Increase Fees for Use of the Inland Waterway System

The Army Corps of Engineers spent about $900 million in 2010 on the nation's system of inland waterways. About 30 percent of those expenditures were devoted to the construction of new navigation channels, locks, and other infrastructure, and about 70 percent paid for the operation and maintenance of existing infrastructure. Current law allows up to half of the Corps' new construction on inland waterways to be funded with revenues from a tax on fuel consumed by towboats (which use most segments of the system); the remaining costs of construction and expenditures for operation and maintenance are financed through appropriations not tied to the revenue source.

This option would set fees high enough to cover all the costs of constructing, operating, and maintaining inland waterways. Those fees could take the form of higher fuel taxes, charges for the use of locks, or assessments based on the weight of transported goods and the distance those goods travel. If implemented, the option would boost collections (and thus reduce net spending) by $2 billion over five years and by $4 billion through 2021.

The principal rationale for this option is that it would increase economic efficiency. Imposing fees on the basis of the actual cost associated with keeping the inland waterway system open would encourage firms that arrange for goods to be shipped--producers or logistics specialists--to choose the most efficient routes and modes of transportation (which in some cases might involve transport by rail or highway or by another water route). In addition, more efficient use of existing waterways could alleviate congestion and perhaps curtail the demand for new construction. Any congestion that remained when fees covered costs would serve as a useful signal of market demand, giving the Corps better information about which additional construction projects would be likely to provide the greatest net benefits.

The effects of such fees on efficiency would depend largely on whether they were set at the same rate for all segments of a waterway or were based on each segment's operating costs. Because costs vary substantially from one segment to another, systemwide fees would offer weaker incentives for the efficient use of resources.

An argument against this option is that higher fees might slow economic development in some regions that depend on waterway commerce. Although the increase could be phased in to ameliorate those effects, doing so would reduce revenues in the near term. Imposing higher fees also would reduce the income of barge operators and shippers in some areas, although those losses would be small in the context of overall regional economies.