Financial Planning and Constraint Planning Tools for Transportation

Conducting successful financial planning and establishing fiscal constraint for transportation plans and improvement programs is often a challenge for transportation agencies.  To help State Departments of Transportation (State DOTs), Metropolitan Transportation Organizations (MPOs), public transportation operators, and others meet that challenge, a set of technical tools has been specifically designed as a resource to be used in preparing the financial elements of long-range statewide transportation plans, STIPs, TIPs, and long-range metropolitan transportation plans.  The tools, which can be found at the links below, are:

• Cooperative Development of the Financial Plan - This guide is about integrating financial planning in the larger planning process, and it addresses the following topics: 
  • relationship between project and system level financial planning;
  • resource allocation: distribution of State funds among local jurisdictions; determining local jurisdictions planned expenditures;  
  • roles and responsibilities of transportation agency staffs and officials in working together to develop financial plans;
  • budgeting;
  • use of financial data in performance measures and performance based planning; and
  • development of investment priorities.

• A Computational Workbook - This workbook helps planners organize and calculate financial data for a 20-year financial plan. It consists of five (5) spreadsheets and can be used to calculate and compare inflation-adjusted systemwide revenues and funding against expenditures at the metropolitan area or state level.   Templates included in the workbook identify the components of sound technical cost and revenue analysis for all modes, including capital, operating and maintenance (O & M) costs, reasonably expected to be available revenues, growth rates, and financing.  An option to calculate and show project cost ranges in the later years of the 20 year financial plan is also available.  The spreadsheet can be tailored to each user’s needs and funding category preferences.

• Results of Financial Model Literature Scan - This document is a summary of research on the state of the practice in financial modeling and is based on a review of the technical literature and MPOs practice regarding use of technical models for forecasting expenses, revenues, and risk. 

This set of tools has been designed specifically with two groups of transportation planning practitioners in mind:

• Federal planning staff, in oversight of metropolitan area and statewide transportation planning, to help in assessing the quality of financial planning and encouraging effective practice;
• MPOs, transit agencies, and State DOTs.

While the time horizon of the tools is long-range (20 years), the technical approach is based on the principle of integrating short term financial planning (five years) within a longer-term framework (this is clearly demonstrated in the "Computational Workbook" or spreadsheet).  Thus, the level of detail is greatest for the short term period and decreases incrementally for 10 years and then 20 years, with the 20-year time horizon reflecting broad, basic expectations consistent with current and past experience, the short-term relatively detailed five-year financial plan, and anticipated changes in conditions affecting finances in the long term, such as population, inflation, and policies affecting revenue sources. 

This set of three tools offers methods, descriptions, and examples of approaches to address various aspects and steps of the financial planning and fiscal constraint demonstration process.  The tools can be used in combination or individually and applied as preferred for each user.  In summary, with other existing tools, guidance, and examples of financial planning for transportation, these tools are intended to offer transportation agencies substantial assistance in developing sound financial plans and setting realistic expectations for transportation investments for decision-makers and the public.