of Directors

VTA has established the project cost threshold that we recommended and requires projects above that cost threshold to have a cost-benefit analysis.

a) VTA will document our methodology for developing our capital project cost estimates including costs for all phases of the project.

b) VTA includes anticipated operating and maintenance costs in our Capital Project Request Forms required for every project and will document the procedures in estimating these costs.

The two component parts for implementing this recommendation are in process and on schedule.

In process and on schedule. The PAM is in its final stages of review and is on target to be completed by the end of December 2024. The PAM includes a section on the various cost estimates that are to be prepared throughout the life cycle of projects, including guidance on the preparation of capital project cost estimates.

The Project Administration Manual (PAM) was completed and placed into use in January 2025. It is a living, evolving document, receiving minor enhancements as needed, the most recent being June 5, 2025.

The PAM includes a section on the various cost estimates that are to be prepared throughout the life cycle of projects, including guidance on the preparation of capital project cost estimates [see pages 41 – 62].

VTA agrees.

a) VTA will document our methodology for developing our capital project cost estimates including costs for all phases of the project.

b) VTA includes anticipated operating and maintenance costs in our Capital Project Request Forms required for every project and will document the procedures in estimating these costs.

Implementation efforts are underway and on schedule.

In process and on schedule. The PAM is in its final stages of review and on target to be completed by December 2024. The PAM has references to processes for estimating anticipated operational and maintenance costs for different types of projects.

The Project Administration Manual (PAM) was completed and placed into use in January 2025. It is a living, evolving document, receiving minor enhancements as needed, the most recent being June 5, 2025.

The PAM has references to processes for estimating anticipated operational and maintenance costs for different types of projects [see pages 60 – 62].

VTA currently monitors project costs and schedule and is currently enhancing its project status reporting to the Capital Program Committee and board. The project budget and schedule at the time of contract award will be monitored and reported, and procedures documenting this process will be developed.

Implementation efforts are underway and on schedule. Enhanced capital project reports are scheduled to be presented at the next VTA Capital Program Committee meeting.

Completed. At the October 2024 Capital Program Committee (CPC) meeting, VTA’s Engineering and Program Delivery (EPD) Division presented on key performance indicators (KPIs) for budgets and schedules for the EPD Division’s Transit Program (Item 9, page 64) and the Highway Program (Item 8, page 78). This reporting of capital program schedule and budget KPIs will be ongoing and occur regularly at future CPC meetings.

At the October 24, 2024 Capital Program Committee (CPC) meeting, VTA’s Engineering and Program Delivery (EPD) Division presented on key performance indicators (KPIs) for budgets and schedules for the EPD Division’s Transit Program (Item 7, page 64) and the Highway Program (Item 8, page 78). This same information was provided at the November 7, 2024 VTA Board meeting (see Items 6.5 & 6.6 starting page 125). This reporting of capital program schedule and budget KPIs is ongoing and will occur regularly at future CPC and Board meetings, the most recent installments being the April 28, 2025 CPC meeting (see Items 8 -10, starting page 84) and the May 1, 2025 VTA Board meeting (Items 6.12 – 6.14, starting page 157).

VTA did not respond to a request for clarification on the measurements it is using to track deviations from preconstruction estimates. Without further information, we cannot confirm that VTA’s practices conform with our recommendation.

The Strategic Capital Investment Plan (SCIP) update is in process and on schedule, with completion anticipated for late 2025.

Work on the update of the SCIP is currently underway. The completed call-for-projects for the capital element of VTA’s FY 2026 & FY 2027 Biennial Budget provides the most recent project information needed to update the SCIP.

The capital element of the FY 2026 & FY 2027 Biennial Budget forms the first two years of the SCIP. This item was reviewed and input received at the May 7, 2025, joint workshop of five (5) VTA advisory committees (Item 2.1, starting page 3). Additionally, on June 5, 2025, the VTA Board approved the FY 2026 & FY 2027 Biennial Budget (Item 7.1, starting page 355).

a) VTA staff, in consultation with Santa Clara County Filing Officer, is developing the policy and procedures to ensure timely reporting of Board Member Form 700 non-filers to the Fair Political Practices Commission (FPPC).

b) VTA staff is developing a comprehensive solution that will monitor the submission of Board Member biennial ethics training and that will include a reminder system.

Implementation efforts for these recommendations are underway and on schedule.

Procedures were developed to document the workflow and requirements for both processes and were placed into operation by the end of January 2025.

VTA is in the process of finalizing a comprehensive Long Range Financial Plan that will review the viability of all VTA revenues and their sustainability, inclusive of operating cost efficiencies to improve financial metrics such as farebox recovery.

Effort to implement this recommendation are underway and on schedule.

In process and on schedule. VTA’s comprehensive Long Range Financial Plan was scheduled for initial review by the Governance & Audit Committee at its 12/5/24 meeting, but due to last-minute cancellation of that meeting this item will now be presented for Board consideration at the 1/24/25 and 2/21/25 Board workshops.

In response to the recommendations outlined in the State Auditor’s report, VTA developed a comprehensive Long-Range Financial Plan (LRFP) in late 2024. This plan has been integrated into the agency’s biennial budget development process and includes a 10-year forecast of all revenues and expenditures. The forecast was reviewed and discussed with the Board during the 2/28/25 VTA Board workshop (Item 2.3, starting page 60). LRFP will be updated periodically to account for the volatility in sales tax revenues, TDA and STA revenues, 2000 Measure A and 2016 Measure B subsidies, and trends in farebox collections. The model highlights the dependency on sales tax as the primary funding source.

VTA staff has also engaged the Board in discussions about identifying additional revenue streams—such as revenues generated from Express Lanes and Transit-Oriented Development (TOD). As these projects and program phases progress toward completion, there is potential to allocate a portion of these revenues to support transit operations.

VTA did not provide a copy of its LRFP, which would allow us to validate its statements about recommendation implementation.

VTA is nearly complete in developing a more robust modeling tool to assist in long range financial planning.

The Long-Range Financial Plan will enable VTA to understand the external economic factors and the risk they pose to our major revenue sources, like sales tax. We will be able to run scenarios based on various internal cost assumptions, revenue trends and external economic factors and how they all impact VTA’s fiscal position.

This plan will also address total cost of ownership for capital projects and include assumptions for operating costs related to those projects.

Implementation efforts for this recommendation are underway and on schedule.

In process and on schedule. VTA’s modeling tool will be included as a component of VTA’s comprehensive Long Range Financial Plan being presented at the 1/24/25 and 2/21/25 Board workshops.

VTA’s Long-Range Financial Plan (LRFP) was completed in late 2024 and presented as part of the 2/28/25 VTA Board workshop on development of VTA’s FY 2026 & FY 2027 Biennial Budget (Item 2.3, starting page 60).

In alignment with the State Auditor’s recommendation, VTA’s LRFP was designed to support comprehensive scenario planning for the Transit Fund. The LRFP includes the development of multiple financial scenarios that model varying expense trajectories based on economic trends, funding uncertainties, and policy assumptions.

This approach enables VTA to better anticipate and plan for a range of possible futures by incorporating key cost drivers—such as labor, non-labor operations, and capital-related operating impacts—into long-term forecasts. By simulating these different financial outcomes, VTA can more effectively assess potential budgetary pressures and proactively develop strategies to address them. Additionally, the tool identifies potential future budget deficits and serves as a proactive planning resource, enabling VTA to implement targeted cost containment strategies and proactively look for additional revenue sources, when necessary.

The modeling tool was also used to forecast multiple scenarios based on different parameters for the Recommended FY 2026 & FY 2027 VTA Biennial Budget that was adopted by the VTA Board on June 5, 2025 (Item 7.1, starting page 352).

The LRFP is under constant review.

VTA has not provided evidence of its LRFP or how it informed the budgetary information it presented to its board.

Although VTA has been following this practice and presenting variance reports to internal stakeholders, finance committees, and the VTA board, we have not had documented procedures guiding the process of quarterly variance reviews with internal divisions.

We are working on finalizing a procedure for the budget office that will document the aforementioned process, use of the reports, and staff responsible for this recommendation.

Implementation efforts for this recommendation are underway and on schedule.

Although VTA has been following this practice and presenting variance reports to internal stakeholders, finance committees, and the VTA board, we have not had documented procedures guiding the process of quarterly variance reviews with internal divisions.

Development of a procedure for the budget office that documents the aforementioned process, use of the reports, and staff responsible for this recommendation has been completed. However, consideration of this item was recently deferred to the 2/6/25 Governance & Audit Committee (G&A) meeting due to unexpected cancellation of the 12/5/24 G&A meeting.

This internal procedure (work process) was developed and placed into operation by January 2025.

The VTA’s procedure does not address the actions to be taken when there are significant deviations identified through quarterly variance reports.

VTA is in the process of identifying the various metrics to share and the cadence of reporting. Certain operational metrics, which have financial implications, are presently shared with committees and will be incorporated in full Board reports. It is anticipated that this will be an iterative process as VTA and the Board refine the reporting needs.

Implementation efforts for this recommendation are underway and on schedule.

VTA is in the process of identifying the various metrics to share and the cadence of reporting. Certain operational metrics, which have financial implications, are presently shared with committees and will be incorporated into full Board reports. It is anticipated that this will be an iterative process as VTA and the Board refine the reporting needs.

This item is in process and on schedule.

VTA reports on farebox recovery and other key financial metrics in its audited Annual Comprehensive Financial Report (ACFR), the most recent ACFR covering FY 2024 (Farebox Recovery is show on Table 22 on page 3-23). This document was reviewed by the VTA Board at its December 5, 2024 meeting (Item 7.2, starting page 427).

Additionally, in November 2024 the VTA Board approved the 2026/2026 VTA Business Plan (BP) (Item 7.1, starting page 407) that is designed to implement the vision, mission and goals of VTA’s Strategic Plan and be reviewed and updated as needed every six (6) months.

The BP contains several new goals, key performance indicators (KPIs), metrics, targets, and strategies. The detailed goals and KPIs are shown in Appendix B (starting page 12). Reporting on KPI status to the Board is intended to be quarterly, with several key metrics to be reported monthly as part of the GM/CEO’s report at each VTA Board meeting.

It is anticipated that this will be an iterative process as VTA and the Board further refine the reporting needs and cycles for the BP.

The indicators included in VTA’s business plan do not include all we recommended. Specifically, VTA has not adopted operating cost per revenue hour as an indicator. Our audit found this was a metric that warranted further assessment because VTA’s costs were higher than its peers.

VTA will prepare a comprehensive strategic plan. VTA staff is developing a work plan and schedule for the development of the five-year strategic plan for Board approval by the end of 2024. The strategic plan will be completed according to the schedule adopted by the Board.

Implementation efforts for this recommendation are underway and on schedule.

In process and on schedule. An update on Strategic Plan development process, including the draft completion schedule, was provided at the 11/7/24 Board meeting. Per the direction of the Board Chair, the draft implementation schedule for the plan update will be provided to the Board in 2025 for their input.

An update on the Strategic Plan development process, including the draft completion schedule, was provided at the 11/7/24 VTA Board meeting (Item 6.17, starting page 334).

Following internal and external engagement and the input received, the development process and completion schedule have subsequently been revised slightly, which were most recently presented at the May 7, 2025 joint VTA Advisory Committee workshop meeting (Item 2.2, starting page 162). The current projected completion schedule is Spring – Summer 2026.

Development of a revised evaluation process for the GM/CEO that includes expectations, goals, and performance metrics is underway and any subsequent updates to the evaluation process will be formally approved by the board. In addition, the VTA Administrative Code will be updated accordingly to reflect the revised process.

Implementation efforts for this recommendation are underway and on schedule.

In process and on schedule. VTA Board approved new evaluation process for Board direct reports on 10/6/24. Corresponding changes to VTA Administrative Code are scheduled for Board approval on 2/6/25.

The Board approved the new evaluation policy/process for Board direct reports on 10/6/24.

Meeting Agenda: 10-3-24 VTA Board Meeting Agenda (Item 8.3, starts page 349)
Meeting Minutes: 10-3-24 VTA Board Meeting Minutes (Item 8.3, page 14)

Corresponding changes to VTA Administrative Code were approved by the VTA Board on 3/6/25.

Meeting Agenda: 3-6-25 VTA Board Meeting Agenda (Item 6.7, starts page 239, Section 2.2)
Meeting Minutes: 3-6-25 VTA Board Meeting Minutes (Item 6.7, page 7 of 15)