COM 0502.001 2006-2008 - Laserfiche WebLink

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~(Ll' lt, l~ WEST HAWAII ASPHALT CONCRETE COST ADJUSTMENT ANALYSIS RATIONALE: Because of the high unit cost of asphalt concrete (AC) in certain West Hawaii districts, a Cost Adjustment Formula (CAF) has been developed to equalize the purchasing power of AC among all districts. The CAF determines the amount of money to be transferred from districts that are able to buy AC at East Hawaii rates to those districts that must purchase AC at the higher West Hawaii rate. The CAF determines a baseline quantity of AC purchased if all districts were able to buy AC at the lower East Hawaii unit cost. A comparison is made between the baseline quantity of AC purchased and the actual amount of AC purchased using East and West Hawaii rates after East Hawaii funds aze transferred to West Hawaii. This comparison is expressed as ratio; with equiTy in purchasing power being achieved when the East Hawaii ratio equals the West Hawaii ratio as shown in the formula below. East Hawaii AC purchases after fund transfer _ West Hawaii AC purchases with fund transfer East Hawaii baseline AC purchases West Hawaii baseline AC purchases COST ADJUSTMENT FORMULA (CAFZ The CAF uses the following variables: $w = Unadjusted amount of money to be spent using West Hawaii unit cost for AC only. $ s = Unadjusted amount of money to be spent using East Hawaii unit cost for AC only. CW = West Hawaii unit cost for AC. CE = East Hawaii unit cost for AC. X = Amount of money to be transferred from East Hawaii districts to West Hawaii districts. The variables are used to establish the following: $E SCE = East Hawaii baseline AC purchase. $W~CE = West Hawaii baseline AC purchase. ($E - X)~CE = East Hawaii AC purchases after fund transfers. ($W + X)~Cw = West Hawaii AC purchase with fund transfers. Ftx Adjustment 2.wpd (8/1/05) Page 1 of 2