Inland Waterways Trust Fund

January 29, 2015Updated February 26, 2018 Inland Waterways Trust Fund Overview What Is It? Figure 1. Federal Fuel-Taxed Inland Waterways The Inland Waterways Trust Fund (IWTF) is a fund in the U.S. Treasury that receives revenues from a tax (also known as the inland waterway user fee) on commercial barge commercialbarge fuel on federally designated waterways . Approximately 11,000 miles of the nation’s 36,000 miles of inland waterways are part of this system and subject to the fuel tax (see Figure 1). Pursuant to the Water Resources Development Act of 1986, (WRDA 1986; P.L. 99-662), IWTF monies are subject to appropriation and are used to finance expenditures for construction and major rehabilitation projects on these these waterways. TheIWTF funds are matched byused to match federal appropriations from the General Fund of the Treasury. Overall, expenditures from the IWTF typically make up 5%-15% of total spending by the Army Corps of Engineers (Corps) on federal inland waterways. Regular operations and maintenance costs on inlandthese waterways, including maintenance dredging and minor lock repairs, are funded separately as a 100% federal responsibility. What Is the Status of the Trust Fund? The balance of the IWTF declined significantly from FY2005 to FY2010 due to a combination of increased appropriations, cost overruns at individual projects, and a decline in fuel tax revenues. The IWTF balance has since stabilized, but spending through FY2014 was limited to current year fuel tax receipts, which were widely seen as insufficient to finance needsdredging and minor lock repairs, are funded entirely from the General Fund. The Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121), enacted in June 2014, authorized changes to IWTF project planning and delivery, altered the cost-sharingcostsharing threshold for major rehabilitation projects, and partially exempted from IWTF cost-sharing a one project (Olmsted Locks and Dam Project, on the Ohio River) from IWTF cost sharing. That same year, P.L. 113-295 on the Ohio River) that recently had been requiring the majority of trust fund balances. Subsequently, another bill (P.L. 113-295) included among its provisions an increase to the inland waterway fuel tax on commercial users. As a result, the fee will increase from $0.20 to $0.29 per gallon on April 1, 2015. Although these changes may allow for more spending on some projects, other alterations to the underlying finance structure for inland waterways (e.g., increased federal spending or additional user fees) may be necessary to fund future project needs. Background and Statistics Annual commercial traffic on the federal inland waterways system accounts for 4%-5% of total commercial tonnage shipped in the United States. Although inland waterways are a relatively small part of the nation’s freight transportation network, they remain an important transportation route in some regions, especially those that rely on movement of bulk goods over long distances. In these areas, the percentage of commercial tonnage shipped by barge, especially for specific commodities, is high. Along with freight rail, inland waterways are a primary means of transport for the nation’s grain and oilseed exports and for bulk products such as coal, petroleum, chemicals, processed metals, cement, sand, and gravel. Figure 1. Fuel-Taxed Inland Waterways (Federal) Source: Congressional Research Service. Notes: Alaska and Hawaii have no fuel-taxed federal waterways. Although previous estimates by the Corps and others projected that inland waterway traffic would increase, actual traffic has remained somewhat flat over the last 20 years. At the same time, overall freight tonnage for all modes of domestic freight shipping has increased. In the future, inland waterways shipping is expected to increase, but at a rate less than other modes. IWTF Financing Trends Since 1986, the IWTF, financed by the inland waterways user fee, has been an important part of financing inland waterways construction and major rehabilitation projects. IWTF balances since 1986 have varied considerably. Balances reached their highest levels in 2002. On multiple occasions, the executive branch proposed to further increase fees on the user industry, including requiring the IWTF to fund some portion of operations and maintenance expenditures (in addition to the construction and major rehabilitation requirements). These proposals were not enacted. Beginning in FY2005, appropriations from the IWTF increased significantly as the Bush Administration requested and Congress appropriated greater investments in IWTF-funded projects. These increasing expenditures www.crs.gov | 7-5700 Inland Waterways Trust Fund exceeded annual fuel tax collections going into the IWTF. Additionally, some projects significantly exceeded their original cost estimates, further stressing the trust fund. One project in particular, the Olmsted Locks and Dam Project, has significantly exceeded estimates. As a result of these issues, balances fell sharply from 2005 to 2010 (see Figure 2). Figure 2. IWTF Financing Trends, FY1987-FY2013 Source: U.S. Army Corps of Engineers data. Graphic by the Congressional Research Service. To reduce pressure on the IWTF and prevent the balance from falling further, Congress enacted a number of stopgap measures. For instance, Congress appropriated funding for inland waterways projects from the General Fund in the American Reinvestment and Recovery Act (ARRA; P.L. 111-5), exempted major rehabilitation projects from their usual cost-sharing requirements in FY2009 appropriations, and limited spending from the IWTF to current year fuel taxes in recent appropriations bills. These changes stabilized the IWTF balance, but a lack of fuel tax revenues relative to needs, coupled with cost overruns at the Olmsted Project, limited the number of ongoing projects. Proposals Administration Proposals. Similar to prior administrations, the Obama Administration has regularly submitted proposals to Congress that would raise inland waterways user fees. Most recently, the Obama Administration recommended replacing the fuel tax with other user fees (tolls, licensing fees, etc.) that would increase revenues and potentially allow for more spending on inland waterways projects. Congress and industry interests have rejected these proposals, arguing that they would impose an undue burden on commercial shippers. Inland Waterways Users Board Proposal. In 2010, the Inland Waterways Users Board (IWUB), a federal advisory committee advising the Corps on inland waterways, endorsed a proposal of its own that was supported by some shipping industry interests. The IWUB proposed to increase the fuel tax by a range of $0.06-$0.09 per gallon (depending on collections) and require the federal government to cover all project costs for dam rehabilitations, as well as costs for other inland waterways rehabilitations that are less than $100 million (the policy of the federal government had been to fund such costs when they were less than $8 million). The IWUB also proposed project delivery process reforms aimed at preventing future cost overruns. Several bills to authorize the IWUB proposal were introduced in the 112th and 113th Congresses. Recent Changes WRRDA 2014 Changes. The Water Resources Reform and Development Act of 2014 (WRRDA; P.L. 113-121) made changes to inland waterways financing. It authorized the project delivery recommendations of the IWUB proposal, made the federal government responsible for paying all rehabilitation costs less than $20 million (i.e., more than the previous $8 million but less than the $100 million proposed by the IWUB), and reduced the IWTF portion of the cost-sharing requirement for the Olmsted Locks and Dam Project from 50% to 15%. These changes are expected to free up some IWTF monies for other projects. WRRDA also directed additional study by the Corps of new user fee and revenue options, including a study of the efficiency of revenue collection on the inland waterways system, a study on the potential use of bonds or new fees to finance the IWTF, and the convening of a stakeholder roundtable to review and evaluate inland waterways policy alternatives. Commercial Barge Fuel Tax Increase. P.L. 113-295, enacted on December 19, 2014, included among its provisions an increase of $0.09 per gallon to the inland waterways fuel tax on commercial barges. The increase had been requested by users and was generally consistent with the recommendation of the IWUB proposal. The change takes effect on April 1, 2015, and will make the overall tax on barge fuel $0.29 per gallon. The increase to the fuel tax does not guarantee increased expenditures on inland waterways, which remain subject to discretionary appropriations. The higher fuel tax would, however, increase revenues accruing to the IWTF and thus increase future IWTF balances available for appropriation. Issues for Congress In considering further changes related to the IWTF, Congress may consider what, if any, level of improvements (and potential funding increases) is necessary for inland waterways. Other issues may include the appropriate cost share between the federal government and users and the appropriate type and amount of user fees (in the form of the fuel tax or other vehicles for revenue generation). Issues such as the sequencing and funding for individual projects, the efficiency of user fee collections, and the addition or deauthorization of individual waterways from the federal system may also be discussed. For more information, see CRS Report R41430, Inland Waterways: Recent Proposals and Issues for Congress. Charles V. Stern, cstern@crs.loc.gov, 7-7786 www.crs.gov | 7-5700 IF10020 waterway fuel tax. These changes have stabilized the IWTF balance and allowed for an overall increase in IWTF-related expenditures on inland waterways (see Figure 2). This In Focus discusses the IWTF, inland waterways, and related issues for Congress. Inland Waterways Background Annual commercial traffic on the federal inland waterways system (i.e., fuel-taxed waterways designated by Congress and eligible for funding from the IWTF) accounts for 4%5% of total commercial tonnage shipped in the United States. Although inland waterways are a relatively small part of the nation’s freight transportation network, they are an important transportation route in some regions. In some areas that rely on movement of bulk goods, the percentage of commercial tonnage shipped by barge, especially for specific commodities, is high. Along with freight rail, inland waterways are a means of transport for the nation’s grain and oilseed exports and for bulk products such as coal, petroleum, chemicals, processed metals, cement, sand, and gravel. Source: CRS, based on Corps data. Note: Alaska and Hawaii have no fuel-taxed waterways. Whereas total freight tonnage for all other modes of domestic shipping has increased in recent years, traffic and tonnage on the inland waterways system has remained relatively flat over the last 20 years. Future inland waterways shipping is expected to increase, albeit at a rate slower than other modes. A primary concern for many commercial waterway users is the age of inland waterways infrastructure and the potential for delays in shipping as this infrastructure deteriorates. Some are concerned that these delays could lead users to turn to other modes of freight transit. IWTF Financing Trends Congress established the inland waterways user fee in 1978. WRDA 1986 formally established the system by which these fees are utilized, including the IWTF and the current system of financing inland waterways construction and major rehabilitation projects. Costs for these projects are shared equally between the IWTF and the General Fund, whereas regular waterway operations and maintenance costs are funded entirely from the General Fund. The IWTF balance has varied considerably over time, reaching its highest level in FY2002. Shortly thereafter, IWTF appropriations increased significantly as the George W. Bush Administration requested and Congress appropriated greater investments in IWTF-funded projects. At the same time, fuel tax receipts declined. As a result, the balance fell sharply from FY2005 to FY2010 (see Figure 2). https://crsreports.congress.gov Inland Waterways Trust Fund Figure 2. IWTF Financing Trends, FY1990-FY2017 previous threshold of $8 million). WRRDA 2014 also reduced the IWTF cost-sharing requirement for the Olmsted Locks and Dam Project from 50% to 15%. WRRDA 2014 directed additional study by the Corps of new user-fee and revenue options, including studies of the efficiency of revenue collection on the inland waterways system and the potential use of bonds or new fees to finance the IWTF. WRRDA 2014 also authorized a stakeholder roundtable to review and evaluate inland waterways policy alternatives. Commercial Barge Fuel-Tax Increase. The Tax Increase Prevention Act of 2014 (P.L. 113-295) included among its provisions an increase of $0.09 (from $0.20 to $0.29) per gallon to the inland waterways fuel tax. This increase was generally consistent with the user-fee recommendation of the IWUB proposal and took effect on April 1, 2015. Since enactment of these changes, new fuel-tax receipts accruing to the IWTF have been approximately $25 million per year. Source: U.S. Army Corps of Engineers data. Graphic by CRS. Notes: FY2009 and FY2010 reflect American Recovery and Reinvestment Act of 2009 (P.L. 111-5) funding. FY2014 reflects alterations enacted under WRRDA and related legislation. To stabilize the IWTF balance, Congress has enacted a number of stopgap measures in recent years. For instance, Congress exempted certain projects from IWTF cost sharing under the American Recovery and Reinvestment Act (P.L. 111-5). In appropriations bills from FY2009 to FY2014, Congress limited IWTF spending to the annual amount received in fuel taxes. These limitations had the desired effect of stabilizing the IWTF, but, combined with cost overruns at the Olmsted Project, they also greatly limited the number of new and ongoing projects. More recently, the IWTF balance and overall spending have increased as a result of the changes discussed below. Proposals and Recent Changes Inland Waterways Users Board Proposal. In 2010, the Inland Waterways Users Board (IWUB), a federal advisory committee advising the Corps on inland waterways, endorsed a proposal supported by some shipping-industry interests. The IWUB proposed to increase the fuel tax by a maximum of $0.09 per gallon, and that the federal government increase its share of projects funded, to cover all project costs for dam rehabilitations, as well as other inland waterways rehabilitation projects less than $100 million (since WRDA 1986, the policy of the federal government had been to fund such costs from the General Fund only when they were less than $8 million). The IWUB also proposed project-delivery changes aimed at preventing future cost overruns, among other things. Bills to authorize these changes were introduced but not enacted. WRRDA 2014 Changes. WRRDA 2014 made changes to inland waterways financing but did not alter the fuel tax or add other user fees. It authorized the project-delivery recommendations of the IWUB proposal and made the federal government responsible for paying all rehabilitation costs less than $20 million (i.e., less than the IWUB’s proposed threshold of $100 million but more than the Budget Proposals. Similar to prior Administrations, budget proposals both before and after WRRDA 2014 requested significant increases to inland waterways user fees to provide additional revenues and allow increased spending on inland waterways. These requests have, in most cases, recommended replacing or supplementing the fuel tax with other fees (tolls, licensing fees, etc.). Congress and industry interests have rejected these proposals, concluding that they would impose an unacceptable burden on shippers. Issues for Congress The enactment of WRRDA 2014, coupled with the increases to the IWTF fuel tax, has made it possible for Congress to both provide significant appropriations for the Olmsted Project and make available a greater share of the IWTF balance for other qualifying inland waterway projects. Receipt collections have increased marginally, and the trust fund remains subject to discretionary appropriations. After the Olmsted Project is complete, inland waterway expenditures may decrease, as the unique cost-sharing arrangement for that project will no longer be in effect. Furthermore, despite the aforementioned fuel-tax increase, recent Administration budgets (including the FY2019 budget request) have continued to propose new inland waterway user fees and reduced expenditures on IWTF construction. In considering future proposals, Congress may consider what level of improvements and increased appropriations are warranted, if any; the appropriate cost share between the federal government and users; and the preferred type and amount of user fees. Other topics for consideration include sequencing and funding of individual projects, efficiency of user-fee collections, and addition or deauthorization of the individual waterways system. Charles V. Stern, Specialist in Natural Resources Policy Nicole T. Carter, Specialist in Natural Resources Policy https://crsreports.congress.gov IF10020 Inland Waterways Trust Fund Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. https://crsreports.congress.gov | IF10020 · VERSION 9 · UPDATED