ANNUAL REPORT 2008/09 - BC Transit

GOVERNMENT FUNDINGContribution from the ProvinceProvincial operating contributions of $71.9 million were $2million greater than target of $69.9 million. The Ministry ofTransportation and Infrastructure provided $2 million to offsetthe provincial share of higher fuel and maintenance costswhich were incurred in the year.Local TaxationLocal taxation revenues were marginally lower than targetby $0.2 million or less than one per cent. The increase yearover year in local taxation revenues was $6.2 million or 13 percent. The increase in contributions from local governmentsyear over year is due to service expansion and general costincreases primarily related to fuel prices volatility and higherfleet maintenance costs.EXPENSESFunctional DescriptionOPERATIONS COSTSThe two primary cost drivers for operations expenses forBC Transit are fuel and labour with fuel generating the mostsignificant volatility in operations expenditures.Fuel PricesFiscal 2008/09 saw record oil prices driven by robust demandfrom the world’s largest economies, combined with concernsover limited production capacity. The 2008/09 budget wasestablished at a time when 2008/09 fuel costs were forecastat US$80/barrel equating to a budget of $0.95 per litre.However; during the year, world oil prices exceeded US$147/barrel. Further, the Canadian dollar has stabilized relative tothe U.S. dollar and no longer insulates Canadian consumersfrom the impact of higher world oil prices. Prices havereceded considerably from the highs experienced in the firstpart of the fiscal year (approximately US$60/barrel at time ofwriting, May 2009); however, oil futures markets are increasingover time compared to present day pricing. There remainsa significant amount of uncertainty in the market aroundeconomic recovery, oil supplies and production capacity.Variance From Target (Un)favourable % of TotalFigures in thousandsVarianceOperations (240) -11%Maintenance (1,442) -66%Administration (1,141) -52%Debt Service 6,412 293%Derivatives and other (1,402) -64%Total 2,188 100%* Note: Comparative year and targets do not reflect impactfrom changes in accounting policies.23BC TRANSIT 2008/09 ANNUAL REPORT