Taxes Can Sink the Local Boating Industry
Friday, August 6, 2010 at 2:16PM Ahoy!
The story du jour in the boating media world is the purchase of a $7 million dollar yacht christened “Isabel” by Sen. John Kerry (D-MA), who has slapped American boat builders in the face and dodged the taxes in his home state.
As American boat builders are trying to recover from the recession, Kerry decides to support the New Zealand economy with the $7 million dollar purchase that could have created jobs for U.S. workers. And Kerry does what most other megayacht owners’ accountants advise their clients to do: keep the boat in a state with low or no taxes.
So, Kerry will be tie his new yacht’s docklines in Rhode Island and not in Boston Harbor close to his house nor in Nantucket where he has a vacation home. This simple move will save him just under a half-million dollars in taxes in addition to avoiding the $70,000 annual excise tax.
Rhode Island will reap the benefits of Kerry’s yacht as it has other yachts since 1993 when its tax laws were repealed.
As I have mentioned numerous times on my radio show and in my columns, boating - and especially megayachts - are a huge cash cow for local businesses and for local governments that reap taxes from the ancillary purchases and services. Just take for example the May 14, 2010, headline in the Vancouver Sun: “Victoria chamber warns that city rezoning to thwart mega-yacht marina could cost $23 million.”
Just look around Newport Harbor, where bayfront homes are selling for multimillions, yet how many megayachts hail Newport Harbor as their homeport? On another note, how many megayachts sales are finalized in California, versus Florida or the British Virgin Islands due to taxes? The wealthy will always have the option to purchase yachts where it makes financial sense, and California should be looking to attract megayacht sales and the berthing of these yachts locally.
The bad part is that the California yacht industry loses. Locally, we will not have the sales – nor the shipyard time, upgrades to the vessel, rigging, slip rent, electronics sales, dinghy with davit sale, lifejacket sale, bottom cleaning, topsides cleaning, canvas work, and the list goes on.
Ensenada can see the cash cow, as there are plans to build a new megayacht marina next to Hotel Coral’s Marina where the big boats can be stored and then brought up to California as needed for the owners.
This ties in nicely with the discussion of increasing some of the harbor fees in Newport Harbor, and yes, a fee increase is probably warranted. However, there are a few items that should be explored, such as referring to the results from a formal fee study. It is impractical to simply look at the fees of other harbors because one has to include the different services offered in Newport.
As such, there should be a formal cost recovery policy along with an annual fee review policy that the city and county can use to ensure that fees accurately reflect growth in the associated costs. Common industry economic factors such as the CPI are used to increase the fees on an annual basis.
Tip of the week is to continue trying to educate every boater to help cruise safely through the harbor, especially with the hundreds of sailboats in the summer classes and races. I want to remind everyone that the harbor is open to everyone, so technically no person or group can block any portion of navigable waters unless granted a special event permit by the U.S. Coast Guard.
With that said, I have noticed that sailing programs are making an effort to leave room between their buoys and the shore for “sea room” passage and most boaters try to avoid a flotilla of sailboats. However, there continues to be a few instances there has been conflicts between skippers and racers, and the blame is not just on the racers.
Boaters cruising through the harbor can try to avoid the sailing courses by trying to stay outside of the markers and clear of the start/finish lines. Additionally, accept the help and guidance from the race committee boats to guide you around or through a race
Charter vessels are in no hurry in the harbor, especially on a 3- to 4-hour voyage. Captains, if you are harbor cruising, then simply turn around and go in another direction to avoid a conflict. And everyone needs to be courteous, as prescribed by the inland right-of-way rules. Trust me as I have been skippering big boats in this harbor for decades - on local charters we are just maintaining proper seamanship and killing time.
No one needs to wave and yell for the other boat to move. Importantly, watch your language, as there are kids on the water. Everybody should stay calm and try to get the vessel through the fleet without tempers flaring.
Seamanship and good sportsmanship are what we need to be instilling as boaters, and we need to set the example for the youth.
And don’t forget: Tune in to the No. 1 boating radio talk show in the nation, Capt. Mike Whitehead's Boathouse Radio Show, broadcasting coast-to-coast on the CRN Digital Talk Radio syndicated network every Saturday at noon, Pacific Time. Join me with my motley crew, Chandler Bell and Matt Prichard, as we talk about “all things boating.” You can find the station listings, cable TV channels, live streaming on the Internet, and an iphone app at www.BoathouseTV.com or www.BoathouseRadio.com.
Until next week, Safe Voyages!
