As tight federal budgets continue to squeeze funding for inland waterways infrastructure, a new study suggests that public-private partnerships could offer an effective funding source for the U.S.’s aging system of locks and dams.
The report was inspired “by the increased attention by Congress and other stakeholders toward exploring alternative financing approaches to the inland waterway system,” said Mike Steenhoek, executive director of the Soy Transportation Coalition, Ankeny, Iowa, which sponsored the report and whose soybean farmers are big users of the waterways for transport.
“But while there is increased attention toward this concept, very few understand how it could actually work,” he added. “Our study isn’t the definitive authority on the concept, but the goal is to increase the level of understanding to make a meaningful contribution to the discussion.”
The study said that the so-called P3 partnerships, which bring together the public and private sectors to design, finance, build, operate and maintain transportation infrastructure, could offer a viable alternate funding source and should be further explored for the inland waterways.
These partnerships are commonly used for transportation projects in many other parts of the world but are not widespread in the U.S. P3s would be new for U.S. waterways, which are operated and managed by the federal government. Federal tax dollars pay for half the cost of new construction and rehabilitation on the inland system, and the other half is paid by a 20-cent per gallon barge fuel tax. But the current funding arrangement is not sustainable, because costs of improving and running the inland system far outstrip the trust fund revenues and federal budgets committed by Congress for the waterways.
“Given the federal budgetary and private capital realities, the U.S. inland waterways need more innovative, lower cost solutions,” said the report, prepared by the Horinko Group.
The report suggests that the private sector would be less interested in investing in the construction of a new lock and dam, and more attracted to providing private investment for the proper maintenance of existing sites.
“The Soy Transportation Coalition continues to argue that a predictably good inland waterways system is better than a hypothetically great one,” Steenhoek said. “Given the reality that the cost of one lock construction project is approximately equal to the cost of nine major rehab projects, we concur with the recommendation that a P3 project focused on maintenance is more viable that one premised on new construction.”
But the Waterways Council Inc., a group funded by the barge industry, is lukewarm on P3s. WCI wants to see the results of two P3 pilot projects that will likely be authorized in the Water Resources Development Act (WRDA) that is moving toward final approval in Congress.
The council also disagrees that funding should be focused on maintenance and operations and not on new construction.
“The WCI mission adheres to the Capital Development Plan, which has prioritized 25 projects for completion and new construction,” said Debra Colbert, WCI’s senior vice president. Congress has begun funding inland improvements at healthy levels of late, so “by pushing for P3s, and just for maintenance rather than new construction, seems to accept that the fight is over before it has really even started,” she said.
Barge operators want Congress to pass legislation that would reform how inland projects are evaluated by the Corps of Engineers and increase the per-gallon barge fuel tax by six-to-nine cents to replenish the trust fund.
Development of partnerships will require congressional legislation to authorize the Corps to enter into long-term leases and to guarantee the investor a sufficient revenue stream and an adequate rate of return.
“A public-private partnership for locks and dams could be appealing because of the potential for better project execution and delivery,” Steenhoek of the Soy Coalition said. “The private sector often is better able and equipped to deliver the same or elevated services at a lower cost. It is appropriate to examine and investigate alternative methods to finance, operate, maintain and enhance our inland waterways system.” — Pamela Glass