Come next April 1, barge operators will see a 9-cent increase in their diesel fuel taxes that is not an April Fool’s joke.
It will be the beginning of a new financing scheme that will help pay for a backlog of stalled and overdue construction and rehabilitation projects along the nation’s aging inland waterways system.
The hike, which will raise the diesel tax from 20-cents to 29-cents per gallon, has strong support from commercial barge and towing operators, agricultural groups and other customers of the inland waterways, who have complained for years that without infrastructure investments, major failures of the lock and dam system could occur. Unscheduled lock closures due to emergency repairs are becoming more frequent, causing delays and disruptions to barge traffic on many busy sections of the river system.
The House of Representatives passed the increase on Dec. 3 as part of a popular bill to allow tax-free savings accounts for individuals with disabilities, called the “Achieving a Better Life Experience (ABLE) Act. The Senate followed on Dec. 16 by folding those provisions in a package of tax extenders, and now it goes to the White House, where the president is expected to sign it.
The new revenues from the diesel fuel tax are deposited into the Inland Waterways Trust Fund (IWTF) and will be matched by funds from the general treasury. The tax increase is expected to bring in an additional $80 million a year to the Fund, according to the Waterways Council, an industry-supported group that has advocated the financing reforms. Operations and maintenance of locks and dams are funded totally by the federal government.
The diesel tax is assessed on 12,000 miles of waters that include most of the nation’s largest rivers — the Mississippi, Ohio, Illinois, the lower Missouri and the Gulf and Atlantic intracoastal waterways.
An influx of revenue into the fund is expected to revive work on several stalled navigation projects. Among them is the Chicamanga Lock on the Tennessee River, where work could begin again by 2016.
The tax increase is part of a larger effort to reform how the nation’s inland infrastructure is managed and funded. As part of the Water Resources Development Act that was approved earlier this year, Congress agreed to use taxpayer funds to provide 85 percent of the cost of finishing the Olmsted lock and dam project on the Ohio River, which is far behind and greatly over budget. Under the old formula, federal funds would cover 50 percent of the $3.1 billion project, while the barge fuel tax would pay the rest. Because of cost overruns, the Olmsted project was draining money from the IWTF, leaving virtually nothing for other projects.
These reforms, along with the strong support from a number of industries that use the waterways, helped convince Congress to approve the diesel tax increase. Some had predicted that winning the increase – even if the barge industry had endorsed it — would be politically difficult given that so many lawmakers had pledged to vote against any kind of tax increase. In the end, conservative and taxpayer watchdog groups did not oppose the legislation.
“America’s inland waterways infrastructure is in desperate need of renovation and modernization, and this much-needed increase in the user fee is absolutely essential to the future global competitiveness and economic growth of the U.S.agriculture and other industries and job creation they represent,” said Randy Gordon, president, National Grain and Feed Association, said in a statement. “Congress is to be commended for taking this action so work at long last can begin.”