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<br />~I <br /> <br />projects with annual operating, maintenance, end replacement costs <br /> <br />equal to about 12 percent of the annual capital charges (the ratio <br />for the Animas-La Plata Project is about 20 percent) the nominal <br /> <br />benefit-cost ratio could get as low as 0.70:1 and still represent <br /> <br />a real benefit-cost ratio of one to one, assuming a fifty-year life <br />11 <br />of the project. In other words, the nominal benefit-cost ratio <br /> <br />tends to understate the true benefit-cost ratio when construction <br /> <br />occurs in depressed areas. <br /> <br />As the Haveman-Krutilla study also observed, the other defi- <br /> <br />~I <br /> <br />~ <br /> <br />ciency in the usual computation of a benefit-cost retio for a <br /> <br />~ <br />~. <br /> <br />~i <br /> <br />chronically depressed area is the understatement of benefits as a <br /> <br />consequence of overlooking additional output by persons employed <br /> <br />during the operations period following construction who would have <br />remained unemployed in the absence of the project.12 <br />It is evident that traditional computation of benefit-cost <br /> <br />ratios for water resource projects in depressed areas tends to <br /> <br />result in a lower benefit-cost ratio than is really the case. This <br /> <br />occurs because opportunity costs of employing labor in such an area <br /> <br />are overstated, and benefits of employing persons in the operations <br /> <br />s <br />~~ <br />~ <br />~ <br />.1;' <br /> <br />phase after construction are overlooked. The benefit-cost ratio <br /> <br />should accordingly be adjusted, in recognition of these problems. <br /> <br />14 <br />