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CORRECTION: Would a new boat tax be a lead weight?
(Daily Press (Newport News, VA) (KRT) Via Acquire Media NewsEdge) Jul. 8--The Daily Press, Newport News, Va., story slugged NN-Would-a-new-boat-tax-be-a-lead-weight-0707, moved by McClatchy-Tribune Regional News for July 7, Hampton incorrectly referred to the "confluence of the Hampton and James rivers." The two rivers don't meet, but separately empty into the Hampton Roads estuary.
Please kill or delete the original version and use the corrected story below, which changes the first graf.
Would a new boat tax be a lead weight
By Matthew Sturdevant
Daily Press, Newport News, Va.
Jul. 7--The head of New World pirate Blackbeard was hung from a post near the Hampton and James rivers in Hampton to scare away pirates in the early 1700s.
Three hundred years later, two brothers and a business partner who own a marina and yacht brokerage on Blackbeard's Point say a new boat tax will scare off high-dollar boat owners.
Chris and Earle Hall, along with Jud Black, manage Blue Water Yacht Sales in Hampton. They've watched carefully as an effort to introduce a new boat tax surfaces, sinks and surfaces again, most recently during the campaign leading up to the May 6 City Council election.
Boat taxes have stirred debate across Hampton Roads for more than a decade as boaters and marina owners contend that a tax will hurt the local economy. Tax advocates say boat owners should pay their fair share.
Each time, it raises questions:
How many boaters will go elsewhere and take with them the money that they put into the local economy by paying for slip fees, repairs, boat supplies, lodging, groceries and restaurant meals? How does that compare with the amount raised in boat tax revenue? Is it fair to tax motorcycles, camper trailers and wheelchair-accessible vans, but not boats?
Hampton is one of several coastal Virginia communities that have recently debated the pros and cons of a new boat tax.
An effort to raise the tax in Virginia Beach was squashed last year, while Portsmouth increased its tax from 1 cent to 50 cents for every $100 of assessed value -- the effects of which are still being watched.
For now, Hampton and Virginia Beach have the same rate of $0.000001 for every $100. That means a person with a $10million boat would pay 10 cents. Hampton hasn't collected a penny on recreational boats since 2002. But it did collect about $27,000 last year on boats used for business purposes, which are taxed at $1 for every $100.
Passing a new boat tax in Hampton was a platform issue for council candidate Donnie Tuck, who came in seventh among eight candidates vying for three open seats in May.
The boat tax was effectively revoked in 2002, when the rate was $1 for every $100.
City officials haven't taken a position on the tax while they wait for a study of the economic effect of boaters and boating in Hampton, and what would happen if the boat tax is raised.
Residents in favor of a new tax say boat owners should be charged for city-financed services that benefit only boaters: maintenance of three city public boat ramps, a $4.3 million capital project this year to dredge the Back and Hampton rivers, and part of $3.03million to restore Factory Point that includes dredging boat channels.
Earle Hall of Blue Water marina said any estimates of how much tax revenue would be raised were skewed because the most expensive boats would cruise out of town.
"Think of that money as fool's gold," he said. "It would run through their fingers because the boats would not be here."
Property owners in favor of the boat tax said that the levy raised money in the past and that it could happen again.
Earl Gerringer of Chesapeake Avenue has gone before the City Council several times to say homeowners shouldn't have to pay to dredge channels that benefit only boat owners.
"It's absurd," he said.
And Tuck pointed out that Hampton has a personal property tax on other recreational items and modes of transportation. Those include a rate of $4.25 for every $100 for passenger cars, pickup trucks, vans, motorcycles and boat-and-utility trailers under 1,500 pounds, as well as $1 for every $100 on camping trailers, motor homes and "modified vehicles for handicapped."
The crux of the issue is comparing the monetary benefit of a boat tax with the economic change that could happen if a rate is introduced, city officials said.
Earle Hall said that yacht owners were very mobile and that a company or individual with a $3 million boat would have to pay $30,000 with a rate of $1 for every $100 of assessed value. Is that enough of an incentive to move the boat someplace where the tax is lower? "What do you think?" Hall asked.
Some people say the fact that Hampton has, in effect, no real boat tax could be one reason the city has so many boats.
Between 2000 and 2008, the number of boats increased from 5,325 to 7,120, according to the commissioner of the revenue's office.
It's not clear how much tax revenue could be raised today because boat assessments haven't been updated since the council got rid of the tax six years ago, city officials said. When the tax was in place, it was bringing in an increasing amount each year, from $373,057 in 1999 to $427,187 in 2002.
If the boat tax was approved and collected next year, how much of an economic loss would it be when some boat owners leave?
That's the question the city hopes to have answered in the economic study by the Virginia Institute of Marine Science. Boat owners are being asked about the type of boat they have, how much they spend on each boating trip, fixed expenses and other costs.
Gerringer said the VIMS research will be skewed by boat owners' answers. He said a better study of boat taxes was done in 2005 by Old Dominion University, and its report was published in its annual State of the Region journal.
The ODU report concluded that a boat tax reduction in many Hampton Roads communities decreased tax revenue without a noticeable increase in the number of boats regionally or to a particular city.
Boat owners are more influential and articulate than other citizen groups, and they were able to pressure one community into a dramatic reduction in the boat tax, which drove other cities and counties to be competitive and follow suit, according to the ODU report.
"Other than boat owners, no one benefited from the boat tax reductions. Indeed, the boat tax reductions forced the cities and counties to find sources of replacement revenue for their lost boat tax receipts," the ODU report said.
Hampton City Manager Jesse Wallace said that the ODU study had been discredited because of some assumptions built into it and that the VIMS study would be the final comprehensive economic analysis.
One of the differences between the ODU and VIMS studies is the ODU one tracked the total number of boats identified by state registrations, as maintained by the Virginia Department of Game and Inland Fisheries.
Most of the boats docked at Blue Water, however, are federally documented boats not counted in the state's figures.
The most expensive boats and yachts are mortgaged, and lenders require that they be documented by the U.S. Coast Guard, rather than registered with Game and Inland Fisheries, said Blue Water President and CEO Chris Hall.
There are 4,740 state-registered recreational boats principally docked, garaged or parked this year in Hampton, according to the state registry. City figures say Hampton has 7,121 boats this year, including those that are federally documented and boats for business purposes, according to the commissioner of the revenue's office.
Despite the difference in inventories, that doesn't mean there are thousands of yachts in Hampton.
Most boats in Hampton had an assessed value of less than $10,000 when the tax was last collected in 2002, Commissioner of the Revenue Ross Mugler said.
Some boat owners are expected to leave if a new tax is approved. But many are expected to stay, as evidenced by the number of boats that remained in Hampton when there was a tax and by the boats still in nearby cities that have a tax.
Based on state registration, Gloucester has almost as many boats as Hampton, and Gloucester has the tax rate that Hampton had in 2002: $1 for every $100 of assessed value. The rate in James City County is $4 per $100 -- the highest on the Peninsula -- and the number of state-registered boats there has increased from 2,336 a decade ago to 2,558 this year.
Meanwhile, Portsmouth lost some boats after instituting a tax last year but is still expected to raise $306,000 in revenue, city spokeswoman Monique Bass said.
If a higher boat tax is approved in Hampton, it will likely hit those with the most expensive boats at a time when the boat business is suffering from high fuel costs, inflation is rising and the stock market is nose-diving.
"We're entering uncharted waters," said Chris Hall of Blue Water. "We can't afford to make a mistake."
Boat tax rate per $100 of assessed value:
--Chesapeake: 9 cents
--Gloucester: $1
--Hampton: $0.000001
--Isle of Wight: $1
--James City: $4
--Newport News: 90 cents for boats over 5 tons; $1 for boats under 5 tons
--Norfolk: 50 cents for personal pleasure boats; $1.50 for commercial
--Northampton: $2.05
--Poquoson: $1.50
--Portsmouth: 50 cents
--Suffolk: $1.50
--Virginia Beach: $0.000001
To see more of the Daily Press, or to subscribe to the newspaper, go to http://www.dailypress.com.
Copyright (c) 2008, Daily Press, Newport News, Va.
Distributed by McClatchy-Tribune Information Services.
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