Hypothetical Example of Cost Apportionment

Appendix B to Part 277— Hypothetical Example of Cost Apportionment Following is the interpretation of the principles as applied to the alteration of a hypothetical highway—railroad bridge across Blank River between City A and City B. Reference table 1. Total estimated cost of alteration project | $10,917,300 | A The existing double deck swing span will be replaced with a new double deck lift span affording a horizontal navigation opening of 250 feet clear width between piers normal to the navigation channel and a vertical clearance of 125 feet above mean high water in the raised position. 2. Salvage | $77,300 This value is deducted from the original cost to determine the actual capital cost (Table VII). It is also deducted from the Total Estimated Cost of Alteration Project to determine the cost to be apportioned. 3. Direct and special benefits: a. Removing old bridge (owner's share) | $165,489 | I b. Fixed charges (owner's share) | 284,460 | II A fixed charge such as engineering, design and inspection costs, realtor's and counsel's fees, and bridge owner's administrative expenses is an undistributed cost shared in the ratio that each party shares the cost of construction less fixed charges. In computing the bridge owner's share of the fixed charges, all other financial liabilities assigned to the bridge owner shall be included in the computation. (Table II). c. Contribution by third party | $432,000 Section 6 of the Act provides that in the event the alteration or relocation of any bridge may be desirable for the reason that the bridge unreasonably obstructs navigation, but also for some other reason, the Secretary may require equitable contribution from any interested person, firm, association, corporation, municipality, county, or State desiring such alteration or relocation for such other reason, as a condition precedent to the making of an order for such alteration or relocation. In the instant case, testimony at the hearing developed that the bridge would require alteration because of the navigation project but also City A desires to relieve traffic on a nearby secondary road by providing access to the new bridge. It is considered that as an equitable contribution, City A should contribute an amount equal to one half of the expectable road user benefit accruing over the next 10 years. Other methods for determining the third party's contribution are acceptable depending on the circumstances. d. Betterments | $18,360 | III 4. Expectable savings in repair or maintenance costs | | IV Repair | $100,000 Maintenance | 16,288 The new bridge is designed for increased loading and width greater than that of the old bridge. Therefore, the estimated annual maintenance cost was based on a hypothetical bridge designed, but not constructed, for the same loading and width as the old bridge but with increased clearances as required to meet the needs of waterborne navigation, and not on the estimated annual maintenance cost of the new bridge. The savings in repair costs represents a savings to the bridge owner who will not have to restore the bridge that was recently damaged since it is being altered as a part of a proposed navigation improvement. 5. Costs attributable to requirements of railway and highway traffic | $1,534,000 | V The old bridge carries a highway deck on the upper level consisting of a roadway 18 feet wide (no sidewalks) and a railway deck on the lower level with 110-lb. rails. The new bridge will carry a highway deck on the upper level consisting of one 28-foot roadway and two 5-foot sidewalks, and the railway deck will have new 130-lb. rails. In addition, the railway deck will be paved to carry highway traffic. Thus, the bridge may be kept in an intermediate raised position when not being used by railway traffic to pass small-boat traffic without delaying highway traffic. City A also desires to provide additional highway approaches and right-of-way to connect a nearby secondary road with the new bridge. 6. Expenditure for increased carrying capacity | $2,330,000 | VI The highway deck of the old bridge was designed for a live loading equivalent to AASHO H15-44 and the railway deck for live loading of Cooper E 45. The highway deck of the new bridge will be designed for live loading AASHO HS20-44, and the railway deck will be designed for live loading of Cooper E 60. Accordingly, the bridge owner will pay the additional cost for the increased carrying capacity of the new bridge. 7. Expired service life of old bridge | $511,300 | VII The structure of the old bridge was completed in 1908 and the superstructure completed in 1909. For this hypothetical example it was assumed the bridge would be replaced in 1970. 8. The following is an explanation of the procedure for determining the tabulation of proportionate shares of costs to be borne by the United States and the bridge owner presented in Table B. (1) Cost of alteration to be apportioned is the total estimated cost of the project (excluding contingencies) less salvage value (§ 277.8(b)), less contribution by third party, if applicable (§ 277.8c(3)). (2) Share to be borne by the bridge owner is the sum of the direct and special benefits (§ 277.8(c)) expectable savings in repair or maintenane costs (paragraph 8d), costs attributable to requirements of railway and highway traffic (§ 277.8(e)), expenditure for increased carrying capacity (§ 277.8(f)) and expired service life of old bridge (§ 277.8(g)) (3) Share to be borne by the United States is the difference between the cost of alteration to be apportioned and the share to be borne by the bridge owner. (4) The exact amount of costs to be borne by the bridge owner will be determined upon completion of the project. (5) Contingencies may be included in the total shares to be borne by both the United States and the bridge owner. Tables A. Summary of Estimated Project Costs. B. Tabulation of Proportionate Shares of Cost To Be Borne by the United States and the Bridge Owner. I. Bridge Owner's Share of Removing Old Bridge. II. Fixed Charges To Be Paid by Bridge Owner. III. Betterments. IV. Expectable Savings in Repair or Maintenance Costs. V. Costs Attributable to Requirements of Railway and Highway Traffic. VI. Expenditure for Increased Carrying Capacity. VII. Value of Expired Service Life of Old Bridge. Table A—Summary of Estimated Project Costs No. and item | Cost | Fixed charges | Total 1 New bridge | $8,104,052 | $570,000 | $8,674,052 2 Removal of old bridge | 521,908 | 500 | 522,408 3 Approaches | 50,000 | 5,000 | 55,000 4 Additional highway approaches | 1,530,000 | 15,000 | 1,545,000 5 Railroad force account work | 41,800 | 3,500 | 45,300 6 Additional signaling | 27,000 | 2,400 | 29,400 7 Right-of-way | 13,240 | 900 | 14,140 8 Additional right-of-way | 30,900 | 1,100 | 32,000 Total | 10,318,900 | 598,400 | 10,917,300 Total estimated cost of project | | | 10,917,300 Less salvage | | | −77,300 Less contribution by third party | | | −432,000 Total cost of alteration to be apportioned | | | 10,408,000 Less right-of-way (Items 7 and 8) | | | −46.140 Total Cost of construction | | | 10,361,860 Table B—Tabulation of Proportionate Shares of Costs To Be Borne by the United States and the Bridge Owner Total estimated cost of project (excluding contingencies) (table A) | $10,917,300 Less salvage | 77,300 Less contribution by third party | 432,000 Total cost of alteration to be apportioned | 10,408,000 Share to be borne by the bridge owner: Direct and special benefits: Removing old bridge | $165,489 Fixed charges | 284,460 Betterments | 18,360 Expectable savings in repair or maintenance costs: a. Repair | 100,000 b. Maintenance | 16,288 Costs attributable to requirements of railway and highway traffic | 1,534,000 Expenditure for increased carrying capacity | 2,330,000 Expired service life of old bridge | 511,300 Total | 4,959,897 Share to be borne by the United States | 5,449,103 Contingencies 15 pct | 817,365 Total | 6,266,468 Share to be borne by the bridge owner | 4,959,897 Contingencies 15 pct | 743,985 Total | 5,703,882 Table I—Bridge Owner's Share of Removing Old Bridge Item to be removed | Age at time of removal (years)—(1) | Owner's share percent—(2) | Removal cost—(3) | Owner's share of removal—(4) | Years remaining—(5) | Present worth factor—(6) | Owner's present liability—(7) Substructure | 62 | 62 | $241,935 | $150,000 | 38 | .1639 | $24,585 Protection Works | 37 | 67 | 60,000 | 40,200 | 18 | .4245 | 17,065 Superstructure | 61 | 87 | 206,896 | 180,000 | 9 | .6516 | 117,288 Signaling | 61 | 100 | 440 | 440 | 0 | 1.0 | 440 Ties and Timber | 20 | 67 | 6,000 | 4,000 | 10 | .6213 | 2,485 Rail and Accessories: Rail, 110 lb | 33 | 100 | 1,000 | 1,000 | 0 | 1.0 | 1,000 Rail, 110 lb | 13 | 65 | 5,637 | 3,664 | | | 2,626 Total | | | 521,908 | 368,104 | | | 165,489 Table II—Fixed Charges To Be Paid by Bridge Owner Cost of construction | $10,361,860 Less fixed charges | 598,400 Total | 9,763,460 Owner's share less fixed charges: Removing old bridge | 165,489 Betterments | 18,360 Expectable savings in repair or maintenance costs: a. Repair | 100,000 b. Maintenance | 16,288 Costs attributable to requirements of railway and highway traffic (less right-of-way) | 1,503,100 Expenditure for increased carrying capacity | 2,330,000 Expired service life of old bridge | 511,300 Total | 4,644,537 Fixed charges by owner | 284,460 Table III—Betterments New furniture and water cooler in control house | $1,050 Increased cost of elevators over stairways | 13,360 Increased cost of galvanized steel grating walkways over timber walkways | 3,950 Total | 18,360 Table IV—Expectable Savings in Repair or Maintenance Costs Repair Cost Cost in 1970 to repair damaged bridge | $100,000 Savings in repair costs | 100,000 Maintenance Cost Average annual maintenance cost for old bridge | 16,875 Estimated annual maintenance cost for new bridge | 16,000 Total decrease in annual maintenance costs | 875 Annual savings capitalized (50 years) @ 4 7/8 %:875÷0.05372 | 16,288 Table V—Costs Attributable to Requirements of Railway and Highway Traffic Heavier running rail (130 lb in lieu of 110 lb) | $11,200 Paving, lower deck | 34,900 Additional signaling | 27,000 Additional highway approaches | 1,430,000 Subtotal | 1,503,100 Additional right-of-way | 30,900 Total | 1,534,000 Table VI—Expenditure for Increased Carrying Capacity Cost of new bridge designed for Cooper E 60 and AASHO HS20-44 loading ^1 | $8,609,592 Cost of replacement-in-kind (hypothetical) bridge designed for Cooper E 45 and AASHO H15-44 loading ^1 | 6,279,592 Total | 2,330,000 Table VII—Value of Expired Service Life of Old Bridge Item to be removed | Year built—(1) | Original cost—(2) | Salvage value—(3) | Actual capital cost (2)-(3)—(4) | Estimated service life—(5) | Expired service life | Years 1970-(1)—(6) | Percent of total (6) (5)—(7) | Value of expired service life (4)×(7)—(8) Substructure: Pivot Pier | 1908 | $34,500 | $0 | $34,500 | 100 | 62 | 62 | $21,390 Right End Pier | 1908 | 18,580 | 0 | 18,580 | 100 | 62 | 62 | 11,520 Left End Pier | 1908 | 21,410 | 0 | 21,410 | 100 | 62 | 62 | 13,274 Right Abutment | 1908 | 8,600 | 0 | 8,600 | 100 | 62 | 62 | 5,332 Left Abutment | 1908 | 11,410 | 0 | 11,410 | 100 | 62 | 62 | 7,074 Protection Works: Pivot Pier | 1909 | 5,800 | 0 | 5,800 | 37 | 61 | ^1 50 | 2,900 Right End Pier | 1942 | 3,200 | 0 | 3,200 | 37 | 28 | ^1 50 | 1,600 Superstructure: Swing Span | 1909 | 168,920 | 19,400 | 149,520 | 70 | 61 | 87 | 130,082 Electrification | 1957 | 5,000 | 500 | 4,500 | 22 | 13 | 59 | 2,655 Left Approach Spans | 1909 | 142,017 | 16,300 | 125,717 | 70 | 61 | 87 | 109,374 Right Approach Spans | 1909 | 156,692 | 19,300 | 137,392 | 70 | 61 | 87 | 119,531 Signaling | 1909 | 15,000 | 1,000 | 14,000 | 35 | 61 | 100 | 14,000 Ties and Timber | 1909 | 8,120 | 0 | 8,120 | 20 | 61 | ^1 50 | 4,060 Rail and Accessories: Rail, 110 lb | 1937 | 6,600 | 2,200 | 4,400 | 20 | 33 | 100 | 4,400 Rail, 110 lb | 1957 | 43,679 | 18,600 | 25,079 | 20 | 13 | 65 | 16,301 Roadway Approaches: ^2 Pavement | 1908 | 17,841 | 0 | 17,841 | 20 | 62 | ^1 50 | 8,921 New Lane | 1961 | 43,609 | 0 | 43,609 | 20 | 9 | 45 | 19,624 Subtotal | | | 77,300 | 633,678 | | | | 492,038 Engineering | | 24,695 | 0 | 24,695 | | | ^3 78 | 19,262 Total | | | 77,300 | | | | | 511.300