Inland Ports and Waterways in the SLC Member States
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INLAND PORTS AND SOUTHERN WATERWAYS IN THE LEGISLATIVE SLC MEMBER STATES CONFERENCE A REGIONAL RESOURCE FROM THE SLC OF THE COUNCIL OF STATE GOVERNMENTS © Copyright January 2016 Photo courtesy of by Sujit CanagaRetna, Fiscal Policy Manager Georgia Ports Authority “A silent workhorse that supports our great cities, inland water- that an efficient and effective marine transportation system ways transportation is critical to Alabama’s and to the nation’s was critical for the nation’s economic success, an attribute supply chain. It benefits farmers, shippers, manufacturers, steel that remains valid even in the contemporary context. In producers, coal miners and producers, agribusinesses, towboat 1779, the United States created what is now the U.S. Ar- operators and just about every American consumer.” my Corps of Engineers (Corps) when engineer officers and companies of sappers* and miners were formed into - Tim Parker, Jr., Chair, a corps of engineers. In 1824, the U.S. Congress assigned Parker Towing Company, Inc., Alabama the Corps its first major public works project, the onerous responsibility of constructing a comprehensive inland wa- According to June 2015 statistics released by the U.S. Army terway system connecting key regions of the United States. Corps of Engineers, 40 of the top 100 U.S. ports (coastal, Congress also appropriated funds to the Corps for the cre- Great Lakes and inland) in terms of tonnage are located ation of this navigable inland waterway system, a funding in states belonging to the Southern Office of The Coun- mechanism—with some variations—that prevails to this cil of State Governments (CSG), the Southern Legislative day. Currently, the Corps shoulders accountability for ap- Conference (SLC).1 Impressively, seven of the top 10 ports proximately $232 billion in water resources infrastructure were SLC state ports. The Port of South Louisiana and the assets, including a network of 11,000 miles of navigable wa- Port of Houston rose to the top, ranking first and second, ter routes and 207 lock chambers (at 171 sites) on 27 inland respectively. While the SLC has focused on ports, the eco- rivers and Intracoastal waterway segments.2 Work by the nomic influence of ports and the potential impact of the Corps to ensure that the nation’s harbors are dredged and expansion of the Panama Canal on ports in the South for navigable continues to this day; in March 2015, the Corps more than 15 years, this Regional Resource reviews an im- announced that 10 harbors on the Mississippi River, all in portant allied field: emerging trends linked to the nation’s, the SLC region (Arkansas, Kentucky, Missouri and Ten- and specifically the region’s, inland ports, waterways and nessee), would be dredged of silt and sediment deposits, a related infrastructure. process that would ensure the smooth flow of barge traf- fic and, by extension, commerce.3 A major factor in the United States’ global economic dom- * Sappers have multiple definitions but, in this instance, it refers inance is the presence of a nationwide system of navigable to a soldier employed in the construction of fortifications, trench- rivers. The founders of the United States quickly realized es and tunnels. THE SOUTHERN OFFICE OF THE COUNCIL OF STATE GOVERNMENTS P.O. Box 98129 | Atlanta, Georgia 30359 SERVING THE SOUTH ph: 404/633-1866 | fx: 404/633-4896 | www.slcatlanta.org Funding the Nation’s Inland Per Gallon Tax Rates Levied Waterway System Table 1 on Commercial Users of the For most of our nation’s history, the fiscal responsibility Inland Waterways for the construction and maintenance of the inland wa- Year Tax Year Tax Year Tax terway system was the sole responsibility of the federal government. In fact, since the Congressional decision to 1980 $0.04 1990 $0.11 1994 $0.19 create the Corps, U.S. taxpayers have borne the brunt 1981 $0.06 1991 $0.13 1995 $0.20 of the costs associated with constructing, operating 1983 $0.08 1992 $0.15 2014 $0.29 and maintaining the infrastructure related to the in- 1985 $0.10 1993 $0.17 land waterway system. In 1978, a major shift occurred Source: http://www.iwr.usace.army.mil/Portals/70/docs/Wood_doc/ with the enactment of the Inland Waterways Reve- IMTS_Final_Report_13_April2010_Rev_1.pdf , page 7 and h t t p :// nue Act; this legislation created the Inland Waterways www.iwr.usace.army.mil/Portals/70/docs/IWUB/annual/UB_Annual_ Trust Fund (IWTF) and cleared the way for financing Report_2014_Final_01Feb15.pdf, page 1. the construction and rehabilitation of the nation’s in- land waterways through a modest tax on commercial ($8 million currently) of existing facilities. The second users of the waterway system. The initial tax was 0.04 relates to funds secured from all taxpayers, extracted cents per gallon, beginning in 1981, on the diesel fuel from the general fund, which covers the remaining 50 purchased to operate on the waterway system with in- percent of the construction costs and 100 percent of the creases gradually leading to a tax of 10 cents per gallon operating costs of these inland waterway assets once by 1985. Additional reforms during the Reagan Admin- they are completed and operational. The tax levied on istration authorized further tax increases through 1995, the commercial users is estimated to generate between when commercial users of the waterways were required $80 million and $85 million in annual contributions to to pay a tax of 20 cents per gallon of diesel fuel con- the IWTF. However, operation and maintenance costs sumed in inland waterway transportation.4 In 2014, the levied on the U.S. taxpayer for these assets amount to tax was further increased to 29 cents per gallon. Table 1 about $600 million annually. In fiscal year 2014, the documents the trajectory of the per gallon tax rates IWTF reaped $81.8 million and disbursed $97.9 million levied on these commercial users in the past 25 years. for construction projects.6 (As evident, operations and maintenance costs related to the nation’s inland water- There are two funding sources involved in maintain- way system involve tens of millions of dollars in extra ing, operating and constructing various elements in costs.) Analysts with Taxpayers for Common Sense, a the nation’s inland waterway system. The first relates Washington, D.C.-based nonpartisan budget watchdog, to funds deposited in the IWTF from the tax levied on have observed that “the nation’s inland waterway sys- commercial users of the nation’s 27 natural and man- tem holds the award for the most heavily subsidized made inland waterways, primarily concentrated in the form of transportation . fully 90 percent of the sys- Eastern half of the United States (see Figure 1). These tem’s costs are assumed by taxpayers.”7 waterways include a majority of the most influential waterways in the country: the Mississippi, Ohio and Funding Challenges Faced by the IWTF Missouri Rivers and the Gulf and Atlantic Intracoast- As with revenues flowing into the Highway Trust al waterways. Of note, the Ohio and Mississippi River Fund (HTF), the IWTF faces serious shortfalls. Some systems carry nearly 90 percent of the total tonnage background on the fiscal pressures facing the HTF is transported on the nation’s inland waterways.5 relevant when assessing the position of the IWTF. With regard to the HTF, there are three major factors driv- Revenues collected from the commercial users are de- ing the looming funding gap: 1) the federal gas tax posited in the IWTF and are then deployed to cover has not been increased since 1993, is not indexed for 50 percent of the construction costs of new dams, nav- inflation and has lost considerable purchasing power igation locks and major rehabilitation or maintenance in the past 22 years; 2) the growing number of hy- projects, i.e., projects costing over a specific amount brid, electric and alternative fuel vehicles that rely less 2 INLAND PORTS AND WATERWAYS IN THE SLC MEMBER STATES on gasoline, resulting in reduced levels of overall gas- a move that was supported by the industry.10 Given oline purchases and, consequently, lowered revenue that this was the first increase in nearly two decades, inflows; and 3) the reduced number of miles that Amer- analysts noted that these additional revenues would be icans currently drive due to consumers living closer to a significant boost to the funding status of the IWTF. their workplaces, keeping driving to a minimum and However, the funding allocated to inland waters and even foregoing owning a vehicle in certain parts of the navigable rivers continues to be inadequate and below country. These three factors acting in concert have se- recommended levels. For instance, Scott Stockton, di- verely endangered the financial viability of the HTF, rector of Civil Works at the Corps, noted that the 2014 forcing the U.S. Congress to make transfers from the WRRDA was “a good start; but, we need about twice General Fund. With regard to the IWTF, a number of as much to bring the system up to the level of repair the same factors surface: until 2014, the fuel tax levied it needs.”11 For fiscal years 2014 and 2015, the Obama on commercial users of the waterways had not been Administration sought and secured appropriations for raised since 1995. Consequently, not only had the tax the operation and maintenance of the inland waterways not been raised for nearly two decades, it had lost con- that were considerably higher than in prior years, but siderable purchasing power since it was not indexed for still lacking in order to fully ameliorate the nation’s inflation. Again, paralleling the HTF’s predicament, vast needs in this area.