Assembly OKs Revival of Tax Break for Shipowners : Harbors: Proponents hope to halt job losses and declining fuel sales at L.A. and Long Beach ports.

Seeking to stem the loss of jobs and keep business in California, the Assembly approved a bill Monday to reinstate a longstanding tax break for commercial shipowners who refuel in the ports of Los Angeles and Long Beach.

Imposition of the tax last year caused job losses and declining fuel sales at both ports, according to the bill’s sponsor, Assemblyman Dave Elder (D-Long Beach). A 53-8 lower house vote sent the measure to an uncertain Senate fate.

Banning the tax break on so-called “marine bunker fuels” was part of last year’s state budget balancing plan. Elder said it was supposed to result in an increase of more than $100 million a year in state tax revenues.

But, he added, fuel sales in the Los Angeles-Long Beach port area have plummeted by almost 50%, state tax revenues have increased by only $3 million, and almost 1,200 port jobs have been lost or put in jeopardy.

Many shipowners simply are purchasing their fuel at ports outside of California where the sales tax is not imposed, according to Elder.

All this means that abolishing the tax break was a mistake that should be corrected before the problems get even worse, Elder told his colleagues.

Opponents argued that this is not the time to reinstate the refueling tax break, particularly because the state is facing an $11-billion budget shortage that will have to be closed by substantial program cuts.

But Elder said that in addition to job losses, “business is being driven out of California when the state can least afford it.”

“These ships can buy fuel anywhere in the world and they are no longer buying it here, where cargo taxes can run as high as $40,000 to $50,000 for one load of fuel,” he said.

The Department of Employment Development reported that six months of unemployment insurance payments at $225 a week for 1,120 out-of-work people would cost more than $6 million, twice as much as the $3 million tax revenue increase, Elder said.

Speaking in opposition, Assemblyman Johan Klehs (D-Castro Valley), the chairman of the Revenue and Taxation Committee, said, “It is absolutely foolish to open up a tax loophole at a time when we should be closing them.”

But Assemblyman Gerald Felando (R-San Pedro) replied, “The cold, hard fact is that ships are not bunkering in California any more.”