Operating Budget
The fare recovery ratio is the revenue received from fares and passes divided by total operational expenses, excluding expenses due to debt. This measures how much of the cost of providing transit services is paid directly by MBTA riders. The FY23 fare recovery ratio was 21 percent, a small increase from 19 percent in FY22 but still significantly lower than 34 percent in FY20 and 43 percent in FY19 before the pandemic.
In order to address this situation, the MBTA is investigating numerous efforts to stimulate public transit usage as well as reduce fare evasion to improve revenue and increase fare recovery ratio. For example, new fare gates has been installed at North Station. The MBTA is also soliciting feedback from the public to improve the system and has plans to introduce civilian fare inspectors to stem fare evasion.
Total expenses (not including capital spending) encompass wages and benefits for employees, materials and services involved in providing transit service, contracted transit services like commuter rail and the RIDE, other operating expenses, and debt service. Total expenses grew 5.2 percent from FY22 to $2.32 billion in FY23, while operating expenses grew 5.6 percent from FY22 to $1.83 billion in FY23. This increase is within budget estimates; in FY22, it was estimated that total expenses would be $2.55 billion when building the FY23 budget.
Total revenues encompass fare revenues from transit riders, other operating revenues such as from advertisements and parking, state and local assistance including sales tax revenue, and other non-operating revenues. In FY23, total revenues dropped by 22.8 percent from FY22, to $2.33 billion. While total revenues decreased from FY22, operating revenue increased, with total operating revenue increasing by 16.6% to $445.9 million in FY23. Within this operating revenue increase, revenue from fares grew 16.8% to $376.3 million in FY23.
The closing balance for the operating budget is defined as total expenses subtracted from total revenues. The closing balance in FY23 was $13.9 million, which was a 98.3% drop from $816.2 million in FY22. This dramatic change was due to the fact that in FY22, MBTA received $842M in one-time federal relief funding through the CARES Act and other COVID-19 relief programs, which were no longer available in FY23 and will not be available again moving forward.
Capital Projects
Capital Investment Plan (CIP)
The MBTA Capital Investment Plan (CIP) is a short-term, financially constrained investment program that funds the planning, construction, and capital maintenance of assets across the MBTA. It is a rolling five-year plan, updated annually in coordination with MassDOT and the Boston Region Metropolitan Planning Organization. It includes over 600 unique capital projects aiming to maintain and modernize assets, expand service, and meet strategic priorities and performance goals. More information on the current CIP and historical updates by fiscal year can be found on the MBTA website.
CIP spend largely funds projects in two broad categories: projects focused on reliability and modernization, and projects focused on expansion of the MBTA system or MBTA service. Major capital projects currently include the Green Line Extension, the Red Line Transformation and Orange Line Transformation programs, South Coast Rail, and Fare Transformation. Total spend in FY23 increased by $248 million over FY22 to $1.85 billion, a 15.4% increase. Of the total, $1.53 billion was spent on reliability and modernization projects, an increase of 37.5% compared to FY22, and the remaining $324.8 million spent on expansion, a reduction of 34.1% from FY22. Total capital spent was 93% of the FY23 programmed amount, compared to 61% in FY22.
Projects Completed On/Under Budget
This measure tracks the percent of capital projects completed on or under budget. In FY23, 20 percent of all construction contracts were completed on or under their approved budget, a reduction from 100 percent in FY22. Cost increases occur for a variety of reasons, including unforeseen conditions, scope added to projects when determined to be advantageous, scope change and increase cost as a project was requested to be accelerated, and extended overhead caused by changes in the project. The MBTA’s Capital Programs departments closely track cost performance on projects and are implementing an electronic project management system to improve efficiencies and transparency. Capital Programs maintains a Lessons Learned database and conducts risk workshops prior to bid as cost control measures. The MBTA is also investing in the Capital Programs QA/QC program to improve design quality.
Projects Completed On/Under Time
This measure tracks the percent of capital projects that were completed on or under their approved contract duration. In FY23, 40 percent of completed construction contracts were finished by their approved delivery date, a reduction from 75 percent in FY22. All of the projects that were completed on time were completed within 120 days over their approved duration. Projects are delayed for many reasons, but delays are largely caused by unanticipated field conditions, projects being extended to accommodate issues such as the current track problems, and scope added to projects when determined to be advantageous. To reduce delays, the MBTA identifies and accounts for construction risks early in the development of contract duration, exploring opportunities to complete enabling or early works ahead of construction projects, and working with design and contracting partners to improve the overall timeliness of the capital program. The MBTA is also implementing a program of exclusive construction access to track and station infrastructure intended to decrease the cost and duration of its construction projects.
Average Elapsed Time Between Advertising and Notice to Proceed (NTP)
In in FY23, the MBTA selected a contractor and approved work to begin within 126 days of a contract being advertised, on average. This is an increase of 13 days compared to FY22, but is within the target of 120 – 130 days. This target has changed starting in FY23 (previously 90 days) to better reflect current work: as projects become more complex, the bidding process becomes longer, and the typical bidding duration of 30 days no longer works. The bidding process is expected to last anywhere between 29 to 71 days, and the target timeline update was to reflect this change. The MBTA is working with the engineering community to ensure better quality of its bidding documents and more accurate construction estimates, and with contractors to maintain bid schedules and reduce procurement timelines. In addition, the MBTA is streamlining internal processes and procedures to ensure timelier processing of documentation for contract execution of its Capital Projects.
