#05 - Right of Way Management - Laserfiche WebLink

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Right of Way Management September 10, 2024 Page 4 planning, design, project inspection and management, and actual construction. The increased costs of engineering and construction resulting from utilities within the right- of-way increases the amount the City must borrow and the corresponding interest costs on that debt Operating Costs The City incurs operating costs in managing and maintaining the right-of-way. These costs can be identified within a number of the City’s operating funds including the General Fund, Internal Service Funds, Special Revenue Funds, Enterprise Funds, Risk Management Fund, Equipment Maintenance Fund, and other funds depending on the City’s fund structure. These costs should be adjusted to include the overhead costs incurred by the City. Disruption Costs Disruption costs are those costs that result in the interruption of the normal use of the public right-of-way. The most common disruptions relate to lane closures and detours. The disruption costs identified should be based on an estimate of the additional distance traveled by the vehicles owned by the City resulting from the closure of streets due to intrusions. An overhead amount is added to arrive at the total annual cost related to disruption Return on Investment The City has made a significant investment in the assets located within the right-of-way. These generally include street pavements, sidewalks, lighting, traffic controls, right-of- way purchased (not dedicated without cost to the local government) and other assets. All of these assets benefit the utility located in the right-of-way. To determine the annual return on investment, the local government needs to determine the net value of these assets (cost of acquisition less depreciation) and then establish an appropriate rate of return on this investment Depreciation Costs incurred in the operation of the right-of-way are either recorded as operating expenses or capitalized as assets. Whether the cost is expensed immediately or capitalized, the City actually pays for the asset at the time it is acquired. Generally, anything that is used up in the period in which the cost of acquiring it is incurred is treated as an operating expense. Personnel, supplies, and repairs and maintenance are typical examples of costs that are treated as operating expenses. These costs are shown in the financial statements each year in the total amount of the expenditure for each category. The cost incurred in the acquisition or construction of assets such as pavement, lighting, traffic controls, etc. are recorded as capital expenditures. That means these costs do not show up as an operating expense in the year in which the expenditure occurs, rather the cost of these assets is depreciated. Depreciation is the process of allocating the cost of an asset over its useful life in a systematic and rational manner. A proportion of the annual depreciation expense can be allocated to the utilities within the right-of-way.