Fast growth in the population of the city of Orlando and in surrounding counties-Orange County in particular-has resulted in insurmountable traffic congestion. The county has few places to turn for extra money for road improvements-except new taxes. County officials have said that the money they receive from current taxes is insufficient to widen overcrowded roads, improve roads that don't meet modern standards, and pave dirt roads. State residents now pay 12 cents in taxes on every gallon of gas. Four cents of that goes to the federal government, 4 cents to the state, 3 cents to the county in which the tax is collected, and 1 cent to the cities.
The county commissioner has suggested that the county get the money by tacking an extra penny-a-gallon tax onto gasoline, bringing the total federal and state gas tax to 13 cents a gallon. This new tax would add about $2.6 million a year to the road-construction budget. The extra money would have a significant impact. With the additional revenue, the county could sell a $24 million bond issue. It would then have the option of spreading that amount among many smaller projects or concentrating on a major project.
Assuming that voters would approve a higher gas tax, county engineers were asked to prepare a priority list outlining which roads would be improved with the extra money. The road engineers also computed the possible public benefits associated with each road-construction project; they accounted for a possible reduction in travel time, a reduction in the accident rate, land appreciation, and savings in the operating costs of vehicles. Table ST16.1 is a list of the projects and their characteristics.
TABLE ST 16.1

Assume a 20-year planning horizon and an interest rate of 10%. Which projects would be considered for funding in parts (a) and (b)?
(a) Due to political pressure, each district will have the same amount of funding, say, $6 million.
(b) The funding will be based on tourist traffic volumes. Districts I and II combined will get $15 million, and Districts III and IV combined will get $9 million. It is desirable to have at least one four-lane project from each district.

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Type of Construction Annual Annual Benefits District Project Improvement O&M Four-lane Four-lane Four-lane Four-lane Realign Four-lane Four-lane Four-lane Realign Four-lande Two-lane Four-lane Four-lane Reconstruct Widen Widen Cost S 980,000 $9,800 $313.600 3,500.000 2.800.000 1,400,000 2,380,000 5,040,000 100,800 1,310,400 2,520,000 4,900,000 1.365.000 2.100,000 1.170,000 1,120,000 2.800,000 1.690,000 35,000 28,000 14.000 47,600523.600 850,000 672,000 490,000 I-3 1.4 1-5 11-1 11-2 II-3 11-4 50.400 98,000 ,021,000 20,475 1,500 567.000 17.550 292,000 16.800 358,400 56,000 33,800 507,000 831.600 245.700 980,000 IV-I IV-2 IV-3 IV 975,00015,900 29,250 273,000 424.200 1.462,500