206 Conn. 65 (1988) | Cited 6 times | Supreme Court of Connecticut | January 26, 1988

In this declaratory judgment action, theplaintiff municipalities1 of Trumbull and Bridgeportsought a determination of (1) whether the defendantpublic utility companies2 are entitled to reimbursementfor the cost of relocating public service installationssituated in a street when ordered to move them by amunicipality intending to construct sewers or other pollutionabatement facilities, (2) whether the amount ofsuch reimbursement should be calculated in accordancewith a formula approved by the state department ofenvironmental protection (DEF), and (3) whether theDEF is obliged to pay 15 percent of the share of therelocation costs to be borne by the municipality. Pursuantto General Statutes 22a-470,3 the action was

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     referred to a state referee, Hon. George A. Saden, whoreported his findings and recommendations to the trialcourt, Jacobson, J. In accordance with the recommendationsof the referee, the trial court rendered a declaratoryjudgment (1) that the defendants were entitledto reimbursement for utility relocations occurring afterJune 19, 1979, pursuant to General Statutes 22a-470,(2) that the DEP formula should be used in calculatingthe amount of reimbursement to the utility companies,and (3) that it would be inappropriate to rendera declaratory judgment concerning the share of therelocation costs to be paid by the DEP, "since the lawalready provides for such reimbursement if proper conditionshave been satisfied."

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The defendants have appealed from the judgment,claiming error in the decision that the DEF formulashould be used for determining the portion of their relocationcosts to be reimbursed by the towns and in severalrelated rulings. The towns have cross appealed,claiming error in the decision that the defendants areentitled to reimbursement under 22a-470. The refusalof the court to render a declaratory judgment concerningthe share of relocation costs to be borne by the DEFhas not been challenged. We find no error in either theappeal or the cross appeal.

The parties presented a written stipulation of the pertinentfacts to the state referee. In 1975, the town ofTrumbull and the city of Bridgeport began to plan ajoint sewer treatment system, known as the Bridgeport-TrumbullInterceptor Sewer Project, in order to extendunderground sanitary sewer lines from Trumbullthrough Bridgeport. An application for funding of theproject was submitted to the federal environmental protectionagency (EPA) through the appropriate stateagency, the DEF. Under the Federal Water PollutionControl Act of 1972; Pub. L. No. 92-500, 33 U.S.C. § 1281et seq. (1976); a grant of federal funds for theproject equal to 75 percent of allowable project costswas available and the EPA approved the grant applicationin June, 1977. Under General Statutes 22a-439,the DEF may grant to a municipality for a sewer constructionproject eligible for federal funding an additional15 percent of the cost of the project from statefunds, leaving the municipality to bear the remaining10 percent. On October 20, 1980, the DEF agreed toprovide 15 percent of the cost of the Bridgeport-TrumbullInterceptor Sewer Project to be constructedin accordance with plans and specifications which theDEF had approved on August 22, 1977.

Construction of the sewer project began after theEPA had approved the grant application in June, 1977.

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     On September 27, 1978, two of the defendants, a gascompany and a water company, were ordered to relocatetheir mains, but they appealed this order pursuantto General Statutes 16-235 to the public utilities controlauthority (PUCA), the predecessor of our departmentof public utility control (DPUC). The PUCA, onJune 29, 1979, sustained the appeal, declaring the cityof Bridgeport responsible for the relocation costs andordering the utility companies to make no further relocationswithout receiving reimbursement pursuant to22a-470, which had been enacted and became effectiveon June 19, 1979. The city appealed from thisorder, but the appeal was withdrawn pursuant to astipulation executed by the city and the two companies,to which the town of Trumbull consented. The DPUCapproved this settlement agreement on April 12, 1983,and modified its previous order concerning relocationsso that it would not apply to any relocation of facilitiesmade prior to June 19, 1979, the effective date of22a-470.

After the PUCA had issued its order prohibiting relocationswithout reimbursement by the municipalities,a dispute arose over the formula to be used in determiningthe amount to be paid to the utility companies.The municipalities proposed to use a formula approvedby the DEP while the companies insisted upon a formuladevised by the department of transportation(DOT) that had been used for many years in calculatingthe reimbursement of utility companies pursuantto General Statutes 13a-126 for relocating their facilitiesas a result of highway construction projects. OnOctober 20, 1981, the DPUC issued a decision orderingthe companies to proceed with the relocations asordered by the city of Bridgeport on the basis of anagreement of the municipalities to reimburse them inaccordance with the DEP formula and also to pay anyadditional amounts that might be required by the ruling

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     of the Superior Court in this action, which had beenfiled on June 29, 1986. The relocation work has proceededunder this arrangement.

When the plaintiff municipalities filed the originalcomplaint in this action on May 15, 1981, the prayerfor relief sought a declaratory judgment only withrespect to the proper formula to be used in determiningthe "equitable share" of the relocation costs to bereimbursed to the utility companies. Not until January 30,1985, when a motion to amend the complaintfor the third time was filed, did the plaintiffs seek adetermination of whether the statute relied upon tosupport the defendants' claims for reimbursement,22a-470, effective on June 19, 1979, was applicableto the Bridgeport-Trumbull Interceptor Sewer Project,for which a federal grant application had been approvedin June, 1977. The state referee concluded that, becausethe federal grant application for the project had beenapproved in June, 1977, prior to the enactment of22a-470, the statute could not be applied retroactivelyto allow reimbursement to the utility companies evenfor work performed after the statute had become effective.He found, nevertheless, that the municipalities hadcontracted to reimburse the utility companies pursuantto the statute and thus had waived its retroactive application.In attacking this conclusion on appeal, the plaintiffsmaintain (1) that any such waiver was inoperativefor lack of consideration, (2) that a municipality cannoteffectively waive its immunity from liability for the performanceof governmental acts, and (3) that it is contraryto public policy to uphold such a waiver.

The utility companies have presented several alternativegrounds to support the determination that theyare entitled to be reimbursed pursuant to 22a-470 forrelocations occurring after its enactment, including an

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     attack upon the referee's conclusion that such reimbursementwould result in retroactive application of thestatute. We need not consider these grounds, however,because we have determined that the referee's conclusionof contractual "waiver" is adequately supportedby the evidence. The trial court, similarly, found itunnecessary to consider the referee's conclusion thatthe plaintiffs' sewer project would have been exemptfrom the reimbursement provisions of 22a-470 but forthe agreement of the municipalities to make such reimbursement.

In five written agreements with individual utilitycompany defendants during the period June 10, 1982,to March 30, 1985, the municipalities agreed to reimbursethem for relocations pursuant to 22a-470, subjectto the ultimate determination of the appropriateformula in this litigation. On October 8, 1980, the cityengineer of Bridgeport sent letters to three utility companiesconcerning a meeting to discuss relocation eligibilityfor federal funding in which he indicated thatpayment by the municipalities would be made pursuantto the DEP formula. When the DPUC, on October 20,1981, revised its previous order to allow utility relocationsto proceed, subject to the determination of theappropriate formula for reimbursement in this action,it expressly relied upon the agreement of the municipalities"to reimburse the companies on an ongoingbasis according to the DEP formula and to pay anyadditional sums if required by the ruling of the SuperiorCourt." There is ample evidence to support thefinding of the referee, adopted by the trial court, thatthe municipalities had "entered into contracts whereinthey agreed the utilities were entitled to reimbursement"under 22a-470 for relocation work performedafter its effective date.

Although the term "waiver" has been used by thereferee as well as the utility companies in characterizing

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     this claim based upon the promises contained in variousagreements with the municipalities, the waiverfound is a necessary consequence of the contractual provisionsrequiring the municipalities to pay for relocationsin accordance with the statute. It is not an impliedwaiver but follows inescapably from the finding thatthe municipalities have agreed to make reimbursementin accordance with the statute. For this reason we neednot consider whether waiver analysis may be applied toa contemporaneous provision of a contract or whetherthis kind of waiver would require consideration for itsvalidity, apart from that which supports the contracts."There is no consideration problem because that promiseis supported by the same consideration as supportsthe other promises of the [contract]." J. Calamari &J. Perillo, Contracts (3d Ed.) 11-30, p. 492; see E.Farnsworth, Contracts 8.5.

The municipalities contend that there was no considerationgiven for the interim agreements for performanceof the work containing their promise of reimbursementunder the statute or for the agreement pursuant towhich the DPUC order prohibiting the utility companiesfrom proceeding with relocations was modified.The mutual promises contained in these agreements,from which the municipalities have obtained the benefitof proceeding with their sewer project without thedelay that otherwise would have attended the resolutionof their dispute, adequately satisfied the considerationrequirement. "An exchange of promises is sufficientconsideration to support a contract." Osborne v. LockeSteel Chain Co., 153 Conn. 527, 531, 218 A.2d 526(1966).

The case relied upon by the plaintiffs in arguing thata municipality cannot waive its immunity from liabilityfor the performance of governmental acts; Gauvinv. New Haven, 187 Conn. 180, 445 A.2d 1 (1982); doesnot support that proposition. Furthermore, the doctrine

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     of governmental immunity is not a restriction upon theauthority of a municipality to enter into a contractwithin the scope of its corporate powers. See WindhamCommunity Memorial Hospital v. Willimantic,166 Conn. 113, 123, 348 A.2d 651 (1974).

The claim that it is contrary to public policy to infer awaiver of the municipalities' belated claim that the statuteshould not be applied to their sewer project, whichhad commenced before its effective date, is similarlywithout merit. There is no public policy against the settlementof a disputed claim by any party, whether ornot a municipality, on terms deemed advantageous atthe time, even though the compromise may later, withthe benefit of hindsight, appear improvident. Whetherthe resolution of the dispute accepted by the municipalitiesin their agreement with the utility companieswas wise or foolish we need not determine.


Under the provisions of 22a-470, a companyordered to relocate or remove a public service facilityfrom a street must comply with such order, but "anequitable share of the cost of such readjustment, relocationor removal of said public service facility, includingthe cost of installing and constructing a facilityequal in capacity in a new location, shall be borne bythe municipality." The statute further provides that"[i]n establishing the equitable share of the cost to beborne by the municipality, there shall be deducted fromthe cost of the readjusted, relocated or removed facilitiesa sum based on a consideration of the value of materialssalvaged from existing installations, the cost ofthe original installation, the life expectancy of the originalfacility and the unexpired term of such useful life."Virtually identical language is used in General Statutes13a-1264 in setting forth the method for calculating

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     the "equitable share" to be borne by the state of thecost of relocating public service facilities when necessitatedby the construction of a state highway. Underthat statute, which long preceded 22a-470, the DOT

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     has for many years reimbursed utility companies inaccordance with a formula5 that ignores the factor ofinflation in determining the value of the expired usefullife of a facility that has been removed or relocated.

The DEP has refused to follow the DOT formula indeciding the amount of the "equitable share" of thecost to be reimbursed pursuant to 22a-470, despite theuse of language similar to that contained in 13a-126.The DEP has devised a formula6 that in effect translates

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     the original cost of the installation into contemporarydollars. The practical result of the DEP formulais that the municipalities will be obliged to pay muchless to the utility companies for relocations than thestate has been paying under the DOT formula in connectionwith highway construction.

The utility companies recognize that the DEP, andnot the DOT, has jurisdiction to apply and interpret22a-470 in processing applications for sewers underGeneral Statutes 22a-439. See General Statutes22a-424(f), 22a-439(c). They maintain, nevertheless,that the DOT formula must be followed (1) because itrepresents a long-standing administrative interpretationof 13a-126, a statute within the jurisdiction ofthe DOT, from which the legislature appears to haveextracted the language used in 22a-470 to define the"equitable share" of relocation costs to be borne by themunicipalities, and (2) because the DEP injects into thecalculation of "equitable share" an element, inflation,that is not mentioned in the statute.

This court has recognized the well established principlethat great deference should be accorded to theconstruction given a statute by the agency charged withits enforcement. Phelps Dodge Copper Products Co. v.Groppo, 204 Conn. 122, 129, 527 A.2d 672 (1987); Board

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     of Education v. Connecticut State Board of Labor Relations,190 Conn. 235, 241, 460 A.2d 1255 (1983). Thisrule is not helpful to the utility companies, however,because the DOT is not responsible for the administrationof 22a-470. The DEP has that responsibility.

The companies also rely upon the circumstance thatthe legislature has made several amendments to 13a-126since the DOT formula has been in effect, none of whichhas modified the interpretation of the statute embodiedin that formula. See Public Acts 1967, No. 671; PublicActs 1976, No. 76-133; Public Acts 1978, No. 78-280,2; Public Acts 1982, No. 82-472. These amendments,however, were unrelated to the statutory definition of"equitable share" and, in addition to technical changesnecessitated by court reorganization, merely revisedother portions of the statute with respect to the kindsof projects and utility installations to which it applied.It is fanciful to presume that the legislature in enactingthem gave any consideration to the manner in whichthe DOT had been implementing the statutory definitionof "equitable share." There is no legislative historyto suggest that the General Assembly was evenaware of the DOT formula at the time of these amendments.

The companies rely principally on the "plain wording"of 22a-470, which they maintain precludes considerationof inflation as an element in determining theamount of reimbursement for relocations. In specifyingthe method for calculating the municipality's "equitable share"of the cost of relocation, including the costof the new installation, the statute specifies that fromthe total cost there shall be deducted "a sum based ona consideration of the value of materials salvaged fromexisting installations, the cost of the original installation,the life expectancy of the original facility and theunexpired term of such useful life." The statute mentionsthe various factors that are to be considered in

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     reaching the "equitable share" goal, but does not setforth a mathematical formula precisely specifyinghow these factors are to be applied in making thecalculation. The evident purpose of the statute is toreimburse the utility companies fully for the cost of relocation,but not to confer upon them, without allowancetherefor, the benefit of receiving a new facility witha far greater remaining useful life expectancy than thatwhich has been replaced. Any formula complying withthe statute must be based upon a consideration of thefactors specified in the statute but must also satisfy therequirement that the share of the cost to be borne bythe municipality be "equitable." If the application ofa particular formula results in a windfall to a utilitycompany at the expense of a municipality, that formuladoes not achieve the statutory objective of imposingonly an "equitable share" of the cost of relocation uponthe municipality.

It is quite apparent that to ignore the effect of inflation,as the DOT formula does, in determining a municipality'sshare of the cost of relocating a facility thatwas installed many years ago, when the cost of suchan installation was a fraction of its present cost, mustinevitably result in substantial overpayments to utilitycompanies and correspondingly excessive burdensupon municipalities. This inequity results from the failureto evaluate the additional useful life that the newfacility has added to the remaining useful life of thereplaced facility in accordance with the current costof the new facility. To use historical costs of facilitiesinstalled many years ago in the same calculation withcurrent costs of replacing those facilities results in adistortion comparable to adding apples and oranges.

The utility companies do not advance any argumentsthat seriously militate against the referee's characterizationof the amount of their reimbursement underthe DOT formula as a windfall. They claim, never the less,

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     that the absence of any reference to inflation in22a-470 as one of the factors to be taken into considerationprecludes its use in the DEP formula. Theyassume that the "cost of the original installation,"referred to in the statute as one of the factors to beconsidered, is equivalent to the "original cost of theinstallation." The phrase "cost of the original installation"does not preclude the translation of that costinto current dollars, as achieved by the inflation adjustmentused in the DEP formula, so long as the resultmore closely fulfills the legislative intention to imposeno more than an "equitable share" of the relocationcosts upon the municipalities. Common sense, after all,is a highly significant guide to statutory interpretation.We agree with the referee and the trial court that theDEP formula may properly be applied to measure the"equitable share" of relocation costs that 22a-470 allocatesto the municipalities.

Because we have concluded that the trial court didnot err in holding that the DEP formula could appropriatelybe applied in calculating the amounts to bereimbursed under 22a-470, we need not consider theclaim of error relating to the admission of a letter fromEPA officials for the purpose of showing that theywould approve the use of the DEP formula, but not theDOT formula, in calculating the costs of the project forthe purpose of the federal grant to the municipalities.Whether this additional ground, upon which the refereeand trial court partly relied, would provide an additionalground to affirm the judgment is a question weleave for another day.

There is no error.

In this opinion the other justices concurred.

1. During the trial court proceedings, the city ofNorwalk intervened as a plaintiff but withdrew prior to judgment.The city of New Haven also intervened as a plaintiff andhas participated in this appeal as well as in the trial courtproceedings. New Haven has briefed and argued only theissue of the formula to be used in calculating the amountof reimbursement to be made to a utility company forrelocating its facilities in the course of construction ofa municipal sewer project.

2. The defendant utility companies are The SouthernConnecticut Gas Company, The United Illuminating Company,Southern New England Telephone Company, Bridgeport HydraulicCompany and Connecticut Water Company. The state departmentof environmental protection was also a defendant in thetrial court, but has not been involved in this appeal.The federal environmental protection agency was originallynamed as a party defendant, but the action was later withdrawnas to that defendant.

3. "[General Statutes] Sec. 22a-470. (FormerlySec. 25-54yy). RELOCATION OR REMOVAL OF PUBLIC SERVICEFACILITIES AS NECESSARY FOR CONSTRUCTION OF MUNICIPAL SEWEROR POLLUTION ABATEMENT FACILITIES. Whenever a municipalityobtains a grant under this chapter for the construction,rebuilding, expansion or acquisition of sewers or otherpollution abatement facilities and where the carrying outof such construction, rebuilding, expansion or acquisitionrequires the temporary or permanent readjustment, relocationor removal of a public service facility from a street orpublic right-of-way, the municipality shall issue anappropriate order to the company owning or operatingsuch facility and such company shall permanently or temporarilyreadjust, relocate or remove such facility promptly inaccordance with such order, provided an equitable shareof the cost of such readjustment, relocation or removal ofsaid public service facility, including the cost of installingand constructing a facility equal in capacity in a new location,shall be borne by the municipality. Such equitable shareshall be one hundred per cent of such cost after thedeductions hereinafter provided. In establishing theequitable share of the cost to be borne by the municipality,there shall be deducted from the cost of the readjusted,relocated or removed facilities a sum based ona consideration of the value of materials salvaged fromexisting installations, the cost of the originalinstallation, the life expectancy of the original facilityand the unexpired term of such useful life. For thepurposes of determining the equitable share of the costof such readjustment, relocation or removal, the booksand records of the company shall be available for theinspection of the municipality. When any facility isremoved from a street or public right-of-way to a privateright-of-way, the municipality shall not pay for suchright-of-way. If the municipality and the company owningor operating such facility cannot agree upon the shareof the cost to be borne by the municipality, eithermay apply to the superior court for the judicial districtin which the street or public right-of-way is situated or,if the court is not in session, to any judge thereof fora determination of the cost to be borne by the municipality,and such court or judge after causing notice of the pendencyof such application to be given to the other party, shallappoint a state referee to make such determination. Suchreferee, having given at least ten days' notice to theparties interested of the time and place of the hearing,shall hear both parties, shall take such testimony as suchreferee may deem material and shall thereupon determine theamount of the cost to be borne by the municipality andforthwith report to the court. If the report is acceptedby the court, such determination shall, subject to rightof appeal as in civil actions, be conclusive upon suchparties. As used in this section, `public service facility'includes any sewer, pipe, main, conduit, cable, wire, tower,building or a utility appliance owned or operated by anelectric, gas, telephone, telegraph, water or communityantenna television service company."

4. "[General Statutes] Sec. 13a-126. REMOVAL ORRELOCATION OF PUBLIC SERVICE FACILITIES FOR HIGHWAY CONSTRUCTION.As used in this section, `public service facility' includesany sewer, pipe, main, conduit, cable, wire, pole, tower,building or utility appliance owned or operated by anyelectric, gas, telephone, telegraph, water or communityantenna television company, or any municipal governmentor department or subdivision thereof. Whenever thecommissioner determines that any public servicefacility located within, on, along, over or underany land comprising the right-of-way of a state highwayor any other public highway when necessitated by theconstruction or reconstruction of a state highway shallbe readjusted or relocated in or removed from such right-of-way,he shall issue an appropriate order to the company,corporation or municipality owning or operating such facility,and such company, corporation or municipality shallreadjust, relocate or remove the same promptly inaccordance with such order; provided an equitable shareof the cost of such readjustment, relocation or removal,including the cost of installing and constructing a facilityof equal capacity in a new location, shall be borne bythe state. Such equitable share, in the case of or inconnection with the construction or reconstruction of anylimited access highway, shall be the entire cost, lessthe deductions hereinafter provided, and, in the case ofor in connection with the construction or reconstructionof any other state highway, shall be such portion or allof the entire cost, less the deductions hereinafterprovided, as may be fair and just under all the circumstances,but shall not be less than fifty per cent of such costafter the deductions hereinafter provided. In establishingthe equitable share of the cost to be horne by thestate, there shall be deducted from the cost of thereadjusted, relocated or removed facilities a sum basedon a consideration of the value of materials salvaged fromexisting installations, the cost of the original installation,the life expectancy of the original facility and the unexpiredterm of such life use. When any facility is removed fromthe right-of-way of a public highway to a private right-of-way,the state shall not pay for such private right-of-way,provided, when a municipally-owned facility is thusremoved from a municipally-owned highway, the stateshall pay for the private right-of-way needed by themunicipality for such relocation. If the commissionerand the company, corporation or municipality owning oroperating such facility cannot agree upon the share ofthe cost to be borne by the state, either may apply tothe superior court for the judicial district withinwhich such highway is situated, or, if said court isnot in session, to any judge thereof, for a determinationof the cost to be borne by the state, and said court orsuch judge, after causing notice of the pendency of suchapplication to be given to the other party, shall appointa state referee to make such determination. Such referee,having given at least ten days' notice to the partiesinterested of the time and place of the hearing, shallhear both parties, shall view such highway, shall take suchtestimony as such referee deems material and shall thereupondetermine the amount of the cost to be borne by the stateand forthwith report to the court. If the report is acceptedby the

5. The DOT formula determines the reimbursementfor utility relocations by subtracting from the net relocationcosts a "depreciated reserve," which is calculated as follows: Depreciated Reserve = Years of used life x Original cost --------------------- of construction Years of expected lifeThe following example illustrates the application of theformula for a facility with the following data:Total cost of replacement installation . . . . . . . $100,000Less Salvage . . . . . . . . . . . . . . . . . . . . 10,000Net cost . . . . . . . . . . . . . . . . . . . . . . $ 90,000Original cost when installed 25 years ago with estimateduseful life of 50 years . . . . . . . . . . . . . . $ 50,000 Depreciated Reserve 25 years X $50,000 = . . . . . . $ 25,000 -------- 50 yearsReimbursement $90,000 (net cost) - $25,000 (depreciatedreserve) . . . . . . . . . . . . . . . . . . . . . . $ 65,000

6. The DEP formula is explained by the referee asfollows: "The DEP formula reads algebraically something likethis: R = A - (B x C x D) - E. R is the reimbursement toutilities; A is relocation costs; B is cost of originalinstallation; C is expired useful life divided by lifeexpectancy of original facility; D is a factor for inflation;and E is value of salvage. The inflation factor is commonlyaccepted in the construction industry as the proper standardfor bringing to current value the cost of constructiondone since 1900." The DEP formula also provides for a minimum reimbursementto a utility company of 20 percent of the current cost of thenew installation, regardless of the age of the replacedfacility. This provision has not been challenged in thislitigation. Using the same figures as those in the example given infootnote 5, supra, and assuming an inflation factor of 2.0over the twenty-five year period, the calculation of thereimbursement would be as follows: 25 years(B x C x D) = $50,000 original cost x -------- x 2.0 inflationfactor - $50,000 50 years Reimbursement = $100,000 (new cost) - $10,000 (salvage) - $50,000 (B x C x D) = $40,000 A 2.0 inflation factor represents a doubling of constructioncosts over the twenty-five year period, corresponding toa 100 percent rate of inflation for that period or anuncompounded rate of 4 percent per year.Page 81

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