Highlights from the Congressional Research Service Report Inland Waterways: Recent Proposals and Issues For Congress (October 18, 2013)

Transcription

1 Highlights from the Congressional Research Service Report Inland Waterways: Recent Proposals and Issues For Congress (October 18, 2013) Prepared by Melissa Welch-Ross, Study Director National Research Council For the First Meeting of the Committee on Reinvesting in Inland Waterways: What Policymakers Need to Know November 22, 2013

2 ISSUES FOR CONGRESS What level of funding (new and ongoing investment) is warranted (or desired) for the inland waterway system? What is the appropriate type of user fee to fund the nonfederal share? What is the appropriate cost share between federal and nonfederal payers?

3 Statutory Framework for Funding and Finance of the Inland Waterways System Inland Waterways Revenue Act of 1978 Water Resources Development Act (WRDA) of 1986 Together, these acts established: Fuel tax on commercial barges Cost share requirements Inland Waterways Trust Fund (IWTF) Inland Waterways Users Board (IWUB)

4 Statutory Framework for Funding and Finance of the Inland Waterways System Fuel tax on commercial barges established waterways subject to the tax in 1978, tax set at.04 cents per gallon; in 1986, set to rise to current level of.20 cents (at this level since 1994) not indexed to inflation

5 Statutory Framework for Funding and Finance of the Inland Waterways System Cost-share requirements Operations and Maintenance (includes Corps study costs, and O&M less than $8 million): 100% federal revenue (Treasury s General Revenue fund ) Cost share for construction (includes major O&M more than $8 million): 50% federal general revenues 50% fuel tax revenues

6 Statutory Framework for Funding and Finance of the Inland Waterways System Inland Waterways Trust Fund (IWTF) holds fuel tax revenues for funding construction Inland Waterways Users Board (IWUB) subject to the Federal advisory Committees act (FACA) represents shipping interests on the primary geographical areas served by inland waterways makes recommendations to the Secretary of the Army and Congress regarding IW investments

7 Statutory Framework for Funding and Finance of the Inland Waterways System Since 1986, WRDA has been the traditional vehicle used to authorize IW projects. There is not a formal set of standard criteria for prioritizing projects. The Corps works with the Administration (in the annual budget formulation process) and Congress (in the appropriations process) to identify projects for funding.

8 Inland Waterways Trust Fund: Trends and Issues Since 1986 Two main concerns: Solvency of the IWTF IWTF Planning and Oversight

9 Solvency of the IWTF Highest level, $413 million in 2002 Fell sharply from 2005 to 2010, with expenditures significantly exceeding fuel tax collections and interest on the IWTF balance Beginning in 2005, the Bush Administration and Congress appropriated greater investments in IWTFfunded projects. Some projects exceeded original cost estimates. Clinton and Bush Administration proposals in 1998 and 2004 that included increased user fees did not succeed in congress.

10 Stopgap Measures by Congress to Stabilize the IWTF Exempted major rehabilitation projects from usual costsharing requirements (continuing resolution, FY2009) Limited projects with access to the IWTF in regular appropriations for FY 2009 Provided more than $400 million in construction funding under the American Recovery and Reinvestment Act (also exempted from cost-share requirements) Since FY 2009, prohibited the Corps from entering into new contracts requiring IWTF funding Limited enacted appropriations from the IWTF to expected fuel tax revenues for the coming year

11 Concerns with IWTF Planning and Oversight Fuel tax payers (IWUB) argue that there are structural inefficiencies and inequities in the Corps project planning process. IWUB cites project cost escalations and schedule delays ( e.g., Olmsted Locks and Dam project on the Ohio River) as evidence for needed reforms. (The CRS report notes the Corps has since implemented several reforms to its project delivery process.) Through at least FY2016, appropriations are expected for just one ongoing lock replacement project, the Olmstead Lock and Dam Project.

12 Proposals: Obama Administration New user fee to replace or supplement the fuel tax; appropriation based only on current year expected fuel tax revenues Two-tier financing structure: All shippers would pay a new annual fee in addition to the existing fuel tax Vessels using IW locks would pay a higher fee Fee amount would be set by the Corp to achieve revenue targets stipulated by the Administration New waterway segments added to fuel-taxed waterways, further raising revenues

13 Proposals: Inland Waterways User Board Inland Marine Transportation Systems Capital Projects Business Model Increases user fees by $ per gallon Increases federal share of costs Increases overall spending on inland waterways Proposes a priority ranking system promulgated via regulation that the Corps would use to select projects Increases IWUB involvement in delivery of Corps projects

14 Proposals: Inland Waterways User Board Increases IWUB Involvement in Delivery of Corps Projects Appoint IWUB representatives to project design teams for individual projects Obtain IWUB sign-off on plans for IWTF-funded projects Provide the IWUB with status updates on all project planning documents This degree of involvement by a non-federal entity in the Corps planning and decision-making process could raise concerns related to conflicts of interest.

15 Other Proposals: Increase User Share of Costs Supported by coalitions of taxpayer watchdog and environmental NGOs, Congressional Budget Office (CBO) Inequalities in spending noted relative to the value of certain segments of the IW system Some propose shifting costs for O&M and/or construction away from the federal government CBO report - observes that a user fee structure that recovers the true costs for inland waterways operations would increase economic efficiency of the system CBO report - notes that user fees could take a variety of forms (annual licensing fees, congestion pricing, tolls, and/or lockage fees), which could be combined with the current fuel tax or other proposals

16 Current Proposals in the 113 th Congress S. 601 (the Water Resources Development Act of 2013) H.R (the Water Resources Reform and Development Act of 2013) H.R (the Waterways Are Vital for the Economy, Energy, Efficiency, and Environment Act of 2013, also known as the WAVE4 Act) S. 407, the Reinvesting in Vital Economic Rivers and Waterways Act of 2013 (RIVER Act)

17 Current Proposals in the 113 th Congress All would increase the federal cost-share, though by different amounts. S. 601 and H.R have no fuel tax increase. H.R and S. 407 include a fuel tax increase. All would authorize the primary project delivery proposals of the IWUB.

18 decision makers are faced with the question of whether to continue to operate federal inland waterways projects under the current statutory framework, or to alter existing policies to increase focus on the repair, rebuilding, or transfer of assets. Written Statement of Charles V. Stern, Specialist in Natural Resources Policy for the Congressional Research Service, U.S. Senate Hearing on Issues Associated with Aging Water Resources Infrastructure (July 25, 2013)

19 ISSUES FOR CONGRESS What level of funding (new and ongoing investment) is warranted (or desired) for the inland waterway system? What is the appropriate type of user fee to fund the nonfederal share? What is the appropriate cost share between federal and nonfederal payers?

20 Competing Views on Inland Waterway Navigation Investments Different groups, such as shippers, environmental groups, and taxpayer groups, have expressed different views about the investments needed. Three areas of disagreement: Aging infrastructure and the urgency of new investments Waterway traffic projections Environmental concerns

21 Aging Infrastructure and Urgency of New Investments The Corps notes a decline in the efficiency of its infrastructure with lock unavailability (both scheduled and unscheduled) increasing in recent years. In some cases, to improve efficiency, the user industry favors new lock construction and expanded capacity over ongoing maintenance of existing infrastructure. Others, such as environmental groups, have argued: regular maintenance can extend the life of aging locks for less than the cost of new construction the cost of new lock construction greatly exceeds the benefits of reduced waiting time and greater lock availability efficiency problems associated with most of the aging infrastructure can be overcome by small-scale and nonstructural improvements.

22 Waterway Traffic Projections The use of projections of traffic increases as a basis for deciding on the level of investments for the inland waterways is not straightforward. Traffic forecasts from future trade scenarios depend on a number of factors that can be difficult to predict (e.g., commodity prices, the overall price sensitivity of shippers, and outside factors such as increases or decreases in the efficiency of other modes of freight transit). The extent to which lock upgrades or new construction would affect demand would depend on these other factors as well. Projections of traffic increases have been criticized as overly optimistic and conflicting results have been obtained.

23 Environmental Considerations Shipping interests Argue for increased investments because of the overall value of inland waterways compared to other modes of shipping Cite studies that have concluded barge shipping is more fuel-efficient and environmentally friendly than other forms of shipping Argue that IW traffic results in significantly fewer greenhouse gas emissions per mile Cite studies reporting other benefits, such as reduced highway congestion and noise reduction

24 Environmental Considerations Taxpayer and environmental groups Question the environmental basis for new investments in barge shipping Disagree with industry fuel-efficiency calculations Note that inland waterway projects can negatively affect riparian habitat and species by altering natural flows Note that waterway traffic may also cause bank erosion through wave action