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<br />~- <br />.; <br /> <br />5 <br /> <br />1 '.:."'~ <br />1 vJ'-' <br /> <br />Reclamation Instructions <br /> <br />Serit'!. 11 0 Pl.lnn;n~ <br /> <br />Pan 116 Economic Invesligarions <br /> <br />CHAPTER 5 COST SHARING <br /> <br />116.S.2A(41-2 <br /> <br />county data can be developed by adjustment of Census of Agriculture <br />data. Some of the data sources which can be obtained from the U.S. <br />Department of Agriculture are: <br /> <br />Agricultural Finance Outlook <br />Balance Sheet of the Farming Sector <br />Agricultural Finance Statistics <br />Farm Mortgage Debt <br /> <br />Local offices of the Federal land Bank, Production Credit Association, <br />Farmers' Home Administration, and banks are also good dala source!> on <br />interest rates and debt/equity ratios. Note that interest is charged as a <br />production expense only on the debt share of investment. The interest <br />return to farmers' equity is covered subsequently In this Chapter as a <br />part of net farm income. <br /> <br />',,- <br />"bbJ Depreciation. Annual depreciation costs are included in the farm budg- <br />ets for machinery, buildings, and any other nonpermanent capital <br />investment Depredation charges are based on recovering full current <br />purchase prices using a sinking fund factor determined by the useful life <br />of the capital investment and the appropriate normalized interest rate as <br />discussed in the preceding section for the length of investment For <br />e"ample, the current normalized interest rale for long term credit should <br />be used for buildings and the intermediate term credit rate should be <br />used for machinery. The period of useful life in years for each item of <br />farm machinery should be determined by dividing the total hours of use- <br />ful life by rhe actual average hours of annual use on the farm budgeted, <br />but not to exceed 2S years. This procedure eliminates the necessity of <br />estimating salvage value at the end of the depreciation period because <br />the amount of depreciation charged in the budget will be less for equip- <br />ment with low rates of use, i.e., longer than normal life in terms of <br />years. <br /> <br />(b) Adjusting to Equal Land Area. The land area included within the typical dry- <br />land farm representing "without" project conditions will often be much <br />greater than expected under irrigation. In order to subsequently calculate <br />payment capacity, the results of the "without" farm budget with respect to <br />net farm income, farm investment, and family labor input must be adjusted to <br />values which would result from the same land area as included in the "with" <br />farm budget. This adjustment may be made either by expanding budgets rep- <br />resenting both situations to the same total project size or prorating these fac- <br />tors on an average per-acre basis to the farm size represented in the "with" <br />project budgets. Regardless of method, the payment capacity computations <br />which {allow must be based on equal land area between the "with" and <br />"without" project situation. <br /> <br />116-4.- 1/12/82 (Supersedes 10/15/801 <br />