Funding For the Future of U.S. Maritime Commerce

October 10th, 2014

Public Law No 113-121, better known as the Water Resources Reform and Development Act (“the Act”), which was enacted on June 10, 2014, authorized 12.3 billion dollars in federal funding for water-related projects. The law was a bipartisan effort to promote the maritime industry. In President Obama’s remarks, he envisioned the Act would “put Americans to work modernizing our water infrastructure and restoring some of our most vital ecosystems.”

The Act applies to diverse projects, such as port revitalizations and flood mitigation. It also streamlines feasibility studies, and accelerates the permitting process for water resource projects. Legislative changes will provide more flexibility to encourage non-federal and private sector investments to fund water resource projects themselves.

The Act also reallocates and redistributes the Harbor Maintenance Taxes (HMT) to the various national ports. Historically, this cargo tax was often re-directed to other projects, which often stymied maritime infrastructure project funding. Under the new Act, the funds must go towards improving the infrastructure for water resources, so that 100% of the HMT must be apportioned for operation and maintenance expenses by 2025.

Next, ports designated as “donor ports” and “energy transfer ports” will receive a larger percentage of HMT. To qualify as a donor port, a port must (1) collect at least $15 million dollars in HMT annually; and (2) receive less than 25% of that collected HMT in return during the previous five years. Additionally, the donor port must also have handled at least 3 million Twenty Foot Equivalent Units (TEUs) in the 2012 fiscal year.

Several ports in California qualify as donor ports. Both the Port of Los Angeles and the Port of Long Beach will enjoy greater tax revenues, empowering them to invest that money in dredging and infrastructure improvement projects. Smaller ports also benefit from the Act, as the Act sets a minimum amount for HMT funding. This funding ensures underserved harbors, the Great Lakes Navigation System, and the Alaska District will receive sufficient funding.

Despite praise for the Act from ports and legislatures, momentum must continue to grow. The Act is merely the first step in modernizing America’s waterways. Plans to spend the money alone are insufficient. The appropriation process by the Corps of Engineers must also allocate enough money to improve ports, and state, local and private sector funding must be available in order to match these federal funds. The widening of the Panama Canal by 2016 will motivate shipping companies to use larger capacity vessels, and in turn dredging projects that deepen ports must be amplified in order to accommodate post-Panamax vessels. Also, structural and technological improvements must be made to handle the higher volume of cargo going through our ports. Ultimately, the passage of the Act symbolizes America’s commitment to promoting American maritime commerce.

For more information about this Act, please contact Angelique So at aso@cwlfirm.com