A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management (2019)

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79 With the calculations in the Financial Plan complete, this chapter helps the TAM professional communicate and present the plan in the TAMP. Naturally, the financial plan incorporates a great many numbers, but effectively communicating the significance of the figures through compelling visuals and narrative descriptions helps demonstrate the need for investment and the critical nature of prudent asset management. 7.1 Introduction The previous chapters established the steps involved in developing a financial plan for asset management. This chapter guides the practitioner in identifying the sources and uses of funding, projecting revenues over the 10-year timeline of the TAMP, developing investment strategies and scenarios, and determining the asset value of assets in the TAMP. This chapter brings all these important elements together and discusses how to communicate and present the financial plan in the TAMP. This chapter includes a number of examples of effective communication approaches, including visualizations of data best suited for providing a high-level overview of a financial plan, and more detailed tables and charts that can be used for purposes such as provid- ing detailed data in an accessible format to internal stakeholders. Each section below provides the key information that should be included in the TAMP, examples from the case studies, and suggested visualizations for communicating the information. TAM Financial Planner Overview A web-based tool, the TAMP Financial Planner (TFP), is available online to accompany this chapter. This tool provides a template for creating the suggested visualizations. These visuals help enhance and clearly communicate the numeric results of the financial plan. There are three main functions that guide the user to the various capabilities of the tool: • Configuration: This is where the user can define the source and use categories and sub- categories, the programs that use the funding, and the assets that are included in the TAMP. • Data Entry: This is where users can input the specific dollar amounts for sources and uses and financial projections. They can also define the unit cost, quantity, and remaining life for use in the asset value visualizations. • Visualize: Once the sources and uses are defined and the data is sufficiently entered, the user can access various visualizations that can then be included in the financial plan document. The tool can be accessed in any browser: https://www.tamplanner.com. Figure 7-1 shows the long-in screen for the tool. Each aspect of the online tool is described in more detail in the remaining sections of this chapter. C H A P T E R 7 Communicating the Results

80 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management 7.2 Sources and Uses The steps in Chapter 3 help identify the sources and uses. These steps result in a table or list of funds and the dollar amounts of revenue and expenditures for a representative year’s budget. This information is typically presented in tabular form. In addition to a table, a Sankey diagram of a representative year’s budget can provide an informative visual to include in a TAM financial plan for more clearly communicating sources and uses of funds. A Sankey diagram is a flow diagram that shows the quantity of the flow by varying the widths of lines or arrows in the diagram. An example Sankey diagram illustrating sources and uses of funds for TAM is shown in Figure 7-2. On the left side of the diagram are the sources of funds, including the gas tax, registration fees, and motor vehicle sales tax. These funds feed into the program, or “account,” in the middle of the diagram. Then from this account, the funding goes to various uses on the right side of the diagram. The use of the intermediate level of the account in the diagram helps to map the funding from sources to uses. For many states it is difficult to directly map the funding sources to the uses because often funding from various sources goes into an account, program, or other pot of money to be used for the agency’s activities. The account in the example above is the Highway Account from which money is distributed. Pie charts of sources and uses funding can also be an effective way to communicate and visual- ize the information in the financial plan. MnDOT utilizes a combination of tables and pie charts in its 20-year Minnesota State Highway Investment Plan (MnSHIP). Figure 7-3 is a pie chart Figure 7-1. TFP login screen.

Communicating the Results 81 Sources Uses All Bonds Figure 7-2. Example Sankey diagram. Pavement Condition $10.31 billion (49.4%) Bridge Condition $2.38 billion (11.4%)Jurisdictional Transfer $90 million (0.4%) System Stewardship Transportation Safety Critical Connections Healthy Communities Other Small Programs $630 million (3.0%) Regional and Community Improvement Priorities $310 million (1.5%) Accessible Pedestrian Infrastructure $530 million (2.5%) Freight $610 million (2.9%) Total = $21.0 billion Project Delivery $3.27 billion (15.6%) Roadside Infrastructure $1.60 billion (7.7%) Bicycle Infrastructure $140 million (0.6%) Twin Cities Mobility $240 million (1.1%) Traveler Safety $670 million (3.2%) Facilities $80 million (0.4%) Greater Minnesota Mobility $25 million (0.1%) Figure 7-3. MnDOT visualization of funding uses (Minnesota GO 2018).

82 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management showing Minnesota’s uses of transportation funding (Minnesota GO 2018). Note that the chart includes both the dollar amount of the expenditure category as well as the percentage of the total it represents. The chart is also color coordinated to correspond with the investment categories established in the MnSHIP. Accompanying the visual of the sources and uses, it is important to clearly document the assumptions made when compiling these sources and uses. A description of these assumptions is critical to include in the narrative of the financial plan in the TAMP. Using the Tool: Sources and Uses The TFP gives users the ability to create their own source and use categories. It also enables users to include more detail about various funds by creating sub-categories. To access this fea- ture, navigate to the sources screen by clicking on “Sources” underneath the “Configuration” heading on the left side of the site. To edit or delete the categories for sources, simply click on the edit or delete buttons on the right hand side of the screen. The same procedure can be applied on the “Uses” screen as well. Also under the “Configuration” heading is a place to create the programs where funds are funneled from sources and uses. It is not required that users have programs. However, as explained above, this can help to map the funding sources to their appropriate uses. See Figure 7-4. Figure 7-4. Creating sources and uses categories.

Communicating the Results 83 Next, users can enter the dollar amounts for each of the source and use categories created above. The screen shown in Figure 7-5 can be accessed by clicking on “Sources and Uses” under the “Data Entry” heading on the left side of the screen. Once all the funds are defined and the dollar amounts are entered, the Sankey diagram can be generated to visualize the flow of money. This is accessed under the “Visualization” heading on the left side by clicking on “Sources and Uses Overview.” 7.3 Forecasting and Investment Strategies Forecasting The steps provided in Chapter 4 guide the practitioner in forecasting revenues for the 10-year time period of the TAM financial plan. Once the forecast of funding is determined, communi- cating the forecast in the TAMP is key. Practitioners will likely include a table of the forecast showing dollar amounts for each year; however, additional visuals can help enhance the presen- tation of the projected revenues. Bar charts, showing changes in funding categories projected each year are one way to pres- ent this information. Figure 7-6 shows a series of bar charts representing an example revenue forecast. In addition to the forecast itself, it is good practice to include key trends and/or demograph- ics that influence the revenue projection. This could include fuel tax trends, trends in federal funding, or historical trends in revenue. These additional details and visuals help paint a clear and complete picture of the funding estimated to be reasonably available over the ten-year time period of the TAMP. MnDOT details its forecast trends in its Transportation Funds Forecast publication (MnDOT 2017b). Figures 7-7, 7-8, and 7-9 show various trends that they use to estimate their revenues, namely the projection of the sale of vehicles over time, the estimate of fuel tax revenue, and the estimate of fuel consumption. Each of these graphs shows historic trends, Figure 7-5. Data entry for sources and uses.

84 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management 2020 2021 2022 2023 2024 2025 2026 2027 2028 General Funds + Gas Tax Gas Tax Registration Fees Motor Vehicle sales tax All Bonds All Local All Tolls 2019 Figure 7-6. Bar charts of revenue forecast. Figure 7-7. MnDOT new vehicles sales trend (MnDOT 2017b). Figure 7-8. MnDOT gas tax revenue trend (MnDOT 2017b).

Communicating the Results 85 projections from 2016, and revised projections from 2017. The commentary accompanying the figure documents changes in the forecast as well as risks that may impact actual revenues. In this case, fuel consumption and gas tax revenues exceeded expectations, in part due to a drop in the price of oil. Together these diagrams help complete the story of the financial projections and illustrate the tremendous care involved in accurately predicting revenue and expenditure over time. Investment Strategies and Scenarios The projection of expenditures tracks closely with the development of the investment scenar- ios and strategies. Chapter 5 of this guide describes the iterative steps for defining the scenarios, allocating budget dollars, selecting projects, and finalizing funding levels. A description of the process used for developing the investment strategies and a description of the key scenarios that were considered should be included in the TAMP document. To visually illustrate the investment strategies and scenarios, there are a number of different options. For example, a DOT may want to provide information on the investment strategy over time. MnDOT illustrates this in a table by grouping different years of the investment strategy lifetime, as shown in Figure 7-10. In addition, MnDOT uses percentages rather than direct dollar amounts when presenting the investment strategy. This clearly communicates how the strategy changes over time. A side-by-side comparison of investment scenarios may also be a compelling addition to the financial plan portion of the TAMP. Figure 7-11 illustrates two of MnDOT’s scenarios: Perfor- mance Level 0 and Performance Level 1. This visual clearly indicates the level of investment of each scenario and provides a brief summary description for readers to quickly grasp the main differences between the scenarios. Using the Tool: Projections and Investment Strategies The web tool can help the user produce visualizations for effectively communicating the pro- jection of sources and uses for the 10-year financial plan. First, the user must enter the dollar amount of the funding sources and uses by program for each year. Figure 7-12 shows part of the Figure 7-9. MnDOT fuel consumption trend (MnDOT 2017b).

86 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management data entry screen which is accessed on the tool by clicking on “Financial Projections” under the “Data Entry” tab on the left side of the screen. Once all the data is entered, the user can view the visualizations. First, is the Projection Summary shown in Figure 7-13: this is a pie chart summarizing the Sources and Uses across all 10 years of the financial plan. The next two visualizations on the left hand side of the screen are the Sources Year-by-Year and the Uses Year-by-Year. These are bar charts (either stacked or grouped) that show the projections of funds over time. Figure 7-14 shows the Sources Year-by-Year in the grouped orientation. Figure 7-10. MnDOT investment strategies (Minnesota GO 2018). Figure 7-11. MnDOT comparison of investment scenarios (Minnesota GO 2018).

Figure 7-13. Online tool projection summary. General Funds + Gas Tax Gas Tax Registration Fees Motor Vehicle sales tax All Bonds All Local All Tolls 2020 2021 2022 2023 2024 2025 2026 2027 20282019 Figure 7-14. Online tool sources year-by-year. Figure 7-12. Online tool financial projections data entry.

88 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management 7.4 Asset Value The final aspect of the financial plan for asset management that needs to be included in the TAMP is information on the asset value of assets in the TAMP. The steps in Chapter 6 guide the practitioner in calculating the asset value using either the GASB Statement 34 value or the DRC methodology. It is key that the assumptions used to calculate the asset value are clearly communicated in the TAMP. Particularly, practitioners need to be sure they include the following items when discussing asset value: • Unit cost, • Quantity, and • Remaining life of assets. Descriptions and assumptions regarding these aspects of the asset value can be accompanied by visuals as well. Bar charts and pie graphs can be used to communicate, for example, current value of assets, replacement value, and various geographic statistics. Refer to Figure 6-6 to see how CDOT uses visuals to communicate asset value. CDOT incorporates pie charts to illus- trate the current value share and replacement value share of assets. The report also includes a geographic element by showing the current value and replacement value distribution of assets across the state. This is an exemplary model of the way to present information about asset value in the TAMP. Using the Tool: Asset Value The last capability of the online tool regards asset value. The user can create asset categories in the “Configuration” portion of the site and then add information on the units of measure, quantity, unit cost, and percent of life remaining in the “Data Entry” portion (see Figure 7-15). The data generates a bar chart (either grouped or stacked) that illustrates the Gross Replace- ment Value and the Current Value (see Figure 7-16). Figure 7-15. Online tool asset value data entry.

Communicating the Results 89 Gross Replacement Value Current Value Bridge Interstate ($26204400.00) Bridge NHS ($4758960.00) Current Value Bridge Non-NHS ($2439600.00) Pavement Interstate ($3062377.50) Pavement NHS ($787072.00) Pavement Non-NHS ($248379.30) Bridge Interstate ($30120000.00) Bridge NHS ($6024000.00) Gross Replacement Value Bridge Non-NHS ($3252800.00) Pavement Interstate ($4083170.00) Pavement NHS ($915200.00) Pavement Non-NHS ($349830.00) Figure 7-16. Online tool asset value visualization.