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From: "Kuba, Galen" <GKUBA@co.hawaii. hi.us>
To: "'hawaiico untyco uncil@yahoo.com"' <hawaiicountycouncil@yahoo.com>
Subject:
Date: Wed, 25 Jul 2007 11:04:31 -1000
As requested by B. McClure.
Plain Text Attachment
Harry Kim Mayor
Bruce C. McClure Director
QIuttuflJ uf-afuai^i
DEP ARTMENT OF PUBLIC WORKS Aupuni Center 101 Pauahi Street, Suite 7,
Hilo, Hawaii 96720-4224 (808) 961-8321 Fax (808) 961-8630
www.co.hawaii.hi.us
Jiro A. Sumada Deputy Director
Date:
July 12,2007
To:
BRENDA FORD, Member Hawaii County Council
e
BRUCE C. McClure, P.E., Director Department of Public Works
From:
SUBJECT:
BILL 119 - AN ORDINANCE AMENDING ORDINANCE 07-93, AS AMENDED, RELATING
TO PUBLIC IMPROVEMENTS AND FINANCING THEREOF FOR THE FISCAL YEAR JULY
1, 2007 TO JUNE 30,2008 (FUEL TAX INCREMENT 5)
As requested at the July 10, 2007 Finance Committee meeting, attached
is chart showing adjusted and unadjusted fuel tax allocations. The
adjusted allocations include a price adjustment factor based on our current
cost of purchasing asphalt concrete in East and West Hawaii. The price
adjustment factor is now based on a cost differential $23.70 compared
to $35.20 which was used for the previous Fuel Tax Increment 4
allocation.
Please contact me if you have any further questions regarding this
matter.
Enclosure
c: w/enclosure Pete Hoffman K. Angel Pilageo Donald Ikeda Bob Jacobson
Emily Naeole J Yoshimoto Stacy Higa Dominic Yaqong c
CORIIn: F10. + OZ
Ref. To; h~uNei )
Ref. Date JUL 2 5 200T
http://us.f588.mail.yahoo.com/ym/ShowLetter?box=Inbox&MsgId=221_7751291_11510_... 7/25/2007
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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.
($W + X)~Cw = West Hawaii AC purchase with fund transfers.
Ftx Adjustment 2.wpd (8/1/05) Page 1 of 2
Substituting the above into the following formula:
East Hawaii AC purchases after fund transfer West Hawaii AC purchases with fund transfer
East Hawaii baseline AC purchases West Hawaii baseline AC purchases
Results in:
($E - X)l CE l$W + X)l~W ($E - X) ($W + X)
~ _ ~
$EICE $W/CE $ECE $WCW
/($E - X)$WCW=($W + X)$ECE ~
l$W$E)CW - X($W CW)-($W$E)CE + Xl$E CE) ~
$W$E (CW - CE)- X[($ECE)+ ($W CW
Solving for X results in the Cost Adjustment Formula (CAF):
$W$E(CW - CE)
Substituting the following values into the CAF:
$w = $ 767,511 (See attached Table 1, Total Column H)
$E _ $2,832,489 (See attached Table 1, Total Column E)
CW = $83.70/ton Mix 4 (Contractual Price)
CE _ $60.00/ton Mix 4 (Contractual Price)
Results in:
X- 767,511 x 2,832,489 x (83.70- 60.00) = 5220,005
(60.00 x 2,832,489) + (83.70 x 767,511)
Therefore:
West Hawaii Adjusted Allotment = $ 767,511 + $220,005 = $ 987,516
East Hawaii Adjusted Allotment = $2,832,489 - $220,005 = $ 2,612.484
Attached Table 2 redistributes the Adjusted Allotments back into the respective districts.
F[x Adjustment 2.wpd (8/1/05) Page 2 of 2