Mr. BURLESON. You may proceed.

Mr. KENNEDY. Mr. Chairman, the U.S. Government has conceived, designed, and built a waterway system that it allows people to use and now it wants to tell them that they must pay for it and at a given rate.

Possibly, had waterway users been allowed to design the system themselves, it would not be that expensive. The Iowa Department of Transportation has produced a specific proposal about how this should be paid for and we recommend the assessment of user fees for commercial users of the inland waterway system. We also suggest a specific method of assessing those fees.

Our propoal illustrates that a user charge based on a fuel tax and lockage fee is realistic, simple, enforceable, and equitable. Such a system is consistent with the concept of a national transportation fund supported by user charges. It brings the various modes into balance, without injuring the public, the companies, or their

customers.

Our rationale is based on the notion that user fees can be calculated from specifically attributable costs incurred by the Corps of Engineers, and the Coast Guard, to operate facilities essential to commercial waterway users.

Since an analysis of the entire United States waterway system is a lengthy, expensive task, and beyond Iowa's capabilities, it was decided to analyze a representative area, the extrapolate. The Iowa DOT feels that since the District maintains channels and locks to nationwide corps standards, the segment surveyed is likely to be typical.

Our study examined the 300-mile, 12-lock-and-dam, Army Corps of Engineers Rock Island District. We separated the costs item by item, collecting those properly attributable to commercial users. the fee structure was then established to recover 43 percent of those costs an amount comparable to that paid by the trucking industry for the publicly owned highway system. The results were 3 cents per gallon of fuel; $32 fee per single lockage.

Now, what is the impact of these two fees? The waterway user charges we propose would cause a 3- to 4-percent increase in barge rates, or an increase of four-tenths of 1 cent per bushel on grain shipped from Davenport, Iowa, to New Orleans, La.

A bushel of wheat produces 60 or 70 loaves of bread. If we had 60 or 70 loaves of bread stacked here, we would be adding to the cost of them four-tenths of 1 penny.

In shipping coal our proposal would increase a coal shipment 10 cents per ton. I called a utility in Iowa yesterday and they told me that would result in about 6 cents to the average household user of electricity for a month.

Fortunately, such fees are not very sensitive to variations in the 43-percent cost-coverage assumption. A 10-point change-say to 53 percent or to 33 percent-causes only a 1 percent rate change.

If we extend this analysis nationally to other areas, we estimate that the user charge as outlined in the Iowa DOT proposal would generate $75 to $100 million annually. We do not recommend user

charges for recreational boaters, and the reasons are stated in our study.

In evaluating the Iowa DOT proposal, or any other proposal, four questions should be asked:

1. Are the proposed charges based upon verifiable line item cost accounting data, or are they based on theoretical calculations?

2. Does the proposal contain a believable statement estimating the economic impact of suggested fees on consumers, consumers, and barge companies?

3. Does the proposal call for the recovery of an amount comparable to user taxes collected from other modes?

It was ironic. We studied the aviation industry, and of the total Federal funds put out for aviation, 42.3 percent are returned in taxes for user fees.

4. Does the proposal call for a tax requiring a new bureaucracy or accounting system to regulate and collect the tax?

We Iowans ship 10 million tons a year on the river. You can be sure we don't want to hurt our farmers or our fine waterway system with unfair user charges-but we also have no intention of harming our railroads and trucks by continuing the uniquely tax-free status of the commercial river users. We want a healthy, competitive system. Our proposal wasn't invented in some ivory tower, or in a dark closet. We know the river people, the Coast Guard, the corps, and the shippers. We will have to live with these recommendations for years to come and still go on economically feeding the world's hungry people. This proposal will work. And we ask that you carefully consider it. It has been the basis of Congressman Leach's H.R. 8302 which he has submitted this past week.

Thank you.

[The prepared statement and attachment follow:]

STATEMENT OF JOSEPH A. KENNEDY, DIRECTOR, RIVER TRANSPORTATION DIVISION, IOWA DEPARTMENT OF TRANSPORTATION

Mr. Chairman, other members of the Committee, the Iowa Department of Transportation has produced a specific proposal. We recommend the assessment of user fees on commercial users of the inland waterway system. We also suggest a specific method of assessing those fees. Our proposal illustrates that a user charge based on a fuel tax and lockage fee is realistic, simple, enforceable, and equitable. Such a system is consistent with the concept of a national transportation fund supported by user charges. It brings the various modes into balance, without injuring the public, the companies, or their customers. Our rationale is based on the notion that user fees can be calculated from specifically attributable costs incurred by the Corps of Engineers, and the Coast Guard, to operate facilities essential to commercial waterway users.

Since an analysis of the entire United States waterway system is a lengthy, expensive task, and beyond Iowa's capabilities, it was decided to analyize a representative area, then extrapolate. The Iowa DOT feels that since the District maintains channels and locks to nationwide Corps standards, the segment surveyed is likely to be typical.

Our study examined the 300 mile, 12 lock and dam, Army Corps of Engineers Rock Island District. We separated the costs item by item, collecting those properly attributable to commercial users. The fee structure was then established to recover 43 percent of those costs . . . an amount comparable to that paid by the trucking industry for the publicly-owned highway system. The results were 3 cents tax per gallon of fuel; and $32 fee per single lockage.

94-769 - 77 - 23

Now, what is the impact of these two fees? The waterway user charges we propose would cause a 3 percent to 4 percent increase in barge rates, or an increase of four tenths of one cent per bushel on grains shipped from Davenport, Iowa to New Orleans, Louisiana. . . . Fortunately, such fees are not very sensitive to variations in the 43 percent cost-coverage assumption. A 10 point charge (say to 53 percent, or to 33 percent) causes only a 1 percent rate change. If we extend this analysis nationally to other areas, we estimate that the user charges as outlined in the Iowa DOT Proposal would generate $75 to $100 million annually. We do not recommend user charges for recreational boaters, and the reaesons are stated in our summary.

In evaluating the Iowa DOT Proposal, or any other proposal, four questions should be asked . . .

1. Are the proposal charges based upon verifiable line item cost accounting data, or is it based on "theoretical" caluclations?

2. Does the proposal contain a believable statement estimating the economic impact of suggested fees on consumers, shippers, and barge companies?

3. Does the proposal call for the recovery of an amount comparable to user taxes collected from the other modes?

4. Does the proposal call for a tax requiring a new bureaucracy or accounting system to regulate and collect the tax?

We Iowans ship 10 million tons a year on the river. You can be sure we don't want to hurt our farmers or our fine waterway system with unfair user charges-but we also have no intention of harming our railroads and trucks by continuing the uniquely tax-free status of the commercial river users. We want a healthy, competitive system. Our proposal wasn't invented in some ivory tower, or in a dark closet. We know the river people, the Coast Guard, the Corps, and the shippers. We will have to live with these recommendations for years to come and still go on economically feeding the world's hungry people. This proposal will work!

I am available for your questions. Thank you.

[NOTE. the Iowa DOT Waterway User Charge Proposal was previously inserted in the record by Hon. Jim Leach. See p. 89.]

Mr. BURLESON. Thank you, Mr. Kennedy.

Mr. Lederer.

Mr. LEDERER. I have no questions.

I thank the gentleman for his testimony.

Mr. BURLESON. Thank you again, Mr. Kennedy.

The next witnesses are those representing Pittsburgh Waterways Association-Mr. Robert Scatterday-and Mrs. Constance Bilski, Women of Steelworkers.

We are glad to have you and you may proceed.

STATEMENTS OF ROBERT SCATTERDAY, PITTSBURGH WATERWAYS ASSOCIATION, AND CONSTANCE BILSKI, WOMEN OF STEELWORKERS

Mr. SCATTERDAY. Thank you, Mr. Chairman.

You have our written statements and we will try to be brief orally for you.

Mr. BURLESON. The statements will be included in the record in full.

Mr. SCATTERDAY. My name is Robert Scatterday, and I am president of the Waterways Association of Pittsburgh.

Our association has traditionally opposed a waterways user tax over the years. It has not been a completely selfish opposition based on the effect of such a tax on our individual businesses; we are concerned from a purely parochial standpoint of the effect of the economy and jobs in the Tri-State district centering around Pittsburgh.

On the banks of the Monongahela and Ohio Rivers from Wheeling, W. Va., through Pittsburgh, on up to Allenport, Pa., is the greatest concentration of basic steel plants in the country-perhaps even in the world. About 30 percent of the Nation's steel is produced in these river valleys.

One of the major commodities moved on the rivers in the Pittsdistrict is coal; 46 million tons per year. This coal is used for iron and steel production, electric power generation, and other industrial uses. With the President's proposal to shift to the use of coal for most of industry's energy requirements, a waterway user tax on the transportation of this basic energy source would escalate deeply into the consumer's cost of just about all products and services.

One startling fact is the 75 percent of the coal consumed in our iron and steel production comes by barge.

Barging is the only way to adequately serve the steel plants in the river valleys of the Pittsburgh district. Coal to be used for coke and other steel-making uses is the main commodity of the Monongahela River and virtually all of the coal received by all plants on the river comes in by barge; some 32 million tons per year or the equivalent of 400.000 railroad cars per year.

Coal comes primarily from mines equipped with water shipping facilities. It is physically impossible to move this coal by any other means than the barges.

Let me give you an example of how one finished steel product. from the Pittsburgh district will be affected.

This one product is shipped to New Orleans. The motor vessel pushing the load uses 4,500 gallons of fuel per day. The trip to New Orleans takes 12 days to complete. If a 4-cent tax is added to the cost of diesel fuel, it means $2,160 additional cost to ship this commodities to New Orleans would be $112,320.

In addition to this added cost would be that of the coal barged in to make coke for the steelmaking process. This amounts to another $40,000 per year. You can see how a domino effect is produced by a transportation tax on basic raw materials such as coal and ores, and then also taxing the transportation of in between and finished. products.

Our parochial interest becomes much broader at this point. The Government has been fighting inflation for a decade. An additional tax would only fuel the inflationary fires. If only one commodity from the Pittsburgh district would have an added cost of $112,000 per year, the multiplying effect on all other commodities shipped on the Pittsburgh rivers and the other inland waterways would be staggering.

So, the imposition of a waterway user charge would be a blow to our Tri-State area. We depend on our industry for a stable economic base and our industry depends heavily on river transportation to remain competitive.

We do not believe that the economic impact of a waterway user tax in terms of people has been studied in depth and assessed in any formal way. Although a number of overview studies have been performed, they have tended to dwell in overall tonnages and expendi

tures in terms of more or less simple arithmetic with little or no comprehensive national considerations or concern about regional impacts. Especially the impact on people and jobs and on the possibility of drastic relocation of huge basic industries.

Even more troublesome is foreign competition, which now accounts for 14 percent of the Nation's steel consumption. Waterway user charges would be a reverse tariff on domestic steel. With user charges the percentage of foreign steel could, by some estimates reach 30 percent by 1980, which would result in the loss of 96,000 steel worker jobs. Due to Pittsburgh's location on the inland waterway system, a larger percentage of the 96,000 jobs would be lost in the Pittsburgh area.

Pittsburgh's three rivers provide not only a principal traffic artery but also water for recreation, a considerable portion of the area's drinking water, and a constant supply of water for manufacturing purposes. Without the dams on these rivers, level pools could not be maintained nor floods contained-46,000 pleasure boats were locked through area locks in a year. Their purpose is therefore multiple, and not solely an aid to navigation. Is it fair, then, to put the entire burden of a user charge on the barge lines as proposed? We think not. Very few Government expenditures of any kind are subject to reimbursement.

The Federal taxes paid by a healthy western Pennsylvania area industry complex and its fully employed populace would be hundreds of time the amount produced by a waterways user tax. It seems a folly to impose a waterways user tax that will surely adversely affect the economic health of such a productive area as the western Pennsylvania and upper Ohio Valley industrial complex. These are the reasons why we are extremely concerned about the Domenici amendment adopted by the Senate. The adverse economic impact I have described would almost certainly come about if the Domenici plan were implemented.

We believe that the best policy for this committee to adopt would be a no waterway user charge at all. However, if the committee determines that some sort of user charge must be imposed, then a fuel tax of no more than 4 cents per gallon would be the preferred alternative.

Moreover, such a tax should be applied to the fuel used by railroads as well, just as it is now to commercial motor vehicles. In other words, if there is to be a transportation tax, it should be extracted from all modes.

I urge, finally, that any tax adopted by the committee contain a termination date, so that its reassessment in light of the title III study results will be assured. We are greatly concerned with the economic impact of waterways taxes on people's jobs on a regional basis.

I thank you, Mr. Chairman, for this opportunity to testify. I will be glad to answer any questions.

[The prepared statement follows:]

STATEMENT OF ROBERT SCATTERDAY, WATERWAYS ASSOCIATION OF PITTSBURGH My name is Robert Scatterday and I am President of the Waterways Association of Pittsburgh.