WSP01110 - Laserfiche WebLink

Home Browse Search

A key to understanding this approach is to appreciate that even though the government may not necessarily borrow money to construct facilities, the government evaluates all projects as if the money is borrowed. This is an economic evaluation principle required by the Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies, March 1983. Cost-effectiveness - is defined as the cost per ton.of salt removed from the Colorado River System. It is computed in three steps by: I- .S:>. (0 I- Annualizing (amortizing) the One-Time Costs: This includes all federal (appropriated) ~ of planning, technical assistance, education, overhead, wildlife replacement (mitigation), design, and construction. The amortization should be over the life of the project at current planning interest rates (about 8-percent) provided by Treasury. This does not include costs paid by non-federal entities (cost sharing). Adding the ~ual Costs to the Annualized Costs: This includes federal (appropriated) costs. These may include the ~ of annual technical assistance, ~onitoring, education, wildlife replacement O&M, facility O&M, or payments for privatized salinity control. O&M costs should not include costS paid by non-federal entities (cost sharing) And Dividing the Total Annual and Annualized Costs by the Tons Removed per Year: Note, the salt load reduction is annual to match the annualized costs. Do not use the total amount of salt removed over the entire project life. Cost Indexing - For proposed projects, if the planned costs are not in current dollar values, they will to be indexed to one, consistent level (usually January 1 of the preceding year) , Major Replacement Costs - these costs need not be included since they are accounted for by amortizing over the facility's useful life. Minor replacements need to be included as an annual O&M cost. Interest During Construction (IDC) - usually IDC is only applicable to projects which require multiple years of construction before they have an impact on salinity. These are relatively few. MOst improvements reduce salinity in the same year as they are constructed. If the proposal requires the government to pay IDC, the costs should be included in the cost effectiveness computation. Local Cost Sharing - This reduces the federal cost, therefore improving the cost-effectiveness to the government. Local Impacts - If significant, negative local impacts (which are unmitigated) should be considered in computing and comparing cost- . effectiveness. It would be appropriate to display two values of cost- effectiveness (with and without local impacts). Risk Factors Typically risk factors will fall into two major categories, cost and effsctiveness. Each proposal will be evaluated on its own merits for each, but the following concepts will apply in principle: 15