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Title XI Funding
Should Congress fund the Title XI program in FY2007?


Marine Log

March 19, 2007

New hope for Title XI funding?

Will the Democrat controlled Congress override the ideological objections of the White House and fund the Title XI Federal Ship Construction Loan Guarantee Program?

The wheels have already started turning. The House Subcommittee on Seapower and Expeditionary Forces held a hearing on Title XI last week.

You can access the witnesses' prepared statements here.

"Given the beneficial applications of the program," said Chairman Gene Taylor, "I am disappointed that again this year the Administration failed to request funding for Title XI loan guarantees."

Taylor said he was "particularly concerned" by U.S. Maritime Administrator Sean Connaughton's written testimony, which characterized the XI program as "a corporate subsidy and recommends that prospective ship-owners finance their ships in the world credit markets."

In fact, the Maritime Administrator's actual words were that "at this time, the Administration does not request funding for Title XI because it believes this program is a form of corporate subsidy, and that shipowners and shipyards should rely on their own creditworthiness to obtain financing..."

That sounds a lot like "well, what I have been told to say is..."

More significant may be Connaughton's assurance that "MARAD is now positioned to continue to administer the program in such a way as to maximize the benefit to our national and economic security while protecting the Government’s financial interest."

That sounds a lot like "if you guys throw us a little funding, we'll do a good job with it."

Equally interesting is that other witnesses included Cynthia Brown, President of the American Shipbuilding Association.

ASA member shipyards, of course, primarily focus on the Navy market, though there are a couple who might have more than a passing interest in building, say, containerships/ Which brings us to another witness at last week's hearing: Chuck Raymond, President and CEO of Horizon Lines, the leading Jones Act operator of containerships. Its 16 ship domestic trade fleet is now looking distinctly long in the tooth, with an average age of 31 years.

Raymond praised Title XI's usefulness and made a plea for regular funding. He also had some suggestions for improving the program's user friendliness and soundness.

"In particular," he said, "we see providing statutory priority to applications for replacement of older, increasingly obsolete vessels, by established operators, in established trade lanes, as an approach that can produce high benefits at low risk. This -- and funding -- is a logical first step to get the program going again."