Industry, Ports Push Full Use Of Trust Funds

As the important House Transportation & Infrastructure Committee’s Water Resources and Environment Subcommittee held hearings, leaders of ports and the inland navigation industry testified to the crucial importance of fully spending funds collected from waterway users, as well as urging permanent changes to the formula for calculating federal versus local contributions to those efforts. (For more on the hearings, see Washington Waves.)

The Harbor Maintenance Trust Fund (HMTF), which supports harbor and port projects, is funded by a Harbor Maintenance Tax collected on imports shipped by water in order to contribute to the Corps of Engineers’ operation and maintenance activities. In the Great Lakes, these activities include regular dredging of harbors, maintenance of breakwaters, and operation of the Soo Locks. Although adequate revenue is collected (about $1.6 billion annually), Congress has restricted spending on harbor maintenance due to budgetary constraints.

A similar but separate trust fund, the Inland Waterways Trust Fund (IWTF), designed to support Corps inland waterway projects, is funded by a diesel tax on the towing industry.

Both Kurt Nagle, president and CEO of the American Association of Port Authorities (AAPA), and Peter Stephaich, Waterways Council Inc. (WCI) chairman and chairman of Campbell Transportation Company in Pittsburgh, Pa., urged the subcommittee members to draft laws facilitating full spending of the two funds, and changing the cost-share formulas.

Four-Pillar Solution

In written testimony submitted to the House Subcommittee on Water Resource and Environment hearing on the “Cost of Doing Nothing: Why Full Utilization of the Harbor Maintenance Trust Fund and Investment in Our Nation’s Waterways Matter,” Nagle called on Congress to invest in critical landside and waterside connections to seaports, fully utilize HMT revenues and implement a long-term funding solution for port maintenance.

“Landside and waterside investments are critical to building America’s 21st century seaport infrastructure. AAPA has highlighted $66 billion in federal need over the next decade for port-related infrastructure. About half of that need, $33.8 billion, is for waterside investments,” said Nagle.

Nagel said that approving a long-term funding solution for port maintenance that makes full use of the HMT more permanent and includes language to address tax fairness and cargo diversion problems, is critical. The four pillars of this solution are:

• full use of future HMT revenues;

• a funds distribution framework that makes permanent and expands donor and energy transfer port funding, as well as expands the allowable in-water use of these funds;

• minimum regional funding assurances based on historic funding; and

• emerging harbors funding that updates the provisions in the Water Resources and Reform Development Act of 2014 and Water Infrastructure Improvements to the Nation 2016 bills to guarantee no less than 10 percent to these harbors.

Stephaich Testifies

At the same hearing, Stephaich recommended a policy improvement to advance modernization of the nation’s inland navigation infrastructure.

Of the 12,000 miles of navigable waterways, nearly 11,000 miles comprise the fuel-taxed portion of the system, on which commercial operators pay a diesel fuel tax deposited into the dedicated IWTF. This tax pays for up to half of the cost of new construction and major rehabilitation of the fuel-taxed waterways’ infrastructure, principally locks and dams, but also deepening of channels. Commercial users successfully advocated to raise the fuel tax by 45 percent in 2015 to its current level of 29 cents per gallon, the highest federal fuel tax currently being paid by a transportation mode.

Beyond enabling waterborne transportation, the inland waterways system aids in flood control, enables a stable water supply for nearby communities and industries, provides hydroelectric power, offers recreation such as fishing and water sports, provides regional economic development opportunities, increases property value, and enhances national security capabilities. Unlike commercial users, none of these other beneficiaries of the inland waterways system pay a fee to support modernization of the system.

Changing Cost-Share Formula

Since 1987—when IWTF revenues were first allocated to individual projects following enactment of the Water Resources and Development Act of 1986—through 2014, the IWTF has supported construction completion of 29 modernization projects. Additionally, the trust fund is currently supporting construction of five other lock and dam modernization projects. A cost-share policy revision for Olmsted Locks and Dam (Ohio River), along with the 45 percent increase in the diesel fuel tax, has allowed for the IWTF to be leveraged from a less than $200-million-dollar annual program to a $400-million-dollar annual program.

That policy change—from 50 percent Inland Waterways Trust Fund and 50 percent General Fund to 15 percent from the Inland Waterways Trust Fund and 85 percent from the General Fund—has led to significant progress, Stephaich said.

Olmsted opened in 2018, four years ahead of its projected operation date, at $330 million below the project’s Post Authorization Change Report. The cost-share change also allowed construction to proceed on three other priority navigation projects (Lower Monongahela 2,3,4, Kentucky Lock and Chickamauga Lock, the latter two of which previously had project construction suspended due to a lack of funding), and initiation of major rehabilitation work on LaGrange Lock on the Illinois Waterway.

Urgent Funding Needs

Currently, the inland waterways system has a portfolio of more than 15 other authorized high priority inland projects awaiting construction. With Olmsted’s completion and no additional policy improvements, only about $230 million a year will be available for inland waterways project modernization. At this funding level, many of these projects will not even begin construction in the next 20 years, an unacceptable situation, he said.

Stephaich urged the Subcommittee to consider adjusting the cost-share to 25 percent derived from the IWTF and 75 percent from the General Fund to enable the inland navigation capital program to remain operating at or above the $400 million level to accelerate project delivery of critical inland waterways projects.

This has already been done, Stephaich said, in other water resources programs. Congress changed the cost-share model for funding construction of deep-draft ports with depths of 45 to 50 feet from 50 percent non-federal sponsor and 50 percent federal government, to 25 percent non-federal sponsor and 75 percent federal government in the Water Resources Development Act of 2016 in order to improve the efficiency of this important work.