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September 21, 2011 - ASCE Statement - Water Resources and the Environment on Inland Waterways Investment

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STATEMENT OF
THE AMERICAN SOCIETY OF CIVIL ENGINEERS
BEFORE THE
SUBCOMMITTEE ON WATER RESOURCES AND ENVIRONMENT
U.S. HOUSE OF REPRESENTATIVES
ON THE
ECONOMIC IMPORTANCE AND FINANCIAL CHALLENGES
OF RECAPITALIZING
THE NATION’S INLAND WATERWAYS TRANSPORTATION SYSTEM
SEPTEMBER 21, 2011

Mr. Chairman and Members of the Subcommittee:

The American Society of Civil Engineers (ASCE) is pleased to provide this statement for the record on the challenges facing Congress as it seeks to rebuild the nation’s inland waterways transportation system. 

A. Background
Because of their ability to move large amounts of cargo, the nation’s inland waterways are a strategic economic and military resource. A recent analysis by the U.S. Army War College concluded that "the strategic contributions of these inland waterways are not well understood. The lack of adequate understanding impacts decisions contributing to efficient management, adequate funding, and effective integration with other modes of transportation at the national level. Recommendations demonstrate that leveraging the strategic value of U.S. inland waterways will contribute to building an effective and reliable national transportation network for the 21st century."

The Corps of Engineers Civil Works program suffers from chronic under funding for essential infrastructure systems. If allowed to continue, this trend likely will result in ever greater system failures and the consequent expenditure of tens of billions of dollars to rebuild what could have been built more economically in the first instance. In the face of the Corps’ aging infrastructure needs, the president's budget for the Civil Works Program in FY 2012 reduces federal investments in essential national civil works systems. Moreover, the negative budgeting 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.
ASCE believes that these levels of spending are inadequate to meet the nation’s security,
economic and environmental demands in the 21st century.

The administration budget proposal for the U.S. Army Corps of Engineers for Fiscal Year 2012 budget would provide $4.6 billion for federal investments in all Corps infrastructure, including the inland waterways. The president’s budget for FY 2012 for these programs is inadequate and must be increased. Congress must expand funding for FY 2012 to at least $5 billion, an amount that is still far below the demonstrated need on an annual basis. Among other things, the administration proposal would fund the operation and maintenance of 51 commercial navigation projects on the inland waterways, according to USACE statements.

The administration’s funding for Civil Works in the 2012 budget is about 15 percent below the enacted amount of $5.445 billion in FY 2010. It is about six percent below the FY 2011(unenacted) budget level. These budget cuts must be reversed to ensure safe infrastructure and a sound economy.

B. Inland Waterways

The Corps maintains approximately 12,000 miles of inland waterways. Inland and intracoastal waterways directly serve 38 states as well as the states on the Atlantic seaboard, the Gulf Coast, and the Pacific Northwest. Shippers and consumers in these states depend on the inland waterways to move approximately 630 million tons of cargo valued at more than $73 billion annually.1

States on the Gulf Coast and throughout the Midwest and Ohio Valley especially depend on the inland and intracoastal waterways. Texas and Louisiana each ship more than $10 billion worth of cargo annually, while Illinois, Pennsylvania, West Virginia, Kentucky, Mississippi, Alabama, and Washington State each ship between $2 billion and $10 billion annually. Another eight states ship at least $1 billion annually.

This system provides an average transportation savings of $10.67 per ton over the cost of shipping by alternative modes. This translates into more than $7 billion annually in transportation savings to the U.S. economy. Future investment must focus on life-cycle maintenance, system interdependencies, redundancy, security, and recovery from natural and man-made hazards.

Forty-one states, including all states east of the Mississippi River and 16 state capitals, are served by commercially navigable waterways. The U.S. inland waterway system consists of 12,000 miles of navigable waterways in four systems—the Mississippi River, the Ohio River Basin, the Gulf Intercoastal Waterway, and the Pacific Coast systems—that connect with most states in the U.S. The system comprises 257 locks, which raise and lower river traffic between stretches of water of different levels.

Forty-seven percent of all locks maintained by the U.S. Army Corps of Engineers were classified as functionally obsolete in 2006. Assuming that no new locks are built within the next 20 years, by 2020, another 93 existing locks will be obsolete—rendering more than 8 out of every 10 locks now in service outdated. Most locks now are anywhere from 50 to 70 years old.

The current system of inland waterways lacks resilience. Waterway usage is increasing, but facilities are aging and many are well past their design life of 50 years. Recovery from any event of significance would be negatively impacted by the age and deteriorating condition of the system, posing a direct threat to the American economy.

The construction and major rehabilitation of inland waterways transportation projects is funded 50 percent from the Inland Waterways Trust Fund (IWTF), with the balance from general revenues. This trust fund receives dedicated revenues from a tax on inland waterways fuel. The tax has been 20 cents a gallon since January 1, 1995. Operation and maintenance of the inland waterways system are entirely funded by general federal revenues.

In recent years, the balance in the Trust Fund has been declining. The Treasury Department reported in November 2010 that the IWTF had a balance of only $5.5 million as of September 30, 2010. Department of the Treasury, Audit Report 6 (2010), http://www.treasury.gov/about/organizational-structure/ig/Documents/oig10017.pdf. The balance on September 30, 1999, was $288 million. Department of the Treasury, Audit Report D-1 (2000).

According to the Inland Waterways Users Board (IWUB), a consortium of waterways users created by Congress, project overruns and delayed construction schedules are the major reasons for the Trust Fund’s declining balances.

Enormous project cost overruns and delays in project schedules have greatly strained the Inland Waterways Trust Fund balance. Project completion delays result in part from a [f]ederal budgeting and appropriations model that provides funding in annual and often-insufficient increments that are frequently further complicated by one or more continuing resolutions that delay budget certainty rather than a more reliable multiyear funding mechanism that would provide the certainty needed to more efficiently contract and build these capital projects.

IWUB, 24th Annual Report 1 (October 2010).

In April 2010, the IWUB issued a proposed investment strategy for the inland waterways system that would increase the 20-cent diesel fuel tax to 26 cents or 29 cents. The plan also recommended that Congress retain the 50 percent federal-local cost share for major projects—those costing more than $100 million—and require the federal government to pay the full cost of all projects costing less than $100 million. The plan would provide an estimated $7.6 billion in new revenues for the IWTF over 20 years.

C. Reversing the Disinvestment Trend

ASCE endorses the IWUB’s recommendations in the Inland Marine Transportation System (IMTS) Capital Investment Strategy Team announced in 2010. The tax rate for the trust fund has been 20 cents per gallon since January 1, 1995. We believe that an increase in the waterways user fee is long overdue, and we concur in the recommendation that the current fee be increased between six and nine cents a gallon.

ASCE’s support for the IWUB plan, however, is contingent on two important considerations.

• Any increase in the Inland Waterways User fee also should include a provision to index that fee to the consumer price index (CPI) and be adjusted every two years.

• Any diesel fuel tax revenues received by the IWTF should be “firewalled” to establish discretionary spending limits in the same manner used for Highway Trust Fund and the Aviation Trust Fund to reserve the IWTF revenues exclusively for the reconstruction of the system’s aging infrastructure.

We come to these conclusions because it is not clear how the Corps will continue to pay for essential infrastructure systems with greatly reduced budgets adopted in the Budget Control Act of 2011 well into the future. It is obvious that drastic budget cuts or the complete elimination of funding mean that little or nothing will be done to maintain these vital programs.

ASCE was founded in 1852 and is the country's oldest national civil engineering organization. It represents 140,000 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 Code.