Combatting the Recreational River “User Fees” Bogeyman

Commentary

Combatting the Recreational River “User Fees” Bogeyman

Why Privatization and a User Fee Model Could Help Fix Our Nation's River Infrastructure Crisis

A recent blog post from American Rivers, a public advocacy group in favor of free-flowing rivers, sounds the alarm about what it dubs “Congress’ Plan to Privatize Rivers.” This “plan to privatize” rivers is a reference to a Public Private Partnership Pilot Program that was inserted into the Water Resources Reform and Development Act of 2014 (WRRDA). The pilot program was proposed with the goal of promoting public-private partnerships (PPPs) and increasing the role of private investment in the nation’s water infrastructure-specifically locks and dams, which are badly underfunded and deteriorating.

Putting aside American Rivers’ false equivalency between PPPs and full-scale privatization, the most eye-catching anti-privatization argument in the blog post is the suggestion that privatization of locks and dams should be resisted because it would lead to a “tax on all recreational boaters-including paddlers.” This fear stems from a fall 2015 draft public-private partnership proposal for Mississippi River infrastructure that states: “All beneficial users of the locks and dams could have tariff rules and rates applied to the added value from water use.”

It is of course true that a privatized system of locks and dams would mean that river users, such as barges and other boats, would have to pay usage fees in much the same way drivers pay highway tolls. These fees, however, serve an important function. Given that there are often multiple, conflicting users of waterways, an efficient user fee system best ensures that waterways achieve their best and highest valued use. When private owners purchase infrastructure like a lock or a dam, they assume an investment risk and therefore must be allowed to recover the cost of their investment. In exchange, the private investors provide critical funding to maintain the locks and dams that they control, which in turn ensures safer and more efficient river travel for everyone.

User fees charged to commercial river users are not what concerns American Rivers, which only focuses on the perceived horror of recreational users being forced to “pay for” the “privilege” of paddling down the Mississippi. While this argument may tug at the heartstrings of kayakers and canoers everywhere, it is not well a thought-out position. In fact, there are many good reasons why all users-even recreational ones-should be expected to contribute user fees for the maintenance of our nation’s water infrastructure.

First of all, recreational users derive special benefits from locks and dams. While all Americans benefit from the enhanced river transportation that is made possible by the presence of locks and dams (in the form of better access to goods and products), recreational users derive special, particularized benefits from this infrastructure. Since locks and dams help smooth and widen uneven portions of rivers, they give recreational users the ability to easily steer clear of large barges and other fast-moving vessels. This makes for a more enjoyable river experience for all river users-especially recreational ones. The longstanding policy of the Office of Management and Budget on user fees, laid out in Circular No. A-25, states that “[a] user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.” Based on this beneficiary-pays principle, both recreational and commercial river users should be expected to pay user fees for the special benefits they derive from the presence of locks and dams.

Furthermore, user fees for recreational activities on federal land and waterways are not unique. As anyone who has visited a national park can attest, the National Park Service charges user fees for many of the activities that take place within park boundaries. User fees are levied on nearly every pursuit one can engage in at a park, including camping, docking, parking, and even just entering the park. Similarly, hunters and fishers that wish to hunt on federal land usually are required to pay the equivalent of a user fee in the form of a permit or a license. All these fees can be justified under the same beneficiary-pays model discussed above since the users who pay the fees are deriving specialized benefits beyond those that are received by the general public.

Rather than viewing the fees as objectionable, most park-goers rightly recognize that modest user fees are used, in part, to maintain the parks, thereby ensuring that they stay open and accessible to the public for years to come.

It’s also important to note that the amount of the user fee charged to a river user will vary depending on the government’s cost of providing the identifiable recipient’s benefit. Just as semi-trucks are charged higher tolls than small cars at tollbooths, barges and large commercial vessels will face higher user fees when they traverse a lock or dam than someone floating down the river on paddleboard. This is because commercial users will derive a greater benefit from the presence of the lock or dam than mere recreational users.

Some might worry that even low user fees will create a de facto barrier of entry for lower-income Americans interested in using our nation’s rivers for recreational purposes. Such concerns ignore the fact that oftentimes travel costs are as much or more of a barrier to using public lands than user fees for the poor. Additionally, there is ample research suggesting that low-income populations overwhelmingly support the concept of recreational user fees. It may even be possible to structure a locks and dams user fee system in a way that allows those who are genuinely unable to afford the fee to apply for an exemption, although if the fee is modest it should present no more of a barrier to the use of public waters than federal fishing or hunting licenses do to the use of public lands.

It’s worth pointing that very few inland rivers in America would even be affected by lock and dam user fees since locks and dams are most often located only on large rivers used for commercial transit. The Army Corps of Engineers “operates and maintains 12,000 miles of inland and intracoastal waterway navigable channels, including 192 commercial lock and dam sites.” For comparison, American Rivers itself notes that there are 250,000 rivers in the United States, totaling 3.5 million river miles, which means that only .003% of river miles have locks and dams on them. That leaves a lot of river miles leftover for “free” paddling.

This is not to say that charging modest user fees to recreational river users that traverse locks and dams would be without challenges. One administrative concern would be enforcement-a kayaker, for example, could plan routes that avoid locks and dams, or even choose to portage around them. But these same drawbacks apply with equal force to toll roads (i.e., drivers often take back roads to avoid them), and merely underscore the importance of not setting fees so high as to incentivize users to go extreme lengths to avoid them.

Ultimately, Americans need to understand that, one way or the other, they will end up paying for the maintenance of our country’s water infrastructure system. Far from being “free,” the status quo-crumbling locks and dams-benefits neither commercial nor recreational river users. If the problem is not addressed now via solutions like privatization and user fees, Americans will face the prospect of having their taxes raised to pay for water infrastructure rehabilitation down the road. Worst of all, given persistent Congressional inaction, these tax hikes would most likely be instituted only after some event forced Congress’s hand (such as a dam bursting), meaning that the cost of rehabilitation would end up much higher than it is today. The better option is instituting a more efficient and affordable system in which all river users pay fees commensurate with the benefits they derive.

Under the current system, the Inland Waterways Trust Fund-funded by a 29-cent per-gallon diesel fuel tax-finances 50% of the costs of new dam and lock construction (as well as major rehabilitation projects), with the remaining 50% coming from general taxes paid by all Americans. But neither commercial cargo vessels nor recreational river users contribute the first nickel to lock and dam maintenance and operations, 100% of which comes from general taxpayers. Instead of this inefficient, under-funded, and costly system, a true beneficiary-pays model should be considered.

Although some form of privatization (or public-private partnership) would be the best solution for America’s crumbling water infrastructure, the Army Corps of Engineers itself can take action. In OMB’s Circular No. A-25, each agency is required to “[r]eview the user charges for agency programs biennially, to include: (1) assurance that existing charges are adjusted to reflect unanticipated changes in costs or market values; and (2) a review of all other agency programs to determine whether fees should be assessed for Government services or the user of Government goods or services.” Therefore, the Corps, in its next biennial review, should recommend that Congress implement and authorize a beneficiary-pays user fee model to help fund both the capital and operating expenses associated with the river locks and dams.

The benefits of a beneficiary-pays system would include reduced river congestion and reduced tax burdens on non-river-using general taxpayers. In the face of deteriorating river infrastructure and a $19 trillion federal deficit, the implementation of a modest user fee system is really the only option left. Rather than being a bad thing like American Rivers suggests, it could make a big difference in addressing our nation’s water infrastructure funding shortfall.

William B. Newman, Jr. (wbnewmanjr@hotmail.com) is Senior Advisor to HC Project Advisors in Washington, D.C. C. Jarrett Dieterle (jdieterle@harkinscunningham.com) is an attorney at Harkins Cunningham LLP in Washington, D.C.

William B. Newman, Jr., is Senior Advisor to HC Project Advisors in Washington, DC. He was a former executive of Conrail, and worked on Conrail's successful sale by the federal government. Conrail was sold in an initial public offering in 1987, then the largest initial public offering in history.