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Infrastructure NEEDS AND REALITIES

On October 10,1992, a large crowd gathered near Huntington, West Virginia, to celebrate a historic event; the dedication of the first fully costshared locks on the inland waterways system. A full 50 percent of the $297 million Gallipolis locks had been paid for by industry fuel taxes applied through the Inland Waterways Trust Fund. The long awaited, state-of-the-art facility will dramatically improve navigation on the middle Ohio River, but the price was a dear one, nearly two full year's tax receipts. Said another way, this one project consumed the equivalent of every dollar the industry paid into the Trust Fund over the last two years. Obviously Gallipolis was not the only project in progress, and that is where the problem begins. The high cost of rebuilding the infrastructure comes at a time when our struggling industry has great difficulty affording it. Engineering and construction costs are spiraling. The average cost of an inland river project today is over $300 million, with the most crucial projects often the most expensive. When completed, the Melvin Price project on the Mississippi River at St. Louis will exceed $700 million. The Olmstead proj ect near the mouth of the Ohio River will approach $1.5 billion. Both are obviously critical projects, but their combined cost to the industry is staggering. Olmstead alone will consume nearly seven years of fuel tax receipts. The way we are headed, the Trust Fund will go bankrupt sometime in this decade. Something will have to give.

In 1992, as in prior years, AWO successfully prodded Congress to delay any movements toward a further increase in fuel tax, but we clearly hear an alarm sounding. Unless it is checked, the zealous pursuit of modernization, coupled with gold-plated construction and run away costs will lead to a substantial tax increase. Projects must be properly prioritized and spread out, and total spending per project must be reduced. Our charge is to find ways to maintain and expand the waterway infrastructure without escalating the current tax burden. The economic health of the industry is at stake.

In 1992 AWO helped conclude the agreement defining project rehabilitation. The Corps of Engineers and the industry often saw the rehabilitation of facilities as a timely, less expensive alternative to new construction, but drawing a clear distinction between genuine rehabilitation projects and routine or deferred maintenance was critical to the industry. Rehabilitation projects would be cost-shared; maintenance must be federally funded. A consensus was reached in June 1992. The new definition sets reasonable parameters for the use of Trust Fund dollars and opens the door to a major, new construction alternative.

Rehabilitation is key to a lower cost modernization program. The definition will encourage reliability and efficiency improvements that lengthen facility life and expand operational capacity. The Corps has often suggested its projects were designed to last 100 years. Rehabilitation will give the Corps the opportunity to get that full facility utilization. At issue is the critical need to stretch a finite amount of Trust Fund dollars across the many projects at hand. We must find ways to ensure system reliability and accommodate operational growth without expending all of the Trust Fund resources.

The Inland Waterways Trust 1 | JL - fj A 6 t f s ^ M Paul J. Werner Fund totaled $186.7 million as fiscal year 1992 came to a close in September. Expenditures for the year exceeded revenues by $39.2 million.

The fund, which totaled over $300 million at the end of 1988, is expected to be fully depleted before the year 2000 if approved projects continue as scheduled. In today's world, operators are the only private contributors to the Inland Waterways Trust Fund and the Fund is rapidly depleting. No one questions the need to maintain and modernize the inland waterway infrastructure, but each new construction or rehabilitation further drains the finite Trust Fund resources.

Obviously, the government does not have the financial constraints of a trust fund and may continue to add or escalate projects. If that occurs, the industry will bear the burden. As the Trust Fund nears depletion, Congress will have no alternative but to raise the user tax.victim.

We must encourage the government to find ways of stretching the available resources and stop flirting with the notion that funds are unconstrained.

What is needed now is sound Trust Fund management, management with the skill to match real need with real resources. AWO believes the Inland Waterways Users Board is best equipped to meet this management challenge.

If, in years to come, Trust Fund revenues are deemed insufficient to meet the real needs of the infrastructure, the government must be made to look beyond the towing industry for revenue.

Our industry is not the only beneficiary of a sound, reliable inland waterway infrastructure.

Municipalities depend on the system for water supplies, flood control, hydropower and recreation; environmentally sensitive areas and wildlife habitats are protected; and hundreds of river-related services and industries exist and profit only though dependence on the lock and dam system.

Collectively, these public and private uses clearly surpass those of commercial navigation, yet those users pay nothing. Even without an increasing need for funds, fairness would demand these recipients pay their share.

AWO's lobbying role will remain unchanged, combating any unnecessary or premature increase to the fuel tax while continuing to educate those who propose spending more than the industry can provide. In addition to concerns over the Trust Fund, actual costs of infrastructure projects have escalated far beyond original estimates. Today's projects, typically estimated at $300 million or more, have an unacceptably high probability of incurringmajorcostoverruns. Original cost estimates for projects currently under construction totalled just less than $2 billion. Current projections for those same projects are $2.7 billion, or a 35 percent overrun. That must change.

We must insist that our dollars be used in a cost effective and efficient manner.

The Corps has often proven itself a world leader in engineering skills. Today, it must prove itself a world leader in cost management.

The Corps must concentrate its efforts on identifying real need and how to match that real need with the work that is necessary, but no more than that.

Installations must not be placed at risk, but projects must be stretched out to allow maximum use of existing facilities. Honing in on real need is the touchstone, and the Corps certainly has the engineering expertise to do just that.

Next, the Corps must forgo its tendency to keep the pipeline filled with projects and resist efforts to promote projects that do not meet the test real need. The advice and counsel of the Users Board should weigh most heavily in these decisions. Finally, those projects that go forward must be designed to minimize construction cost and completed within budget restrictions.

As a new Congress and Administration take the helm, the deficit will certainly be addressed. Both Congress and the Administration have a mandate to reduce the Federal deficit. The barge and towing industry must be alert to two probable initiatives in 1993 and beyond.

First, reductions in defense spending will potentially reduce the size and service provided by the Coast Guard and Corps of Engineers.

Second, cost sharing and user fee proposals will surely be pursued in an effort to decrease government outlays. Previous initiatives such as efforts to secure private funding for Corps of Engineers operating and maintenance activities will probably resurface, and the towing industry will be the prime target.




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