Chapter 2: Contents of the Financial Plan

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The central element of a financial plan is an agency-wide 20-year cash flow projection that includes the capital and operating plans for the agency as a whole and for the proposed project. The 20-year cash flow begins with the current year. The remaining content of a financial plan is the information to back up all the assumptions and inputs that contribute to the cash flow projection.

The 20-year cash flow projection is the summary of several elements of a financial plan that includes:

  • Funding sources and revenue forecasts;
  • Proposed project capital budget;
  • Other planned capital projects; and
  • Annual operating and maintenance (O&M) expenses for the proposed project and the existing system.

The plan is constructed by bringing several plan elements together into an integrated financial model. Figure 1 summarizes the relationships among the plan components.

Figure 1: Components of a Financial Plan

Figure 1: Components of a Financial Plan. This flow chart shows how either (1) existing and forecast capital spending and funding sources, proposed project cost estimates, and proposed project funding sources all lead to an agency-wide capital plan, and then a plan summary cash flow projection, or (2) existing system O&M costs and operating funding, proposed project O&M costs, and proposed project fare revenues and funding sources all lead to an agency-wide operating plan, and then a plan summary cash flow projection.

The tables and schedules that constitute the financial plan demonstrate how financial and economic assumptions and project cost estimates have been derived, how the resulting forecasts of capital and operating costs of the proposed project fit into the agency-wide capital and operating plans, whether funds have been committed to the project, how the revenue forecasts are developed, and finally, how capital and operating plans impact projected agency cash flow.

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