Fiscal Demonstration

Introduction

This plan’s financial analysis was developed in response to the requirements for a “fiscally constrained plan,” which was first introduced in the Intermodal Surface Transportation Efficiency Act (ISTEA) and continued in subsequent federal transportation legislation, including the Bipartisan Infrastructure Law (BIL).

This plan considers capital, operation and maintenance costs associated with the preservation and continued operation of the existing transportation system, as well as the costs associated with the recommended improvements presented in this plan. It also projects revenues (funds) from all sources to be available to pay for the improvements. The process includes revenue estimation, cost analysis and a revenue/cost comparison to arrive at a fiscally constrained plan. Revenues and costs are tracked separately for Ohio, Kentucky and Indiana. Comprehensive details are provided in the entire Financial Plan document (PDF).

Revenue (FUNDING) and Cost Expectations

The primary source of public funding will be from federal sources. On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA) (Public Law 117-58, also known as the “Bipartisan Infrastructure Law”) into law. The Bipartisan Infrastructure Law is the largest long-term investment in our infrastructure and economy in our Nation’s history. It provides $550 billion over fiscal years 2022 through 2026 in new Federal investment in infrastructure, including in roads, bridges, and mass transit, water infrastructure, resilience, and broadband. The BIL provides approximately 28% higher formula funds to OKI compared to the FAST ACT.

Estimated funding for transportation improvements for the OKI region is based on data from federal, state and local sources. Future funding levels expected for the planning period covering 2024 through 2050 are estimated based on past trends and through consultation with the Ohio Department of Transportation (ODOT), the Kentucky Transportation Cabinet (KYTC), the Indiana Department of Transportation (INDOT) and FHWA. First, the base annual revenue is derived (averaged) from actual expenditure data.

All three transportation agencies provided data for OKI’s use in estimating revenue. ODOT and KYTC both provided revenue data (2024 to 2050) to OKI for use in this Plan. INDOT provided data from Dearborn County for 2023, which OKI used to estimate the expenditures by primary project type. OKI used guidance provided by the states to arrive at a 2% annual growth rate over the planning period . OKI used the same relative share of expenditures by project type that was used in the previous 2050 MTP, which included the categories of new roadway capacity, roadway maintenance, transportation system management and operations (TSMO), non-highway, transit capital, and transit operating. To complete the base year funding picture, OKI estimated local highway and transit funding using OKI Transportation Improvement Program (TIP) information because it was not fully included in the DOT data sets.

Finally, an adjustment is made to account for other federal discretionary/competitive programs such Mega, the Bridge Investment Program and INFRA. Funding for the Brent Spence Bridge Corridor, a combination of Mega and Bridge Investment worth more than $1.6 billion was awarded in late 2022. This funding is included in the Ohio tables which is consistent with the OKI TIP.

The relative proportion for expenditures, such as the proportion of operations and maintenance (O&M) funds versus capital, are assumed to remain stable through the planning period. The total revenue for the planning period (2020 to 2050) is equivalent to the future value of a series of annual payments at the growth rate stated.

An estimated $25.375 billion ($16.48 billion in Ohio, $7.96 billion in Kentucky, and $930 million in Indiana) is expected to be available over the 26 year planning period of 2024 to 2050. These revenues are a mix of formula and non-formula funds. Formula based funds are those that OKI or other local governments receive on an ongoing, annual basis and are therefore, repetitive, and predictable. These revenue estimates do not include non-formula based expenditures.

Once the revenues were identified for each state, the dollars available for new projects were determined by subtracting the funds equal to four years of base annual revenues to approximate the level required for currently programmed TIP projects and O&M and subtracting the funds attributable to transit formula funds. Figures 1 and 2 present the funds that can reasonably be expected to be available. Figure 1 is the regional outlook and Figure 2 is broken down by state.

Assumptions on Revenue Forecasts

Revenues expected to be reasonably available for projects in the region are primarily based on federal and state sources. To estimate annual rate of growth, OKI relies on approaches from the collective states in which OKI operates, as well as analyzing trends from federal transportation bills. The annualized estimated revenue growth is assumed to be 2 percent per year for all three states.

Assumptions on Cost Estimation

Year of Expenditure Cost

  • The BIL requires that this plan’s fiscal constraint demonstration include estimates of project costs in terms of dollars for the year of expenditure (YOE). In other words, a project that is built in a future year would include inflation in the cost estimate. For example, 2035 projects would have the cost in terms of 2035 dollars, 2050 projects would have the cost in terms of 2050 dollars. The YOE is assumed to be the mid-point of the construction period. Year of expenditure cost estimation requires a current or base year cost estimate, the implementation date (year) of the project and an inflation factor for the project to reflect the cost in terms of the implementation year.

Base Year Cost

  • Base year project cost (BY) is developed in the documented planning process that generated the concept of the project. Some projects not originating in a documented study are estimated by staff as described below. Refer to Estimation of Individual Project Costs section. Refer to Estimation of Individual Project Costs section.

Year of Expenditure

  • The year in which the project is constructed is estimated by staff. Staff considered information from various corridor studies, perceived complexity of the construction process, environmental challenges, availability of right of way and revenue flow to assign projects into implementation time frames. The time frames are consistent with air quality conformity analysis years for the region of 2026, 2030, 2035 2040 and 2050.

Inflation Factor

  • The OKI Plan is required to account for the time value of money (inflation). Therefore, project costs are inflated using generalized figures derived from industry cost information (material, labor, etc.) and guidance from the states’ transportation agencies. This practice is known as developing estimated project costs in terms of their YOE. The YOE is estimated by OKI staff as the midpoint of the project’s year of construction. The year of expenditure cost is the product of the base year cost and an inflation factor. The factor is dependent on the inflation rate and the number of years between the BY and the YOE. OKI has estimated a yearly inflation rate based on information from several sources, including the USDOT National Highway Construction Cost Index (NHCCI) and ODOT. For this plan update OKI assumes the inflation rate is 2.8 percent per year.

The formula for converting base year cost estimates to year of expenditure cost estimates is:

YOE Cost = BY Cost Estimate x Inflation Factor
YOE Cost = BY Cost Estimate x [1+ (i / 100)](YOE – BY)
(BY = base year)

Source: Federal Highway Administration, Office of Highway Policy Information, “National Highway Construction Cost Index (NHCCI)”

Estimation of Individual Project Costs

OKI will use the cost estimate from published planning studies or those provided by the agency that submitted the project. In the absence of a cost estimate from a primary source, an estimate is made using either a Kentucky Project Information Form (PIF) (if available for a Kentucky project) or the default value described below using secondary literature research. View the detailed Financial Plan for more information.

Recommended Plan Cost Distribution

The individual recommended projects have been identified elsewhere. A summary and the associated cost is provided below in Figure 7. These figures do not include the approximate seven billion dollars programmed in the current OKI TIP.

Ohio

160 Projects

 

Freight (19) $1038.53 M
Bike/Ped (41) $397.18 M
TSMO (4) $133.65 M
Highway (86) $2388.51 M
Transit (10) $625.73 M
Total (160) $4283.60 M

Kentucky

79 Projects

 

Bike/Ped (7) $62.18 M
TSMO (6) $77.15 M
Highway (65) $3887.34 M
Other (1) $11.48 M
Total (79) $4038.14 M

Indiana

9 Projects

 

Bike/Ped (3) $12.64 M
TSMO (1) $0.63 M
Highway (4) $21.37 M
Freight (1) $1.17 M
Total (9) $35.82 M

Fiscal Constraint

Federal legislation requires the OKI 2050 Regional Transportation Plan to demonstrate that its recommendations are fiscally constrained, that is, financial resources can be reasonably expected to be available to cover the costs of the plan. As outlined above in the Funding Revenue and Cost Expectations section, about $25.38 billion is estimated to be available for all transportation expenditures in the OKI region over the life of the plan. The estimated cost of the recommendations of this plan is an estimated $24.40 billion. Because the total value or cost of recommended projects in this plan (Figure 8) is less than the resources reasonably expected to be available, this plan demonstrates financial constraint.

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