WRDA bill exemplifies ports' frustration with fed gridlock
There is growing recognition in Congress about the contribution of ports to economic growth, but stalled water resources legislation that easily passed both houses is symptomatic of the ongoing political and regulatory dysfunction that has made it difficult the past quarter century to invest in infrastructure and optimize port functions, port industry officials say.
The reauthorization of the Water Resources Development Act (WRDA) is held up in a House-Senate conference committee because of differences over whether Congress or the executive branch should have final say on which deepening projects get funded. Congressional leaders and maritime industry supporters had high hopes the legislation would be passed before the Christmas break.
It's the same divisive politics that has prevented the government from developing a responsible, long-term budget to bring down the deficit, raise the debt ceiling to pay U.S. obligations or pass many needed laws, Port Tampa Bay CEO Paul Anderson suggested.
"I doubt we could put a man on the moon today because of our bureaucracy and federal government," Anderson told fellow port officials gathered in Tampa, Fla., late last month for the American Association of Port Authorities' annual seminar on shifting trade patterns. "If we don't adapt as a nation we're going to miss the opportunity to grow with the rest of the world."
WRDA has bipartisan support and passed the House by an overwhelming 417-3 vote, something that rarely happens in this day of hyper-partisan politics and legislative gridlock. It lays out the priorities for the Army Corps of Engineers in terms of maintaining harbor dimensions, allowing construction for deepening projects, authorizing feasibility studies, repairing locks and dams on inland waterways, flood control, and environmental protection. The Senate and House WRDA bills authorize about $8.2 billion in port and waterway projects each, which must be separately funded through the appropriations process.
Congress traditionally refreshed its spending guidance for the Army Corps every couple years, but it has been seven years since the last WRDA bill was enacted.
The House bill includes several reform measures designed to streamline the process for reviewing projects and keep a lid on costs, such as shifting authorization to fund projects that have languished on the books to new projects.
The lack of federal investment for dredging, as well as the surface transport system that conveys cargo to and from ports, is a major constraint on productivity and will make shipping more expensive as trade volumes grow, AAPA President Kurt Nagle said at a press conference aimed at promoting the importance of ports.
Merchandise trade represents a quarter of U.S. Gross Domestic Output, according to the World Bank, and Army Corps data shows 95 percent of that cargo by volume moves through ports. Retailers and manufacturers import huge quantities of finished goods and supplies from around the world, while American farmers, factories and energy producers depend on ports to reach overseas customers.
East Coast and Gulf ports are especially keen on dredging ship channels to 47 feet, and preferably 50 feet, to accommodate much larger vessels now being deployed by ocean carriers because of their lower operating costs per unit. The large vessels are forced to load at less than full capacity to manage shallow drafts, reducing their efficiency. Port authorities fear that carrier executives will decide to bypass their facilities if the infrastructure is inadequate.
"If we're not competitive in our ability to move products in and out of this country our economy is going to suffer, our consumers are going to suffer," Nagle said.
U.S. port authorities plan to invest $46 billion to modernize infrastructure over five years through 2017, including expansion and deepening of berths to handle much larger vessels, bigger cranes, on-dock rail facilities, and high-tech truck gates. But Nagle and other freight interests have long-complained that the federal government is not doing its part, pointing to a permitting process that can take more than a dozen years for many large projects, an eroding funding base for highway repairs and expansion because user fees are not keeping up with growing needs, and diversion to other parts of the budget of half the user fees from waterborne cargo - or more than $700 million per year - dedicated to maintaining harbor channels at their authorized depths.
The American Society of Civil Engineers estimates the nation, across all levels of government, will face by 2020 an $846 million funding gap for surface transportation infrastructure and a $16 billion shortfall for inland waterway and harbor improvements.
The federal government needs to make transportation infrastructure a higher priority in its budget because the money is an investment that provides long-term, ongoing returns in the form of jobs, economic activity and $200 billion in local, state and federal tax revenues, Nagle said.
"Unfortunately, we have our grandparents' infrastructure and we really need to be building our grandchildren's infrastructure at our ports," he told the small group of reporters.
States such as Florida and South Carolina, unwilling to wait for federal appropriations to start projects years in the planning, have stepped in with their own money to cover the federal share of deepening once certain projects are authorized. Florida, for example, committed $77 million beyond its own cost-share requirement to deepen Port Miami. Officials eventually hope to be reimbursed by the federal government.
In addition to new water resources legislation, the government needs to develop a national freight policy for the first time to prioritize transportation investments, Anderson said. Congress, in the 2012 MAP-21 bill that served as a two-year Band-Aid for transportation programs, instructed the U.S. Department of Transportation to begin that process, but the analysis is weighted toward highways and requires a more multimodal focus, transportation experts say. States have great discretion on how to use their federal highway aid, but there is no overarching plan for what projects should take precedence because they form a national network that carries higher volumes of motorists and cargo. A national transportation strategy that includes freight would also help the Army Corps make judgments about where to dredge and the DOT disburse money through its popular TIGER discretionary grant program, which has spread about $500 million per year to ports, freight rail and other modes that aren't part of the automatic formula for state aid.
"We don't have enough money to go around and do all of our projects, so let's prioritize the ones that bring the biggest return on investment to our nation," Anderson said.
The WRDA bill is hung up in the conference committee over how much power to give the Army Corps on project approvals, a dispute that has more to do with institutional differences between the House and Senate than with the Republican-Democrat divide, Rep. Rodney Davis, R-Ill., said last month in Washington at one of the hundreds of sessions held during the Transportation Research Board's annual conference. The Senate version allows the Army Corps to move ahead on projects after a final feasibility study from the Chief of Engineers, is finished and if there is a local sponsor willing to front the cost before Congress appropriates funds, but the House version still requires the Army Corps to come back to Congress for permission to move to the construction phase.
House members like Transportation and Infrastructure Chairman Bill Shuster say they want to speed up the decision-making process, but don't support ceding to the executive branch their constitutional authority to make spending decisions.
The fact that each house of Congress is controlled by a different party does, however, make the horn-locking over jurisdiction ultimately about politics. Davis seemed to acknowledge as much when questioned by a reporter about the bill, saying he doesn't understand how conservatives at odds with President Obama on so many issues could consent to give the administration final say on new dredging projects.
"That's always been a frustration to me. We're ceding authority to a president that you despise because he and his administration gets to pick who gets projects and who doesn't. That's why we need congress' voice - to keep the balance," he said.
The dilemma is a function of the House and Senate leaders in 2011 placing a moratorium on earmarks in spending bills. Funding used to be inserted by individual lawmakers on a project-by-project basis in an annual appropriations bill for Army Corps operations, but now the only way projects can move to construction is if the White House includes them in its budget request for the next fiscal year.
Earmarks have a poor public reputation as wasteful spending for politicians' pet projects, but lawmakers and industry officials say earmarks are different in the water resources arena because they are based on the results of rigorous benefit-cost analysis and environmental reviews conducted by multiple agencies, including input from local Army Corps offices about their available capabilities. The earmarks are based on merit, not merely district politics, they insist.
The challenge is finding a mechanism to identify needed improvements that can be advanced without circumventing the earmark moratorium
The House WRRDA (the extra "R" is for "reform") bill would allow local sponsors that receive final feasibility studies after enactment of the bill to move forward with pre-construction, engineering and design at their own risk and apply for in-kind credit or reimbursement after the project is authorized at a later date. The clause would benefit ports such as Jacksonville and Everglades in Florida that are on the cusp of receiving the Army Corps Chief's reports, but would miss getting authorized in the current legislation and otherwise might have to wait several years to even start preliminary work.
The two bills also attempt to make the deepening process more flexible by creating demonstration programs for local public-private partnerships to carry out coastal and inland harbor navigation projects, and for local sponsors to conduct feasibility studies of water infrastructure projects with appropriate federal monitoring.
Davis expressed confidence that the public-private partnership language will remain in the final WRDA bill.
Other countries are more serious about developing transportation infrastructure, because they understand it can support trade and economic growth, economists and transportation analysts say.
Anderson said it took Panama only five years to move to a national referendum approving the $5.2 billion expansion of the Panama Canal and has completed 70 percent of the project in the time it has taken Congress to consider renewing WRDA.
The recent omnibus appropriations bill passed by Congress for the remainder of fiscal year 2014 includes a new high of $1 billion for dredging operations and maintenance, reflecting many of the goals outlined in the pending WRDA bills.
Congress also approved the Army Corps to initiate three new deep-draft navigation studies and three construction projects. These are the first new starts since 2010, according to the AAPA.
The Army Corps will make the final decision about which projects it will undertake.
The bill green lights the Army Corps to enter into a project partnership agreement with the Georgia Port Authority (GPA) for the deepening of the Savannah River ship channel from 42 feet to 47 feet, a project that has been in the planning stage for 15 years. That will allow the Army Corps to treat the deepening as a construction project and tap the $231 million the state of Georgia has approved for its share of the cost. The total price tag is now estimated at $652 million. The cost has risen from its authorized level of $500 million in 1999 primarily due to more environmental mitigation requirements.
Federal agencies approved the final permit in October 2012, but the change in cost structure requires further congressional approval. The WRDA bill would raise the authorization ceiling above $652 million, but lawmakers had to insert in the omnibus a two-year waiver on cost limits for projects like Savannah that never saw appropriations in either the House or Senate materialize the past few years because Congress was only able to pass continuing resolutions of prior budgets that did not include the new money.
Georgia Gov. Nathan Deal recently recommended an additional $35 million to cover the state's estimated share of the cost escalation since the project was originally authorized. The Georgia legislature is expected to approve the increase next month.
The Army Corps will award a contract soon and commence dredging by the middle of the year, GPA Executive Director Curtis Foltz, said on the sidelines of the conference. The $350 million construction phase should be completed in 2017, while environmental mitigation work will take longer, he said.
By effectively borrowing state money, the Army Corps can start the project while waiting for Congress to appropriate funds for the federal share of the project in the next budget cycle.
Port and Army Corps estimates indicate the deeper channel will reduce shipping costs by up to 20 percent because larger containerships will require fewer individual trips. The Army Corps has determined the economic benefit to the nation will be five-times the annual $39 million cost to maintain the deeper draft.