ESTIMATED OPERATING EXPENSES

Estimated operating costs are based on the physical characteristics of the system, the plan of operation, the standards of the Authority and practices of other systems. Cost estimates are broken down into separate categories: maintenance of way, maintenance of equipment, electrical and controls, transportation, power, general and administrative, and parking lots and landscaping. To obtain realistic estimates of operating costs, train operations were simulated for the entire Metro system. Personnel requirements based on safety and operating practices of the rapid transit industry were determined. Working rules and conditions as they affect operating costs were assumed to be those stated in the Agreement between D.C. Transit System, Inc., and Division 689 of the Amalgamated Transit Union. Employee benefits were assumed to be comparable with those of D.C. Transit. Proposed salaries were based on general salary levels in the transit industry and related to the level of responsibility and authority held. Wage rates were estimated using as a base point the wage rate in effect May 1, 1968, for bus operators of D.C. Transit. This rate was used for train operators. Where there were no comparable job classifications, wage rates were estimated on the basis of existing differentials on other rapid transit systems.

Material costs were estimated at mid-1968 price levels. The Authority anticipates that operation of the Metro system will be conducted by private enterprise under contract. A contingency factor of 5 per cent was added to computed operating costs. On power costs, a 10 per cent contingency was added. Both operating costs and fares were based upon comparable prices with the assumption that escalation would thus be neutralized. For purposes of the estimate, annual depreciation expense was calculated on the basis of 7.5 per cent of system gross revenues. This allowance covers replacement of vehicles as well as other depreciation expenses such as turnstiles, escalators, ticket booths and wiring. Total annual depreciation expenses are estimated to amount to $6.7 million for 1990. Given all cost-of-operation factors, total annual operating expenses by 1990 are projected at $32 million. Including depreciation, total operating expenses for 1990 will approximate $38.7 million.

ESTIMATED REVENUE

Total fare box revenue for the year 1990 is estimated at $124.2 million. Anticipated allocation to the private bus companies for their share of bus-rail joint fares is $37.9 million, resulting in net fare box revenue of $86.3 million. It is estimated that revenue accruing from parking, concession leases and similar activities will amount to $3.1 million for an adjusted gross revenue of $89.4 million. Operating and maintenance expenses of $32 million reduces the net revenue before depreciation to $57.4 million. Net revenue after allowance for depreciation of $6.7 million is $50.7 million.

The Metro financial program calls for capital costs to be financed, to the extent possible, through revenues from the operation of the system. The remaining costs are to be shared among the federal government and the local jurisdictions within the Washington Metropolitan Area Transit Zone. Cost of the system is estimated at $2,494.6 million. Net interest during construction will amount to $60.9 million, increasing the total project cost to $2,555.5 million. Approximately one-third of the total project cost will be financed through system revenues. The Authority's financial consultants anticipate that net revenues of Metro will support issuance of revenue bonds during the construction period amounting to $835 million. Revenue bonds issued by the Authority will have a maturity of less than 50 years and will be secured by a pledge of the gross revenues of the system. These bonds will have a coverage factor of 1.2 times net revenue before depreciation. Bond issue and grants needed to meet total project cost

A reserve for debt service will be built out of revenues during the period prior to the start of the sinking fund until such reserve equals one year's maximum debt service on all bonds outstanding. An average interest rate of five per cent for these tax-exempt revenue bonds has been assumed by the Authority's financial advisors. A sinking fund will be estblished to provide for the repayment of bonds, This fund will be in an amount sufficient to retire all bonds within 50 years of issue. Because revenue bonds are secured by a pledge of the gross revenues of the transit operations, provisions are made for meeting operating expenses in