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Saturday, March 24, 2018

Maritime Logistics Professional

A Perilous Trip Down the River for Inland Operators

Posted to Global Maritime Analysis with Joseph Keefe (by on March 1, 2018

WCI’s Michael Toohey outlines the challenges ahead for U.S. inland river stakeholders.

Washington, DC: At the National Press Club on Tuesday morning, Waterways Council President and CEO Michael Toohey provided a stark view of the task ahead of inland stakeholders as they look to build on recent funding and infrastructure renewal successes. That’s because the much-touted Trump administration infrastructure plan promises much, aims to change how that value is delivered, and potentially increases the considerable financial pressure already on inland operators at a time when they can least afford it.

The release of the long-awaited Trump Administration infrastructure principles, and then the release of President Trump’s FY 2019 budget request have inland advocates on edge. And, with good reason. The President has, at various times, promised to ramp up renovation of the “dilapidated system of locks and dams that are more than half a century old.” But, as with all things in Washington, the Devil is in the details. Trump’s massive funding initiative, as it turns out, relies heavily on so-called P3 – or public Private Partnerships – in order to make it work.

From the cheap seats, the President’s campaign promise and current initiative sounds good. So many different sectors of the domestic economy await good news on this front. These include recreational boaters, commercial fishermen, and those who benefit from hydropower generation, municipal and industrial water supply, flood control and national security sectors. But, currently, commercial waterways operators – approximately 400 companies across the entire national waterway system – are the only ones contributing a 29-cents-per-gallon diesel fuel tax to a dedicated Inland Waterways Trust Fund. Those funds are matched by General Treasury Funds that pays for the costs of construction and major rehabilitation of the system. Everyone else is riding for free.

In a well-publicized visit to the river system, the President promised, “Together, we will fix it. We will create the first-class infrastructure our country and our people deserve.” As the details of how that would come together emerge, it is clear that his vision includes far less in federal support, and significantly more in private and local state money to do just that. So-called P3 projects leverage commercial funds and investors, who would then have skin in the game and typically involve tolls and/or user fees, spread out over a fixed time frame.

In his talk to a gathered group of perhaps 20 journalists, Toohey reminded us that “the inland industry is already involved with a P3 partnership with the federal government.” As the only stakeholder already contributing significant funds to the effort, he also lamented that, sometimes, “no good deed goes unpunished.” And, looking ahead to the possibility that the P3 route could produce additional tolls and lockage fees, he had some stark predications of what could come to pass, if they do.

For starters, any additional tolls or fees imposed on a fragile inland marine transportation sector – already mired in a state of low freight rates – he said, would drive traffic off the rivers and onto trucks. Or, in other words: exactly the outcome that the U.S. Department of Transportation’s Maritime Administration doesn’t want to see.  Beyond the increased congestion and accelerated deterioration of the nation’s interstate highways that this would create, the migration of freight from the intermodal equation’s cleanest mode onto one of its dirtiest – trucking – would be a major setback for America’s aggressive drive to clean up the air that we breathe.

As P3 projects across the fruited plain drive up costs for consumers everywhere, drivers along just one ten mile stretch of I-66 near Washington, DC are now facing $46 roundtrip DAILY commuting bills. Translating that metric to the nation’s waterways would be a tragic blunder, a disaster for the nation’s heartland (which is already in a fierce battle with South American grain producers for broader access to global markets), creating new and increased highway maintenance costs while at the same time dealing a body blow to the environment. Doesn’t sound like a good idea to me.

At a time when the Democrats are not looking to give their colleagues across the aisle any additional legislative victories, the task of steering public policy back onto the right course has never been more difficult. Nevertheless, says Toohey, bipartisan support is what produced the successes of 2014, WRDA, and the successes that for inland infrastructure that will follow. Arguably, this will be his most difficult task yet as he leads the Waterways Council in its advocacy role. “Compromise,” he said, “will be the key.”

Toohey correctly asserts that since the founding of the United States, the Federal government has played a role in operating and maintaining the inland waterways because the system is a national treasure, and does not belong to one state or entity. More recently, and since the end of 2014, through the advocacy of Waterways Council, Inc., (WCI), inland waterways carrier and shipper members increased their contributions to the diesel fuel tax (by 45%) deposited into the Inland Waterways Trust Fund for increased investment to the system. Today, inland waterways carriers pay the highest tax of any surface transportation mode in the nation.

In a recent OP/ED in MarineNews magazine, WCI’s President pointed out that the President’s FY2019 budget request to Congress proposes to cut more than 22% of the U.S. Army Corps of Engineers’ Civil Works funding to $4.78 billion, down from the FY2018 Senate Appropriations Committee’s funding level of $6.16 billion. Among other things, the FY2019 budget also proposes a New User Fee on Inland Waterways. The proposal would establish a vessel user fee to supplement existing revenue from the $0.29 per-gallon diesel fuel tax to help finance the users' share of anticipated capital investment projects, as well as 10% percent of the cost of Operations and Maintenance (O&M) – historically a Federal responsibility –  activities on the inland waterways. This proposal would seek to raise approximately $1.7 billion over a 10-year window. 

If accepted, said Toohey, “This budget, like the infrastructure proposal, hamstrings America’s ability to compete in the world, and could virtually eliminate the cost-competitive advantage the waterways provide to shippers.” He wound up his talk, before taking questions, by saying that WCI looks forward to working with the Trump Administration and with Congress to develop an equitable and meaningful infrastructure plan, and to see full and efficient funding provided for the U.S. Army Corps of Engineers. “We can and must do better,” insists Toohey. I agree. What about you? – MLPro.

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Joseph Keefe is a 1980 (Deck) graduate of the Massachusetts Maritime Academy and lead commentator of MaritimeProfessional.com. Additionally, he is Editor of both Maritime Logistics Professional and MarineNews magazines. He can be reached at jkeefe@maritimeprofessional.com or at Keefe@marinelink.com. MaritimeProfessional.com is the largest business networking site devoted to the marine industry. Each day thousands of industry professionals around the world log on to network, connect, and communicate.

Tags: Michael Toohey P3 Partnerships President Trump WRDA WCI


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