Illinois' Proposed Public-Private Partnership

Last week, the Illinois General Assembly tried to hold a subject matter hearing on aging navigation infrastructure (I say “try” because it was rescheduled for December 2 at 10AM).  The hearing was based on this memo provided by the Illinois Department of Natural Resources.  They propose to establish a new Inland Rivers and Waterways Authority with a scope of work that includes advocacy for lock expansion via the Navigation and Ecosystem Sustainability Program (NESP).  And they propose the General Assembly support an application for an Illinois and Middle Mississippi River Public Private Partnership pilot program (IMMR P5).  The Water Resources Reform and Development Act of 2014 established this pilot program and the Corps of Engineers is accepting applications to designate the pilot projects.  It looks like private interests are seeking NESP funding through this new program. 

American Rivers submitted testimony, along with several Nicollet Island Coalition partners, opposing both of the above mentioned proposals.  Instead, we recommended Illinois abandon pursuit of funding for lock expansion and submit an IMMR P5 designation request for private financing of operations, maintenance, and rehabilitation only, using river coordinating bodies that already exist in statute – instead of creating a new authority.

The rationale behind the lock expansion opposition is detailed in the 2010 report, Big Price – Little Benefit:  Why Proposed Locks on the Upper Mississippi and Illinois Rivers are not Economically Viable.

Our other concerns are more nuanced.  The Inland Waterways System is the most subsidized mode of freight transport in the nation. More than 90 percent of the infrastructure costs are paid by federal taxpayers. While Illinois is trying to identify private investments under the IMMR P5 program, it’s possible much of the federal subsidies will be shifted onto Illinois taxpayers and will not significantly reduce the overall public subsidy for the private navigation businesses.

There are also major problems around the proposed cost recuperation plan outlined in the IMMR P5 Factsheet.  Tonnage tariffs and user fees are the only revenue stream listed from the private sector.  However, the barge industry has routinely fought every effort to incorporate such fees. A May 12, 2009 Press Release from the American Waterways Operators states:

“Replacing the excise tax on fuel that equitably distributes taxes on all commercial waterways users with a lock usage tax would impose disproportionate tax burdens on vessels transiting certain segments of the inland waterways, while other vessels using the system would pay little or nothing. This flawed approach would increase the cost of shipping essential commodities such as grain and petroleum and would undermine the nation’s inland waterways transportation system…”

Basically, the barge industry is saying that the fees Illinois plans to rely on to pay for the infrastructure would eventually drive barge traffic from those segments that have locks. It seems likely that the costs for major construction projects will not be recuperated.

We also opposed the creation of any government body or authority established specifically to pursue state or private funding for the NESP.  NESP has several fundamental flaws, which we detail in Big Price – Little Benefit.  The Corps of Engineers’ own study of the lock expansion component of the program demonstrates that the program is not economically justified, and that increasing barge traffic in the region will increase carbon emissions. There also is no evidence that taxpayer investment by the State of Illinois under the proposed IMMR P5 program will improve the benefits.  Pursuing funds for lock expansion would likely turn into a state financed boondoggle, and while it might benefit the navigation industry, it would certainly not benefit the Illinois taxpayer.

We also pointed out in the testimony that the work of the new “Inland Rivers and Waterways Authority” proposed to be created legislatively would significantly overlap with the already existing Illinois and Mississippi Rivers Coordinating Councils.  These Councils have the authority to make recommendations to the General Assembly and Governor regarding funding and spending in the Illinois and Mississippi River watersheds.  They also have the authority to identify new funding sources for river management needs and serve as a well-established public forum for discussions between all stakeholders on the rivers.  And these Councils are not mandated to pursue projects within any particular authority.

Instead of forming a new authority or submitting a proposal to the Corps of Engineers to expand locks, we recommend the state pursue IMMR P5 designation for private financing of operations, maintenance, and rehabilitation only, using river coordinating bodies that already exist in statute.  Funding under these authorities would remain independent of NESP and its related controversies.  Applications for operations, maintenance and rehabilitation would stand a greater likelihood for federal approval and funding.