Distribution of Harbor Maintenance Trust Fund Expenditures

Distribution of Harbor Maintenance Trust Fund Expenditures

September 10, 2020
Distribution of Harbor Maintenance Trust Fund Expenditures
As Congress deliberates on authorization legislation for
In the Water Resources Reform and Development Act of
Army Corps of Engineers water resource projects (House-
2014 (WRRDA 2014; P.L. 113-121, §2101), Congress set a
passed H.R. 7575, Senate-reported S. 3591), it is
“target” annual increase in the percentage of each year’s
considering how to direct the use of funding available for
harbor maintenance tax revenue that should be spent on
harbor maintenance. Harbor maintenance consists mostly of
harbor maintenance, such that by FY2025 an amount equal
the dredging of navigation channels and harbors along the
to the prior year’s receipts would be targeted for s pending.
coasts and Great Lakes, and to a lesser extent at inland
ports. The policy choices offered by these bills will have
Since 2014, Congress has generally appropriated at least the
consequences for navigation efficiency and safety,
targeted percentage of harbor maintenance tax revenues for
recreation uses, and the levels of state and private
each fiscal year. Although HMTF annual outlays averaged
investment in port infrastructure. They may also affect
$843 million from FY2009 to FY2013, they averaged
competition among U.S. ports to capture import and export
$1.392 billion from FY2015 to FY2019. Section 1108 of
cargo and the associated logistics-industry jobs.
the Water Resources Development Act (WRDA) of 2016
(Title I of P.L. 114-322) established a “floor,” should
At the center of these policy decisions is the Harbor
HMTF collections decrease from one year to the next,
Maintenance Trust Fund (HMTF), created by Congress in
which would keep spending from decreasing in proportion
1986 and funded primarily by receipts from a tax on
to the decrease in collections. Due to Coronavirus Disease
importers of waterborne cargo (assessed at a rate of $1.25
2019 (COVID-19) and a drop in waterborne trade, harbor
per $1,000 worth of cargo). In FY2019, harbor maintenance
maintenance tax receipts are down 17% for the first half of
tax collections totaled $1.6 billion, investment earnings
CY2020 compared to CY2019.
totaled $214 million, and expenditures from the fund
through annual appropriations totaled $1.6 billion.
Minimum Percentages for Smaller Ports
H.R. 7575 would guarantee that emerging harbors, defined
The amount of maintenance required to keep channels open
as those handling less than 1 million tons of cargo annually,
varies considerably among harbors. Some of the ports that
receive at least 20% of HMTF expenditures annually, in
draw large flows of imports, and therefore generate a large
lieu of the current 10% guarantee (33 U.S.C. §2238). For
portion of harbor maintenance tax revenue, are naturally
context, an average-size ship transporting oil or containers
deep and require relatively little maintenance dredging.
internationally carries around 80,000 tons, so an emerging
While channels at other major commercial ports are
harbor transits the equivalent tonnage of one average-size
generally adequately maintained, some harbors with lower
shipload per month. The bill would also increase the
volumes of commercial cargo have maintenance backlogs,
minimum share for the Great Lakes Navigation System to
potentially affecting fishing and recreational boat traffic.
12% of total HMTF expenditures, rather than the current
10% of a smaller subset of HMTF expenditures.
The Unspent Balance
The value of U.S. imports has increased at a faster rate than
These provisions reflect continued congressional concern
HMTF expenditures, so the trust fund has built up an
that cargo volume not be the sole criterion in setting HMTF
unspent balance of more than $9 billion. H.R. 7575
spending priorities. Until 2014, the Corps of Engineers
potentially facilitates spending down the unspent balance
evaluated the economic consequences of not sufficiently
by removing this amount from counting toward the limits
maintaining a harbor’s channels mainly by estimating the
on discretionary spending set in the annual budget
likely effect on cargo volume. In WRRDA 2014 (§2102),
resolution. These limits apply to spending provided in
Congress directed the Corps to also consider a “needs
appropriations acts and constrain spending under the
assessment” of harbor conditions, the national and regional
jurisdiction of each appropriations subcommittee (in this
significance of a harbor, and any support it provides for
case, the Subcommittees on Energy and Water
military readiness. WRRDA 2014 also established that
Development in each house of Congress). Thus, if H.R.
emerging harbors and the Great Lakes Navigation System
7575 were to be enacted, spending more from the HMTF
receive at least a certain minimum percentage of HMTF
would not require spending less on other activities within
spending. According to the Corps, annual appropriations
annual Energy and Water appropriations bills.
have met these targets for emerging harbors and for the
Great Lakes Navigation System.
This approach would further recent enactments intended to
spend more from the trust fund. In the CARES Act (P.L.
Expanding Eligible Uses of the HMTF
116-136, §14003), Congress directed that the use of HMTF
The Corps is authorized to use the HMTF only for harbor
funds up to the prior fiscal year’s deposits into the fund
operations and maintenance, or O&M (33 U.S.C. §2241).
would not count against annual discretionary budget limits.
New project construction, such as dredging to deepen or
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Distribution of Harbor Maintenance Trust Fund Expenditures
widen a channel to new dimensions authorized by
Beaumont, Corpus Christi, Houston, Texas City,
Congress, is paid for from the general fund, with ports
Norfolk.
contributing 20% to 60% depending on the depth of the
H.R. 7575, in addition to the $50 million appropriation,
construction work (33 U.S.C. §2211). Besides maintenance
would provide 10% of HMTF expenditures for expanded
dredging, eligible uses of HMTF funds include breakwater
uses at donor ports.
and jetty maintenance, and construction and operation of
dredged material disposal facilities.
In WRRDA 2014, Congress also specified that any funds
appropriated each year above the FY2012 funding level of
The HMTF is used to pay for 100% of the maintenance
$898 million would be classified as priority funds, and
costs of harbors (there is no local cost share), except for
directed that a minimum of 10% of the priority funds be
dredging at depths greater than 50 feet. Nonfederal
used for harbors that have generated more harbor
interests, such as port authorities, must contribute half the
maintenance tax revenue than they have received over the
additional cost of maintaining channel depths greater than
prior three years; these funds can also be used for dredging
50 feet. The 50% nonfederal cost share formerly applied to
berths and contaminated sediments (§2102). The Corps has
dredging at depths greater than 45 feet; WRRDA 2014
not publicly reported whether 10% of priority funds has
(§2102(b)) changed this to 50 feet.
been used this way in recent fiscal years.
H.R. 7575 would further expand eligible uses of HMTF
funds at certain harbors to activities traditionally funded by
Beneficial Placement of Dredged Material
state or local government, or private industry. For instance,
Rather than separately dredging sand from an offshore
H.R. 7575 would allow up to $5 million be spent at up to 10
location for use in replenishing a beach or restoring a
emerging harbors for dredging a marina or berthing area
wetland, Congress has encouraged the Corps to use dredged
(where vessels dock) that is connected to a federal channel.
material from navigation projects. The HMTF may pay for
The bill would also make repair or replacement of wharfs
beneficial placement, if it is authorized as part of a
and piers and reinforcing slope stability of dredged berths
navigation project. In those cases where it costs more to
an HMTF-eligible expense, but only at donor ports and
beneficially place sediment rather than dumping it in open
energy transfer ports, as discussed below.
water, the nonfederal sponsor is typically required to pay
these additional costs. In WRDA 2016 (§1122) Congress
Donor and Energy Transfer Ports
created a pilot program for 10 beneficial use projects in
Donor ports were defined by Congress in WRRDA 2014
which the nonfederal interest would not be required to bear
(§2106) as a means of directing HMTF funds to harbors
the additional cost of transporting and disposing sediment
that generate significant harbor maintenance tax revenue
for beneficial use. In WRDA 2018 (Title I of P.L. 115-270),
but require little dredging. Donor ports are defined as
Congress expanded the pilot to 20 projects.
generating at least $15 million in annual tax revenue but
H.R. 7575 would expand the beneficial use pilot to 30
receiving less than 25% of the amount they generate in
projects; the bill also would allow for the economic benefits
harbor maintenance funding. In the same law, Congress
and efficiencies of beneficial use to be considered when the
also defined energy transfer ports at which energy
Corps is determining how to dispose of dredged material. S.
commodities comprise more than 25% of the tonnage.
3591 as reported contains provisions that would encourage
WRRDA 2014 authorized an annual appropriation of $50
beneficial placement of dredged sediment, and would
million that can be used by both types of ports for dredging
expand the beneficial use pilot to 40 projects.
berths and contaminated sediments, and by donor ports for
rebating importers some of their harbor maintenance tax
Data to Inform Decisionmaking
payments. Such dredging is funded by the HMTF, but the
Some specific information from the Corps on HMTF
tax rebates are paid for by the general fund. WRDA 2016
spending is generally not publicly available or reported on.
(§1110) defined medium-sized donor ports, those that
Since FY2006, the Corps has not published annual reports
generated $5 million to $15 million in harbor maintenance
on the status of the HMTF. Before then, these reports
tax revenue and received less than 25% of tax payments in
itemized project-level spending.
harbor maintenance funding, and made them eligible for a
The long-term trend in Corps dredging has been flat or
share of the $50 million. Congress partially funded from
declining volumes of material dredged, despite significant
2016 to 2018 and then fully funded in FY2019 and FY2020
increases in annual spending. The Corps’ unit cost of
the $50 million for donor and energy transfer ports. Half of
dredging (the cost per cubic yard of material dredged) has
the amounts are provided to donor ports, and half are
increased steadily since the mid-1990s. However, the Corps
equally distributed to states with energy transfer ports. As
does not itemize dredging costs by activity (e.g., excavating
identified by the Corps, these ports are
vs. transport and disposal) to determine the causes of these
 donor ports: Los Angeles, Long Beach, Miami, New
trends (see CRS Insight IN11133, Harbor Dredging: Issues
York/New Jersey, Seattle, Tacoma;
and Historical Funding). The trends raise questions of how
 medium-sized donor ports: Port Everglades, Port
proposed changes to the HMTF may increase Corps
Hueneme, San Diego; and
maintenance dredging costs and quantities.
 energy transfer ports: Mobile, Long Beach, Baton
Rouge, Lake Charles, New Orleans, Plaquemines, South
John Frittelli, Specialist in Transportation Policy
Louisiana, Baltimore, New York/New Jersey,
Nicole T. Carter, Specialist in Natural Resources Policy
IF11645
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Distribution of Harbor Maintenance Trust Fund Expenditures

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