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Financial Planning

Financial Planning. Session E-1 The Metropolitan Transportation Planning Process. Session Objectives. Explain the reasons for doing financial planning Identify the sources and uses of transportation funds List the steps in a financial analysis.

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Financial Planning

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  1. Financial Planning Session E-1 The Metropolitan Transportation Planning Process

  2. Session Objectives • Explain the reasons for doing financial planning • Identify the sources and uses of transportation funds • List the steps in a financial analysis

  3. Financial Planning and the Topics Covered in This Course Visioning & Goals Monitoring Objectives & MOEs Project Development & Operation Problem Identification Financial Planning Program Development Alternatives Plan Adoption Analysis & Evaluation Session E-1 - Slide 3

  4. Why do financial planning? • Ensure realistic plans and programs • Identify funding shortfalls and establish strategies to overcome shortfalls • Meet Federal requirements

  5. Fiscal Constraints and the Transportation Plan • Include a financial plan demonstrating consistency with available and projected revenues • Identify proposed new revenue sources and strategies to ensure their availability 23 CFR 450.322(b)(11)

  6. Where Do Highway Funds Come From? In the U.S., total funding for highways was $108 billion in 1999 Source: FHWA (2000)

  7. How are They Collected? Over 60% of highway revenues come from user fees Source: FHWA (2000)

  8. How are Highway Funds Used? Source: FHWA (2000)

  9. Where do Transit Funds Come From? Capital Operating In the U.S., total funding for transit was $33.8 billion in 2000 Source: APTA (2002)

  10. How are Transit Funds Used? 72% of all transit funds are used for operations and maintenance (O&M) Source: APTA (2002)

  11. Federal Funding Programs Program Administering Agency Dollars per year (FY01) Eligible Projects National Highway System (NHS) FHWA $6.2 B • Rural and urban roads on NHS System • Links to intermodal terminals • Transit improvements in NHS corridors Surface Transportation Program (STP) FHWA (funds can be transferred to FTA) $7.2 B • Any Federal-aid highway • Transit • Enhancements • Safety Congestion Mitigation and Air Quality (CMAQ) FHWA/ (FTA) $1.8 B • Projects that reduce emissions Session E-1 - Slide 11

  12. Federal Funding Programs … Program Administering Agency Dollars per Year (FY01) Eligible Projects Interstate Maintenance FHWA $5.0 B • Resurfacing, restoring, rehabilitating and reconstructing Interstate routes Highway Bridge Replacement FHWA $4.3 B • Replacement and rehabilitation of deficient highway bridges High Priority (Demonstration) FHWA $1.8 B • Projects identified in TEA-21 Session E-1 - Slide 12

  13. Federal Funding Programs Program Administering Agency Dollars per Year (FY01) Eligible Projects Section 5307 Urbanized Formula Grants FTA (funds can be transferred to FHWA) $3.3 B • Transit capital and operating assistance (only urbanized areas <200,000 population are eligible for operating assistance) Section 5309 Discretionary Grants FTA $2.7 B • Fixed guideway systems and extensions • Fixed guideway modernization • Bus improvements TIFIA Loan Program $2.2 B in credits • Investments of critical national importance RRIF Loan Program FRA $0 • Railroad capital improvements USDOT Session E-1 - Slide 13

  14. Use of Flexible Funds FY 99 FY 00 FY 01 CMAQ Transfers to FTA $573 M $864 M $633 M STP Transfers to FTA $384 M $708 M $532 M Section 5307 Transfers to FHWA $ 1 M $ 0 M $ 17 M Between 1992 and 2002, 55% of all CMAQ funds and 38% of allSTP fundswere transferred to FTA. Source: FTA (2002)

  15. Traditional State and Local Funding Sources • User fees (dedicated and non-dedicated) • Bonds (revenue and general obligation) • General revenues

  16. Innovative Financing • Public/private partnerships • Tolls – Congestion pricing, HOT lanes • Benefit assessment districts, joint development • COPS (Certificates of Participation) • Leasing and contracting out • Advance construction • GARVEE bonds and TIFIA loans

  17. Steps in a Financial Analysis • Estimate costs • Establish revenue baseline • Compare revenues with costs • Evaluate new revenue sources, if needed

  18. 1. Estimating Costs • Capital costs • Operating and maintenance costs • Replacement and rehabilitation costs

  19. 2. Establishing the Revenue Baseline • The “Baseline” refers to a projection of revenues from existing sources. • This might include: • Grants and loans • Government appropriations • Tolls, fares, and other user charges • Bonds and other financing mechanisms • Private sector funding • Implementing agency’s funding streams

  20. Cooperative Revenue Forecasting TEA-21 requires that the MPO and State cooperatively develop estimates of funds that will be available to support plan implementation

  21. Financial Guidance Working Group (FGWG) allocates funds among different parts of State Focus is on 4-year STIP Pennsylvania Example:Process Re-engineering 14 MPOs Counties State Transportation Commission Penn DOT FGWG Local Development Districts FHWAFTAEPA

  22. Arizona Example: The Casa Grande Resolves • ADOT established a Resource Allocation Advisory Committee (RAAC) that meets annually to negotiate revenue projections • RAAC includes representatives of Phoenix and Tucson MPOs, a rural COG, and Arizona DOT • Revenue allocation process for long range plan still being developed

  23. 3. Comparing Revenues with Costs Basic analysis identifies available revenues or shortfalls by comparing total costs and total revenues over the life of the plan

  24. Cash Flow Analysis of Costs and Revenues • Use spreadsheet to identify and analyze sources and uses of funds by year • Positive balances each year show that revenues exceed costs

  25. 4. Evaluating New Revenue Sources • Statutory authority • Adequacy • Equity • Risk and uncertainty • Political acceptability • Ease of administration

  26. Fiscal Constraints and the TIP • Be financially constrained by year • Demonstrate which projects can be implemented with current revenue sources • Identify strategies for ensuring the availability of new funding sources • In non-attainment/maintenance areas, only projects with available or committed funding can appear in first 2 years of TIP

  27. Financial Analysis for TIP Projects matched with revenue sources on year-to-year basis

  28. Seattle TIP Example In 1999, Washington State voters enacted Initiative 695 which cut Seattle transportation funding by $9B thru 2020 (13%)

  29. Seattle TIP Example… • State and USDOT did not approve TIP • Puget Sound Regional Council (PSRC) reallocated funds and extended the TIP • State Blue Ribbon Commission identified new sources • PSRC is reflecting Commission proposals in plan update

  30. Summary • Reasons for doing financial planning • Sources and uses of transportation funds • Steps in a financial analysis

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