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May 6, 2010 - ASCE Statement - WRDA 2010: Jobs and Opportunities

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Statement of
The American Society of Civil Engineers
Before The
Senate Committee on Environment and Public Works
On The
Water Resources Development Act of 2010:
Jobs and Economic Opportunities

May 6, 2010

The American Society of Civil Engineers (ASCE)∗ is pleased to provide this statement for the record for the Committee hearing on the “Water Resources Development Act of 2010: Jobs and Economic Opportunities.” We congratulate the Committee for assuming a leadership role in pursuing a pro-growth, public-safety agenda through reauthorization of WRDA in 2010.

It is long established that money invested in essential public works can create jobs, provide for economic growth, and ensure public safety through a modern, wellengineered national infrastructure.1 The infrastructure systems under the jurisdiction of this Committee are vital to those goals.

∗ ASCE was founded in 1852 and is the country's oldest national civil engineering organization. It represents 144,000 civil engineers individually in private practice, government, industry and academia who are dedicated to the advancement of the science and profession of civil engineering. ASCE is a non-profit educational and professional society organized under Part 1.501(c) (3) of the Internal Revenue Service rules.

A. Infrastructure Investments Provide Jobs, Long-Term Growth

In 2009, Congress enacted the American Recovery and Reinvestment Act, which appropriated an estimated $100 billion for infrastructure renewal. According to recent reports, the legislation also has had a significant impact on job creation by putting hundreds of thousands of Americans to work.

As of February 28, 2010, the data show that, of the $38 billion available for highway, transit, and wastewater infrastructure formula program projects under the Recovery Act, $33.4 billion has been put out to bid on 16,360 projects. Within this total, 14,475 projects, totaling $29.6 billion, are under contract. Across the nation, work has begun on 12,545 projects totaling $26.7 billion, or 70 percent. Work has been completed on 4,238 of these projects, totaling $3.6 billion. The 12,545 projects under way or completed have created or sustained nearly 350,000 direct, on-project jobs. This has resulted in $1.8 billion in payroll expenditures. The Committee calculates that $296 million in unemployment checks have been avoided as a result of this direct job creation, and that these direct jobs have caused nearly $376 million to be paid in [f]ederal taxes.2

In 2009, the Clean Water Council (CWC) reported that infrastructure investments in sewer and water treatment facilities have a three-fold economic impact. Such investments create jobs directly through the purchase of supplies and construction materials, indirectly through purchases from vendors to the construction industry, and “induced impacts” based on the impacts of the spending.3

Infrastructure investment as a powerful economic tool has been advocated by President Obama. During his campaign in 2008, he stated: “A robust federal infrastructure investment program today will help strengthen the U.S. economy and provide at least one million more U.S. jobs at a time when the housing and construction industries are slowing.”

B. Waterways, Marine Transportation System Support Economic Growth

The U.S. Marine Transportation System (MTS) consists of waterways, ports and their intermodal connections, vessels, vehicles, and system users. Each component is a complex system within itself and is closely linked with the other components. It is primarily a collection of state, local, or privately owned facilities and private companies.4

In addition, national, state, and local governments participate in the management, financing, and operation of the MTS. More than 1,000 harbor channels and 25,000 miles of inland, intracoastal, and coastal waterways in the United States serve more than 300 ports, with more than 3,700 terminals that handle passenger and cargo movements. The waterways and ports link to 152,000 miles of rail, 460,000 miles of pipelines, and 45,000 miles of interstate highways. The MTS also contains shipyards and repair facilities important to maritime activity.5

Currently, 59 authorized federal channels handle approximately 90 percent of all cargo tonnage through U.S. ports. While trade is thriving, segments of the MTS are showingsigns of strain, which will intensify as cargo and passenger traffic increase. Large containerized cargo ports, which are beginning to experience capacity problems, will be pressured to keep up with the growth in trade. The MTS physical infrastructure will experience increased strain and become prone to failures. The U.S. military's reliance on MTS ports to deliver equipment and supplies to defense forces abroad adds to the strain.6

More than 13 billion tons of freight, valued at $11.8 trillion, were transported nearly 3.5 trillion ton-miles in the United States during 2007, according to the Commodity Flow Survey conducted by the U.S. Bureau of Transportation Statistics.7

Waterborne shipments via the ocean, Great Lakes, and inland waterways accounted for about $107 billion worth of goods, or one percent of the total value of all shipments in the United States that year, the BTS reported. In addition, vessels shipped approximately 423 million tons of goods, three percent of all tonnage shipped in the U.S. in 2007. The Mississippi River system was the most active waterway system in the country for freight transport, and shallow draft vessels, most of which travel the Mississippi River, carried the largest portion of waterborne freight in the United States.8

In 2007, water shipments were valued on average at $253 per ton, compared to $201 per ton for rail, the two lowest modal values per ton in the 2007 CFS. Historically, the major commodity groups shipped in bulk via waterway are metallic ores and concentrates, bituminous coal, fertilizers, gravel and crushed stone, and natural sands.

C. A National Commitment to the Improvement and Maintenance of Ports, Harbors and Waterways Is Essential to the Economic and Environmental Well-Being of This Nation.

The lack of adequate investment in America's infrastructure over many decades has left us with a vast backlog of deteriorated facilities that no longer meet our nation's increasing demands.9 As a threshold matter, we believe that a federal multi-year capital budget for public works infrastructure construction and major rehabilitation, similar to those used by state and local governments. The capital budget must be separated from non-capital federal expenditures.

Such a budget would provide a knowable and reliable source of funding for the maintenance and improvement of America’s ports, harbors and waterways and other infrastructure to protect the public health, safety, and general welfare.

The current budgeting process at the federal government level has a short-term, one to two year, focus. Infrastructure, however, by its very nature, is a long term investment. In order to provide for a minimum acceptable and consistent level of infrastructure funding, a long-term approach is needed. Without long-term financial assurance, the ability of the federal, state, and local governments to do effective infrastructure investment planning is constrained severely.

ASCE strongly supports the concept of federal, state, and local investments in waterborne transportation infrastructure. Furthermore, we believe that these investments ought to come in the form of designated trust funds that are apart from the unified federal budget or have revenues that are segregated from other federal program revenues.

With regard to WRDA, we support the deepening and widening of ship channels, as necessary, to accommodate the new, larger ships in the world fleet and the continued maintenance dredging of ship channels for the efficient handling of maritime commerce. ASCE also supports programs that limit erosion and sedimentation in ports, harbors and waterways globally.

The enactment of federal and state legislation and regulations to protect the health and welfare of citizens from the catastrophic effects of levee failures is essential. Congress must enact legislation to establish a national levee safety program that is modeled on the successful National Dam Safety Program. The act should require the federal and state governments to conduct mandatory safety inspections for all levees and establish a national inventory of levees.

D. The Committee Must Conduct Vigorous Oversight of the Budgets for the U.S. Army Corps of Engineers Civil Works Program

In the face of the Corps’ aging infrastructure needs, the president's budget for the Civil Works Program in FY 2011 reduces—not increases—federal investments in essential national civil works systems.

The budget proposal totals only $4.9 billion, a reduction of 9.3 percent from the FY 2010 enacted level of $5.4 billion. The administration request represents a 51 percent decrease from the FY 2009 enacted total of $10 billion through regular appropriations and the American Recovery and Reinvestment Act.

Moreover, the trend is not likely to improve in future years. The Corps estimates that its budget proposals will continue to decline through FY 2015, with a low estimate of $4.5 billion for FY 2013. The Corps expects that inflation will reduce actual spending on key infrastructure programs by a further $3 billion over the next five years. 10 ASCE believes that these levels of spending are inadequate to meet the nation’s security, economic and environmental demands in the 21st century.

In an appearance before Congress earlier this year, the assistant secretary testified to the president’s intentions in cutting the civil works budget. “In keeping with President Obama's commitment to limit the overall level of non-security discretionary spending, the level of funding in the 2011 Civil Works budget is a reduction from both the 2010 budget and the 2010 appropriations.”11

The secretary explained that this year’s budget proposal funds four principal objectives: construction of the highest performing water resources infrastructure investments thatprovide the best returns from a national perspective; the nation's 12,000-mile navigation system by financing capital investments; aquatic-ecosystem-restoration efforts; and critical maintenance and operational reliability of the existing Corps infrastructure. The president’s plan emphasizes commercial navigation, flood and coastal storm damage reduction and aquatic ecosystem restoration, the secretary said.

The proposed construction budget for FY 2011 would assign $1.7 billion to 99 construction projects; only two of these are new starts. The administration’s request represents a reduction of $341 million from the FY 2010 appropriation for this account. These funds are used for the construction of river and harbor, flood control, shore protection, environmental restoration, and related projects specifically authorized or made available for selection by law.

Increased funding to the states for water resource planning is vitally important to encourage statewide collaborative efforts to avert future crisis such as flooding or drought. Preparedness is a cornerstone for ensuring future water supply availability for population and economic growth and new challenges to address environmental needs. At least $100 million should be provided on a cost-shared basis in the Civil Works program to help states develop strategies to address their future challenges and needs.

We urge the removal of the prohibition on “new starts” in future Appropriations bills. We believe this is not in the best interest of the Corps’ work on the nation’s waterways, flood control needs and ecosystems restoration. Congress took a strong stand and made a serious commitment to the American people when it voted to override President Bush’s veto of the 2007 Water Resources Development Act and authorized more than $23 billion in new projects for the Corps of Engineers. It is time to meet that commitment by addressing this backlog of funding needs and provide additional funding for this critically important program. Failing to move on new projects that have been authorized will stop the Corps from addressing pressing needs.

E. Congress Should Solve the Problem of Declining Balances in the Inland Waterways Trust Fund

Of the 257 locks still in use on the nation's inland waterways, 30 were built in the 19th century and another 92 are more than 60 years old. The average age of all federally owned or operated locks is nearly 60 years, well past their planned design life of 50 years.

The government needs to set a priority system for restoring locks that have outlasted their design lives, with an initial focus on all locks built in the 19th century. The current federal budget process does not differentiate between expenditures for current consumption and long-term investment. This causes major inefficiencies in the planning, design and construction process for long-term investments. In the interim, Congress must provide new revenues for the Inland Waterway Trust Fund (IWTF) to begin reducing the maintenance backlog.

The IWTF finances construction and maintenance of the nation’s 12,000-mile inland waterways system. The trust fund is supported by a 20-cent per gallon tax on commercial fuel used on specified inland waterways. The fund is used to pay for half of the federal cost of constructing navigation improvements on those waterways; the remaining half is paid from general revenues. In recent years, the Corps has been steadily spending down the Inland Waterways Trust Fund.

The IWTF balance has declined each year for more than a decade. In FY 2011, the Office of Management and Budget estimates fund revenues at $85 million, with a yearend balance of approximately $30 million.

The administration’s budget request notes that the administration will propose to replace the current fuel tax with a new funding mechanism that will raise the revenue needed to meet the authorized non-federal cost-share of these capital investments “that is more efficient and more equitable than the fuel tax” for traffic on the inland waterway system.

If the administration’s proposal is enacted, the budget forecasts additional receipts of $72 million for the IWTF for FY 2011. Together with the $85 million in estimated receipts from the current excise tax and interest income, total receipts for the Inland Waterways Trust Fund would be $157 million under the administration’s budget request in FY 2011.

According to the Inland Waterways Users Board, large project cost overruns and delays in project schedules on the waterways have drawn down the IWTF balance. Project completion delays result from a federal budgeting and appropriations model that provides funding in annual and often-insufficient increments rather than a more reliable multi-year funding mechanism that would provide the certainty needed to more efficiently contract and build these capital projects.12

Respectfully submitted,

The American Society of Civil Engineers
For further information, please contact:

Michael Charles, Senior Manager, Government Relations
American Society of Civil Engineers
101 Constitution Avenue NW, Suite 375 East
Washington, D.C. 20001
(202) 789-7844 DIRECT
(202) 789-7859 FAX
mcharles@asce.org
www.asce.org 

ENDNOTES

1 The connection between economic expansion and infrastructure investments was most clearly explained more than 20 years ago. See David A. Aschauer, Is Public Expenditure Productive?, 23 J. MONET. ECON. 177 (1989) (finding that “the fall-off in productivity growth [in the 1970s] is matched, or slightly preceded, by a precipitous decline in addtions to the net stock of public nonmilitary structures and equipment.”)ock of public nonmilitary structures and equipment. urprisingly, the potential importance of public capital

2 Press release, House Transportation and Infrastructure Committee, Eighty-eight Percent of T&I Recovery Funds Out to Bid (Mar. 25, 2010), at http://transportation.house.gov/News/PRArticle.aspx?NewsID=1152 (last visited Apr. 30, 2010) (emphasis added).

3 Clean Water Council, Sudden Impact: An Assessment of Short-Term Economic Impacts of Water and Wastewater Construction Projects in the United States (2009).

4 The ports and harbors contain landside port infrastructure such as terminals, wharves, rail yards, and roadways within the harbor districts. The vast bulk of America's landside port infrastructure is owned and operated by state, local and private sector entities. The owners and operators are not required by law to report regularly on the physical condition of their landside infrastructure.

5 U.S. Maritime Administration, An Assessment of the U.S. Marine Transportation System: A Report to Congress (1999).

6 Committee on the Marine Transportation System, National Strategy for the Marine Transportation System: A Framework for Action (2008), at http://www.cmts.gov/nationalstrategy.htm (last visited Apr. 29, 2010).

7 Bureau of Transportation Statistics, U.S. Freight on the Move: Highlights from the 2007 Commodity Flow Survey Preliminary Data, at http://www.bts.gov/publications/bts_special_report/2009_09_30/html/entire.html#2 (last visited Apr. 29, 2010).

8 Id.

9 The American Society of Civil Engineers, Report Card for America’s Infrastructure (2009), at http://www.infrastructurereportcard.org/. Fifteen infrastructure systems received a cumulative grade of D due to deferred maintenance and a lack of investment in new systems.

10 U.S. Army Corps of Engineers, The Fiscal Year 2011 Budget and an Alternative View of the Civil Works Mission 11 (Mar. 9, 2010) (unpublished PowerPoint presentation, on file with ASCE).

11 CQ.com, House Appropriations Subcommittee on Energy and Water Development Holds Hearing on President’s Fiscal 2011 Budget Request for the Army Corps of Engineers, at http://www.cq.com/display.do?productId=4&dockey=/cqonline/prod/data/docs/html/trans cripts/congressional/111/congressionaltranscripts111 (testimony of Assistant Secretary Jo-Ellen Darcy) (last visited Mar. 15, 2010).

12 Inland Waterways Users Board, Annual Report to Congress (2009), http://www.iwr.usace.army.mil/usersboard/AnnualReportToCongress.htm (last visited Mar. 15, 2010).