Harbor Dredging and the Demise of the Harbor Maintenance Tax
Realistic Clean-Up Costs
Loss of Agricultural Land
Sustainable development, based on the interdependence of the economy and environment, and aiming to achieve their mutual sustainability, is both a policy and a practice. A way of life is sought which meets the needs of the present without compromising the ability of future generations to meet their needs. The basic concept was nurtured through countless individual and organization efforts, but it received broader expression with the publication of Our Common Future, the 1987 report of the World Commission on Environment and Development. The Commission focused on accelerated population growth, a limited resource support base, and environmental degradation. The global implications of "business as usual" were reemphasized at the U.N. Conference on Environment and Development held in Rio de Janeiro, Brazil in 1992.14
The economy of the Great Lakes region has been making the transition from dependence on heavy manufacturing to a greater emphasis upon service-oriented sectors resulting from changing markets, international competition, and advances in production technologies. Particularly in the central urban areas of the Great Lakes Basin, many communities have experienced plant downsizing and shutdowns. Thousands of under used or abandoned sites have been left behind, sometimes contaminated, commonly called "brownfields." Redevelopment is deterred for a number reasons, including high cleanup costs, uncertain standards, and lingering uncertainty over liability issues. These reasons also encourage migration to outlying areas or undeveloped "greenfields."
"Brownfields" may be defined in a variety of ways. According to the May 1995 edition of the NIRPC newsletter Regional View, "brownfields" are "property, both land and structures, previously used for a commercial or industrial purpose that may require mediation." Conversely, "greenfields" are properties characterized as rural or agricultural and perceived as being free of industrial contamination.15
The consequences of expanding urbanization include traffic congestion, pollution, higher housing costs, disinvestment in older communities and related social disruption, loss of productive agricultural lands, reduced wildlife habitat, and increased infrastructure investment requirements. "Unless checked, or in some cases reversed, these economic, social and environmental problems will have an irreversible effect on the sustainable future of the Great Lakes Basin ecosystem."16
The public desires "quick and efficient means of travel for employment, recreation, and commerce. Businesses and organizations require mobility to market products and provide services." Many areas of Northwest Indiana have experienced accelerated residential and commercial development, while others have decreased in populations and economic activity. "These changes have stressed the transportation system by creating increased demand on fringe areas and by allowing the deterioration of facilities in the older communities."17
A major economic issue for Great Lakes shipping is providing for harbor maintenance dredging. One subject of controversy with respect to harbor dredging has been application of the Harbor Maintenance Tax, a tax found unconstitutional by the U.S. Supreme Court in March 1998.
According to the Lake Carriers' Association, a trade association representing U.S. flag freighters operating on the Great Lakes, the ability of the U.S. Army Corps to perform regular dredging of ports is critical to the economic viability of Great Lakes shipping. The Corps' "ability to maintain the Great Lakes system at a designed vessel draft of 25 ½ feet is crucial to the efficiency of waterborne transportation. A 1,000-foot-long ship forfeits approximately 270 tons of cargo for each 1-inch reduction in loaded draft. An ocean-going vessel sized to fit the St. Lawrence Seaway (730' x 76') loses roughly 100 tons of cargo capacity for each lost inch of loaded draft." Of particular concern is sedimentation within the Indiana Harbor and Ship Canal which has not been dredged in nearly 20 years. Boats delivering ore to LTV Steel and Inland Steel must "surrender as much as 16 inches of draft, or more than 4,300 tons of cargo each arrival."
The Lake Carriers' Association has urged that a viable plan to meet the long-term port dredging needs for the Great Lakes requires three steps:
The Harbor Maintenance Tax was authorized by the Water Resources Development Act of 1986.19 This tax was originally intended to partially cover the costs of the Army Corps of Engineers operations and maintenance program for the deep draft navigation system (including the Great Lakes). The tax rate was initially set at .04% of cargo value on shipments into and out of U.S. ports. In 1990, in an attempt to fund 100% of the operation and maintenance costs, Congress tripled the ad valorem Harbor Maintenance Tax from .04% to .125%. A substantial surplus (several hundred million dollars) subsequently accrued in the Harbor Maintenance Trust Fund.
Application of the Harbor Maintenance Tax was criticized by the Great Lakes Commission, at least at the higher 1990 rate, because the tax took more money from U.S. maritime trade than was spent on harbor maintenance. "The tax diverts cargo to competing land modes such as trains and trucks which are more polluting, congestive, and energy consuming than water transport." The tax also was seen as encouraging the shipment of U.S. goods through nearby Canadian ports which do not pay the tax.20
In 1995, the U.S. Court of International Trade ruled that, by enacting the Harbor Maintenance Tax, Congress imposed an unconstitutional "duty under the pretext of fixing a fee." The court found there was little relationship between the tax on cargo and the costs of harbor maintenance.21 The Federal Circuit affirmed, concluding the Harbor Maintenance Tax was an unconstitutional duty on exports because it constitutes a tax rather than a user fee "paid by the exporter, not the direct user of the harbor, and is calculated solely based on the value of the cargo loaded for export and bears no reasonable relationship to the cost of the use of the port facilities maintained by the government."22 In the fall of 1997, the U.S. Supreme Court agreed to review the decision.23
In March 1998, the Supreme Court affirmed the findings by the lower federal courts that the Harbor Maintenance Tax was unconstitutional. "The Export Clause of the Constitution states: ‘No Tax or Duty shall be laid on Articles exported from any State.' U.S. Const., Art. I, Sec. 9, cl. 5." While agreeing that the Export Clause did not rule out a properly crafted "user fee," the Court found the Harbor Maintenance Tax was not appropriate because it did "not correlate reliably with the federal harbor services used or usable by the exporter." The Court said this analysis did "not mean that exporters are exempt from any and all user fees designed to defray the cost of harbor development and maintenance. It does mean, however, that such a fee must fairly match the exporters' use of port services and facilities."24
With the demise of the Harbor Maintenance Tax, a complex legal and political debate is certain to follow as to how harbor maintenance should be funded. One commentator recently described replacement of the fund as an "epic challenge."25
A key issue to the economic development of degraded sites is the establishment of realistic clean-up costs. An American Bar Association article examined the issue and provided an illustration with reference to the risk posed by a site to result in human cancer. For carcinogens, the goal of the Environmental Protection Agency for a Superfund clean up is the reduction of human chemical exposure so the incremental upper bound cancer risk presented by the site is no greater than the range of one person in 10,000 to one person in 1,000,000 deaths.26 Although the author praised the standard itself, he criticized the application to site usages. He reflected that the Environmental Protection Agency applied the standard for onsite drinking water, even "when it is clear that the actual land use is industrial or commercial and is likely to remain so."27
Another concern expressed during the work group process was with urban sprawl and the resulting loss of productive agricultural land.28 These concerns can also be troubling to established city neighborhoods.29 The Indiana Farm Bureau convened a special task force in 1996 in the hope of reconciling the preservation of valuable farmland with the protection of private property rights. According to Indiana Farm Bureau President, Harry Pearson, the goal of the Farmland Preservation Task Force was to preserve farmland, "which is disappearing at an alarming rate," while protecting property rights of landowners who wish to develop their land.
In early 1997, the Indiana Senate passed a resolution urging the Governor to establish an Indiana Farmland Preservation Task Force. In August 1997, Governor Frank O'Bannon named a task force "to help preserve Indiana farmland and the way of life it supports." The 19-member task force was created to examine historical trends, causes, and consequences of converting agricultural land to non-agricultural uses. "The task force will also identify voluntary methods and incentives for preserving and maintaining land for agricultural production and provide recommendations for enhancing the continued vitality of agricultural activity."
The task force is discussed in more detail in the chapter addressed to Property Rights.
A relatively new concept with respect to social needs and economic development is embodied by the phrase "environmental justice." In the broad sense, the concept is directed to the use of natural resources by one region or nation to the real or perceived detriment of another. As a result of the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992, recommendations on environmental accounting were published. The environmental accounting system, however, realizes only the "exploitation" of natural resources associated with activities such as fishing, logging, and mining. The system does not reflect the reduction in value of the natural resources when used, or the inability to provide for future generations if overused.30
The concept is receiving attention on the national, state, and regional levels as well. In 1994, President Clinton signed Executive Order 12898 entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations. According to Bob Moran, Branch Chief for the Office of Environmental Response of the Indiana Department of Environmental Management, the order "directed all federal agencies to develop strategies to identify and address any disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low-income populations." Each federal agency was required to report to the Interagency Working Group on Environmental Justice within two years as to their progress.
Moran said beginning in the 1970s, the concept developed that minority and low income communities bore an unfair burden of hazardous waste facilities, superfund sites, and undesirable environmental land uses. This idea was bolstered by four major studies.
First was Robert Bullard's study of landfill and incinerator sites in Houston, Texas. He found that African-American neighborhoods housed the vast majority of these facilities.
In 1983, the U.S. General Accounting Office performed a study of racial and socio-economic characteristics of communities surrounding four hazardous waste landfills within EPA Region IV. This study found that three of the four landfills were in primarily black communities and that those communities were also disproportionately poor when compared to the state averages.
In 1987, the United Church of Christ Commission for Racial Justice determined that minorities were more likely to live close to a hazardous waste facility or an uncontrolled waste site.
Finally, in 1992, the National Law Journal published Unequal Protection in Environmental Laws. The report alleged the federal government requires longer to address hazards and accepts less stringent solutions for hazards if located in minority communities.31
Environmental justice was a focal point for a 1995 seminar of the American Bar Association in Chicago. The U.S. Environmental Protection Agency, Office of Civil Rights, reported it had begun to accept citizen complaints that federally funded programs discriminate on the grounds of color or national origin in violation of Title VI of the Civil Rights Act of 1964. An internal dilemma for EPA was revealed. "On the one hand, section 3005(c) of RCRA requires EPA to issue a permit to a facility in compliance with RCRA's requirements. The authority to add conditions pursuant to RCRA section 3005(c)(3) is limited to those conditions necessary to protect human health and the environment."32
Also in 1995, IDEM participated in the EPA's "sensitivity session" for environmental justice. In 1996, EPA studied how the agency might integrate environmental justice into regional processes and how EPA could form partnerships with local government and communities to effectuate those processes. A "small grants program" provided "$20,000 allotments to grass roots organizations" to support environmental justice projects.33