HomeMy WebLinkAboutCOM 0377.001 2004-2006 Presentation for Bill 127
16t" Session Hawaii Countv Council
Committee on Finance
August 2, 2005, BCM
• Handouts
- Presentation (Additional)
- West Hawaii Asphalt Concrete Cost Adjustment
Analysis ($282,996) (Replacement)
- Example (Replacement)
• Brief History of Allotment Formula
- District Miles Plus District Car Resigtration
- Nine Districts Plus Around the Island Roads
- District Miles Only
• Short Course
- Background -Mileage Data
- "Black Box" -West Hawaii Asphalt Concrete Cost
Adjustment Analysis ($282,996) (Replacement)
- Bottom Line Table 2, Columns G, I & J
- Verification of Adjustment, Table 3
• Questions
Comm. No.
Ref. To: ~
»f. cds~ AUG
WEST HAWAII ASPHALT CONCRETE
COST ADJUSTMENT ANALYSIS
RATIONALE:
Because of the high unit cost of asphalt concrete (AC) in certain West Hawaii districts. a Corr
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 Hawai `i rates to those districts that must purchase AC at the higher West Hawai `i 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 are
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 Hawai `i 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 AD.TUSTMENT FORMULA (CAFI:
The CAF uses the following variables:
$w = Unadjusted amount of money to be spent using West Hawaii unit cost for AC only.
$E = Unadjusted amount of money to be spent using East Hawaii unit cost for AC only.
CW = West Hawaii unit cost for AC.
CE = East Hawai `i 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 )SCE = East Hawaii AC purchases after fund transfers.
($W + X )~CW = West Hawaii AC purchase with fund transfers.
Ftx Adjustment 2.wpd (8/1/5) Page 1 Of 2
Substituting the above into the following formula:
East Hawaii AC purchases after fund transfer West Hawaii AC purchases with fund transfer
East Hawaii baseline AC purchases West Hawaii baseline AC purchases
Results in:
E - X )~CE ($W + X )~Cw «E - ($W + X )
Q~ ~ _ ~
$EICE $WICE ~E CE $W CW
($EQQ- X)$wCw=($W + X)$ECE ~
~$W"'E~CW - X($W CW~=(${y$E(~CE + X($ECE) ~
$W$E~CW-CE~= X~($E CE~+~$W ~W
Solving for X re/sups in the Cost Adjustment Formula (CAF):
X- ~W$E~CW - CE~
($ECE)+ ($N,Cw)
Substituting the following values into the CAF:
$ W = $ 476,221 (see attached Table 1, Total Column H)
$E _ $2,538,779 (See attached Table 1, Total Column E)
CW = $75.00/ton Mix 4 (Contractual Price)
CE _ $41.80/ton Mix 4 (Contractual Price)
Results in:
476,22] x 2,538,779 x (75.00-41.80) _ $282,996
X=
(41.80 x 2,538,779) + (75.00 x 476,221)
Therefore:
West Hawaii Adjusted Allotment = $ 476,221 + $282,996 = 759 217
East Hawaii Adjusted Allotment = $2,538,779 - $282,996 = $ 2.255.783
Attached Table 2 redistributes the Adjusted Allotments back into the respective districts.
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