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

2. Session E-1 - Slide 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 Session E-1 - Slide 3 Problem Identification Problem Identification Objectives & MOEs Objectives & MOEs Visioning & Goals Visioning & Goals Analysis & Evaluation Analysis & Evaluation Alternatives Monitoring Plan Adoption Project Development & Operation Project Development & Operation Program Development Program Development Financial Planning

4. Session E-1 - Slide 4 Why do financial planning?  Ensure realistic plans and programs  Identify funding shortfalls and establish strategies to overcome shortfalls  Meet Federal requirements

5. Session E-1 - Slide 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. Session E-1 - Slide 6 Where Do Highway Funds Come From? Federal Government22.1% State Government52.7% Local Government25.3% Source: FHWA (2000) In the U.S., total funding for highways was $108 billion in 1999

7. Session E-1 - Slide 7 How are They Collected? Source: FHWA (2000) User Fees  Tolls  Fuel & vehicle tax 4.2% 58.7% Bonds9.6% Investment income5.7% General fund appropriations 12.3% Other taxes and fees9.9% Over 60% of highway revenues come from user fees

8. Session E-1 - Slide 8 How are Highway Funds Used? Source: FHWA (2000) Capital outlay48.4% Maintenance and services 26.1% Administration and miscellaneous 7.9% Law enforcement and safety 8.7% Interest4.1% Bond retirement4.8%

9. Session E-1 - Slide 9 Where do Transit Funds Come From? Capital Operating Federal Government 47.2%4.1% State Governments10.8%20.5% Transit Agencies  Taxes  Fares 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

10. Session E-1 - Slide 10 How are Transit Funds Used? Capital  Infrastructure & rolling stock  Renovation & replacement  Planning & design 28.4% Operating  Salaries & benefits  Fuel & supplies  Purchased transportation  Insurance & other 71.6% Source: APTA (2002) 72% of all transit funds are used for operations and maintenance (O&M)

11. Federal 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

12. 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

13. 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

14. 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 01FY 00FY 99 Use of Flexible Funds Between 1992 and 2002, 55% of all CMAQ funds and 38% of all STP funds were transferred to FTA. Source: FTA (2002)

15. Session E-1 - Slide 15 Traditional State and Local Funding Sources  User fees (dedicated and non-dedicated)  Bonds (revenue and general obligation)  General revenues

16. Session E-1 - Slide 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. Session E-1 - Slide 17 Steps in a Financial Analysis 1.Estimate costs 2.Establish revenue baseline 3.Compare revenues with costs 4.Evaluate new revenue sources, if needed

18. Session E-1 - Slide 18 1. Estimating Costs  Capital costs  Operating and maintenance costs  Replacement and rehabilitation costs

19. Session E-1 - Slide 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. Session E-1 - Slide 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. Session E-1 - Slide 21  Financial Guidance Working Group (FGWG) allocates funds among different parts of State  Focus is on 4-year STIP FGWG Penn DOT FHWA FTA EPA 14 MPOs State Transportation Commission Counties Local Development Districts Pennsylvania Example: Process Re-engineering

22. Session E-1 - Slide 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. Session E-1 - Slide 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 Cost of PlanExpected Revenues Highway Capital Highway O&M Transit Capital Transit O&M Bike/Pedestrian …

24. Session E-1 - Slide 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. Session E-1 - Slide 25 4. Evaluating New Revenue Sources  Statutory authority  Adequacy  Equity  Risk and uncertainty  Political acceptability  Ease of administration

26. Session E-1 - Slide 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. Session E-1 - Slide 27 Financial Analysis for TIP Projects matched with revenue sources on year-to-year basis

28. Session E-1 - Slide 28 Seattle TIP Example In 1999, Washington State voters enacted Initiative 695 which cut Seattle transportation funding by $9B thru 2020 (13%)

29. Session E-1 - Slide 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. Session E-1 - Slide 30 Summary  Reasons for doing financial planning  Sources and uses of transportation funds  Steps in a financial analysis