, 2015

Marine interests seek relief
from ‘highest boat tax on bay’

by Audrey Thomasson

LANCASTER—A sudden deluge of rain last Thursday evening didn’t keep boat and marina owners away from the county’s public hearings on next year’s budget and tax rates. About 50 boaters turned out to protest the county’s high personal property tax on boats while only one resident objected to a portion of the proposed budget increase that could result in up to a 5-cent increase in the real estate tax rate.

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As proposed, the $31,141,381 budget for fiscal year 2014-15 represents an increase of more than $900,000 over the current budget. To meet the budget, a real estate tax rate increase of 5 cents, from 50 cents to 55 cents per $100 of assessed value, has been proposed. A penny increase in the tax rate would bring $263,770 in revenue.

“I would have brought my boat, but I couldn’t get it started,” said Howard Kyser in an opening statement in the public hearing.

Specifically, Kyser objected to a proposed increase in the public safety portion of the budget, which he said is resulting in 1 cent of the proposed 5-cent tax rate increase.

“You propose to give them a whole new penny in taxes,” he said. Kyser made a comparison of Lancaster’s public safety budget to Hanover County’s. “They have a population of 101,502 people. Their public safety budget results in a cost of $472 per person. In Lancaster County there are 11,391 people. That results in a cost for public safety of $777 a person with the new proposed budget. That’s crazy. Have they ever been asked to save a penny? The county is not growing. The population is going down. You’re just going to hand them another penny?” he asked.

District 5 supervisor and board chairman Wally Beauchamp offered to personally meet with Kyser to discuss the issue. After the meeting, Beauchamp explained Kyser’s concerns were with the Emergency Medical Services portion of the budget.

George Bott and Charlie Costello both spoke in favor of the proposed budget and the board’s expressed interest in borrowing funding to finance capital improvement projects. Supervisors have been talking about the benefits of a county loan with financial planner Davenport and Company, because without the loan the county’s reserve account is predicted to decrease another $1.8 million to $2.4 million by the end of the next fiscal year.

“It’s a wise choice to finance,” said Bott.

“Put enough money in (the loan) so you don’t have to keep going back to the well,” said Costello.

Sven Anker Madsen said, “I don’t like to see the reserves depleted. You’ve kept taxes really, really low...You can’t afford to increase taxes over the inflation rate either.”

During the tax rate hearing, area residents in the boating industry made a pitch for eliminating the personal property tax on boats.

According to Rappahannock Yachts owner Bruce Saunders, after the seafood industry, boatyards are the most significant segment of the working waterfront in terms of creating jobs and ability to expand the industry.

“There is significant excess capacity at all existing facilities in the county” including empty slips and employee layoffs at the boatyards, said Saunders. “From my 40 years of experience in the business, I know there is a direct connection between personal property taxes and marine economic activity.”

Saunders claimed Lancaster has the highest boat tax of any county or city on the Chesapeake Bay at $1.52 per $100 of assessed value. “Boats leave the county in the winter for zero tax havens when local boatyards most need the work...We need more customers. ‘No tax’ will allow people to leave their boats here. ‘No tax’ advertising will attract boats to our area.

“But will residents want to pay personal property tax on their boats that is more than the real estate tax on their home? Boats are mobile and can be relocated. A thriving waterfront will create jobs and increase economic activity for all businesses in our area. I believe my business would double in size from 12 to 24 employees if the tax were zero on boats over five tons,” said Saunders.

Beauchamp said he was in favor of lowering the tax, however, “this will not happen this year. There are too many unknown ramifications. We will look into this over the next six to eight months. If it proves to attract boats here, I will commit to you that we will look at that.”

Ron Mihills said he met with Beauchamp and others on the issue. “Existing marine businesses are hesitant to invest when customers are declining,” he said. He noted that in counties that have eliminated the boat tax, there has been a ripple effect on all businesses with more spending on boating activities, including restaurants. “We need to lower boat taxes now,” he said.

“Water is the biggest single asset we have,” said Ken Knull, owner of Yankee Point Marina. He said one need only look at all the ‘for sale’ signs to know that people are leaving the county “...and not coming back because of the boat tax.”

Bott noted there are 4,449 boats registered in Lancaster County. He said Hampton was running ads stating, “Avoid the boat tax, come to Hampton.”

According to Bott, a reduction or elimination of the boat tax would result in more boaters “coming here, staying here, especially boats over 30-foot. More boats would result in more money spent here...at marinas, on mechanics, batteries, fuel, shopping, eating out, new sails, and more hiring.”

Gordon Slatford, the general manager of The Tides Inn, said he was disappointed in the empty wharfs on Carters Creek and that Rappahannock Yachts was half empty. “It’s not economically smart,” he said.

Rhode Island abolished all sales tax and boat taxes, according to Eddie Richard. The result was the state attracted the best boat mechanics and services as well as most of the large boats from Boston and New York.

Don McCann, a boat surveyor and member of the school board, said if the county doesn’t capitalize on the waterfront, young people will continue to go other places.

Chesapeake Boat Basin owner Clay Holbrook said he lost a $288,000 boat sale because of the boat tax. He managed to retain a $180,000 boat deal because he offered a free slip for a year. Over the summer, the owner spent “probably $25,000” staying in hotels, renting vacation homes in Lancaster and eating in area restaurants, he said. “The money goes further than what you see on the tax revenue,” Holbrook said.

Jamie Stalnaker said he appreciated the board’s consideration “over the next six to eight months,” but the tax needs to be addressed now. “This county has the highest tax rate on the bay,” he said.

“What we don’t pay in the boat tax, we are kicking over to someone else to pay,” warned Madsen in arguing against abolishing the tax.

Costello noted the boat tax brings in $3.5 million over 10 years. The county is facing some big expenses in updates to communication systems that are outdated, he said. “Someone has to pay it.”

District 1 supervisor Butch Jenkins asked county staff to supply the board with the back-up materials on the boat tax so they could study all the information before next week’s vote.

Jenkins’s motions to vote on the budget and tax levy at 7 p.m. June 26 passed on 5-0 votes.

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