Agenda - Council - 07/28/1981 - Laserfiche WebLink

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APPENDIX 5 Current Value Credits At the time that the Legislature authorized the MSSB to assume the ownership of the various locally owned facilities, a formula to . determine their value was enacted. The costs of construction of each facility in each year was first ascertained from records of the respective cities and townships. Government grants and outstanding indebtedness (see Local Government Debt Service) were subtracted to obtain a net original cost. The net original cost was multiplied by a factor (trend factor) which was derived by dividing a current cost index by the same cost index at the time of construction. This calculation determined the replacement cost of the facility. The current value of the facility is the replacement cost depreciated by 2.5 percent per year from the date of construction of treatment works, and 1.25 percent per, year from the date of construction of interceptors. There may be a further depreciation if the preceding calculation does not adequately reflect obsolescence. Examples of the calculations are shown in Appendix Tables 3 and 4. Note that in both examples grants and outstanding debt are subtracted before the net original cost is determined. The first expenditure in Appendix Table 3 exceeds the maximum 40 -year life of the formula, and, therefore, has no current value. Although both facilities in Apendix Table 4 were constructed in the eF.. same year, the fact that different indices were used for treatment works as for interceptor construction is illustrated by slightly different trend factors.. The condition percent reflects the 40 -year amortization of treatment works and 80 -year amortization of interceptors. The Legislature stated that the current value should be credited to the local governments including interest on the uncredited principal balance over a period of 30 years. See the current value credit example in Appendix Table 6. NW: sj e: emp EP8704 06.30..81