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3 133C Reclamation Instructions Series 110 Planning Part 116 Economic Invesligations CHAPTER 5 COST SHARING 116.5.2A(41 (al Analv,is of New Irrigated Land. For nonirrigated lands which will receive a full waler supply from the project, farm budget, are usually prepared to rep- resent future condilions with and without the project. Nonirrigated conditions vary widely, ranging from arid grazing areas with negligible income. where no farm budget is needed, through more productive range or grain farming, to intensively used dryfarming areas where the productivity of future family farms without irrigation should be analyzed in some delail. Farm budgets rep- resenting future conditions of operation as a Water and Power project analyze the dominant patterns of land use and income expecled 10 prevail with a full water supply. (b) Analvsis of Supplemental Water Service. Future conditions without a project m areas needing supplemental water may reflect one or more of many kinds of deficiencies. For example, some tracts may be fully irrigated while others lie idle; the entire area may be devoted to crops with low water require- ments; water shortages may occur annually or sporadically; the effects of shortage may vary because of senior and junior water rights; ground-water supplies may be insufficient or overdrawn; and water supply may be inade- quate only because of insufficient structures for proper storage and distribution. (aa) Incremental Analysis. The preferred method of determining payment capaCity In thIS SItuation is through farm budgets depicting future condi- tions "with" and "without" the proposed supplemental service. The pur- pose of this incremental analysis is to determine payment capacity resulting from increased net farm income attributable to the supplemen- tal water supply. Under this method, the investment value of land should reflect current fair market value with the existing, nonproject water supply. Annual nonproject water charges. and/or nonproject dis- tribution and drainage system costs must also be included as farm expenses so that payment capacity will reflect the incremental value of project-supplied supplemental waler rather than the average value of all water. -..-- (bbl New Land Equivalent. Some supplemental waler situations are of such compleXity that the preferred incremental method may be impractical. In these situations, the new land equivalent method may be used to determine the average payment capacity per acre-fOOl of a full water supply. Under this method. a non irrigated situation is assumed to rep- resenl conditions without the project. Land values in both the with and without project budgets should exclude the capitalized value of non- project water. and payment for nonproject water should also be excluded from the analysis. The resulting payment capacity will reflect the same value for water from project and nonproject sources. (4) Determination of Payment Capacity. Payment capacity is derived from the increase in net farm mcome under tuture conditions with the project. Net farm income is the 116-4 - 1 /12/1J2 (Supersedes 10/1 S /80)