NORTH COUNTY TRANSIT DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Years Ended June 30, 2016 and 2015     810 Mission Avenue   Oceanside, CA 92054   Office (760)966‐6500   Fax (760)967‐2001  www.gonctd.com          Comprehensive Annual Financial Report    Who we are…   North County Transit District’s services are a vital part of San Diego’s regional tranportation  network.  NCTD  moves  more  than  12  million  passengers  annually  by  providing  public  transportation for North San Diego County. The family of transit services includes:   The BREEZE bus system   The COASTER commuter rail service   FLEX rural and demand service   LIFT paratransit, and   The SPRINTER hybrid rail line  MISSION…   North County Transit District’s mission is to deliver safe, convenient, reliable and user friendly  public transportation services. VISION…   Our vision is to build an integrated transit system that enables our customers to travel easily  and efficiently throughout our growing region.  We will achieve our Mission and Vision by:   Placing service to our customers first   Ensuring safety and security of our employees and customers   Delivering high quality transit services   Developing and maintaining facilities that sustain and promote current and future  transportation services   Securing adequate revenue, protecting our assets and getting the maximum return  on the public investment   Working in partnership with our communities and other stakeholders   Encouraging innovation, creativity and leadership    Page  1  Comprehensive Annual Financial Report  NORTH COUNTY TRANSIT DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Years Ended June 30, 2016 and 2015 Prepared by: Finance Division, North County Transit District  810 Mission Avenue   Oceanside, CA 92054   Office (760)966‐6500   Fax (760)967‐2001  www.gonctd.com  Page  2  Comprehensive Annual Financial Report  Table of Contents Introductory Section ..................................................................................................................................... 5  Letter of Transmittal ........................................................................................................... 6  Board of Directors ............................................................................................................. 10  Organizational Chart ......................................................................................................... 12  Certificate of Achievement ............................................................................................... 13  Service Area Map .............................................................................................................. 14  Service and Activities ........................................................................................................ 15  Background ................................................................................................................. 15  Services ....................................................................................................................... 15  Activities ..................................................................................................................... 20  Financial Section ......................................................................................................................................... 23  Independent Auditor’s Report .......................................................................................... 24  Management’s Discussion and Analysis ........................................................................... 26  Introduction ................................................................................................................ 26  The Financial Statements ........................................................................................... 27  Statements of Net Position ........................................................................................ 28  Net Capital Assets ....................................................................................................... 30  Statements of Revenue, Expenses, and Change in Net Position ................................ 33  Operating Revenue ..................................................................................................... 35  Operating Expenses .................................................................................................... 37  Restrictions and Commitments .................................................................................. 39  Long‐Term Debt .......................................................................................................... 39  Contacting NCTD’s Financial Management ................................................................ 39  Basic Financial Statements ............................................................................................... 40  Notes to Basic Financial Statements ................................................................................. 44  Statistical Section (Unaudited) .................................................................................................................... 76  Financial Trends ................................................................................................................ 78  Net Position by Component (Last Ten Fiscal Years) ................................................... 78  Changes in Net Position (Last Ten Fiscal Years) ......................................................... 79  Revenue Capacity .............................................................................................................. 80  Operating Revenues by Source (Last Ten Fiscal Years) .............................................. 80  Page  3  Comprehensive Annual Financial Report  Public Funding Sources (Last Ten Fiscal Years) .......................................................... 81  Fare Rate Tables ......................................................................................................... 86  Principal Fare Revenue (Fiscal Years 2016, 2011 and 2006) ...................................... 90  Debt Capacity .................................................................................................................... 91  Ratios of Outstanding Debt (Last Ten Fiscal Years) .................................................... 91  Demographic and Economic Information ......................................................................... 92  Demographic and Economic Statistics (Last Ten Fiscal Years) ................................... 92  Principal Employers .................................................................................................... 93  Employees by Function (Last Ten Fiscal Years) .......................................................... 94  Operating Information ...................................................................................................... 95  Operating Indicators by Transportation Mode (Last Ten Years) ................................ 95  Operational Statistics ‐ Revenue Hours, Operating Costs and Operating Costs per  Revenue Hour ............................................................................................................. 98  Average Fare, Subsidy per Passenger and Farebox Recovery Ratio ........................... 99  Capital Asset Statistics by Transportation Mode (Last Ten Fiscal Years) ................. 100  Industry Comparative Statistics ................................................................................ 101        Page  4  Comprehensive Annual Financial Report Introductory Section Page 5 Comprehensive Annual Financial Report  Letter of Transmittal   January 27, 2017 To the Board Chairman, Members of the Board, and Citizens of North San Diego County: On behalf of the North County Transit District (NCTD), we are pleased to present you with the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2016. The basic financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) and have been audited in accordance with generally accepted auditing standards in the United States of America by Macias Gini & O’Connell LLP. This letter of transmittal highlights significant factors affecting the financial and operating results of NCTD. Further detail is presented in the management's discussion and analysis (MD&A), and the audited basic financial statements and accompanying footnotes. NCTD management is solely responsible for the accuracy, completeness and fairness of the information presented in this CAFR. Management has established a comprehensive system of internal controls to prevent the loss, theft, or misuse of NCTD assets and to ensure that adequate financial information is compiled to allow for the presentation of the financial statements in conformity with GAAP. Due to the inherent limitations of internal controls, such controls are designed to provide reasonable, rather than absolute, assurance that the financial statements are free from material misstatement. To the best of our knowledge the basic financial statements, as presented, are accurate and complete in all material respects and present fairly NCTD's financial position and the results of NCTD operations for Fiscal Years (FY) 2016 and 2015. NCTD Governance The North San Diego County Transit Development Board (NSDCTDB) was created by California Senate Bill No. 802 on September 20, 1975 to plan, construct, and operate, directly, or through a contractor, public transit systems in its area of jurisdiction. In September 2002, Senate Bill 1703 modified the responsibilities of the NSDCTDB by transferring responsibility for planning, programming, project development, and construction to the San Diego Association of Governments (SANDAG). In January 2006, the North San Diego County Transit Development Board was renamed to the North County Transit District. NCTD provides bus, van and train service for people in the northern half of San Diego County –from the rural areas of Fallbrook and Ramona and the Camp Pendleton Marine Corps Base, to the cities of Oceanside, Vista, Carlsbad, Encinitas, San Marcos, Del Mar, Solana Beach, and Escondido, plus the unincorporated areas of North San Diego County. A nine-member Board of Directors (Board) consisting of eight city council representatives (one from each of the eight cities in North San Diego County) and the 5th District representative from the San Diego County Board of Supervisors governs the operations of NCTD.   Page  6  Comprehensive Annual Financial Report  Operations, Services and Activities NCTD contracts with private operators for the provision of all modes of public transit service. Through these contracts, NCTD provides the following transit services: commuter rail (COASTER), hybrid rail (SPRINTER), fixed-route bus (BREEZE), demand response fixed route and route deviation (FLEX), and Americans with Disability Act of 1990 (ADA) complementary paratransit (LIFT). The COASTER commuter rail service and the SPRINTER hybrid rail service is operated by Bombardier. BREEZE, LIFT, and FLEX services are operated by First Transit. As of June 30, 2016, NCTD directly employed 153 positions, of a total 157.5 budgeted positions that support safety and security, customer service and operations, engineering, operations systems, technology and other support functions and, through its contract with First Transit and Bombardier, contracted for 549 positions. Economic and Funding Outlook The state of the economy influences a number of factors such as unemployment rates, traffic congestion, fuel prices, and sales tax which impacts NCTD’s revenues and operations. NCTD experienced decreased ridership of 5.0% in FY 2016 as compared to FY 2015 as a result of lower fuel prices and increased usage of automobiles as measured in vehicles miles driven. As a result of the decreased level of ridership, fare revenue declined by $1.3 million (6.6% below FY 2015). The decline in fare revenue was offset by a $1.7 million decrease in fuel costs and $80,000 increase in advertising revenue. NCTD projects that ridership declines will continue through the end of FY 18 (June 30, 2018), fuel costs will remain stable at current levels and advertising revenues will increase by 7%. Local Sales Tax Revenue – In FY 2016, more than 49% of the total revenue for operations and 13% of capital revenue that supported NCTD capital projects expenditures came from local sales tax-based sources (Transit Development Act [TDA] and TransNet). Local sales tax revenues used for operating expenditures for FY 2016 remained at relatively the same level as FY 2015. Local sales tax dollars are expected to increase 4.8% for FY 2017. Federal and State Revenue - Federal and state recurring revenues comprised 18% of NCTD total revenues from operations and 87% of NCTD’s capital expenditures during FY 2016 (inclusive of contributed capital from SANDAG). Federal Transit Administration funding is expected to increase 10.22% in FY 2017, and is expected to increase by 14.2% over the five (5) years of the Fixing America's Surface Transportation (FAST) Act, the transportation funding bill signed into law on December 4, 2015. State Transit Assistance decreased by 9.6% to $5.0 million in FY 2016 and is forecast to increase 20.2% in FY 2017 and remain at that level for FY 2018. Financial Health In FY 2009, NCTD projected annual operating deficits as funding streams diminished and operating costs projections were on the rise. At that time, BREEZE operating cost per revenue mile was projected to escalate to $10.36 by FY 2014. In response, NCTD made proactive changes to maintain transit services and related jobs, including reducing staff, renegotiating and restructuring contracts, and signing innovative bus and paratransit contracts. These changes helped close a significant budget shortfall and lowered the future operating costs for delivering service. Actual BREEZE operating cost per revenue mile for FY 2015 was $7.55 and $8.17 in FY 2016. This represents a level of cost containment below the FY 2009 projections as a result of improved operational efficiencies from contracting for operations and maintenance of the BREEZE bus system. System-wide cost per revenue miles was contained to $10.14 in FY 2015 and $10.30 for FY 2016 as compared to the cost per revenue mile for FY 2011 of $10.10. Page  7  Comprehensive Annual Financial Report  NCTD has experienced significant costs increases associated with the LIFT program as ridership has increased by 97% since 2008 and the cost has increased from $3.5 million in FY 2008 to $8.4 million for FY 2016. NCTD projects that ridership will increase by 9.8% for LIFT in FY 2017 and costs are projected to increase by 19.3%. Beginning in FY 2017, NCTD will implement business improvement strategies to manage the increased costs associated with LIFT operations. Long-Term Financial Planning and Contingency Planning As part of adopting an annual capital and operating budget, NCTD’s Board of Directors approves a Comprehensive Strategic, Operating, and Capital Plan (COMP Plan) that covers a ten (10) year period. The COMP Plan includes a ten year operating and capital plan expense management strategy based on low-range, mid-range, and high-range revenue scenarios. NCTD has also established and maintains a Board controlled reserve of $15 million, which equates to 15% of NCTD’s FY 2016 operating budget. The specific requirements of this Board Reserve are included in Board Policy No. 10. NCTD has also established a risk reserve of $3,300,000 for payment of future claims. Major Initiatives Positive Train Control Project – This is a federally mandated rail safety project with specific timeline for implementation. Testing of the system has moved at a steady pace and NCTD and the contractor have submitted draft documents to the Federal Railroad Administration (FRA) to support Revenue Service Demonstration during the Fall/Winter timeframe. Once this milestone has been completed, the next major hurdle is submission of the Safety Plan. Combined Rail Operations Contract – In December 2015, NCTD awarded a seven-year contract with an option for one, three-year extension to Bombardier. The total value of the contract with Bombardier, including options totals $293 million. NCTD successfully completed the transition to Bombardier in FY 2016. Financial Management – NCTD established a Board policy requiring the Board approve the establishment of new banking accounts. Additionally, NCTD established a separate bank account for the $3.3 million of risk reserve. Buy America Waiver Request - NCTD has submitted a Buy America Waiver to the Federal Transit Administration related to the SPRINTER vehicle. Currently, NCTD cannot utilize federal funds for certain capital activities when vendors cannot supply parts that comply with Buy America requirements. If NCTD’s Buy America Waiver is approved, NCTD can then utilize federal funding to support the capital needs of the SPRINTER. Additionally, the Buy America Waiver will allow NCTD to better leverage the use of local, state, and federal funds to meet its operating and capital needs. Rail Shared Use Agreement - NCTD successfully completed negotiations with BNSF and Metropolitan Transit System (MTS) for amended and restated shared use agreement which governs the operations, maintenance, and allocation of costs and risks of the coastal and inland rail lines. This negotiation resulted in increased revenues for NCTD over the next five (5) years and addressed liability allocation risks that existed in the prior agreement. Enterprise Asset Management System Re-Implementation – NCTD is advancing a critical project to upgrade this system to better support NCTD business activities. Phase I, which was launched on October 19, 2015, was completed in November 2016 and the project is now transitioning into Phase II – executing the project implementation and management plans as developed in Phase I. Phase II was informally Page  8  Comprehensive Annual Financial Report  launched on June 29, 2016 and is expected to be substantially completed in the summer of 2017. Financial Reporting The Financial Section includes the independent auditor’s report, management's discussion and analysis, audited basic financial statements and accompanying notes, and required supplementary information. We express our appreciation to the dedicated NCTD employees who assisted in the preparation of this report as well as our independent auditors who helped prepare and reviewed this report. We extend special appreciation to the Board of Directors for its support of our efforts to provide excellent operational and financial management of NCTD. Respectfully submitted, Matthew O. Tucker Executive Director Luz Cofresí-Howe Chief Financial Officer  Page  9  Comprehensive Annual Financial Report  Board of Directors     Board Chair  Chair of Executive Committee    Mark Packard  Council Member, City of Carlsbad     Member, SANDAG Transportation Committee   Member, Joint Committee on Regional Transit    Board Vice‐Chair  Vice Chair of Executive Committee  Chair of Performance, Administration, and   Finance Committee   Rebecca Jones  Vice Mayor, City of San Marcos   Member, SANDAG Transportation Committee   Member, Joint Committee on Regional Transit    Performance, Administration, and    Finance Committee   Bill Horn    Supervisor, County of San Diego   Alternate Member, SANDAG Transportation  Committee     Member, Joint Committee on Regional Transit           Member of Marketing, Service Planning,     and Business Development Committee  Donald Mosier    Councilmember, City of Del Mar     Member, SANDAG Regional Planning Committee     Member, Joint Committee on Regional Transit              Member of Marketing, Service Planning,    and Business Development Committee    Mike Nichols  Vice‐Chair  Performance,  Administration,  and  Finance Committee  Executive Committee   Tony Kranz  Councilmember, City of Encinitas   Member, LOSSAN Corridor Board of Directors    Councilmember, City of Solana Beach     Alternate Member, SANDAG Board of Directors            Chair of Marketing, Service Planning,  and Business Development Committee  Executive Committee  Ed Gallo   Councilmember, City of Escondido   Alternate Member, SANDAG Board of Directors   Alternate Member, LOSSAN Corridor Board of  Directors    Member of Marketing, Service Planning,  and Business Development Committee  Chuck Lowery  Deputy Mayor, City Oceanside   Alternate Member, SANDAG Regional Planning  Committee          Performance, Administration, and    Finance Committee   John Aguilera    Deputy Mayor, City of Vista   Alternate Member, SANDAG Transportation  Committee            Page  10  Comprehensive Annual Financial Report Organizational Chart NCTD Organization Chart Effect-e anemone Page 12 Comprehensive Annual Financial Report  Certificate of Achievement   The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the North County Transit District for its comprehensive annual financial report for the fiscal year ended June 30, 2015. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements Special thanks to the team of NCTD employees who have assisted in preparing this Comprehensive Annual Financial Report. We thank them for their hard work, and commend them for their professionalism. Sincerely, Luz Cofresí-Howe Chief Financial Officer    Page  13  Comprehensive Annual Financial Report  Service Area Map     NCTD provides public transit in North San Diego County, from the Pacific Ocean east to Ramona, and from the Orange County border south to Del Mar, with connections extending to downtown San Diego. The approximate Service Area for the cities and areas served is about 403 square miles.     Page 14  Comprehensive Annual Financial Report  Service and Activities Background The North San Diego County Transit Development Board (NSDCTDB) was created by California Senate Bill 802 on September 20, 1975 and was renamed the North County Transit District (NCTD) in January 2006. NCTD was created to plan, construct, and operate, directly, or through a contractor, public transit systems in its area of jurisdiction. On January 1, 2003, a state law was enacted (SB 1703) that essentially transferred future transit planning, programming, development and construction to the San Diego Association of Governments (SANDAG), San Diego County’s Regional Planning Agency. NCTD operates the BREEZE, FLEX, LIFT, the COASTER commuter rail service and the SPRINTER hybrid rail service. In its current role, NCTD provides integrated public transit service within the North San Diego County region. Services NCTD provides bus, van and train service for people in the northern half of San Diego County – from the rural areas of Fallbrook and Ramona and the Camp Pendleton Marine Corps Base, to the cities of Carlsbad, Del Mar, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach, and Vista, as well as unincorporated parts of the county. The total population of NCTD’s 403 square mile service area is estimated to be 849,000. BREEZE bus service operates throughout the area, as does ADA paratransit service known as LIFT. The COASTER commuter rail service operates along the coastal rail line serving the coastal communities between Oceanside and San Diego. The SPRINTER hybrid rail service operates between Escondido and Oceanside with stops in San Marcos and Vista. NCTD provides BREEZE bus service to many shopping malls, beaches, major attractions and employment centers throughout North County, such as Legoland in Carlsbad, the San Diego Zoo Safari Park near Escondido, and the Marine Corps Base at Camp Pendleton. NCTD provides connecting service to other transit agencies including: Orange County Transportation Authority in San Clemente; Metropolitan Transit Service (MTS) in San Diego via the Trolley and MTS’ Rapid Transit Bus in Escondido; Riverside Transit Association (RTA) buses; Metrolink commuter rail service and Amtrak trains connect at Oceanside Transit Center; Amtrak also connects in Solana Beach and San Diego; Greyhound buses connect at Oceanside as well as the Escondido Transit Center. NCTD BREEZE buses, COASTER and SPRINTER trains, and LIFT paratransit vehicles also connect at transit centers throughout the region.   Page 15  Comprehensive Annual Financial Report  Fixed Route Bus Service – BREEZE Since 1976, NCTD has provided safe and efficient bus service to nearly 361 million passengers. The BREEZE currently operates 31 routes in the North County service area, from early morning to late at night, seven days a week. Of the current active fleet of 164 buses, 120 of the newest vehicles are cost-efficient environmentally friendly Compressed Natural Gas (CNG) models. CNG buses require more maintenance checks than diesel buses, but the environmental benefits are significant. All of the buses in the fleet are equipped with bicycle racks giving passengers the ability to bike and ride to their destinations. All NCTD BREEZE buses are accessible with low floors, ramps, or wheelchair lifts to assist the elderly and those passengers with disabilities to board and ride with ease. All BREEZE buses are fitted with fareboxes that allow passengers to use a regional “smartcard” known as the Compass Card for seamless travel throughout San Diego County on all public transportation. The Compass Card offers a variety of local and regional day passes as well as monthly passes. Effective July 1, 2010, NCTD executed a contract with First Transit to assume responsibility for bus operations and maintenance.   Page 16  Comprehensive Annual Financial Report  ADA Paratransit Service – LIFT   All NCTD vehicles - the buses, the vans, and the trains - are equipped with ramps, low floors, or lifts to make boarding and riding the vehicles easy for everyone. Passengers, who because of their disability are unable to access fixed route service, can travel on LIFT throughout NCTD’s service area and connect with neighboring transit services. Throughout NCTD’s service area, paratransit service operates using liftequipped vans. The lifts can be used to assist standing passengers who need assistance boarding, as well as those using wheelchairs and other mobility aids. Passengers who receive an ADA certification may call and schedule a ride from the curbside nearest their home, to the curbside nearest to their destination. This service also connects with bus or train service at the transit centers. In late fiscal year 2014, NCTD was informed that its previous contractor for LIFT could no longer provide the service. The previous contractor had used a brokerage model, utilizing local taxi services and independent car services. At that time, NCTD purchased vehicles and contracted with First Transit to maintain the vehicles and operate the LIFT service. NCTD currently has a fleet of 53 vans and low-floor buses known as “cut-a-ways” to provide paratransit transportation services for the community.    Page 17  Comprehensive Annual Financial Report  Commuter Rail Service – COASTER   The COASTER provides commuter rail service seven days a week, north and south along the San Diego County coast between Oceanside and San Diego. COASTER trains, including trains for special events, also run for every Padres and select Chargers home games. Trip time is about one hour. Eight stations provide service points along the route, and connections can be made to the MTS trolley and buses at San Diego’s Old Town and Santa Fe stations. Passengers can connect with Metrolink and Amtrak train service north to Orange County and Los Angeles at NCTD’s northernmost stop on the railroad, the Oceanside Transit Center. Currently, the COASTER service is provided by seven locomotives and 28 bi-level passenger coaches. TransitAmerica Services, Inc. was the contract operator responsible for maintaining and operating the trains for eleven and a half months of FY 2016. In mid-June 2016 Bombardier began as the contract operator for COASTER. During FY 2014, NCTD entered into an agreement with Amtrak to allow COASTER-ticketed passengers to ride six select Amtrak trains at no additional charge. This agreement increased the number of trains available to riders throughout the day and accounted for more than 95,000 passenger rides on Amtrak trains during the year. The COASTER carried a total of 1.5 million passengers in FY 2016 comprised primarily of workers, tourists, and baseball and football fans commuting along the 41 miles of track.   Page 18  Comprehensive Annual Financial Report  Hybrid Rail Service – SPRINTER   The SPRINTER hybrid rail line is NCTD’s newest transit mode with operations beginning in March 2008. The European-style hybrid rail vehicles run on 22 miles of rail that provides an east-west mobility link between Escondido, San Marcos, Vista and Oceanside. The SPRINTER features short convenient trips to 15 stations, averaging 3-5 minutes between stations, and a 53 minute travel time from end to end. Each train has a maximum capacity of 226 passengers and two can be linked together to offer a capacity of more than 450 passengers. Passenger service runs seven days a week from approximately 4:00am to 9:30pm with weekend service extended to 12:30am. Weekday service runs every 30 minutes and weekend trains run 30 minute frequencies during peak travel times from 10:00am to 6:00pm. The SPRINTER offers easy connections to the COASTER commuter rail, BREEZE bus service, Amtrak, Metrolink, Greyhound and to MTS’ RAPID EXPRESS bus service in Escondido. The operations and maintenance of the trains was contracted out to TransDev for eleven and a half months of FY 2016 with Bombardier taking over as the operating contractor in mid-June 2016. The SPRINTER carried a total of 2.6 million passengers in fiscal year 2016 comprised primarily of workers, students and tourists.     Page 19  Comprehensive Annual Financial Report  Activities Coach Operators and Vehicle Maintenance Personnel NCTD’s BREEZE bus service has more than 300 coach operators under the First Transit contract. They receive their initial training and licensing, renewal licensing, specialty training, and continuous dispatch assistance while operating the buses. The 36 mechanics that work for First Transit also are licensed to drive the buses. NCTD contracted out the responsibility for bus operations, vehicle maintenance and facility maintenance to First Transit. Vehicle Maintenance ‐ Trains NCTD contracts with Bombardier for maintaining and operating seven locomotives and 28 coach cars. Bombardier maintains COASTER rail equipment at NCTD’s Stuart Mesa facility located on Camp Pendleton Marine Corps Base. This facility houses massive and specialized equipment, primarily booms, cranes and lifts to assist with replacement of heavy parts. Dedicated contract mechanics and service workers perform daily train-washing and exterior and interior maintenance and repair. Specialty equipment is used to maintain the railroad right-of-way including, but not limited to, clearing vegetation away from the tracks and replacing rail ties. The 40,000 square foot SPRINTER operations facility is located in Escondido and was constructed specifically to house the operations center and to maintain the 12 SPRINTER trains. The operations area is home of the train control center and security monitoring center for the entire SPRINTER line as well as storage, training rooms, lockers, and office areas for SPRINTER employees. The maintenance area can house up to four train sets. Two structurally supported tracks allow maintenance crews access underneath and on top of trains to fully service the vehicles via pits, suspended platforms and overhead bridge cranes. The pits are fully functional with integrated electrical service, compressed air and lube oil systems. Rail Maintenance of Way NCTD owns the main north-south line between the Orange County border and the northern border of the City of San Diego, which is 41 miles of track. San Diego Metropolitan Transit System (MTS) owns the north-south line from the northern border of the City of San Diego to downtown San Diego, which is 21 miles of track. NCTD also owns the eastwest line between Escondido and Oceanside, which is 22 miles of track. Collectively, these lines are known as the San Diego Northern Railway. The COASTER operates on the north-south line, and the SPRINTER operates on the east-west line. NCTD maintains both lines including the MTS portion.   Page 20  Comprehensive Annual Financial Report  In addition to maintaining the track, NCTD is responsible for numerous railroad bridges along the coast, the railroad bed, sidings, grade crossings, turnouts, culverts and signals, land alongside the track as well as commercial property located within the right-of-way. Track maintenance equipment and personnel are housed in a facility located in Oceanside. Vehicle Maintenance ‐ Buses NCTD contracts with First Transit to operate and maintain its 167 buses, 61 vans and numerous other transit support vehicles. To maintain this fleet, mechanics work 24 hours a day, seven days a week at two locations. These bus yards include CNG (Compressed Natural Gas) fueling, maintenance and administration buildings, and parking areas for buses, service vehicles, and bus operators’ vehicles. Inside the maintenance buildings there are bus repair bays, pits for general servicing, bus lifts, hoists, fork lifts, engine repair benches, a body shop, a parts inventory storeroom, and a paint shop. Maintenance continues around the clock to keep the buses in excellent condition and keep road calls and service interruptions to a minimum. In addition to servicing and repairing the bus fleet, the maintenance crews also maintain a fleet of service vehicles, administrative automobiles, fork lifts, ride-on sweepers, and special vehicles that can operate on the railroad. Facilities Maintenance NCTD has contracted facility maintenance direction and supervision to First Transit, with oversight provided by NCTD staff. NCTD has two main administration buildings in Oceanside, two bus maintenance buildings located in Oceanside and Escondido, three bus transit centers, eight multi-modal train stations along the coastal railroad, 15 train stations along the inland railroad, two train maintenance facilities, two CNG fill stations, two bus washers, and all the adjacent land and parking lots. Facilities maintenance crews maintain, clean and repair most of the facilities using specialized equipment like ride-on sweepers and portable boom trucks. These crews keep the maintenance buildings in excellent condition, considering that buses and trains regularly arrive for repairs and routine maintenance and are subject to substantial amounts of dirt, dust and salt air, in addition to weather changes, during a single day. Facility maintenance crews contract and supervise major maintenance projects such as roof replacements, parking lot paving and striping, bus shelter replacements and repairs, heating and air-conditioning repair and replacement, as well as painting and repair of the administration buildings.   Page 21  Comprehensive Annual Financial Report  Security Security at the train stations, the parking lots, and the bus transfer centers is provided by a security patrol consisting of NCTD security staff and deputies from the San Diego County Sheriff’s department. Video security cameras at the COASTER and SPRINTER stations are monitored by NCTD’s Transit Enforcement and Emergency Oversight staff who contact the security patrol or the Sheriff in case of incidents. Management and Oversight The management of NCTD is comprised of the Executive Director (ED) supported by the nine divisional chiefs that oversee each of the functional divisions. These divisions include Operations, Safety, Development Services, Transit Enforcement, Finance, Procurement and Contract Administration, Planning, Information Technology and Administrative Services. The ED supports the Board of Directors’ policies and manages the inter-governmental affairs and the office of the General Counsel. General Counsel reports directly to the Board of Directors. Day to day functions are under the direction of the ED. The office of the General Counsel also oversees civil rights compliance, and risk management functions. Operations manage all the modes’ operational services and contractors that provide services including purchased transportation and maintenance of the rail, as well as PTC (positive train control) construction. Safety oversees preparedness, including safety policy and investigating incidents. Development Services manages the real estate, engineering, and facilities maintenance. Transit Enforcement is responsible for providing security services for customers, operators and staff. Finance manages the accounting, budget and fare collections and grants for NCTD that includes various internal and compliance reporting in addition to audits. Information Technology supports the various computer technology demands for NCTD that includes not only the administration, but the operational equipment required to operate the transportation services. Procurement and Contract Administration supports NCTD in obtaining goods and services in accordance with federal, state, local and internal compliance standards. Planning is responsible for the planning, design, scheduling and monitoring of NCTD’s transit service. Planning is also responsible for coordination with SANDAG and other local governments to promote transit service, determine locations for bus stops, design transit oriented development (TOD), and facilitate capital project planning and permitting. The Planning Division supports the Operations and Development Services Divisions. Administrative Services include communications, marketing, customer service and administration.   Page 22  Comprehensive Annual Financial Report Financial Section I'llPage 23 Comprehensive Annual Financial Report Century City Los Angeles Newport Beach Oakland Sacramento San Diego San Francisco Independent Auditor’s Report Walnut Creek To the Board of Directors North Country Transit District Woodland Hills Report on the Financial Statements We have audited the accompanying financial statements of the North County Transit District (NCTD) as of and for the fiscal years ended June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise NCTD’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NCTD as of June 30, 2016 and 2015, and the changes in its financial position and its cash flows for the fiscal years then ended in accordance with accounting principles generally accepted in the United States of America. Macias Gini & O’Connell LLP 225 Broadway, Suite 1750 San Diego, CA 92101 www.mgocpa.com Page 24 Comprehensive Annual Financial Report Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and defined benefit pension plan and other postemployment health care benefits plan schedules on pages 26-39 and 73-75 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively comprise NCTD’s basic financial statements. The introductory section and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audits of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2017, on our consideration of NCTD’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering NCTD’s internal control over financial reporting and compliance. San Diego, California January 27, 2017 Page 25 Comprehensive Annual Financial Report  Management’s Discussion and Analysis June 30, 2016 and 2015 Introduction The following discussion and analysis of the financial performance and activity of the North County Transit District (NCTD) provides an introduction and understanding of the basic financial statements of NCTD. This discussion has been prepared by management and should be read in conjunction with the basic financial statements and the notes thereto, which follow this section. The North San Diego County Transit Development Board (NSDCTDB) was established by an act of the California State Legislature (Senate Bill 802) on September 20, 1975 to plan, construct and operate public transit systems in the northern region of San Diego County. The NSDCTDB acquired the municipal transit systems operated by the cities of Escondido and Oceanside. NSDCTDB was renamed as the NCTD in January 2006 and commenced operations in July 1976 by providing bus services to the region. In 1992, NCTD was designated by the San Diego Association of Governments (SANDAG) as the lead agency for providing commuter rail service in San Diego County. NCTD receives funding from various state sources to construct and improve the coastal rail corridor from Oceanside to San Diego as part of the Los Angeles – San Diego – San Luis Obispo Rail Corridor (LOSSAN) joint powers agreement. Rail services between Oceanside and San Diego (called the COASTER) began in February 1995. On January 1, 2003, Senate Bill 1703 essentially transferred future transit planning, programming, development, and construction to the SANDAG, San Diego County’s regional planning agency. In 2003, NCTD began the construction of a hybrid rail system between Escondido and Oceanside (called the SPRINTER). The SPRINTER project consisted of reconstructing 22 miles of railroad in the existing eastwest corridor. The SPRINTER hybrid rail service commenced operations in March 2008 and serves 15 transit stations with interconnecting bus stops.       Page 26  Comprehensive Annual Financial Report  The Financial Statements NCTD’s basic financial statements include the following: 1. The Statements of Net Position report NCTD’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Total net position is displayed in three components – (a) net investment in capital assets; (b) restricted; and (c) unrestricted. 2. The Statements of Revenues, Expenses, and Changes in Net Position present information to show changes in NCTD’s net position during the fiscal year. The Statements categorize revenues and expenses as either operating or nonoperating, based upon the definitions provided by Governmental Accounting Standards Board (GASB) Statement No. 34. 3. The Statements of Cash Flows are presented using the direct method and include a reconciliation of operating cash flows to operating income.   Page 27  Comprehensive Annual Financial Report  Statements of Net Position Below is a comparison of NCTD’s Statements of Net Position as of June 30, 2016 and June 30, 2015:    In fiscal year 2016, current assets decreased $1.3 million or 1% and current liabilities decreased $211,833 or 0% as compared to FY 2015. The primary decrease in current assets was due to Grants Receivable increasing $14.3 million, Accounts Receivable increasing $3.0 million and Cash and Investments decreasing $18.8 million. The decrease in cash was primarily due to delayed receipts for grants caused by the deferred renewal of grants related to NCTD Positive Train Control project. Capital assets decreased $13.1 million primarily as a result of asset additions of $50.4 million offset by annual depreciation of $63.5 million. The annual depreciation is $5.6 million lower than 2015 ($69.1 million). (Refer to Note 5 of the audited financial statements for additional information on capital assets). Current liabilities increased $5.6 million primarily due to an increase in accounts payable of $5.8 million. The increase in accounts payable was due to an increase in unpaid invoices as of June 30, 2016 related to invoicing issues with contractors. Long-term debt decreased by $1.3 million or 5%. Net pension liability increased by $3.8 million. Other noncurrent liabilities increased $1.4 million or 17% due mostly to an increase in the negative fair value   Page 28  Comprehensive Annual Financial Report  Statements of Net Position (Continued)  of NCTD’s interest rate swap. Long term unearned grant revenue decreased by $5.8 million due to the use of unearned grant revenues during FY 2016. The decrease in unearned grant revenue was due to the recognition of revenue during FY 2016 for deferred TDA revenues spent for capital projects of $4.7 million and $1.7 million used for operating expense in FY 2016. Below is a comparison of NCTD’s Statements of Net Position as of June 30, 2015 and June 30, 2014: Increase/(Decrease) Amount % 2015 2014 $           109,792,045               588,750,133 $   114,057,360      557,184,591 $       (4,265,315)          31,565,542 (4%) 6%               698,542,178      671,241,951          27,300,227 4% Deferred outflows of resources                   6,708,351          4,584,903            2,123,448 46% Current liabilities Long‐term debt Long term uneared grant revenue Net pension liability Other noncurrent liabilities                 30,833,393                 28,075,000                 27,599,611                 24,813,639                   8,453,847        30,254,938        29,350,000        34,883,055                      ‐          8,596,042               578,455           (1,275,000)           (7,283,444)          24,813,639              (142,195) 2% (4%) (21%)                    ‐ (2%)               119,775,490      103,084,035          16,691,455 16% Deferred inflows of resources                   7,475,076                      ‐            7,475,076 Net position: Net investment in capital assets Restricted  Unrestricted                562,144,871                         50,495                 15,804,597      529,424,444                50,495        43,267,880          32,720,427                        ‐        (27,463,283) 6% 0% (63%) $           577,999,963 $   572,742,819 $         5,257,144 1% Current assets Capital assets Total assets Total liablilities Total net position                    ‐   In FY 2015, current assets decreased $4.2 million or 4%. The primary decrease in current assets was due to Grants Receivable decreasing $9.2 million and Cash and Investments increasing $5.6 million. The increase in cash of was primarily due to the collection of grants receivable from FY 2014. The decrease in grants receivable was primarily due to the collection of FY 2014 amounts and lower capital project billings to grantors. Capital assets increased $31.5 million primarily as a result of asset additions of $100.6 million offset by annual depreciation of $69.1 million. The annual depreciation is $7.4 million higher than 2014 ($61.7 million) due to new assets placed into service. (Refer to Note 5 of the audited financial statements for additional information on capital assets).   Page 29  Comprehensive Annual Financial Report  Statements of Net Position (Continued)  Long-term debt decreased by $1.2 million or 4%. Net pension liability increased by $24.8 million due to the implementation of GASB Statement No. 68. Other noncurrent liabilities decreased $142,195 or 2% due to a decrease in claims payable. The decrease in long-term unearned grant revenue was due to the recognition of revenue during FY 2015. Net Capital Assets During fiscal year 2016, the amount of net capital assets decreased $13.1 million. Below is a more detailed analysis of the changes in NCTD’s capital assets and accumulated depreciation during the year ended June 30, 2016: Land Land improvements Buildings, structures and improvements Right‐of‐way and improvements Revenue and service vehicles Equipment Construction‐in‐progress Increase/(Decrease) Amount % 2016 2015 $               92,851,021                  56,170,156                159,546,011                487,795,766                184,974,784                142,480,102                  96,700,426 $         92,851,021            56,170,156          159,284,425          454,676,698          185,182,899          138,922,998            83,403,208 $                       ‐                          ‐                 261,586            33,119,068                (208,115)              3,557,104            13,297,218            1,220,518,266      1,170,491,405            50,026,861 0% 0% 0% 7% 0% 3% 16%   Total 4%   Less: accumulated depreciation                644,860,027          581,741,272            63,118,755   Net Capital Assets $            575,658,239 11%   $      588,750,133 $       (13,091,894) (2%) Additional information on NCTD’s capital assets can be found in Note 5 of the notes to basic financial statements. Below are some of the significant items affecting the increase in Net Capital Assets during fiscal year 2016: Right-of-way and improvements increased $33.1 million due to bridge repairs and double tracking occurring on the LOSSAN corridor. These right-of-way improvements were primarily projects conducted by SANDAG. SANDAG projects accounted for $31.8 million of the increase and represent contributed capital recorded during fiscal year 2016. Revenue and service vehicles decreased $208,115 due to the disposal of service vehicles during fiscal year 2016. Equipment increased $3.5 million due primarily to project work by SANDAG which was recorded as contributed capital for fiscal year 2016. Construction in progress increased $13.3 million due primarily to the ongoing work for the Positive Train Control (PTC) project which had costs of $7.6 million in fiscal year 2016. Ongoing bridge repair projects   Page 30  Comprehensive Annual Financial Report  Net Capital Assets (Continued) accounted for an additional $2.5 million of cost in fiscal year 2016. Other ongoing projects account for the remaining $3.2 million increase. Depreciation of $63.5 million is primarily due to the right-of-way depreciation. There was a reduction in total accumulated depreciation of $374,268 due to the disposals of capital assets.   During fiscal year 2015, the amount of net capital assets increased $31.5 million. Below is a more detailed analysis of the changes in NCTD’s capital assets and accumulated depreciation during the year ended June 30, 2015: Land Land improvements Buildings, structures and improvements Right‐of‐way and improvements Revenue and service vehicles Equipment Construction‐in‐progress Increase/(Decrease) Amount % 2015 2014 $               92,851,021                  56,170,156                159,284,425                454,676,698                185,182,899                138,922,998                  83,403,208 $         92,851,021            56,124,900          151,272,248          373,650,452          182,605,375          137,500,835            75,979,176 $                       ‐                    45,256              8,012,177            81,026,246              2,577,524              1,422,163              7,424,032            1,170,491,405      1,069,984,007          100,507,398 0% 0% 5% 22% 1% 1% 10%   Total 9%   Less: accumulated depreciation                581,741,272          512,799,416            68,941,856   Net Capital Assets $            588,750,133   13%   $      557,184,591 $         31,565,542 6% Page 31  Comprehensive Annual Financial Report  Net Capital Assets (Continued) Additional information on NCTD’s capital assets can be found in Note 5 of the notes to basic financial statements. Below are some of the significant items affecting the increase in Net Capital Assets during fiscal year 2015: Buildings, structures and improvements increased $8.0 million primarily due to the addition of the new San Luis Rey Transit Center. The transit center was constructed by SANDAG and represents contributed capital from SANDAG recorded in fiscal year 2015. Right-of-way and improvements increased $81.0 million due to bridge repairs and double tracking occurring on the LOSSAN corridor. These right-of-way improvements were projects conducted by SANDAG and represent contributed capital recorded during fiscal year 2015. Revenue and service vehicles increased $2.6 million primarily due to the repairs of the SPRINTER air bellows and assembly trucks and the replacement of service trucks. Equipment increased $1.4 million due to the purchase of data processing equipment for $1.3 million. Construction in progress increased $7.4 million due to the ongoing work for the Positive Train Control (PTC) project. Depreciation of $69.1 million is primarily due to the right-of-way depreciation. There was a reduction in total accumulated depreciation of $178,747 due to the disposals of capital assets.     Page 32  Comprehensive Annual Financial Report  Statements of Revenue, Expenses, and Change in Net Position Below is a summary of NCTD’s Statements of Revenues, Expenses, and Changes in Net Position for the fiscal years 2016 and 2015: 2016 2015 Operating revenues Operating expenses $               31,551,911              (157,091,303) $         31,492,023        (161,809,565) Operating loss              (125,539,392) Nonoperating revenues/expenses net Capital grants and contributions Change in net position Net position  Beginning of year, as previously reported Cumulative effect of change in accounting  principles Beginning of year, as restated End of year Change‐Favorable/(Unfavorable) Amount %        (130,317,542) $                59,888              4,718,262                4,778,150 0% (3%) (4%)                  64,724,136                  50,401,131            65,627,848          100,919,607                (903,712)           (50,518,476) (1%) (50%)                 (10,414,125)            36,229,913           (46,644,038) (129%)                577,999,963            572,742,819              5,257,144 1%                                ‐                577,999,963 $            567,585,838           (30,972,769)          541,770,050 $      577,999,963            30,972,769            36,229,913 $       (10,414,125)                       ‐ 7% (2%)   The fiscal year 2016 change in net position was $46.6 million less than the change in net position for fiscal year 2015. This decrease is due to the recognition of $50.5 million less in Capital grants and contributions in fiscal year 2016 as compared to fiscal year 2015. The overall change in net position for fiscal year 2016 was a decrease of $10.4 million compared to an increase of $5.3 million for fiscal year 2015.   Page 33  Comprehensive Annual Financial Report  Statements of Revenue, Expenses, and Change in Net Position (Continued)  Below is a summary of NCTD’s Statements of Revenues, Expenses, and Changes in Net Position for the fiscal years 2015 and 2014: 2015 2014 Operating revenues Operating expenses $               31,492,023              (161,809,565) $         31,820,874        (149,466,935) Operating loss              (130,317,542) Nonoperating revenues/expenses net Capital grants and contributions Change in net position Net position  Beginning of year, as previously reported Cumulative effect of change in accounting  principles Beginning of year, as restated End of year Change‐Favorable/(Unfavorable) Amount % (1%) 8%        (117,646,061) $             (328,851)           (12,342,630)             (12,671,481)                  65,627,848                100,919,607            60,058,623            26,577,453              5,569,225            74,342,154 9% 280%                  36,229,913           (31,009,985)            67,239,898 (217%)                572,742,819            603,752,804           (31,009,985) (5%)                 (30,972,769)                541,770,050 $            577,999,963                          ‐          603,752,804 $      572,742,819           (30,972,769)           (61,982,754) $           5,257,144                       ‐ (10%) 1% 11%   The fiscal year 2015 change in net position was $67.2 million more than the change in net position for fiscal year 2014. This increase is due to the recognition of $74.3 million more in Capital Grants and Contributions in fiscal year 2015 as compared to fiscal year 2014. The overall change in net position for fiscal year 2015 was an increase of $5.2 million compared to a decrease of $31 million for fiscal year 2014. This increase of $5.2 million is a result of the $36.2 million change in net position for FY 2015 less the cumulative effect of the change in accounting principles related to GASB Statement No. 68 of $30.9 million.   Page 34  Comprehensive Annual Financial Report  Operating Revenue As shown in the fiscal year 2016 Statements of Revenue, Expenses, and Change in Net Position, NCTD’s operating revenues were comparable from fiscal year 2015 to 2016. Below is a more detailed breakdown of NCTD’s operating revenues: 2016 2015 Fare revenue Advertising and right‐of‐way Lease and sublease revenue Other revenue $               18,147,101                  10,416,549                    1,646,667                    1,341,594 Total operating revenues $               31,551,911 $         19,438,167              9,502,115              1,602,676                 949,065   $         31,492,023 Increase/(Decrease) Amount % $      (1,291,066)              914,434                43,991              392,529 (7%) 10% 3% 41% $             59,888 0% Fare revenues have decreased $1.3 million or 7% primarily due to a 5.1% decrease in boardings in fiscal year 2016 as compared to fiscal year 2015. Advertising and right-of-way revenues increased $914,434 or 10% primarily due to increased shared use revenues from the right of ways. Other revenues increased $392,529 or 41% primarily due to fuel tax credits claimed in fiscal year 2016.   Page 35  Comprehensive Annual Financial Report  Operating Revenue (Continued) As shown in the fiscal year 2015 Statements of Revenue, Expenses, and Change in Net Position, NCTD’s operating revenues were comparable from fiscal year 2014 to 2015. Below is a more detailed breakdown of NCTD’s operating revenues: 2015 2014 Fare revenue Advertising and right‐of‐way Lease and sublease revenue Other revenue $              19,438,167                    9,502,115                    1,602,676                       949,065 Total operating revenues $              31,492,023 $        19,274,834             9,347,259             1,476,319             1,722,462   $        31,820,874 Increase/(Decrease) Amount % $          163,333             154,856             126,357            (773,397) 1% 2% 9% (45%) $        (328,851) (1%) Fare revenues have increased $163,333 or 1% primarily due to a 1% increase in boardings. Advertising and right-of-way revenues increased $154,856 or 2% primarily due to increased ad sales on COASTER and buses. Other revenues decreased $773,397or 45% primarily due to fuel tax credits claimed in fiscal year 2014 that expired in December 2014 resulting in a lower claim amount in fiscal year 2015.     Page 36  Comprehensive Annual Financial Report  Operating Expenses During fiscal year 2016 NCTD’s operating expenses decreased to $157.1 million from $161.8 million in fiscal year 2015. Below is a breakdown of NCTD’s operating expenses: Vehicle operations Vehicle maintenance Non‐vehicle maintenance Administration Right‐of‐way operations Depreciation Total operating expenses 2016 2015 $               41,555,160                  13,125,807                    8,907,149                  24,791,426                    5,218,738                  63,493,023 $         43,331,766            12,307,320              8,559,735            22,776,865              5,713,276            69,120,603   $      161,809,565 $            157,091,303 Increase/(Decrease) Amount % $     (1,776,606)             818,487             347,414          2,014,561            (494,538)         (5,627,580)   $     (4,718,262) (4%) 7% 4% 9% (9%) (8%)   (3%) As shown in the table above, operating expenses decreased by $4.7 million during fiscal year 2016. Among the significant issues affecting operating expenses were:  Vehicle operations decreased $1.8 million or 4% primarily due to decreased fuel prices.  Vehicle maintenance and non-vehicle maintenance increased by $1.2 million due to improvements along the right-of-way that were allocated to operating costs.  Administration increased $2.0 million or 9.0% due primarily to professional services related to JDE reimplementation Phase I costs and the costs related to Bombardier rail contract mobilization.  Depreciation decreased $5.6 million due to assets reaching the end of their useful life and because FY 2015 depreciation contained prior year depreciation due to assets placed into service prior to being recorded as contributed capital from SANDAG.   Page 37  Comprehensive Annual Financial Report  Operating Expenses (Continued) During fiscal year 2015 NCTD’s operating expenses increased to $161.8 million from $149.5 million in fiscal year 2014. Below is a breakdown of NCTD’s operating expenses: Vehicle operations Vehicle maintenance Non‐vehicle maintenance Administration Right‐of‐way operations Depreciation Total operating expenses 2015 2014 $              43,331,766                 12,307,320                    8,559,735                 22,776,865                    5,713,276                 69,120,603 $        39,313,456           12,458,342             9,471,138           20,961,917             5,599,239           61,662,843   $     149,466,935 $            161,809,565 Increase/(Decrease) Amount % $      4,018,310           (151,022)           (911,403)         1,814,948             114,037         7,457,760   $   12,342,630 10% (1%) (10%) 9% 2% 12%   8% As shown in the table above, operating expenses increased by $12.3 million during fiscal year 2015. Among the significant issues affecting operating expenses were:  Vehicle operations increased $4.0 million or 10% primarily due to an increase in purchased transportation of $1.7 million, primarily for LIFT and SPRINTER.  Non-vehicle maintenance decreased $911,403 or 10% primarily due to decreased right-of-way maintenance costs allocated to the operating modes.  Administration increased $1.8 million or 9% due primarily to the increased cost of purchased transportation for LIFT of $1.1 million.  Depreciation increased $7.4 million as a result of the addition of a new transit center, bridge repair and double tracking.   Page 38  Comprehensive Annual Financial Report  Restrictions and Commitments Restrictions on net position were $50,495 as of June 30, 2016 and 2015. As of June 30, 2016, NCTD has commitments of $31,442,632 for capital and operating projects, which are funded by eligible grant revenues. Refer to Note 10 to the financial statements for additional information. Long‐Term Debt NCTD entered into a long-term debt arrangement in 2004 for $114 million which has since been reduced to $28.075 million. This debt is structured to mature in 2035. Refer to Note 7 to the financial statements for additional information. Contacting NCTD’s Financial Management NCTD’s financial report is designed to provide NCTD’s Board of Directors, management, legislative and oversight agencies, citizens, customers and other stakeholders with an overview of the North County Transit District’s finances and to demonstrate its accountability for funds received. For additional information about this report, please contact Luz Cofresí-Howe, Chief Financial Officer, at 810 Mission Avenue, Oceanside, CA 92054.   Page 39  Comprehensive Annual Financial Report  Basic Financial Statements   NORTH COUNTY TRANSIT DISTRICT STATEMENTS OF NET POSITION JUNE 30, 2016 AND 2015 2016 ASSETS Current assets Cash and investments Investments with fiscal agent Accounts receivable Grants receivable Parts and supplies inventory Prepaid expenses Total current assets $ Noncurrent assets Capital assets: Nondepreciable capital assets Depreciable capital assets, net of accumulated depreciatio Total capital assets Total assets DEFERRED OUTFLOWS OF RESOURCES Accumulated decrease in fair value of interest rate swap Pension contributions Total deferred outflows of resources LIABILITIES Current liabilities payable from current assets Accounts payable Accrued liabilities Deposits payable Unearned grant revenue - due within one year Certificates of participation - due within one year Claims payable - due within one year Compensated absences - due within one year Total current liabilities payable from current assets Noncurrent liabilities Certificates of participation - due in more than one year Claims payable - due in more than one year Compensated absences due in more than one year Net other postemployment benefits obligation Unearned grant revenue - due in more than one year Net pension liability Negative fair value of interest rate swap Total noncurrent liabilities Total liabilities 69,659,663 2,776,837 7,487,207 24,116,328 3,155,745 1,311,962 108,507,742 2015 $ 88,440,306 2,744,738 4,440,839 9,805,308 3,205,652 1,155,202 109,792,045 189,551,447 386,106,792 575,658,239 684,165,981 176,254,229 412,495,904 588,750,133 698,542,178 6,406,543 2,064,509 8,471,052 4,780,890 1,927,461 6,708,351 22,596,768 652,002 852,334 9,701,404 1,325,000 759,336 603,076 36,489,920 16,792,822 495,528 723,365 9,983,301 1,275,000 966,807 596,570 30,833,393 26,750,000 1,436,414 174,519 1,841,663 21,731,251 28,667,315 6,406,543 87,007,705 123,497,625 28,075,000 1,789,522 174,408 1,709,027 27,599,611 24,813,639 4,780,890 88,942,097 119,775,490 1,553,570 7,475,076 550,360,076 562,144,871 50,495 17,175,267 567,585,838 50,495 15,804,597 577,999,963 DEFERRED INFLOWS OF RESOURCES Inflows of resources as related to pensions NET POSITION Net investment in capital assets Restricted for: Capital projects Unrestricted Total net position $ $ The accompanying notes are an integral part of these financial statements   Page 40  Comprehensive Annual Financial Report  NORTH COUNTY TRANSIT DISTRICT STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEARS ENDED JUNE 30, 2016 and 2015 2016 OPERATING REVENUES Fare revenue Advertising and right-of-way Lease and sublease revenue Other revenue Total operating revenues $ OPERATING EXPENSES Vehicle operations Vehicle maintenance Non-vehicle maintenance Administration Right-of-way operations Depreciation Total operating expenses Operating Loss NONOPERATING REVENUES (EXPENSES) Operating grants Investment income Debt related expense Gain on disposal of capital assets Total nonoperating revenues (expenses) Loss before capital contributions CAPITAL CONTRIBUTIONS Capital grants Donated capital assets Change in Net Position NET POSITION Beginning of year, as previously reported Cumulative effect of change in accounting principles Beginning of year, as restated End of year $ 18,147,101 10,416,549 1,646,667 1,341,594 31,551,911 2015 $ 19,438,167 9,502,115 1,602,676 949,065 31,492,023 41,555,160 13,125,807 8,907,149 24,791,426 5,218,738 63,493,023 157,091,303 (125,539,392) 43,331,766 12,307,320 8,559,735 22,776,865 5,713,276 69,120,603 161,809,565 (130,317,542) 65,322,281 317,367 (942,170) 26,658 64,724,136 66,462,938 250,086 (1,086,335) 1,159 65,627,848 (60,815,256) (64,689,694) 15,534,248 34,866,883 16,976,048 83,943,559 (10,414,125) 36,229,913 577,999,963 572,742,819 577,999,963 567,585,838 (30,972,769) 541,770,050 577,999,963 $      The accompanying notes are an integral part of these financial statements   Page 41  Comprehensive Annual Financial Report  NORTH COUNTY TRANSIT DISTRICT STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 2016 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Payments to suppliers Payments to employees Net cash (used) by operating activities $ CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Operating grants received CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital grants received Purchase of capital assets Transfer of capital grant funds to SANDAG for capital projects Proceeds from disposal of capital assets Payments on certificates of participation Payment of interest and fees Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Investment income 28,634,508 (76,550,051) (13,820,862) (61,736,405) 2015 $ 56,974,137 52,134,737 9,735,214 (15,534,247) (6,314,097) 26,645 (1,275,000) (942,170) (14,303,655) 39,195,247 (16,742,586) 1,171 (1,225,000) (1,086,335) 20,142,497 317,367 Net (decrease) increase in cash and cash equivalents Cash and cash equivalents Beginning of year End of year RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENTS OF NET POSITION Cash and investments Investments with fiscal agent Less investments not meeting the definition of cash and cash equivalents Cash and cash equivalents 250,086 (18,748,556) $ 88,440,306 69,691,750 5,538,644 $ 69,659,663 2,776,837 (2,744,750) $ 31,997,417 (83,778,058) (15,208,035) (66,988,676) 69,691,750 82,901,662 88,440,306 88,440,306 2,744,738 (2,744,738) $ 88,440,306 The accompanying notes are an integral part of these financial statements   Page 42  Comprehensive Annual Financial Report  NORTH COUNTY TRANSIT DISTRICT STATEMENTS OF CASH FLOWS, CONTINUED FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 2016 2015 $ (125,539,392) $ (130,317,542) 63,493,023 (3,046,368) 49,907 (156,760) (137,048) 5,803,946 156,474 128,969 (560,579) 6,617 3,853,676 (5,921,506) 132,636 63,802,987 69,120,603 419,084 71,069 43,041 (584,000) (2,809,176) (2,666,597) 94,300 (545,352) 94,901 (7,502,591) 7,475,076 118,508 63,328,866 RECONCILIATION OF OPERATING LOSS TO NET CASH (USED) BY OPERATING ACTIVITIES Operating loss Adjustments to reconcile operating loss to net cash (used) by operating activities: Depreciation (Increase) decrease in accounts receivable Decrease in parts and supplies inventory (Increase) decrease in prepaid expenses Increase in deferred outflows-pension contributions (Decrease) increase in accounts payable (Decrease) increase in accrued liabilities Increase in deposits payable Decrease in claims payable Increase in compensated absences Increase (decrease) in pension liability Increase (decrease) in deferred inflows-pension plan investments Increase in net other postemployment benefits obligation Total adjustments Net cash (used) by operating activities NONCASH CAPITAL FINANCING ACTIVITIES: Capital assets contributed by SANDAG $ (61,736,405) $ $ 34,866,883 $ (66,988,676) 83,943,559         The accompanying notes are an integral part of these financial statements   Page 43  Comprehensive Annual Financial Report  Notes to Basic Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying basic financial statements of the North County Transit District (NCTD) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting standards. The more significant of NCTD’s accounting policies are described below. Reporting Entity The North San Diego County Transit Development Board was created by an act of the California State Legislature in 1975 and commenced operations during 1976 as a special district to plan, construct, and operate, directly or indirectly, public transit systems in the northern part of San Diego County. Under California Assembly Bill 1238, the North San Diego County Transit Development Board’s name was changed to North County Transit District (NCTD). The NCTD governing board (Board) consists of nine members, including one member from each of the city councils of Carlsbad, Del Mar, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach and Vista and one member from the San Diego County Board of Supervisors. On January 1, 2003, California Senate Bill 1703 (SB 1703) became effective. SB 1703 required the consolidation of the planning and programming functions of the North County Transit District and San Diego Metropolitan Transit System (MTS) into the San Diego Association of Governments (SANDAG) in an initial transfer to take place prior to July 1, 2003. SB 1703 also required the consolidation of the project development and construction functions of NCTD and MTS into SANDAG in a subsequent transfer to take place prior to January 30, 2004. The initial transfer occurred on July 1, 2003, and the subsequent transfer occurred on October 13, 2003. With these actions, employees were transferred from NCTD and MTS to SANDAG, and certain planning, development, and construction functions were also transferred. As a result, NCTD’s activities subsequent to the transfers are focused on operating public transit systems in the area identified above. NCTD commenced operations by providing bus services to the region. In 1992, NCTD was designated by SANDAG as the lead agency for providing commuter rail service in San Diego County. NCTD receives funding from various state sources to construct and improve the coastal rail corridor from Oceanside to San Diego as part of the Los Angeles – San Diego Rail Corridor (LOSSAN) joint powers agreement. NCTD began commuter rail service between Oceanside and San Diego (known as the COASTER) in February 1995. In March 2008, hybrid rail service (known as the SPRINTER) commenced operations servicing the northern east-west corridor of San Diego County between Oceanside and Escondido. The SPRINTER’s 22 miles of hybrid rail system comprises 15 transit stations with interconnecting bus routes that also service the cities of San Marcos and Vista.   Page 44  Comprehensive Annual Financial Report  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BASIS OF ACCOUNTING AND PRESENTATION These basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of NCTD’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, including capital assets, are included in the accompanying Statements of Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Grants are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Grants received in advance of revenue recognition by NCTD are shown in the accompanying Statements of Net Position as unearned grant revenue. The Statements of Revenues, Expenses and Changes in Net Position present increases (revenues) and decreases (expenses), in total net position. Enterprise funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with the entity’s principal ongoing operational activities. Charges to customers represent NCTD’s principal operating revenues and include passenger fares and revenues from use of its capital assets for advertising, right-of-way and other leasing activities. Operating expenses include the cost of operating, maintaining, and supporting transit services and related capital assets, administrative expenses, and depreciation. All revenues and expenses not meeting this definition are reported as non-operating or other revenues and expenses. CAPITAL GRANTS NCTD receives grants from the Federal Transit Administration (FTA) and other agencies of the U.S. Department of Transportation, state, and local transportation funds for the acquisition of transitrelated equipment and improvements. Capital grants are included in the determination of changes in net position as capital contributions resulting in an increase of $15,534,248 and $16,976,048 for the fiscal years 2016 and 2015, respectively. INCOME TAXES NCTD is a governmental agency exempt from federal income taxes under Section 115 of the Internal Revenue Code (IRC) and from California franchise taxes under similar California law. CASH, CASH EQUIVALENTS AND INVESTMENTS For purposes of the Statements of Cash Flows, NCTD considers all short-term investments purchased with an original maturity of three months or less to be cash equivalents, including cash and cash equivalents restricted for capital projects and future maintenance, and NCTD’s investment in the Local Agency Investment Fund. At June 30, 2016 and 2015, NCTD considered all of its cash and investments, except for the guaranteed investment contract, to be cash and cash equivalents. Highly liquid market investments with maturities of one year or less at the time of purchase are stated at amortized cost. NCTD’s guaranteed investment contract is reported at cost, and all other investments are stated at fair value. NCTD is a voluntary participant in the Local Agency Investment Fund (LAIF) investment pool that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of NCTD’s investment in the pool   Page 45  Comprehensive Annual Financial Report  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) is reported based upon NCTD’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio. The balance available for withdrawal is based on the accounting records maintained by LAIF, which is recorded on an amortized cost basis. Substantially all investment income, including changes in the fair value of investments, is reported as nonoperating revenue in the accompanying Statements of Revenues, Expenses, and Changes in Net Position. PARTS AND SUPPLIES INVENTORY Inventories of maintenance parts and supplies are stated at the lower of cost or market, with cost being determined using the weighted average cost method. The cost of inventory is recorded as an expense at the time the inventory is consumed. CAPITAL ASSETS Capital assets, which include land, construction-in-progress, land improvements, buildings, right-ofway property, improvements, vehicles, and equipment and furniture, are defined as assets with an initial cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the time of donation. Major outlays for capital assets and improvements are capitalized as assets are purchased or projects are constructed. Land and construction-in-progress are not depreciated. Other capital assets are depreciated using the straight-line method over the following estimated useful lives: ASSET TYPE USEFUL LIFE Land improvements 10 years Buildings, structures and improvements Right-of-way and improvements 5 - 30 years 10 - 20 years Revenue and service vehicles 3 - 25 years Equipment and furniture 2 - 60 years UNEARNED GRANT REVENUE NCTD reports unearned grant revenue in its financial statements. Unearned grant revenue arises when resources are received by NCTD before eligibility requirements have been met. SELF-INSURANCE LIABILITIES NCTD self-insures claims on a per-occurrence basis. Claims expenses and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated, net of any insurance coverage. These losses include management’s estimate of claims that have been incurred but not reported. These losses also include, where available, estimates of recoveries on unsettled claims and incremental claim adjustment expenses, such as legal expenses. Small dollar claims and judgments are recorded as expenses when paid. Refer to Note 15 for further details.   Page 46  Comprehensive Annual Financial Report  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) COMPENSATED ABSENCES NCTD employees receive paid time off based on their position classification and years of service up to a maximum of 400 hours. The liability is recorded as benefits are earned and is reduced when hours are paid out. Refer to Note 6 for further details. PENSIONS For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions and pension expense, information about the fiduciary net position of NCTD’s defined benefit pension plan (Plan), which is administered by the California Public Employees’ Retirement System (CalPERS) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments of the Plan are reported at fair value. OTHER POSTEMPLOYMENT BENEFITS NCTD makes certain benefits available to retired employees. These include medical insurance coverage provided through the California Public Employees’ Retirement System (CalPERS). Beginning January 1, 2016, all but $125 per month per participant of the cost is paid by the participants. During the previous calendar year, the amount paid by NCTD per participant was $122 per month. Total payments for the fiscal years ended June 30, 2016 and 2015 were $130,316 for 85 retirees and $136,620 for 95 retirees, respectively. Refer to Note 14 for further details. NET POSITION Net position is classified in the following categories: Net Investment in Capital Assets – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt, net of unspent proceeds, related to the acquisition, construction, or improvement of the assets, and deferred outflows and inflows of resources related to debt (e.g. deferred amounts on refunding). Restricted Net Position – This amount represents restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted Net Position – This amount represents all net position that does not meet the definition of “net investment in capital assets” or “restricted net position.” Unrestricted net position includes a Board established reserve fund of $15,000,000 as of June 30, 2016 and 2015. USE OF RESTRICTED/UNRESTRICTED NET POSITION When both restricted and unrestricted resources are available for use, it is NCTD’s policy to use restricted resources first and then unrestricted resources as they are needed. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect   Page 47  Comprehensive Annual Financial Report  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS Effective, July 1, 2014, NCTD adopted the GASB Statement No. 68, Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. NCTD also implemented GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - An Amendment of GASB Statement No. 68. This statement requires that, at transition, a government should recognize a beginning deferred outflow of resources for its pension contributions made after the measurement date of the beginning net pension liability. Statement No. 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts. The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No. 68. In fiscal year 2015, the District restated its beginning net position as of July 1, 2014, to record the cumulative effect of the change in accounting principles of $30,972,769. Net Position, June 30, 2014, as previously reported $ 572,742,819 Cumulative effect of change in accounting principles: GASB Statement No. 68 - net pension liability GASB Statement No. 71 - contributions made prior to the measurement date Net Position, July 1, 2014, as restated (32,316,230) 1,343,461 $ 541,770,050 Effective July 1, 2015, NCTD adopted the GASB Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements. It also provides guidance for determining a fair value measurement for financial reporting purposes and for applying fair value to certain investments and disclosures related to all fair value measurements. Refer to Note 2 for additional information related to GASB 72 implementation. 2. CASH AND INVESTMENTS Reconciliation of cash and investments to the Statements of Net Position at June 30, 2016 and 2015: 2016 Cash and investments Investments with fiscal agent Total   2015 $ 69,659,663 2,776,837 $ 88,440,306 2,744,738 $ 72,436,500 $ 91,185,044 Page 48  Comprehensive Annual Financial Report  2. CASH AND INVESTMENTS (CONTINUED) Cash and investments consist of the following at June 30, 2016 and 2015: 2016 Cash: Cash on hand Demand deposits Total cash $ 132,192 19,674,044 19,806,236 Investments: Deposits in Local Agency Investment Fund (LAIF) Investments with fiscal agent Total investments $ 106,925 38,408,935 38,515,860 49,853,427 2,776,837 52,630,264 $ Total cash and investments 2015 72,436,500 49,924,446 2,744,738 52,669,184 $ 91,185,044 Investments Authorized by the California Government Code and NCTD’s Investment Policy: The table below identifies the investment types that are authorized for NCTD by the California Government Code (or NCTD’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or NCTD’s investment policy, where more restrictive) that address interest rate risk and concentration of credit risk. Maximum Maturity Maximum Percentage of Portfolio Maximum Investment in One Issuer U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptances 180 days 40% Authorized Investment Type Commercial Paper 180 days Negotiable Certificates of Deposit (1) 5 years Repurchase Agreements 90 days Medium-Term Notes (1) 15% (1) 30% 40% (1) 10% (1) 10% None None 5 years 30% 10% N/A None None 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None Savings Accounts Mortgage and Asset-Backed Obligations $50 million (1) (1) NCTD policy is more restrictive than California Government Code Section 53601   Page 49  Comprehensive Annual Financial Report  2. CASH AND INVESTMENTS (CONTINUED) INVESTMENTS AUTHORIZED BY DEBT AGREEMENTS Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or NCTD’s investment policy. The table below identifies the investment types that are authorized for investments held by the bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Maximum Maturity Maximum Percentage of Portfolio Maximum Investment in One Issuer U.S. Treasury Obligations None None None U.S. Agency Securities None None None Banker's Acceptances 180 days None None Commercial Paper 270 days None None N/A None None 30 years None None Authorized Investment Type Money Market Mutual Funds Investment Contracts DISCLOSURES RELATING TO INTEREST RATE RISK  Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater its sensitivity is to changes in market interest rates. Information about the sensitivity of the fair value of NCTD’s investments to market interest rate fluctuations is provided by the following tables that show the distribution of NCTD’s investments by maturity as of June 30, 2016 and 2015: Investment Type Local Agency Investment Fund Held by fiscal agent - Money Market Mutual Fund Held by fiscal agent - Guaranteed Investment Contract Investment Type Local Agency Investment Fund Held by fiscal agent - Guaranteed Investment Contract   Amount at June 30, 2016 $ 49,853,427 32,087 2,744,750 $ 52,630,264 Amount at June 30, 2015 $ 49,924,446 2,744,738 $ 52,669,184 Remaining Maturity (in Months) 12 Months 13 to 24 or Less Months $ 49,853,427 $ 32,087 2,744,750 $ 52,630,264 $ - Remaining Maturity (in Months) 12 Months 13 to 24 or Less Months $ 49,924,446 $ 2,744,738 $ 49,924,446 $ 2,744,738 Page 50  Comprehensive Annual Financial Report  2.  CASH AND INVESTMENTS (CONTINUED)  DISCLOSURES RELATING TO CREDIT RISK Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, or NCTD’s investment policy, and the actual rating as of year-end for each investment type. Investment Type Local Agency Investment Fund Held by fiscal agent - Money Market Mutual Fund Held by fiscal agent - Guaranteed Investment Contract Investment Type Local Agency Investment Fund Held by fiscal agent - Guaranteed Investment Contract Minimum Legal Rating N/A N/A N/A N/A Rating as of Year End Amount at June 30, 2016 $ 49,853,427 32,087 2,744,750 $ 52,630,264 Minimum Legal Rating N/A N/A N/A Rating as of Year End Amount at June 30, 2015 $ 49,924,446 2,744,738 $ 52,669,184 $ $ $ $ Not Rated 49,853,427 32,087 2,744,750 52,630,264 Not Rated 49,924,446 2,744,738 52,669,184 DISCLOSURES RELATING TO CONCENTRATION OF CREDIT RISK Concentration of credit risk is the risk of loss attributed to the relative size of an investment in a single issuer. The investment policy of NCTD contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments issued or explicitly guaranteed by the U.S. government and investments in mutual funds, external investment pools and other pooled investments are exempt from concentration of credit risk. NCTD has investments with LAIF (an external investment pool) and a guaranteed investment contract issued by CDC Funding Corporation that each represented more than 5% of NCTD’s investments at June 30, 2016 and 2015. DISCLOSURES RELATING TO CUSTODIAL CREDIT RISK Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and NCTD’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the   Page 51  Comprehensive Annual Financial Report  2. CASH AND INVESTMENTS (CONTINUED) pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. Also, a financial institution may, in accordance with California Government Code, secure the public agency deposits using first trust deed mortgages; however, the market value of the first trust deed mortgages collateral must be at least 150% of the total amount deposited. None of NCTD’s deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts. INVESTMENT IN STATE INVESTMENT POOL NCTD’s investment in the Local Agency Investment Fund (LAIF) included a portion of the pooled funds invested in structured notes and asset-backed securities. These investments included the following: Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. As of June 30, 2016 and 2015, NCTD had $49,853,427 and $49,924,446, respectively, invested in LAIF, which had invested 2.81% and 2.086%, respectively, of the pooled investment funds in mediumterm and short-term structured notes and asset-backed securities. DISCLOSURES RELATING TO FAIR VALUE MEASUREMENT NCTD categorizes its fair value measurements within the fair value hierarchy established by GASB Statement No. 72, Fair Value Measurement and Application, implemented during fiscal year ended June 30, 2016. The hierarchy provides three levels of the fair value with the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurement); valuations based on inputs (other than quoted prices in included within Level 1) that are observable either directly or indirectly (Level 2 measurement); and, valuations that have significant unobservable inputs (Level 3 measurement). The investment in LAIF and the GIC are not subject to the fair value hierarchy. NCTD has no other investments that require disclosure subject to GASB Statement No. 72. The GIC is reported at cost and the investment in LAIF is reported based upon the application of a fair value factor to each one dollar share invested. Statement No. 72 provides guidance for determining fair value for financial reporting purposes and expands disclosures related to fair value measurements and their impact on financial position. The statement is intended to enhance comparability between government financial statements and provide more detailed information to financial statement users about fair value and measurement techniques.   Page 52  Comprehensive Annual Financial Report  3. ACCOUNTS RECEIVABLE NCTD’s accounts receivable consisted of the following at June 30: 2016 Trade accounts receivable $ 2015 1,032,271 Other receivables $ 930,190 6,454,936 $ 3,510,649 7,487,207 $ 4,440,839 Management has evaluated the receivables as of June 30, 2016 and 2015, and determined that an allowance for doubtful accounts is unnecessary. 4. GRANTS AND GRANTS RECEIVABLE Grants receivable consisted of the following at June 30: 2016 Federal Transit Administration $ Other, including California Transportation Commission funds 2015 14,335,315 $ 4,562,132 9,781,012 $ 24,116,328 5,243,176 $ 9,805,308 These receivables represent reimbursement requests on projects being funded by grants that may be subject to program compliance and financial audits by the granting agencies. Although the outcome of any such audits cannot be predicted, it is management’s opinion that these audits would not have a material effect on NCTD’s financial position or change in financial position. NCTD receives public support funding from various federal, California, local and other agencies in the form of operating grants and capital grants. NCTD earned the following operating grants during the years ended June 30: 2016 TDA Article 4 $ TDA Article 4.5 2015 34,903,639 $ 33,962,397 1,852,389 1,768,351 10,760,000 11,858,857 STA 4,978,430 5,506,123 FTA 12,568,370 13,155,905 259,453 211,305 TransNet Other Operating Grants $   65,322,281 $ 66,462,938 Page 53  Comprehensive Annual Financial Report  4. GRANTS AND GRANTS RECEIVABLE (Continued) Pursuant to the California Transportation Development Act of 1971 (TDA), a portion of sales tax proceeds is made available to NCTD through the local transportation fund for the development and operation of public transportation systems and related research and development projects. For the fiscal years ended June 30, 2016 and 2015, NCTD recorded $36,756,028 and $35,730,748, respectively, in TDA revenues. The San Diego Transportation Improvement Program (TransNet) is administered by the San Diego Association of Governments (SANDAG) and is funded by the San Diego countywide one-half cent local transportation sales tax that was effective April 1, 1988. For the fiscal years ended June 30, 2016 and 2015, SANDAG granted NCTD $10,760,000 and $11,858,857, respectively, in operating funds from this program. During the fiscal years ended June 30, 2016 and 2015, NCTD earned $12,568,370 and $13,115,905, respectively, as federal operating revenue under the Federal Transit Administration (FTA) which provides federal assistance for local mass transportation systems, including capital maintenance and planning activities. NCTD earned $5,237,883 and $5,717,428 for the fiscal years ended June 30, 2016 and 2015, respectively, as other federal non-FTA, state and other local operating grants. NCTD expended $15,534,248 and $16,976,048 of federal, California, local and other capital grants to fund various construction projects and for the purchase of various capital assets in the fiscal years ended June 30, 2016 and 2015, respectively. 5. CAPITAL ASSETS The following is a summary of changes in capital assets for the fiscal years ended June 30, 2016 and 2015: Balance Balance June 30, 2015 Nondepreciable assets Land Construction-in-progress Total nondepreciable assets Depreciable assets Land improvements $ Additions 92,851,021 $ - Deletions $ - Transfers $ - June 30, 2016 $ 92,851,021 83,403,208 15,534,247 - (2,237,029) 96,700,426 176,254,229 15,534,247 - (2,237,029) 189,551,447 56,170,156 - - 159,284,425 31,402 - 230,184 159,546,011 Right-of-way and improvements 454,676,698 31,797,503 - 1,321,565 487,795,766 Revenue and service vehicles 185,182,899 Equipment and furniture 138,922,998 Buildings, structures and improvements 56,170,156 (251,896) 43,781 184,974,784 3,037,977 (122,372) 641,499 142,480,102 994,237,176 34,866,882 (374,268) 2,237,029 1,030,966,819 (42,005,199) (4,509,433) - - (66,929,499) (5,591,772) - - (72,521,271) Right-of-way and improvements (282,823,299) (37,176,232) - - (319,999,531) Revenue and service vehicles (113,225,404) (8,006,710) 251,896 - (120,980,218) (76,757,871) (8,208,876) 122,372 - (84,844,375) (581,741,272) (63,493,023) 374,268 - (644,860,027) 412,495,904 (28,626,141) $ 588,750,133 $ (13,091,894) Total depreciable assets, at cost Less accumulated depreciation Land improvements Buildings, structures and improvements Equipment and furniture Total accumulated depreciation Total depreciable assets, net Total capital assets - -   $ - 2,237,029 $ - (46,514,632) 386,106,792 $ 575,658,239 Page 54  Comprehensive Annual Financial Report  5. CAPITAL ASSETS (CONTINUED) It is important to note that of the total additions to Capital Assets, $34.9 million and $83.9 million for fiscal years 2016 and 2015, respectively, was contributed capital from SANDAG for completion of projects including bridge improvements, double tracking along the COASTER right-of-way, and the San Luis Transit Center. Balance Balance June 30, 2014 Additions Deletions Transfers June 30, 2015 Nondepreciable assets Land $ 92,851,021 $ Construction-in-progress Total nondepreciable assets - $ - $ - $ 92,851,021 75,979,176 16,742,586 - (9,318,554) 83,403,208 168,830,197 16,742,586 - (9,318,554) 176,254,229 Depreciable assets Land improvements 56,124,900 34,685 - 10,571 56,170,156 151,272,248 3,276,752 - 4,735,425 159,284,425 Right-of-way and improvements 373,650,452 80,628,294 Revenue and service vehicles 182,605,375 Buildings, structures and improvements Equipment and furniture Total depreciable assets, at cost - - (142,856) 397,952 454,676,698 2,720,380 185,182,899 137,500,835 3,828 (35,891) 1,454,226 138,922,998 901,153,810 83,943,559 (178,747) 9,318,554 994,237,176 Less accumulated depreciation Land improvements (37,385,315) (4,619,884) - - (42,005,199) Buildings, structures and improvements (61,225,071) (5,704,428) - - (66,929,499) Right-of-way and improvements (243,637,844) (39,185,455) - (282,823,299) Revenue and service vehicles (103,116,529) (10,251,731) 142,856 - (113,225,404) (67,434,657) (9,359,105) 35,891 - (76,757,871) (512,799,416) (69,120,603) 178,747 - (581,741,272) 388,354,394 14,822,956 Equipment and furniture Total accumulated depreciation Total depreciable assets, net $ 557,184,591 $ Total capital assets 31,565,542 - $ - 9,318,554 $ - 412,495,904 $ 588,750,133 Depreciation expense for the fiscal years ended June 30, 2016 and 2015 was $63,493,023 and $69,120,603, respectively. 6. COMPENSATED ABSENCES Compensated absences activity for the fiscal years ended June 30, 2016 and 2015 was as follows: Balance July 1, 2015 $ 770,978 Additions $ Balance July 1, 2014 $ 676,077 860,821 Deletions $ Additions $ 880,143 (854,204) Deletions $ Classification Due in Due in more One Year than One Year Balance June 30, 2016 (785,242)   $ 777,595 Balance June 30, 2015 $ 770,978 $ 603,076 $ 174,519 Classification Due in Due in more One Year than One Year $ 596,570 $ 174,408 Page 55  Comprehensive Annual Financial Report  7. LONG-TERM DEBT Long-term debt activity for the fiscal years ended June 30, 2016 and 2015 was as follows: Original Issue Balance at Amount July 1, 2015 $ 114,000,000 $ 29,350,000 Additions Retirements Balance at Due Within June 30, 2016 One Year Certificates of Participation, 2004 Series A Original Issue Balance at Amount July 1, 2014 $ 114,000,000 $ 30,575,000 $ - Additions $ (1,275,000) Retirements $ 28,075,000 $ 1,325,000 Balance at Due Within June 30, 2015 One Year Certificates of Participation, 2004 Series A $ - $ (1,225,000) $ 29,350,000 $ 1,275,000 In July 2004, NCTD completed a financing transaction in which debt in the principal amount of $114 million was issued through the California Transit Finance Corporation (CTFC) to finance a portion of the design, acquisition and construction of the SPRINTER hybrid rail project. This financing was done to address the delay in the receipt of $80 million of Traffic Congestion Relief Program (TCRP) funds to be provided by the State of California for the SPRINTER project. NCTD received the proceeds of $114 million of Certificates of Participation, 2004 Series A Auction Rate Certificates issued as Auction Rate Securities by CTFC. In conjunction with this financing, NCTD entered into a lease agreement with CTFC whereby NCTD agreed to make lease payments to CTFC to retire the Certificates. The Certificates represent the proportionate interest of the registered owners in the lease payments NCTD is obligated to make from all funds legally available to NCTD. NCTD has granted a security interest in such funds to CTFC. The Certificates mature in 2034. In August 2005, the California Transportation Commission approved an allocation of $80 million from the TCRP for the SPRINTER project. NCTD used these funds as they became available to retire $69.2 million of the related debt, and retired an additional $10.8 million in September 2006. The remaining principal balance is $28.075 million at June 30, 2016. The debt was issued as auction rate securities with a variable interest rate determined weekly by the auction agent. In February 2006, NCTD entered into an interest rate swap agreement for $34.0 million of the SPRINTER-related debt. Essentially, per the synthetic fixed-rate swap agreement, NCTD pays the counterparty, UBS, a fixed interest rate, in exchange for UBS paying the variable interest rate for the $34.0 million of outstanding debt. During late 2007, subprime mortgage losses caused significant financial stress on bond insurers, who guaranteed the payment of municipal bonds in the event of default. NCTD has insurance from the bond insurer MBIA for the $34.0 million of outstanding debt. Stresses on the bond insurers, along with other aspects of the national “credit crunch,” generally created dislocations in the municipal bond market, and particularly in the market for auction rate securities. The market for auction rate securities was large, estimated to be between $325 and $350 billion. However, during February 2008, widespread failures were reported in the auction rate market.   Page 56  Comprehensive Annual Financial Report  7. LONG-TERM DEBT (CONTINUED) NCTD’s debt was affected by the disruptions in the overall market, and NCTD was notified in February 2008 that there were failures in the auctions for NCTD’s debt. It is important to note that the disruptions in the auction rate securities market generally had nothing to do with the creditworthiness of individual issuers. In fact, the rating on NCTD’s outstanding debt was upgraded by Moody’s from A-2 to A-1 on April 16, 2010 with an outlook of stable. This rating was affirmed by Moody’s on May 21, 2014. In May 2008, the Board of Directors for NCTD and for SANDAG approved a restructure of NCTD’s outstanding debt, involving SANDAG’s commercial paper program. SANDAG issued $34 million of commercial paper, which was then used by SANDAG to purchase the NCTD auction rate securities, effectively making SANDAG the holder of NCTD’s outstanding debt. The interest rate that NCTD pays SANDAG (as the holder of the $34 million of debt) is equal to the actual interest rate that SANDAG pays on the commercial paper. This results in no net cost to SANDAG, but allowed NCTD to effectively reduce its current interest rate down to the commercial paper rate. NCTD also paid its share of administrative costs associated with the commercial paper program (including letter of credit fees, trustee fees, rating agency fees, etc.) as well as legal and financial advisor fees related to the transaction. However, these transaction costs were substantially lower than the costs that would have been associated with other alternatives, such as a new issuance of fixed-rate debt or variable– rate demand notes. This arrangement allowed NCTD to reduce its borrowing costs, to retain the current interest rate swap structure, and to preserve the existing bond insurance. As market conditions settle down in the future, NCTD can consider such alternatives as refinancing at a fixed rate, or move back into the auction rate security market. If this were to occur, NCTD would pay down the $28.1 million of outstanding commercial paper, and the agreement with SANDAG would be terminated. Estimated future debt payments for the $28.075 million of long-term debt are as follows: Estimated Year Ending Interest and Support Total Costs (1) Payments June 30, Principal 2017 $ 1,325,000 2018 1,200,000 973,700 2,173,700 2019 1,250,000 930,020 2,180,020 2020 1,250,000 884,520 2,134,520 2021 1,300,000 839,020 2,139,020 2022-2026 6,850,000 3,472,560 10,322,560 2027-2031 7,900,000 2,149,420 10,049,420 2032-2035 Total 7,000,000 $ 28,075,000 $ $ 1,021,930 642,460 10,913,630 $ $ 2,346,930 7,642,460 38,988,630 (1) Based on a 3.64% fixed rate that includes interest and support costs   Page 57  Comprehensive Annual Financial Report  7. LONG-TERM DEBT (CONTINUED) 2006 INTEREST RATE SWAP Objective of the interest rate swap. In February 24, 2006, NCTD entered into two interest rate swaps for $17 million each in order to hedge the interest rate risk associated with variable-rate certificates of participation by “locking in” a fixed interest rate. The intention of NCTD in entering into the swaps was to lock in a relatively low cost of funds on the debt for the construction of the SPRINTER hybrid rail project. Terms. The initial notional amounts of the swaps were $17 million each. The current notional amounts of the swaps are $17 million each. Under the two swaps, NCTD pays the counterparty a fixed payment of 3.369 percent and receives a variable payment based on 65 percent of one-month London Interbank Offered Rate (LIBOR) until maturity at September 1, 2034. The notional amounts and maturity dates of the swaps match the notional amounts and the maturity dates of the certificates of participation that were issued in July 2004 and outstanding as of June 30, 2016. Fair values. Because interest rates have declined since execution of the swaps, the UBS swaps had a total negative fair value of $6,406,543 and $4,780,890 as of June 30, 2016 and 2015, respectively. The fair values of the derivatives were estimated by an independent third-party based on mid-market levels as of the close of business on June 30, 2016 and 2015. The fair values take into consideration the prevailing interest rate environment and the specific terms and conditions of the swaps. Credit risk. This is the risk that the counterparty will fail to perform under the terms of these agreements. As of June 30, 2016 and 2015, NCTD was not exposed to credit risk on these swaps because they had negative fair values. However, should interest rates change and the fair values of the swaps become positive, NCTD would be exposed to credit risk in the amount of the swaps’ fair value. Favorable credit ratings of the counterparty (UBS) mitigate this risk. As of June 30, 2016 and 2015, UBS long–term rating was rated A1 by Moody’s and A+ by Standard & Poor’s and A1 by Moody’s and A by Standard & Poor’s, respectively. The ratings are monitored on a weekly basis. In addition, the fair value of the swaps will be fully collateralized by the counterparty with cash or United States government securities if the counterparty’s credit quality falls below a rating of Baa2 by Moody’s or BBB by Standard & Poor’s. Collateral would be posted with a third-party custodian. Termination risk and termination payments. This is the risk that the transaction is terminated in a market dictating a termination payment by NCTD. NCTD can terminate the swaps at the fair value by providing notice to the counterparty, while the counterparty may only terminate the swaps upon certain termination events under the terms of the agreements. NCTD or the counterparty may terminate the swaps if the other party fails to perform under the terms of the contracts, such as the failure to make swap payments. If the swaps are terminated, the expected variable-rate certificates of participation would no longer be hedged. Given the negative fair values as of June 30, 2016 and 2015, NCTD was not in a favorable termination position relative to the market. The fair values and changes in fair values at June 30, 2016 and 2015 are shown below. Changes in Fair Value Classification Amount Cash flow hedges: Pay-fixed interest rate swap Deferred outflow $   (1,625,653) Fair Value at June 30, 2016 Classification Amount Debt $ (6,406,543) Notional $ 28,075,000 Page 58  Comprehensive Annual Financial Report  7. LONG-TERM DEBT (CONTINUED) Changes in Fair Value Classification Amount Cash flow hedges: Pay-fixed interest rate swap Deferred outflow $ (195,987) Fair Value at June 30, 2015 Classification Amount Debt $ (4,780,890) Notional $ 29,350,000 8. DEBT DEFEASANCE During the year ended June 30, 1997, NCTD entered into two agreements to lease five locomotives and sixteen rail cars. It simultaneously entered into sublease agreements with the lessee to lease them back. During that same year NCTD received a prepayment from its lessee of NCTD’s lease receivable. NCTD then used those proceeds to prepay the future lease payments on its sublease obligation, which were deposited into an irrevocable trust and invested in U.S. Government zero coupon treasury strips. In so doing, NCTD defeased that obligation. Accordingly, the trust account asset and the defeased sublease obligation are not included in the financial statements. During the term of the sublease, the sublessor and its financing partners had a secured interest in the leased locomotives and rail cars. In addition, NCTD could be liable to the sublessor for termination penalties if certain loss events occur. NCTD has hedged against those possible penalties through its risk management programs and through contract provisions with the sublessor allowing it to replace that equipment with other like-kind equipment. Management believes that it is unlikely any of the loss events will occur or if they did, NCTD would not incur any termination penalty that would be material to NCTD’s financial statements. In January 2016, the sublessor executed a buyout option and conveyed ownership of the five locomotives and sixteen rail cars to NCTD. 9. ARBITRAGE REBATE LIABILITY Arbitrage rebate applies to interest earned on the issuance of tax-exempt debt. The rebate is based on the difference between the interest actually earned from the investment of the debt proceeds and the interest expense on the debt issued. As of June 30, 2016 and 2015, there was no liability related to the NCTD’s Certificates of Participation 2004 Series A debt. 10. COMMITMENTS CONTRACTUAL COMMITMENTS As of June 30, 2016 and 2015, NCTD had total contractual commitments in the amount of $31,442,632 and $37,797,802 respectively, for capital and operating projects. As of June 30, 2016, NCTD had available $966,695 in federal, $8,411,361 in state, and $22,054,599 in local and other funding for current and future capital and operating projects. NCTD’s federal funding for capital projects consists primarily of Federal Sections 5307 and 5339 formula funds, as well as discretionary federal awards. NCTD’s state and local funding for its capital program consists primarily of State Transit Assistance (STA) funds; Transportation Development Act (TDA) funds and TransNet funds, as well as other state funds.   Page 59  Comprehensive Annual Financial Report  10. COMMITMENTS (CONTINUED) LEASE COMMITMENTS NCTD leases office equipment under various agreements which are classified as operating leases. NCTD also leases a building as its maintenance of way facility. These agreements expire at various dates through 2020. Total rental expense of $579,890 and $522,840 was recognized during the fiscal years ended June 30, 2016 and 2015, respectively. Future aggregate minimum annual rentals under these lease agreements are as follows: Year Ending June 30, 2017 2018 2019 2020 Total Annual Rental Amounts $ 223,029 182,721 186,690 4,201 $ 596,641   NCTD acts as the lessor on certain facilities and property under various agreements, which are classified as operating leases. These agreements expire on various dates through May 2100, some of which contain provisions for annual increases and options to renew. Total lease and sublease income was $1,646,667 and $1,602,676 for the fiscal years ended June 30, 2016 and 2015, respectively. Future aggregate minimum annual rental revenue under these agreements is as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2041 2042-2046 2047-2051 2052-2056 2057-2061 2062-2066 2067-2071 2072-2076 2077-2081 2082-2086 2087-2091 2092-2096 2097-2100 Total   $ $ 772,806 777,887 768,382 678,438 623,994 2,768,762 2,307,746 2,282,702 2,278,500 2,288,289 2,325,709 1,724,076 140,733 130,849 109,520 109,520 109,520 109,520 109,520 72,982 32,246 20,521,700 Page 60  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM A. General Information about the Pension Plan Plan Description – All qualified permanent and probationary employees are eligible to participate in NCTD’s Miscellaneous Plan (Plan), an agent multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and NCTD resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided – CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is the Basic Death Benefit. The cost of living adjustments for each plan are applied as specified by the California Public Employees’ Retirement Law (PERL). The Plan’s provisions and benefits in effect at June 30, 2016, are summarized as follows: Plan Benefits Hire Date Benefit Formula Benefit vesting schedule Benefit payments* Retirement age (earliest) Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Miscellaneous Plan On or after December Prior to December 23, 23, 2012 with prior On or after 2012 CalPERS January 1, 2013 2% @ 55 2% @ 60 2% @ 62 5 years service 5 years service 5 years service monthly for life monthly for life monthly for life 50 or older 50 or older 50 or older 1.426 - 2.418% 1.092 - 2.418% 1.0 - 2.5% 7% 7% 6.25% 19.851% 19.851% 19.851% *Can take lump sump or designate recipient The Plan’s provisions and benefits in effect at June 30, 2015, are summarized as follows: Plan Benefits Miscellaneous Plan On or after December Prior to December 23, 23, 2012 with prior On or after Hire Date 2012 CalPERS January 1, 2013 Benefit Formula 2% @ 55 2% @ 60 2% @ 62 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments* monthly for life monthly for life monthly for life Retirement age (earliest) 50 or older 50 or older 50 or older Monthly benefits, as a % of eligible compensation 1.426 - 2.418% 1.092 - 2.418% 1.0 - 2.5% Required employee contribution rates 7% 7% 6.25% Required employer contribution rates 18.672% 18.672% 18.672% *Can take lump sump or designate recipient   Page 61  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) Employees Covered – The following employees were covered by the benefit terms of the Plan as of the June 30, 2015 and 2014 actuarial valuation reports: Covered Employees as of June 30: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total 2014 2015 633 392 133 1,158 629 393 147 1,169    Contributions – Section 20814(c) of the PERL requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The funding contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the years ended June 30, 2016 and 2015, the average active employee contribution rate was 7.0 percent percent of annual pay, and the employer’s contribution rate was 19.851 percent and 18.672 percent of annual payroll, respectively, based upon the June 30, 2013 and 2012 actuarial valuation reports. Employer contribution rates may change if plan contracts are amended. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any Employer Paid Member Contributions or situations where members are paying a portion of the employer contribution. B. Net Pension Liability NCTD’s net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. For the measurement period ended June 30, 2015 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2014 actuarial valuation using standard update procedures. NCTD’s June 30, 2016 and the June 30, 2015 reported total pension liability was based on the following actuarial methods and assumptions.   Page 62  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) Actuarial Assumptions – The total pension liability in the June 30, 2013 and 2014 actuarial valuations were determined using the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Payroll Growth Projected Salary Increase Investment Rate of Return Mortality* Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Payroll Growth Projected Salary Increase Investment Rate of Return Mortality* June 30, 2013 June 30, 2014 Entry-Age Normal Cost Method 7.50% 2.75% 3.00% 3.3% to 14.2% depending on age, service, and type of employment 7.5% Net of Pension Plan Investment and Administrative Expenses: includes inflation Derived using CalPERS Membership Data for all Funds June 30, 2014 June 30, 2015 Entry-Age Normal Cost Method 7.65% 2.75% 3.00% 3.3% - 14.2% depending on age, service and type of employment 7.5% Net of Pension Plan Investment and Administrative Expenses: includes inflation Derived using CalPERS Membership Data for all Funds *The mortality tables used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report. All other actuarial assumptions used in the June 30, 2013 and 2014 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under Forms and Publications. Change of Assumptions- GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.5 percent used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65 percent used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense. Discount Rate – The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, the tests revealed the assets would not run out. Therefore, the current 7.65 percent discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section.   Page 63  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both shortterm and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the CalPERS Board on July 1, 2014. Asset Class Current Target Allocation Global Equity Global Fixed Income Inflation Sensitive Private Equity Real Estate Infrastructure and Forestland Liquidity 51.0% 19.0% 6.0% 10.0% 10.0% 2.0% 2.0% Total Real Return Years 1 - 10 (1) 5.25% 0.99% 0.45% 6.83% 4.50% 4.50% -0.55% Real Return Years 11 + (2) 5.71% 2.43% 3.36% 6.95% 5.13% 5.09% -1.05% 100.0% (1) An expected inflation of 2.5% used for this period (2) An expected inflation of 3.0% used for this period   Page 64  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) C. Changes in the Net Pension Liability The following tables show the changes in NCTD’s net pension liability recognized over the measurement period.  Total Pension Liability (1) Balances at June 30,2014 $ 132,279,734 Changes during the measurement period: Service cost Interest on total pension liability Changes of benefit terms Changes of assumptions Differences between expected and actual experience Plan to plan resource movement Contributions-employer Contributions-employee Projected earnings on investments Net investment income Benefit payments, including refunds of employee contributions Administrative expenses Net changes (1) Balances at June 30,2015 Increase/(Decrease) Plan Fiduciary Net Position $ 1,319,179 9,651,604 (2,087,682) (203,397) (8,966,967) 131,992,471 $ 1,869,306 726,973 2,346,127 (8,966,967) (116,378) (4,140,939) (287,263) $ 107,466,095 Net Pension Liability $ 103,325,156 24,813,639 1,319,179 9,651,604 (2,087,682) (203,397) (1,869,306) (726,973) (2,346,127) 116,378 3,853,676 $ 28,667,315 (1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self-insurance and OPEB expense. This may differ from the plan assets reported in the CalPERS funding actuarial valuation report.     Increase/(Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability $ 130,080,693 $ 97,764,463 $ 32,316,230 (1) Balances at June 30,2013 Changes during the measurement period: Service cost Interest Changes of benefit terms Changes of assumptions Differences between expected and actual experience Contributions-employer Contributions-employee Net investment income (net of administrative expense) Benefit payments, including refunds of employee contributions Net changes (1) Balances at June 30,2014 1,333,061 9,482,907 (8,616,927) 2,199,041 $ 132,279,734 1,343,461 633,097 16,342,001 (8,616,927) 9,701,632 $ 107,466,095 1,333,061 9,482,907 (1,343,461) (633,097) (16,342,001) (7,502,591) $ 24,813,639 (1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self-insurance and OPEB expense. This may differ from the plan assets reported in the CalPERS funding actuarial valuation report.   Page 65  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following tables presents the net pension liability of NCTD’s Miscellaneous Plan as of the measurement dates of June 30, 2015 and June 30, 2014. The calculation uses the current discount rates shown in the tables , as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower or 1 percentage-point higher than the current rate: Measurement Date: June 30, 2015 Plan's Net Pension Liability/(Asset) Measurement Date: June 30, 2014 Plan's Net Pension Liability/(Asset) Discount Rate - 1% (6.65%) $ 43,984,434 Discount Rate - 1% (6.5%) $ 39,856,584 Current Discount Rate (7.65%) $ 28,667,315 Current Discount Rate (7.50%) $ 24,813,639 Discount Rate + 1% (8.65%) $ 15,908,511 Discount Rate + 1% (8.50%) $ 12,237,068 Recognition of Gains and Losses - Under GASB Statement No. 68, gains and losses related to changes in the total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss: Difference between projected and actual earnings on investments 5 year straight-line amortization All other amounts Straight-line amortization over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the Plan for the June 30, 2015 and 2014 measurement dates are 1.2 and 1.0 years, respectively, which was obtained by dividing the total service years of 1,394 and 1,159, respectively, (the sum of remaining service lifetimes of the active employees) by 1,158 and 1,124, respectively, (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also, note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund. Pension Plan Fiduciary Net Position – Detailed information about NCTD’s Miscellaneous Plan’s fiduciary net position is available in the separately issued CalPERS financial reports.   Page 66  Comprehensive Annual Financial Report  11. PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) D. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the fiscal years ended June 30, 2016 and 2015, NCTD incurred pension expense of $198,524 and $1,315,946, respectively, related to its Miscellaneous Plan. As of June 30, 2016 and 2015, NCTD has deferred outflows and deferred inflows of resources related to pensions as follows: As of June 30, 2016 Pension contributions made subsequent to measurement date Differences between actual and expected experience Changes of Assumptions Net differences between projected and actual earnings on plan investments Total As of June 30, 2015 Pension contributions made subsequent to measurement date Net differences between projected and actual earnings on plan investments Total Deferred Outflows of Deferred Inflows of Resources Resources $ 2,064,509 $ (33,899) (347,947) (1,171,724) $ 2,064,509 $ (1,553,570) Deferred Outflows of Resources $ 1,927,461 $ 1,927,461 Deferred Inflows of Resources $ (7,475,076) $ (7,475,076) Pension contributions made subsequent to the measurement date of June 30, 2015 in the amount of $2,064,509 will be recognized as a reduction of the net pension liability during the fiscal year ended June 30, 2017. Amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Measurement Period Outflows/(Inflows) Ended June 30: of Resources 2016 2017 2018 2019 2020 Remaining $   (1,141,969) (760,123) (760,123) 1,108,645 - Page 67  Comprehensive Annual Financial Report  12. DEFERRED COMPENSATION NCTD offers its employees a deferred compensation plan (Plan) created in accordance with Internal Revenue Code Section (IRC) 457 and provisions of the Government Code of the State of California. The plan, available to all full-time employees, permits the employees to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, total disability, death or unforeseeable emergency. The Plan is administered by NCTD and contracted to an unrelated financial institution. Under the terms of an IRC Section 457 deferred compensation plan, all deferred compensation and income attributed to the investment of the deferred compensation amounts held by the financial institution, until paid or made available to the employees or beneficiaries, are held in trust for employees. NCTD is not the fiduciary of that trust. As such, employees’ assets held in IRC Section 457 plans are not the property of NCTD and are not subject to the claims of NCTD’s general creditors. In accordance with GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, employees’ assets are not reflected in NCTD’s financial statements. NCTD also offers its employees a qualified defined contribution retirement plan under IRS Code Sections 401(a) and 411(d). Starting in December 2012 NCTD established that all full time employees were eligible to participate in this plan. NCTD provides a match of up to 4% of payroll for employee contributions to the 401(a) plan. The total cost paid by NCTD for its match was $243,513 and $183,436 for the fiscal years ended June 30, 2016 and 2015, respectively. During the fiscal years 2016 and 2015, $22,071 and $20,959, respectively, of employee forfeitures were used to fund employer contributions. 13. CONTINGENT LIABILITIES NCTD is involved in various lawsuits in the ordinary course of business. Management cannot predict the outcome of the lawsuits or estimate the amount of any loss that may result. However, where the contingency of a liability is probable and the amount can be reasonably estimated, a claims liability is accrued. NCTD believes that losses resulting from these matters, if any, would be covered by its accrual for such contingent liabilities and/or covered under NCTD’s insurance policies and would not have a material effect on the financial position of NCTD. 14. OTHER POSTEMPLOYMENT HEALTH CARE BENEFITS Plan Description NCTD participates in a medical health plan provided by CalPERS for employees and retirees. Total NCTD payments for the fiscal years ended June 30, 2016 and 2015, were $130,316 for 85 retirees and $136,620 for 92 retirees, respectively, currently receiving postemployment health care benefits. Separate stand-alone financial statements for NCTD’s OPEB plan are not issued. Eligibility. All employees are eligible after the fifth year of service and attaining age 50.   Page 68  Comprehensive Annual Financial Report  14. OTHER POSTEMPLOYMENT HEALTH CARE BENEFITS (CONTINUED) Funding Policy The contribution requirements of plan members and NCTD are established by management and may be amended. The annual required contribution is based on projected pay-as-you-go financing requirements. The following tables shows the number of participants in the plan as of June 30, 2016 and 2015. Participants as of June 30, 2016 Current retirees Other participants either currently eligible for or earning service credits for eligibility 85 143 228 Total Participants as of June 30, 2015 Current retirees Other participants either currently eligible for or earning service credits for eligibility 92 129 221 Total Annual OPEB Cost and Net OPEB Obligation NCTD’s annual OPEB cost (expense) is calculated based on NCTD’s actuarially determined Annual Required Contribution (ARC). The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and any amortized unfunded actuarial liabilities over a period not to exceed thirty years. The tables below show the components of NCTD’s annual OPEB cost, the amount actually contributed, and the changes in NCTD’s net OPEB obligation for fiscal years 2016 and 2015: As of June 30, 2016 Annual required contribution Adjustment to annual required contribution Interest on net OPEB obligation Annual OPEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year   $ $ 295,771 (109,725) 76,906 262,952 (130,316) 132,636 1,709,027 1,841,663 Page 69  Comprehensive Annual Financial Report  14. OTHER POSTEMPLOYMENT HEALTH CARE BENEFITS (CONTINUED) As of June 30, 2015 Annual required contribution Adjustment to annual required contribution Interest on net OPEB obligation Annual OPEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year $ $ 293,280 (109,725) 71,573 255,128 (136,620) 118,508 1,590,519 1,709,027 NCTD’s annual OPEB cost, the percentage of annual OPEB cost contributed to the OPEB plan and the net OPEB obligation for fiscal years 2014, 2015 and 2016 were as follows: Fiscal Year Ended 6/30/2014 6/30/2015 6/30/2016 Annual OPEB Cost $ 234,455 255,128 262,952 Contributions Made $ 136,350 136,620 130,316 % of Annual OPEB Cost Contributed 58.16% 53.55% 49.56% Net OPEB Obligation $ 1,590,519 1,709,027 1,841,663 Funded Status and Funding Progress As of July 1, 2016, the most recent actuarial valuation date, the OPEB plan was not funded. The actuarial accrued liability for benefits was $4,036,134, and the actuarial value of assets was $0. The covered payroll (annual payroll of active employees covered by the plan) as of July 1, 2016, was $10,401,000 and the ratio of Unfunded Actuarial Accrued Liability (UAAL) to covered payroll was 38.81 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as Required Supplementary Information following the notes to basic financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include   Page 70  Comprehensive Annual Financial Report  14. OTHER POSTEMPLOYMENT HEALTH CARE BENEFITS (CONTINUED) techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets consistent with the long-term perspective of the calculations. In the July 1, 2016 actuarial valuation, the projected unit credit method was used with service prorate. The actuarial assumptions included (a) 4.0% investment rate of return which assumes that NCTD continues to fund employee retiree health benefits on a pay-as-you-go basis; (b) 2.75% inflation per annum; (c) projected salary increases of 3.0% per annum, in aggregate; and (d) healthcare cost trends generally grade down from between 7% and 6.5% to an ultimate of 5% by 2022. The UAAL is being amortized over an initial 30 years using a level-dollar amortization method. The remaining amortization period at July 1, 2016 was 22 years. The annual required contribution (ARC) is comprised of the present value of benefits accruing in the fiscal year (normal cost) plus a 22-year amortization (on a level-dollar and closed basis) of the unfunded actuarial accrued liability (past service liability) at July 1, 2016. In the July 1, 2014 actuarial valuation, the projected unit credit method was used with service prorate. The actuarial assumptions included (a) 4.5% investment rate of return which assumes that NCTD continues to fund employee retiree health benefits on a pay-as-you-go basis;; (b) 2.75% inflation per annum; (c) projected salary increases of 3.0% per annum, in aggregate; (d) postretirement benefit increases of 4% per year, and (e) healthcare cost trends generally grade down from between 7% and 6.5% to an ultimate of 5% by 2020. The UAAL is being amortized over an initial 30 years using a level-dollar amortization method. The remaining amortization period at July 1, 2014 was 24 years. The annual required contribution (ARC) is comprised of the present value of benefits accruing in the fiscal year (normal cost) plus a 24-year amortization (on a level-dollar and closed basis) of the unfunded actuarial accrued liability (past service liability) at July 1, 2014. 15. RISK MANAGEMENT NCTD is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. NCTD established selfinsurance programs for workers’ compensation and property damage/public liability, as described in Note 1. Funds are used for the settlement of claims and for management services provided by two contracted insurance management firms. NCTD self-insures claims on a per-occurrence basis as follows: $500,000 for workers’ compensation claims, $2 million for public liability claims, $50,000 for non-rail property damage claims and $750,000 for rail property claims. Upon meeting these deductibles, NCTD’s insurance covers an additional $50 million for workers’ compensation claims, $130 million per occurrence for property damage, and $200 million for public liability using excess liability policies with commercial insurance companies. The following is a summary of changes in claims payable for the fiscal years 2014, 2015 and 2016: Current Year 2013-2014 $ Beginning of Claims and Fiscal Year Changes in Claim Fiscal Year Due in Due in more Liability Estimates Payments Liability One Year than One Year 4,189,649 $ End of (74,479) $ (813,489) $ 3,301,681 Classification $ 1,016,276 $ 2,285,405 2014-2015 3,301,681 132,949 (678,301) 2,756,329 966,807 1,789,522 2015-2016 2,756,329 (105,170) (455,409) 2,195,750 759,336 1,436,414   Page 71  Comprehensive Annual Financial Report  16. TRANSPORTATION DEVELOPMENT ACT/CALIFORNIA ADMINISTRATIVE CODE NCTD is subject to compliance with the Transportation Development Act provisions, Sections 6634 and 6637 of the California Administrative Code and Sections 99267, 99268.1 and 99314.6 of the Public Utilities Code. Section 6634 Pursuant to Section 6634, a transit claimant is precluded from receiving monies from the Local Transportation Fund and the State Transit Assistance Fund in an amount that exceeds the claimant’s capital and operating costs, less the required fares, and local support. NCTD did not receive Transportation Development Act or State Transit Assistance revenues in excess of the prescribed formula amounts. Section 6637 Pursuant to Section 6637, a claimant must maintain its accounts and records in accordance with the Uniform System of Accounts and Records for Transit Operators adopted by the State Controller. NCTD did maintain its accounts and records in accordance with the Uniform System of Accounts and Records for Transit Operators.   Page 72  Comprehensive Annual Financial Report  REQUIRED SUPPLEMENTARY INFORMATION 1. DEFINED BENEFIT PENSION PLAN - PUBLIC EMPLOYEE RETIREMENT SYSTEM SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Measurement Period TOTAL PENSION LIABILITY Service Cost Interest Changes of Benefit Terms Difference Between Expected and Actual Experience Changes of Assumptions Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability-Beginning Total Pension Liability-Ending PLAN FIDUCIARY NET POSITION Contributions-Employer Contributions-Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes in Fiduciary Net Position Net Change in Fiduciary Net Position Plan Fiduciary Net Position-Beginning Plan Fiduciary Net Position-Ending Plan Net Pension Liability/(Asset) - Ending Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 1 Covered-Employee Payroll 2014-2015 $ $ $ $ $ $ Plan Net Pension Liability/(Asset) as a Percentage of Covered-Employee Payroll 2013-2014 1,319,179 $ 9,651,604 (203,397) (2,087,682) (8,966,967) (287,263) 132,279,734 131,992,471 $ 1,333,061 9,482,907 (8,616,927) 2,199,041 130,080,693 132,279,734 1,869,306 $ 726,973 2,346,127 (8,966,967) (116,378) (4,140,939) 107,466,095 103,325,156 $ 28,667,315 $ 78.28% 1,343,461 633,097 16,342,001 (8,616,927) 9,701,632 97,764,463 107,466,095 24,813,639 81.24% 9,329,409 307.28% $ 8,719,083 284.59% 1 Covered-Employee Payroll presented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for coveredemployees, the employer should display in the disclosure footnotes for the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. Notes to Schedule of Changes in Net Pension Liability and Related Ratios: 1. Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2014 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). 2. Changes of Assumptions: The discount rate was changed from 7.5 percent (net of administrative expense) to 7.65 percent.   Page 73  Comprehensive Annual Financial Report  REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) 1. DEFINED BENEFIT PENSION PLAN - PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) Schedule of Plan Contributions for the fiscal years ended: Actuarially determined contribution (2) Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered-employee payroll (3),(4) June 30, 2016 June 30, 2015 $ 2,064,509 $ 1,927,461 $ (2,064,509) - $ (1,927,461) - (2) $ 10,324,006 Contributions as a percentage of covered-employee payroll (3) 20.00% $ 10,009,330 19.26% 1 As prescribed in GASB 68, paragraph 46, the information presented in the Schedule of Plan Contributions should also be determined as of the employer's most recent fiscal year-end. The employer is responsible for determining this information as prescribed by the standard as this data is not available to CalPERS. 2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions. 3 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 4 Payroll from the prior year of $9,057,679 was assumed to increase by the 3.00 percent payroll growth assumption. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2015-16 were derived from the June 30, 2013 funding valuation report.      Page 74  Comprehensive Annual Financial Report  REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) 1. DEFINED BENEFIT PENSION PLAN - PUBLIC EMPLOYEE RETIREMENT SYSTEM (CONTINUED) Methods and Assumptions used to Determine Contribution Rates: Actuarial Cost Method Entry age normal cost method Amortization Method Level percent of payroll Asset Valuation Method Market value Discount rate 7.5% (net of administrative exenses Inflation 2.75% Payroll Growth 3.00% Projected Salary Increases 3.3% to 14.2% depending on age, service, and type of employment 2. OTHER POSTEMPLOYMENT HEALTH CARE BENEFITS PLAN SCHEDULE OF FUNDING PROGRESS The following Schedule of Funding Progress shows the recent history of the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll for NCTD’s other postemployment health care benefits (OPEB) plan. Actuarial Valuation Date 7/1/2012 7/1/2014 7/1/2016 Actuarial Asset Value - Entry Age (Unfunded) Actuarial Accrued Liabilities $ 3,246,496 3,448,765 4,036,134 Actuarial Accrued Liabilities $ (3,246,496) (3,448,765) (4,036,134) (Unfunded) Actuarial Funded Ratio 0.0% 0.0% 0.0% Covered Payroll $ 5,882,000 7,831,000 10,401,000 Liabilities as Percentage of Covered P/R (55.19%) (44.00%) (38.81%) Actuarial review and analysis of OPEB liability and funding status is performed every two years, or annually, if there are significant changes in the OPEB plan.     Page 75  Comprehensive Annual Financial Report Statistical Section (Unaudited) ST - 5PRINTEH mNih-Il:lu ll ?h n. ?Hum Page 76 Comprehensive Annual Financial Report  Statistical Section Index  Section Content These schedules contain trend information intended to assist the reader in understanding and assessing NCTD’s financial performance and well-being over time. Financial Trends These schedules contain information to assist the reader in understanding and assessing the factors that affect NCTD’s funding sources and ability to generate passenger fare revenue. Revenue Capacity This schedule presents information intended to assist the reader in understanding and assessing NCTD’s current level of outstanding debt and its ability to issue additional debt in the future. Debt Capacity Demographic and Economic Information Operating Information   Page Number These schedules provide demographic and economic indicators to assist the reader in understanding the environment within which NCTD operates and to facilitate comparisons of financial statement information over time. These schedules contain information about NCTD’s operations and resources to assist the reader in understanding how NCTD’s financial information relates to the services it provides. 78 80 91 92 95   Page 77  Comprehensive Annual Financial Report  Financial Trends   Net Position by Component (Last Ten Fiscal Years)     Net Position by Component Last Ten Fiscal Years (Accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ 625,395,671 $ 674,373,465 $ 663,558,117 $ 636,190,236 $ 606,619,098 $ 581,520,592 $ 563,577,429 $ 529,424,444 $ 562,144,871 $ 550,360,076 Restricted net position 15,702,930 3,002,355 50,495 816,475 50,495 50,495 50,495 50,495 50,495 50,495 Unrestricted net position (5,024,529) 10,503,193 20,739,774 22,982,906 28,493,072 35,484,133 40,124,880 43,267,880 15,804,597 17,175,267 $ 636,074,072 $ 687,879,013 $ 684,348,386 $ 659,989,617 $ 635,162,665 $ 617,055,220 $ 603,752,804 $ 572,742,819 $ 577,999,963 $ 567,585,838 Net investment in capital assets Total Net Position Source: Comprehensive Annual Financial Report       Page 78  Comprehensive Annual Financial Report  Changes in Net Position (Last Ten Fiscal Years)   Changes in Net Position Last Ten Fiscal Years (Accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 $ 16,527,926 7,039,714 1,239,155 122,668 $ 17,402,899 7,309,818 1,375,471 417,345 $ 18,258,384 7,714,995 1,354,175 423,073 $ 17,092,486 8,269,214 1,388,370 105,492 $ 17,034,369 8,431,886 1,444,090 71,407 $ 18,169,758 9,158,236 1,483,540 2,488,290 $ 18,910,726 9,801,291 1,588,827 2,183,026 Total operating revenues 24,929,463 26,505,533 27,750,627 26,855,562 26,981,752 31,299,824 OPERATING EXPENSES Vehicle operations Vehicle maintenance Non-vehicle maintenance Administration Right-of-way operations Amortization Depreciation 36,821,459 9,413,976 5,618,723 15,932,295 4,923,695 55,305 19,423,562 40,348,188 11,289,486 7,886,900 17,460,223 3,557,679 55,873 30,643,519 38,931,922 12,352,037 9,031,883 16,291,186 3,024,073 62,396 54,991,799 37,292,391 11,780,817 9,033,391 16,187,077 2,921,588 62,487 55,074,416 33,643,900 10,971,577 9,790,389 17,650,643 3,207,377 1,499,681 57,546,549 Total operating expenses 92,189,015 111,241,868 134,685,296 132,352,167 134,310,116 OPERATING REVENUES Fare revenue Advertising and right-of-way Lease and sublease revenue Other revenue Operating loss NONOPERATING REVENUES Operating grants Investment income (expense) Debt Related Expense Gain (loss) on disposal of capital assets Total nonoperating revenues Loss before capital contributions CAPITAL CONTRIBUTIONS Capital grants and donated capital assets Change in net position (67,259,552) 50,860,914 191,597 (109,559) (84,736,335) (106,934,669) (105,496,605) (107,328,364) 55,120,879 (522,098) - 58,518,819 (1,092,759) - 53,832,627 (1,182,850) - 55,431,646 (1,047,435) - 2014 2015 2016 19,274,834 9,347,259 1,476,319 1,722,462 $ 19,438,167 9,502,115 1,602,676 949,065 $ 18,147,101 10,416,549 1,646,667 1,341,594 32,483,870 31,820,874 31,492,023 31,551,911 37,190,774 10,152,117 7,812,517 21,038,055 3,333,768 58,969,531 40,811,588 9,446,107 8,219,859 20,530,599 4,205,572 61,266,681 39,313,456 12,458,342 9,471,138 20,961,917 5,599,239 61,662,843 43,331,766 12,307,320 8,559,735 22,776,865 5,713,276 69,120,603 41,555,160 13,125,807 8,907,149 24,791,426 5,218,738 63,493,023 138,496,762 144,480,406 149,466,935 161,809,565 157,091,303 (107,196,938) (111,996,536) 57,457,701 157,015 (1,338,777) 57,435,201 140,875 (1,131,984) 61,436,279 172,035 (1,071,555) 66,462,938 250,086 (1,086,335) (19,851) 87,180 (478,136) 1,159 26,658 $ (117,646,061) (130,317,542) (125,539,392) 65,322,281 317,367 (942,170) 23,218 25,676 15,530 143,365 50,942,952 54,621,999 57,451,736 52,665,307 54,527,576 56,256,088 56,531,272 60,058,623 65,627,848 64,724,136 (16,316,600) (30,114,336) (49,482,933) (52,831,298) (52,800,788) (50,940,850) (55,465,264) (57,587,438) (64,689,694) (60,815,256) 47,316,889 28,472,529 27,973,836 32,833,405 42,162,848 26,577,453 100,919,607 146,008,025 80,554,695 $ 129,691,425 $ 50,440,359 $ (2,166,044) $(24,358,769) $(24,826,952) $ (18,107,445) $ (13,302,416) $ (31,009,985) $ 36,229,913 50,401,131 $ (10,414,125)   Source: Comprehensive Annual Financial Report   Page 79  Comprehensive Annual Financial Report  Revenue Capacity Operating Revenues by Source (Last Ten Fiscal Years) Operating Revenues by Source Last Ten Fiscal Years Fiscal Year Farebox Revenue & Pass Sales 2007 $ 16,512,012 2008 17,381,197 21,702 388,750 6,921,068 1,375,471 417,345 26,505,533 2009 18,255,347 3,037 407,487 7,307,508 1,354,175 423,073 27,750,627 2010 16,488,394 604,092 408,780 7,860,434 1,388,370 105,492 26,855,562 2011 16,604,204 430,165 435,765 7,996,121 1,444,090 71,407 26,981,752 2012 17,666,958 502,800 1,045,137 8,113,099 1,483,540 2,488,290 31,299,824 2013 18,333,650 577,076 1,341,798 8,459,493 1,588,827 2,183,026 32,483,870 2014 18,698,837 575,997 877,412 8,469,847 1,476,319 1,722,462 31,820,874 2015 18,944,087 494,080 952,555 8,549,560 1,602,676 949,065 31,492,023 2016 18,057,994 89,107 1,032,732 9,383,817 1,646,667 1,341,594 31,551,911 Special Transport $ 15,914 Advertising $ 378,644 Lease and Sublease Right-of-way $ 6,661,070 $ 1,239,155 Other Revenue $ 122,668 Operating Revenue $ 24,929,463 Source: Comprehensive Annual Financial Reports and NCTD Internal Financial Information       Page 80  Comprehensive Annual Financial Report  Public Funding Sources (Last Ten Fiscal Years)   Public Funding Sources Last Ten Fiscal Years FEDERAL FUNDS Operating Grants Fiscal Year FTA 2007 $ 9,139,801 STATE FUNDS Capital Grants and Contributions Operating Grants Other $ 48,731 STA $ 86,266,449 $ LOCAL FUNDS Capital Grants and Contributions Other 3,492,000 $ 143,755 TDA $ 9,971,921 Capital Grants and Contributions Operating Grants $ 32,927,330 TransNet $ 5,064,320 Other $ 44,977 $ 49,769,655 2008 16,322,011 678,965 21,510,742 - 211,737 15,337,409 32,574,696 5,333,470 - 43,706,544 2009 21,544,473 460,809 6,216,419 - 297,255 (6,142,555) 26,143,502 10,072,780 - 47,243,025 2010 16,700,827 461,221 11,264,117 2,972,551 64,807 (2,428,832) 23,121,725 10,511,496 - 19,637,244 2011 16,925,416 441,891 15,188,844 2,972,551 160,572 3,984,794 25,091,968 9,772,061 67,187 8,800,198 2012 12,258,139 216,885 8,128,838 5,833,788 39,486 7,705,391 28,423,797 10,443,123 242,483 16,999,176 2013 16,314,648 401,960 21,150,562 6,202,916 40,447 15,255,791 23,163,527 11,012,259 299,444 5,756,495 2014 15,349,284 257,674 10,290,419 5,771,888 41,161 10,013,493 28,101,453 11,673,090 241,729 6,273,541 2015 13,155,905 170,000 9,089,131 5,506,123 41,305 5,290,728 35,730,748 11,858,857 - 86,539,748 2016 12,568,370 151,232 7,885,351 4,978,430 98,221 35,993,356 36,756,027 10,760,000 10,000 6,522,424 Source: Comprehensive Annual Financial Report and NCTD Internal Financial Information     Page 81  Comprehensive Annual Financial Report  Federal Funds   Federal Transit Administration (FTA) funding – Federal capital and operating assistance for transit purposes is subject to an annual appropriation by Congress and is administered by the FTA. The two primary sources of Federal aid are FTA 5307,FTA 5337 and FTA 5339. o FTA 5307 is a formula grant program which provides both capital and operating assistance for transit. The formula for determining each metropolitan area’s share of funds involves population, density, bus and rail vehicle miles and rail route miles. The FTA publishes annually the allocations for the recipients. SANDAG is the designated recipient and then allocates the funds between NCTD and San Diego Metropolitan Transit System (MTS). The current allocation is thirty percent (30%) for NCTD and seventy percent (70%) for MTS. In addition to using these funds to cover typical Construction in Process (CIP) costs, FTA 5307 funds can be used for preventive maintenance. The preventive maintenance program allows the use of capital funds to offset 80% of the costs of maintaining both vehicles and facilities. o FTA 5337 is a formula based State of Good Repair program that is dedicated to repairing and upgrading rail transit systems. Eligible activities include capital projects to maintain a system in a state of good repair, including projects to replace and rehabilitate: rolling stock; track; line equipment and structures; signals and communications; power equipment and substations; passenger stations and terminals; security equipment and systems; maintenance facilities and equipment; and operational support equipment, including computer hardware and software, transit asset management plan development and implementation of preventative maintenance for rail. FTA 5337 funds are allocated using the same percentages as FTA 5307. o FTA 5339 is a formula grant program which provides capital funding to replace, rehabilitate and purchase buses and related equipment and to construct bus related facilities. FTA 5339 was established under Section 5339, replacing the previous Section 5309 discretionary Capital Investment Program. State Funds   State Transit Assistance (STA) funding – STA is part of the Transportation Development Act (TDA, see Local Funds) and is derived from the statewide one quarter cent ($0.0025) sales tax on diesel fuel. The State Board of Equalization collects the sales tax and returns it to each county’s Local Transportation Fund (LTF). The STA funds are appropriated by the Legislature to the State Controller’s Office (SCO). The SCO then allocates the tax revenue, by formula, to planning agencies and other selected agencies. Statute requires that fifty percent (50%) be allocated according to operator revenues from the prior fiscal year and fifty percent (50%) based on population. The STA budget provides funding for allocation to local transit agencies to fund a portion of the operations and capital costs associated with local mass transit programs. The provision in ABx8-9, which suspended the qualifying criteria requirement to use the funds for operations, expired with the FY 2012 apportionment; subsequently, SB 565 (Chapter 341) extended the suspension through FY 2015. The criteria prohibits the use of STA for operations if the operator did not meet certain operating efficiencies. Local Funds   TDA Sales Tax – The Mills-Alquist-Deddeh Act (SB 325) or Transportation Development Act of 1971 was signed by the Governor on November 4, 1971 and became effective July 1, 1972. TDA was enacted by the California Legislature to improve existing public transportation services and encourage regional transportation coordination. TDA is the major subsidy source that supports NCTD’s operations and non-motorized transportation projects. These funds are generated by the one-quarter percent (1/4%) sales tax on taxable sales in the San Diego region and are collected by the State of California for transportation purposes. SANDAG, as the Regional Transportation   Page 82  Comprehensive Annual Financial Report  Planning Agency, is responsible to release the apportionment of TDA funds each year in conformance with state statute.  TransNet – TransNet is a funding source created by Proposition Z, the one-half cent ($0.005) local countywide sales tax originally enacted in November 1987 to fund a 20-year transportation program that expired at the end of FY 2008. The voters of San Diego County approved Proposition A that extended this program until year 2048. Proposition A mandates the formation of an Independent Taxpayer Oversight Committee (ITOC) to provide oversight for the use of TransNet funds and ensure that voter mandates are carried out. In addition, the ITOC makes recommendations to improve the program’s financial integrity and performance. After deducting the costs associated with administrative expenses, the ITOC, and the bicycle/pedestrian program, the TransNet program is divided into Major Corridor Projects, New Bus Rapid Transit/Rail Operations, Local System Improvements and Transit System Improvements. Within the transit share, services provided pursuant to Americans with Disabilities Act (ADA) and subsidies for seniors have specific earmarks. The remaining revenues can be used by the transit agencies for operating or capital purposes. Other   Other federal and state funding – NCTD also receives funding from other federal and state programs. These include New Freedom, Job Access Reverse Commute (JARC), 5311(f) for rural bus service, Medi-Cal Administration Activities (MAA), and various Caltrans grants. The ADA paratransit service receives substantial funding from the MAA.     Page 83  Comprehensive Annual Financial Report  Fare Revenue (Last Ten Fiscal Years) Fare Revenue Last Ten Fiscal Years Fiscal Year Ended BREEZE Fixed June 30 Route 2007 $ 9,654,712 2008 9,278,013 2009 8,518,097 2010 8,351,831 2011 7,896,229 2012 7,994,043 2013 8,771,339 2014 8,240,099 2015 8,273,999 2016 7,451,679 Change 2007-2016 (22.8)% Bus Service FAST/ FLEX ADA/ On Demand Paratransit $ 84,088 $ 421,079 80,331 379,112 7,928 484,516 504,631 492,102 46,824 522,454 76,342 554,330 75,968 567,825 74,744 686,606 66,114 776,194 (21.4)% 84.3% Commuter Train Service COASTER $ 6,368,047 6,997,396 6,975,640 6,159,647 6,257,840 6,955,444 7,222,779 7,627,368 7,400,568 6,877,549 8.0% Hybrid Rail Train Service SPRINTER $ 668,047 2,272,203 2,076,377 2,388,198 2,650,993 2,285,936 2,763,574 3,002,250 2,975,565 - Total Fare Revenue $ 16,527,926 17,402,899 18,258,384 17,092,486 17,034,369 18,169,758 18,910,726 19,274,834 19,438,167 18,147,101 9.8% SPRINTER Hybrid Rail Service introduced in March, 2008 FAST on demand service discontinued in August, 2008. FLEX service began in June, 2012. Source: Comprehensive Annual Financial Report and NCTD Internal Financial Information     Page 84  Comprehensive Annual Financial Report  Passenger Boardings (Last Ten Fiscal Years)  Passenger Boardings Last Ten Fiscal Years Fiscal Year Bus Service Ended BREEZE FAST/FLEX ADA/ June 30 Fixed Route On Demand Paratransit 2007 10,160,477 95,239 98,762 2008 9,744,558 87,818 101,161 2009 8,747,458 8,205 115,496 2010 7,825,176 119,150 2011 7,722,646 117,734 2012 7,904,516 3,786 130,384 2013 8,339,239 18,690 145,039 2014 8,124,839 24,557 154,162 2015 8,018,531 25,705 184,845 2016 7,547,119 24,890 199,670 Change 2007-2016 (25.7)% (73.9)% Commuter Train Service COASTER 1,560,729 1,686,015 1,501,619 1,271,620 1,390,142 1,624,211 1,629,196 1,673,816 1,641,525 1,556,056 102.2% (0.3)% Hybrid Rail Train Service SPRINTER 717,960 2,195,373 2,117,920 2,219,825 2,417,640 2,000,888 2,551,106 2,769,686 2,677,929 Total Boardings 11,915,207 12,337,512 12,568,151 11,333,866 11,450,347 12,080,537 12,133,052 12,528,480 12,640,292 12,005,664 - 0.8% SPRINTER Hyrbrid Rail Service introduced in March, 2008 FAST on demand service discontinued in August, 2008. FLEX on demand service began FY 2012 Source: Comprehensive Annual Financial Report and NCTD Internal Financial Information     Page 85  Comprehensive Annual Financial Report  Fare Rate Tables Bus Service Passenger Fare Rates (Last Ten Fiscal Years) Bus Service Passenger Fare Rates Last Ten Fiscal Years Fares - Fixed Route FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Basic Fare Regular Senior/Disabled/Medicare $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $1.75 0.75 $1.75 0.75 $1.75 0.75 $1.75 0.75 $1.75 0.75 $1.75 0.75 Day Pass Regular Senior/Disabled/Medicare 4.00 2.00 4.00 2.00 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 5.00 2.25 54.00 54.00 59.00 59.00 59.00 59.00 59.00 59.00 59.00 59.00 5.00 11.00 5.00 11.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 14.00 14.00 12.00 12.00 12.00 12.00 12.00 68.00 34.00 17.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 Regional Premium Monthly Calendar or Rolling 30-Day Pass Regular 90.00 Youth 45.00 Senior/Disabled/Medicare 22.50 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 Regional 14 Day Pass 43.00 43.00 43.00 43.00 43.00 43.00 43.00 Regional Premium 14 Day Pass 60.00 60.00 60.00 60.00 60.00 60.00 60.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 Monthly Pass Regional Day Pass Day Pass Premium Day Pass Region Plus Day Pass Regional Monthly Calendar or Rolling 30-Day Pass Regular 60.00 64.00 Youth 30.00 32.00 Senior/Disabled/Medicare 15.00 16.00 College Monthly Pass 44.00 44.00 49.00 Fares - ADA FY 2007 FY 2008 Regular Fare 4.00 4.00 FY 2009 FY 2010 4.00 4.00 FY 2011 FY 2012 3.50 3.50 FY 2013 3.50 FY 2014 3.50 FY 2015 3.50 FY 2016 3.50 Note: Any fare changes to be determined by the Board following separate public hearing. Source: NCTD Rider's Guide       Page 86  Comprehensive Annual Financial Report  Hybrid Rail Service Passenger Fare Rates (Last Ten Fiscal Years) Hybrid Rail Service Passenger Fare Rates Last Ten Fiscal Years Fares - Hybrid Rail FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Basic Fare Regular Senior/Disabled/Medicare $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 $2.00 1.00 Day Pass Regular Senior/Disabled/Medicare 4.00 2.00 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 4.50 2.25 5.00 2.25 Monthly Pass 54.00 59.00 59.00 59.00 59.00 59.00 59.00 59.00 59.00 Regional Day Pass Day Pass Premium Day Pass Region Plus Day Pass 5.00 11.00 5.00 11.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 14.00 14.00 12.00 12.00 12.00 12.00 12.00 68.00 34.00 17.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 72.00 36.00 18.00 Regional Premium Monthly Calendar or Rolling 30-Day Pass Regular 90.00 Youth 45.00 Senior/Disabled/Medicare 22.50 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 100.00 50.00 25.00 Regional 14 Day Pass 43.00 43.00 43.00 43.00 43.00 43.00 43.00 Regional Premium 14 Day Pass 60.00 60.00 60.00 60.00 60.00 60.00 60.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 Regional Monthly Calendar or Rolling 30-Day Pass Regular 64.00 Youth 32.00 Senior/Disabled/Medicare 16.00 44.00 College Monthly Pass 49.00 SPRINTER Hybrid Rail Service introduced in March, 2008 Note: Any fare changes to be determined by the Board following separate public hearing. Source: NCTD Rider's Guide         Page 87  Comprehensive Annual Financial Report  Commuter Rail Service Passenger Fare Rates (Last Ten Fiscal Years) Commuter Rail Service Passenger Fare Rates Last Ten Fiscal Years Fares - Commuter Rail FY 2007 FY 2008 Sorrento Valley Coaster Connection * Single Trip Single Trip Senior/Disabled/Medicare Monthly Pass Monthly Pass Youth Monthly Pass Senior/Disabled/Medicare FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $1.00 0.50 40.00 20.00 10.00 $5.00 2.50 $5.00 2.50 $4.00 2.00 $4.00 2.00 $4.00 2.00 $4.00 2.00 $4.00 2.00 $4.00 2.00 ZONE 1 Basic Fare Regular Senior/Disabled/Medicare $4.00 2.00 $4.00 2.00 Ten Trip Ticket Regular Senior/Disabled/Medicare 36.00 18.00 36.00 18.00 115.00 77.00 115.00 77.00 144.00 91.00 144.00 91.00 120.00 82.50 120.00 82.50 120.00 82.50 120.00 82.50 120.00 82.50 120.00 82.50 38.50 38.50 45.50 45.50 41.25 41.25 41.25 41.25 41.25 41.25 Basic Fare Regular Senior/Disabled/Medicare 4.50 2.25 4.50 2.25 5.50 2.75 5.50 2.75 5.00 2.50 5.00 2.50 5.00 2.50 5.00 2.50 5.00 2.50 5.00 2.50 Ten Trip Ticket Regular Senior/Disabled/Medicare 40.50 20.25 40.50 20.25 126.00 126.00 154.00 154.00 150.00 150.00 150.00 150.00 150.00 150.00 Basic Fare Regular Senior/Disabled/Medicare 5.00 2.50 5.00 2.50 6.00 3.00 6.00 3.00 5.50 2.75 5.50 2.75 5.50 2.75 5.50 2.75 5.50 2.75 5.50 2.75 Ten Trip Ticket Regular Senior/Disabled/Medicare 45.00 22.50 45.00 22.50 142.00 142.00 170.00 170.00 165.00 165.00 165.00 165.00 165.00 165.00 Monthly Pass Regular Youth (all zones) Senior/Disabled/Medicare (all zones) ZONE 2 Monthly Pass Regular ZONE 3 Monthly Pass Regular * Fare subsidized by NCTD beginning in 2009 Note: Any fare changes to be determined by the Board following separate public hearing. Source: NCTD Rider's Guide     Page 88  Comprehensive Annual Financial Report  Commuter Rail Service Passenger Fare Rates (Last Ten Fiscal Years)‐Continued Commuter Rail Service Passenger Fare Rates (Continued) Last Ten Fiscal Years Fares - Commuter Rail FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 ZONE 4 Basic Fare Regular Senior/Disabled/Medicare 5.50 2.75 5.50 2.75 Ten Trip Ticket Regular Senior/Disabled/Medicare 50.00 25.00 50.00 25.00 154.00 154.00 Monthly Pass Regular 6.50 3.25 6.50 3.25 182.00 182.00 Note: Any fare changes to be determined by the Board following separate public hearing. NCTD consolidated the from 4 zones to 3 zones in 2011 Source: NCTD Rider's Guide     Page 89  Comprehensive Annual Financial Report  Principal Fare Revenue (Fiscal Years 2016, 2011 and 2006) Principal Fare Revenue Current Year, Five Years Ago and Ten Years Ago BREEZE Fiscal Year 2016 % of Total Fare Fare Revenue Revenue Fiscal Year 2011 % of Total Fare Fare Revenue Revenue Fiscal Year 2006 % of Total Fare Fare Revenue Revenue $ $ $ 7,451,679 41.0% 66,114 0.4% 776,194 4.3% COASTER 6,877,549 SPRINTER FLEX/FAST ADA/Paratransit Total Fare Revenue $ 7,896,229 9,374,181 59.0% 0.0% 85,109 0.5% 492,102 2.9% 356,000 2.2% 37.9% 6,257,840 36.7% 6,086,694 38.3% 2,975,565 16.4% 2,388,198 14.0% 18,147,101 100.0% 17,034,369 100.0% - $ 46.4% - $ 15,901,984 0.0% 100.0% SPRINTER Hybrid Rail Service introduced in March, 2008 FLEX on demand service started 2012; FAST on demand service discontinued in August, 2008 Source: Comprehensive Annual Financial Report and NCTD Internal Financial Information       Page 90  Comprehensive Annual Financial Report  Debt Capacity Ratios of Outstanding Debt (Last Ten Fiscal Years) Ratios of Outstanding Debt Last Ten Fiscal Years Fiscal Year Ended June 30 2007 Certificates of Participation $ Percentage of Personal Income (1) Debt Per Capita (1) $ 43.60 Debt Per Passenger Boarding (2) 34,000,000 0.1% $ 2.85 2008 34,000,000 0.1% 40.17 2.76 2009 34,000,000 0.1% 39.62 2.71 2010 34,000,000 0.1% 39.06 3.00 2011 34,000,000 0.1% 38.74 2.97 2012 32,900,000 0.1% 37.48 2.72 2013 31,775,000 0.1% 36.46 2.62 2014 30,575,000 0.1% 36.00 2.44 2015 29,350,000 0.1% 34.03 2.32 2016 28,075,000 0.1% 32.35 2.34 Source: Comprehensive Annual Financial Report (1) These ratios are calculated using personal income and population for the prior calendar year. (2) This ratio is calculated using ridership data for the current fiscal year.           Page 91  Comprehensive Annual Financial Report  Demographic and Economic Information Demographic and Economic Statistics (Last Ten Fiscal Years) Demographic and Economic Statistics Last Ten Calendar Years' Calendar Year Population (1) 2005 770,866 2006 779,883 2007 Per Capita Personal Income (2) Personal Income (in thousands) $ 31,147,612 $ San Diego County State Unemployment Unemployment Rate (3) Rate (3) US Unemployment Rate (4) 40,406 4.3% 5.4% 5.1% 33,317,382 42,721 4.0% 4.9% 4.6% 846,340 37,602,886 44,430 4.6% 5.4% 4.6% 2008 858,127 40,030,766 46,649 6.0% 7.2% 5.8% 2009 870,373 39,715,120 45,630 9.7% 11.4% 9.3% 2010 877,696 40,115,973 45,706 9.7% 11.2% 9.6% 2011 877,696 40,115,973 45,706 9.7% 11.2% 9.6% 2012 871,603 40,791,020 46,800 10.0% 11.7% 8.9% 2013 849,420 42,232,313 49,719 7.5% 8.9% 7.5% 2014 862,494 44,383,079 51,459 5.5% 7.1% 6.2% 2015 867,792 46,251,578 53,298 5.0% 6.2% 5.3% Data for 2016 is not yet available, therefore, 2015 data is the most current year provided. Sources: (1) 2005 through 2009- California Dept. of Finance (includes member cities Carlsbad, Del Mar, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach, Vista) as of calendar year end. Beginning 2012, data from SANDAG data warehouse for North and Inland Counties. (2) U.S. Dept. of Commerce, Bureau of Economic Analysis, per capita personal income are the calendar year averages for San Diego Metropolitan Statistical Area. (3) State of California Employment Development Department calendar year averages. (4) US Bureau of Labor Statistics calendar year averages.   Note: Population includes certain areas outside NCTD’s Service Area that are part of North San Diego County.   Page 92  Comprehensive Annual Financial Report  Principal Employers   Major Employers within our Service Area Employer Source Percent of Number of Total Employees Employment Marine Corps Base, Camp Pendleton Palomar Pomerado Health Palomar College Tri City Medical Center Naval Hospital, Camp Pendleton Oceanside Unified School District Pala Casino Resort and Spa California State University San Marcos Escondido Union School District ViaSat Inc. Vista Unified School District LEGOLAND California LLC Welk Group Inc Life Technologies Corp (Thermo Fisher Scientific) San Diego Wild Animal Park City of Escondido City of Oceanside Carlsbad Unified School District La Costa Resort and Spa GIA Laboratory Taylor Made/Adidas Golf Company Hunter Industries City of Carlsbad Genoptix Callaway Golf Company 1 4 2 2 2 5 2 2 4 3 6 3 4 3 4 4 5 3 3 3 3 7 3 3 3 70,000 4,411 2,665 2,279 2,151 2,114 2,010 1,900 1,898 1,800 1,724 1,600 1,500 1,454 1,188 1,035 939 931 919 893 750 740 670 613 431 Total San Diego County Labor Force 8 1,353,180 5.2% 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% Rank 2015 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Data for 2016 is not yet available, therefore, 2015 data is the most current year provided. Source Key: 1 Pendleton.Marines.mil 2 San Diego Source Book, Largest Employers-latest data is from 2014 3 City of Carlsbad, CAFR FY 2015 4 City of Escondido, CAFR FY 2015 5 Oceanside Unified School District Fast Facts & City of Oceanside CAFR FY2016 6 City of Vista, CAFR FY 2015 7 City of San Marcos, CAFR FY 2015 8 Bureau of Labor Statistics, U.S. Dept of Labor     Page 93  Comprehensive Annual Financial Report  Employees by Function (Last Ten Fiscal Years)   Employees by Function Last Ten Fiscal Years 2007 Bus Operations 2008 2009 2010 2011 2012 2013 354.0 325.0 288.0 285.0 10.5 8.0 17.0 Vehicle Maintenance 95.0 91.0 83.0 84.0 54.0 0.0 0.0 Facility Maintenance 45.0 54.0 53.0 53.0 32.0 2.0 2.0 Security 14.0 22.0 19.0 19.0 17.0 16.5 Risk, Safety and Training 9.5 9.5 10.5 10.0 4.0 Human Resources 7.0 7.0 9.0 9.0 Information Technology 9.0 10.0 10.0 20.0 22.0 5.0 2014 2016 17.0 18.0 0.0 0.0 5.0 5.0 4.0 22.0 30.0 41.0 41.0 4.0 4.0 4.0 4.0 5.0 5.5 4.0 3.0 3.0 3.0 4.0 10.0 7.0 10.0 10.0 8.0 11.0 8.0 18.0 18.0 18.0 15.0 13.0 15.0 14.0 19.5 5.0 5.0 5.0 5.0 6.0 5.0 16.0 13.0 8.0 24.5 24.0 23.0 15.0 9.8 14.0 14.0 19.0 16.0 15.0 0.0 0.0 0.0 0.0 1.0 1.0 3.0 3.0 3.0 3.0 Rail Services 11.5 12.5 12.0 11.0 8.0 11.0 4.0 4.0 4.0 5.0 Capital Project Construction 14.0 12.0 0.0 0.0 0.0 0.0 9.0 11.0 10.0 12.0 5.0 5.0 3.0 4.0 5.0 8.0 13.0 14.0 12.5 15.0 613.5 599.0 533.5 523.0 176.8 99.5 119.0 151.0 153.5 157.5 Finance and Accounting, Budget, Grants Contracts and Procurement Communications and Business Development Real Estate General Management Total 19.0 2015 0.0 Source: NCTD Budget Documents Note 1: As a result of several organizational structure changes, prior data has been restated to make it comparable to the current year. Readers of this schedule should be aware that a comparison of the information contained above does not lend itself to comparison with previously published budget documents. Note 2: Prior to June 30, 2010, NCTD directly employed coach operators. Effective July 1, 2010, NCTD contracted with First Transit to assume responsibility for staffing bus operations. Note 3: Prior to June 30, 2011, NCTD directly employed vehicle and facility employees. Effective July 1, 2011, NCTD contracted with First Transit to assume responsibility for staffing the Vehicle Maintenance and Facility Maintenance.         Page 94  Comprehensive Annual Financial Report  Operating Information   Operating Indicators by Transportation Mode (Last Ten Years) Operating Indicators By Transportation Mode Last Ten Fiscal Years Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PASSENGERS (thousands) BREEZE Fixed Route FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER TOTAL 10,160 95 99 1,561 11,915 9,745 88 101 1,686 718 12,338 8,747 8 116 1,502 2,195 12,568 7,825 119 1,272 2,118 11,334 7,723 117 1,390 2,220 11,450 7,905 4 130 1,624 2,418 12,081 8,339 19 145 1,629 2,001 12,133 8,125 25 154 1,673 2,551 12,528 8,019 26 185 1,641 2,769 12,640 7,547 25 200 1,556 2,678 12,006 FARE REVENUES (thousands) BREEZE Fixed Route $ FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER $ TOTAL 9,655 $ 84 421 6,368 16,528 $ 9,278 $ 80 379 6,998 668 17,403 $ 8,518 $ 8 484 6,976 2,272 18,258 $ 8,352 $ 504 6,160 2,076 17,092 $ 7,896 $ 492 6,258 2,388 17,034 $ 7,994 $ 47 523 6,955 2,651 18,170 $ 8,771 $ 76 554 7,223 2,286 18,910 $ 8,240 $ 76 568 7,627 2,764 19,275 $ 8,274 $ 75 687 7,400 3,002 19,438 $ 7,452 66 776 6,878 2,976 18,147 OPERATING COSTS (thousands) BREEZE Fixed Route $ 45,262 $ 47,242 $ 41,046 $ 41,987 $ 39,371 $ 40,912 $ 40,896 $ 41,897 $ 42,454 $ 45,456 FAST (1)/ FLEX (2) 1,012 998 102 324 510 617 604 636 ADA/Paratransit 3,622 3,514 3,748 3,932 3,642 3,335 3,932 4,789 7,402 8,420 COASTER 17,784 17,824 16,440 15,388 15,851 17,603 18,767 19,549 19,741 16,745 SPRINTER 7,220 15,050 12,780 13,036 13,805 14,725 15,031 16,148 16,295 $ 67,680 $ 76,798 $ 76,386 $ 74,087 $ 71,900 $ 75,979 $ 78,830 $ 81,883 $ 86,349 $ 87,552 TOTAL REVENUE VEHICLE MILES (thousands) BREEZE Fixed Route 7,062 FAST (1)/ FLEX (2) 230 ADA/Paratransit 993 COASTER 254 SPRINTER 8,539 TOTAL 6,650 225 976 256 140 8,247 5,746 22 1,138 257 482 7,645 5,339 1,122 259 482 7,202 5,245 1,114 263 499 7,121 5,198 55 1,026 278 514 7,071 5,672 81 1,176 277 418 7,624 5,522 100 1,400 277 518 7,817 5,626 118 1,979 277 518 8,518 5,561 120 2,028 274 519 8,501 PASSENGER MILES (thousands) BREEZE Fixed Route 48,744 FAST (1)/ FLEX (2) 359 ADA/Paratransit 1,345 COASTER 43,076 SPRINTER 93,524 TOTAL 46,845 331 1,452 48,316 7,467 104,411 43,794 28 1,523 42,056 19,575 106,976 38,882 1,600 35,916 18,400 94,798 39,485 1,540 38,483 19,602 99,110 37,518 397 1,418 44,592 21,210 105,135 39,706 567 1,626 44,875 18,103 104,877 41,054 743 1,935 48,708 22,178 114,619 38,534 302 2,350 45,886 24,355 111,427 37,794 290 2,748 43,773 23,329 107,934 Notes: (1) Added FAST service to Encinitas and San Marcos during FY 2003. FAST on demand service discontinued in August, 2008. (2) FLEX implemented during FY 2012 as a demand response to replace FAST               Page 95  Comprehensive Annual Financial Report  Operating Indicators by Transportation Mode (Last Ten Years)‐Continued   Operating Indicators By Transportation Mode (Continued) Last Ten Fiscal Years Fiscal Year 2007 REVENUE HOURS (thousands) BREEZE Fixed Route FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER TOTAL 497.4 20.9 48.5 6.1 572.9 REVENUE PER REVENUE HOUR BREEZE Fixed Route $ 19.41 4.02 FAST (1)/ FLEX (2) ADA/Paratransit 8.68 COASTER 1,043.93 SPRINTER SYSTEM 28.85 COST PER PASSENGER BREEZE Fixed Route FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM $ 2009 475.8 20.8 48.3 6.2 6.2 557.3 2010 425.0 2.0 56.1 6.4 21.8 511.3 2011 396.1 58.0 6.5 21.9 482.5 2012 381.8 56.2 6.6 22.6 467.2 2013 390.1 2.4 62.0 6.9 23.3 484.7 2014 445.7 4.2 66.3 6.9 18.9 542.0 2015 437.2 7.7 75.3 7.0 23.5 550.7 2016 462.6 8.3 112.6 7.0 23.5 614.0 462.0 8.5 116.4 6.9 23.6 617.4 $ 19.50 3.85 7.85 1,128.71 107.74 31.23 $ 20.04 4.00 8.63 1,090.00 104.22 35.71 $ 21.09 8.69 947.69 94.79 35.42 $ 20.68 8.75 948.18 105.66 36.46 $ 20.49 19.58 8.44 1,007.97 113.78 37.49 $ 19.68 18.18 8.36 1,046.78 120.95 34.89 $ 18.85 9.93 7.54 1,089.62 117.60 35.00 $ 17.89 9.04 6.10 1,057.14 127.74 31.66 $ 16.13 7.80 6.67 994.87 126.16 29.39 $ 99.29 47.98 72.75 2,874.84 1,164.52 137.80 $ 96.58 51.00 66.81 2,568.75 690.37 149.40 $ 106.00 67.79 2,367.38 583.56 153.55 $ 103.12 64.80 2,401.67 576.81 153.90 $ 104.88 135.00 53.79 2,551.16 592.49 156.75 $ 91.76 121.43 59.31 2,719.86 779.10 145.44 $ 95.83 80.65 63.60 2,792.71 639.62 148.70 $ 91.77 72.77 65.74 2,820.14 687.15 140.63 $ 98.40 75.00 72.31 2,422.32 690.92 141.81 0.95 0.88 4.25 4.08 1.39 $ 0.95 0.91 3.75 4.15 0.93 1.41 $ 0.97 1.00 4.17 4.64 1.04 1.45 $ 1.07 4.24 4.84 0.98 1.51 $ 1.02 4.21 4.50 1.08 1.49 $ 1.01 11.75 4.02 4.28 1.10 1.50 $ 1.05 4.02 3.82 4.43 1.14 1.56 $ 1.01 3.04 3.69 4.56 1.08 1.54 $ 1.03 2.88 3.71 4.51 1.08 1.54 $ 0.99 2.66 3.89 4.42 1.11 1.51 4.45 10.65 36.59 11.39 5.68 $ 4.85 11.34 34.79 10.57 10.06 6.22 $ 4.69 12.75 32.31 10.95 6.86 6.08 $ 5.37 33.04 12.10 6.03 6.54 $ 5.10 31.13 11.40 5.87 6.28 $ 5.18 81.00 25.65 10.84 5.71 6.29 $ 4.90 26.84 27.12 11.52 7.36 6.50 $ 5.16 24.68 31.10 11.68 5.89 6.54 $ 5.29 23.23 40.01 12.03 5.83 6.83 $ 6.02 25.54 42.17 10.76 6.09 7.29 COST PER REVENUE HOUR BREEZE Fixed Route $ 91.00 FAST (1)/ FLEX (2) 48.42 ADA/Paratransit 74.68 COASTER 2,915.41 SPRINTER SYSTEM 118.14 REVENUE PER PASSENGER BREEZE Fixed Route $ FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM 2008 Notes: (1) Added FAST service to Encinitas and San Marcos during FY 2003. FAST on demand service discontinued in August, 2008. (2) FLEX implemented during FY 2012 as a demand response to replace FAST             Page 96  Comprehensive Annual Financial Report  Operating Indicators by Transportation Mode (Last Ten Years)‐Continued   Operating Indicators By Transportation Mode (Continued) Last Ten Fiscal Years Fiscal Year 2007 2008 PASSENGERS PER REVENUE MILE BREEZE Fixed Route 1.44 0.41 FAST (1)/ FLEX (2) ADA/Paratransit 0.10 COASTER 6.15 SPRINTER SYSTEM 1.40 2009 1.47 0.39 0.10 6.59 5.13 1.50 2010 1.52 0.36 0.10 5.84 4.55 1.64 2011 1.47 0.11 4.91 4.39 1.57 2012 1.47 0.11 5.29 4.45 1.61 2013 1.52 0.07 0.13 5.84 4.70 1.71 2014 1.47 0.23 0.12 5.88 4.79 1.59 2015 1.47 0.25 0.11 6.04 4.92 1.60 2016 1.43 0.22 0.09 5.92 5.35 1.48 1.36 0.21 0.10 5.69 5.16 1.41 REVENUE PER REVENUE MILE BREEZE Fixed Route $ FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM 1.37 0.37 0.42 25.07 1.94 $ 1.40 0.36 0.39 27.34 4.77 2.11 $ 1.48 0.36 0.43 27.14 4.71 2.39 $ 1.56 0.45 23.78 4.31 2.37 $ 1.51 0.44 23.79 4.79 2.39 $ 1.54 0.85 0.51 25.02 5.16 2.57 $ 1.55 0.94 0.47 26.08 5.47 2.48 $ 1.49 0.76 0.41 27.54 5.34 2.47 $ 1.47 0.64 0.35 26.71 5.80 2.28 $ 1.34 0.55 0.38 25.13 5.74 2.13 COST PER REVENUE MILE BREEZE Fixed Route $ FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM 6.41 4.40 3.65 70.02 7.93 $ 7.10 4.44 3.60 69.63 51.57 9.31 $ 7.14 4.64 3.29 63.97 31.22 9.99 $ 7.86 3.50 59.41 26.51 10.29 $ 7.51 3.27 60.27 26.12 10.10 $ 7.87 5.89 3.25 63.32 26.86 10.75 $ 7.21 6.30 3.34 67.75 35.23 10.34 $ 7.59 6.17 3.42 70.57 29.02 10.47 $ 7.55 5.12 3.74 71.27 31.17 10.14 $ 8.17 5.30 4.15 61.19 31.41 10.30 FAREBOX RECOVERY RATIO BREEZE Fixed Route FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM 21.3% 8.3% 11.6% 35.8% 24.4% SUBSIDY PER PASSENGER BREEZE Fixed Route $ FAST (1)/ FLEX (2) ADA/Paratransit COASTER SPRINTER SYSTEM 3.50 9.77 32.33 7.31 4.29 19.6% 8.0% 10.8% 39.3% 9.3% 22.7% $ 3.90 10.43 31.04 6.42 9.13 4.81 20.8% 7.8% 12.9% 42.4% 15.1% 23.9% $ 3.72 11.75 28.14 6.30 5.82 4.63 19.9% 12.8% 40.0% 16.2% 23.1% $ 4.30 28.81 7.25 5.05 5.03 20.1% 13.5% 39.5% 18.3% 23.7% $ 4.08 26.92 6.90 4.80 4.79 19.5% 14.5% 15.7% 39.5% 19.2% 23.9% $ 4.16 69.25 21.63 6.56 4.61 4.79 21.4% 15.0% 14.1% 38.5% 15.5% 24.0% $ 3.85 22.82 23.29 7.09 6.22 4.94 19.7% 12.3% 11.9% 39.0% 18.4% 23.5% $ Notes: (1) Added FAST service to Encinitas and San Marcos during FY 2003. FAST on demand service discontinued in August, 2008. (2) FLEX implemented during FY 2012 as a demand response to replace FAST 4.14 21.64 27.41 7.13 4.81 5.00 19.5% 12.4% 9.3% 37.5% 18.6% 22.5% $ 4.26 20.35 36.30 7.52 4.75 5.29 16.4% 10.4% 9.2% 41.1% 18.3% 20.7% $ 5.04 22.88 38.28 6.34 4.97 5.78                 Page 97  Comprehensive Annual Financial Report  Operational Statistics ‐ Revenue Hours, Operating Costs and Operating Costs per Revenue Hour Revenue Hours - System Wide (in thousands) 800 700 572.9 557.3 600 614.0 511.3 542.0 482.5 467.2 617.4 550.7 484.7 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Operating Costs By Mode (in thousands) $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 2007 Breeze - Bus 2008 2009 ADA/Paratransit 2010 2011 2012 Coaster - Commuter Rail 2013 2014 2015 Sprinter - Hybrid Rail 2016 FAST/FLEX Operating Costs Per Revenue Hour - System Wide $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016   Page 98  Comprehensive Annual Financial Report  Average Fare, Subsidy per Passenger and Farebox Recovery Ratio Average Fare, Cost and Subsidy Per Passenger - System Wide $8 $7 $6 $5 $4 $3 $2 $1 $0 2007 2008 2009 2010 Operating Cost Per Passenger 2011 2012 2013 2014 Average Fare Per Passenger 2015 2016 Subsidy Per Passenger Subsidy Per Passenger By Mode $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 2007 Breeze - Bus 2008 2009 2010 ADA/Paratransit 2011 2012 Coaster - Commuter Rail 2013 2014 2015 Sprinter - Hybrid Rail 2016 FAST/FLEX Farebox Recovery Ratio By Mode 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2007 Breeze - Bus 2008 2009 ADA/Paratransit 2010 2011 2012 Coaster - Commuter Rail   2013 2014 2015 Sprinter - Hybrid Rail 2016 FAST/FLEX Page 99  Comprehensive Annual Financial Report  Capital Asset Statistics by Transportation Mode (Last Ten Fiscal Years) Capital Asset Statistics By Transportation Mode Last Ten Fiscal Years FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 165 7,558,778 496,995 159 7,200,043 508,075 156 6,317,053 443,268 154 5,803,083 406,881 144 5,755,243 408,954 146 5,842,776 443,008 158 6,355,769 448,864 164 6,181,031 452,991 164 6,318,860 468,513 164 6,264,528 462,571 34 1,130,361 85,182 34 1,148,355 93,146 34 1,352,620 107,452 34 1,372,856 112,062 34 1,339,913 107,945 136 1,339,913 123,689 88 1,175,839 137,464 44 1,571,406 142,511 53 2,458,596 170,843 53 2,258,758 180,207 35 265,196 6,181 35 269,724 6,239 35 271,126 6,267 35 273,496 6,316 35 278,488 6,420 35 293,527 6,775 35 292,916 6,746 35 293,964 6,761 35 292,668 6,737 35 290,075 6,662 12 142,990 6,399 12 490,401 22,208 12 490,150 22,197 12 504,209 22,845 12 515,196 23,334 12 419,440 19,034 12 519,618 23,611 12 519,761 23,603 12 520,809 23,933 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 2 4 7 8 15 Revenue Vehicles: Fixed Route Number of Buses Total Miles Number of Trips ADA/Paratransit Number of Vehicles Total Miles Number of Trips COASTER Number of Vehicles Total Miles Number of Trips SPRINTER Number of Vehicles Total Miles Number of Trips - Facilities: Administrative Offices Maintenance Facilities Transit Centers Commuter Rail Stations Hybrid Rail Stations 2 4 7 8 - SPRINTER Hybrid Rail Service introduced in March, 2008   Source: NCTD Internal Financial Information   Page 100  Comprehensive Annual Financial Report  Industry Comparative Statistics INDUSTRY COMPARATIVE STATISTICS Total Pass. Pass. Oper. Operating Exp. per per Oper. per Revenue Revenue Expenses Revenue Exp. per Hour Pass. Mile Mile (000's) Vehicle Revenue Miles (000's) Vehicle Revenue Hours (000's) BUS-FIXED ROUTE Albuquerque Transit Fort Worth Transportation Authority San Mateo County Transit District Riverside Transit Santa Cruz Transit Spokane Transit North County Transit District 5,460 4,202 2,589 2,499 2,651 5,502 5,561 403 341 197 380 201 398 462 11,423 6,997 3,081 7,034 5,164 10,548 7,547 41,826 23,664 21,519 45,181 28,578 46,108 37,794 2.09 1.67 1.19 2.81 1.95 1.92 1.36 28.34 20.52 15.64 18.51 25.69 26.50 16.34 FLEX & ADA/PARATRANSIT San Francisco Municipal Railway Central Contra Costa Fresno Area Express San Diego Metropolitan Transit System Dallas Area Rapid Transit North County Transit District 1,746 1,090 1,140 4,634 5,571 2,148 260 76 95 260 322 125 479 154 202 632 555 225 3,336 1,469 1,470 5,837 6,205 3,039 0.27 0.14 0.18 0.14 0.10 0.10 1.84 2.03 2.13 2.43 1.72 1.80 1,407 3,596 2,289 1,372 37 125 72 35 886 4,241 4,353 1,556 44,551 118,049 132,624 43,773 0.63 1.18 1.90 1.13 1,299 304 650 164 685 52 13 26 8 31 2,747 825 559 457 2,678 44,640 13,491 8,175 3,992 23,329 2.11 2.71 0.86 2.79 3.91 Total Pass. (000's) Pass. Miles (000's) $ $ $ $ $ $ $ Total Fare Fare Revenues Rev. per Farebox Pass. Ratio (000's) 40,639 35,499 19,596 33,244 32,966 46,841 45,456 $7.44 $8.45 $7.57 $13.30 $12.44 $8.51 $8.17 $3.56 $5.07 $6.36 $4.73 $6.38 $4.44 $6.02 $ $ $ $ $ $ $ 3,766 4,558 4,225 6,714 7,407 7,988 7,452 $0.33 $0.65 $1.37 $0.95 $1.43 $0.76 $0.99 9.3% 12.8% 21.6% 20.2% 22.5% 17.1% 16.4% $ 17,963 $ 5,117 $ 7,024 $ 17,465 $ 19,433 $ 9,056 $10.29 $4.69 $6.16 $3.77 $3.49 $4.22 $37.50 $33.23 $34.77 $27.63 $35.01 $40.33 $ $ $ $ $ $ 1,078 554 299 2,438 1,213 842 $2.25 $3.60 $1.48 $3.86 $2.19 $3.75 6.0% 10.8% 4.3% 14.0% 6.2% 9.3% 23.96 33.93 60.46 44.46 $ $ $ $ 30,290 76,374 65,764 16,745 $21.53 $21.24 $28.73 $12.21 $34.17 $18.01 $15.11 $10.76 $ 2,587 $ 12,783 $ 37,093 $ 6,878 $2.92 $3.01 $8.52 $4.42 8.5% 16.7% 56.4% 41.1% 52.83 63.46 21.50 57.13 86.38 $ $ $ $ $ 36,240 14,796 13,429 6,668 16,295 $27.90 $48.67 $20.66 $40.66 $23.79 $13.19 $17.93 $24.02 $14.59 $6.09 $ $ $ $ $ $0.87 $3.01 $1.44 $1.14 $1.11 6.6% 16.8% 6.0% 7.8% 18.3% (1) COMMUTER RAIL Rio Metro Regional Transit District South Florida Regional Transp Authority Virginia Railway Express North County Transit District (1) HYBRID New Jersey Transit Capital Metropolitan Transportation Denton County Transportation Authority Tri-County Transportation District of Oregon North County Transit District 2,393 2,487 806 523 2,976 (1) Vehicle revenue miles and revenue hours for rail services are compared based on car miles and hours and will not agree with train miles and hours as shonw in Operating Indicators Source: Based on passengers carried, agencies were selected for comparison using the FTA Database, 2015 data. Subsequent years' data is not yet available.     Page 101