Funding and Managing the U.S. Inland Waterways System: What Policy Makers Need to Know What Policy Makers Need to Know (2015) / Chapter Skim
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3 Federal Role in the Inland Waterways System
3 Federal Role in the Inland Waterways System
Pages 66-102
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From page 66... ...
The primary USACE Civil Works mission areas are support of navigation for freight transportation and public safety; reduction of flood and storm damage; and protection and restoration of aquatic ecosystems, 3_ Federal Role in the Inland Waterways System
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From page 67... ...
Hence, with the exception of a few multipurpose projects, USACE's navigation mission, its costs, and its benefits are separable from USACE's other missions. Overview of the USACE Water Resources Authorization, Planning, and Budgeting Process capital projects: new construction and major rehabilitation The inland waterways system is both part of a larger national freight transportation system and part of the nation's watershed system (system of rivers and canals)
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From page 68... ...
.2 On the basis of this legislation, Congress authorizes individual capital projects and numerous other USACE activities and provides policy direction in areas such as project delivery, revenue generation, and cost-sharing requirements. Benefit–cost analysis is the primary criterion used in selecting capital expenditures projects for funding.
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From page 69... ...
Similarly, the goal of the USACE planning process is to determine whether a navigation project is eligible for funding, not to assess whether the project will be the most efficient option for meeting national freight transportation needs and economic interests given the availability of other modes. (The benefit–cost analyses required for the authorization of navigation projects must consider other modes to a degree, as described later in this chapter.)
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From page 70... ...
Major rehabilitation projects meet the following criteria 6 The USACE budget submitted as part of the President's budget request is not commensurate with all local requests given the lack of available funds and competing priorities within and across USACE programs (e.g., hydropower, recreation)
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From page 71... ...
The decision to classify major rehabilitations as a capital expenditure instead of as an O&M expense is arbitrary.9 Funding for the Inland Waterways Navigation System cost-sharing rules Before 1978, the inland navigation system was funded almost entirely through general revenues collected from taxpayers. Congress transformed funding for the inland waterways by passing two pieces of legislation: the Inland Waterways Revenue Act of 1978 and the Water Resources Development Act of 1986, which created the funding framework followed today.
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From page 72... ...
to pay for construction with fuel tax revenues. It also increased the nonfederal cost-sharing requirements for inland navigation construction projects.10 The required cost share depends on whether the navigation project is classified as a capital cost or as O&M.
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From page 73... ...
Navigation Coastal ports -- <20-ft harbor 20- to 50-ft harbor >50-ft harbor Inland waterways 80a 65a 40a 100c 100b 100b 50b 100 Flood and hurricane damage reduction Inland flood control Coastal hurricane and storm damage reduction except periodic beach renourishment Repair of damaged flood and coastal storm projects Locally constructed flood projects Federally constructed flood and coastal projects 65 65 50 NA NA 0 0 0 80d 100d Aquatic ecosystem restoration 65 0 Multipurpose project components Hydroelectric power Municipal and industrial water supply storage Agricultural water supply storage Recreation at Corps facilities Aquatic invasive species control and prevention 0e 0 65f 50 NA 0 0 0 0 30 Environmental infrastructure (typically municipal water and wastewater infrastructure) 75g 0 Note: Information comes from 33 USC §§2211–2215 unless otherwise specified in footnotes a through g.
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From page 74... ...
The Secretary is to communicate with IWUB at least quarterly on the status of commercial navigation 11 Before WRRDA 2014, a reconnaissance study to assess the need and support for a project was produced at 100 percent federal expense for navigation projects. WRRDA 2014 replaced the reconnaissance study with a preliminary study that is combined with the feasibility study as the first phase of analysis.
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From page 75... ...
Reasons for the decline include increased appropriations, lower fuel tax revenues than in previous years, large construction costs, and construction cost overruns. Capital projects are funded incrementally by Congress through the annual budgeting and appropriations process.
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From page 76... ...
ta bl e 32 A dm in is tr at io n Bu dg et s fo r U SA C E In la nd N av ig at io n, F Y 2 0 0 8– FY 2 0 15 Pr es id en t's Bu dg et ( FY )
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From page 77... ...
Fiscal Year Current Constant 1994 $ figure 3-1 USACE budget authority, FY 1994–FY 2015, for (a) lock and dam construction and (b)
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From page 78... ...
. [Federal spending includes total revenues disbursed by the federal government to pay for commercial navigation on the fuel-taxed inland waterways system, including general revenues from taxpayers and fuel tax revenues from carriers.
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From page 79... ...
capital projects backlog A substantial number of water resources projects that have been authorized by Congress via WRDA remain unfunded through the appropriations process. These projects are known as the backlog.
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From page 80... ...
IWUB, as part of a capital projects business model, has proposed projects that might serve as a starting point for evaluating the urgency of needed repairs throughout the system (Inland Marine Transportation System Capital Investment Strategy Team 2010)
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From page 81... ...
The budget for inland navigation O&M in 2011 was more than $550 million; however, fuel tax revenues are only for construction and not O&M. The increase in the barge fuel tax passed by the 113th Congress in 2014 is consistent with the proposal of IWUB in its capital projects business model report (Inland Marine Transportation System Capital Investment Strategy Team 2010)
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From page 82... ...
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From page 83... ...
. As explained, fuel tax revenues are dedicated only to capital spending and not O&M, and the federal government must match the user contribution for capital costs while paying all of the O&M costs.
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From page 84... ...
General federal tax revenues pay about 90 percent of total inland waterways system costs, including the construction, operations, and maintenance of barge navigation infrastructure 18 The federal government has other important roles related to regulating and securing access to petroleum and other fuel supplies for transportation. It also sets environmental and safety standards for each mode through regulation and provides for operation of the air traffic control system and aids to navigation for ports and waterways.
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From page 85... ...
Decisions About Federal Funding and Beneficiary Payments for the Commercial Inland Waterways System In a climate of constrained federal funds and with O&M becoming a greater part of the inland navigation budget, a pressing policy issue is how to pay to preserve the inland waterways system for commercial navigation. The structures (locks and dams)
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From page 86... ...
The trucking assessment of competitive subsidies is most complex because trucks use highways that are shared with passengers. Although both freight and passenger operators pay fuel taxes and other user a Association of American Railroads.
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From page 87... ...
. (Improved fuel economy and political opposition to raising fuel taxes have resulted in insufficient user fees into the HTF to pay for the federal share of highway capital improvements.)
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From page 88... ...
.22 The Principles and Guidelines prioritize the national net economic development benefit defined in terms of commercial navigation and operationalized as savings in shippers' transportation costs.23 According to the most recent and wide-ranging attempt to catalogue and estimate the benefits of the inland waterways system, benefits beyond commercial navigation may include hydropower generation, recreation, flood damage avoidance, municipal water supply, irrigation, higher property values for property owners, sewage assimilation, mosquito control, lower consumer costs because the availability of barge shipping may result in more competitive railroad pricing (referred to as water-compelled rates) , and environmental benefits associated with lower fuel emissions of barge compared with other modes (Bray et al.
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From page 89... ...
find that for situations in which a segment of the rail network competes with barge and then connects to a rail monopoly segment, the rail rates on the segment with barge competition may be lower, but the rail rates on the monopoly segment are often higher than comparable rail-only monopoly segments for the same commodities. Thus, the shipper likely receives no net benefit in these cases.
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From page 90... ...
box 3-2 (continued) The Issue of Water-Compelled Rates A possible national benefit of investing in the inland waterways is the environmental advantage that barge may have over other modes: barge's lower fuel usage per ton-mile than other transportation modes may result in lower air emissions.
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From page 91... ...
However, the more common claim is that inland waterway project investments for commercial navigation are detrimental to the aquatic ecosystem. When that is the case, the alternative must include actions to mitigate the unavoidable adverse impacts on the aquatic environment, and the costs of those actions are part of project cost.
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From page 92... ...
The various beneficiaries can be grouped into four classes: commercial navigation, flood control and hydropower, ancillary, and environmental. Commercial Navigation Beneficiaries This group is a direct beneficiary and imposes marginal costs to obtain these benefits.
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From page 93... ...
The policy question that arises in deciding the federal role is whether the emission, safety, highway congestion, and infrastructure costs are greater than the costs of preventing them. Flood Control and Hydropower Beneficiaries Bray et al.
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From page 94... ...
The federal policy of subsidizing commercial navigation began to be questioned (U.S. Office of the Federal Coordinator of Transportation 1939, 125)
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From page 95... ...
In 1978 and 1986 Congress passed the two pieces of legislation that began to transform funding for the inland waterways and created the funding framework followed today. This legislation established the fuel tax on commercial barges, increased user cost-sharing requirements, and established the IWTF to fund construction with fuel taxes paid by the barge industry.
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From page 96... ...
For the commercial navigation projects that also provide hydropower, the hydropower beneficiaries pay 100 percent of capital costs allocated to hydropower and any allocated costs for operations. If the navigation function ceased for these waterways, hydropower beneficiaries would have to pay to maintain the dams to continue to receive this benefit.
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From page 97... ...
The 113th Congress and the shipping industry supported a $0.09-per-gallon increase in the barge fuel tax in 2014. However, under federal legislation, fuel tax revenues can
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From page 98... ...
While the amount of funding required to sustain reliable freight service is not clear, it is evident that total revenues after the increase in the fuel tax will not be sufficient to maintain the system.25 Furthermore, increased capital funding from users would compete with available federal funding for O&M, since the federal government must both match the user contribution for capital improvements and pay all of the costs of O&M. Because of historical precedent, the federal role in the management and funding of the inland waterways for commercial navigation is already greater than for other freight modes.
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From page 99... ...
Practical mechanisms or economic reasons do not appear to exist for charging ancillary beneficiaries of waterways projects used for commercial navigation (municipal water supply, irrigation, higher property values for property owners, sewage assimilation, mosquito control, and recreation) , with the possible exception of charging for recreational boat lockages.
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From page 100... ...
Journal of Water Resources Planning and Management Division, Vol. 102.WR1, April, pp.
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From page 101... ...
2013. Fuel Tax Report, 2011.
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From page 102... ...
Virginia Water Resources Research Center, Virginia Polytechnic Institute and State University, Blacksburg. Stern, C
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