The Issue

Structurally/Economically Infeasible

Since Tier 4 engines and technology that meet the California Air Resources Board’s (CARB) air quality standards are too large and heavy for existing engine rooms and operate at very high temperatures. A California Maritime report (PDF), commissioned by CARB, concluded modifications to existing engines would “significantly” impact vessel stability and create safety issues for passengers and crew. CARB’s solution is to mandate boat owners to build larger, steel vessels for millions of dollars to accommodate the equipment. But since the existing vessel doesn’t meet the mandates, the vessel owner won’t even be able to sell their existing boat that was custom built for trips off California’s coast.

Economically Impossible

Commercial passenger boats are family operated business and they simply can’t afford to build CARB compliant new boats that will cost between $4.6 million and $5.7 million dollars, especially when their non-compliant boats will have no resale value in California. For those who may try to buy new boats, there is no conceivable way to maintain current passenger loads by tripling the price of passenger tickets to pay off boat loans. Ocean access will become only affordable for the one-percenters that can already afford to purchase their own boats.

CARB’s economic assessment grossly understates their conclusion that the proposed regulations could lead to (just) “some business elimination.” Rob Southwick, an expert in sportfishing market research and economics, concluded that, “Any assumption that costs can be fully or even partially passed along to customers without decreasing participation is simply wrong. If boat operators were in a position to charge higher prices, just like any business, they already would have. Without a doubt, price increases will harm Commercial Passenger Fishing Vessel operators and likewise the local communities that depend on them.”

Given that CARB has refused to disclose its vessel replacement data or bids from a reputable shipbuilder, SAC commissioned its own analysis with the assistance of a shipbuilder, a Certified Public Account (CPA) and Southwick and Associates.

Southwick Findings

• In stark contrast to CARB’s estimate of $2.1 million for a new vessel, a reputable shipbuilder provided bids for the two most common passenger boats found off California’s coast. The bids revealed costs of $4.6 million to construct a 65 ft one-day vessel (Class 1, suitable for day fishing trips, whale watching and SCUBA excursions) and $5.7 million for an 80 ft multi-day vessel (Class 2). These boats would conform to CARB’s proposed rules.
• According to the CPA report, based on the operating budgets of current H&M landing boats, to break even, businesses replacing a Class 1 boat would have to increase prices for a one-day fishing trip from $180 to $542 (201% increase) and a new Class 2 boat that provides multi-day fishing trips would have to increase its prices from $200 to $394 (97% increase). These prices are significantly higher than the 19% to 27% increases anticipated by CARB and don’t take into account any loss of passengers due to the unaffordability on the ticket to most Californians.
• Communities of lower economic means stand to be most impacted by higher passenger ticket prices.
• The CPA’s analysis underscored the financing challenges. The CPA notes that 20% – 40% is a commonly required down payment within the marine industry. Considering existing non-compliant boats will have no resale value in California and the glut of boats to be sold will depress markets outside of California, businesses will find it difficult to sell their current boats and secure down payments on new vessels, thus raising the risk for banks. Banks would have to demand higher down payments and/or higher rates. Without feasible financing, many vessel operators will shut down.

Read the press release (PDF) | Read the report (PDF)