Marine Transportation System

Archive for the ‘Ports’ Category

Two Trust Funds in Search of a Solution

In Infrastructure, MTS Policy, Ports, Water Resources on October 25, 2012 at 3:31 pm

Yesterday Tennessee Senator Lamar Alexander (R) stood near Chickamauga Lock in Chattanooga and said, “We have two trust funds to deal with waterway infrastructure like the Chickamauga Lock, and neither of them works.”  He tells the truth.

The senator and former governor convened a presser to preview legislation–the American Waterways Act–that he and others will introduce when Congress resumes its session after the November election. The still in draft bill would tackle some financially challenging issues because the Inland Waterways Trust Fund (river system) and the Harbor Maintenance Trust Fund (for the most part coastal ports) are both at the center of current navigation infrastructure problems and the ultimate solutions to those problems.

The IWTF fund, with collections from a fuel tax on commercial vessels operating on the inland system, raises insufficient funds for what is a large, backlogged demand for lock and dam construction and rehab work. The users of the system have proposed changes in cost-sharing as well as increases in the fuel tax.

As has been discussed elsewhere in MTS Matters the Harbor Maintenance Trust Fund is a problem of a different kind. The ad valorem tax on cargo raises sufficient funds to cover the nation’s channel maintenance requirements but the Administration and Congress do not spend O&M funds at a rate commensurate with collections. The crafters of the planned bill are said to be working on how to assure annual appropriations at full-use levels as well as to free the accumulating surplus–now above $7 billion–for port projects.

The greatest challenge in drafting the legislation is the high hurdle presented by congressional budget rules. Based on what we have heard, the drafters intend to enable  the spending of tens of billions of dollars for construction and maintenance work over a 5 to 10 year period.  Even if the existing and future collections from the fuel and cargo taxes can handle that, as is the plan, Congress would have to effectively waive budget rules to get past procedural barriers. That doesn’t happen often. Moreover, it would require consensus among the key actors and probably a majority in the House and a super-majority in the Senate.

And while there has been significant growth in the ranks of advocates on these issues, solutions to the IWTF and HMTF problems have yet to achieve that kind of consensus.

The AWA–if it isn’t premature to assign an abbreviation to a measure not yet introduced–would have other provisions.  Senator Alexander identified these:

  • address regulatory and permit process streamlining projects by adopting the MAP-21 approach to speeding projects;
  • shift the 50/50 cost-sharing requirement for coastal channel maintenance from 45 feet to apply to those channels deeper than 50 feet;
  • open the HMTF to now ineligible port projects, to include landside projects (especially to satisfy ports like Los Angeles that don’t have much in the way of O&M dredging needs);
  • authorize a 5-year construction program to advance projects to deepen ports to accommodate post-panamax ships needing around 50-foot depths (to include Charleston and other planned deepenings that meet the present 3.0 benefit/cost test);
  • make the increasingly expensive Olmsted Lock project on the Ohio River a fully Federal responsibility, which would free IWTF resources to start other waiting construction projects; and
  • require the Federal government to follow the Inland Waterways Capital Development Plan developed by the industry and Corps of Engineers for an increase in the fuel tax and a 20-year schedule for projects.

The guts of the Inland Waterways Capital Development Plan were put into legislative language found in HR 4342, the WAVE 4 Act,  introduced earlier this year byRep. Ed Whitfield (R-KY). Worth noting, the Administration put forward a different proposal to address the ITWF problem and had been at loggerheads with the industry with no agreement in sight.

The likely sponsors of AWA are from both parties and will include principal sponsors Lamar Alexander and Lindsey Graham (R-SC), plus others who may include Dianne Feinstein (D-CA).  Feinstein and Alexander are the lead senators on the appropriations subcommittee that funds the civil works program.

Why are senators talking about introducing a controversial reform bill soon before the 112th Congress comes to a close? There are several answers, one of which is that the House and Senate are preparing to tackle major fiscal and revenue decisions (see “fiscal cliff“). Resolving the navigation trust fund problems could be made easier as part of the larger debate.  Also, as I mentioned in The WRDA Mantra post, an effort may be made to move water resources legislation (WRDA) during lame duck.  The AWA is squarely in WRDA territory and Alexander needs to be ready to jump on-board even if the odds of WRDA advancing are slim to none.  Push come to shove, the senators who introduce the AWA bill this year will be staking claim to the issue in the next congress.

Let’s face it.  The American Waterways Act, as it has been developing in the months leading up to Senator Alexander’s announcement, is an extremely ambitious package.  It will entail getting Congress to approve significant hikes in commercial navigation project spending, increase the fuel tax, venture into the touchy subject of expanding uses of the HMTF, and streamline permitting on some water resource projects that have been a favorite target of environmental conservation organizations…none of which are reasons to put a halt to such ambitious foolishness.

Said Lamar Alexander yesterday, “The Harbor Maintenance Trust Fund collects a lot of money, but doesn’t spend it well. The Inland Waterways Trust Fund doesn’t collect much money, but spends it well. This bill would fix the way our ports and waterways are funded so that we can meet the challenges they face…”

Here’s a challenge for a do-something Congress.  Pbea

FMC on HMT: Unintended Consequences

In Congress, Federal Government, Infrastructure, Ports, Water Resources on October 18, 2012 at 11:52 am

In July the Federal Maritime Commission released a study that claims a relationship between the Harbor Maintenance Tax (HMT) charged in U.S. ports and logistics decisions that result in some imports bypassing U.S. gateways and moving through Canadian ports to American destinations.

Concerns at the Ports of Seattle and Tacoma that the HMT are tilting the competitive field prompted the study.  These are long standing concerns that predate the cargo fee.

In the mid-80s Congress eventually acceded to the Reagan Administration’s insistence that the cost of maintaining Federal coastal channels be recovered through a new user fee.  The main question was how to collect the fee, which at that time was proposed to cover 40 percent of channel O&M.  It is now 100 percent.

The issue of maintenance fees and cost-sharing on improvement projects—another Reagan demand—prompted a split among port authorities. A “small port coalition,” consisting of ports of all sizes, many of which handled cargo that made it easy to find political allies, wanted to avoid a fee that would burden low margin cargo such as export grain and coal.  Some of those ports with outsize channel maintenance requirements fought any suggestion that the new policy require their dredging costs to be supported by fees collected in their ports.  If a port had to rely on its cargo volume to cover its dredging costs the New Yorks, Norfolks, and Oaklands would have an advantage, not to mention those ports with naturally deep water.

Notwithstanding the efforts of the “large port coalition” that dominated the container trade and favored a charge on cargo tonnage, the small port coalition had success in defining the revenue mechanism. Key committee leaders, most notably Chairman Bob Packwood (R-OR) of the Senate Finance Committee, settled on a fee that would go easy on American export commodities and, as it happens, raise a tidy sum for the new Harbor Maintenance Trust Fund. The new HMT would be applied to cargo value, not tonnage.

Seattle and Tacoma (members of the large port coalition, for the curious reader) opposed the HMT provision. They sought to be exempt from the cargo fee, fearing the advantage it would create for nearby Vancouver, B.C. in the container trade. (Did they even imagine a Prince Rupert was in their future?) Their objections to the HMT won them only a section in the new WRDA ’86 law that tasked the Treasury Department, where the Customs Service was located, to study and report to Congress on any effect the HMT had on diverting cargo from U.S. ports.

A year or so later Customs reported back with its conclusion: no effect of diversions.  With no formal report to refer to one wondered how Customs arrived at that determination.

In the 25 years that passed since the HMT became law we have seen the tax increase from 0.04% to 0.125%, the Supreme Court quickly came to a 9-0 decision and voided the HMT on exports, and the Harbor Maintenance Trust Fund’s unexpended and seemingly untappable balance has ballooned to over $7,000,000,000.

Through those years, and with the addition of Prince Rupert to American West Coast woes, the Sea-Tac ports have pressed the argument that the HMT contributes to the loss of cargo. The fact that those ports benefit little by the HMT revenues—they require little in the way of dredging—is salt in the wound.

Enter the Federal Maritime Commission. Washington State senators asked the FMC for analysis of the extent to which the “HMT and other factors impact container cargo diversion from U.S. west coast ports to west coast Canadian and Mexican ports.”

The FMC was fertile ground for such a request. In the 1980s Maryland Port Administration attorney Richard Lidinsky energetically fought “Canadian diversion.”  Today he chairs the FMC.

The FMC inquiry commenced in late 2011, public comments were received, and the resulting “Study of U.S. Inland Containerized Cargo Moving Through Canadian and Mexican Seaports” was released in July 2012.  The conclusion: no FMC related law or regulation is violated in the use of the Canadian ports but the HMT plays a role to the extent that it adds to the cost of transportation.

The FMC study noted that ports compete on “a wide variety of variables.” (Such was the essence of the shipper and carrier comments–easily the most detailed and responsive comments submitted in the public process–that didn’t confirm the report’s presumption that the HMT is a factor in decisions to use Rupert.)  The study found no significant difference in cargo transit times moving through the U.S. and Canadian gateways. It acknowledged that the rates through Prince Rupert are lower but stated that other factors in the supply chain make it “difficult to conclude that transportation costs are significantly lower.”

The study employed a ports elasticity model developed years before by Dr. Robert Leachman. The FMC concluded that if the HMT (estimated to average $109 per FEU) were eliminated in the Sea-Tac ports, or if an equivalent charge were put on the U.S. bound cargo when crossing the land border, “up to half” of the containers “could revert to using U.S. west coast ports.” The report concluded that the HMT “does appear to be one competitive force that is not based on natural competition, but may indeed be a legislative disadvantage on some U.S. ports” i.e., an unintended consequence.

What is one to make of the study?  It is not conclusive in the way we like to have questions settled.  The FMC document has its critics within the agency, with two commissioners voting against its release. One called it “a political policy paper to justify a predetermined conclusion.” The other wondered why, if the HMT is such a discouragement, does Canada-bound cargo use U.S. ports?

After 25 years do we yet know the extent of the problem, assuming it is a problem?

If anything, the study gives Sea-Tac and their advocates in Congress something to quote as they lobby for a fix. One such fix, an exemption from the HMT, is not in the cards. (Why would other ports go along with that?)

Legislation has been drafted to apply an equivalent charge on U.S. cargo when it crosses the land border (a “land border loophole”?), the revenue from which might be put to making freight improvements. But is the FMC study enough to convince Federal policy makers to slap a fee on cargo entering through Canada or Mexico? Dress it up to look like a user fee to support infrastructure improvements but it still will come off as a penalty for not using an American gateway. The cargo interests will fight it, probably the railroads, too. And don’t expect the Commerce and State Departments and the White House Trade Representative to be mute on the question.

The valuable but imperfect HMT (title  for another blog entry?) continues to create problems while feasible solutions elude us.  Meanwhile, look to the east. There on the horizon are Nova Scotia ambitions to establish a Rupert-on-the-Atlantic.

The fight against the HMT is 25 years long and counting.  Pbea

One Hundred Percent Security

In Congress, Federal Government, Ports, Security on July 23, 2012 at 8:46 pm

Not even Ivory Soap is 100 percent.  It may float but, as the once ubiquitous slogan puts it, Ivory doesn’t do better than “99 and 44/100 percent pure!”

So if the blue chip labs of Proctor & Gamble can’t deliver a simple matter of 100 percent pure soap why should anyone think it’s possible to implement 100 percent cargo scanning before the boxes hit our shore?  …Or think 100 percent secure U.S. coastlines is possible. Okay, sure, that last one sounds a bit silly but we’re dealing in facts here.

In the months following the attacks of September 11 former Rep. Gene Taylor (D-MS) insisted that America could be completely secured along the over 12,000 miles of seacoast. A tight seal that would catch whomever and whatever might dare to sneak into our collective nightmare.  He persisted, earnestly, in pressing that point to a hearing witness, a retired Coast Guard rear admiral who found it hard to believe the congressman was serious.

In more recent years the Department of Homeland Security (DHS) has struggled with that kind of no-exceptions, no-excuses expectation. The sort that has plagued the TSA for much of its existence. Congress directed the U.S. agencies to go forth and have image and radiation scanning equipment installed in every overseas port that exports containerized cargo to the U.S. We don’t want terrorists to view our ports as easy gateways for nuclear weapons guised as consumer goods.

One result of al-Qaeda proving the nation’s vulnerability was an almost immediate national awareness of our seaport system. Open doors in the global village. America had security in place at airports–tragically loopholed as it was–while at our ports the Federal agencies were on the lookout mostly for contraband, plant disease, and the occasional stowaway. Flood-lit attention quickly zeroed in on the seaports and land borders. Persons such as Stephen Flynn filled the vacuum as government and news agencies required expert testimony and quotable expressions of alarm.

The policy response was understandable. New laws, quickly crafted regulations, and a flood tide of security personnel. A new department was created when small-government Republicans largely dominated in Washington.

By 2007 two maritime security laws had been enacted and a considerable security regime was in place in our harbors, on cargo ships and in the supply chain. Countries and companies trading with the U.S. were told to meet our terms. Hundreds of millions of grant dollars were spent to harden security in large and small ports. (Over $2,000,000,000 for port security grants since then.) Funding also was provided for three pilot tests of 100 percent scanning  in overseas ports. Then Congress upped the ante.

A new “full-scale implementation” requirement was put in place to deny entry to cargo containers unless they were “scanned by unobtrusive imaging equipment and radiation detection equipment at a foreign port before it was loaded on a vessel.” The shipping/logistics industry explained why that wasn’t good policy or particularly feasible. Nevertheless a deadline of July 2012 was set for 100 percent scanning along with authority for the Secretary of Homeland Security to extend the deadline as necessary.

Not surprisingly, in June Secretary Napolitano reported to Congress that the deadline would not be met and has pushed out the compliance date to July 2014.  Months before, the GAO gave testimony on the state of containerized cargo security.  It is a readable statement about the layered, risk-based security regime that is in place and the challenges the government has experienced both here and abroad in securing the country against smuggled nuclear devices.

The legislators stand 100 percent behind their 100 percent requirement. In an op-ed piece three House Members acknowledge that the original deadline was ambitious but want to keep the pressure on an executive branch they doubt wants to see full-scale implementation. “Cost and technology have never been the primary obstacles to meeting this mandate. What is missing is a sense of urgency and determination.” Rep. Edward J. Markey (D-MA) said in a Washington Post story, “I personally do not believe they intend to comply with the law…. This is a real terrorist threat, and it has a solution. We can’t afford to wait until a catastrophic attack.”

Don’t expect this issue to be resolved anytime soon. Few in Congress will go on record to remove the requirement.

Should we expect–even want–100 percent security at any cost? In a global supply chain so extensive and complex is absolute security possible? Ask voters if they are willing to be subjected to metal detectors and armed guards at their local Loews Cinema after what just happened in Aurora. Where will the next troubled mind chose to bear arms?  At the Harris Teeter meat counter?

In 2002 I met with the fellow who headed the transportation branch at the Office of Management and Budget. He and his colleagues were struggling with the budgetary response to September 11. They faced the practical questions of what can be afforded even when we had horrific cause to be generous with tax dollars–and indeed, the money flowed–and whether unlimited spending could really make the nation secure. How do we determine risk in order to set priorities? Could money buy the “full-scale” securing of the American transportation system? How does one make a public transit system 100 percent secure?

Go to the Ivory Soap website–actually a Facebook page–and you see this absurdly-reassuring corporate statement that could be a Madison Avenue rewrite of the preamble to the U.S. Constitution. “Ivory provides freedom from nonsense and complexity by giving you everything you need and nothing you don’t.”

Just don’t look for 100 percent.   Pbea

HMTF: A Bump and RAMP Strategy

In Infrastructure, Ports, Water Resources on April 27, 2012 at 1:19 pm

Bump and RAMP doesn’t sound like a sophisticated legislative strategy.  It certainly isn’t a complicated one.  But when one is talking about the world of dredging one must do what one can to make it sound interesting.

As I’ve discussed previously the RAMP Act is an attempt to remedy a failing of current law.   A tax is collected on some of the beneficiaries of port infrastructure–specifically channels, turning basins, anchorages–in order to cover the cost of maintaining–specifically dredging–that Federal navigation infrastructure.

You can read about the Harbor Maintenance Trust Fund (HMTF) by going to previous postings:  RAMP Gets Its Chance and  The Seven Billion Dollar Clue.  (Hmm…those like a lot like Hardy Boys titles.  Who?…oh, never mind.)

The procedural (point-of-order) solution in the RAMP legislation is not a complete solution.  There is nothing to mandate full funding of channel maintenance.

Absent an automatic funding mechanism that effectively bypasses congressional appropriations–which ain’t happening–the president will have to budget for channel maintenance every year and Congress will retain the prerogative to decide how much to spend.

Yesterday, today and tomorrow ports and other stakeholders have to make the case to Congress in support of the Corps of Engineers channel maintenance program.  While the RAMP lobbying effort, led by the dredging industry, has proceeded so has the routine effort to increase the level of appropriations for channel maintenance. Bumping up the annual funding has been the persistent and particular point of emphasis for the American Association of Port Authorities along with others.  And the effort has seen success.

Since FY 2009 the appropriation from HMTF funds has progressively grown from $773 million to $833 million in FY 2012.  The FY 2013 budget, now subject to appropriations committee attention, estimates $839 million will be used from the fund.

Most, but not all, of the appropriated amounts apply to port O&M costs.  Some goes to dredged material management facility construction, offsets for St. Lawrence Seaway tolls on the U.S. side, and for administrative overhead costs. If we look at the HMTF allocation to O&M the growth over that same timeline has been from $737 million to $767 million, in actual spending, and $779 million budgeted for FY 2013.

That’s modest growth, especially considering the fact that over the same period HMTF annual revenue (HMT receipts + interest) grew from $1.253 billion to an estimated $1.864 billion in FY 2013.

But it is growth in a time when Federal spending isn’t exactly growing like gangbusters.

One might attribute the growth to the RAMP effort, which commenced in 2008, and to AAPA’s bump-up strategy.  Those complementary and not exclusive efforts have shone a bright light on the inconvenient fact that the infrastructure maintenance buying  power of dedicated user-taxes has been capped while Federal-managed channels are allowed to shoal.

As of this writing, 44 percent of the House Members have cosponsored Rep. Boustany’s RAMP Act (HR 104) and over one-third of the Senate has signed on to Sen. Levin’s S. 412.  Those numbers reflect a bipartisan sensitivity to taxes collected but not used-as-promised as well as a greater awareness of the correlation between full-depth channels and the ability of U.S. exports to compete successfully on the global market.

That increased appreciation on Capitol Hill for the muddy, mundane world of maintenance dredging explain the two most recent and significant developments to date.

First, the House of Representatives voted, by voice, in support of full funding of Federal channel maintenance.  The vote was an easy one.  It doesn’t have an enforcement provision,  so there is nothing in the approved amendment to ensure full funding in future appropriations.  That explains why the amendment–a watered down HR 104, also sponsored by Rep. Boustany–didn’t have the opposition of committees that object to the RAMP Act as well as any other proposals for mandatory spending from trust funds.

That said, it is slightly stronger language than the “sense of Congress” provisions contained in the House and Senate transportation bills and which simply say what the Administration and Congress should do.  So, for the first time, the full House is associated with the view that the total spending from the HMTF should equal HMTF revenue.

Second, and quantifiably more significant, the House Appropriations Committee this week approved a record level of funding from the HMTF for FY 2013.   It is a handsome, marvelously round number of $1 billion.  It is over $150 million more than in the president’s budget, which itself represents an increase.

We don’t know as yet what is the comparable HMTF allocation on Senate side but the draft committee report is quotable:

The Committee understands that the O&M budget fluctuates from year to year due to periodic maintenance dredging requirements, however, the general trend should be for this budget to increase.

Yes, indeed…all the way to the annual level of user-taxes being paid to keep the channels fully maintained.  So far, the trend is in the right direction.  Pbea

HMTF: RAMP Gets Its Chance

In Congress, Ports on February 14, 2012 at 11:33 am

HR 7, the surface transportation (and energy) bill that was reported from the Transportation and Infrastructure Committee in the wee hours of February 3, has a wee Water Transportation title whose only provision is hortatory language about full use of the Harbor Maintenance Trust Fund.

The HMTF, along with the Inland Waterways Trust Fund, was left out of the full-funding fixes that the transportation committees muscled through Congress for the highway and transit programs in 1998 (TEA-21) and Airport Improvement Program in 2000 (AIR-21).

Chairman John Mica (R-FL) wanted to do something to remedy that oversight and, for the moment, that something is the “sense of Congress” that the HMTF “is not being used for its intended purpose” and fails “to provide the service for which it was established is unfair and places the National at economic risk.”  The Administration “should request full use” for channel work and “Congress should fully expend” what is in the fund.

Optimistically, the language is a placeholder for something with a bit more teeth, specifically the text of HR 104, the RAMP Act, that Rep. Charles Boustany (R-LA) and 171 colleagues sponsored in the hope of prying more out of the trust fund for deep draft channel O&M.  RAMP is an opaque acronym for Realize America’s Maritime Promise, the coalition that has advanced the issue.

HR 104 is modeled on the point-of-order approach employed in AIR-21 and which has had a role in leveraging substantial funding from the Aviation Trust Fund. However that doesn’t mean the procedural remedy would ensure full-funding from the HMTF. There is no guarantee. For that reason HR 104 is thought to have a better chance of winning Hill approval than would, for example, a mandatory spending requirement that is  the Hill committee turf battle equivalent of Iraq invading Kuwait for its oil.

The bill is intended to force the hand of the Appropriations Committees. But, you see, appropriators like to protect their prerogative to appropriate when, how much and for what. That explains why appropriations leaders are fighting RAMP. That and the fact that the appropriators have a long and bruised memory of being bested by one of Mica’s predecessors, Bud Shuster, in the TEA-21 and AIR-21 “truth in budgeting” fights.

There’s another reason. Assume the RAMP Act becomes law. If appropriators were forced to add, say, another $500,000,000 for channel maintenance they would have to do so within the parameters of the annual budget cap established through a separate budget process. If that cap isn’t increased by $500,000,000 then the added O&M money would have to come from other program areas. Having to cut a half-billion dollars is when it isn’t any fun being on the Appropriations Committee.

Chairman Mica decided on a strategy to add the HR 104 to HR 7 when the latter moved to the House floor for amendments. With 171 co-sponsors and a sustained advocacy effort on the part of ports, dredging contractors, the U.S. Chamber of Commerce and others, an amendment stands a pretty good chance. RAMP advocates also are pressing for the Senate counterpart measure, S. 412, to be added to the MAP-21 surface transportation bill, S. 1816.

On February 1, the Ways and Means Committee held a maritime taxes hearing. Rep. Boustany, who chairs the Oversight Subcommittee of the tax panel, used the hearing to make the case for his bill. He polled witnesses from four ports and Louisiana’s agricultural commissioner.  All spoke to the economic efficiencies of vessels operating at full capacity when provided sufficient channel depth. When allowed to make the most of a ship’s capacity US exports prove to be more competitive on the world market.

On February 3, Ways and Means met on a bill to extend the Highway Trust Fund related taxes, the essential revenue piece for HR 7. Ways and Means Committee does not have jurisdiction over the HMTF even though it does have jurisdiction over the Harbor Maintenance Tax. That didn’t prevent Rep. Jim McDermott (D-WA) from offering an amendment to 1) add the RAMP Act to the bill and, 2) increase eligible uses of the HMTF. Having naturally deep water the ports of Seattle and Tacoma are among a small number that have little need for channel maintenance funding and in that way do not benefit by the cargo tax collected in those ports. (See the fairness discussion in the previous MTSM post.)  Rep. McDermott explained that by expanding eligible port uses of the HMTF to include “infrastructure improvements or repairs” Seattle, for example, might obtain funding for a needed seawall project. As noted, the committee had no jurisdiction. The amendment was withdrawn. Rep. Boustany said he would work with Rep. McDermott on the matter.

This week on the House floor Boustany amendment #180 will be offered to HR 7. Rep. McDermott will attempt his amendment #178. And you can watch it all on C-Span.  Pbea

HMTF: The Seven Billion Dollar Clue

In MTS Policy, Ports, Water Resources on February 11, 2012 at 6:04 pm

The Harbor Maintenance Trust Fund (HMTF) is overdue for a remedy. How do we know? The unspent balance of Harbor Maintenance Tax (HMT) receipts, plus interest, is a mere $7,000,000,000.

HMT receipts are accounted for in the channel “maintenance” trust fund. However (not to be too picky) the Federal channel system is not fully maintained, and not for lack of money (see “mere” above). That and other information can be found in this 2011 report by the Congressional Research Service.

(A Moment for Trivia: The HMT is considered by some folks a user fee but as the Supreme Court figured out, unanimously and with little effort, the value-based charge on cargo bears little relationship to the service being provided i.e., maintaining channel depths and other dimensions for vessels, and “therefore does not qualify as a permissible user fee” under the export clause of the Constitution.)

The HMT is collected on import and domestic cargo handled at most US ports. On cruise tickets, too. The majority of what is collected comes from the high volume, high value imports; much less from comparatively low value domestic cargo moving between American ports. US exports cannot be charged, sez the Supreme Court.

The HMT was set to cover 100 percent of the cost of coastal channel maintenance. But if 100 percent of the channel maintenance that is needed isn’t done then 100 percent of the funds isn’t spent. It’s the kind of math that even I can understand.

Well, you might say, that’s okay because the money is safe in a trust fund. It is dedicated for maintenance dredging, right? It will be there when it’s needed, right?

Sure, but the balance has grown every year since 1994 and, more to the point, full funding is justified now. According to the Corps of Engineers the total channel system, including small recreational harbors, would cost around $1.3 billion a year. And even if the money is sitting in a trust fund collecting interest, it actually is being put to an unrelated purpose. Turns out the HMTF is a handy offset, especially when you are running a Federal deficit. Makes the deficit a little lower–$7,000,000,000 lower.

The money is collected for a specific purpose but is not being spent fully for that purpose. More than a few folks argue that is not fair. Especially the ones who have a direct stake in channel dredging such as ports and dredging contractors.

But then fairness has been an issue since the HMT and the HMTF were made law.

In the mid-80s Congress deliberated how to offset the cost of Federal channel maintenance (originally by 40 percent and then a few years later by 100 percent). Some ports argued that because heavy cargo weighs down a ship the new user fee for maintaining channel depth should applied to cargo tonnage.

Other ports took the opposite view, pointing to how heavier cargoes are often low value as well as low margin US exports. They said the charge should be on cargo value, arguing that containerized cargo could afford the charge. And since the vessel operators had already succeeded in fending off a fee on the vessel (arguably the direct user of the channel) it came down to which ports and kinds of cargo had the most, or least, votes in Congress.

The “fairness” question was decided in favor of the greater number of ports, which were export oriented and/or whose channel maintenance costs might be expected to exceed channel fee collections in those harbors.

As was patently obvious the major international gateways would produce a substantial portion of the revenue. Indeed in 2005—yes, most HMTF data is musty stuff because the Federal government unreliably produces the mandated annual report—the top cargo value ports of LA (13.7%), NYNJ (12.2%) and Long Beach (12.2%) represented nearly $380 million, which was more than one-third of HMT receipts. The top ten ports by value handled over 68 percent.

Some of them, as it happens, also require little in the way of channel maintenance. (I’ll get more into that subject in a later post.)

The HMT and the HMTF are in ways unfair and they are imperfect by design. The value basis of the tax can be explained as a seaport maintenance policy crafted for nation where no seaport has the same cargo, cargo type, volumes or geography and whose Constitution forbids Congress giving “preference” to one port over another (Article 1, Section 9).

We can’t be so generous and understanding with the way the HMTF is crafted in law and managed in the budget process.

Changing the basis of the HMT is politically unlikely (see “snowball’s chance in Honolulu”). As for the HMTF, changing the law is not easy but it is doable. (To be continued.) Pbea

The Mineta Speech, Pt.3

In Federal Government, Infrastructure, Leadership, MTS Policy, Ports, Water Resources on February 8, 2011 at 3:07 pm

Former Transportation Secretary Norman Mineta offered his audience at the North American Port and Intermodal Finance and Investment Summit recommendations “we can act on immediately” to address the inadequate “role of maritime issues in our national transportation policy.”    Here are Pt. 1 and Pt.2. Pt.3 follows…

It struck some people as a bit odd.  Here Norman Mineta was talking about changes that are needed to strengthen U.S. maritime policy but he waited until he was out of office  to raise them.  Perhaps these were ideas that coalesced in his mind only once relieved of the day-to-day tasks of office.  Maybe not.   Ultimately it didn’t matter.  At least he was raising them now.

“What is the path to victory?  I have ten recommendations we can act on immediately.  Some are major and some seem to be minor, but are critical to success.

“First, the Federal government must reorganize the Maritime Administration – MARAD.  I would rename it for what it should become – the Federal Maritime Administration, and I would combine virtually all of the Federal maritime responsibilities there.  It should reinvigorate the uniformed Federal Maritime Service and transfer the aids to navigation responsibilities from the Coast Guard to it.

“The portion of the Army Corps of Engineers whose responsibilities and capabilities for our domestic ports and waterways should be relocated to the Federal Maritime Administration.  The Army performing as domestic civil Federal engineers is not a role for the military and the country would save money and get a better product if these services were transferred to a single maritime agency.

“Secondly, the new agency must shift its focus to the condition of the nation’s ports and waterways and the role of this infrastructure in the totality of the U.S. transportation system.  The current agency has too many of its resources and its structure focused on the issue of ships and crews.

“Thirdly, the Merchant Marine Academy in Long Island should be renamed the National Maritime Academy.  It should be a Federal service academy where every graduate must perform his or her service in the Federal Maritime Service or as a commissioned officer in one of the other services as they do now including the Department of Homeland Security.  This Academy is one of the major assets of the Federal government and we need to give it our time and attention.

“Fourthly, the Federal government must develop a legislative reauthorization process that puts maritime issues on the same priority and level of importance that surface and aviation assets currently have.  If ports and waterways funding is always being relegated to parts of the surface transportation bill, or the defense bill, they will remain second-class subjects where the hope is to get your particular project an earmarked status.

“Fifth, the U.S. must revitalize its role in international maritime organizations and its maritime relations with other countries.  Whether its treaties or issues involving security and trade, the U.S. needs to give more time and attention to these areas.

“Earlier I said to achieve this refocus on maritime importance, state and local governments, port authorities, and other government entities reliant upon maritime trade must work with industry stakeholders to educate American citizens and their decision makers regarding U.S. reliance on a strong national maritime system.

“Therefore, I believe the next set of actions should begin with port and waterway interests and industry stakeholders – including financial players who want to enter this sector – creating a national association whose charter is to accomplish the following action items:

“Educate the Congress and the presidential candidates on the role of the national maritime system and get hard commitments to take action.  Educate American decision makers and others on the role maritime assets play in how freight and goods are delivered to them.  Then enroll them in the effort to get maritime’s fair share of infrastructure resources.

“My final recommended action is that you accomplish all of the above by overcoming the inevitable opposition – not only from without but from within.  Within the maritime industry there are many agreements of mutual mediocrity.  People are familiar with this system and will not want to see it changed.  The ground is shifting under their feet and they imperil needed financial investment and the innovation and the efficiencies it brings.

“Also, there are issues that need to be addressed within the industry – labor agreements, the role that technology will play in the labor force, and how security issues will be addressed.  These are important issues that need to be vigorously debated and resolved – but they are not reasons to oppose raising the importance of maritime issues on the national agenda.  Take a side in these issues, fight for them, but do not let it dominate the larger objective.

“Finally, for those of you who are looking for quick investments in ports and maritime infrastructure, I’m not sure I’ve given you a lot of useful information.  And for you I’m afraid there is more bad news.  There are no quick rates of return to be made here.  Private investment into ports and infrastructure will have to be a true and long-term partnership.

“The up side as we say is that this is an industry that has the potential for tremendous growth and to have a real impact on our national transportation system.”

So there you have it.  A message that is important not so much for the specific recommendations made–although there are some good ones there–but for the fact that he was putting the spotlight on a problem that few public officials and industry people bother to talk about or even acknowledge.  See the next post for some additional  thoughts.   Pbea

Green Move at FMC

In Environment, Green Transportation, Ports on January 8, 2010 at 2:49 pm

The Federal Maritime Commission has formed a Maritime Environmental Advisory Committee.  This isn’t fresh news–the FMC announced the action last November–but it’s still worth noting.

It is a smart move by Chairman Rick Lidinsky.  He announced it, appropriately so, while on a visit to the San Pedro Bay ports.  Says the FMC press release: “I wanted to recognize these ports’ leadership in demonstrating that the maritime industry can remain commercially competitive while acting in a manner consistent with the country’s commitment to energy independence and environmental standards.”  While those two largest of US ports have led the way in greening seaport operations the Lidinsky comments were a particular reference to the ports’ more recent Clean Trucks Program. It was his way to demonstrate the agency’s new leadership.

The program–in conjunction with the efforts of an enlightened shipper community–has been very successful in reducing port drayage trucking diesel emissions by a praiseworthy 80 percent.  Doing it well ahead of schedule.  The program has inspired similar action in other parts of the country and, with the exception of one particular element, has the strong support of both public and private interests.  (The exception is the controversial “employee driver” provision in the Los Angeles plan that is being challenged by the American Trucking Association in court.)

The formation of the FMC panel followed by several months a decision in the FMC to halt its action against the ports of Los Angeles and Long Beach.  Their joint action raised technical issues under the Shipping Act and that prompted an FMC complaint in court as well as the decision to start an FMC enforcement investigation.   (The environmental objectives of the  clean trucks program were not challenged.)   The decision to withdraw the complaint took place before Lidinsky’s arrival at the FMC.

The bid in court  proved unproductive.  I’ve not the training to judge the merits of the  complaint.   But I do know that the new chairman–a sharp fellow–knew what he was doing when he asked his staff what was their understanding of the environmental issues that color and confront maritime related activity in the United States today.

On learning the answer Lidinsky took action.  A Maritime Environmental Advisory Committee was formed.  Strictly an internal panel, the press release notes that the staff committee’s purpose is “consistent” with Obama administration policy for the development of “green jobs”, etc.  A reference to creating jobs is de rigueur for a government  press release these days, likewise an ethos statement on seeking “a more sustainable approach to maritime issues.”

On a more basic level, however, the new advisory committee would help the commissioners understand what is going on in the maritime realm and tune the agency’s work–its deliberations and services–to what is an undeniably changed environment–regardless of the party in power–in which business and government now has to operate.  And smartly so.   Pbea

Obama Jobs Initiative: Meaning in Missing Words?

In Infrastructure, Ports on December 8, 2009 at 4:19 pm

This is what is in the president’s jobs proposal announced today with respect to infrastructure investment:

2. Investing in America’s Roads, Bridges and Infrastructure

Additional investment in highways, transit, rail, aviation and water. The President is calling for new investments in a wide range of infrastructure, designed to get out the door as quickly as possible while continuing a sustained effort at creating jobs and improving America’s productivity.

Support for merit-based infrastructure investment that leverages federal dollars. The Administration supports financing infrastructure investments in new ways, allowing projects to be selected on merit and leveraging money with a combination of grants and loans as was done through the Recovery Act’s TIGER program.

The second paragraph is a reference to the over-subscribed TIGER grant program for which a broad range of transportation projects are eligible and awardees will be announced no later than February.  The administration has shown an affinity for “merit-based” grants (as opposed to congressional earmarks and formula funding).   USDOT loves it because it puts the Secretary in the position to judge what projects are worth funding and to apply White House principles such as emission reduction.

With so little in the way of detail we might infer from the first paragraph that the Marine Transportation System may not be as much as part of the next jobs bill as it was in ARRA signed in February.  Does the Obama administration include port or marine transportation as eligible for job stimulus funding?  Especially for  the “out the door” quickly category?

Certainly connecting roads and rail are valuable elements of the MTS but when the president’s proposal for infrastructure funding uses the term “water” it may not mean maritime.  I think it means water and sewer infrastructure, which would appeal greatly to capital starved municipal governments but do little for marine highway and other MTS infrastructure needs.

Prior references by Congress and the administration to funding maritime related projects as part of ARRA used the word “port“ along with rail, highway and transit projects.  No mention of port or maritime in the White House statement or the president’s remarks at the Brookings Institution today.

That said, port/maritime projects were eligible for TIGER grants, which the White House appears to want to continue.  But almost by definition TIGER grant money doesn’t flow in a matter of couple months.  The first grant announcements won’t be made until close to a year after the funds were appropriated by Congress in February 2009.  Indeed, I’m told that White House officials said after the president’s remarks that some part of the infrastructure element of the s announcement today may not be intended to pour money into the system over the short term.

The White released an outline today.   The administration and Congress will put flesh on the bones and maybe once the House and Senate take up legislation early next year ports and  marine transportation, including capital needs for marine highway development, will be eligible.

For that to happen, the industry will have to make its case.     Pbea

California Trailblazing to a Miami Tunnel

In Intermodal, Ports, Surface Transportation Policy on November 17, 2009 at 11:04 pm

When earth was turned in 1997 for the Alameda Corridor project in the San Pedro Bay port region more than one kind of ground breaking was occurring.  The Port of Miami is a beneficiary.

In freight transportation policy circles the Alameda Corridor project one day may be legend.  The ports of Los Angeles and Long Beach were the gaping end of a freight funnel that emptied import boxes onto the exit rails and streets.  In essence the solution was to eliminate grade crossings by building a blow-grade rail way out of town.  A big project with a $2.4B price tag.  A key to the financing was Federal credit assistance.  The project and two others in California were the first to benefit by this innovation.  A paper on the FHWA website tells the story.

Due to Federal budgetary constraints, however, the grant was not deemed to be a fiscally or politically viable option. An alternative form of Federal support for this project was needed, and by 1997 the answer was clear: Federal credit enhancement in the form of a junior-lien loan to ACTA.

The fiscal year 1997 Omnibus Consolidated Appropriations Act (Public Law 104-208) provided $58.7 million for DOT to cover the capital reserve charges associated with making a direct loan of up to $400 million to ACTA for the Alameda Corridor Project. This represents an actual budgetary cost of 14.7 percent of the face value of credit assistance. The legislation also provided that the loan be repaid within 30 years from the date of project completion and that the interest rate on the loan not exceed the 30-year Treasury rate.

Inspired by the success of leveraging non-Federal investment for large infrastructure project, particularly private financing, Congress in 1998 fashioned a fully articulated TIFIA program.  It was adjusted in SAFETEA-LU with a lowered threshold to make more projects eligible.

Nearly $7 billion in projects in 13 states have benefited since TIFIA was created by Congress.  The Port of Miami’s rail freight tunnel had an uncertain future but with the October announcement the financing is in place and a $607 million construction project soon will be underway.  Not bad.   Pbea

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