Do increased Tax Revenues' Translate Into Higher Waterways User Taxes?

In March, Transportation Secretary Samuel K. Skinner unveiled his much ballyhooed national transportation strategy. It proposed dramatic shifts in the responsibility for the nation's harbors, waterways and other transportation modes: State and local governments would have a greatly expanded financial role. Privatization of transportation facilities and services would be encouraged. And user charges, imposed at the state and local, as well as Federal levels, would become the basic concept for financing the transportation infrastructure.

Almost without exception, editorial writers, columnists and cartoonists castigated the policy statement.

It was labeled as "empty," "a dud," "a disappointment," "a cop-out," "a toothless document," etc. As a result, most Washington observers and transportation industry officials dismissed the new strategy.

Secretary Skinner, however, has continued to plug away for his userpay- all philosophy. And he seems to be making headway—not because of any new support but because of the absence of viable alternatives.

The Federal deficit is playing into his hands. If additional funding for the transportation infrastructure does not come from the Federal Government, then it must come from non-Federal sources.

Now pending in Congress is a White House-sponsored proposal to triple the ad valorem tax on deepdraft waterborne commerce. This tax, which went into effect in April 1987, is now 0.04 percent of cargo value and recovers 40 percent of the cost of maintaining deep-draft access channels.

The President wants to increase the tax to 0.125 percent of the cargo value. If Congress approves, waterway shippers would be paying approximately 125 percent of the cost of harbor maintenance. In other words, this program would then be completely de-federalized or, in a sense, privatized since funding would come only from the private sector.

The real test of Secretary Skinner's new user charge policy will come this year with reauthorization of the aviation program. At present, non-military aviation users pay 57 percent of system costs, but DOT wants these users to pay 85 percent.

In effect, this would be full cost recovery, since military use accounts for 15 percent of system costs.

If DOT succeeds in shifting most or all of the aviation cost burden to users, the highway program is the next target. It faces reauthorization next year.

In 1992, if not earlier, waterways could be in DOT's aim. Towboats and tugs plying the 27 principal shallow-draft inland waterways already pay a tax of 11 cents per gallon on their fuel. Under a 1986 law, this tax will increase annually until January 1, 1996, when it will reach 20 cents per gallon.

Fuel tax receipts are used to finance one-half of the cost of constructing inland locks and dams.

There is no recovery, at present, for operation and maintenance of shallow-draft waterways.

This policy is in keeping with a 1985 agreement which resulted in the authorization of seven new locks and dams in return for the doubling of the fuel tax from 10 cents to 20 cents per gallon. But there is no lack of proposals calling for shallowdraft O&M recovery.

For instance, the Congressional Budget Office has repeatedly suggested inland waterway fees of 1.6 mills per ton-mile, which would recover about $330 million annually, in its report to Congress on "spending and revenue options." Another option: turning over the Coast Guard's aids-to-navigation program to non-Federal interests.

Even though President Bush has backed away from his no-new-taxes pledge, most Washington observers don't believe major tax hikes are in the offing. They translate "increased tax revenues" as, in all likelihood, more and higher user taxes.

Rather than taking waterways off the hook, the President's new stance is seen as making it even more difficult to hold the line on user charges.

The waterways sector, still reeling from the after-effects of a recession which lasted most of the last decade, has everything at stake in the continuing debate over national transportation policy.