Bunker Fuel Tax Exemption Bill Reaches Wilson’s Office

Legislation that would reinstate a tax break for commercial ship owners who refuel in California ports has been passed by the California Legislature and sent to the governor for his signature. Supporters say it could save up to 1,100 jobs in the ports of Los Angeles and Long Beach.

However, they concede that Gov. Pete Wilson might not be eager to sign a bill that gives businesses a tax break, given the state budget crisis and the cutting of funds for schools and social services.

“(Wilson) will probably overlook the wishes of the lawmakers and veto it, because that’s his way,” said Bob Forrester, regional director of the Inland Boatmen’s Union, which represents barge, ferry, tugboat and water taxi workers. “But it would behoove him to sign the bill. This harbor has become a ghost town. It’s terrible how many ships are passing us by.”

The legislation would reinstate a partial state sales tax exemption on marine bunker fuels, which are used by large commercial ships. Until last year, shipowners had to pay sales taxes only on a portion of the fuel purchased in California ports.

But in July, 1991, the partial exemption was abolished, making California the only state to fully tax marine bunker fuels. Since then, shipowners have had to pay an 8.25% sales tax on every barrel of bunker fuel purchased in California.

The result has been ships bypassing California ports, preferring to refuel at ports where fuel is not taxed. According to Assemblyman Dave Elder (D-San Pedro), who sponsored the bill, bunker fuel sales in the ports of Los Angeles and Long Beach have declined 60% in the past year.

At the same time, Elder and others say, port workers who depend on ship refueling calls--from water taxi operators to ship chandlers to port hotels--have been hit hard by the decline.

Supporters of the bill maintain that the tax on marine bunker fuels may actually cost the state more in lost income taxes, unemployment benefits and other items than it raises in revenues.

“(Abolishing the tax exemption) was a mistake, and now we have a chance to rectify that mistake,” Elder said. He added that although he has had no indication whether Wilson will sign the bill, he is optimistic that the bill will become law.

“We’re keeping our fingers crossed” that Wilson will sign the legislation, said Leo Brien, president of the Pacific Merchant Shipping Assn. But Brien fears that Wilson will find it “politically risky” to sign legislation giving large shipping companies a tax cut amid a budget crisis.

Brien and Forrester said their organizations are starting “grass-roots” letter-writing campaigns to urge Wilson to sign the legislation. The governor has 30 days to act on the bill.