Marine Transportation System

Archive for September, 2013|Monthly archive page

The Murray-Cantwell Approach to Problem Solving

In Competition, Congress, Infrastructure, Intermodal, Water Resources on September 23, 2013 at 7:05 pm

This past week State of Washington Senators Patty Murray and Maria Cantwell introduced the Maritime Goods Movement Act of 2013 (S. 1905). Their inspiration for legislation came from what I have described as the unintended consequences of the Harbor Maintenance Tax, starting with complaints from the ports of Seattle and Tacoma that the Canadian competition to the north and the shippers, who are obliged to pay the Harbor Maintenance Tax when entering U.S. ports, were taking full advantage of the cost-differential where the HMT does not apply.

It is a complaint that was given some appearance of validity in a Federal Maritime Commission report issued last year and, a bit more convincingly, by data comparisons published by The Journal of Commerce last month.

At the request of the senators the FMC studied the role played by the HMT (0.125% of cargo value) in decisions to use the Vancouver and Prince Rupert gateways. The report, adopted by the FMC commissioners on a party line vote, didn’t make a strong case as to cause and effect. It did suggest that if an equivalent of the tax were applied in Canada “a portion of the U.S. cargo…likely would revert to using U.S. West Coast ports.” The report concluded by suggesting any remedy is in the hands of Congress not the regulatory agency.

The JOC looked at the issue by comparing market share within the PNW and among U.S. West Coast ports, where the HMT is uniformly applied. This is their finding in a nutshell:

Port data collected by The Journal of Commerce shows clearly that while Seattle and Tacoma have lost no market share relative to U.S. West Coast ports, their market share in the Pacific Northwest, a region that includes the Canadian ports of Vancouver and Prince Rupert, has slipped significantly in recent years.

That may not be conclusive of HMT culpability but it is indicative of competitive weakness just south of the 49th Parallel.  The comparative strength in British Columbia could be attributed to the HMT in addition to other factors, among them the efficient intermodal delivery system established as part of Canada’s ongoing Pacific Gateway Transportation Strategy.

Enter the Maritime Goods Movement Act User Fee proposed in the bill. The HMT would be repealed and then, for all practical purposes, recreated as the “MGMA User Fee.” In virtually every respect it would be like the HMT. The principal difference is that it also would be applied to U.S. bound cargo that first enters North America through Canada or Mexico.  Shippers would pay when the cargo crosses the land border.  On this bill rest the hopes of Puget Sound’s largest ports.

But the senators didn’t stop there. They also decided to try to fix the issue that is troubling most U.S. ports—the Harbor Maintenance Trust Fund. The bill would make several changes—including expanded uses of the HMTF such as are found in the Senate-passed WRDA (S. 601)—but let’s here focus on the greatest failing of the law as it now stands. That is the under-spending of HMTF funds.

Unlike the RAMP Act that would rely on a parliamentary mechanism to leverage full funding over the objections of appropriators, and unlike the WRDA bills of the Senate and House that set funding targets at which appropriators might aim, the MGMA bill uses a direct approach. At the bottom of page 10 is this: “[N]o fee may be collected…except to the extent that the expenditure of the fee [for allowable activities] is provided for in advance in an appropriations Act.” It is a rarely used means tying revenue collections to the spending of those revenues. The transaction would occur outside the section 302 allocations that cap appropriations committee spending. In doing so it would remove the incentive for appropriators to limit allocations and would treat the HMTF more like a dedicated trust fund.

This approach is employed in other areas of government where a user fee is collected to support a specific function of government. The only downside is that to meet the requirements of budget rules Congress also would have to identify offsetting revenue to fill the hole that would be created when, as a first step to creating the new MGMA User Fee, the HMT would be repealed, thereby eliminating 10 years of projected revenue.  Yes, it gets murky down deep in the budget process. But the result would be the very easily understood concept of “dollars in, dollars out,” as a Murray aide summarized.

Finding the offset, in the range of billions of dollars, presents a real challenge to the bill sponsors. There is a reason why other attempts at legislative solutions have produced little more than “sense of Congress” statements of principle and funding targets that are…well…just targets. The climb up this legislative Hill is very steep and the obstacles—including leadership objections and the search for offsetting revenue—have been daunting.

While we are noting the degree of incline ahead, let’s add to this particular bill the likelihood of complaints to the State Department from Mexico and Canada, who are major U.S. trading partners, and opposition from shippers and the railroads that carry their cargo into the U.S.

But that doesn’t mean it is the wrong solution to an HMTF problem that has existed since the early 1990s. It is the right one because it would be a more effective and lasting way to link the revenue to the reason for the revenue, which is to keep American harbor channels maintained and our ports competitive.  Pbea

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Bottom Line Thoughts on the MTS

In Congress, Federal Government, Infrastructure, Marine Highway, MTS Policy, Ports on September 17, 2013 at 11:30 pm

AASHTO, the association of State DOT chiefs, issued this summer the last of its “bottom line” modal reports. This one–Waterborne Freight Transportation–is a useful addition to the studies and papers that indicate a marine transportation system in great need of policy attention. It is not that the MTS is in failing condition–certainly not that part engaged in international commerce–but “the very success of the MTS has masked serious underlying structural problems” that, if left unaddressed, “pose critical threats to the long-term health of the MTS and the nation as a whole.”

The report notes that unlike the American interstate highway system the MTS “has evolved without larger scale coordinated policy and planning.” Indeed the ports and related infrastructure and services that developed without a “master plan” make the MTS a “collection of competitors.”  Persons who follow action in the ports of Charleston and Savannah, both overseen by State port authorities and championed by their respective State legislatures, can be fascinated watching that competition in real time.

The AASHTO report, the focus of which lands principally on the MTS infrastructure, identifies areas requiring attention. Waterway maintenance needs are not being met, navigation projects often take far too long to accomplish, funding for MTS expansion needs is uncertain, national investments are not being effectively targeted to meet national needs, and responsibility for the MTS in official Washington is widely diffused.  That last item can be easily understood by looking at the “comprehensive matrix” spreadsheet on the CMTS website.

In a statement that could apply to maritime elements of the private sector as much as it most definitely does to government policy, the AASHTO report offers this bottom line thought: “Embracing business as usual will inevitably lead to significant further declines in MTS condition and performance, and to lost opportunities for our transportation system and economy.” Today, former Pennsylvania Governor Ed Rendell, the nation’s inconvenient truth teller on matters infrastructure, and National Association of Manufacturers CEO Jay Timmons used the Philadelphia port as a backdrop for a similar message that is bolstered by a survey of manufacturers. “Improving our ports, highways, and bridges is essentially an economic driver. Modernized ports and transportation systems enable American manufacturers and businesses to export their goods to countries around the world, which strengthens our economy here at home,” said Rendell.

Much of that message in Philly and the AASHTO report is centered on international commerce, understandably. Ports and their modal connectors enable U.S. exports to make it to other markets in competitive fashion. They also speed imported goods to Costco shelves and components to American assembly plants.

One had to look for it, but the AASHTO “bottom line” document also makes the suggestion, however briefly, that the MTS can play an increasingly important role stateside. With reference to the potential for Marine Highway freight transport the document notes that “with growing highway congestion, waterborne transportation becomes an even more attractive transportation alternative.” It concludes with the statement that “[w]aterborne trade and transportation will be cornerstones of the 21st century economy.”

Among the actions called for in the report is the establishment of an office of multimodal freight at USDOT, an oft-made recommendation by various stakeholders and in the reports of appointed and self-appointed commissions. Among the tasks of the office would be to create a “system map and classification of MTS facilities, analogous to the National Highway System and the National Freight Network.” Congress specified in MAP-21 that the designated NFN be highway only, a decision that reflects more the congressional committee jurisdictions and the “highway bill” tradition than it does the multimodal operating freight sector. (A recently introduced House bill, H.R. 2875, grandly named the “Waterfront of Tomorrow Act,” would amend MAP-21 to “ensure that ports and harbors are incorporated into the national freight network.”)

The recommended freight office would also be used to prepare a “long-range vision plan for the national MTS development and investment to meet national transportation and economic development objectives.” The report also calls for full utilization of Harbor Maintenance Trust Fund monies for navigation infrastructure maintenance as well as an exemption from the Harbor Maintenance Tax for “domestic Marine Highway services.”

These recommendations are pointed in a constructive direction. But there is a missing element in the report. More significantly, it also is missing from the national transportation policy discussion on Capitol Hill, in those many departments and agencies tagged on the CMTS spreadsheet, and in the White House, then and now.  What is missing is visible interest in what the national maritime policy need be. The weakest element of the multifaceted American marine transportation system, oddly enough, is marine transportation. The long, sloping trend line representing flagging support for U.S.-flag merchant shipping, an aging Jones Act coastal fleet that frustrates Marine Highway development, and a shrinking ship building sector needs to be reversed.  It’s far from being the cornerstone of the economy that it once was and perhaps still can be.  Pbea