346 DOCUMENTARY HISTORY OF THE FLORIDA CANAL

 which varied in many important details. For instance, the engineers of the
 Public Works Administration planned a canal with two locks, while the special
 board of survey considered a canal with three locks. Other important differ-
 ences in plan and specifications make the estimates of total costs of these two
 examining agencies incommensurate. Again, the board of review developed its
 cost estimate from plans and specifications for a sea-level canal. As these board
 of review plans and specifications and cost estimate of $142,700,000 have been
 approved by the Chief of Engineers, these elements of the project may be con-
 sidered as definitely determined. It remains to consider the benefits found by
 the examining agencies, and to apply these benefits to the cost of the project.
 The method for determining the economic Justification of a river and harbor
 project established and followed by the Corps of Engineers is as follows:
 "The direct benefits to commerce are determined as accurately as possible in
 terms of dollars and cents per year. From these direct benefits are deducted
 the annual cost of maintenance and operation of the improvement, and, in the
 case of a certain class of structures which are subject to depreciation, an addi-
 tional annual amount is deducted to amortize such structures over a reasonable
 period of time. The net remainder of benefits, when capitalized at 3 percent,
 should exceed the estimated cost of the project it it is economically justified.
 Sometimes when the whole project is subject to depreciation the net annual
 benefits are capitalized at 4 percent in lieu of charging amortization. In the
 case of the canal under discussion the only structures which are subject to
 depreciation are two small water-control works and certain bridges, the cost of
 which is less than 2% percent of the total cost of the project. With this expla-
 nation, the essential conclusions which may be drawn from the findings and
 figures of the board of review are the following:
 "(1) On the basis of the methods customarily used by the Board of Engineers
 for Rivers and Harbors to determine the economic justification of a project,
 the Florida ship canal is justified by a wide margin. These methods are analo-
 gous to those used in commercial practice for work of a similar character.
 "(2) Not only would-the benefits to shipping exceed by a wide margin mainte-
 nance and operating costs and interest at the current rates as required by the
 board of engineers, but in approximately 32 years they would, in addition, more
 than amortize the original cost of the work plus interest during construction.
 "(3) The return from tolls considered by the board of review is no longer an
 issue, as the route is being opened as a free canal, as are the other waterways
 of the United States.
 "On work of the nature of the canal, which includes but a small percentage
 of items subject to depreciation (less than 2% percent), the Board of Engineers
 requires that estimated annual benefits exceed by a safe margin estimated main-
 tenance and operating charges and interest at current rates. These rates are
 now less than 3 percent.
 "In the case of the Florida ship canal the board of review's report of June 28,
 1935, finds with the Army special board of survey annual benefits of approxi-
 mately $8,200,000, which, even on a 4-percent basis, allowing for amortization,
 the board found would justify a' cost up to $100,000,000, or $17,000,000 above the
 actual estimated cost. It will be recalled that the engineers of the Public Works
 Administration reported annual benefits above $10,500,000. The figure of the
 special board of survey of the Army is therefore the more conservative.
 "Following the method of the Board for Rivers and Harbors of the Corps of
 Engineers, we have, then, the following basis of justification for the Florida
 canal, using the benefits determined by the Army special board of survey and
 the cost estimate approved by the Chief of Engineers:
 Annual benefits------.---------.---------------- -------. $8, 200,000
 Cost, without interest during construction-------- _--- $143, 000,000
 Interest during construction, at 3 percent------------ 12,870, 000

 Total first cost------------------------_-- 155,870,000
 Annual interest charges on $155,870,000, at 3 percent-- 4,676,000
 Annual maintenance and operation expense----------- 601,000

 Total annual costs------------- -....------------------_ 5,277, 000
 Net annual benefits--------------------------------_ 2,923, 000
 "This amount at 3 percent will amortize the entire cost of the project in
approximately 32 years. If capitalized at 3 percent, it shows a margin over the
cost of construction of $99,000,000. In other words, on the basis used by the