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Step Three - Project Valuation Calculation of the improvement fee begins with a review of MWMC's adopted 20- Year Project List to determine the value of future projects. Future projects are valued based on the inflation adjusted original cost estmate approach. Under this approach, the original estimated cost of future projects is adjusted by the Engineering News-Record national20-city average Construction Cost Index from the time of the original eStmate to estimate current values. The inflation adjusted original cost estimate approach recognizes inflation since the original estimate. Step Four - Project Cost Allocation The project cost allocation methodology, for use in determining the improvement fee cost basis, is a four-step allocation process consisting of the following steps: 1-1. Allocate project costs to facility process components (e.g., primary treatment, secondary treatment). 1-2. Allocate costs by components to system capacity parameters (e.g., average flow, peak flow). . 1-3. Allocate project costs to type (capacity improvement, performance upgrade, or rehabilitation). 1-4. Allocate costs to user type (existing customers or projected growth). The project cost allocation methodology provides an equitable basis for determining the projects or portions of projects that are related to growth capacity needs and are, thereby, included in the improvement fee portion of the SOC. calculation. The methodology is not tied to a specific list of projects. intended to be funded by SDCs (20-year project list), but is intended to provide a consistent framework for allocation of future projects to growth. Each step of the methodology is described below. The gene~al allocation process is also presented graphically in Figure 3.