Page 8: of Maritime Reporter Magazine (August 1985)

AWO PERSPECTIVE

COAST GUARD USER TAXES:

UNTIMELY AND UNWISE

The following is an excerpt from the June 27, 1985 testimo- ny of James H. Sanborn, chairman of the board of the

American Waterways Opera- tors, Inc. and vice president-

Operations, Sonat Marine, Inc., before the House Subcommittee on Coast Guard and Navigation on the subject of H.R. 1936,

Coast Guard User Tax legisla- tion.

I appreciate this opportunity to appear before you on behalf of AWO to testify on H.R. 1936, legislation to impose annual Coast Guard user fees of $476 million. The Coast

Guard continues to feel the effects of budget constraints and the addi- tion of new statutory responsibili- ties. However, it appears that the driving force behind this hearing is the desire to reduce federal expen- ditures, rather than on the merits of this issue. As every member is well aware, this committee has on several occasions rejected imposition of

Coast Guard user fees. We hope that, despite the pressure to act quickly to raise revenues, you will take a comprehensive look at the consequences of Coast Guard user fees and the alternative course of cutting costs.

As members of the maritime com- munity, we are appreciative of the committee's continued efforts to help and support American-flag operators. This is particularly im- portant given the desperate eco- nomic plight that exists in all seg- ments of the industry. We submit that the best way to help this indus- try is not to burden it with more taxes. Whatever the term—user fee, charge or toll—these costs are in reality added taxes on our industry.

I hope the subcommittee will keep in mind that the Administra- tion is seeking to greatly increase user taxes for inland waterway oper- ators as well as impose significant new taxes for the use of our nation's ports and harbors. Recently, the

Senate leadership and David

Stockman shook hands over such an agreement. The cumulative im- pact is staggering. I will address the specific issue of Coast Guard user fees but it is, I believe, imperative to note that all these proposed new revenue sources are aimed at U.S.- flag operators and should be viewed as a whole.

In 1981 and 1982, AWO testified before this subcommittee on the issue of Coast Guard user fees. After reviewing their comments, I have several observations: AWO's recom- mendations are as valid today as they were in 1981-82; there is a gen- eral reluctance to implement these recommendations as a way to re- duce costs; the entire U.S.-flag mer- chant marine, including shallow- draft coastal and inland operators, has continued to shrink in number, and the economic plight of our in- dustry has steadily worsened over the past four years, with no relief in sight.

The Coast Guard is a military and humanitarian service, operating for the common good, whose charter also includes enforcement of marine safety and protection statutes and regulations.

It is clear that so-called "indirect services"—i.e., vessel traffic services and aids to navigation—do not sole- ly benefit commercial vessels. These functions also provide significant benefit to our nation's ports, recrea- tion areas, fish and wildlife en- hancement, water quality—to the

American public as a whole. The "public benefit" ripple effect of

Coast Guard responsibilities is not confined exclusively to indirect ser- vices. For example, icebreaking—a "direct service" according to the

Administration—provides benefit to a wider universe . . . just ask the residents of areas that my company supplies with home heating oil in the winter.

As to direct charges, which are contemplated in the House and

Senate budget resolutions, commer- cial vessel operators are being asked to reimburse the Coast Guard for functions performed as a result of statutorily-mandated requirements.

The responsibility for enforcement of these statutes has been given by

Congress to the Coast Guard. In response to that Congressional man- date, the agency performs a govern- mental function and has promul- gated rules and regulations with which we must comply.

Compliance with these require- ments is already costly to our indus- try; it is inequitable to ask commer- cial vessel operators, deep in the midst of an economic depression, to bear the added financial burden of reimbursing the Coast Guard for performing its statutorily-man- dated duties. These requirements were promulgated for the public good and are clearly not benefits conferred upon the industry; we op- pose paying for these so-called ser- vices in the form of Coast Guard user taxes.

Furthermore, because of the

Coast Guard's multi-mission func- tion, there are numerous costs in- herent in each Coast Guard "civil- ian" activity that would not be pres- ent if private industry was perform- ing that activity, unencumbered by the military aspect of Coast Guard operations.

And, because the agency's budget is structured to respond to the Con- gressional authorization and appro- priations process, it cannot accu- rately identify the direct costs asso- ciated with performing a specific function with respect to each seg- ment of the maritime industry.

The industry is in the fourth year of a severe depression that shows no sign of diminishing. All executives of barge companies can readily identify with the need to respond to budget deficits. There are two ave- nues which can be taken: raise reve- nues or reduce costs. The Coast

Guard is in the same "market" that we are. Our industry cannot raise revenues because the market will not accept higher rates. That simply means we are not in a position to pass on increased costs to our cus- tomers. The prudent operator has but one option: reduce his costs to try to preserve his operating mar- gin.

Some of us have had success. We have reduced staff sharply and work smarter. We prioritize our time to work on only those things that are important. We reduce our expendi- tures wherever we can, without af- fecting the safety of our operations or the quality of our service.

We recommend that the Congress exercise the same prudent business approach that private industry has been forced to adopt by asking the

Coast Guard to reduce their operat- ing costs, and transfer additional functions to the private sector to allow a reduction in personnel. The

Coast Guard already has delegated the responsibility for performing certain functions to the American

Bureau of Shipping (ABS), a private classification society. ABS performs these duties efficiently and cost- effectively because they are able to maintain lower overhead costs. Fur- ther, it runs as a business, indepen- (continued on page 14) 12 Maritime Reporter/Engineering News 4*

James H. Sanborn