Marine Transportation: Federal Financing and a Framework for Infrastructure Investments
Published: 2002-09-09T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: As the world's leading trading nation, the United States depends on a vast marine transportation system. Ninety-five percent of overseas trade tonnage moves by water, and the cargo moving through the U.S. marine transportation system contributes hundreds of billions of dollars to the U.S. gross domestic product. As it does with the nation's highway and aviation systems, the federal government participates with hundreds of public and private entities in maintaining and improving the marine transportation system. During fiscal years 1999, 2000, and 2001, federal expenditures for the commercial marine transportation system averaged $3.9 billion per year. Funding for about 80 percent of these expenditures came from the U.S. Treasury's general fund. During this same period, federal agencies collected $1 billion each year from marine transportation system users. During the same three-year period, federal expenditures for aviation and highway transportation systems averaged $10 billion and $25 billion, respectively, each year. Unlike the funding approach for the marine transportation system, which relies extensively on tax revenue, the federal funding approach for aviation and highway relies almost exclusively on assessments on users of the transportation systems.

section_title: Letter
paragraphs: As the world’s leading trading nation, the United States depends on a vast marine transportation system. Ninety-five percent of our overseas trade tonnage moves by water, and the cargo moving through the U.S. marine transportation system contributes hundreds of billions of dollars to the U.S. gross domestic product. The marine transportation system includes coastal ports and shipping channels; 25,000 miles of navigable inland and coastal channels and waterways like the Mississippi, St. Lawrence, and Columbia Snake rivers; and ports on the Great Lakes and elsewhere. According to a congressionally mandated report (1999 marine transportation system  report) that assessed the capabilities and challenges of the system, critical issues include modernizing aging locks and dams on inland waterways, dredging waterways to new depths to accommodate larger ships, and upgrading navigation systems for maximum safety and efficiency. Additionally, new and far-reaching security challenges have emerged for the system since the September 11 terrorist attacks.
As it does with the nation’s highway and aviation systems, the federal government participates with hundreds of public and private entities in maintaining and improving the marine transportation system. Federal funding has been directed primarily at “waterside” projects such as maintaining channels, aiding navigation, and monitoring the entry of ships into the nation’s ports. “Landside” projects, such as terminals, berths, piers, and systems for transferring goods from ships to trains and trucks, have been funded mainly by state and local entities. Federal funding for the system is derived from either general revenues or a variety of user charges.
You asked us to analyze federal funding for the commercial marine transportation system and compare it with federal funding for the aviation and highway systems. As agreed with your office, this report provides information on the amount of federal funds expended to support the commercial marine transportation system and the amount of revenue collected from federal assessments on the users of the system for fiscal years 1999, 2000, and 2001. Similarly, this report provides information on the amount of federal funds expended to support the aviation and highway transportation systems and the amount of revenue collected from federal assessments on the users of the transportation systems for fiscal years 1999, 2000, and 2001. As you requested, we also are providing information on customs duties. In addition, we agreed to use our work on this assignment, together with past work in transportation and other issues, to present a framework that the Congress could use to consider potential changes to the scope or nature of future federal investments in the marine transportation system.
We gathered information on expenditures and collections from 15 federal agencies involved in supporting the commercial marine, aviation, and highway transportation systems. We asked each agency to identify the source of funding for expenditures and the accounts that were credited with the collections based on categories we identified for this purpose.We separated their expenditures into the following categories: administrative services; physical services, such as inspections and certifications; construction and maintenance; or miscellaneous services. In addition, we obtained information on customs duties collected on goods transported by each transportation system. Although we had each agency validate the data provided, we did not independently verify agency expenditures and collections. To provide a framework for the Congress when considering a revised federal investment role in the marine transportation system, we relied extensively on the perspectives gained from our past work in transportation and infrastructure systems and federal investment strategy. Appendix I contains a more detailed description of the scope and methodology of our work. We conducted our work from January 2002 to September 2002 in accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: The marine transportation system is a vital component of our nation’s economic growth and plays an important role in national defense. According to the 1999 MTS Report, there is a growing gap between the services that the current infrastructure can provide and the increasing levels of demand being placed upon it. Furthermore, security issues have emerged as a result of the September 11 terrorist attacks. Given these changes, port stakeholders have growing concerns about the level of effort needed to keep the system functioning efficiently and are asking the federal government to increase funding for the system.
subsections: section_title: Nation’s Extensive Marine Transportation System Fills Many Roles
paragraphs: The United States is the world’s largest maritime trading nation, accounting for 1 billion metric tons, or nearly 20 percent of the world’s oceanborne trade. Over 95 percent of the U.S. overseas trade tonnage is shipped by sea. The marine transportation system, a system of navigable waterways that connects oceans to rivers, lakes, and canals, serves waterborne commerce through more than 300 public and private ports. These ports serve as freight connectors between the waterborne system and the nation’s other transportation systems. In addition to the ports and navigable waterways, the marine transportation system also encompasses vessels, marine terminals, intermodal connections, shipyards, locks, dams, and information systems.
The marine transportation system plays an essential role in the nation’s economy and defense. For example, it moves import and export cargo worth hundreds of billions of dollars, generating jobs, both directly and indirectly, for Americans and our trading partners. The system’s inland waterways also support the movement of grain, petroleum products, coal, paper products, and industrial chemicals. In addition to its economic role, the marine transportation system plays an important role in national defense by facilitating the movement of military equipment and supplying troops deployed overseas. The nation’s marine transportation system also serves as an alternative transportation mode to roads and provides recreational value through boating, fishing, and cruises.
Federal, state, and local governments and private sector organizations all participate in financing the marine transportation system. In general, expenditures for the development and operation of the waterside portion of the system (e.g., dredging channels, installing navigational aids, monitoring vessel traffic, or operating locks and dams) have been largely a public function, with participation at the federal, state, and local government levels. Ports—usually state, county, or local entities—and private commercial interests spend billions of dollars in the landside portion of the system by updating and modernizing their facilities. The source of the expenditures for intermodal connections (rail, pipeline, or highway) can vary. For example, rail and pipeline development are generally funded by the private sector; funding for public roadways, on the other hand, comes from the public sector.
One source of federal funding common to all three major transportation systems—marine, aviation, and highway—is collections from assessments on users of the system. These collections can include user fees and excise taxes. Collections are deposited into the U.S. Treasury’s general fund and can be used for the general support of federal activities or may be earmarked by law for specific purposes and credited to a trust fund. Also, some collections are credited directly to agency accounts for services provided by that agency such as inspections or certifications. Trust funds that support the marine transportation system include the Harbor Maintenance Trust Fund and the Inland Waterways Trust Fund. Trust funds that support the aviation and highway transportation systems include the Airport and Airway Trust Fund and the Highway Trust Fund. (See app. II for detailed information concerning these trust funds.) The portion of collections from users of these systems that are deposited into the U.S. Treasury’s general fund are not earmarked for a specified purpose and are used for the general support of federal activities.
In addition to assessing fees and taxes to specifically support the transportation systems, the federal government also assesses customs duties on goods imported into the United States. All three transportation systems ship goods that generate customs duties. Customs duties are taxes on imported goods without regard to their mode of transportation. The majority of customs duties are deposited into the U.S. Treasury’s general fund to be used for the general support of federal activities.
section_title: Concerns Have Been Raised about the Adequacy of the System’s Infrastructure
paragraphs: Given the role of the marine transportation system within the nation’s entire transportation system, some system stakeholders have raised concerns about the system’s ability to keep pace with the growing levels of demands being placed upon it. This issue was discussed in depth in the 1999 MTS Report that assessed the capabilities and challenges of the nation’s marine transportation system. The report cited a growing gap between transportation demands and shifting user requirements on one side and available transportation infrastructure on the other side. According to the report, the projected doubling of maritime trade by the year 2020 and the need for the system to be responsive to users means that the infrastructure would face challenges on several levels. The projected increase in maritime trade will likely result in an increase in the overall demand for the kinds of infrastructure improvements in which the federal government has typically participated. For example, there are calls to modernize aging structures such as key locks and dams in river transportation systems. Changes in the shipping industry also have increased the pressure to make capacity improvements, such as deeper navigation channels to accommodate larger ships.
Since the issuance of the 1999 MTS Report, new and far reaching security issues have emerged as a result of the September 11 terrorist attacks. Many of the security improvements now planned or under way at our nation’s ports will require costly outlays for infrastructure, technology, and personnel. Even before September 11, the Interagency Commission on Crime and Security in U.S. Seaports estimated that the cost of upgrading security infrastructure at U.S. ports ranged from $10 million to $50 million per port. These estimates could increase dramatically due to new post- September 11 security requirements. For example, when the Congress recently made $92.3 million in federal funding available for port security as part of a supplemental appropriations bill, the Transportation Security Administration received grant applications totaling almost $700 million.
In today’s environment, with growing system demands and border security concerns, some stakeholders have suggested a larger federal role in funding the marine transportation system. Two examples illustrate the mounting pressure for increased federal funding in this area. First, for the last several years, the U.S. public port authorities have advocated increased federal funding for dredging. Currently, funding for such maintenance—which has totaled more than $700 million annually since fiscal year 2000—is derived from a fee on passengers and imported and domestic cargo loaded and unloaded in U.S. ports. Ports and shippers would like to see funding for maintenance dredging come from the general fund instead, and there was legislation introduced in 1999 to do so.Second, besides the growing pressures on areas of traditional federal investment, ports are seeking substantial federal assistance to enhance security in the aftermath of the events of September 11. In other work we have conducted on port security, port and private-sector officials have said that they believe combating terrorism is the federal government’s responsibility, and that if additional security is needed, the federal government should provide or pay for it.
Deciding on an appropriate federal role to address these concerns requires, in part, a better understanding of the magnitude and nature of federal revenues generated by and expenditures for the maritime transportation system and how these revenues and expenditures compare to other transportation modes. Also key is the establishment of a sound investment framework to make certain that limited federal dollars are applied in ways that, from a national perspective, provide the greatest public benefit.
section_title: Federal Funding for the Commercial Marine Transportation System
paragraphs: During fiscal years 1999, 2000, and 2001, federal expenditures for the commercial marine transportation system averaged about $3.9 billion each year, most of which was provided from general revenues. About 45 percent of this money was spent on construction and maintenance of federally authorized projects. During this same period, almost $1 billion in revenue was collected each year by federal agencies from users of the marine transportation system, and most of this money was credited to trust fund accounts dedicated to financing the system. In addition, customs duties on imported goods shipped through the system during the same period averaged $15.2 billion each year. The majority of the customs duties are deposited into the U.S. Treasury’s general fund.
subsections: section_title: General Revenues Account for More than Three- Fourths of the Federal Expenditures for the Commercial Marine Transportation System
paragraphs: Thirteen federal agencies spent an average of $3.9 billion annually for 3 years on the commercial marine transportation system. (See app. III.) As shown in table 1, the majority of federal funding spent by these agencies for the system came from general revenues. On average, general revenues accounted for $3 billion, or 80 percent, of the total amount expended for the system.
To provide a perspective on the uses for which federal expenditures were applied, we analyzed the type of service or activity for which each expenditure was directed. We used four categories: administrative processing and associated services (e.g., processing documents or issuing permits), physical services (e.g., inspections or certifications), construction and maintenance projects (e.g., dredging, constructing or maintaining locks and dams, or operating and maintaining aids to navigation), and miscellaneous services. As shown in table 2, the average amount expended for construction and maintenance projects represented $1.7 billion, or 45 percent, of the total amount expended annually for the system, with physical services accounting for about $1.5 billion, or 38 percent.
section_title: Most of the Revenue Collected from System Users was Credited to Trust Fund Accounts
paragraphs: Eleven different federal agencies collected an average of nearly $1 billion each year from users of the commercial marine transportation system to help finance federal expenditures to support the system. (See app. IV.) As shown in table 3, an average of $830 million, or 85 percent, of the assessment amounts collected from users was credited to trust funds to be appropriated to agencies for designated services, with the remaining amount credited to agency accounts as reimbursement for the services provided or deposited in the general fund for the general support of federal activities.
The collections shown in table 3 do not include amounts from customs duties levied on the goods carried through the marine transportation system. The Customs Service estimates that duties on commodities entering the United States by the system for fiscal years 1999, 2000, and 2001 were about $14.3 billion, $15.6 billion, and $15.6 billion, respectively. (See app. V.) Most of the customs duties are deposited into the general fund for the general support of federal activities, with the largest exception being that approximately 30 percent of the gross receipts from customs duties were designated for agricultural and food programs.
section_title: Federal Funding for the Aviation and Highway Transportation Systems
paragraphs: During fiscal years 1999, 2000, and 2001, federal expenditures averaged $10 billion each year for the aviation system and $25 billion each year for the highway system. Unlike the funding approach used for the commercial marine transportation system, which relies heavily on general tax revenue, the aviation and highway transportation systems were primarily funded by collections from users of the systems that are accounted for in trust funds. During this same period, most of the revenue collected by federal agencies for the aviation and highway transportation systems were credited to trust fund accounts. Customs duties on imported goods carried by these systems averaged $3.7 billion each year for the aviation transportation system and $928 million for the highway transportation system. Most of these customs duties were deposited into the U.S. Treasury’s general fund.
subsections: section_title: Assessments on Users Are the Primary Source of Funding for the Aviation and Highway Transportation Systems
paragraphs: Six federal agencies were involved in spending the $10 billion annually on the aviation transportation system and five federal agencies were involved in expending the $25 billion annually on the highway transportation system. (See app. III.) Whereas the primary source of funding for the marine transportation system is general tax revenues, the vast majority of federal funding invested in both the aviation and highway systems came from assessments on users of the systems that are accounted for in trust fund accounts, as shown in table 4. During the three- year period, assessments on system users were the funding source for about 88 percent of the amount spent on the aviation system and over 99 percent of the amount spent on the highway system.
As we did for maritime funds, we analyzed the type of service or activity for which each expenditure was directed, using the same four categories of administrative processing and associated services, physical services, construction and maintenance projects, and miscellaneous services. As shown in table 5, the average amount expended for construction and maintenance projects represented about $7.2 billion, or 70 percent, of the total amount expended for the aviation system and about $25 billion, or nearly 100 percent, of the total amount expended for the highway system. The Federal Aviation Administration and the Federal Highway Administration distributed most of the funds expended for construction and maintenance projects for these systems.
section_title: Most Revenue Collected from System Users Was Credited to Trust Fund Accounts
paragraphs: Five federal agencies collected an average $11 billion from the aviation transportation system while four federal agencies collected an average $34 billion on the highway transportation system. (See app. IV.) As with the marine transportation system, the vast majority of the assessment amounts collected on the aviation and highway transportation systems was credited to trust funds to be appropriated to agencies for designated services, as shown in table 6. The remaining amounts were credited to agency accounts as reimbursement for the services they provided or deposited into the U.S. Treasury’s general fund for the general support of federal activities. On average, about 94 percent of the $11.1 billion collected annually for the aviation system and nearly 100 percent of the $33.7 billion collected annually for the highway system were credited to trust fund accounts.
The Customs Service reported that duties on commodities entering the United States by the aviation transportation system for fiscal years 1999, 2000, and 2001 were about $3.6 billion, $4.1 billion, and $3.4 billion, respectively. For the same period, customs duty collections for the highway system were about $1.2 billion, $880 million, and $735 million. (See app. V.) Most of these customs duties were credited to the general fund for the general support of federal activities.
section_title: Systematic Framework Would Help Guide Decisions on Federal Investment in the Marine Transportation System
paragraphs: A systematic framework with several key components would be helpful in considering potential changes in the scope or nature of federal funding for the marine transportation system. Substantial new investments in the maritime infrastructure by federal, state, and local governments and by the private sector may be required because of an aging infrastructure, changes in the shipping industry, and increased concerns about security. Pressure on the federal government to bear a significant portion of these new investment costs is evident. These growing and varied demands for increased federal investments in the marine transportation system heighten the need for a clear understanding about the federal government’s purpose and role in providing funding for the system and for a sound investment approach to guide federal participation. In examining federal investment approaches across many national activities, we have found that issues such as these are best addressed through a systematic framework. As shown in figure 2, this framework has the following four components that potentially could be applied to all transportation systems:   Set national goals for the system. These goals, which would establish what federal participation in the system is designed to accomplish, should be specific and measurable.
Define clearly what the federal role should be relative to other stakeholders. This step is important to help ensure that federal participation supplements and enhances participation by others, rather than simply replacing their participation.
Determine which funding tools and other approaches, such as alternatives to investment in new infrastructure, will maximize the impact of any federal investment. This step can help expand the capacity to leverage funding resources and promote shared responsibilities.
Ensure that a process is in place for evaluating performance periodically so that defined goals, roles, and approaches can be reexamined and modified, as necessary.
subsections: section_title: Establishing National Goals to Guide Federal Participation
paragraphs: The first component of a framework for evaluating federal investments is establishing a set of clearly defined national goals that can serve as a basis for guiding federal participation. Such goals can help chart a clear direction, establish priorities among competing issues, specify the desired results, and lay the foundation for such other decisions as determining how assistance will be provided.
At the federal level, measuring results for federal programs has been a longstanding objective of the Congress. The Government Performance and Results Act of 1993 has become the primary legislative framework through which agencies are required to set strategic and annual goals that are based on national goals, measure performance, and report on the degree to which goals are met and on what actions are needed to achieve or modify goals that have not been met. These goals need to be measurable in order to identify and provide accountability for the amount of public benefits to be attained. Stating goals in measurable terms makes it easier to assess the success or failure of government support and ultimately, to hold system stakeholders accountable for the outcomes. Establishing clear goals and performance measures for the marine transportation system is critical to ensuring both a successful and a fiscally responsible effort.
Meaningful goal-setting for the marine transportation system requires an in-depth understanding of the relationship of the system to other transportation modes. Transportation experts highlight the need to view the system in the context of the entire transportation system in addressing congestion, mobility, and other challenges and ultimately investment decisions. For example, congestion challenges often occur where modes connect or should connect, such as ports where freight is transferred from one mode to another. The connections require coordination of more than one mode of transportation and cooperation among multiple transportation providers and planners. While decision makers recognize the importance of intermodal planning, the goals for the system need to reflect this broader perspective. A systemwide approach to transportation planning and funding, as opposed to focus on a single mode or type of travel, could improve focus on outcomes related to customer or community needs.
Meaningful goal-setting also requires a comprehensive understanding of the scope and extent of issues and priorities facing the marine transportation system. However, there are clear signs that certain key issues and priorities are not yet understood well enough to establish meaningful goals for the system. For example, a comprehensive analysis of the issues and problems facing the maritime transportation system has not yet been accomplished. In setting goals for investment decisions, leading organizations usually perform comprehensive needs assessments to obtain a clear understanding of the extent and scope of their issues, problems, and needs and ultimately to identify resources needed. These assessments should be results-oriented in that they determine what is needed to obtain specific outcomes rather than what is needed to maintain or expand existing capital stock. Developing such information is important for ensuring that goals are framed in an adequate context. The call by many ports for federal assistance in dredging channels or harbors to 50 feet is an example. Dredging to 50 feet allows a port to accommodate the largest of the container ships currently being constructed and placed in service. However, developing the capacity to serve such ships is no guarantee that companies with such ships will actually choose to use the port. Every port’s desire to be competitive by having a 50-foot channel could thus lead to a situation in which the nation as a whole has an overcapacity for accommodating larger ships. The result, at least for the excess capacity, would signal an inefficient use of federal resources that might have been put to better use in other ways. Proper economic analysis for the justification of such a project, however, may minimize the likelihood of such excess capacity.
section_title: Defining the Federal Role Relative to Other Stakeholders
paragraphs: The second component of the framework involves defining the federal role relative to other stakeholders. The federal government is only one of many stakeholders in the marine transportation system. While these various stakeholders may all be able to share a general vision of the system, they are likely to diverge in the priorities and emphasis they place on specific goals. For example, the federal government, with its national point of view, is in a much different position than a local port intensely involved in head-to-head competition with other ports for the business of shipping companies or other businesses. For a port, its own infrastructure is paramount, while the federal government’s perspective is focused on the national and broader public interest.
Past patterns of participation are a tacit acknowledgement of these differences in roles. Traditionally, federal participation has been directed mainly at projects related to “waterside” issues, such as keeping navigation channels open by dredging or icebreaking; improving systems of locks and dams; maintaining navigational aids such as lighthouses or radio systems; and monitoring the movement of ships in and out of the nation’s coastal waters. Federal participation has generally not extended to “landside” projects related to a port’s capabilities, such as building terminals or piers and purchasing cranes or other equipment to unload cargoes.
Since there are so many stakeholders involved with the marine transportation system, achieving national goals for the system hinge on the ability of the federal government to forge effective partnerships with nonfederal entities. Decision makers have to balance national goals with the unique needs and interests of all nonfederal stakeholders in order to leverage the resources and capabilities that reside within state and local governments and the private sector.
Future partnering among key maritime stakeholders may take on a different form as transportation planners begin focusing across transportation modes in making investment decisions instead of making investment decisions for each mode separately. Transportation experts with whom we talked said that current transportation planning institutions, such as state transportation departments and metropolitan planning organizations, may not have sufficient expertise or authority to effectively identify and implement improvements across modes. They suggested that transportation planning by all entities should focus more closely on regional issues and highlighted the importance of cooperation and coordination among modal agencies at the federal, state, and local levels, between public and private transportation providers, and between transportation planning organizations and other government and community agencies to address transportation issues.
The Alameda Corridor Program in the Los Angeles area provides an example of how effective partnering allowed the capabilities of the various stakeholders to be more fully utilized. Called the Alameda Corridor because of the street it parallels, the program created a 20-mile, $2.4 billion railroad express line connecting the ports of Los Angeles and Long Beach to the transcontinental rail network east of downtown Los Angeles. The express line eliminates approximately 200 street-level railroad crossings, relieving congestion and improving freight mobility for cargo. This project made substantial use of local stakeholders’ ability to raise funds. While the federal government participated in the cost, its share was about 20 percent of the total. In addition, about 80 percent of the federal assistance is in the form of a loan rather than a grant.
Making careful decisions about these roles is important in order to match capabilities and resources with appropriate goals. This is important for federal assistance because other stakeholders may want to emphasize other priorities and use federal funds in ways that may not match federal goals. This can happen in two main ways.
Other stakeholders may seek to transfer a previously local function to the federal arena. For example, in the area of port security, there is a significant funding need at the local level for overtime pay for police and security guards. Given the degree of need, if more federal funding were made available, local interests might push to apply federal funding in this way, thereby transferring a previously local function to the federal arena. In moving toward federal coverage of basic public services, the Congress and federal officials would be substantially expanding the federal role.
Other stakeholders may also seek to use federal funds to reduce their traditional levels of commitment. Federal decision makers need to guard against this tendency—where federal support reduces or supplants private, state, or local funding. One aim of providing federal assistance has been to promote or supplement expenditures that would not otherwise occur—or at a level deemed necessary—without federal funding. Otherwise, federal funding is largely substituting for funding that would otherwise have been provided by private or other public investors.
section_title: Developing Funding Tools and Other Approaches That Maximize the Return on the Federal Investment
paragraphs: The third component of a framework for evaluating federal investments involves a careful choice of the approaches and funding tools that would best leverage federal funds in meeting identified goals. A well-designed funding approach can help encourage investment by other stakeholders and maximize the application of limited federal dollars. In addition, the federal government has other tools available besides those that relate specifically to making funding available such as demand management, technology improvements, and different operational approaches.
An important step in selecting the appropriate approach is to effectively harness the financial capabilities of local, state, and private stakeholders. The Alameda Corridor Program is an apt example. In this program, state and local stakeholders had both a financial incentive to relieve congestion and the commitment and ability to bring financial resources to bear. Some other ports may not have the same level of financial incentives or capabilities to undertake projects largely on their own. For example, in studying the extent to which Florida ports were able to implement a set of security requirements imposed by the state, we found that some ports were able to draw on more financial resources than others, based on such factors as size, economic climate, and funding base. While such information would be valuable in crafting federal assistance, it currently is largely unavailable. Relatively little is known about the extent of state, local, and private sector funding resources across the country.
The federal government has a variety of funding tools potentially available for use, ranging from outright grants to loan guarantees, as shown in table 7. Through cost sharing and other arrangements, the federal government can use these approaches to help ensure that federal funds supplement— and not supplant—funds from other stakeholders. For example, an effective use of funding tools, with appropriate nonfederal matches and incentives, can be valuable in implementing a national strategy to support federal port investments, without putting the government in the position of choosing winners or losers.
Federal approaches can take other forms besides those that relate specifically to making funding available. These tools allow increased output without making major capital investments. Examples include the following:   Demand management. Demand management is designed to reduce travel at the most congested times and on the most congested routes. One demand management strategy involves requiring users to pay more to use congested parts of the system during such periods, with the idea that the charge will provide an incentive for some users to shift their use to a less congested time or to less congested routes or transportation modes. On inland waterways, for example, congestion pricing for locks—that is, charging a toll during congested periods to reflect the additional cost of delay that a vessel imposes on other vessels—might be a way to space out demand on the system. Economists generally believe that such surcharges or tolls enhance economic efficiency by making operators take into account the external costs they impose on others in deciding when, where, and how to travel.
Technology improvements. Instead of making extensive modifications to infrastructure such as locks and dams, it may be possible to apply federal investments to technology that makes the existing system more efficient. For example, technological improvements may be able to help barges on the inland waterways navigate locks in inclement weather, thereby reducing delays on the inland waterway system.
Different operational approaches. Enhancing capacity of existing infrastructure through increased maintenance and rehabilitation is an important supplement to, and sometimes a substitute for, building new infrastructure. Similarly, different operating arrangements may also be able to produce efficiencies. For example, the U.S. Army Corps of Engineers is investigating the possibility of automating the operation of locks and dams on the inland waterways to reduce congestion at bottlenecks.
section_title: Examining Outcomes to Determine the Effectiveness of Investments
paragraphs: The final component of a framework for developing a federal investment strategy is evaluating results and incorporating lessons learned into the decision-making process. Evaluating the effectiveness of existing or proposed federal investment programs could provide decision makers with valuable information for determining whether intended benefits have been achieved and whether goals, responsibilities, and approaches should be modified. Such evaluations are also useful for better ensuring accountability and providing incentives for achieving results.
Leading organizations that we have studied have stressed the importance of developing performance measures and linking investment decisions and their expected outcomes to overall strategic goals and objectives.Hypothetically, for example, one goal for the marine transportation system might be to increase throughput (that is, the volume of cargo) that can be transported through a particular lock and dam system on the nation’s inland waterways. A performance measure to gauge the results of an investment for this goal might be the increased capacity (such as number of barges per hour) that results from this investment and the economic benefits associated with that increase. Assessing progress in achieving this goal is, therefore, dependent on carrying out analyses of accurate and complete outcome data.
section_title: Concluding Observations
paragraphs: There are substantial differences in the federal approach for supporting the commercial marine transportation system and the approaches for supporting air and highway transportation. Compared to these two other transportation modes, the federal approach for marine transportation funding relies more extensively on general revenues and less extensively on users of the system. These differences notwithstanding, there is growing awareness of, and agreement about, the need to view various transportation modes from an integrated standpoint, particularly for the purposes of developing and implementing a federal investment strategy and alternative funding approaches. Also, an intermodal perspective appears especially important as the nation reacts to the increased security needs for transportation networks and as it plans for better, more efficient transportation for the future. In such an effort, the framework of goals, roles, tools, and evaluation can be particularly helpful— not only for marine transportation funding, but for other modes as well.
section_title: Agency Comments
paragraphs: We validated the data in our report on assessment collections and expenditures with officials from the 15 federal agencies currently levying assessments on users of the systems and expending funds to support the systems. In addition, we provided a draft of this report to the U.S. Army Corps of Engineers and the Department of Transportation for review and comment.  The officials generally agreed with the facts presented in this report. We made technical changes to the report, as appropriate.
As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 10 days from the report date. At that time, we will send copies of the report to the Honorable Norman Y. Mineta, Secretary of Transportation; Admiral Thomas H. Collins, Commandant of the Coast Guard; Captain William G. Schubert, Administrator, Maritime Administration; the Honorable Albert S. Jacquez, Administrator, Saint Lawrence Seaway Development Corporation; the Honorable Michael K. Powell, Chairman, Federal Communications Commission; the Honorable Donald H. Rumsfeld, Secretary of Defense; the Honorable John Ashcroft, Attorney General; the Honorable Thomas E. White, Secretary of the Army; Lieutenant General Robert B. Flowers, Commander and Chief of Engineers, U.S. Army Corps of Engineers; the Honorable Harold J. Creel, Jr., Chairman, Federal Maritime Commission; the Honorable Donald L. Evans, Secretary of Commerce; the Honorable Paul H. O’Neill, Secretary of the Treasury; the Honorable Robert C. Bonner, Commissioner of Customs; the Honorable Charles O. Rossotti, Commissioner of Internal Revenue; the Honorable Monte R. Belger, Acting Administrator, Federal Aviation Administration; the Honorable Mary E. Peters, Administrator, Federal Highway Administration; the Honorable Ann M. Veneman, Secretary of Agriculture; the Honorable Tommy G. Thompson, Secretary of Health and Human Services; the Honorable Julie Louise Gerberding, Director, Centers for Disease Control; the Honorable Mitchell E. Daniels, Director, Office of Management and Budget; and Vice Admiral Conrad C. Lautenbacher, Jr., Administrator, National Oceanic and Atmospheric Administration. We also will make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at heckerj@gao.gov at (202)512-2834 or Randall Williamson at williamsonr@gao.gov at (206)287-4860. GAO contacts and acknowledgments are listed in appendix VII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To determine the amount of federal expenditures to support the commercial marine, aviation, and highway transportation systems and the amount of collections from federal assessments on the users of these systems for fiscal years 1999, 2000, and 2001, we reviewed prior GAO reports and other relevant documents, and interviewed officials from the Office of Management and Budget and various industry representatives. On the basis of this determination, we contacted 15 federal agencies and asked them to provide information on the expenditures and collections specific to the transportation systems. We relied on each agency to identify expenditures and collections related to activities that support the transportation systems.
For the purposes of this report, expenditures are outlays to pay federal obligations identified by the agency for each fiscal year to support these systems, but may include payments for obligations incurred in previous fiscal years. Assessment collections are fees and taxes paid by users of a system that were identified by the agencies and may include revenues credited to federal funds, offsetting collections, and offsetting revenue.
For each expenditure, we requested information on the nature of the expenditure (e.g., administrative processing, physical services, construction and maintenance projects, and miscellaneous services), source of funds for the expenditure (general revenues, trust fund, and reimbursement from agency account), and the amount expended for fiscal years 1999, 2000, and 2001. Expenditures for enhanced port security, derived from the Department of Defense Supplemental Budget Appropriations for fiscal year 2002, were not included in our review. For each assessment, we requested information on the nature of the assessment (fee or tax), a description of the assessment, the type of fund the receives the collection (general fund, trust fund, and reimbursement to agency account), and the amount collected for fiscal years 1999, 2000, and 2001. In addition to the assessment revenue collected that is specific to the transportation systems, we also received data from the U.S. Customs Service on the amount of duty collected on commodities imported by the transportation modes. The U.S. Customs Service provided estimates, developed by the U.S. Census Bureau, on the percent of collections that were attributable to water, sea, and land transportation modes. We applied these percentages to the total customs duties collected for fiscal years 1999, 2000, and 2001 provided by the U.S. Customs Service to compute the amount of total customs duties collected by the marine, aviation, and highway transportation systems each year.
We performed limited reasonableness tests on the data (comparing the data to the actual trust fund outlays contained in the budget of the U.S. government for fiscal years 2001, 2002, and 2003) and found that the data were reliable enough for our uses in this report. Although we had each agency validate the data provided, we did not verify agency expenditures and collections.
To identify initial considerations that could help the Congress in addressing whether to change the scope or nature of federal investments in the marine transportation system, we conducted a review of prior GAO reports and other relevant studies to identify managerial best practices in establishing strategic plans and federal investment approaches. We also interviewed U.S. Army Corps of Engineers and Department of Transportation (DOT) officials to obtain information on the current state of the commercial marine transportation system, the ability of the system to keep pace with growing demand, and activities that are under way to assess the condition and capacity of the infrastructure. We conducted our work from January 2002 to September 2002 in accordance with generally accepted government auditing standards.
section_title: Appendix II: Description of Trust Funds Used to Support the Commercial Marine, Aviation, and Highway Transportation Systems
paragraphs: Transportation-related federal trust funds include the Highway Trust Fund, Airport and Airways Trust Fund, Harbor Maintenance Trust Fund, and Inland Waterways Trust Fund. The trust fund collections come from user charges (such as fuel taxes, vehicle taxes, registration and licensing fees, and air passenger ticket taxes), which are deposited in the U.S. Treasury’s general fund for subsequent transfer to the trust fund accounts. Also, interest earned through fund balances is generally added back to these funds.
subsections: section_title: Highway Trust Fund
paragraphs: The Highway Trust Fund was established by the Highway Revenue Act of 1956 (Pub. L. No. 84-627). Highway Trust Fund revenues are derived from various excise taxes on highway users (e.g., motor fuel, motor vehicles, tires, and parts and accessories for trucks and buses) and interest earned on balances. The excise tax on gasoline is the most important source of the trust fund’s revenues. The excise tax rate on gasoline has changed five times since 1985 and is currently 18.4 cents per gallon.
The money paid into the fund is earmarked primarily for the Federal-aid Highway program, which is apportioned to states for planning, construction, and improving the nation’s highway system, roads, and bridges. Effective April 1983, the Highway Revenue Act of 1982 (Pub. L. No. 97-424) created the Mass Transit Account within the Highway Trust Fund. Currently, 2.86 cents per gallon of the federal excise tax on gasoline sales is set aside for the Mass Transit Account that will be used for transit capital projects.
A small portion (0.1 cents per gallon) of the federal excise tax on gasoline has been assigned to the Leaking Underground Storage Tank Trust Fund until April 1, 2005.
section_title: Airport and Airway Trust Fund
paragraphs: The Airport and Airway Revenue Act of 1970 (Pub. L. No. 91-258) created the Airport and Airway Trust Fund to provide a stable source of funding to finance investments in the airport and airway system and, to the extent funds were available, cover the operating costs of the airway system. The Act provided for the deposit (through the general fund) of aviation excise taxes into the trust fund. Since its establishment, various changes have been made to the rate structure supporting the trust fund. The most recent changes were centered in the Taxpayer Relief Act of 1997 (Pub. L. No. 105- 34), effective October 1, 1997, which, among other things, extended aviation taxes for 10 years (through September 30, 2007) and converted the 10 percent ad valorem tax on domestic passenger tickets to a combination ad valorem/flight segment tax over 3 years. The trust fund currently receives the vast majority of its funding from a 7.5 percent tax on domestic passenger tickets and a $3 flight segment tax. Additional funding is obtained from taxes on aviation fuels, cargo waybills, and international departures and arrivals.
The trust fund finances 100 percent of FAA’s capital investment programs (Facilities and Equipment; Airport Improvement Program; and Research, Engineering, and Development). Within certain limits set by Congress, some of the remaining money is used to cover operation and maintenance expenses of the FAA. The portion of the FAA’s operation and maintenance expenses not paid from the trust fund revenues are financed by general funds of the Treasury. While held by the Treasury, trust fund monies are invested and interest earned is deposited into the trust fund. Amounts are withdrawn from the trust fund as it is needed and transferred into each FAA appropriation to cover necessary outlays.
section_title: Harbor Maintenance Trust Fund
paragraphs: The Harbor Maintenance Trust Fund was established in accordance with the Harbor Maintenance Revenue Act of 1986 (Pub. L. No. 99-662), as amended. Revenues for this fund are derived from receipts from a 0.125 percent ad valorem user fee imposed on commercial users of specified U.S. ports, Saint Lawrence Seaway tolls, and investment interest. On March 31, 1998, as per the U.S. Supreme Court ruling, the tax on exports was terminated. The tax continues to be levied on passengers and imported and domestic cargo.
The Harbor Maintenance Trust Fund is used to finance up to 100 percent of the U.S. Army Corps of Engineers’ harbor operation and maintenance cost, including the cost associated with Great Lakes navigation projects. In addition, the trust fund fully finances the operation and maintenance of the Saint Lawrence Seaway Development Corporation. Payments from the trust fund are also authorized for the federal share of construction costs for dredged material disposal facilities and the expenses incurred by agencies related to administration of the harbor maintenance tax.
section_title: Inland Waterways Trust Fund
paragraphs: The Inland Waterways Trust Fund was authorized by the Inland Waterways Revenue Act of 1978 (Pub. L. No. 95-502), as amended by the Water Resources Development Act of 1986 (Pub. L. No. 99-662). The trust fund has been in effect since fiscal year 1981. The sources for the fund are taxes imposed on fuel for vessels engaged in commercial waterway transportation and investment interest. From this tax of 24.3 cents per gallon, 4.3 cents goes for deficit reduction and a statutory maximum of 20 cents goes to the trust fund. The funds are earmarked for financing one half of the U.S. Army Corps of Engineers’ construction and rehabilitation costs of specified inland waterway projects.
section_title: Appendix III: Amounts Expended by Federal Agencies on the Marine, Aviation, and Highway Transportation Systems
paragraphs: Thirteen different federal agencies spent federal funds on the commercial marine transportation system. On average, the agencies spent over $3.8 billion annually. During the same period, six federal agencies spent an average of over $10.3 billion annually on the aviation transportation system and five federal agencies spent an average of over $25 billion annually on the highway transportation system.
section_title: Appendix IV: Amounts Collected by Federal Agencies on Users of the Marine, Aviation, and Highway Systems
paragraphs: Eleven different federal agencies levy assessments on the users of the commercial marine transportation system. On average, the agencies collected nearly $1 billion annually. During the same period, five federal agencies collected an average of almost $11.1 billion annually from users of the aviation transportation system and four federal agencies collected an average of almost $33.7 billion annually from users of the highway transportation system.
section_title: Appendix V: Amount of Customs Duties Collected for Commodities Transported on the Transportation Systems
paragraphs: Unlike the fees and taxes on users that are earmarked to support the transportation systems, customs duties are not an assessment on the system; rather, duties are assessed on imported goods transported by the systems. The majority of customs duties collected are deposited in the U.S. Treasury’s general fund for the general support of federal activities. On average, the Customs Service reported $19.8 billion collected annually for commodities imported by the transportation modes, with nearly 80 percent collected from the marine transportation system.
section_title: Appendix VI: The Interagency Committee on the Marine Transportation System and the National Advisory Council
paragraphs: In January 2000, the Secretary of Transportation chartered the establishment of the Marine Transportation System National Advisory Council (NAC), a nonfederal body, whose purpose is to advise the Secretary of Transportation on marine transportation system issues. An Interagency Committee on the Marine Transportation System (ICMTS) was established by a memorandum of understanding among the Departments of Transportation, Defense, Commerce, Interior, Agriculture, Treasury, and the Environmental Protection Agency. The charter of the ICMTS is to facilitate implementation of the recommendations in the 1999 MTS Report to the Congress and to identify, evaluate, develop, and promote implementation of federal policies and make recommendations concerning resource utilization to ensure effective public funding decisions, support services, and management of the marine transportation system.
In May 2001, the NAC recommended that the ICMTS conduct a thorough needs-based assessment of each federal and nonfederal component mode of the marine transportation system documenting (1) the prerequisites necessary to enable the system in its entirety to meet projected traffic demands in a manner consistent with the vision statement, (2) the impact on nonmarine transportation modes should future infrastructure disruption/failure occur at critical points in the marine transportation system, and (3) an appraisal of the funding required to ensure the transportation system meets the goals of the vision statement. ICMTS officials report that the Chamber of Commerce currently has an effort under way to compile existing studies on infrastructure needs of North American ports. In addition, the ICMTS is seeking contract support for a comprehensive analysis assessing the future needs and funding of the marine transportation system.
section_title: Appendix VII: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those individuals named above, Christine E. Bonham, Jack J. Burriesci, Jay R. Cherlow, Thomas E. Collis, David K. Hooper, Elizabeth C. McNally, Sara Ann W. Moessbauer, Timmy R. Schindler, Albert E. Schmidt, and Stanley G. Stenerson made key contributions to this report.