Background

		Waterway Transportation and the 13 Inland Ports

Inland ports along the section of the Mississippi River between St. Louis,  Missouri, and Baton Rouge, Louisiana, provide “on and off ramps” for  shippers using the river, such as agricultural or chemical-processing  companies, that need to move a large amount of bulk commodities. The  13 ports selected for our review vary in size, ranging from the Port of  Memphis, Tennessee, the 5th largest inland port in the United States, to  small ports, such as the Port of Osceola, Arkansas, that may serve one or  two companies. Inland ports may be located on the banks of the river, or  in harbors that are located off the main channel of the river. See figure 1  for the locations of inland ports on the Mississippi River, including the 13  ports we selected for this review (the starred ports in the figure).
As shown in figure 2, a number of entities are involved in moving  commodities through ports. Shippers may have facilities, such as grain  silos, inside the port, or they may be located offsite and simply use the  port to receive or ship commodities. Shippers enter into contracts with  barge companies to move commodities along the river. If the shipper is  sending cargo, then a barge company will drop off empty barges that the  shippers load. The barge company then picks up the loaded barges,  lashes them to a flotilla or “tow” (a number of barges or vessels), and  transports the barges along the river to their destination. Within the port, a  harbor services/fleeting company will move individual barges to docks  within the port for loading or unloading, use “fleeting areas” along the  sides of the harbor to store barges waiting to be moved, and take the  barge back out to the river when it is ready to be added to a tow. On the  landside of the port, trucks and trains deliver or pick up commodities, and  a variety of port tenants, such as grain and fertilizer companies, have on- site facilities to store and move freight.

		Dredging and the Corps

The Mississippi River carries a large amount of sediment, which travels  downstream and can accumulate in various spots (shoaling) within the  river’s main channel and harbors. If the shoaling is too high or the river  level drops, these spots can become impassable for fully loaded barges.
See figure 3 for an example of shoaling at the mouth of a harbor. To help  maintain navigable waters, some inland harbors require dredging. A  vessel called a “dredge” removes sediment from the bottom of the harbor  and deposits it elsewhere. Dredging needs vary among ports. For  example, industry and port officials told us that harbors located off the  main stem of the river provide port and tenant infrastructure some  protection from the river’s current and large debris in the river, but these  harbors also tend to accumulate more sediment, particularly at the mouth,  or entrance, of the harbor. Finally, flooding events can deposit large  amounts of sediment in the channels and harbors, which becomes more  problematic as water levels fall.
The Corps is responsible for dredging the nation’s federally authorized  inland waterways, harbors, and channels, which are those that Congress  defined in statute as federal projects and approved their construction and  maintenance by the Corps to certain dimensions (depth, width, and  length). To maintain the harbors and channels, the Corps may hire  contractors or use its own vessels to dredge the harbors. The Corps  does not dredge outside of the federally authorized areas, but ports and  their tenants may dredge around their private docks and in other areas  not maintained by the Corps. Dredging is part of the Corps’ Civil Works  navigation mission, which includes the provision of safe, reliable, efficient,  effective, and environmentally sustainable waterborne transportation  systems for the movement of commerce, national security needs, and  recreation in the United States. The Corps is also responsible for the  operation and maintenance of locks and dams, as well as a number of  other missions, such as flood risk management and hydropower.
The Corps is organized into three tiers: a national headquarters in  Washington, D.C.; 8 regional divisions; and 38 Civil Works districts  nationwide. District offices are generally responsible for managing  dredging projects located within their district boundaries, including  planning, awarding, and administering maintenance-dredging contracts  with industry. Regional oversight is provided through the division. All three  tiers are involved in the budget development process. For example,  districts will compile a list of funding requirements for work packages in  the districts (for example, dredging an inland harbor). These work  packages are ranked and reviewed by the division and headquarters, and  the approved packages become the basis for the President’s Budget  proposal for the Corps’ Civil Works program. The Corp’s fiscal year  appropriation, as passed by Congress, may provide more or less funding  than what was requested in the President’s Budget proposal.

		Methods for Funding Dredging and Other Transportation Needs

The federal government uses a variety of methods to fund transportation  networks. The Corps pays the dredging costs for federally authorized  harbors and channels with funds appropriated by Congress and generally  reimbursed from the Harbor Maintenance Trust Fund. The trust fund is  supported through collections of the Harbor Maintenance Tax, which is a  tax collected on imports, domestic shipments, Foreign-Trade Zone  admissions, and passengers primarily at coastal ports. The annual  cost to fully dredge the harbors at each of the 13 selected inland ports  varies by harbor, with one harbor requiring about $300,000 to be fully  dredged, and another requiring over $3 million (although this could also  change each year, based on flows from the Mississippi River and the  conditions of each harbor). Prior to 2010, Congress used line-item  appropriations to provide dredging funds for the harbors of specific  ports. In contrast to the Harbor Maintenance Tax—which is paid by  shippers primarily using coastal ports (and thus, is not directly linked to  use of the inland ports)—the maintenance of other transportation  networks, such as highways, is paid by users through a fee or tax. In  addition, state and local governments are required to match federal funds  for transportation infrastructure, such as highways and landside  infrastructure at ports.

	Selected Ports Varied in Terms of Type and Amount of Freight Moved, and Did Not Show a Consistent Traffic Trend from 2010 through 2015

		Types of Freight

From 2010 through 2015, the 13 selected ports we reviewed moved the  following types of freight: agricultural commodities (primarily soybeans,  corn, and rice); petroleum products; crude materials (sand, gravel, and  similar materials); chemicals; coal; and primary manufactured goods  (such as lime and concrete). As shown in figure 4, the bulk of the freight  tonnage moved through these ports was composed of agricultural  commodities, petroleum products, and crude materials.
With respect to the contribution of the selected ports to the total tonnage  moved on the Mississippi River, the 13 ports included in our review  represented 15 percent of all agricultural freight; 9 percent of all crude  materials; 8 percent of all primary manufactured goods; and 9 percent of  all tonnage moved on the river from 2010 through 2015. The vast majority  (99 percent) of the agricultural freight departing from the selected ports  went downriver to deep-draft coastal ports primarily used for export  purposes, such as Baton Rouge, South Louisiana, New Orleans, and  Houston.
However, individual ports varied with respect to the type of freight moved  through the port, with some ports specializing in certain commodities. For  example, as shown in table 1, eight ports primarily transported agricultural  commodities from 2010 through 2015, and the remaining five ports  transported a range of types of commodities.
The industries located in a port’s geographic area tend to influence the  products handled by that port. For example, port stakeholders told us and  our review of Corps data confirmed that a number of ports primarily serve  the local farming industry by shipping out agricultural commodities and  bringing in fertilizer through the port. In addition, through site visits and  document reviews, we found that the Port of Southeast Missouri has a  lead facility in its region and a substantial amount of the freight moved  through that port is lead concentrate, classified as crude materials.

		Amount of Freight

As shown in table 2, the amount of tonnage transported through individual  ports can fluctuate significantly from year to year; however, the 13  selected ports fell into three broad groups. For the purposes of this report,  we will describe these groups in relation to the Corps’ definition of low-,  moderate-, and high-use ports, which is based on the 5-year average of  annual tonnage transported through the port. While tonnage fluctuated  annually, based on the 5-year averages, 6 ports transported less than 1- million tons; 6 ports transported 1-million tons to less than 10-million tons;  and 1 port consistently transported over 10-million tons.

		Freight Trends

The total annual amount of freight transported through the 13 selected  ports fluctuated substantially at the individual selected ports, making it  difficult to identify a consistent trend (see table 2). None of the 13  selected ports consistently experienced a year-to-year increase or  decrease throughout the 6-year time period. Stakeholders we interviewed  told us that some of the fluctuations in the total amount of tonnage moved  at individual ports is due to increases and declines in specific  commodities handled by the port. For example, at the Port of Pemiscot  County, total tons of freight increased by about 465 percent from 2012 to  2013, because of a large spike in crude petroleum shipments. The port’s  total tonnage declined in later years as those shipments declined.  According to stakeholders, changes in individual commodities are also  sometimes related to changes in export market demand or crop yields, or  situations in which freight movement is impeded by harbor conditions  (discussed later in the report). For example, stakeholders told us that if  export market conditions improve for American agricultural commodities  due to a drought in another country, farmers may sell more of their  product, as opposed to storing it when prices are low. In addition, crop  yield per acre determines the amount of crop harvested, and can be  affected by weather, seed quality, and other factors. Stakeholders also  told us that individual businesses decide where and by which mode to  transport their commodities based on many different long-term and short- term factors, such as transportation time and cost, and market demand,  among others.

	Stakeholders Identified Challenges That Funding Constraints Pose to Dredging Inland Harbors and Concerns about the Corps’ Fund Allocation Process Funding Constraints Limit the Corps’ Ability to Fully Dredge Harbors, Which Negatively Affects Freight Movement

A majority of the stakeholders we interviewed, as well as officials from  USDA and the Corps, cited funding constraints as a challenge that  prevents the Corps from fully dredging all inland harbors, including the  harbors at the selected ports. Port stakeholders told us that their harbors  generally need annual dredging, particularly at the entrance to the harbor,  where sediment flowing down the river tends to accumulate. Corps  officials in one district agreed that the dredging needs for the ports are  fairly consistent, although weather events and river levels can affect the  amount of dredging needed. According to Corps officials, the Corps has  dredged most of the 13 selected ports’ harbors most years from 2010  through 2016 (see table 3). However, port authorities we interviewed and  Corps officials noted that the Corps does not dredge all of the harbors to  their authorized dimensions (length, width, or depth) primarily due to  funding constraints. According to local Corps officials, the Corps needed approximately $20.6 million, and received approximately $13.1 million to  dredge all of the harbors and channels associated with the 13 selected  ports to their full dimensions in fiscal year 2016. While Congress provided  much more than this for the Corps to address operations and  maintenance needs, the Corps must allocate operation and maintenance  funds among hundreds of harbors and waterway projects. Nonetheless,  according to Corps officials in one district, the Corps has been able to  distribute the funds so that it can dredge enough of each harbor in that  district to keep barges moving. Some stakeholders echoed this sentiment,  stating that the Corps does a good job working with the funds that it  receives.
As shown in table 3, the Corps has dredged most of the 13 selected  ports’ harbors most years from 2010 through 2016. However, port  stakeholders provided some examples of how unmet dredging needs  have negatively affected freight movement at these ports, particularly with  respect to limiting the amount of freight moved per barge or creating  temporary harbor closures. Some of these stakeholders noted that these  situations can further lead to increased transportation costs and freight  congestion, which can have negative consequences for the industries  reliant on these ports, particularly agricultural industries.
Light-loading: Light-loading refers to situations in which shippers  cannot load a barge to its full capacity (see figure 5). Shippers have to  light load a barge when a harbor is experiencing shoaling because a  fully loaded barge would not have enough clearance for the bottom of  the barge to pass over the shoaled areas of the harbor. Light-loading  may refer to loading a barge so that it sits anywhere from several  inches to a few feet higher above the water; but stakeholders  explained that every inch taken off the barge’s draft corresponds to  about 15 to 18 fewer tons of cargo on the barge. Light loading was the  negative effect most commonly cited by port stakeholders when  discussing the effects of unmet dredging needs. Since light-loaded  barges carry less cargo than fully loaded barges, shippers must use  more barges to move the same amount of product, an outcome that  may lead to increased transportation costs. For example, one shipper  explained that its agreement with a barge company requires that the  shipper pay as if the barge is carrying a certain amount of tonnage,  regardless of the load size. Thus, during a period of light-loading, the  shipper would have to pay the barge company to move seven barges,  instead of six, and the shipper would be required to pay as if the  barges were carrying full loads. In addition to increased  transportation costs, stakeholders said that since light-loading  requires the use of more barges to move the same amount of freight;  barge shortages can occur if light-loading is widespread. One port  stakeholder told us that during periods of light-loading, it takes more  time to load the same amount of product onto barges (because of the  need to use multiple barges and the time it takes to switch each barge  out), which can lead to long lines of trucks waiting to unload their  cargo at the port.
Harbor closures: Port stakeholders provided examples in which their  ports were shut down due to unmet dredging needs. Several  stakeholders, as well as the Corps, cited the 2012 drought as being  particularly problematic. Over the course of 15 months, the Mississippi  River fluctuated from historic flood stages in 2011 to record lows in  2012, dropping over 50 feet in some places. A significant amount of  sediment from the 2011 flood settled along the river and in harbors,  and as the water level fell, numerous harbors along the river were  shoaled in and needed dredging. In this case, the shoaling occurred  during the harvest season, which is the busiest time of year for the  agricultural ports. Representatives from two ports told us they were  shut down for 2 to 3 months, with barges full of grain stuck inside the  harbor. Stakeholders said that grain silos at ports filled because  barges could not get out of the harbors and farmers were at risk of  losing grain due to spoilage in the field. Corps officials told us that  initially, four of the ports’ harbors in one district were closed during the  2012 drought; so the Corps worked to dredge two of those ports’  harbors so that agricultural shippers could move cargo from some  ports. Harbor shutdowns led to increased costs as companies began  trucking product to other ports. (One company estimated it lost $5  million.) Some companies said that the increased costs led to  downward pressure on the prices paid to farmers for grain. Port  shutdowns affected non-agricultural stakeholders as well. For  example, one port representative said that the area surrounding the  port ran out of gas and diesel fuel three times because temporary  harbor closures made it difficult to bring in fuel by barge. The 2012  drought was an unusual event, but the experiences at ports during  that time provide useful insight into the critical nature of dredging at  inland harbors. Moreover, port and tenant representatives provided  other examples in which ports were temporarily shut down for a few  weeks to as much as a month in more typical years. For example, a  tenant told us that due to harbor shoaling at its port, the company  spent $98,000 to reroute 14 incoming barges to another location on  the river, unload the cargo at that location, and truck the cargo into its  port.
Port and industry representatives explained that the increased  transportation costs created by light-loading and harbor closures are of  particular concern because the affected industries operate on very small  profit margins. In particular, agricultural companies and trade associations  noted that one of the main reasons that their exports can compete in the  global market is because of their low transportation costs. Some industry  representatives raised concerns about their ability to switch to shipping  cargo by truck or rail, explaining that shipping by barge is far more  economical.
In addition, port stakeholders noted that funding constraints that limit the  Corps’ ability to fully dredge their ports have led to increased costs for  them. Although port stakeholders varied in their financial ability to pay for  dredging, some stakeholders reported that they took their own steps to open their harbor by hiring a dredge or excavating part of the harbor  themselves. For example, one port representative said that his port  recently spent an additional $75,000 to further dredge the harbor because  the Corps did not have enough funding to fully dredge it. In addition,  another port used funds from other sources to pay to dredge its harbor in  2010, 2011, and 2013.
Port and industry stakeholders also told us that the uncertainty related to  the annual decisions made in the federal budget process and whether the  Corps will have enough funding to dredge their harbors creates  challenges in attracting tenants. The Corps and the ports are not sure of  how much funding will be provided in a given year until Congress passes  the Corps’ annual appropriation, as is the case with any activity funded  through the annual federal budget process. Once the funding amounts  and allocations are known, the Corps releases a work plan outlining  which harbors will be dredged and the amount of funding allocated to  each harbor. Port stakeholders stated that the funding uncertainty can  affect their ability to attract tenants, which need clarity about the reliability  of dredging when determining whether to spend millions of dollars to build  facilities, such as grain silos, that will last decades at the port. One port  provided an example in which a new tenant faced significantly increased  costs because the harbor was not dredged and the tenant had to light- load its cargo. Corps officials and researchers echoed these concerns,  noting the importance of reliable dredging when ports are attempting to  attract new tenants.

		The Corps’ Prioritization Process for Allocating Funds to Dredge Harbors Creates Challenges for Low Tonnage Ports

According to Corps officials, within current funding levels, the Corps must  make decisions about which harbors to dredge, and the amount of  dredging each harbor should receive. Based on interviews with Corps  officials and our reviews of budget guidance documents, when assessing  which projects to fund during the annual budget process, the Corps uses  a risk-based matrix that considers condition versus consequence, and  based on each value, assigns the project an overall risk score. With  respect to dredging inland harbors, the anticipated condition is based on  the expected level of shoaling, and the consequence is based on the  average annual tonnage moved by the port over the past 5 years, and  other factors, such as imminent life-safety impacts. Consequence is rated  on a scale of 1 to 5, with 1 being the most severe. For example, ports  that move less than 1-million tons of freight are ranked as “4,” or “low  economic impact.” In interviews, Corps officials identified other factors  that they consider when allocating funds for dredging, such as whether  nearby ports will be dredged, but several Corps officials pointed to  tonnage shipped as the primary factor they use to make dredging  decisions. In addition, Corps officials noted that funding for low- commercial use ports—ports that on average ship less than 1-million tons  per year—was reduced in the fiscal year 2012 budget and subsequent  budgets, in response to a 2010 Memorandum from the Office of  Management and Budget.
Stakeholders, including representatives of smaller ports as well as a  barge operator and industry associations that we spoke to, raised  concerns about the Corps’ emphasis on tonnage and its effects on which  ports are selected for dredging, with some stating that other factors  should be considered (such as economic impact or cargo value). Some  stakeholders and an expert stated that if ports do not receive dredging  and barges moving through that harbor have to light-load or temporarily  cannot move through the port, then industries may leave the port; the cost  of dredging may increase as sediment builds, and the port may face more  difficulties meeting the 1-million-ton threshold. Corps officials  acknowledged stakeholders’ concerns related to the low-commercial use  ports’ ability to compete in the prioritization process and stated that they  have worked to request more funding for these ports since funding was  cut in fiscal year 2012. However, a senior Corps official also noted that  the inland ports make up a very small percentage of the Corps’ overall  national navigation project portfolio and therefore competition for  constrained resources is very keen.
Congress has taken steps to try to address this issue, such as requiring  the Corps to allocate a minimum amount of the funds to be reimbursed  from the Harbor Maintenance Trust Fund on low tonnage ports. In  addition, Congress has emphasized the importance of considering factors beyond tonnage. For example, when allocating funds from the Harbor  Maintenance Trust Fund among eligible harbors and channels, the Corps  is directed by statute not to base its allocation of funds solely on the  amount of tonnage transiting through the harbors. In addition, in  determining an equitable allocation, the Secretary of the Army is required  to consider:  the national and regional significance of harbor operations and  maintenance; and a biennial assessment of the needs and uses of the harbors, which  should include, to the extent practicable, the national, regional, and  local benefits of such uses, including the use of harbors for:  commercial navigation and the movement of goods; domestic and  international trade; commercial fishing; subsistence; harbors of  refuge; transportation of persons; domestic energy production; use by  the Coast Guard or Navy; emergency response; recreation purposes;  and other authorized uses.
When providing appropriations for the Corps, Congress has also  suggested the Corps consider issues beyond tonnage when allocating  funds for dredging. Based on our reviews of budget guidance  documents and interviews with Corps officials, the Corps does collect  data on many of the factors identified by Congress in law and in the  language accompanying the appropriations act. For example, the Corps  collects information on whether the harbor is used for some of the  purposes outlined in the statute (for example; commercial fishing,  transportation of persons, whether the harbor is used by the Coast  Guard); however, a senior Corps official noted that many of these factors  are more applicable to the coastal harbors and channels and are not as  applicable to the inland harbors. In addition, Corps officials told us they  may note specific circumstances about the regional importance of a port  when submitting a budget package to dredge its harbor (for example, if industries in the port lack access to other modes of transportation).  However, Corps officials told us that due to funding limitations, they have  not conducted the statutorily required assessments of the national and  regional significance of the harbor operations and maintenance, or of the  local, regional, and national benefits from the use of the harbors. A senior  Corps official noted that the cost to do an in-depth economic analysis of a  port may be equivalent to the cost of dredging some of these harbors,  and the results of the economic analyses may not change which harbors  are ultimately prioritized for dredging.
However, the Corps has developed some internal tools that might help it  assess data related to some of the factors that Congress has required the  Corps to consider when allocating funds from the Harbor Maintenance  Trust Fund, such as the national and regional significance of harbor  operations and maintenance, and the use and benefit of the harbor for  domestic trade. For example, a Corps official from the Corps’ Engineer  Research and Development Center (ERDC) explained that ERDC  developed a web-based “channel portfolio tool” that collates, summarizes,  and visualizes detailed data from the Corps’ Waterborne Commerce  Statistics Center to help district officials understand the direct role of  dredging on the movement of cargo through coastal ports and the inland  waterway system. The tool is scalable, meaning that users can view the  data for the entire river system, for specific combinations of harbors, or for  specific harbors. Corps officials using the tool can select specific harbors  and quickly access annualized data on how many tons of various  commodities moved through the location, the depths of loaded barges  (which can be compared to present shoaling conditions), and the origin  and destination of the cargo. Further, the official explained that the Corps  has also used the tool to generate metrics on the amount and the dollar  value of cargo at risk when harbors lose 5 feet of depth. The official  further added that these metrics capture the cargo most at risk during  periods of shoaling or low water conditions, thereby enabling objective  comparisons across harbors. In addition, according to a Corps official, the  Corps’ Institute for Water Resources has a tool that provides a detailed  model that uses a variety of data about the coastal harbors, including  their ship depths and cargo value, to better inform budgetary decisions.  The official added that this tool potentially could be expanded to inland  harbors.
The tools described above suggest that the Corps has tools already  available that may help it better assess the additional factors that  Congress required it by statute to consider when allocating dredging  funds. For example, information about vessel depths, barge traffic, cargo  value, and destination used in the channel portfolio tool could help the  Corps assess the needs, use, and significance of harbor operations and  maintenance by demonstrating the effects from unmet dredging needs  (e.g., the frequency and duration of light-loading and the estimated impact  on shipping costs), and comparing the relative effects among inland ports.  However, Corps officials told us that additional work would be needed to  develop useful metrics for inland ports, since the existing analyses have  focused on coastal ports. For example, as previously noted, one tool  estimates impacts from a loss of 5 feet of draft at a deep-draft coastal  harbor, but an official stated it would be rare for an inland harbor to lose  that much depth. Furthermore, the value of using the existing tools in this  new context would depend on the reliability and the costs of this new  approach, which are currently unknown. As noted above, Corps officials  stated that funding constraints have prevented them from conducting the  statutorily required assessments of the significance of harbor operations  and maintenance. However, we developed a framework for examining  agencies’ efforts to manage declining resources, and a key sub-theme  within that framework is the importance of consulting with Congress to  consider how budget decisions align with congressional goals, constituent  needs, and industry concerns. A senior Corps official agreed that it may  be beneficial for the Corps to provide Congress with information on the  extent to which the Corps’ existing tools could be adapted to allow it to  consider factors beyond tonnage when allocating dredging funds, the  limitations of using these tools, as well as the amount of additional  resources that may be needed to pursue such an approach.

	Many Stakeholders Favored Continued Use of the Harbor Maintenance Trust Fund and Identified Potential Challenges of Alternative-Funding Options

		Stakeholders Preferred the Harbor Maintenance Trust Fund for Funding Dredging

Many stakeholders and experts we interviewed said that the federal  government should make more use of the current mechanism for funding  dredging—the Harbor Maintenance Trust Fund—before considering  alternative-funding options. Stakeholders representing shippers, as well  as a state department of transportation official stated that dredging inland  harbors is in the national interest as it promotes U.S. exports and  transports freight through coastal ports such as New Orleans and Baton  Rouge. Stakeholders also noted that the fund has a balance that is  available for such projects. However, the money from this fund is only  available for these purposes if Congress makes an appropriation out of  the Harbor Maintenance Trust Fund. Congress has taken steps to  increase spending from the Harbor Maintenance Trust Fund; however,  other factors may affect the use of the trust fund. For example, to  balance competing priorities among government programs and meet  budgetary spending caps, Congress may choose to appropriate more or  less funding from a trust fund than requested by an agency. In addition,  as we have previously reported, due to fiscal pressures imposed by the  nation’s budget deficit, any decisions about the Harbor Maintenance Trust  Fund would need to be considered within the context of all major federal  spending and tax programs.

		Stakeholders Cited Potential Challenges Related to Alternative Funding Options

We asked selected stakeholders and experts about three options for  funding inland harbors’ dredging: contributions from state and local governments; expanding the use of the Inland Waterways Trust Fund (currently  used for new construction and major rehabilitation of locks and  dams as well as other channel and waterway improvements) to  include maintenance dredging; and a new user fee or tax.
Stakeholders and experts identified challenges, some of which apply to  multiple options and some of which apply to specific options. Additional  details on the challenges are below:  Financial effects on users and local governments: Stakeholders raised  concerns that a user fee or tax or a state and local contribution would  negatively affect users and those governments. For example,  stakeholders representing port tenants, shippers, and trade associations  stated that a user fee could raise waterborne transportation costs and  negatively affect shippers. State department of transportation officials  stated that there could be a shift to alternative transportation modes if  barge rates increased, which could lead to more congestion and surface  degradation on roads. However, experts noted that alternative modes are  more costly than water transportation, so any diversion to these modes  would depend on the extent of the increase in water transportation costs.  Stakeholders such as ports, port tenants, and state departments of  transportation officials also stated that many of the selected ports in our  review do not have the financial resources to provide a funding  contribution, and that it may be difficult to secure state or local funds from  rural, low income counties and states where a number of the inland ports  are located. More generally, we have reported that state and local  governments face long-term fiscal pressures, which may limit their ability  to contribute to dredging costs for harbors in their jurisdiction.
Impact on Inland Waterways Trust Fund: Stakeholders representing  ports, port tenants, and state department of transportation officials stated  that the Inland Waterways Trust Fund has a backlog of lock and dam  projects that need funding, and any expanded use (absent an increase in  the fuel tax) of the fund’s revenues on maintenance dredging would  reduce available funds for locks and dams. In addition, port tenants,  ports, and a state department of transportation official noted that directing  funds to locks and dams, many of which are decades old and in need of  repairs, may be a better use of funds than for dredging. For example, a  port tenant noted that a lock failure would have more significant effects to  more users than shoaling at one harbor.
Alternative funding options may not result in more predictable funding for  dredging: Stakeholders and a state department of transportation official  stated that requiring a state or local contribution may not result in more  consistent funding given state and local budget processes and priorities.  A state department of transportation official noted that funds for dredging  could compete with other local needs, such as schools. When discussing  alternative options generally, a Corps official said that since there is an  existing mechanism that collects funds that can be appropriated for  dredging—the Harbor Maintenance Tax—other options may not be  feasible. This official noted that any new funding option may impose  administrative burdens that might outweigh additional revenue collection.

		Stakeholders Cited Potential Benefits Related to Alternative Funding Options

The majority of experts and a number of stakeholders we spoke to  identified potential benefits related to users directly paying for their  infrastructure use and using state and local revenues for dredging instead  of devising an entirely new funding mechanism.
Users pay for infrastructure use: Some of the experts noted that many  benefits of dredging inland harbors are local and that a state or local  contribution from their budgets or a fee or tax paid by port users may be  more appropriate than other funding options as those who benefit most  from a project would pay for it. The Congressional Budget Office,  Congressional Research Service, and the Transportation Research Board  have also noted the benefits of maritime users paying more for their  infrastructure use. State department of transportation officials as well as  experts noted that a new user fee may be more appropriate than a tax as  it would mean one is paying for their use rather than paying a general tax.  However, experts and some of the state departments of transportation  officials cautioned that any alternative funding option imposed on just one  section of the inland waterways would likely raise equity concerns and  could put those inland ports at a competitive disadvantage. Thus, they  emphasized that any alternative funding option should be applied to all  U.S. inland waterways and not just those in the scope of this report.
Use of state and local revenues for dredging: Some stakeholders,  including port tenants and shippers, believe that they already pay for  dredging through state, local, and port taxes and fees. Some of these  stakeholders gave reasons why a state or local contribution could be  warranted. First, one port tenant, one state department of transportation  official and two experts noted that state and local governments benefit  from operating ports, which contribute to their economies. In addition,  stakeholders representing port tenants and a state department of  transportation agency, as well as one expert, noted that state and local  governments and ports have provided funding for landside investments at  ports, and it is therefore in their interest to maintain port access to the  river. We have previously reported that investments being made in  maritime infrastructure should be considered as part of state and national  freight planning. In addition, some stakeholders noted that using state  and local revenues to fund dredging could be an option if it could be used  to match federal government funds. A Corps official noted that it is  currently possible for non-federal entities to provide “contributed funds” to  the Corps for dredging, but none has done so yet for this particular  segment of the Mississippi River. However, Corps officials stated that  they have received contributed funds for dredging in other regions, and as  previously noted, some ports have paid for their own dredging in certain  cases and port tenants are already financially responsible for dredging  around their docks.
Stakeholders representing shippers said that they might be more inclined  to consider an alternative-funding option if the benefits of a particular  option outweighed the costs. In addition, some stakeholders also said that  they would be more willing to consider a funding option for emergency  dredging as opposed to routine dredging and would be more willing if  there were a cost-share with the federal government.

	Conclusions

The Mississippi River and its inland ports are important to the movement  of freight, particularly agricultural goods destined for export. However,  natural shoaling in many of these ports’ harbors negatively affect vessel  operations, potentially resulting in freight congestion and increased  shipper costs. The Corps, responsible for dredging these particular  harbors as well as hundreds of other harbors and channels around the  country, operates in a federally constrained budgetary environment and  will likely continue to do so. It therefore must choose which harbors to  dredge, with what frequency, and to what depth and width. In making  these decisions, the Corps primarily relies on tonnage data—a potentially  reasonable approach. The Corps is statutorily required to consider other  factors such as the harbors’ national, regional, and local benefits when  allocating funding for dredging inland harbors. Although the Corps has  cited funding constraints as the reason for being unable to fulfill the  statutory requirements, it has tools available that could potentially be  adapted to help it consider all the factors Congress identified in statute  and better inform its decisions regarding inland harbor dredging.  However, some of these tools were developed for coastal harbors, and  the feasibility, potential limitations, and costs of adapting the Corps’  existing analytical tools and capabilities will need to be assessed before  these tools could be successfully utilized.

	Recommendation

We recommend the Assistant Secretary of the Army for Civil Works direct  the Director of Civil Works to determine whether existing tools and  capabilities (such as the Corps’ analyses and models related to inland  harbors’ conditions and freight traffic, as well as shoaling effects at  coastal ports) can be adapted to help evaluate other factors when  allocating funds from the Harbor Maintenance Trust Fund. The Corps  should report to Congress on the feasibility, limitations, and potential  costs and on an estimate of any additional funds needed to use such an  approach to meet the statutory requirements.

	Agency Comments

We provided a draft of this report to the Department of Defense for review  and comment. In comments, reproduced in appendix II, the Department  of the Army, Office of the Assistant Secretary (Civil Works), stated that it  concurred with the recommendation; with comment, and that it would  work with the Corps to address the recommendation. The office also  provided comments that focused on the recommendation in the broader  context of the development of the Corps’ overall Civil Works budget,  which we considered and incorporated as appropriate.  In addition, the  Department of the Army, Office of the Assistant Secretary (Civil Works)  and the Corps of Engineers provided technical comments, which we  considered and incorporated as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties. In  addition, the report is available at no charge on our website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or Flemings@gao.gov. Contact points for our Office  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

The Joint Explanatory Statement accompanying the Consolidated  Appropriations Act, 2016, contained a provision for us to study freight  flows, dredging, and funding of dredging with respect to the harbors of  inland shallow-draft ports on the Mississippi River between St. Louis and  Baton Rouge. This report addresses three objectives: (1) what is known  about the freight traffic (including types of freight and trends in traffic) of  selected inland ports on the Mississippi River between St. Louis and  Baton Rouge since 2010; (2) stakeholders’ views on any challenges that  the current federal approach to funding dredging presents for inland ports  and the reported effect on the movement of freight at these ports; and (3)  stakeholders’ views on the potential benefits and challenges of using  alternative options for funding dredging of inland harbors.
The 13 selected ports included in this review are (listed in geographic  order, southbound): Southeast Missouri Regional Port Authority, Missouri;  Hickman-Fulton County Riverport Authority, Kentucky; New Madrid  County Port Authority, Missouri; Pemiscot County Port Authority,  Missouri; Osceola Port Terminal, Arkansas; International Port of  Memphis, Tennessee; Helena-West Helena/Phillips County Port  Authority, Arkansas; Port of Rosedale, Mississippi; Yellow Bend Port,  Arkansas; Port of Greenville, Mississippi; Port of Lake Providence,  Louisiana; Madison Parish Port, Louisiana; and Port of Vicksburg,  Mississippi.
To determine what is known about freight traffic of selected inland ports  between St. Louis and Baton Rouge since 2010, we reviewed and  analyzed data from the U.S. Army Corps of Engineers’ (Corps)  Waterborne Commerce Statistics Center for the 13 inland ports included  in our review. Specifically, we analyzed the types and amount of freight  transported through these ports annually, as measured by weight, from  2010 through 2015. These data are referred to as annual tonnage data,  and include total waterborne tonnage, whether the tonnage was moving  into or out of the port, and the amount and types of commodities moved  through the port. We analyzed these data to determine whether we could  identify any trends in the movement of freight in these ports. To assess  the reliability of the data, we reviewed a 2009 GAO report that discussed  the reliability of Corps’ tonnage data and then interviewed Corps officials  at the Waterborne Commerce Statistics Center about any changes that  had occurred in the data collection, receipt, handling, and storage  processes since that review, as well as their current processes for  ensuring the reliability of the data. We also interviewed port officials to  discuss any concerns they had about the data and companies  responsible for filing the reports that the Corps uses to assess port  tonnage, to discuss their methods for ensuring the accuracy of the data.  We found the data to be reliable for the purposes of our review.
To determine stakeholders’ opinions on whether the current federal- funding approach for dredging presents any challenges for inland ports  and on the reported effects on freight movement at these ports, we  interviewed port directors and in some cases port tenants at 11 of the 13  inland ports. We also conducted site visits at 7 of the 13 selected ports to  interview port directors, harbor services companies, and tenants in  person, and to gain an in-depth understanding of how shoaling can affect  their harbors. To select the ports we interviewed and visited, we used  information provided by the Corps on relevant federal dredging projects  and the corresponding inland shallow-draft ports in this section of the  river. Through initial research and interviews, we determined which  factors may contribute to variations in ports’ dredging needs, extent of  dredging received, and the effect of unmet dredging needs. Based on  those factors, we selected ports for site visits and interviews to ensure  diversity in total tonnage, the percentage of inbound and outbound freight  traffic at the port, the types of commodities most frequently handled,  geographic location (including which Corps District they were located in),  the funding source for dredging, and prior dredging history, based on  information provided by the Corps. In addition to interviewing port  directors and tenants, we also conducted interviews with industry  stakeholders such as barge companies, trade associations, and shippers  as well as academic experts. We also interviewed officials at the United  States Department of Agriculture (USDA) Agricultural Marketing Service’s  Transportation Services Division to discuss their research on agricultural  transportation. See tables 4 and 5 for a list of stakeholders and experts  we interviewed. We selected industry and academic stakeholders based  on a review of our prior reports on waterway transportation, as well as  through recommendations from other interviewees.
In addition, to understand how the Corps budgets and implements  dredging activities and the role of the federal budget process, we  reviewed relevant statutes, the Corps’ budget guidance documents, as  well as prior President’s Budget requests and congressional  appropriations, and interviewed Corps officials from the headquarters,  division, and district offices. We reviewed statutes, regulations, and  legislation to understand what factors Congress has directed the Corps to  consider when allocating funds for dredging harbors. We also used prior  frameworks developed by GAO to assess the Corps’ actions with respect  to collecting and analyzing data to help inform its budgeting decisions.  We received data from the Corps on the prior dredging history for each  port, for 2010 through 2016. To determine the reliability of the dredging  history data, we compared these data to documentation publicly  available, such as Corps work plans that outline the dredging plan for  each year, and cross-checked the data against what port stakeholders  told us in terms of prior dredging activities. We followed up with Corps  officials to discuss the data and obtain supplementary information as  necessary to get the most complete, reliable information possible. Except  where otherwise noted, we found the data sufficiently reliable for our  purposes.
To determine stakeholders’ opinions about the potential benefits and  challenges of using alternative funding methods for dredging inland  harbors, we identified funding options through a literature search and  conducted 14 initial interviews with 11 stakeholders representing industry,  including representatives of some of the ports we previously described,  and 4 experts. We used these initial interviews to collect the stakeholders’  general views on potential alternative-funding options, as well as the  benefits and challenges of those options. From these interviews and  literature searches, we identified the three types of options that were most  commonly discussed: a new user fee or tax, a state or local contribution,  and expanding the use of the Inland Waterways Trust Fund for  dredging. We then interviewed 33 stakeholders representing ports,  tenants, shippers, barge companies, and state transportation agencies to  collect their opinions on the benefits and challenges of each of the three  types of options. We selected stakeholders to interview based on a  review of related reports and suggestions from other interviewees, and  we included port tenants and representatives from the ports we  interviewed. In addition to these stakeholders, we interviewed five experts  on their views of the benefits and challenges of the alternative funding  options. The experts were identified through a literature search and our  prior, related reports on inland waterways and surface transportation  funding and financing. We selected these experts based on their  knowledge of the inland waterways and/or infrastructure funding and  judgmentally chose at least two individuals from academia and consulting  firms. See tables 4 and 5 for a list of stakeholders and experts we  interviewed  With respect to research objectives 2 and 3, because we asked  stakeholders for their opinions and did not conduct a survey in which  every stakeholder could provide a response as to whether a certain issue  was relevant for them, we do not enumerate responses in the report.  Instead, we analyzed the responses and reported on common themes  that arose in multiple interviews. In addition, considering the number of  inland ports outside of this section of the river and the fact that we  selected a non-generalizable sample of stakeholders, ports, tenants, and  experts to discuss dredging issues and funding options related to the  selected ports in this section of the river, the information cannot be used  to make inferences about a population. However, the description of the  Corps’ budget development process is representative of its process for all  dredging projects.
We conducted this performance audit from July 2016 to July 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: Comments from the Department of the Army

Appendix III: GAO Contact and Staff Acknowledgments

	GAO Contact:

Susan A. Fleming, (202) 512-2834, or Flemings@gao.gov.

	Staff Acknowledgements:

In addition to the contact named above, Sharon Silas (Assistant Director);  Crystal Huggins (Analyst in Charge); Amy Abramowitz; Alexandra  Edwards; Carol Henn; Alyssa Hundrup; Delwen Jones; Elke Kolodinski;  Hannah Laufe; Maureen Luna-Long; SaraAnn Moessbauer; Joshua  Ormond; and Cheryl Peterson made key contributions to this report.

Summary:
Why GAO Did This Study

Inland ports on the Mississippi River between St. Louis and Baton Rouge enable shippers to move millions of tons of agricultural and other bulk commodities. However, these ports' harbors can accumulate sediment that reduces their depth, width, and length, making it difficult for vessels to move. To address this, the Corps routinely dredges the harbors.
Congress included a provision in statute for GAO to review dredging issues for ports in this region. This report addresses: (1) freight traffic of selected ports since 2010; (2) stakeholders' views on any challenges presented by the current federal funding approach to dredging inland harbors; and (3) the benefits and challenges of alternative options to fund dredging.
GAO reviewed Corps' 2010–2015 port traffic data for 13 of 18 inland ports in the region. Data for 2015 were the most recent available. GAO also interviewed Corps officials, industry stakeholders, and officials from 11 of 13 ports selected to include a range in terms of cargo handled, location, and dredging history. GAO conducted a literature search and interviewed 52 industry, port, and other stakeholders and experts about alternative options to fund dredging.

What GAO Found

From 2010 through 2015, 13 Mississippi River ports that GAO selected for review varied individually in terms of the amount, type, and trends in traffic handled. As a group, these ports primarily moved a mix of agricultural commodities (corn, soybeans, and rice); petroleum products; and crude materials (such as sand and gravel, among others). However, the ports varied individually, with some primarily moving agricultural commodities, and others moving a variety of commodities. These ports also varied in the quantity of goods transported through them, ranging from less than 1-million tons to more than 10-million tons per year. The amount of freight moved through each port tended to fluctuate each year due to various factors, such as weather, crop yields, and export markets.
A majority of the stakeholders GAO interviewed, as well as U.S. Army Corps of Engineers (Corps) officials, stated that funding constraints limit the Corps' ability to fully dredge the 13 ports' harbors, which can affect freight movement. According to local Corps officials, they received about $13.1 million of the $20.6 million needed to fully dredge the 13 ports' harbors in fiscal year 2016. Some stakeholders told GAO that smaller ports are negatively affected by the Corps' emphasis on the amount of cargo moved (measured in tons) when making decisions about which harbors to dredge. Congress has directed the Corps to consider harbors' significance and to conduct an assessment of harbors' use and benefits—considering factors beyond tonnage—to inform its allocation of dredging funds. Corps officials said they have not conducted such an assessment due to funding constraints, and raised concerns about the cost-effectiveness of conducting such assessments. However, the Corps has developed some tools that may help it assess inland harbors' significance, use, and benefits. For example, Corps officials explained that they have a tool that allows them to track the amount and type of cargo moving through harbors and to estimate the value of cargo at risk if a harbor loses depth. However, a Corps official noted the cargo-at-risk metric was based on deep coastal harbors and would need to be adapted for inland harbors. A senior Corps official agreed that it could be useful to inform Congress of the Corps' existing tools and capabilities and the resources needed to adapt these tools and capabilities to address the statutory requirements related to allocating dredging funds.
Many of the stakeholders GAO interviewed said that before considering alternative-funding options, the federal government should make more use of the current mechanism for funding dredging: the Harbor Maintenance Trust Fund. With regard to three other potential options for funding dredging—user fees, state and local contributions, and use of the Inland Waterways Trust Fund (which currently funds new construction and major rehabilitation of locks and dams as well as other channel and waterway improvements)—stakeholders identified challenges to their use. In particular, they noted the financial effects of these options on users, state and local governments, and the Inland Waterways Trust Fund. However, some stakeholders identified benefits related to these options, such as benefits from industry paying user fees for its infrastructure use, and state and local governments contributing funds to meet the dredging needs of harbors in their jurisdiction.

What GAO Recommends

The Corps should inform Congress whether it can adapt its existing tools to address factors for allocating funds from the Harbor Maintenance Trust Fund, and the resources needed to do so. The agency concurred with the recommendation, with comment, and provided technical comments that were incorporated, as appropriate.