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FHWA Resource Center

PLANNING TEAM

Financial Planning/Fiscal Constraint

Financial planning takes a long-range look at how transportation investments are funded, and at the possible sources of funds. State DOTs, MPOs, and public transportation operators must consider funding needs over both the 20-year period of the long-range transportation plan and the 4-year period of TIPs and STIPs. In the Statewide Transportation Plan and the MTP, state DOTs may, and MPOs must develop a financial plan that identifies funding sources for needed investments, and demonstrates the reasonably reliable means to maintain and operate the existing federally funded transportation system.

The metropolitan transportation plan, which has a minimum 20-year planning horizon, must include a financial plan that estimates how much funding will be needed to implement recommended improvements, as well as operate and maintain the system as a whole, over the life of the plan. This includes information on how the MPO reasonably expects to fund the projects included in the plan, including anticipated revenues from FHWA and FTA, state government, regional or local sources, the private sector, and user charges. The metropolitan transportation plan must demonstrate that there is a balance between the expected revenue sources for transportation investments and the estimated costs of the projects and programs described in the plan. In other words, a metropolitan plan must be fiscally (or financially) constrained.

The long-range statewide plan, under federal requirements, may be a "strategic plan that may or may not contain a listing of recommended projects"; a financial plan is optional. The long-range statewide transportation plan may include some or all of the financial elements commonly found in a typical metropolitan transportation financial plan (as the state DOT finds appropriate or necessary.) It does not need to demonstrate fiscal constraint. Additional information may be found at the Policy/Guidance and Metropolitan Planning website.

Another resource is Report 574 (Project 8-49), Procedures for Cost Estimation and Management for Highway Projects During Planning, Programming and Preconstruction. It includes strategies, methods and tools to develop, track and document realistic cost estimates through planning, programming and preconstruction phases.

Demonstrating fiscal constraint in planning and programming documents is not an easy task. Recent SAFETEA-LU changes related to Year-of-Expenditure dollars and cost-banding have also raised the bar. Towards that end, the RC has developed several training opportunities and tools to assist MPOS and state DOTs in achieving this goal. The Planning Team has recently assisted the FHWA California Division in providing their MPOs and Caltrans with these enhancements to improve their respective financial planning processes.

A 2-hour training webinar is available to review Federal requirements for financial planning and discuss tools and techniques for revenue forecasting and cost estimation for Plans and TIPs. Examples of good practices among MPOs and state DOTS will also be highlighted. Customized technical assistance is also available to MPOS and state DOTS to review/enhance assumptions, documentation and fiscal constraint practices. Contact Ralph Rizzo or Brian Betlyon for further information.

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