To Fee Or Not To Fee

Last week, the Georgia Ports Authority (GPA) approved allocating up to $3 million for maintenance of the shipping channel to the Port of Brunswick marking the second straight year GPA has had to supplement federal funds for this project.

While the decision by the GPA board to dedicate funds for maintaining the waterway to the nation’s second busiest seaport in terms of shipping automobiles was certainly the right one, it is said to have been made with some reluctance.

That’s because the Port of Brunswick receives back from the federal government only a portion of the fees that it generates for the maintenance of the shipping channel through the Harbor Maintenance Tax (HMT).

The HMT, a tax (or fee as it is referred to as in the law), was created by the Water Resource Act of 1986 and was intended to be collected from those who benefit from maintenance of U.S. ports and harbors to pay for the cost of their operation and maintenance (O&M).

The HMT, which began being imposed on April 11, 1987, is levied on importers and domestic shippers using ports located on the Great Lakes and coastal areas. Originally, exporters were also required to pay the fee but a Supreme Court decision in 1998 ruled it to be unconstitutional.

The HMT is only collected on imports, domestic shipments, passengers and Foreign-Trade Zone (FTZ) admissions and is assessed at a rate of 0.125% of cargo value ($1.25 per $1,000 in cargo value). The fees go into the Harbor Maintenance Trust Fund (HMTF) through which Congress appropriates them for harbor dredging.

Herein lies the problem- Congress does not appropriate the funds like it should.

The most common complaint regarding the HMT is that the busiest ports- like the afore mentioned second busiest seaport for automobile shipping in Brunswick- contribute the most while not receiving enough back for O&M.

While the Brunswick port requires around $6 million per year for ongoing O&M, depending on the appropriation process in Congress this fiscal year, it is set to receive only between $1-1.5 million in HMT dollars for O&M. This is why GPA responsibly, albeit reluctantly, agreed to fund up to $3 million for O&M of the Brunswick port.

However, combining both of these funds will still not net Brunswick the funds it needs for full yearly O&M. The lack of full O&M funding over the years has put the Brunswick port into a situation where it will take between $15-20 million to “catch up” the shipping channel to where it needs to be.

But perhaps the biggest problem with the HMT is that not all of the fees are being used for O&M.

For instance, in FY 2010, the HMT generated and collected $1.2 billion yet only spent $793 million on its intended purpose of dredging and maintenance. The remainder of the money went into the HMTF as surplus and is being diverted to plug holes in the federal budget deficit.

This year it is estimated that of the $1.8 billion generated by the HMT only half will go back to the ports for O&M.

With the U.S. Army Corps of Engineers estimating that full channel dimensions are available at the nation’s 59 busiest ports less than 35% of the time, concern now grows that shipping rates may increase due to vessels carrying less cargo to reduce their draft or having to wait for high tide before entering. It also increases the risk of grounding.

Thankfully, Congress has finally recognized this problem and with the passage of the Water Resources and Development Act (WRDA) of 2014, and has committed to incremental increases in the usage of the HMT over a ten year period to ultimately send all of the fees back to the ports for O&M by 2025.

While this is certainly good news that the fees being collected on users of the ports for O&M of the ports will finally be spent where they were meant to be, it is still not a done deal. Congress still must pass appropriation bills for this purpose along with adopting a budget each year.

And if recent history in that area is any indication of future action, don’t hold your breath too long.

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