As previously stated, this estimated average service life of the selected roads as a whole materially exceeds the 16-year period for which it is reasonable to estimate revenues. It also is about twice as long as the 30-year period fixed for retirement of the debt.
Annual debt service charge.—Retirement of the debt in 30 years will, it is estimated, entail an annual debt service charge of 4.84 percent of the total estimated cost. This 4.84 percent rate covers annual interest on the loan at 2.6 percent and provides for retirement in 30 years by an added 2.24 percent. The 2.6 percent interest rate on the loan is approximately the composite rate of United States Treasury borrowing charges as of January 1939. It reflects the rates on both short-term and long-term Treasury borrowings. It therefore can be assumed that with this rate borrowing for the proposed road construction may either be of short- or long-term character. The retirement annuity of 2.24 percent to be added to the interest rate will retire or amortize the total cost in about 30 years if compounded at 2.6 percent annually. Thirty years is a common term for highway loans.[1] It is also slightly longer than the term of any outstanding United States borrowings. The assumed annual debt service cost, on the basis of the United States Treasury borrowing rate, therefore, is 4.84 percent of $2,899,770,000 or about $140,401,000 annually. The corresponding annual debt service on an average construction cost of $202,270 per mile is approximately $9,790.
The annual debt service is the largest item of annual cost. It could be decreased by extending the term of the loan. The total cost of the loan, on the other hand, increases directly as the term increases. The 30-year loan, at 2.6 percent annual interest rate as indicated, reflects the United States Treasury rate and the longest term of Federal borrowing.[2]
Annual costs of maintenance and minor reconstruction.—The annual costs of maintenance and minor reconstruction are entailed principally by the strict maintenance of the surfaced roadway and operating facilities and the drainage, and other structures, plus the maintenance of a good appearance of the right-of-way, together with any necessary reconstruction during the interval 1945–60. These annual costs vary from section to section. They are estimated to amount to $18,637,000 and are equivalent to approximately $1,300 per year for the average mile during the period 1945–60.
Annual operating cost.—The assumed annual operating cost consists principally of the collection and management of the tolls, the operation of a sufficient traffic police force, and the removal of snow. These items vary from section to section, but combined they are estimated at a total cost of $25,016,000, or approximately $1,740 per average mile per year for the period 1945-60.
Total annual cost.—The estimated total annual cost which is the sum of debt service, maintenance and minor reconstruction, and operating costs, is $184,054,000, or an average of approximately $12,840 per mile per year. This total cost figure is shown, as of the year 1960, in table 17, which table also shows the corresponding accumulated cost of $2,944,861,936 for the period 1945-60.
