September 28, 1976
Page 32907
Mr. MUSKIE. Mr. President, at this point in the debate on S. 3823, I would like to comment on the bill from the point of view of the Budget Committee.
I want to begin by noting that S. 3823 is an authorization measure. It will not by itself result in new Federal spending. Subsequent appropriations are required to fund the projects authorized in the bill.
As reported, S. 3823 authorizes approximately $1.1 billion for new water resources projects of the Corps of Engineers. The bill continues the traditional and important role of the Federal Government in water resources development.
Approximately $1 billion in this reported bill covers the full cost of the new construction projects that are authorized in S. 3823. An additional $58 million covers the planning costs of other projects, which the bill authorizes to proceed to the phase I stage. Under a new set of procedures established by the Committee on Public Works, phase I "advance engineering and design" must be completed before a separate decision to go to phase II construction work can be made. This procedure avoids making costly commitments to construction programs without first carefully reviewing the analysis developed as a result of the planning process.
This phase II procedure is one that I support wholeheartedly. It prevents premature commitments to expensive construction activities. It also allows the Committee on Public Works to present to the Senate an accurate calculation of costs when bringing a bill of this type to the floor. There are no hidden costs in this bill. If S. 3823 is enacted, and if it is funded, the water resource projects authorized — both phase I and phase II — will require $1.1 billion.
However, additional funding would be required were Congress to decide to go to phase II construction on those projects for which this bill authorizes phase I planning activity. CBO has estimated these additional funds at some $6 billion. I want to emphasize that a separate authorization would be required for these phase II activities. But I also want to provide Members of the Senate with an estimate of what it would cost to construct the projects we are authorizing in this bill for the phase I planning stage.
Because of the time constraints under which the Senate is now operating it was not possible for the Committee on Public Works to include in its report accompanying S. 3823 the CBO cost estimate that is required under section 403 of the Budget Act. This cost estimate is now available, and should be a part of the record on S. 3823.
Mr. President, I ask unanimous consent that the CBO cost estimate on S. 3823 appear in the RECORD at the end of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. MUSKIE. One aspect of the bill we have reported is of particular significance. I refer to section 5 of the bill which establishes that as a matter of equity commercial users of the inland waterways of the United States should pay a portion of the cost of constructing, operating, and maintaining these waterways. At present, no fees are charged to waterway users. The Federal Government bears the costs associated with the inland waterways. The effect is to provide the waterway users with an indirect subsidy.
The question of equity arises because other modes of transportation do not traditionally enjoy such benefits. Highway users are burdened with the gasoline tax and other Federal excise taxes. Muchof the total expenditure in support of our air transportation system is financed with revenues from taxes and user charges on the airlines and the passengers themselves. Even the railroads, which directly compete with the inland waterways, must build and maintain their own right-of-way and must pay taxes on their property.
Moreover, recent Federal policy has been to provide financial assistance to railroads that have had difficulty paying their bills. The Government thus finds itself in the position of not only bailing out the railroads, but of subsidizing the railroads’ competition and thereby contributing to the railroads’ financial demise.
So it seems to me to make sense to establish a system of waterway user charges. And by phasing in these charges over a period of 10 years, the adjustment to the charges can be made more easily.
I want to emphasize that in speaking on the subject of inland waterway user charges, I am not speaking on behalf of the Budget Committee. The committee took no position on user charges.
But I do believe, as a Senator from Maine and as a member of the Budget Committee, that the system of user charges contemplated in S. 3823 is desirable. Legitimate, fair, and appropriate policies that increase Federal receipts — and thus help reduce pressure on the Treasury — ought to be encouraged.
The indirect Federal subsidy enjoyed by waterway users has had a negative effect on the economy of my own State of Maine. Businesses in Maine must rely upon rail and trucking for the transportation of goods moving in and out of the State. The higher costs of these modes of transportation put Maine businesses at a competitive disadvantage to similar businesses elsewhere in the country, most notably the southeast, which take advantage of federally subsidized waterway transportation services.
I believe that Maine businesses deserve equity in this area, and I therefore support the waterway user fees measure incorporated in the committee bill as it was reported.
This bill authorizes no funds for fiscal year 1977. If the bill is enacted and funds are provided, the water resources projects in S. 3823 would first receive moneys in fiscal year 1978. S. 3823 authorizes funds solely for fiscal year 1978 and beyond.
Thus, the bill will place no pressure upon the recently enacted second budget resolution which dealt exclusively with fiscal year 1977.
The distinguished chairman of the Committee on Public Works, Senator RANDOLPH, the distinguished chairman of the Water Resources Subcommittee, Senator GRAVEL, and the distinguished members of the full committee are to be commended for their work to assure that S. 3823 complies with the spirit of the new congressional budget process. By drafting the bill to authorize funds in fiscal year 1978 and beyond, they have avoided the possibility of placing heavy, unanticipated pressure upon the ceilings of the fiscal year 1977 second budget resolution.
They have understood — with insight and concern — the need for the second budget resolution to be adopted with all possible claimants for Federal dollars laid out as clearly as possible ahead of time. They have responded in a fashion that brings credit to them and to the Public Works Committee.
Let me add on my part that I intend next year, as the Senate develops the first concurrent resolution for fiscal year 1978, to consider carefully the actual funding requirements for the Corps of Engineers resulting from this bill. I look forward to receiving the March 15 report from the Committee on Public Works which will spell out these requirements. And I know that the Budget Committee in sifting through the entire range of possible Federal spending, will review these requirements carefully.
EXHIBIT 1
CONGRESS OF THE UNITED STATES,
CONGRESSIONAL BUDGET OFFICE,
Washington, D.C.,
September 28, 1976.
Hon. JENNINGS RANDOLPH,
Chairman, Committee on Public Works,
U.S. Senate,
Dirksen Senate Office Building,
Washington, D.C.
DEAR MR. CHAIRMAN: Pursuant to Section 403 of the Congressional Budget Act of 1974, the Congressional Budget Office has prepared the attached revised cost estimate for S. 3823, the Water Resources Development Act of 1976.
Should the Committee so desire, we would be pleased to provide further details on the attached cost estimate.
Sincerely,
ALICE M. RIVLIN, Director.
CONGRESSIONAL BUDGET OFFICE REVISED COST ESTIMATE — SEPTEMBER 28, 1976
Bill Number: S. 3823.
Bill Title: Water Resources Development Act of 1976.
PURPOSE OF BILL
This proposed legislation authorizes the Phase I design memorandum stage of advance engineering and design for seine navigation and multipurpose water resource development projects and full construction for others. Surveys and plans for flood control, water development and conservation, shoreline protection and erosion control are also authorized. In addition, this bill requires the Secretary of the Army to promulgate regulations to establish user charges on the nation's inland waterways. Specifically, when fully implemented, the user charges are to recover 50 percent of the related capital costs. Finally, the bill does the following: directs the National Transportation Policy Commission to report on waterway user charges, creates a Water Resources Mitigation Advisory Board and establishes a Hydroelectric Power Development Fund to finance development of hydroelectric power.
BASIS FOR ESTIMATE
The authorization levels are those stated in the bill and essentially represent 1976 prices. For those projects for which only Phase I design is authorized, the authorization levels above only reflect those totals, i.e., the additional costs to complete the projects are not included. On the other hand, where authorization totals are for the entire project, the above cost estimate reflects such a level. The authorization levels for FY 1979 through FY 1982 represent the annual costs associated with navigation improvement on the Mermentau River, Louisiana, flood control storage on this Baker River, Washington, and maintenance dredging of the Oregon Slough, Oregon. These annual costs are not included in costs for the years beyond FY 1982, as no year limitation was specified in the legislation.
Based on other similar advisory boards, it is assumed that the Water Resources Mitigation Advisory Board would require an authorization of approximately $500,000 per year. In addition, it is postulated that the Hydroelectric Power Development Fund would receive the onetime $25 million authorized in the bill. It is further assumed that this $25 million will be used for the Phase I design memorandum state for a hydroelectric power project on the Susitna River. Although elsewhere in the bill an additional $25 million is authorized for the Susitna River, this total is not double counted. While it is possible that there will be offsetting revenues to the Hydroelectric Fund from repayments by local governments for the purchase of plants, these would most likely only occur after 1982. Consequently, this cost estimate reflects zero repayments.
The cost estimate for both the Phase I and full cost totals were derived by applying pay out rates to each of the authorization totals for designated projects. The payout rates differ according to the size of the projects and therefore its length of time for completion. For example, 3 year projects are assumed to pay out 25 percent, 40 percent and 35 percent for years 1 through 3, while 4 year projects are assumed to be 10 percent, 25 per cent, 35 percent, and 30 percent for years 1 through 4. Since the Corps of Engineers has an estimated length of time for completion for each project, a unique payout curve was applied to each authorization total. The pay out curves also differ substantially depending upon whether or not it was a full authorization or only for Phase I
It is important to note here that although the Phase I design stage of many of the projects were authorized at a total cost of $58 million, the Corps of Engineers’ estimates indicate that the completion of these projects would cost an additional $6.0 billion in 1976 prices. The above cost estimate does not include this additional funding as it is assumed that it would have to be included in a subsequent authorization. However, its critical to note that the completion of these projects would require such an additional amount of funds.
The water user charge section assumes active date of July 1, 1978 and states that 10 percent, 20 percent, 30 percent, 40 percent and 50 percent of the operation and maintenance of navigation related expenditures will be covered in years 1– 5. During the sixth year, i.e., 1983, the construction costs of navigation related expenditures will be phased in an identical way. The user charge estimate was derived by applying the above stated percentage phase in schedule against an estimated expenditure total for operation and maintenance expenditures on navigation projects.
The expenditure totals were derived by inflating, by an annual rate of 8 percent, the 1975 actual total for operation and maintenance on inland waterways, excluding Great Lakes harbors and deep draft harbors. This gives a total of $4.7, $25.5, $49.5, $77.5, and $109.2 million in FY 1978 through FY 1982 respectively. Although such charges will undoubtedly be a federal receipt, it is unknown at this time whether it will be a revue total or an offset to total expenditures.
Estimate Comparison: None.
Previous CBO Estimate: Since the previous estimate of September 21, 1978 was prepared, the
full construction costs of completing several projects that are authorized for Phase I only have become available from the Corps of Engineers. (These costs, while not a direct cost of this bill, are discussed in footnote a on page 1.) This estimate reflects these additional costs which result in an increase of $2.3 billion in the total cost of Phase I projects if they are fully authorized. In addition, while the total authorization level of the bill has not been changed, the distribution of the authorizations during the projection period has been modified to more accurately reflect the timing of authorization requirements.
Estimate Prepared By: Arleen Fain Gilliam (225-9678) A.G.
Estimate Approved By: C. G. Nuckols, for James L. Blum,
Assistant Director for Budget Analysis.