Coast Guard’s Rule May Rock Boat at Parades

A Coast Guard crackdown on boats it considers commercial charters could disrupt Newport Beach’s revered 80-year-old Christmas boat parade and wreak havoc with that community’s charter boat industry, business leaders warned Wednesday.

“I look at the boat parade as similar to the Rose Parade in Pasadena,” said Tom Deemer, president of the Balboa Bay Club. “If they start boarding the boats and making them return to the dock on the premise that it’s a charter for hire, they can destroy the whole parade.”

For years, up to half of the brightly lit boats that cruise Newport Bay at Christmastime have been used by corporations for office holiday parties. Nearly all of these yachts have been privately owned or leased for the occasion and were not certified as commercial charter vessels.

But Coast Guard officials are broadening their interpretation of federal boating regulations on what constitutes a commercial charter. If a boat is used for any business-related purpose, that’s a commercial use, said Coast Guard Lt. John Sarubbi, who is based in Long Beach.

For instance, if a company president takes clients or employees on his own boat or rents a boat for them, the boat is considered a commercially chartered craft that must meet rigorous design and safety standards.

He added that Coast Guard investigators will be inspecting boats in the Newport Beach Festival of Lights parade Dec. 17-23 and perhaps also in Huntington Harbour’s boat parade this weekend to see whether they comply with regulations.

“We’re going to board vessels during the (Newport Beach) boat parade,” Sarubbi vowed. He said the Coast Guard does not intend to destroy the boat parade but rather is concerned about passenger safety.

In addition to the discomfort of being detained, operators whose boats are considered illegal charters risk a suspended license and fines of up to $2,000 a day, Sarubbi said.

He conceded that the Coast Guard’s stringent interpretation of what constitutes a commercial charter was “relatively new” but noted that the interpretation had been upheld in an Aug. 18 ruling by a Coast Guard administrative law judge, H.J. Gardner.

In a Newport Beach case involving the motor yacht Roman Holiday on Dec. 11, 1987, Gardner ruled that the chartering of the yacht by a company for its workers was “an employee bonus.”

Considered Passengers, Not Guests

He said the employees should be considered “passengers” aboard a commercial charter rather than “guests” on a pleasure boat.

But Gardner’s decision is being appealed, local yachting officials and the attorney for Roman Holiday’s skipper responded, noting that they consider the Coast Guard’s current interpretation of what constitutes a commercial charter outrageous, arbitrary and unfair.

Charter operator Nancy Irvine said: “It affects every private yacht owner. . . . The little guy across the bay can’t take his office staff out.”

She estimated that if she and six other major Newport Beach charter operators terminated contracts for all the shipboard corporate Christmas parties they have booked this year, “upwards of 25,000 people could be stranded.”

“This affects the economy of the entire harbor,” she added, noting that companies such as hers had made “hundreds of thousands of dollars in contractual commitments” for Christmas.

She also said local corporations have leased yachts and motorboats at Christmas for years

under the so-called “bare-boat” contract agreements, without creating any safety problem.

Irvine said she did not know whether she would be canceling corporate charters.

But Ian Bruce, president of the Newport Sailing Club, said he had recently canceled contracts involving 14 corporate groups because of the Coast Guard’s position.

“We mailed back all the deposits about 4 weeks ago,” Bruce said unhappily. “I lit a match to over $50,000 in charters.”

Local businessmen estimated that from a third to a half of the 250 boats taking part in the Festival of Lights parade each night involved bare-boat charters that the Coast Guard could now consider illegal.

Angry Reaction of Owners

“Why not just shut down the whole parade, because everybody’s breaking the law?” muttered one angry yacht owner.

On Friday night, the Coast Guard detained as illegal charters two motor yachts, the Magnum Force and the Dulcinea. Both boats had been booked for corporate Christmas parties.

Operators of the Magnum Force could not be reached for comment, but Joseph Lancaster, captain of the 96-foot Dulcinea, said 40 employees from the Braxton Manufacturing Co. of Costa Mesa are angry because they were not allowed on the boat.

Four Coast Guard officers boarded the Dulcinea about 6 p.m. Friday night, an hour before the charter was supposed to begin, Lancaster said. They kept employees and executives from Braxton waiting until 9 p.m. while they inspected the boat and eventually declared the charter illegal.

In Lieu of a Turkey?

According to Lancaster, a Coast Guard officer asked the wife of Braxton’s president whether the boat ride was being offered to employees “in lieu of a Christmas bonus or turkey and she said, ‘Absolutely not.’ ”

But eventually, Lancaster said, a Coast Guard commander ruled that the charter was illegal because “he felt the party would be given to employees in hopes that they would be producing more next year.”

Coast Guard officials could not be reached late Wednesday for comment on the incident.

Wednesday morning, charter company representatives and business leaders met with Rep. Robert E. Badham (R-Newport Beach) to ask for his help.

Badham vowed to use “my powers of persuasion” with the Coast Guard and was planning to discuss the charter issue with the district commander today.

‘There Is No Case Law’

“There is no case law,” Badham said, noting that the administrative law judge’s decision is on appeal. “We’ve got some Coast Guard officers interpreting the law. Between now and the boat parade, I’m going to be in Washington. I don’t want to have to take a problem like this to Washington. But I will.”

Richard Luehrs, president of the Newport Beach Chamber of Commerce, which is sponsoring the Festival of Lights, said he does not believe that this year’s boat parade is “doomed.”

With Badham and the Coast Guard talking, “we think an amicable decision can be reached,” he said.

“Even if we agree to disagree, that’s fine--if we agree to disagree after the boat parade,” Luehrs said.