Waterways infra ‘difficult to navigate’

A US government report into waterways infrastructure has highlighted the complexity in funding US Army Corps of Engineers projects, including using P3.

The US Government Accountability Office (GAO) has recommended the Corps should define and measure deferred maintenance for inland waterways in a way that enables it to clearly communicate estimated costs for maintenance needs.

The government watchdog has also recommended that the Corps should pursue ways to increase its ability to use available funding for inland waterways construction more efficiently and, should changes to the Corps' authority be necessary, develop a legislative proposal to request such authority.

It examines alternative financing arrangements following “numerous proposals” for the Corps to leverage private capital.

While some stakeholders stated that alternative financing arrangements could increase available funding for inland waterways construction projects, they were unsure of whether these agreements would work in practice. According to some stakeholders, P3s and debt financing would provide upfront funding with an expectation of either a profitable return to a private equity partner or repayment of debt; however, others warned that there is limited interest in entering into these financing arrangements among private sector investors because there is no clear and viable revenue stream to provide such returns.

Alternative financing arrangements would also require congressional action to implement.

While the Water Resources Reform and Development Act of 2014 authorized the pilot programs to explore the use of P3s and debt financing, Corps officials told the GAO that they cannot enter into agreements of this type without specific appropriations, which they have not yet received. Corps officials stated that they are currently developing a high level policy to provide general direction about the use of alternative financing but according to them, the lack of a clear revenue source may make it more difficult to execute alternative-financing strategies that include private partners for inland waterways infrastructure.

The opportunities and limitations are also highlighted of the proposed establishment of a Federal Capital Revolving Fund, which could enable federal agencies to access full upfront funding for certain construction projects without leveraging private capital.

An availability payment based model was used by the Netherlands to procure a multi-billion dollar waterways and coastal program.

However a leading expert in the sector has highlighted to P3 Bulletin that inland waterways in the US are federally owned and operated, so availability payment structures are made impossible due to budget scoring issues.

“This is why we have been arguing for exemptions and/or different scoring rules for federal water resources for years now,” the source said.

The GAO report is available here.