Del Norte County supervisors recently discussed a citizens initiative of the local Fishermans Association to increase local Transient Occupancy Tax (TOT) rates to help the Harbor but made no decisions.
Harbor Commissioner Brian Stone told supervisors Tuesday the Crescent City Harbor Commission has no position on the proposal, and was asked to speak about what would happen if the harbor were to default on its loans
“This is strictly the fishermen coming up to present something,” Stone said. “I’m not even sure what it is at this moment.”
Stone recalled the Harbor District borrowed $5.5 million from the U.S. Department of Agriculture for repairs following the 2006 and 2011 tsunamis, resulting in annual payments of $260,303. Over the life of the loan, payments would total more than $10.2 million, he said.
Stone said the harbor has made three payments on that schedule.
“All the funds we received were only for repairs of damage from the two tsunamis,” Stone said. “Currently the (district) is running a $98,000 deficit this year. When you add in the depreciation ... it’s frightening.”
He said the district is not putting money aside for harbor development or maintenance.
“If we were to default on these loans, we’d have a larger problem,” Stone said. “It’s that the impact on the community would be devastating.”
He predicted the community could lose 563 fishing jobs, 241 harbor business jobs and up to 200 other jobs due to the ripple effect in the local business community.
“I’m not saying they’re going to be (affected) but I am fearful that if we get to three years from now and run out of money, then we’re in a real worry here,” he said.
Stone noted several businesses in and around the harbor district make money every year out of proximity to the harbor.
Stone said the harbor district currently needs about $11 million in repairs, showing supervisors photos of rusted sea walls, failing pier supports, broken and corroded pilings and eroded jetty at Whaler Island.
Stone said the district currently collects $87,000 less in taxes than it did in 1978. Meanwhile, the cost of living has increased 278 percent and real estate prices have risen by 586 percent since 1978, his presentation showed. Compounding the deficit is the fact that fishing and crab seasons have been disrupted and fleets have been reduced.
“Our tonnage coming across the harbor docks came out to about $100,000 last year,” he said. “If we don’t have a crab season again this year, the tonnage will go down in values. In other words, that’s our income.”
Stone said the harbor currently has $1.7 million in reserve funds, a $498,000 deficit, will lose about $100,000 in tonnage, is over-budget by about $85,000. His presentation showed the district can draw on its reserves for about three years before running out of money, to which the result could be the loss of up to 1,000 local jobs.
“We need funding for a brighter future,” Stone said. “We have been discussing amongst ourselves, how we get to that point and we are still in the process of trying to develop what it is that we are going to do.”
He said recent 2x2 meetings were inconclusive regarding a possible increase in transient occupancy funds to offset the harbor’s deficit.
Rick Shepard, owner of a fishing boat in the harbor, said Del Norte County has a TOT of 8 percent, the lowest he could find in California counties. He suggested a 2 percent increase in TOT go to the harbor for three years and split with the county after that.
“The reason I am proposing that is I think the harbor is helping the RV parks and the hotels in the area,” he said, noting a well-maintained harbor will attract visitors to local lodging providers and RV parks. Shepard noted TOT increases do not affect the bottom line of local lodging providers, but are paid for by their customers.
Noting a TOT increase must be approved by a vote of the people, Supervisor Gerry Hemmingsen confirmed that the request would be to earmark the 2 percent increase to the harbor.
Asked by Supervisor Bob Berkowitz what has been done to bring the problems to the attention of the community, Stone said several options were considered.
“We still haven’t made a decision,” Stone said. “We’re still trying to understand what’s acceptable to the community.” He said the district might choose to conduct a survey to determine whether the community would be most open to special assessments, sales taxes or TOT increases. He said the district has been promoting awareness through its meetings and subsequent newspaper articles.
Shepard said the increase could be a hard sell, locally, recalling a fairgrounds tax only won in election by just a few votes.
When asked, Stone estimated the proposed TOT increase would generate an additional $123,000 but if county RV parks were mandated to charge TOT, it would push the number closer to $500,000 per year. However, it was not clarified if that number reflected a 2, 8 or 10 percent TOT mandate for the RV parks.
County Chair Chris Howard said a previous initiative in 2012 “spiraled down in flames” due to resistance from lodging providers and RV parks.
“There would have to be a considerable amount of effort placed on a campaign, per se, to go out there and do the polling necessary to get community feedback because, to a certain extent, a lot of us thought that it might have been a vote taken from a lack of education,” Howard said, “but when you looked at the four measures specific to that ... folks must have been a bit more knowledgeable about the item than we thought at the time.”
Supervisor Roger Gitlin said he would support a TOT increase, if approved, earmarking it to the harbor.
“The harbor is more than just a tourist attraction, it’s a workplace and there are jobs involved so I absolutely can support, 100 percent, the vibrancy and future of the harbor,“ Gitlin said, adding the harbor commission will need to look into all aspects of revenue generation, including the development of harbor properties.
Gitlin said the proposed solution does not address long term issues.
Shepard said the three-year, 2 percent increase would allow the district to solve some problems and then the earmark could be reduced to 1 percent to fund ongoing costs.
“I’ve been in the harbor for 40 years, and I think it will work,” Shepard said, “but I have a really hard time with tax in California.”
Stone said a special assessment tax has been proposed of $25 per year for 13 years that would generate about $5.5 million, to be used specifically to pay the tsunami repair debt.
Harbor Master Charlie Helms said he was pleased that Shepard took it on himself to investigate solutions and bring them forward. he also thanked the board for considering the issue.
“None of this will be solved unless the citizens get involved in the county,” he said.
Fisherman George Bradshaw reminded citizens the debt came from a natural disaster, not from a district-generated harbor construction project or commission overspending.
Harbor Commissioner Wes White also sits on the Visitors Bureau and said after looking at several options, including debt forgiveness, bankruptcy and asset sales, increased taxes were the only possible way to keep the harbor from reverting to state or county control. White said he would prefer a TOT increase, sales tax increase or property tax increase, in that order.
Of the methods, a citizen’s initiative was preferred, he said, which would require a 2/3 vote to pass.