Capital Expenditures

Capital Expenditures

A capital expenditure is any expenditure that adds to the productive capacity of the economy. Specifically, a capital expenditure in transportation is any expenditure that increases the capacity and efficiency of the transportation infrastructure, whether by reducing travel times, improving access, creating capacity for more passenger and goods traffic, reducing costs, or reducing adverse safety and environmental impacts. It includes outlays for the construction of transportation infrastructure, purchase of land and existing structures, purchase of equipment, research activities, and outlays for major maintenance and repairs to existing infrastructure and equipment.

Federal Capital Expenditures

At the federal level, capital expenditures include outlays for the construction of highways and bridges, airports and rail systems, waterway systems, acquisition of land for these purposes, acquisition of equipment such as air traffic control infrastructure, and outlays for research. Outlays for significant repairs and maintenance such as the U.S. Army Corps of Engineers Rehabilitation of Channels and Harbors program are included, since they represent increases in the capacity of the infrastructure. Routine maintenance expenditures, however, are not included. Specific federal government programs or activities, which are included in the capital expenditures in this report, are listed below by mode.

Highways

Highway capital expenditures are obtained directly from the Highway Statistics reports of the Federal Highway Administration. Highway capital expenditures constitute those outlays associated with highway improvements, including land acquisition and other right-of-way costs; preliminary and construction engineering; construction and reconstruction; resurfacing, rehabilitation, and restoration costs of roadway and structure; system preservation activities; and installation of traffic service facilities such as guard rails, fencing, signs, and signals (FHWA, 2000). Research expenditures for the highway mode, which could not be determined as they are not distinguished from operational expenditures data published by FHWA in Highway Statistics, are not included. Maintenance costs required to keep highways in usable condition are also not included because these outlays do not extend the service life of a highway beyond the original design.

Transit

For transit, one half of the FTAs research expenditures are considered as capital. This assumption was made in consultation with the FTA.

Rail

The funding for the following FRA programs is included under rail capital expenditures: Railroad R&D; the Local Rail Freight Assistance program, which provides matching grants to states for rail freight planning and acquisition, rail facility construction, and track rehabilitation with respect to low volume freight lines (generally owned and operated by small and regional rail roads); the Amtrak Corridor Improvement Loan, which was included in the DOT FY 1990, 1991 and 1992 Appropriations Act and was specifically available for rehabilitation of a section of the Amtrak route between Chicago and St. Louis owned by Southern Pacific Chicago-Saint Louis (SPCSL) Corporation; Freight Line Rehabilitation; the Northeast Corridor Improvement program; and a part of Amtrak Grants, which were obtained directly from FRA.

Air

Federal capital expenditures for air include FAAs outlays for facilities and equipment program; and research, engineering and development program (prior to FY 1988); and for Washington D.C. metro area airports construction. In addition, all NASA aeronautics-related expenditures are included.

Water

For water, funding for the following programs is included under capital expenditures: U.S. Coast Guard capital expenditures, which covers Acquisition, Construction and Improvement program; Alteration of Bridges program; MARAD capital expenditures, which includes Ship Construction and Federal Ship Financing programs; U.S. Army Corps of Engineers capital expenditures (Construction of Locks and Dams program, Construction of Channels and Harbors program, Rehabilitation of Locks and dams program, Rehabilitation of Channels and Harbors program, and 25 percent of the Mississippi River and Tributaries (MR&T) program expenditures (This conforms to the rule of thumb used by the Corps of Engineers to allocate the MR&T program expenditures between transportation and flood control)); and Saint Lawrence Seaway Development Corporation and Panama Canal Commission capital expenditures, which were obtained directly from these agencies.

Pipeline

For the pipeline mode, all of the Pipeline Safety Research and Development program expenditures are accounted for as capital.

State and Local Capital Expenditures

State and local capital expenditures, which are obtained from the Census Bureau, consist of outlays for construction, purchase of land and existing structures, and purchase of equipment.[15]

Construction covers outlays for production, additions, replacements, or major structural alterations to fixed work, undertaken either on a contractual basis by private contractors or through a government's own staff (i.e., force account). It includes initial production of buildings and structures, initial permanent improvements (other than buildings) that add value to land, and subsequent improvements representing major permanent structural alterations that materially extend the useful life of fixed works. It covers all costs of materials, supplies, and labor that are reasonable and necessary to place an asset in its intended location and prepare it for its intended use, namely, professional fees for architects, engineers, appraisers, and attorneys associated with feasibility studies; preliminary engineering, planning, and design; or related developmental costs such as overhead, office costs, and other purchased construction-related services. It also includes centralized architecture, design, and planning offices whose main role is to support public construction projects, including related salaries and wages, insurance, professional services, etc.

Purchase of land and existing structures includes outright purchase, payments on capital lease-purchase agreements or installment purchase contracts, costs associated with eminent domain (including purchase of rights-of-way), and tax or special assessment foreclosure. It covers all ancillary costs associated with the transaction, such as legal and title fees, surveying fees, appraisal and negotiation fees, damage claims. It does not cover construction-related site preparation costs, including clearing, filling, leveling, and razing unwanted structures.

Purchase of equipment consists of not only purchase and installation of apparatus, furnishings, motor vehicles, office equipment, etc. (including both additional equipment and replacements purchased outright or through capital lease or installment purchase contracts) but also other related expenditures such as transportation and installation charges, which are necessary to place the equipment for its intended use.

Maintenance and repair expenses for the purpose of keeping property in an ordinarily efficient operating condition and which are not considered permanent structural alterations that materially extend the life of the asset are not accounted for under capital expenditures.