Inland waterways funding: Tax increases or user fees?

Just before Christmas, the inland waterways industry found coal in its stocking when the Obama administration bluntly rejected a new funding plan that had taken 18 months to develop.

Shocked, as it thought it had a strong proposal to modernize and maintain the nation’s system of aging locks and dams, the joint industry-federal board that developed the plan pleaded with federal officials to reconsider.

After months of silence, the response finally came last Monday when the president announced his plan for economic growth and deficit reduction. But its not quite what the industry had hoped for.

Obama’s proposal includes a plan to finance waterways infrastructure with “a new user financing structure.” This user fee would supplement the diesel fuel tax that barges now pay to finance 50 percent of infrastructure construction. (So there would possibly be two taxes — the existing diesel tax and a likely lockage fee under the president’s plan.)

By contrast, the joint industry-federal plan would, among other reforms, increase the diesel fuel tax by six cents a gallon, while shifting more of the financial burden for building most infrastructure from a 50-50 federal-industry split entirely to Uncle Sam. This shift is one of the principal reasons why the Obama administration and taxpayer groups oppose the plan.

Testifying before a congressional committee on Wednesday, Jo-Ellen Darcy, assistant secretary of the Army for Civil Works, said that the new fee would raise $1.1 billion additional revenue for the Inland Waterways Trust Fund. The idea is that beneficiaries should shoulder a significant share of the costs of the infrastructure they use.

It’s not yet clear what form the fee would take. Lockage fees, perhaps in the form of a flat fee or sliding scale to help combat congestion delays, are possibilities, although such proposals have been rejected by Congress when included in previous budgets. Darcy said the administration would offer details soon.

But both the administration’s fee (or, really, tax) and the development plan’s tax increase on diesel fuel and the funding shift put Congress in a political dilemma. Republicans in the House have taken a strong public stand against no new taxes while advocating spending cuts. Democrats must also show that they can take steps to reduce the deficit.

Neither of these proposals offers lawmakers much political cover in this partisan, budget-cutting environment.

Many congressmen at Wednesday’s hearing, although emphasizing the need for a resolution, expressed reservations about components of the joint industry-federal plan. Meanwhile, taxpayer groups called it “greedy” and suggested that some “deadbeat waterways” should be shut down, investments prioritized, and lockage fees considered.

At least two congressmen — one Democrat and one Republican — told me after the hearing that any plan with a tax increase will not likely move forward. This leaves us with a murky future for the reform of inland infrastructure funding. There is still a lot of work to be done.



About the author

Pamela Glass

Pamela Glass is the Washington, D.C., correspondent for WorkBoat. She reports on the decisions and deliberations of congressional committees and federal agencies that affect the maritime industry, including the Coast Guard, U.S. Maritime Administration and U.S. Army Corps of Engineers. Prior to coming to WorkBoat, she covered coastal, oceans and maritime industry news for 15 years for newspapers in coastal areas of Massachusetts and Michigan for Ottaway News Service, a division of the Dow Jones Company. She began her newspaper career at the New Bedford (Mass.) Standard-Times. A native of Massachusetts, she is a 1978 graduate of Wesleyan University (Conn.). She currently resides in Potomac, Md.

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