Civil Works Budget Awakens Critics Again

President Clinton's budget transmitted to Congress includes $4.06 billion for the USACE Civil Works program. In addition the program will include $322 million in non-federal contributions and trust fund receipts. Funding in this request will be used to continue the development of the nation's water resources, the efficient operations, maintenance and management of the nation's navigation, flood damage reduction, and multiple-purpose projects, the equitable regulation of wetlands, and the restoration of important environmental resources such as the South Florida Ecosystem. The budget also begins to address some of the Corps long-term water resources infrastructure main-tenance requirements. The budget includes a proposal to establish a Harbor Services User Fee and Harbor Services Fund (HSF). Under this proposal, fees would be charged to vessels transiting the harbors of the U.S. These receipts would be placed in the HSF and would be available the following fiscal year for appropriation to fund both construction and operation and maintenance of the nation's channels and harbors. The existing Harbor Maintenance Tax (HMT) and Harbor Maintenance Trust Fund would be repealed, and the remaining balance of the Harbor Maintenance Trust Fund would be deposited in the new HSF. The budget proposes to appropriate $950 million from the fund in FY 01, with $250 million applied to port improvement construction and $700 million to fund operation and maintenance requirements. The HSF is a replacement for the HMT, which the U.S. Supreme Court declared unconstitutional in March 1998, with a new tax on commercial vessels that use federal navigation channels in U.S. harbors. HSF Debate A variety of maritime organizations reacted strongly to inclusion of the HSF, for the second year in a row, in the Administration's budget proposal. The HSF is included in the budget request of $4.06 billion. It compares to $4.15 billion in FY 00 appropriated levels. Although federal budget surpluses are projected to be larger than at any time in recent history, the Clinton Administration, in April 1999, proposed the new tax in the Harbor Services Fund Act of 1999, H.R. 1947. It is purported to address the Supreme Court decision as well as an HMT challenge brought by the European Union (EU). However, last August the EU responded the HSF would still constitute an unfair trade practice. Also in April, 1999, Congressmen Oberstar (D-Minn.) and Borski (D-Pa.) introduced H.R. 1260, which would repeal the HMT and return to funding the federal share of operating and maintaining federal navigation channels from general revenues (since ports benefit the entire nation). The new tax on vessels places the entire financial burden of navigation channel maintenance, as well as improvements, on certain commercial traffic. The HSF plan could have the effect of pricing U.S. commodity exports, such as grain and coal, out of international markets. Organizations Have Their Say "It's incredible to the entire maritime community that despite the uniform opposition to H.R. 1947, the HSF bill, the Administration put it right back into the 2001 budget proposal," said Kurt J. Nagle, president, American Association of Port Authorities (AAPA). "With a surplus of more than $2 billion in the Harbor Maintenance Trust Fund, and projected budget surpluses, the HSF proposal would create a new tax to raise nearly twice what is needed for maintenance dredging. The Federal Government continues to suggest it completely abdicate its financial responsibility for federal navigation channel maintenance." "The Transportation Institute continues to oppose the Administration's proposal to replace the Harbor Maintenance Tax with a new tax on vessel operators," said Peter Friedmann, executive director, Transportation Institute. "In renewing its proposal in the FY 01 budget request to establish the Harbor Services Fund, the Administration clearly has failed to listen to the concerns of marine transportation, the ports, shippers, and commodity interests. We continue to urge the Congress to weigh the concerns of these vital industries, to recognize the importance of a well-maintained waterway system to the economy and national security, and to support sound legislation such as H.R. 1260, which will fund port and waterway projects out of the general treasury." "The American Waterways Operators (AWO) is extremely disappointed the Administration has again completely abdicated the historic responsibility of the federal government to maintain and improve America's ports ? ports that benefit the entire nation's economy," said Thomas A. Allegretti, president, AWO. "The tugboat, towboat and barge industry strongly supports the legislation sponsored by Congressmen Oberstar and Borski to repeal the existing Harbor Maintenance Tax and again authorize general revenues to pay for the federal cost of operating and maintaining the nation's harbors." "The Administration's proposal to shift the entire cost of constructing and maintaining deep-draft harbor channels to the private sector is tantamount to a denial coastal and Great Lakes ports contribute to national economic well-being, generate Federal tax revenues, or, in fact, have public value," said Harry N. Cook, president, National Waterways Conference (NWC). "Exactly the opposite is true, which is why it makes good sense for the U.S. Treasury to invest in navigation infrastructure." Under-Investment In fact, the NWC said, for years, America has been under-investing in its water resources infrastructure. "The result is that the nation's unmet civil works needs are massive," said Cook. He pointed to a backlog of some $27 billion in pending projects authorized by Congress, a five-year delay in completing on-going navigation and flood control projects, and deferred maintenance increasing at the rate of about $100 million a year. "The civil works program has been the victim of 'severe under-investment' at a time when modernization of the inland navigation system and deeper harbor channels are urgently needed to keep U.S. grain, coal, paper and other products competitive in global markets," he said. "Although our cost of production is frequently higher than that in other nations, efficient waterway transportation is frequently the key to maintaining our competitiveness. "It is folly to suggest in some sinister way the USACE is out beating the bushes looking for new projects just to increase its workload," Cook said. "The agency already has a full plate, and the plate is being piled ever higher because the agency is being forced to get by on funding which is woefully inadequate." Although the marine transportation system contributes eight percent of the Gross Domestic Product (GDP), Federal investment in the navigation infrastructure has been decreasing since the early 1980s. In FY 2000, the civil works program received $4.1 billion and the President's FY 2001 budget request is slightly less, which Cook described as a "stand-still" budget. Navigation proponents testified last year that the civil works program needed $4.5 billion to complete current construction in a timely and efficient manner, attack the backlog of deferred maintenance and begin a few "new starts." In FY 2001, the National Waterways Conference and other waterways groups argue that the agency needs at least $5 billion to fulfill its mission. Federal investment goes only for in-channel improvements. State and other non-Federal entities fund ports and terminals, highway connections, and police and fire services, while the private sector invests large sums in locating waterside plants, elevators, tank farms, and other facilities, as well as railroad spurs and thousands of towboats, tugs and barges. "Waterways are really a joint venture," Cook said. "The USACE is only one participant in this partnership, which has paid enormous dividends to the American public. Studies have shown waterways return about $8 in benefits for every $1 spent by the Federal government." Environmental Concerns Most of the recent attacks on inland navigation projects have come from the Sierra Club and Environmental Defense (formerly Environmental Defense Fund), which have questioned the environmental impact of lock-and-dam replacements or lock expansions. These attacks have come despite exhaustive studies of every possible environmental effect, including positive aspects such as wetlands creation, backwater sloughs, waterfowl islands and mitigation lands. "It is strange none of the environmental organizations have told their members how they believe all the current waterborne commerce should be transported," Cook said. "We believe barge transportation is the most environmentally friendly of all the major modes." Statistics show, for instance, 120.5 million tons of commerce was moved on the Upper Mississippi River between Cairo, Ill., and Minneapolis, Minn., in 1996. If any of the outmoded, 65-year-old locks on this river stretch were to fail, it would require 33 100-car trains per day or 12,698 semi-trailer trucks per day to move this volume of commerce. "The impact of such a huge amount of overland traffic would surely take a toll on the environment to say nothing of troubling safety, noise, and pollution effects," Cook said. Since river towboats are so energy efficient, this means that river transportation creates far less pollutants per ton-mile of cargo moved, he stated. The waterways in question are already in place, so no new projects are contemplated - only replacements. In other countries, environmentalists are campaigning to force freight off the roads onto canals and waterways. "That should be our goal here in the U.S., too," Cook said. Meticulous Procedures As a Federal agency, the Corps of Engineers generally wins high marks from the Congress, ports and waterways users. A newly released study by Syracuse University's Public Affairs Institute and Government Executive magazine ranked the Army Corps of Engineers as the second best-managed of some 25 Federal agencies which it surveyed. The USACE goes through an involved reconnaissance and feasibility study process with built-in checks and multiple levels of review. The process ? which takes years ? includes an independent technical review, a minimum of two formal public reviews, Washington-level policy review, State and agency coordination requirements, and a final review at the White House. "It should be remembered no other Federal agency even attempts to conduct a benefit-cost analysis of its projects," Cook said. "Estimating a project's costs and its benefits over a 50-year time period, beginning perhaps 10 years in the future, is never precise but the process does enable policy-makers and lawmakers alike to prioritize projects in terms of national goals and objectives." Lt. Gen. Joe N. Ballard, Chief of Engineers, testified before a Senate subcommittee that his agency's screening process for water resources investments was "tough." Historically, he said, "only 16 percent of the studies that we begin ultimately result in a construction start." Budget Breakdown $137.7 million: for general investigation (funds studies, design, coordination, data collection and research and development) $1.4 billion: for general construction (funds project construction and major rehabilitation) $1.9 billion: for general operation and maintenance (funds the running and upkeep of existing projects which include hydropower facilities, locks and dams, recreation areas, and navigable waterways) $125 million: for regulatory program (funds the USACE's permit program for dredge and fill material in the waters of the U.S., partially offset by $7 million from permit fees which is dependent upon enactment of proposed legislation) $309 million: for flood control, Mississippi River and Tributaries (funds the study, design construction, operation and maintenance for water resources projects in the alluvial valley of the Mississippi River); $152 million: for general expenses (funds for the executive direction and management of the USACE Headquarters and major subordinate commands such as divisions) $140 million: for the Formerly Utilized Sites Remedial Action Program (FUSRAP) (funds for the management of the program transferred to the Corps from the Department of Energy by the Energy and Water Appropriations Act, 1998).