These industries want their taxes hiked to pay for vital infrastructure; why won’t Congress act?
Those of you who claim to have “better” things to do with your Sunday evenings in the fall than watch ESPN GameNight may be unfamiliar with a segment called “C’mon Man!” It is a lighthearted bit where the co-hosts pick video clips of inexcusable mistakes or something silly and make their point at the end by uttering the phrase “c’mon, man!” Check out an example here.
My C’mon Man award goes to Congress for not yet passing the Water Resources Development Act, otherwise known as WRDA. WRDA is normally updated every two years, but the last bill was approved in 2007. WRDA provides authorization of projects for upgrades to the nation’s aging locks and dams as well as port improvements and flood protection. While the Senate has passed a version of WRDA, any increased funding has to originate in the House, which has not passed a bill. Many prognosticators are putting the odds at 50/50 as to whether anything will get passed this session.
I know what you’re thinking right now. So what else is new? We are having a hard time finding consensus when it comes to all kinds of important issues at the national level. You’re probably also thinking that it is a classic case of a need for more money and no one being the least bit interested in having to cough it up.
Well, you would be right on the first point. But you would be wrong about the second, which is why this shouldn’t be such an intractable problem.
I will try to explain.
The U.S. has two types of waterways, which are funded with two different funding streams. Our two types of waterways are deep-water ports and inland waterways — which consist largely of the Mississippi and connecting waterways.
The first funding stream is the Harbor Maintenance Trust Fund (HMTF). Many of our nation’s bulk commodities and containerized goods are shipped via ports. Money for the maintenance and dredging of these ports comes from the Harbor Maintenance Tax. The tax was established in 1986 on the value of imported and exported and domestic cargo handled at ports. Due to a Supreme Court decision that found taxing exported goods was unconstitutional, well over 90% of the revenue generated by the 0.125% tax comes from imported waterborne cargo.
The most recent estimates are that this tax brought in about $1.4 billion in 2007, while the expenditures on maintenance and dredging total less than $800 million. For those of you keeping score at home, that is barely more than half the money being collected.
So when it comes to maintaining our ports and harbors, the answer to this vexing problem is to simply spend the money that we are already collecting for the purpose it was intended rather than sitting on about a $7 billion balance. That’s pretty straightforward, right?
The second funding stream is the Inland Waterways Trust Fund. Here is a map of the inland waterway system. Notice Wisconsin’s relative position compared to most states:
A good portion of the revenue for this fund comes from a tax on barge diesel. The tax is currently set at 20 cents. The people who pay this tax, such as corn growers, soybean growers, and barge operators, are begging Congress to raise the tax to 29 cents per gallon. Yes, you heard me right. They want to pay a higher diesel tax. Why? Because they view that as a cheaper alternative than their products’ movement growing more and more unreliable as a result of an aging lock and dam system that isn’t getting repaired.
Of the 22 projects that are in need of serious work, one is slated to be done in 2020, another in 2027, and the rest fall anywhere between 2041 and 2090.
Interruptions in this system are unacceptable to the industries that depend on getting their goods to domestic and international markets as cost-effectively as possible.
What are these industries? Well, they are scattered all over Wisconsin, and they are major exporters. One is the Delong Co. of Clinton, Wis. This is a sixth-generation, family-owned company that began in 1929 as a grain elevator/feed mill operation and now has annual sales exceeding $900 million.
Besides providing many other services to local farmers, Delong exports large quantities of soybeans, corn, wheat, and DDGS. DDGS stands for dried distiller grains with solubles — a co-product of the ethanol production process. It is a high-nutrient feed used by the livestock industry. These exports are moved via containers that are loaded on barges and shipped across the globe — predominantly to Asia.
When you think about Wisconsin’s agricultural prowess, you would be right to assume there are many other players like this throughout the state that are able to be profitable in part because of access to a waterways system that can connect them to foreign markets.
If we continue to defer the maintenance of these corridors, however, headlines like this one in Reuters from last year are going to become much too familiar: Export grain prices soar as US shippers fear Mississippi closure. Corn basis jumps to 4-mth peak, soy to 2-1/2 mth high.
I don’t think a maintenance schedule that has the year 2090 on it is going to be particularly helpful to companies like Delong that are looking to ship agricultural products and don’t have 77 years to wait.
Our current situation with our waterways in this country is not a conundrum. It is eminently fixable. Especially when the industries that use these waterways are asking to pay more in order to do just that — fix them.
At this point, the answer from Congress seems to be: “Boy, I don’t know. That seems like an awfully heavy lift.” My response to that is simply, “Cmon, man!”
The massive expansion of the Panama Canal is scheduled to be completed next year. The size of the barges that can traverse this commerce corridor will be increased significantly. It is sad to think the country that gave birth to this engineering marvel wouldn’t be able to reap the benefits because our own system is not up to it.
We need to treat our waterways like the tremendous competitive advantage that they are. That is why TDA is once again teaming up with the Department of Transportation and the governor’s office to promote Wisconsin Ports Week, the week of Sept. 9-15.
I hope Congress and the president will also recognize that repairing our aging waterways infrastructure in a timely fashion is both attainable and necessary for economic expansion.
Click here to sign up for the free IB ezine – your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.