By Patti Payne, July 23, 2013, Puget Sound Business Journal
Did you know that the state of Washington builds more super yachts than all the rest of the United States? This surprising statistic is fromwww.superyachtintelligence.com, in its 2012 Superyacht Report.
But many say the state is losing money because of what critics call a shortsighted and aggressive approach to taxation of these recreational boating yachts in comparison to any other top-tier marine state, according to Peter Schrappen of the Northwest Marine Trade Association.
That is because after 60 days in Washington state waters, a 10 percent tax on the value of the boat is imposed if it is registered as an LLC, as most super yachts are, whether they are built here or trying to visit. Smaller, individually owned boats get to stick around for 180 days before they are taxed on their value. A marine tourism bill, which failed to pass the Washington state Legislature this year, is aimed at getting both the LLC boats and individually owned smaller boats treated the same.
“No boat owner has ever come to the association and asked for this,” says Schrappen. “We are pushing this bill because we represent all the marine trades that go into courting the recreational boating industry. The main opposition to this bill is from the State Department of Revenue.”
“This bill will come up again in the next session,” he promises.
The state Department of Revenue is concerned that the marine tourism bill, if passed, would make it easier for wealthy owners to avoid paying taxes on their super yachts. The agency’s objections have helped keep the House and Senate versions of the bill bottled up in committees.
A study by Hebert Research, of Bellevue, indicates that tens of millions of dollars in new spending would be pumped into the economy through money spent on marinas, boatyards, electricians, welders, painters, grocery stores, and hospitality and retail outlets if the current taxation law were changed.
According to the research, this year super yachts are a $4.02 billion industry for Washington state.
A U.S. Superyacht Association graph shows that total annual expenses for a 180-foot yacht amount to $4.75 million, with $250,000 injected into the local economy by guests and crew on a visit. Marine jobs and the local economies hard hit by the recession in Port Townsend, Everett, Port Angeles, Bremerton, Westport, Bellingham, Anacortes, Tacoma and Vancouver, Wash., would all benefit from passage of the marine tourism bill, Schrappen says.
“It’s really rare to have so many world-class cruising grounds, the best waters on Earth, with the best mechanics and boatyards,” he says.
Elliott Bay Harbormaster Brian Kaloper says people don’t realize the multiplier effect these pleasure craft have. “When a boat the size of Vibrant Curiosity comes to Washington,” he says, “it turns into a floating economic stimulus package. The bigger the boat, the more it spends.”
The 380-foot Luna, which is one of several giant yachts owned by Russian business tycoonRoman Abramovich, spent $900,000 in fuel on one day to fill up when it was in Seattle, before it left for San Diego. Another yacht, the 147-foot Cracker Bay, spent $30,000 topping off its tanks before heading to Alaska. And a wine steward from a super yacht recently dropped $50,000 on local wine.
Yes, we have seen those yachts and others glide in. The point is that most glide out rather quickly. Among them are the 280-foot Vibrant Curiosity; the 216-foot Invictus, built in Seattle; the 215-foot Lady Lola; 165-foot Triton; 160-foot Cocktails; and the 155-footCompass Rose.
Those in the know say that about eight to 10 super yachts are built in our area each year. And another 28 to 30 come to visit our waters, which is a far smaller number than what could be accommodated in area marinas. “We have so much excess capacity in the whole Puget Sound area,” says Dwight Jones, general manager of Elliott Bay Marina.
The marine trades in Puget Sound handle vessels of all sizes. “And that owner-operated flower shop, the fruit stands, the butcher — all benefit and can keep their doors open a bit longer when yachts come into Washington waters,” says Kaloper. “Unlike any other asset out there, it’s a true ripple effect.”
Kaloper and others say that outside of the few super yachts that find their way here for a short time, most yachts come into the Strait of Juan de Fuca and turn left to Canada rather than right to the Emerald City. Take, for example, the Serene, owned by Russian vodka titanYuri Scheffler, which never made it into our waters but rather headed to Vancouver, British Columbia, where the marinas are full. The boat has been there for several months.
“The state of Washington’s Department of Revenue has laws set in place that make this an easy decision for yacht owners,” says Kaloper. “Sadly, a bill to give these boats more time in our state tax-free has fallen on deaf ears in Olympia.”
In Florida, because of a recently passed $18,000 sales- or use-tax cap on boats valued at more than $300,000, state coffers have grown by $12 million; boat owners now are paying the tax and staying in Florida waters year round. “And the state and local economies are reaping the benefits,” says Kaloper, who wants them here.
“We love these big boats, but even more than that, we love the careers, marine trades and jobs that go with these larger vessels. I’ve been involved with the Northwest Marine Trade Association for a few years now and sit on their super yacht committee. When that super yacht comes in, it’s the fabricators, detailers, dockhands, fuel-dock attendants, florists, bar owners, restaurants, Washington state’s tourism (which no longer has a state budget to promote our wonderful slice of paradise) — those are the people that benefit, not the yacht owner with the pretty white boat,” he says.
The association’s Schrappen says: “I think (big yachts) are perceived as a tax break for the rich.” But he adds, “Really they are out-of-state businesses that want to come and spend money in our state.”
The Elliott Bay Marina’s Jones points to an upcoming boating event that will attract the eyes of the world. “America’s Cup 2013 is culminating in San Francisco in September,” he says. “It’s a showcase, a global event on a global stage. There will be boats going up and down the coast. We see this as a great opportunity (for them) to spend time and money here. These boats are floating economic stimulus packages,” he says.
Jones wonders: Why don’t we do a better job to attract them?