Financing of Navigation Projects at Small and Medium-Sized Ports
RCED-00-58: Published: Mar 2, 2000. Publicly Released: Mar 2, 2000.
- Full Report:
Pursuant to a congressional request, GAO reviewed the Army Corps of Engineers' financing of navigation projects at small and medium-sized public ports, focusing on: (1) how small and medium-sized public ports financed the nonfederal share of the cost of navigation projects from 1986 through 1999; (2) the extent to which projects have been terminated or suspended at small and medium-sized public ports during this period because the ports were unable to demonstrate a feasible source of funding for the nonfederal share; and (3) whether federally sponsored innovative financing mechanisms could help small and medium-sized public ports fund the nonfederal share of navigation projects.
GAO noted that: (1) for most small and medium-sized public ports, states play a major role in financing the nonfederal share of the Corps of Engineers' navigation projects; (2) 23 of the 32 states where such projects have been conducted have provided all or a portion of the nonfederal share to the associated public ports through annual appropriations or grants; (3) GAO's analysis of 63 projects, for which detailed financial information was available from the Corps of Engineers, corroborated the states' role in financing navigation projects; (4) GAO's analysis showed that while most of these projects relied primarily on assistance from the states, some projects also used cash reserves, bonds, and grants from local communities to complete the nonfederal share of the financing package; (5) only 12 of 463 navigation projects identified by the Corps of Engineers as having been initiated from 1986 through 1999 had been terminated or suspended because the ports had failed to raise the nonfederal share; (6) these projects were located in ports and waterways where funding was limited or in states that did not provide financial assistance for them; (7) certain types of federally sponsored innovative financing mechanisms, such as guaranteed federal loans and other credit enhancements to lower interest costs, conceptually offer desirable financing alternatives to fund navigation projects for some small and medium-sized public ports; (8) however, their practical relevance in funding the cost-sharing requirement for navigation projects has been limited by two principal factors; (9) unlike the sponsors of airport and highway projects, the sponsors of public port projects do not receive federal funds directly and do not have the opportunity to increase those funds in the private debt market to help them raise their nonfederal share; (10) the use of some federally sponsored innovative financing mechanisms involves debt financing, which, by its very nature, requires a project's sponsors to eventually repay the debt; and (11) although some sponsors of navigation projects could eventually repay such debt, generally, the 12 sponsors that had difficulty funding navigation projects did not have sufficient revenues to repay any type of additional debt.