--- kind: "range" citation: "46 C.F.R. §§ 404.101–404.109" title: "46" from: "404.101" to: "404.109" count: 9 url: "https://uscodex.org/cfr/46/404.101..404.109" --- # §404.101. Ratemaking step 1: Recognize previous operating expenses. The Director uses an independent third party to review each pilotage association's expenses, as reported and audited for the last full year for which figures are available, and determines which expense items to recognize for base ratemaking purposes in accordance with [§ 404.2](/cfr/46/404.2.md) of this part. # §404.102. Ratemaking step 2: Project operating expenses, adjusting for inflation or deflation. The Director projects the base year's non-compensation operating expenses for each pilotage association, using recognized operating expense items from [§ 404.101](/cfr/46/404.101.md). Recognized operating expense items subject to inflation or deflation factors are adjusted for those factors based on the subsequent year's U.S. government consumer price index data for the Midwest, projected through the year in which the new base rates take effect, or if that is unavailable, the Federal Open Market Committee median economic projections for Personal Consumption Expenditures inflation. # §404.103. Ratemaking step 3: Estimate number of registered pilots and apprentice pilots. - (a) The Director projects, based on the number of persons applying under [46 CFR part 401](/cfr/46/part401.md) to become U.S. Great Lakes registered pilots, and on information provided by the district's pilotage association, the number of pilots expected to be fully working and compensated. - (b) The Director projects, based on the number of persons applying under [46 CFR part 401](/cfr/46/part401.md) to become Apprentice Pilots, traffic projections, information provided by the pilotage association regarding upcoming retirements, and any other relevant data, the number of Apprentice Pilots and Apprentice Pilots with Limited Registrations expected to be in training and compensated. # §404.104. Ratemaking step 4: Determine target pilot compensation benchmark and apprentice pilot wage benchmark. - (a) In a full ratemaking year, the Director determines base individual target pilot compensation using a compensation benchmark, set after considering the most relevant currently available non-proprietary information. For supportable circumstances, the Director may make necessary and reasonable adjustments to the benchmark. - (b) In an interim year, the Director adjusts the previous year's individual target pilot compensation level by the Bureau of Labor Statistics' Employment Cost Index for the Transportation and Materials sector, or if that is unavailable, the Director adjusts the previous year's individual target pilot compensation level using a two-step process: - (1) First, the Director adjusts the previous year's individual target pilot compensation by the difference between the previous year's Bureau of Labor Statistics' Employment Cost Index for the Transportation and Materials sector and the Federal Open Market Committee median economic projections for Personal Consumption Expenditures inflation value used to inflate the previous year's target pilot compensation. - (2) Second, the Director then adjusts that value by the Federal Open Market Committee median economic projections for Personal Consumption Expenditures inflation for the upcoming year. - (c) The Director determines each pilotage association's total target pilot compensation by multiplying individual target pilot compensation computed in paragraph [(a)](#a) or [(b)](#b) of this section by the number of pilots projected under [§ 404.103](/cfr/46/404.103.md) or [§ 401.220(a)](/cfr/46/401.220.md?p=a) of this chapter, whichever is lower. - (d) The Director determines the individual Apprentice Pilot wage benchmark at the rate of 36 percent of the individual target pilot compensation, as calculated according to paragraphs [(a)](#a) or [(b)](#b) of this section. - (e) The Director determines each pilot association's total Apprentice Pilot wage benchmark by multiplying the Apprentice Pilot compensation computed in [paragraph (d)](#d) of this section by the number of Apprentice Pilots and Apprentice Pilots with Limited Registrations projected under [§ 404.103(b)](/cfr/46/404.103.md?p=b). # §404.105. Ratemaking step 5: Project needed revenue. The Director calculates each pilotage association's base projected needed revenue by adding the projected adjusted operating expenses from [§ 404.102](/cfr/46/404.102.md) (step 2) and the total target pilot compensation from [§ 404.104](/cfr/46/404.104.md) (step 4). # §404.106. Ratemaking step 6: Calculate initial base rates. The Director calculates initial base hourly rates by dividing the projected needed revenue from [§ 404.105](/cfr/46/404.105.md) (step 5) by averages of past hours worked in each district's designated and undesignated waters, using available and reliable data for a multi-year period set in accordance with [§ 401.220(a)](/cfr/46/401.220.md?p=a) of this chapter. # §404.107. Ratemaking step 7: Calculate average weighting factors by area. The Director calculates the average weighting factor for each area by computing the 10-year rolling average of weighting factors applied in that area, beginning with the year 2014. If less than 10 years of data are available, the Director calculates the average weighting factor using data from each year beginning with 2014. # §404.108. Ratemaking step 8: Calculate revised base rates. The Director calculates revised base rates for each area by dividing the initial base rate from [§ 404.106](/cfr/46/404.106.md) (step 6) by the average weighting factor from [§ 404.107](/cfr/46/404.107.md) (step 7) to produce a revised base rate for each area. # §404.109. Ratemaking step 9: Review and finalize rates. The Director reviews the base pilotage rates calculated in [§ 404.108](/cfr/46/404.108.md) (step 8) to ensure they meet the goal set in [§ 404.1(a)](/cfr/46/404.1.md?p=a), and either finalizes them or first makes necessary and reasonable adjustments to them based on requirements of Great Lakes pilotage agreements between the United States and Canada, or other supportable circumstances.