How Revenues and Expenditures are Forecast

Background and Overview of Analysis Methods

DDOT, MDOT, VDOT and WMATA separately prepare revenue and cost forecasts for the financial analysis.  In addition, county and city transit and transportation agencies in Suburban Maryland and Northern Virginia provide revenue and cost information which is used to develop forecasts.  A working group composed of financial-planning staff from all of the TPB implementation agencies works over an 18 month period with a consultant specializing in transportation system finances to coordinate the financial data and forecasts into a unified financial plan for the CLRP update.  The group reviews the financial information prepared by each implementing agency for consistency and accuracy.  Each agency is responsible for ensuring the validity and reliability of their analysis and forecasts.   The working group reviews the methods and assumptions, such as rates of inflation, to assess their reasonableness based on past trends and related analysis.

The detailed methodologies for preparing 2040 forecasts of revenues and costs are documented below:

Additional information about methodologies can be found in the report: Analysis of Resources for the 2010 Financially Constrained Long-Range Transportation Plan for the Washington Region.  These same methods have largely been used for developing the financial plans for the CLRP since 1996.  A comprehensive financial plan is prepared every four years with major update of the CLRP, and the implementing agencies update financial data for their projects between the major updates.  The next financial analysis will be completed in 2014.

Revenue and expenditure data were developed and synthesized by the DOTs from Maryland and Virginia and the District of Columbia, by WMATA and other transit agencies, and by the local jurisdictions.  Each agency and jurisdiction was requested to provide year-by-year forecasts of their transportation revenues and expenditures through 2040.  VDOT coordinated the local jurisdiction and transit agency inputs in Virginia and the consultant team coordinated all of the local jurisdiction and MDOT inputs in Maryland.  The DDOT provided all District of Columbia estimates.  WMATA provided forecasts of capital and operating expenditures for its regional Metrobus, Metrorail, and MetroAccess services, which were coordinated with the jurisdictions and agencies that fund those services.

Highway expenditures in Maryland are made by both MDOT and by the local jurisdictions. Transit in Maryland is funded and operated either directly by MDOT, which provides WMATA’s funding and which operates commuter rail service, or by the local jurisdictions themselves.  Prince Georges County and Montgomery County fund and operate their own local bus services.

Highways in Virginia are mostly owned and funded by VDOT, with some local jurisdiction and private funding.  Transit in Virginia is provided by WMATA, by the local jurisdictions themselves and by specific Northern Virginia transit agencies, with the Virginia DRPT providing state funding support.

District of Columbia Forecasts

Over the near term, the District revenues forecasts rely on budget projections.  For revenue forecast beyond 2015, the District assumes future escalations at the rate of general inflation (2.1 percent per year).

The revenue numbers for highways ($12.7 billion in year of expenditure dollars) in the summary tables has been derived from yearly revenue projections provided by DDOT in spreadsheet format.  The District forecasts that $7.0 billion of this would be covered by Federal and grants and $5.7 billion from various local District sources used traditionally to fund highways.

Total highway expenditure forecast also is based on DDOT highway expenditure spread-sheet.  WMATA’s request from the District was for $13.9 billion for operations and $3.3 billion to meet capital allocation.  This excluded WMATA’s request of $1,253 million in match from D.C. for the extension of Rail Investment and Improvement Act of 2008 type of WMATA rehabilitation expenditures beyond 2020.  The District has identified $11.1 billion to meet WMATA operations providing the Metro service levels envisioned by WMATA and $3.3 billion to meet the WMATA capital request.  The operating funding of $11.1 billion is about $2.8 billion below WMATA’s original subsidy request.  This difference is largely due to the DDOT decision to utilize alternative service delivery methods to provide the Metrobus and MetroAccess service levels which have been projected through the future.  This will reduce WMATA’s Metrobus and MetroAccess operating subsidy allocation to the District.  These modes account for about 80 percent of the projected total District WMATA operating subsidy allocation over time.

The D.C. budget includes $1,221 million in revenue and expenditures for local transit that mainly consists of the D.C. Streetcar Phase I, and the D.C. Circulator Bus.  The total amount consists of about $169 million in capital expenditures over the next three years.  The remaining $1,052 million will be to cover operating expenses over the period 2016-2040.  DDOT estimates that Federal grants of $61 million will cover part of the capital expenses expected over early years.  The fares are projected to generate $161 million (2016-2040).  The remaining $999 would be funded from District sources.

Suburban Maryland Forecasts

The revenue numbers for Suburban Maryland include estimates for MDOT funding and from the five local jurisdictions (Montgomery County, Prince Georges County, Frederick County, the City of Frederick, and the City of Rockville).  Suburban Maryland’s figures show MDOT’s and five jurisdictions’ funding projections and expenditure projections for the future.  The total local transit figures include commuter rail numbers.

MDOT bases both its overall revenue projections on the budget estimates over the next few years, and extrapolation of past trends as well as assumptions about future increases for out years (approximately 2016-2040).  For years 2016-2040, the numbers from MDOT imply an annual increase of approximately 3 percent in real terms (over and above the general inflation – assumed to be 2.1 percent per year beyond 2016) in funding for high-way expansion, 2.5 percent in real terms for operations, and 0.5 percent in real terms in system preservation.  MDOT projections considered continuation of funding of the Passenger Rail Investment and Improvement Act of 2008 for rehabilitation types of expenditures beyond 2020, but MDOT will not commit matching funds without regional consensus.

Maryland jurisdictions also base their overall revenue projections on the budget estimates over the next few years, and extrapolation of past trends as well as assumptions about future increases for out years (approximately 2016-2040).  For years 2016-2040, while each jurisdiction makes slightly different assumptions about future escalations, the aggregate numbers imply an overall annual increase of approximately 0.6 percent in real terms (over and above inflation) in funding for highway and transit by the Maryland jurisdictions. 

Table 1 revenue breakdown by source for Maryland shows $12 billion from Federal,  $44 billion from state, $13.5 billion from local, $4 billion from tolls/private, and $0.75 billion from non-WMATA transit fares.

On the expenditure side, the figures again include MDOT data and data from the five suburban Maryland jurisdictions.  MDOT and jurisdictions typically match their expenditures to the forecasted revenues available for each year.  Table 2 includes  $44.5 billion for operations/preservation and  $30 billion for expansion.  The WMATA expenditure items exclude the $1.253 billion Maryland share for continuation of funding of Passenger Rail Investment and Improvement Act of 2008 type expenditures beyond 2020.

Northern Virginia Forecasts

Northern Virginia estimates of revenues and expenditures were developed cooperatively by VDOT and the local jurisdictions and transit agencies.  VDOT developed estimates of Federal and state revenues that would be available both statewide and to the Northern Virginia region.  VDOT worked with local jurisdictions to identify their additional highway and transit funding needs, taking into account the state revenues available for highways and transit.  VDOT and the jurisdictions reviewed the WMATA requests and WMATA funding.

Northern Virginia revenues are derived from multiple Federal, state, local, toll/private and transit user sources, and future forecasts are based on a complex set of assumptions regarding expected escalations of each source.  VDOT coordinated the effort and provided revenue and expenditure information for the state, Federal, and local jurisdiction data.  Six separate worksheets were developed for different categories of projects and program.  These include:  General Highways; selected mega-highway projects, including the HOT lanes and others; WMATA Virginia Allocations; Dulles Corridor Rail; Local Transit; and VRE.  In each, the revenues by source (state, Federal, local, tolls, other) and expenditures by category (operating, capital) have been identified.  These disaggregated data have been used to build the summary table categories.

The total Federal, state, and local funding figures that are shown in Table 1 include both highway and transit funding –  $7.3 billion, $22.2 billion, and  $13.4 billion, respectively.  User charge revenues of $11.5 billion from tolls on state toll roads and  $3.7 billion from local transit and commuter rail fares are shown separately.

The Federal revenues include:  STP, NHS, Interstate Maintenance, Minimum Guarantee/Equity Bonus, Safety, CMAQ, and Rail.  The estimate of Federal revenues reflects Virginia’s anticipated growth in the consumption of motor fuels and is continued at the anticipated Federal Obligation Authority levels.  The state revenues include:  Motor Vehicle Sales and Use Tax, Motor Vehicle Fuels Tax, Licenses Fees, International Registration Plan, and State Sales and Use Tax.  The six-year estimate of state revenues used for the fiscal annual Budget and the Six-Year Program is extracted the official fore-cast of state revenues prepared by the Department of Taxation.  For the CLRP, the estimate of state revenues beyond FY 2016 reflects the same growth pattern of the current six-year program.  The sources of local revenue include Telephone Right-of-Way fees and NVTD Debt Service funding.

Expenditures include data from VDOT and the Northern Virginia jurisdictions.  WMATA expenditure items in Table 2 exclude WMATA’s request of YOE $1,253 million in match from Northern Virginia for the extension of Rail Investment and Improvement Act of 2008 type expenditures beyond 2020.  Table 2 shows  $39.6 billion for operations/preservation and $18.5 billion for expansion, including both highways and transit.  The expenditure data for the near term are derived from the latest annual budget and the six-year program data along with estimates in the TIP.  The future year projections are based on forecasted cost escalations and expected revenue allocations.

Washington Metropolitan Area Transit Authority Forecasts

WMATA numbers have been derived from WMATA’s latest estimates for the CLRP submission.  For capital expenses, WMATA uses figures for FY 2011-FY 2016 that match its Capital Improvement Program (CIP).  The remaining projects and needs are funded in 2017-2040.  WMATA capital estimates are derived assuming inflation of roughly 3.0 percent per year for FY 2011-FY 2020 and 2.1 percent for 2021-2040 (with the exception of costs from Dulles Operating Financial Plan to 2030 and Rail Fleet Plan to 2034 – where a 3.0 percent inflation is used). 

For operating expenses, WMATA utilizes two sets of escalation factors.

The first set of expenditure escalators consists of unit cost (cost per vehicle-mile) increase due to general inflation and as well as other additional factors such as wage and fuel price increases in excess of general inflation.  For this set (unit cost), WMATA assumes a 3 percent per year escalation to FY 2020 and 2.1 percent from 2021-2040 for rail and Metro Access.  For Metrobus, 4.4 percent rate is used up to FY 2020 and for years 2021-2040, 2.1 percent rate (equal to the general inflation rate) is assumed.

The second set of escalators accounts for the growth in service (increase in vehicle-miles) due to increase in ridership and expansion of routes (like Dulles Extension).  WMATA expense estimates assume annual service growth:  for bus – 1.0 percent 2011-2040; for Metro Access – 9.0 percent 2011-2015, 5.0 percent 2016-2020, and 3.0 percent beyond 2020; and for Metro Rail – about 33 percent increase by 2020 (Dulles Extension by 2017 and 100 percent eight-car trains by 2020).

The overall effect is implied annual operating cost escalation rates of 3.8 percent for Bus, 3.4 percent for Rail, and 6.6 percent for Access.

For regional operating revenues (largely from fares), estimates are based on fare increases to keep the farebox recovery rates constant at the present level (32.8 percent for Bus, 80.6 percent for Rail, and 6.4 percent for Access).

WMATA regional operating and capital numbers (covered by operating revenues, grants, and other non-jurisdictional funds) are shown in a separate row below the rows summarizing the three jurisdictions in summary Tables 1 and 2.  WMATA’s request from each jurisdiction is shown under each jurisdiction summary section as well as separately at the end of expenditure Table 2.  As mentioned earlier, the expenditures in Table 2 exclude WMATA’s request of $7.5 billion for the extension of Passenger Rail Investment and Improvement Act of 2008 type expenditures beyond 2020.

The revenues for WMATA identified by each jurisdiction are shown in the revenue Table 1 under each jurisdiction section.  These WMATA summaries show the aggregate picture for total WMATA revenues and expenditures of  $113.8 billion.  This expenditure amount is about  $2.8 billion below WMATA’s original estimate and is caused by the fact that the funding identified by the District is below the WMATA original subsidy request from the District by this amount.  The District will utilize alternative service delivery methods to provide the same service levels within the budget levels that are forecasted by the District, at a lower cost than required through Metrobus and MetroAccess.