49 C.F.R. Subpart C—Cost-Effectiveness
Title 49 - Transportation
(a) To qualify a lease for capital assistance, a recipient must— (1) Make a written comparison of the cost of leasing the asset with the cost of purchasing or constructing it; and (2) Certify to FTA before entering into the lease or before receiving a capital grant for the asset, whichever is later, that obtaining the asset by lease is more cost-effective than purchase or construction of such asset. (b) For purposes of this part, obtaining the asset by lease is more cost-effective than purchase or construction when the lease cost calculated under §639.25 of this part is less than the purchase cost calculated under §639.23 of this part. (c) If a recipient is unable to perform the prescribed cost-effectiveness comparison as described in this subpart, it may ask FTA to approve an alternate form of cost-effectiveness evaluation. (a) For purposes of this subpart, the purchase or construction cost of a capital asset is— (1) The estimated cost to purchase or construct the asset; plus (2) Ancillary costs such as delivery and installation; plus (3) The net present value of the estimated future cost to provide any other service or benefit requested by the applicant in its proposal to obtain the capital asset. (b) The estimated cost to purchase or construct must be— (1) Reasonable; (2) Based on realistic current market conditions; and (3) Based on the expected useful life of the asset in mass transportation service, as indicated in paragraph (c) of this section. (c) For purposes of this part, the expected useful life of a revenue vehicle is the useful life which is established by FTA for recipients of Federal assistance under FTA's Circulars for section 9 recipients. For assets other than revenue vehicles, the applicant is responsible for establishing a reasonable expected useful life. If the recipient does not intend to use the capital asset it is proposing to obtain by lease in mass transportation service for its entire expected useful life, when calculating the purchase cost, the recipient must calculate the fair market value of the asset as of the date the lease will terminate pursuant to Guidelines found in section 108(b) of part II Standard Terms and Conditions for valuation of property withdrawn from transit use before the end of its useful life and subtract that amount from the purchase price. The resulting amount is the purchase price for purposes of this rule. (a) For purposes of this part, the lease cost of a capital asset is— (1) The cost to lease the asset for the same use and same time period specified in the recipient's proposal to obtain the asset by purchase or construction; plus (2) Ancillary costs such as delivery and installation; plus (3) The net present value of the estimated future cost to provide any other service or benefit requested by the applicant in its proposal to obtain the capital asset. (b) The estimated lease costs must be reasonable, based on realistic market conditions applicable to the recipient and must be expressed in present value terms. In making the comparison between leasing and purchasing or constructing an asset, recipients should ascribe a realistic dollar value to any non-financial factors that are considered by using performance-based specifications in the comparison. In addition to factors unique to each recipient, the following factors are to be used where possible and appropriate: (a) Operation costs; (b) Reliability of service; (c) Maintenance costs; (d) Difference in warranties; (e) Passenger comfort; (f) Insurance costs; (g) Costs/savings related to timing of acquisition of asset. (h) Value of asset at expiration of the lease.
Title 49: Transportation
PART 639—CAPITAL LEASES
Subpart C—Cost-Effectiveness
§ 639.21 Determination of cost-effectiveness.
§ 639.23 Calculation of purchase or construction cost.
§ 639.25 Calculation of lease cost.
§ 639.27 Minimum criteria.
