ANNUAL REPORT 2008/09 - BC Transit

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$145.00Oil Barrel Pricing and Canadian ExchangeApr 4/08 - Apr 17/09$1.05CDN $USDBarrel$90.00Barrel$0.90CDN $$35.00$0.754-Apr-0825-Apr-0816-May-086-Jun-0827-Jun-0818-Jul-088-Aug-0829-Aug-0819-Sep-0810-Oct-0831-Oct-0821-Nov-0812-Dec-0830-Dec-0816-Jan-096-Feb-0927-Feb-0920-Mar-0910-Apr-09Despite the inherent volatility in fuel pricing, BC Transitcontinues to purchase fuel on a weekly rack rate rather thanhedge fuel prices as a significant hedging premium exists inthe western diesel market. Further, the company receivesa significant commercial discount relative to retail rates. (Atthe time of writing, May 2009, the company was paying$0.77/litre against a retail rate of $0.927/litre.) In response tothis unprecedented volatility, management is developinga long-term commodity price risk management programwhich will be implemented in fiscal 2009/10 to help mitigatethe volatility risk and thereby reduce the budget risk toprovincial and local partners. In the short term, managementis monitoring current weekly rack rates versus fixed physicalpricing and may lock-in fixed pricing on a portion of fiscal2009/10 fuel requirements.Fuel2008 2009Actual Target ActualFuel volume (000s litres) 20,002 22,477 22,075Fuel price per litre* $0.96 $0.98 $1.11Total fuel cost (000s) $19,202 $22,028 $24,504Over 80 per cent of the fuel utilized has a minimum fiveper cent bio content (B5). This fuel mix helps position thecompany with fuel vendors who under provincial legislationmust meet strict provincial bio content targets effectiveJanuary 1, 2010. It also assists in achieving corporateenvironmental initiatives. However, the cost of biofuels isincreasing as producers shift to a market pricing model basedon conventional petroleum product pricing. While higherfuel costs have generated increased ridership, it is unlikely thatthe lift will fully compensate for increased costs.Labour CostsWith the strong regional economy, Victoria had among thelowest unemployment rates in the country during 2008/09.The buoyant local labour market resulted in increaseddifficulty in recruiting staff particularly in skilled trades,technical vocations and the professions. This combinedwith the accelerating pace of retirements, continuingservice expansion and emerging requirements includingenvironmental monitoring and compliance and projectevaluation and management, created significant recruitingchallenges.As a result of these challenges, overtime costs were $1.6million over target. Of this variance, approximately 35 percent was attributable to maintenance and 55 per centattributable to operations and the remainder due primarily tosupply chain. Overtime costs are a function of the challengesdiscussed above. Management will be reviewing plans tomitigate overtime costs while at the same time balancing theneeds for meeting service and operational requirements.24BC TRANSIT 2008/09 ANNUAL REPORT
Further, the challenge in recruiting staff is already easingsomewhat with the economic downturn.Transit service is a labour intensive business. To implementthe services anticipated over the next three years will requireover 100 additional staff at BC Transit to operate the VictoriaRegional Transit System and provide the professional andadministrative services supporting the remainder of theprovincial network. Additional new jobs will be requiredby contract operators delivering BC Transit service in theremainder of the province.In the Victoria Regional transit system, collective agreementswith the Canadian Auto Workers Union and the CanadianOffice & Professional Employees’ Union, representing over600 employees, expire on March 31, 2010. Negotiations withthese bargaining units will likely begin late in 2009. A thirdcollective agreement with the Canadian Union of PublicEmployees representing transit supervisors expires onDecember 31, 2010 and negotiations will commence in thefall of 2010.Service ExpansionBC Transit executed the largest service expansion in its historyto meet the goals set in the Provincial Transit Plan. Serviceexpansion is reflected in increased ridership including anincrease of 1.3 million passengers or six per cent from prioryear in Victoria conventional transit and 1.6 million passengersor seven per cent from prior year in Municipal Systemsconventional transit.Within Municipal Systems, there were significant ridershipincreases in the following tier 1 communities:•• Prince George - Ridership increased 15.6 per centfrom 2007/08. The continued ridership growthcan be attributed to further expansion and serviceimprovements targeted at the University of BritishColumbia student market.•• Central Fraser Valley – Ridership increased 13.5 percent from 2007/08. Commuter and student marketscontinue to account for most ridership growth.•• Kelowna Region - Ridership increased 13 per centfrom 2007/08. New evening and Sunday service,with the continued effects of the previous year’sroute and schedule restructure were the maincontributors to this increase.Resource constraints on fleet and staffing resulted in serviceexpansion delays aggregating $2.4 million in 2008/09.MAINTENANCEFleet MaintenanceTotal fleet maintenance increased $4.7 million or 20 percent from the prior year. The cost of fleet maintenancesupport has increased significantly over the past five years.Maintenance costs for running repairs, major componentoverhauls and mid-life tune-ups are largely attributable tothe age of the fleet, increasing costs of parts, labour andoutside service providers, and the technological complexityof newer vehicles. Maintenance costs are also expected toincrease due to the lower Canadian dollar, higher shippingand base metal costs. Most parts originate from American orEuropean suppliers.Maintenance costs continue to increase at a rate greater thaninflation (Canadian Consumer Price Index). In Victoria, fleetmaintenance costs exceeded target by $1.07 million or nineper cent. The amount of overtime expended due to theshortage in the targeted number of mechanics in Victoriawas the main contributor to the overage. In the MunicipalSystems, the cost per hour of running repairs increased 16 percent over the previous year.The aging fleet is a driver of maintenance costs. BC Transit’sfleet replacement and expansion capital plan will in partmitigate some of these cost pressures. During fiscal 2009,BC Transit acquired 77 conventional buses and 50 customvehicles. In addition, 12 conventional buses were retired. Asa result of this fleet replacement and expansion, the averageage of the fleet has improved year over year from 10.5 yearsfor conventional vehicles to 9.8 years.Most replacement parts are purchased directly or indirectlyfrom offshore or the United States. The appreciation in theCanadian dollar seen during 2007/08 and into the first quarter25BC TRANSIT 2008/09 ANNUAL REPORT
Page 1 and 2: BC TransitANNUAL REPORT 2008/091BC
Page 3 and 4: His HonourThe Honourable Steven L.
Page 5: Message from the Chairto the Minist
Page 8 and 9: Organizational OverviewBC Transit i
Page 10 and 11: THE YEAR’SACCOMPLISHMENTS6BC TRAN
Page 12 and 13: BC Transit introduced new programs
Page 15 and 16: PERFORMANCEREPORT11BC TRANSIT 2008/
Page 17 and 18: Goals, Targets and ResultsGOAL 1Sup
Page 19 and 20: Result:Canadian Consumer Price Inde
Page 21 and 22: Progress Against Shareholder’s Le
Page 23 and 24: Performance SummaryNon-GAAP Financi
Page 25 and 26: Management Discussion and AnalysisD
Page 27: GOVERNMENT FUNDINGContribution from
Page 31 and 32: BC Transit - Owned and Leased Facil
Page 33 and 34: Capital ExpendituresActual 2008/09
Page 35 and 36: government entities were considered
Page 37 and 38: REPORT OF MANAGEMENTYear ended Marc
Page 39 and 40: BRITISH COLUMBIA TRANSITBalance She
Page 41 and 42: BRITISH COLUMBIA TRANSITStatement o
Page 43 and 44: BRITISH COLUMBIA TRANSITNotes to Fi
Page 59 and 60: APPENDICES
Page 61 and 62: Appendix A2 - Performance SummaryMu
Page 63 and 64: Victoria BC(2007/08)CUTA Population
Page 65 and 66: Paratransit - Serves small town and
Page 67: Appendix A6 -Map of BC Transit Syst

ANNUAL REPORT 2008/09 - BC Transit

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