BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 1432 Hearing Date: 7/14/2015
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|Author: |Bonta |
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|Version: |6/29/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Harbors and ports: Monterey Bay and the Bays of San
Francisco, San Pablo, and Suisun: pilotage rates
DIGEST: This bill increases pilotage fees and rates, as
specified, for commercial vessels calling on ports (inbound and
outbound transits) in San Francisco, San Pablo, Suisun, and
Monterey Bay, including the Sacramento River to the Port of
Sacramento and the San Joaquin River to the Port of Stockton.
This bill also reinstitutes a navigation technology surcharge
for the purchase or lease by the pilots of new navigation
hardware and software to enhance navigation safety.
ANALYSIS:
Existing law:
1)Provides for the regulation and licensure of pilots for
Monterey Bay and the Bays of San Francisco, San Pablo, and
Suisun by the Board of Pilot Commissioners (Board) within the
Transportation Agency.
2)Specifies that the Board shall consist of seven members
appointed by the Governor and one ex-officio non-voting member
(the Secretary of the Transportation Agency). Two members are
pilots licensed by the Board; two are industry members (one
from the tanker industry and one from the dry cargo industry);
and, three public members who are neither pilots nor work for
companies that use pilots.
AB 1432 (Bonta) Page 2 of ?
3)Prescribes the rates of pilotage fees required to be charged
by pilots and paid by vessels. The rates involved are set
forth in Sections 1190 and 1191 of the Harbors and Navigation
Code. Section 1190 relates to bar pilotage for every vessel
inward or outward bound over the San Francisco Bar, which lies
west of the Golden Gate Bridge, and charges vary, depending on
a vessel's gross registered tonnage and draft. Section 1191
of the Harbors and Navigation Code relates to charges for
transits that originate and are concluded inland of Golden
Gate Bridge - charges for these transits are flat amounts,
with the amounts varying with the places at which the transit
begins and ends.
4)Stipulates that the Board shall recommend that the
Legislature, by statute, adopt a schedule of pilotage rates
providing fair and reasonable return to pilots engaged in ship
movements or special operations if rates for those movements
or operations are not specified in Section 1190 of the Harbors
and Navigation Code.
5)Provides that a vessel using pilots for ship movements or
special operations that do not constitute bar pilotage shall
pay the rate specified in the schedule of pilotage rates
adopted by the Legislature.
6)Provides for a movement fee as is necessary and authorized by
the Board to recover a pilot's costs for the purchase, lease,
or maintenance of navigation software, hardware, and ancillary
equipment purchased after November 5, 2008 and before January
1, 2011.
This bill:
1)Increases the draft foot and mill rates in effect under
Harbors and Navigation Code Section 1190(a)(1) as follows:
those rates that are in effect on December 31, 2015, shall be
increased by 3% on January 1, 2016; those in effect on
December 31, 2016, shall be increased by 3% on January 1,
2017; those in effect on December 31, 2017, shall be increased
by 2% on January 1, 2018; and those in effect on December 31,
2018, shall be increased by 2% on January 1, 2019.
2)Increases the minimum schedule of pilotage rates for ship
movements and special operations in effect under Section
AB 1432 (Bonta) Page 3 of ?
1191(c) of the Harbors and Navigation Code as follows: those
rates that are in effect on December 31, 2015, shall be
increased by 3% on January 1, 2016; those in effect on
December 31, 2016, shall be increased by 3% on January 1,
2017; those in effect on December 31, 2017, shall be increased
by 2% on January 1, 2018; and those in effect on December 31,
2018, shall be increased 14% on January 1, 2019.
3)Reinstitutes, until January 1, 2020, a navigation technology
surcharge for the purchase or lease by the pilots of new
navigation hardware and software to enhance navigation safety.
Background
Brief Historical Perspective. Bar pilots have been guiding
ships into San Francisco Bay, one of the most treacherous
passages in the world, since at least 1835. The work that bar
pilots performed was so important that one of the first
legislative enactments by the newly formed California
Legislature that met in San Jose in 1850 was to address the
regulation of bar pilots.
California's history of piloting parallels to a large extent the
history of pilotage throughout the United States. Prior to the
American Revolution, pilotage was regulated by colonial
legislatures. They generally provided for the commissioning of
pilots, apprenticeship requirements to become a pilot, specified
the type and size of pilot boats used in the service, and
established fees to be charged. When the United States
Constitution was adopted, it recognized that pilotage fell
within the domain of the federal government because it involved
regulation of instruments of foreign commerce. One of the first
acts of the newly formed Congress in 1789 was to recognize the
existing state laws regulating pilots and delegate to the states
the authority to continue to regulate pilotage because of its
unique character.
Bar pilots are responsible for steering an arriving vessel
through the Golden Gate of San Francisco Bay, the Bay waters and
adjoining navigable waters, which include San Pablo Bay, Suisun
Bay, the Sacramento River and its tributaries. When a vessel
approaches the "SF" buoy several miles west of the Golden Gate
Bridge, a bar pilot boards the ship and takes navigational
AB 1432 (Bonta) Page 4 of ?
control. (Pilots in San Francisco are called "Bar Pilots"
because they board and disembark ships just beyond a treacherous
sand bar which provides a natural obstacle to shipping.) It
becomes the pilot's responsibility to guide the ship to its
berth. The bar pilots provide service to all types of vessels,
from 100-foot tugs to 1000-foot supertankers.
Pilots are generally mandatory in every major port throughout
the world and their pilotage service is paid for by the vessel
owner/agent. As noted above, the San Francisco Bar Pilots
(SFBP) have been state regulated and licensed since 1850 to
pilot vessels to various ports in the Bay Area such as San
Francisco, Oakland, Redwood City, Martinez, Richmond,
Pittsburgh, Vallejo, Rodeo, Antioch, Stockton, Sacramento and
more recently including Monterey.
Board of Pilot Commissioners Recommendations. In February 2015,
the SFBP filed a petition for an increase in pilotage rates
under the provisions of Section 1200 through 1203 of the Harbors
and Navigation Code. Under these provisions, the Board itself
does not set pilotage rates but instead makes recommendations to
the Legislature concerning adjustment of pilotage rates. The
SFBP petition requested a 5% increase in rates in 2016 and 2017
and a further increase of 4% each in 2018 and 2019. The Pacific
Merchant Shipping Association (PMSA) subsequently filed its
opposition to the petition requesting that the Board reject the
increases submitted by the SFBP.
On April 10, 2015, the Board, in accordance with the
Bagley-Keene Open Meeting Act voted on two different rate
adjustment proposals. In the first vote (a 2-4 vote), it
declined to recommend approval of the rate increase proposed by
SFBP in its petition. In the second vote (6-0 vote), the Board
recommended that the Legislature adopt across-the-board pilotage
rate increases of 3% in each of 2016 and 2017 and 2% in each of
2018 and 2019. The Board also recommended reinstitution of the
navigation technology surcharge so that pilot's may recover
their costs for the purchase, lease, or maintenance of
navigation equipment.
The Board stated, "The last time the Legislature authorized an
increase in pilotage rates was in 2002, 13 years ago. At that
time, the Legislature approved a phased annual percentage
increase in rates, ending with a final percentage increase in
2006. In the nine years since that last increase in 2006, the
AB 1432 (Bonta) Page 5 of ?
cost to the pilots of providing pilot services has risen by 33%.
During that same period, due to a reduction in the number and
size of the ships calling in the Bay Area during the economic
downturn, the gross revenue to the pilots has dipped as much as
13% from a high in 2006. Only recently has gross revenue
reached and slightly exceeded the 2006 total. The overall net
increase in gross revenue over that nine-year period is 1.3%."
Additionally, the Board noted, "Pilot net income is what is left
for division among the pilots after the cost of providing pilot
services is subtracted from gross revenue. There have been
significant drops in pilot net income since 2006. In 2010,
pilot net income was 26% less than in 2006. Overall, the
decrease in pilot net income between 2006 and 2014 has been
9.5%. Although pilot net income has increased from the low in
2010, it is still short of where it was in 2006 because of
increases over the last nine years in the cost of providing
pilot services. In early 2015, pilot net income has dipped
nearly 50% from 2014 levels because of the slowdown associated
with the labor dispute between the Pacific Merchant Shipping
Association and the International Longshore and Warehouse
Union."
Furthermore, the Board found that "since the last increase in
2006, the consumer price index for the San Francisco-Oakland-San
Jose area has risen 20.5%. Of the 10 ports deemed comparable to
one another in the Board's regulations, the San Francisco Bay
Area trails only New York City in the cost of living."
Purpose of AB 1432. According to the author's office, this
measure is intended to implement the April 10, 2015 pilotage
rate recommendations issued by the Board.
Staff comments. As noted above, vessels entering the San
Francisco Bay are required by law to utilize the services of a
licensed SFBP and are charged fees for those services. The
Board regulates and contracts for the services of the bar pilots
who are independent contractors, not state employees. The 58
pilots currently licensed by the Board are members of a private
unincorporated association (the San Francisco Bar Pilots
Association) which is essentially a "regulated monopoly," with
membership and rates fixed by statute. Among other things, the
San Francisco Bar Pilots Association maintains pilot boats,
AB 1432 (Bonta) Page 6 of ?
rents office space, provides dispatch and billing services, and
hires pilot-boat crews and office staff. After the expenses of
running the business are subtracted from the revenue that the
pilots generate with their services, the pilots share equally in
the net proceeds. The SFBP are the only coastal pilots that
have their rates set in statute by the Legislature. For
example, the Los Angeles Pilot Service, which dates back to
1907, and ensures a safe flow of ship traffic to and from Los
Angeles Harbor, consists of pilots who are employees of the City
of Los Angeles. Additionally, the Port of Long Beach contracts
with a private pilot service.
Suggested amendment. As currently drafted, this bill does not
fully reflect the Board's recommendations. The author may wish
to consider amending this bill as follows: On page 5, line 39,
strike "14 percent" and insert "2 percent."
Prior/Related Legislation
AB 2287 (Swanson, of 2012) stated the intent of the Legislature
to enact legislation that would require a 2nd bar pilot for
safety in the San Francisco Bay and its tributaries for ultra
large container vessels, and what the appropriate compensation
is for the 2nd pilot. (Held in Assembly Appropriations
Committee)
AB 2042 (Huber, 2012) would have eliminated the Board of Pilot
Commissioners, effective January 1, 2022, and transferred the
board's functions and duties to the Secretary of Business,
Transportation and Housing. Also, would have recast and
reenacted certain provisions that regulate pilots for those
bays, as provided. (Held in this committee at author's request)
AB 907 (Ma, 2011), among other things, would have increased
pilotage fees and rates, as specified for Monterey Bay and the
Bays of San Francisco, San Pablo and Suisun and established a
fuel surcharge for all vessel moves using pilotage service to be
determined by the board. (Failed passage in this committee and
was subsequently gutted and amended for other purposes)
AB 1025 (Skinner, Chapter 324, Statutes of 2011) made the
following substantive changes to existing provisions of law
relating to bar pilotage : (a) modified the definition of
"inland pilot" to mean a person holding an inland pilot license
prior to January 1, 2011 and deleted all references to inland
AB 1432 (Bonta) Page 7 of ?
pilots, (b) required the Board's assistant director be appointed
by the Secretary of Business, Transportation and Housing,
instead of the Governor, and to serve at the pleasure of the
Secretary, (c) recast certain provisions relating to violations
of safety standards to require the executive director instead of
an assigned commission investigator to perform investigations,
make findings and recommendations and report to the Board, and
(d) authorized the Board to charge an examination fee, as
specified, to each applicant to the pilot trainee training
program.
AB 1888 (Ma, Chapter 455, Statutes of 2010), among other things,
revised the terms for members of the board who are licensed
pilots and members who represent the industry and exempted from
those pilotage fees and surcharges noncommercial vessels that
are maritime academy training vessels and vessels owned and
operated by nonprofit museums or foundations. These vessels
would be subject to the board operations surcharge.
SB 300 (Yee, Chapter 497, Statutes of 2009) established a
surcharge for payment of navigational aids for bar pilots and
revised the pilotage rate based upon the current number of bar
pilots.
SB 1627 (Wiggins, Chapter 567, Statutes of 2008) made numerous
substantive, clarifying and technical changes to the body of law
relating to the Board of Pilot Commissioners by injecting
ongoing and continuous legislative oversight and administrative
responsibility within the existing pilot licensing framework,
without altering the Board, its charge, or composition and
without changing current pilotage rates, pilot pension benefits,
or duties and responsibilities of current, past or future
licensed pilots. Also, directed the State Auditor to conduct a
comprehensive performance/financial audit of the Board.
SB 1217 (Yee, Chapter 568, Statutes of 2008) required the Board
of Pilot Commissioners to appoint a physician or physicians who
are qualified to determine the suitability of a person to
perform his or her duties as a pilot, an inland pilot, or a
pilot trainee in accordance with specified requirements. Also,
required the Board to terminate a pilot trainee or suspend or
revoke the license of a pilot or an inland pilot who fails to
submit the prescribed medication information required by these
provisions.
AB 1432 (Bonta) Page 8 of ?
AB 852 (Leno, Chapter 129, Statutes of 2005), among other
things, authorized revenue generated by the pilot boat surcharge
to be used to pay for pilot boat design and engineering
modifications intended to extend the service life of existing
boats, in addition to the existing purpose of purchasing new
pilot boats.
SB 1303 (Torlakson, Chapter 560, Statutes of 2004) made a minor
change to an existing provision of law relative to
representation on the Board of Pilot Commissioners by clarifying
that the Board's two industry members must be substantial users
of any of the waters of the Bays of San Francisco, San Pablo,
Suisun, or Monterey.
SB 1353 (Perata, Chapter 765, Statutes of 2002) established a
schedule of incremental changes (through January 1, 2006) to the
rates and special surcharges that bar pilots may impose on
vessels that move in and out of the Bays of San Francisco, San
Pablo and Suisun.
SB 637 (McPherson, Chapter 177, Statutes of 2001) allowed San
Francisco bar pilots to pilot commercial vessels calling on
ports in "Monterey Bay" by including Monterey Bay within the
system of state regulated pilotage for the Bays of San
Francisco, San Pablo and Suisun.
SB 2177 (McPherson, 2000) would have applied existing provisions
of law relative to the regulation, licensing, and management of
pilots for the Bays of San Francisco, San Pablo and Suisun to
persons who pilot vessels into or out of the waters of Monterey
Bay. (Held in Assembly policy committee at author's request)
SB 2144 (Perata, Chapter 394, Statutes of 2000) made various
modifications to provisions of law governing the licensing of
bar pilots.
SB 1109 (Burton, Chapter 786, Statutes of 2000), among other
things, required a vessel owner and its operators to defend,
indemnify, and hold harmless, a bar pilot from any liability and
expenses in connection with any civil claim suit as action
arising out of the pilot's performance of the pilotage services,
except for acts of willful misconduct.
AB 951 (Wiggins, Chapter 261, Statutes of 1999) codified the
agreement on bar pilot rate increases reached between the San
AB 1432 (Bonta) Page 9 of ?
Francisco Bar Pilots and the Pacific Merchant Shipping
Association.
SB 1741 (Johnston, Chapter 1115, Statutes of 1996), among other
things, established a schedule of bar pilotage rate increases
that were phased in over a three-year period (1997-99).
SB 496 (M. Thompson, Chapter 711, Statutes of 1995) revised the
formula the fiduciary uses to calculate the quarterly adjustment
for pilotage rates. Also, changed the schedule of pilotage fees
for ship movements and internal operations, as specified.
SB 2068 (Johnston, Chapter 385, Statutes of 1994) increased the
pilotage rate from 60.70 mills to 64.88 mills and required the
board to temporarily reduce the additional charge, as specified,
if maintenance and repair costs of two pilot boats are less than
$200,000.
SB 238 (Lockyer, Chapter 1192, Statutes of 1993) increased the
rate of the additional pilotage charge from 60.56 mills per high
gross registered ton to 60.70 mills. Also, included inland
pilots, as defined, in the pension benefit program.
AB 1768 (Papan, Chapter 1653, Statutes of 1984) among other
things, established a unified system of state regulated pilotage
whereby inland pilots became members of the San Francisco Bar
Pilots Association and the combined group assumed joint
responsibility for all pilotage moves on the pilotage grounds
(San Francisco, San Pablo, and Suisun Bays and all other ports
included therein.)
AB 1061 (Agnos, Chapter 1306, Statutes of 1983) increased
pilotage rates and pension benefits, as specified.
AB 2027 (Felando, 1983), among other things, would have created
three classes of pilots (pilots, inland pilots, and company
pilots) and would have repealed existing law relative to the
Legislature establishing pilotage rates. (Held in this
Committee at author's request)
AB 3603 (Brown, W., 1982) would have provided a unified system
of state regulated bar and inland pilotage. (Dropped at
author's request in Senate Finance Committee)
FISCAL EFFECT: Appropriation: Yes Fiscal
AB 1432 (Bonta) Page 10 of ?
Com.: Yes Local: No
SUPPORT:
San Francisco Bar Pilots
Bay Institute
CA Labor Federation
Sailors' Union of the Pacific
OPPOSITION:
Pacific Merchant Shipping Association
ARGUMENTS IN SUPPORT: Writing in support, the San Francisco
Bar Pilots (SFBP) state, "We endorse AB 1432 and the Board of
Pilot Commissioners findings and recommendations." The SFBP
also point out, "When the maritime industry experiences
increased costs, it increases its rates to its customers. For
example, Matson Navigation Company increased rates for its
Hawaiian service by an average of 5.4% in each of the last four
years. It reported income of $25 million during the first
quarter of 2015, seven times the earnings for the same quarter
last year. The SFBP cannot simply increase rates as a result of
an increase in costs or to keep up with inflation. Our only
recourse is through legislation following a hearing before the
Board of Pilot Commissioners."
ARGUMENTS IN OPPOSITION: The Pacific Merchant Shipping
Association (PMSA) has expressed opposition to this bill and
emphasizes that evidence does not provide a reasonable
justification for rate increases. PMSA argues that growth in
pilotage fee revenues actually outpaced growth in pilot
expenses. PMSA claims that pilotage revenues collected by the
SFBP in 2014 outperformed even its own stated income goals from
2011 - and did so without a rate increase.
According to PMSA, "in 2010, the average net income per San
Francisco Bay Pilot was $393,207. This was down from the
average net income of $427,153 per pilot in 2009 because of the
overall decline in ship traffic using the San Francisco Bay
system as a result of the ongoing recession. Overall, today
tonnage is up significantly since 2010, and as a result pilots'
salaries exceeded $450,000 in 2014 without any benefit of a rate
increase thanks solely to increased Bay traffic and ship
AB 1432 (Bonta) Page 11 of ?
tonnage. It is anticipated that, as the trend towards larger
ships being brought into service continues, pilot income will
continue to grow accordingly without increasing pilotage rates."