3

Costs, Benefits, and Funding

The extent of the benefits derived from VTS in U.S. ports and waterways is a subject of considerable controversy. This uncertainty over benefits has led to a public debate over how the costs of VTS should be recovered and whether general tax revenues, user fees, or special trust funds is the most appropriate, fair, and equitable mechanism.

In the past, the Coast Guard has installed and operated VTS systems in major ports and paid for them with appropriated federal funds. However, some key ports, including ports considered by some stakeholders to be most in need of safety improvements, still do not have VTS. For example, in the Port Needs Study (Maio et al., 1991), the Port of New Orleans was rated as receiving by far the greatest net benefit from a VTS system. But New Orleans has only minimal Coast Guard traffic services.

The Port Needs Study was conducted to satisfy the requirements of the Oil Pollution Act of 1990 (OPA 90). The study estimated the benefits of VTS based on the number of hypothetical accidents avoided, providing analytical justification for what came to be known as VTS-2000—a national acquisition program for new and improved VTS in key U.S. ports. The program has reached the stage of beginning system designs. If it proceeds as originally planned, systems will be designed to meet the needs of individual ports, and equipment will be procured beginning sometime in 1997 according to priorities developed by the Coast Guard. Early cost estimates for the full 17-port system are $260 to $310 million for total system design and procurement and $42 million in annual operating expenses (Anderson, 1996).

The prospect of funding the program at these levels during these years of tight budgets has prompted the administration and Congress to question the need for VTS-2000, the cost effectiveness of the system, and the projected benefits. Congress has also suggested that alternatives to federal funding be considered, citing to some new private initiatives that have established user fees to recover costs (U.S. House of Representatives, 1995).

For example, in the past few years the marine industry, in the ports of Los Angeles and Long Beach (LA/LB) with Coast Guard cooperation, has implemented a VTIS under the management of the Marine Exchange of LA/LB. The system was financed with the assistance of the state of California, and operating costs are recovered through fees charged to vessels operating in the ports. Another private system in the Delaware Bay and River is operated by local pilots, and costs are recovered through pilot charges to vessels.

The following discussion of available data on costs, benefits, and prospects for funding, in light of the current budget climate and questions raised about VTS-2000, is an attempt to inform the debate. In addition, the concept of federal/state partnerships is introduced as a means of fostering consensus on local needs and getting the greatest possible benefits from increasingly scarce federal dollars.

COSTS

Currently, U.S. vessel traffic and waterways management systems are run as federal, federal/private, private, or port authority operations. The eight federal VTS systems and the two most prominent private systems, LA/LB and Delaware Bay, are listed in Table 3-1 with corresponding annual operating costs.

In examining VTS costs, it is important to understand where the data come from and the limitations on their use. Variations in cost shown in Table 3-1 can be attributed mostly to the level of sophistication, the geographical coverage, and the operational standards of the variation installations. For example, in Delaware Bay and LA/LB, radar surveillance is limited to the entrance to the waterway or harbor, while in New York, San Francisco, and Puget Sound, radar and other sensors cover extensive areas in the harbor and adjacent waterways. In addition, Coast Guard-operated systems provide communications and other traffic management services throughout the regions designated as VTS operating areas. Thus, a pattern can be discerned in the cost data for existing systems, but these figures cannot be used to project the capital or operating costs of new systems in other ports. Each port has its own traffic situation and unique needs



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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report 3 Costs, Benefits, and Funding The extent of the benefits derived from VTS in U.S. ports and waterways is a subject of considerable controversy. This uncertainty over benefits has led to a public debate over how the costs of VTS should be recovered and whether general tax revenues, user fees, or special trust funds is the most appropriate, fair, and equitable mechanism. In the past, the Coast Guard has installed and operated VTS systems in major ports and paid for them with appropriated federal funds. However, some key ports, including ports considered by some stakeholders to be most in need of safety improvements, still do not have VTS. For example, in the Port Needs Study (Maio et al., 1991), the Port of New Orleans was rated as receiving by far the greatest net benefit from a VTS system. But New Orleans has only minimal Coast Guard traffic services. The Port Needs Study was conducted to satisfy the requirements of the Oil Pollution Act of 1990 (OPA 90). The study estimated the benefits of VTS based on the number of hypothetical accidents avoided, providing analytical justification for what came to be known as VTS-2000—a national acquisition program for new and improved VTS in key U.S. ports. The program has reached the stage of beginning system designs. If it proceeds as originally planned, systems will be designed to meet the needs of individual ports, and equipment will be procured beginning sometime in 1997 according to priorities developed by the Coast Guard. Early cost estimates for the full 17-port system are $260 to $310 million for total system design and procurement and $42 million in annual operating expenses (Anderson, 1996). The prospect of funding the program at these levels during these years of tight budgets has prompted the administration and Congress to question the need for VTS-2000, the cost effectiveness of the system, and the projected benefits. Congress has also suggested that alternatives to federal funding be considered, citing to some new private initiatives that have established user fees to recover costs (U.S. House of Representatives, 1995). For example, in the past few years the marine industry, in the ports of Los Angeles and Long Beach (LA/LB) with Coast Guard cooperation, has implemented a VTIS under the management of the Marine Exchange of LA/LB. The system was financed with the assistance of the state of California, and operating costs are recovered through fees charged to vessels operating in the ports. Another private system in the Delaware Bay and River is operated by local pilots, and costs are recovered through pilot charges to vessels. The following discussion of available data on costs, benefits, and prospects for funding, in light of the current budget climate and questions raised about VTS-2000, is an attempt to inform the debate. In addition, the concept of federal/state partnerships is introduced as a means of fostering consensus on local needs and getting the greatest possible benefits from increasingly scarce federal dollars. COSTS Currently, U.S. vessel traffic and waterways management systems are run as federal, federal/private, private, or port authority operations. The eight federal VTS systems and the two most prominent private systems, LA/LB and Delaware Bay, are listed in Table 3-1 with corresponding annual operating costs. In examining VTS costs, it is important to understand where the data come from and the limitations on their use. Variations in cost shown in Table 3-1 can be attributed mostly to the level of sophistication, the geographical coverage, and the operational standards of the variation installations. For example, in Delaware Bay and LA/LB, radar surveillance is limited to the entrance to the waterway or harbor, while in New York, San Francisco, and Puget Sound, radar and other sensors cover extensive areas in the harbor and adjacent waterways. In addition, Coast Guard-operated systems provide communications and other traffic management services throughout the regions designated as VTS operating areas. Thus, a pattern can be discerned in the cost data for existing systems, but these figures cannot be used to project the capital or operating costs of new systems in other ports. Each port has its own traffic situation and unique needs

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report TABLE 3-1 Estimated Annual Operating Costs for the 10 Major VTS and VTIS Systems in the United States (1995) Coast Guard-operated VTS Budget (millions) a Puget Sound $5.08 New York 4.53 Houston 3.24 San Francisco 2.63 Prince William Sound 1.13 Berwick Bay .68 Sault St. Marie .25 Louisville .03 Privately Operated VTIS   Los Angeles/Long Beach 1.60 Delaware Bay .50 a Figures include operations, maintenance, and personnel. Coast Guard costs do not include a $1.15 million annual cost for central systems maintenance and engineering facility. for numbers and types of surveillance equipment, depending on the geography and traffic patterns. Adding to the difficulty of projecting costs are the national scope of VTS-2000 and rapid advances in technology. Although capital and operating cost estimates are available for VTS-2000 for 17 ports, these data are based on very early conceptual work and could change substantially when the needs of individual ports are analyzed more carefully and current technologies are applied to meet those needs. Therefore, only generalizations about future VTS costs are possible at this time. The Coast Guard has estimated total VTS-2000 capital costs for 17 ports to be between $260 million and $310 million. Overall systems development is estimated at $145 million, and the equipment costs for individual ports are estimated to range from $5 million to $32 million (Anderson, 1996). Data from other sources obtained by the committee indicate that some low-cost private systems (which do not meet international standards for VTS but are similar in concept) can be constructed for about $1–2 million (U.S. House of Representatives, 1995). To put these numbers in some perspective (although U.S. cost data are not always comparable to foreign cost data), the Port of Rotterdam has stated that the central and local government has invested about $180 million in capital costs in its elaborate VTS system (Anderson, 1996). Although these data do not provide a good basis for establishing future capital costs, which cannot be estimated with any reliability until system designs have been completed, the figures do show that capital costs vary widely and depend entirely on local factors—specifically, port size and geography, individual needs, and the extent to which VTS meets those needs accurately and reliably. Estimates of operating cost estimates do not vary as widely as estimates of capital costs and thus may be easier to project based on existing data. Annual operating costs for the eight federal VTS systems in 1995 were about $19 million. The Coast Guard has projected that VTS-2000 operating costs for 17 ports would total about $42 million. The average per-port costs are almost the same for the two sets of calculations. Two private systems report annual operating costs of $0.5 million (Delaware Bay) and $1.6 million (LA/LB); these systems are more limited than the systems proposed under VTS-2000. The disparity between federal and private systems in terms of per-port operating costs probably can be explained by differences in the levels of service and the related needs for personnel and equipment maintenance. Because VTS-2000 was designed as a federal program, it seems likely that state-of-the-art systems installed under the program would incur operating costs close to the Coast Guard's estimate, regardless of who operates them. But these costs probably could be reduced by lowering the requirements, the standards, or coverage. BENEFITS The committee could not locate any reliable analyses of who benefits from VTS systems, and to what extent. This is a difficult issue to study and is related to the long-standing debate over public versus private roles in port activities in general. It is possible, however, to develop a general picture of VTS beneficiaries, who are distributed among the user community and the general public. The nation as a whole benefits from VTS because these systems facilitate domestic and international trade and the capability of U.S. industries to compete in world markets. Local ports and users benefit to the extent that VTS systems enhance the flow of vessel traffic, avert accidents and resulting expenses, and improve shipping efficiency. Beneficiaries range from wheat farmers in Kansas to coal miners in West Virginia, because they too depend on the efficient flow of goods through U.S. ports to customers worldwide. The general public benefits from VTS because efficient maritime commerce keeps the costs of goods down, and shipping safety helps protect human health and the environment. Most citizens want to protect the environment, and everyone has an interest in public safety and national security, both of which have been traditional government roles. Because it is difficult to allocate benefits and estimate an equitable distribution of costs, the benefits of VTS are usually assumed and allocated in the political process. This is true in major European ports that have modern VTS systems. As noted in Chapter 2, officials in the Netherlands and northern Germany have stated that the benefits of safety and efficiency are so obvious that detailed analyses would be superfluous. This argument has been sufficient to justify the allocation of significant resources to European VTS systems. In the past, the U.S. government has assumed that the national benefits from VTS were significantly broad to justify full federal funding. That assumption is being challenged, not only because of budgetary pressures but also because of a general political trend toward reducing the role

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report of government in all areas of commercial activity. In the case of VTS, as with many other activities, a federal role will remain important for ensuring public safety, national security, and protecting the environment. Properly constituted VTS systems support Coast Guard missions, such as search and rescue operations, the safety of commercial vessels, military preparedness and operations, boating safety, law enforcement, and emergency response to accidents, including oil spills. But the federal role in VTS can be justified only qualitatively. Although it is beyond the scope of the present report to quantify the benefits of VTS, anecdotal evidence (see Chapter 2 ) and common sense suggest that both the public and private sectors derive some benefits from these systems. This thesis offers some support for the argument that both the public and private sectors should participate in the development and operations of VTS systems. Many private stakeholders, however, continue to oppose user fees on the grounds that any benefits they receive are intangible and that the most obvious benefits are related to safety, which has traditionally been a federal responsibility. The value of VTS in promoting waterways efficiency, which is of direct economic interest to the private sector, seems to be less obvious. However, some private parties have stated that VTS systems are necessary to ensure safety in certain U.S. harbors, and they would support reasonable user fees for VTS operations if federal funding cannot be assured (Intertanko, 1996). FUNDING PROSPECTS The opposition to user fees is particularly strong with respect to VTS-2000 because, as was discussed in Chapter 2 , some stakeholders believe the program will produce overly expensive systems with high capital costs that could not be funded locally without having negative economic effects on port users. This perception, coupled with general skepticism about whether the program will satisfy local needs, has kept many ports from even trying to quantify the benefits of VTS. Resistance to both the VTS-2000 program itself and, more specifically, to user fees suggests that local funding may be hard to come by. However, full federal funding of the program as currently configured may also be difficult to come by for a number of reasons. First, congressional efforts to reduce government spending are threatening budgets for many agencies, including the Coast Guard. Second, there is a general political trend toward reducing the size and role of the federal government in commercial activities. Third, as was discussed in the preceding section, local users derive some benefits (albeit unmeasured) from VTS systems and could be expected to contribute something. And fourth, models for private VTIS systems exist and are receiving public attention. These systems are funded in various ways, involving user fees, state and local government support, and, sometimes, federal support. In light of the need to control federal expenditures and also ensure safety in U.S. ports and waterways, the federal and private roles in funding VTS may have to be reexamined. The federal government has the lead role and responsibility for funding services necessary for safety, environmental protection, and national security. The importance of these functions has been emphasized throughout this report. But there are reasons for seeking some private funding. Local ports and private users, who may benefit most directly from services that promote efficiency in maritime commerce, might be expected to help pay for them. At the same time, a reassessment of the VTS-2000 program goals and strategies could result in (1) plans to reduce overall expenses while still meeting urgent needs and (2) a formula for the equitable distribution of costs among public and private parties. If federal funding is to be allocated for VTS systems on the basis of safety and other clear national benefits, then the government must make the case that the planned program will serve these purposes. Current plans for VTS-2000 are not far enough along to provide specifications for individual port systems, to show how these systems would meet local safety needs, or to enable selection of the first group of ports to receive VTS. The original 17 candidate ports were identified several years ago using a plausible, but imprecise, measure (hypothetical number of oil spills averted) and may have been superseded by port development, advances in technology, and private VTIS initiatives. Therefore, it may be useful to revisit the candidate port selection process and make a stronger case for VTS needs where they exist, justified mainly by safety concerns. It is probable that two categories of priorities would emerge from this process—one group of ports with high-priority safety needs that could be addressed with VTS and another group with less urgent needs or needs that could be met more cost effectively through initiatives other than VTS. Given that current VTS-2000 plans call for only the first four to six systems to be developed within this decade, it also seems reasonable that the procurement process could be split into two or more phases. Justification for the first group of ports with high-priority needs could be developed separately from justification for the second group, for which planning could be initiated several years hence. In this way, the program could take advantage of the latest technological developments and be responsive to changing conditions and needs in individual ports. Furthermore, it may become evident through the assessment process that some ports in the second group do not really need VTS, and the elimination of these systems from the program would reduce the overall VTS-2000 budget. This may be the most straightforward way of cutting costs significantly while maintaining nationwide safety standards. Another possible cost-cutting approach for future systems would be to incorporate technological advances (discussed in Chapter 4 ). Certain conclusions from Coast Guard studies to date would justify the selection of about four to six ports as candidates for the high-priority group with urgent safety needs.

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report First, the port-needs study grouped the 23 study zones into three categories in terms of life cycle net benefits: (1) the first seven zones had a positive net benefit; (2) the next eight zones had either a small positive or small negative net benefit; and (3) the last eight zones had negative net benefits. The first category ports have changed some since the study was done. One (LA/LB) now has a private VTIS, and the system at another (Houston) has been upgraded. In addition, the Coast Guard plans for VTS-2000 call for four ports to be addressed early in the program, and only these ports are scheduled to receive VTS before the year 2000. VTS for the other ports in the 17 port program would not be implemented until after 2000. Finally, the safety needs for each of the 17 VTS-2000 ports are now being re-evaluated by the Coast Guard, and the study is expected to be completed soon. This re-evaluation should either confirm a selection of one high-priority group for early attention or suggest an alternate approach. The committee believes that re-evaluation of the needs of individual ports is vital for a final decision about priorities. Finally, to help clear up the confusion over who benefits from VTS (and therefore who should pay for it), it appears to be necessary for the VTS-2000 program, especially each individual port system, to be re-evaluated on the basis of contributions to the safety needs of that port. Based on the assumption that a federally funded VTS program must be linked explicitly to national benefits, such as safety and environmental protection, it is important that a minimum “base ” system be specified for that purpose. The Coast Guard will then have to make the case that the base system would meet safety requirements and is a necessary federal system. To ensure that minimum safety levels are maintained nationwide, it may also be advisable for the Coast Guard to review existing VTS systems, and perhaps even private VTIS, to ensure that they provide the minimum coverage and level of service to satisfy the public interest. If a base federal system were specified and implemented, then local ports and users could evaluate additions to this base that might provide commercial benefits, such as enhanced shipping efficiency. These additions or enhancements could be components or operational additions. The process by which they were identified and adopted would require the cooperation of the Coast Guard and local stakeholders (see section on federal/state partnerships). Funds for local enhancements could be obtained in a variety of ways that would require local acceptance of some cost-sharing scheme. Private support for services that local users considered beneficial could be obtained in a number of ways. Three options are considered below, private user fees, trust funds, and cost-sharing grants. Guidelines for User Fees The federal/private VTIS system in LA/LB is jointly operated by the Coast Guard and the Marine Exchange and financed by user fees that reimburse the government for personnel expenses incurred by the Coast Guard. Start-up expenses were funded by grants from the two ports and a low-interest loan from the state of California. User fees are based on the kinds of vessels covered; sometimes fees vary in direct proportion to the overall length of vessels, ranging from $200 to $380 per vessel. Monthly user fees are charged for other vessels, for example, vessels that provide local services, like scheduled passenger or freight service between the mainland California coast and Santa Catalina Island, vessels engaged in commercial rescue or emergency assistance service for hire, and vessels engaged in offshore oil well maintenance and supply or construction projects. The user fee was established in cooperation with local maritime industries and other stakeholders who helped define the parameters of the VTIS, agreed on its implementation, and oversaw its management. This group also worked to keep costs low and to focus on the most important needs as defined locally. According to the system operators, the LA/LB VTIS vessel user fees have “not been a detrimental situation either to the ports'competitiveness nor to the vessels operators themselves” (Aschemeyer, 1995). Because of higher-than-expected revenues, user fees were reduced by 10 percent as of January 1, 1995. Another VTIS system serves the Philadelphia/Camden area. The system is operated by the local pilots association and the Maritime Exchange for the Delaware River (coverage only for piloted vessels) and Bay. The pilots and the Maritime Exchange have independent vessel reporting systems, each responsible for collecting certain types of vessel information. Although the system is voluntary, the operators claim that about 95 percent of deep-draft commercial vessels participate. The annual cost of operation is approximately $500,000. The costs incurred by the pilots association are covered by pilotage fees, and the costs incurred by the Maritime Exchange are covered by a port service charge of $100 per vessel arrival (these fees are also used to cover Maritime Exchange expenses). Funding for capital expenses was provided through a grant from the state of Pennsylvania. A similar but less comprehensive system serves the Chesapeake Bay and the Ports of Baltimore and Hampton Roads. The system is operated by and receives funding from the pilots association (via pilotage fees) and from the Hampton Roads Maritime Association and the Maryland Port Administration. Another example is the Tampa Bay Vessel Traffic Advisory System, which is operated by the Tampa Port Authority (or the Hillsborough County Port District). This is a communications system only, with no surveillance or precise positioning capability. The system is funded in part by a harbor master fee established by the state legislature, which is applicable only to commercial freight and passenger vessels docking in the port district. The charge is $0.29 per foot of the overall length of the docked vessel, or a minimum of $5.

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report Tampa and the state of Florida plan to enhance and expand this system. In sum, the federal/private LA/LB VTIS system relies upon revenues from user fees, which vary with the overall length of participating vessels; fully private operations rely on pilotage fees, voluntary port service charges, and funding from maritime associations and port authorities to recover costs. The only port authority operation is funded by a harbormaster fee based on the length of docked vessels as well as funds from the state, the port authority, and other members of the marine industry. Trust Funds Three notable trust funds have been established to fund maritime projects other than VTS. They can be evaluated for possible extension to cover VTS or as models for a new VTS trust fund. The funds discussed here are the Oil Spill Liability Trust Fund (OSLTF), the Harbor Maintenance Trust Fund (HMTF), and the Aquatic Resources Trust Fund (ARTF). The OSLTF was established by Congress in 1986 under the Comprehensive Oil Pollution Liability and Compensation Act (P.L. 99-509). The bill was amended four years later with passage of OPA 90, which consolidated the liability and compensation requirements of preexisting federal oil pollution laws and the funds supporting them. The OSLTF has two component funds: the emergency fund and the principal fund. The former pays for cleaning up oil pollution and assessing damage to natural resources. The president has the authority to make available as much as $50 million annually from the emergency fund without congressional appropriations. The principal fund pays claims for certain uncompensated costs for removing oil pollution and damages; costs necessary for implementing, administering, and enforcing OPA 90; research and development; and damage assessments and restoration of natural resources. At the start of FY 1996, the OSLTF contained approximately $1.2 billion. Sources of revenue include a five-cents-per-barrel tax on petroleum produced in or imported to the United States collected from the oil industry, cost recovery funds from parties responsible for oil spills, fines and civil penalties paid by responsible parties, and interest on the balance. The HMTF was established in 1986. The Harbor Development and Navigation Improvement Act of 1986 (P.L. 99-662) authorized appropriations from this fund for 100 percent of the “eligible operations and maintenance cost of those portions of the St. Lawrence Seaway operated and maintained by the St. Lawrence Seaway Development Corporation” and “not more than 40 percent of the eligible operations and maintenance costs assigned to commercial navigation of all harbors and inland harbors within the United States.” The latter percentage was increased to 100 percent by the Water Resources Development Act of 1990 (P.L. 101-640). USACE interprets “commercial navigation” to mean any project authorized by Congress. Expenditures for FY 1996 were $476.9 million and $10.9 million to USACE and the St. Lawrence Seaway Development Corporation, respectively. Revenue sources for the HMTF include harbor maintenance fees, St. Lawrence Seaway tolls, and interest on the balance. The harbor maintenance fee is an ad valorem fee on U.S. commerce (imports, exports, and domestic) subject to the fee. The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) increased the fee from 0.04 to 0.125 percent; revenue from the fee amounted to $622.2 million in FY 1994. The fee on imports is collected in conjunction with the U.S. customs duty. As of October 1, 1994, tolls for the U.S. portion of the St. Lawrence Seaway were eliminated. In FY 1990, the surplus (or balance) in the HMTF account was $30.3 million; by FY 1994, the balance had increased to $452.4 million. Two factors have contributed to the growing surplus. First, legislation authorizing the reimbursement of approximately $45.5 million in annual expenses incurred by NOAA for commercial-navigation activities has not been passed by Congress. Second, operation and maintenance expenditures by USACE on commercial navigation have been lower than expected. Shipping companies have recently attacked the constitutionality of the HMTF fee on exports, also arguing that revenues are not being spent exclusively for dredging and other port projects but are being used to mask the size of government budget deficits. The government 's position is that the harbor maintenance fee is a user fee and that revenues are used to finance the cost of maintaining and improving navigation channels. The U.S. Court of International Trade recently ruled in favor of carriers, but the ruling will probably be appealed. The ARTF was established by the Deficit Reduction Act of 1984 (P.L. 98-369) to increase funds to the states under the Recreational Boating Safety (RBS) Federal Financial Assistance Program. The purpose of the RBS program is to encourage greater state participation and uniformity in programs that promote boating safety. The ARTF consists of two accounts, the boat safety account and the sport fish restoration account. The boat safety account is funded solely from motorboat fuel taxes; the sport fish restoration account is funded from federal excise taxes on motor boat fuels; gasoline used in small engines and fishing equipment (e.g., a 10 percent tax on fishing tackle and tackle boxes and a 3 percent tax on electric trolling motors); and import duties on fishing equipment, yachts, and pleasure craft. The ARTF receives no general tax revenues; the taxes and duties received by the fund are paid solely by beneficiaries the RBS program (i.e., boaters and fishermen). Under current law, the boat safety account is authorized to receive up to $70 million per year in motorboat fuel taxes, half of which is authorized for appropriation to the Coast Guard to offset a portion of expenditures for boating safety programs. The other half is authorized for matching grants to help participating states fund RBS programs. The receipts

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report of the Sport Fish Restoration Account for FY 1993 totaled $249.1 million, including $87.2 million from the motor boat fuel tax and $161.9 million from various taxes and duties and interest earned on the account. For FY 1994, the Congress appropriated a total of $64.5 million from the Boat Safety Account—$32.25 million for the Coast Guard and $32.25 million for the states. Congress also provided additional funds for the state RBS grant program from the Sport Fish Restoration Account (by amending the law)—$7.5 million additional in FY 1994 and 1995, $10 million in FY 1996 and 1997, and $20 million per year beginning in FY 1998. When considering using trust funds to finance VTS, several things should be kept in mind. First, expenditures from trust funds must be appropriated by the Congress each year, and they count against the parent agency's budget and affect the national deficit. Thus, the money would have an impact on the Coast Guard and national budgets. Under current law, if a federal agency obtains appropriations from a trust fund for any reason, then the additional funds are scored as an offset against that agency's budget. The result from the perspective of the affected agency can be no real increase in funding. Second, because political circumstances and priorities change over time, a trust fund might not provide the steady, predictable funding needed for VTS systems. Federal Grants Another approach to public-private cost sharing for VTS or VTIS projects would be to establish a federal grant program for the specific purpose of funding VTS. The grants could be subject to local sharing of the costs. One model for a federal grant program in the marine arena is the Coastal Zone Management (CZM) Program established by the Coastal Zone Management Act of 1972 (P.L. 92-583). This program, administered by NOAA, provides for management and protection of the coastal zone in cooperation with states. Federal actions must be consistent with approved state coastal zone management programs. The act also authorized federal grants to coastal states as incentives to establishing management plans. Programs have been established in most coastal states and approved by the U.S. Department of Commerce, which oversees NOAA. The CZM program is considered to have worked well in establishing partnerships among federal and state agencies and has led to agreed principles of sharing costs based on benefits to the two parties. The idea of using planning grants, under CZM, to encourage local stakeholder partnerships could be useful as well in the development of VTS, where cooperation among local interests is vital to success. Grants to local entities for VTS purposes would have to be subject to certain national guidelines. The Coast Guard, or any other federal agency that administered the program, would have to set guidelines based on an understanding of national and local needs. Once the guidelines were established, a specific port could apply for a grant, document its commitment to specific funding levels, and request a matching grant from the federal government. The CZM program procedures could be a model for the VTS grant program. FEDERAL/LOCAL PARTNERSHIPS One underlying theme of much of the foregoing discussion, as well as the discussion in Chapter 2 , is the need for stakeholder cooperation. The skepticism about VTS-2000 among port and other local interests suggests that the Coast Guard needs to redouble its efforts to explain the program and invest users in the process. In addition, experience with VTIS systems in LA/LB and Delaware Bay indicates that local partnerships can succeed and that private support for VTS can be obtained if users are convinced the system will benefit them. Finally, the best way to define the most urgent local needs and address them cost effectively is to involve port users in the decision making. Regardless of whether VTS-2000 is fully funded by the federal government or some cost-sharing approach is adopted, the federal/local partnership concept offers a number of advantages. First, it would foster the development of a consensus on local needs, thereby improving the sometimes-adversarial relationship between the federal government and some local stakeholders. Second, public/private partnerships could establish local institutions to manage the process of identifying, designing, acquiring, implementing, and operating the most urgently needed new or improved navigation information systems. Third, if private support were needed for system enhancements in the future, then the partnerships could devise the cost-sharing scheme and seek acceptance from all local users. For the partnership concept to work, an organization representing local interests in each port would have to be identified or developed to work with the Coast Guard to make decisions. In some areas, an existing port authority might serve this purpose. In other areas, a new group would have to be formed. Examples of the types of groups were established during the development of the LA/LB VTIS system (see Appendix D ). The LA/LB Marine Exchange Port and Navigation Safety Advisory Group was formed in 1988 to develop a VTIS system for the combined ports. 1 The group (modeled after a previously established safety committee in the port complex) was composed of representatives from the tug and barge industry, dry cargo and tank vessel operators, the U.S. Navy and Coast Guard, the two port authorities, and pilots from both ports. In addition, harbor safety committees were established in a number of ports as the result of a recommendation (made by the States/British Columbia Oil Spill 1   The group developed a comprehensive user's manual, a survey of existing communications and surveillance capabilities at the Marine Exchange and pilot stations, and took steps to develop state liability legislation. The plan was placed on hold after the Coast Guard announced plans to install and operate a federally funded VTS (see Appendix D ).

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VESSEL NAVIGATION AND TRAFFIC SERVICES FOR SAFE AND EFFICIENT PORTS AND WATERWAYS: Interim Report Task Force 2 ) that was incorporated into California law. Existing harbor safety committees could play a role in the development of federal/local partnerships. In port areas where no group stepped forward to assume local leadership, the federal government might stimulate the formation of appropriate groups by offering planning grants. SUMMARY Although available data on VTS costs, benefits, and funding schemes are inadequate to resolve fully the related questions that have been raised about VTS-2000, sufficient evidence can be found to derive useful findings. Capital costs of future VTS systems cannot be projected until system designs are complete, but operating costs are likely to be close to the Coast Guard estimates. Both capital and operating costs could be reduced by scaling back system requirements or coverage areas. The benefits of VTS have not been quantified, but these systems serve the public interest by enhancing safety and environmental protection; they also benefit, however intangibly, the private sector. Therefore, both public and private sectors can be expected to contribute to the development and operation of VTS systems. A rational approach would be for the federal government to fund systems for which clear national benefits, related primarily to safety, can be demonstrated. The private sector could then fund enhancements that would provide commercial benefits, such as enhancements related to improving shipping efficiency. This approach recognizes that political trends are reducing prospects for full federal funding and that there is justification for some private funding. There are three possible sources of private funds: user fees, trust funds, and matching grants. There is strong opposition to user fees in many U.S. ports, but they have been established and generally accepted under certain circumstances. Trust funds are difficult to administer and have not been used to date to support VTS. Federal grants with matching local contributions may be an option in some situations. The principal example of funds from user fees is the LA/ LB system, where fees are charged to most vessels transiting the port to pay for VTIS operating costs. User fees, however, were only established following state legislation and after local maritime industries and other stakeholders had worked together to define the parameters of a VTIS, agreed on implementation, and agreed to oversee management. Similar cooperation was evident in Delaware Bay, where local pilots and industry worked together to define needs and develop an efficient system to meet the specific requirements of the parties involved. In examining the cost-sharing options for VTS, an argument can be made that the LA/LB model is close to a user-pay concept because the user fees are earmarked for that particular system and are assessed only to the beneficiaries. By contrast, full federal funding for VTS-2000 can be equated with a tax on the entire U.S. population. Taxes that raise monies for the federal general revenue fund, which supports Coast Guard-operated VTS systems, must be paid not only by those who benefit from VTS but also by those who may not benefit. Therefore, federal funding must be justified for use in meeting compelling national needs and benefiting the public in general. Regardless of who pays for future VTS systems, federal/ local partnerships are advisable. Such partnerships can foster the development of a consensus on local needs and manage the identification, design, acquisition, implementation, and operation of the most urgently needed navigation information systems. If user fees are implemented, then negotiation among local stakeholders seems to be essential, both in designing the system and in setting the amount of the fee. User fees may not be feasible in all ports, and the amount must be commensurate with the perceived benefits. User fees appear to be most appropriate for funding system enhancements to a base system justified by national safety needs. REFERENCES Anderson, J.H. 1996 . Testimony of John H. Anderson, Jr., director, Transportation Issues, Resources, Community, and Economic Development Division of the General Accounting Office, before the Subcommittee on Transportation of the Committee on Appropriations, House of Representatives, Washington, D.C., March 7, 1996 . Aschemeyer, M.H.K. 1995 . Testimony by Capt. M.H.K. Aschemeyer, executive director, Marine Exchange of Los Angeles/Long Beach Harbor . Pp. 18–20 in Hearing Before the Subcommittee on Coast Guard and Maritime Transportation of the Committee on Transportation and Infrastructure, House of Representatives, One Hundred Fourth Congress, First Session, June 29, 1995 . Washington, D.C. : U.S. Government Printing Office . Intertanko , 1996 . U.S. Port and Terminal Safety Study, An Internal Discussion Paper . Accompanying paper to the Annual General Meeting, Agenda Notes, 9 May 1996, Oslo, Norway . Maio, D. , R. Ricci , M. Rossetti , J. Schwenk , and T. Liu . 1991 . Port Needs Study . DOT-CG-N-01-91-1.2, three volumes, prepared by John A. Volpe National Transportation Systems Center . Washington, D.C. : U.S. Coast Guard . States/British Columbia Oil Spill Task Force . 1990 . Final Report of the States/British Columbia Oil Spill Task Force . Olympia : Washington Department of Ecology . U.S. House of Representatives . 1995 . Privatization of Coast Guard Vessel Traffic Service Systems . Hearing Before the Subcommittee on Coast Guard and Maritime Transportation of the Committee on Transportation and Infrastructure, House of Representatives, One Hundred Fourth Congress, First Session, June 29, 1995 . Washington, D.C. : U.S. Government Printing Office . 2   Recommendation CA-2: “Create port/harbor safety committees for the harbors of San Diego, Los Angeles/Long Beach, Port Hueneme, and for the bays of San Francisco/San Pablo/Suisun and Humbolt. Each port/harbor safety plan prepared by the committees shall include the following minimum requirements: tug boat escorts, unless they are specifically found not to be beneficial; a review of anchorage designations and sounding checks, communications systems, small vessel congestion in shipping channels, and placement and emergencies; bridge management requirements; and mechanisms to insure the harbor safety plan is regularly enforced” (States/British Columbia Oil Spill Task Force, 1990)