Question-and-Answer Session
Operator
(Operator Instructions). Our first question is from Wendy Caplan from Wachovia. You may go ahead please.
Wendy Caplan – Wachovia Securities
Thanks, good morning.
Alvaro Garcia-Tunon
Good morning Wendy.
Albert Neupaver
Good morning.
Wendy Caplan – Wachovia Securities
I’ve been getting a lot of questions so I’m guessing you’re getting a lot of questions about transit’s expanding given some issues with various states, cities, and etcetera. Can you comment on that whether you’re feeling anything yet or whether it’s something we should worry about?
Albert Neupaver
Let me?In order to answer that question, it’s a fairly complex question and it’s a complex issue. I think to understand the situation you have to understand the basis of the funding. When the transit authorities get funding from the government whether it be federal, local or state, there’s two different pocket that goes into.
One of the pocket is called the operating funds and the other is the capital fund. The typical products that we actually supply and in our long term backlog are the capital funding portion of it, and how these transit authorities get funding for this particular two areas, in the operating fund, about 48% to 50% of that have to come from direct generation being the toll gate in order to -- so it have the direct relationship to the ridership.
And one of the problems with that obviously is ridership’s goes up and if most of the funding really comes from directly generated, without raising the price and fares, what they have seen is increased cost related to obviously their labor cost, but more importantly in some of their fuel and energy cost that they have.
So they’re really getting stretched. In the operating funds about 20% comes from local, about 20 comes from state and only seven comes from the federal government. Now that’s the kind of news that you’re reading about when you talked about these trends in authorities being pressed. That’s really the operating fund that’s being -- there’s struggling with.
When you look at the capital funding directly generated is only about 25% while the state supports about 13, local 15 I think, and federal is over 40%. Some of the programs are really funded 80% federally from matching funds. So, that particular funding is in place and that’s what’s in our backlog.
The ability to move between these two funds is very, very difficult. So, the concern that we would have going forward, the real question is what happens to this federal funding when the current safety, I mean the current funding expires and that’s called the safety lieu with some $52 billion, but it does expire and it had increased spending each year, in September of ’09.
- To read the full transcript on Seeking Alpha, click here »
