financial planning session e-1 the metropolitan transportation planning process

Financial PlanningFinancial Planning

Session E-1The Metropolitan Transportation Planning Process

Session E-1 - Slide 2

Session ObjectivesSession Objectives

Explain the reasons for doing financial planning

Identify the sources and uses of transportation funds

List the steps in a financial analysis

Financial Planning and the Topics Covered in This CourseFinancial Planning and the Topics Covered in This Course

Session E-1 - Slide 3

ProblemIdentification

ProblemIdentification

Objectives& MOEs

Objectives& MOEs

Visioning &Goals

Visioning &Goals

Analysis &Evaluation

Analysis &Evaluation

AlternativesAlternatives

MonitoringMonitoring

Plan AdoptionPlan Adoption

ProjectDevelopment& Operation

ProjectDevelopment& Operation

ProgramDevelopment

ProgramDevelopment

Financial Planning

Session E-1 - Slide 4

Why do financial planning?Why do financial planning?

Ensure realistic plans and programs

Identify funding shortfalls and establish strategies to overcome shortfalls

Meet Federal requirements

Session E-1 - Slide 5

Fiscal Constraints and the Transportation PlanFiscal 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)

Session E-1 - Slide 6

Where Do Highway Funds Come From?Where Do Highway Funds Come From?

Federal Government 22.1%

State Government 52.7%

Local Government 25.3%

Source: FHWA (2000)

In the U.S., total funding for highways was $108 billion in 1999

Session E-1 - Slide 7

How are They Collected?How are They Collected?

Source: FHWA (2000)

User FeesTolls Fuel & vehicle tax

4.2%

58.7%

Bonds 9.6%

Investment income 5.7%

General fund appropriations

12.3%

Other taxes and fees 9.9%

Over 60% of highway revenues come from user fees

Session E-1 - Slide 8

How are Highway Funds Used?How are Highway Funds Used?

Source: FHWA (2000)

Capital outlay 48.4%

Maintenance and services

26.1%

Administration and miscellaneous

7.9%

Law enforcement and safety

8.7%

Interest 4.1%

Bond retirement 4.8%

Session E-1 - Slide 9

Where do Transit Funds Come From?Where do Transit Funds Come From?

Capital Operating

Federal Government

47.2% 4.1%

State Governments 10.8% 20.5%

Transit AgenciesTaxesFares

26.7% 17.4%

36.1%

Local Governments

15.5% 21.9%

Source: APTA (2002)

In the U.S., total funding for transit was $33.8 billion in 2000

Session E-1 - Slide 10

How are Transit Funds Used?How are Transit Funds Used?

CapitalInfrastructure & rolling stockRenovation & replacementPlanning & design

28.4%

OperatingSalaries & benefitsFuel & suppliesPurchased transportationInsurance & other

71.6%

Source: APTA (2002)

72% of all transit funds are used for operations and maintenance (O&M)

Federal Funding ProgramsFederal Funding Programs

Eligible ProjectsDollars per year (FY01)

Administering Agency

Program

Rural and urban roads on NHS System

Links to intermodal terminals

Transit improvements in NHS corridors

$6.2 BFHWANational Highway System (NHS)

Any Federal-aid highway

Transit

Enhancements

Safety

$7.2 BFHWA

(funds can be transferred to FTA)

Surface Transportation Program (STP)

Projects that reduce emissions$1.8 BFHWA/ (FTA)Congestion Mitigation and Air Quality (CMAQ)

Session E-1 - Slide 11

Federal Funding Programs …Federal Funding Programs …

Projects identified in TEA-21$1.8 BFHWAHigh Priority (Demonstration)

Resurfacing, restoring, rehabilitating and reconstructing Interstate routes

$5.0 BFHWAInterstate Maintenance

Replacement and rehabilitation of deficient highway bridges

$4.3 BFHWAHighway Bridge Replacement

Eligible ProjectsDollars per Year (FY01)

Administering Agency

Program

Session E-1 - Slide 12

Federal Funding Programs Federal Funding Programs

Investments of critical national importance

$2.2 B in credits

TIFIA Loan Program

Transit capital and operating assistance (only urbanized areas <200,000 population are eligible for operating assistance)

$3.3 BFTA

(funds can be transferred to FHWA)

Section 5307 Urbanized Formula Grants

Fixed guideway systems and extensions

Fixed guideway modernization

Bus improvements

$2.7 BFTASection 5309 Discretionary Grants

Eligible ProjectsDollars per Year (FY01)

Administering Agency

Program

Railroad capital improvements$0FRARRIF Loan Program

USDOT

Session E-1 - Slide 13

Session E-1 - Slide 14

$ 17 M$ 0 M$ 1 MSection 5307 Transfers to FHWA

$532 M$708 M$384 MSTP Transfers to FTA

$633 M$864 M$573 MCMAQ Transfers to FTA

FY 01 FY 00 FY 99

Use of Flexible FundsUse of Flexible Funds

Between 1992 and 2002, 55% of all CMAQ funds and 38% of allSTP fundswere transferred to FTA.

Source: FTA (2002)

Session E-1 - Slide 15

Traditional State and Local Funding SourcesTraditional State and Local Funding Sources

User fees (dedicated and non-dedicated)

Bonds (revenue and general obligation)

General revenues

Session E-1 - Slide 16

Innovative FinancingInnovative 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

Session E-1 - Slide 17

Steps in a Financial Analysis Steps in a Financial Analysis

1. Estimate costs

2. Establish revenue baseline

3. Compare revenues with costs

4. Evaluate new revenue sources, if needed

Session E-1 - Slide 18

1. Estimating Costs1. Estimating Costs

Capital costs

Operating and maintenance costs

Replacement and rehabilitation costs

Session E-1 - Slide 19

2. Establishing the Revenue Baseline2. 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

Session E-1 - Slide 20

Cooperative Revenue ForecastingCooperative Revenue Forecasting

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

Session E-1 - Slide 21

Financial Guidance Working Group (FGWG) allocates funds among different parts of State

Focus is on 4-year STIPFGWG

Penn DOT

FHWAFTAEPA

14 MPOs

State Transportation Commission

Counties

Local Development

Districts

Pennsylvania Example:Process Re-engineeringPennsylvania Example:Process Re-engineering

Session E-1 - Slide 22

Arizona Example: The Casa Grande ResolvesArizona 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

Session E-1 - Slide 23

3. Comparing Revenues with Costs3. Comparing Revenues with Costs

Basic analysis identifies available revenues or shortfalls by comparing total costs and total revenues over the life of the plan

Cost of Plan Expected Revenues

Highway Capital

Highway O&M

Transit Capital

Transit O&M

Bike/Pedestrian

…

Session E-1 - Slide 24

Cash Flow Analysis of Costs and RevenuesCash Flow Analysis of Costs and Revenues

Year

1

Year

2

Year

3

Year

4

Year

5

… Year

N

OPERATING BUDGETSOURCES OF FUNDS

Source 1Source 2Source 3

USES OF FUNDSExpenditure 1Expenditure 2

BALANCECAPITAL BUDGETSOURCES OF FUNDS

Source 1Source 2Source 3

USES OF FUNDSProject 1Project 2

BALANCE

Use spreadsheet to identify and analyze sources and uses of funds by year

Positive balances each year show that revenues exceed costs

Session E-1 - Slide 25

4. Evaluating New Revenue Sources4. Evaluating New Revenue Sources

Statutory authority

Adequacy

Equity

Risk and uncertainty

Political acceptability

Ease of administration

Session E-1 - Slide 26

Fiscal Constraints and the TIPFiscal 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

Session E-1 - Slide 27

Financial Analysis for TIPFinancial Analysis for TIP

Cost

Sourc

e 1

Sourc

e 2

Sourc

e 3

Sourc

e 1

Sourc

e 2

Sourc

e 3

Project 1 $ $ $ $ $Project 2 $ $ $ $ $Project 3 $ $ $Project 4 $ $ $Total $ $ $ $ $ $ $

Year 1 Year 2

Projects matched with revenue sources on year-to-year basis

Session E-1 - Slide 28

Seattle TIP ExampleSeattle TIP Example

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

Session E-1 - Slide 29

Seattle TIP Example…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

Session E-1 - Slide 30

SummarySummary

Reasons for doing financial planning

Sources and uses of transportation funds

Steps in a financial analysis