TxDOT seeks funding for ship channel improvement loan program

The Texas Department of Transportation (TxDOT) has requested $450 million in general revenue to capitalize the Ship Channel Improvement Revolving Fund in fiscal 2020-21. The fund, established by the 85th Legislature in 2017 through SB 28 by Creighton, was intended to be used to finance loans for projects that deepen or widen a ship channel. The 85th Legislature did not provide funding for the revolving loan program but may consider granting TxDOT’s request for funds in the upcoming regular session.

According to TxDOT, projects to increase the width and depth of Texas ports would help accommodate larger vessels, allowing the state to remain competitive with ports in nearby states and the Panama Canal. The funding request is an exceptional item in the legislative appropriations request because the State Highway Fund, TxDOT’s main funding source, may be used only for state highway system projects. TxDOT states in its appropriations request that the $450 million would be used to make loans available to navigation districts to start ship channel projects while the ports wait for the appropriation of federal funds for projects already authorized by Congress. Some navigation districts have put up local funds to begin projects but do not know when they will receive the full federal cost share to complete construction.

As required by SB 28, the Texas Transportation Commission, which administers the fund, established rules for the Ship Channel Improvement Revolving Loan Program in September 2018. The rules require a navigation district that qualifies for a loan to conduct an annual audit and report detailed project expenditures, along with other compliance requirements. Loan proceeds may be used for costs incurred both before and after the effective date of SB 28. Navigation districts that qualify for loans must repay the funds according to terms specified by the commission. Projects must be authorized by the federal government to qualify for the revolving loan program, and maintenance dredging projects do not qualify.

While ship channel improvement projects fall under the jurisdiction of the federal government, federal grants usually require a 35 to 50 percent cost share from a non-federal sponsor such as a state agency or port authority. Congress has authorized 17 ship channel improvement projects in several states, five of which are in Texas. Eight states allocate some state funds to cover the non-federal share of the projects, while Mississippi, Florida, and Texas do not. Projects in the latter states are largely funded through local funding sources instead. In Texas, navigation districts contribute the non-federal portion of funding, which can amount to hundreds of millions of dollars.

The chart below, created using TxDOT data, shows the estimated total cost and federal share authorized by federal legislation for each qualified project in Texas. The total cost for all four projects currently seeking funds was estimated to be $1.9 billion, including $1.17 billion in federal dollars and a required $743 million in matching funds. While most of the projects are waiting for the federal share of funds,the Port of Corpus Christi entered into an agreement with the U.S. Army Corps of Engineers in 2017 to accelerate the port’s cost-share and pay up to $102 million in advance funding to begin construction. Congress also authorized the Port of Houston to pursue a ship channel improvement project, but the port opted to pay the total cost itself.

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By Casey Floren

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