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" .6 133; Reclamation Instructions Pari 1 T 6 Economic In\lt"50tiRcltions Series 110 Planning 116.S.2A(41-3 CHAPTER S COST SHARING - (c) Computing Payment Capacity. Payment capacity is determined by subtract- ing from the net farm income "with" the project (1' net (arm income "without" the project, (2) returns to family labor and management, and (3) a return to the farm operator's equity capital. (a a) Net Farm Income "Without" the Project. This deduction is necessary in order to "net out" the increase in farm income anributable to the project. After making this deduction, no additional rerurn to thai portion of family labor and management or equity capital which would be employed "without" the project is necessary. (bb) Family labor and Management. After the preceding computation, a return to the increased labor and management of the farm operator and his family must be deducted from the remaining "with" project net farm income. The operator's labor is valued at the current wage rate for full time, skilled farm labor in the project area. The return to labor per- formed by the farm operator's family should be valued at the same wage rate as used in the budget for hired farm labor which is a com- posite rate for seasonal skilled a.nd unskilled farm labor. The return to management should be 10 percent of the increased net farm income due to the project. (cc) Equity Allowance. An allowance for return to the farm operator's equity share at [he increased total farm inv~tment under "with" project conditions is subsequently subtracted from remaining net farm income. The rate for this allowance is the current normalized rate of return from earnings to farm equity capital in United States agriculture. This rate will be based on an average of the three most recent years reported annU4 ally in USDA's Balance Sheet of the FarminR Sector. ld) Summary of Project Payment Capacity. The residual income remaining after the preceding computations is payment capacity which could be used to pay for irrigation water. The payment capaCity per farm, per acre", or per acre-fool of project water for significant variations of produccive value wirhin Ihe proj- eer area is extended by appropriate weighting to cover the entire project area. This weighting shall be in physical terms such as the acres represented by each budget, the portions of project water received by various types of farm, the proportion of different land c1asse5, or other significant variables repre. sented by the sample budgets. The determination of payment capacity shall not be adjusted to reflect contingency allowances or altitudes of water users. "- ------ 11&-4 -1/12/B2 (Supersedes 10/1S/BOI ~