Community-based Sectors for the New England Groundfish Fishery

More documents

Recommendations

Info

evaluated through discussion with a number of groundfish permit owners and vessel operators in Portland. Under this strawman, the sector would receive allocations of all regulated groundfish species it regularly encounters as well as monkfish. As was done for the Port Clyde case study, the analysis of the economic feasibility of the sectors is done based on sector and overall commercial catches for two different allocation periods: (1) from May 1, 2001 through April 30, 2006, and (2) from May 1, 1996 to April 30, 2002. The sector would not restrict the operations of member vessels geographically. It would be exempt from DAS limits, trip limits, and seasonal closures but would continue to be subject to the same restrictions on year-round closed areas and gear as other multispecies vessels. Each permit in the sector will receive a specific allocation of the overall allocation of each of the species-stocks for which the Sector receives an allocation. Sector members would be free to utilize these allocations on their vessels or transfer them to other vessels within the sector upon notification and approval by the sector manager. The analysis suggests that sector management can provide substantial gains in net revenues to sector vessels and that these gains far outweigh the costs of establishing and operating a sector. Sector A is projected to increase net revenues by $4.6 million with the FY01-05 allocation and by $4.2 million with the FY96-01 allocation. This assumes sector A vessels pay a landing tax of 1% on groundfish and monkfish landings. The smaller Sector B is projected to increase net revenues by $2.8 million with the FY01-05 allocation and by $2.0 million with the FY96-01 allocation. Since the Portland sectors are much larger and have higher projected revenues than the Port Clyde sector the percentage of sector revenues required for covering operating costs of the sector is much lower. As with the Port Clyde sector, the projected gains for the sector are based on the ability of the sector fishermen to more effectively and efficiently utilize their share of the overall target TACs by targeting effort on stocks for which total industry catches have been well below TACs and by landing fish they are now forced to discard because of trim limits. The sector might achieve additional gains beyond what is calculated here through higher prices or by reducing costs through consolidation. Permit Bank A means for communities interested in maintaining or regaining access to the groundfish fishery is to create a permit bank affiliated with a sector. The permit bank would purchase and hold permits and the associated catch history and then include these permits and catch history in the community-based sector. The share of the sector’s annual catch entitlement (ACE) allocation contributed by the permit bank vessels would be leased to sector vessels at rates sufficient to pay back loans incurred for purchasing the permits. Once loans were paid back, the permit bank might continue to charge a fee for access to this ACE and use the revenues to acquire more permits or other investments in the interest of the fishing community and the sector members. The permit bank might also use these revenues to purchase permits of sector members that wished to retire. The sector could create an apprentice program that would provide young fishermen access to the fishery through access to the ACE controlled by the permit bank. There are a variety of ways that a permit bank might be financed. The most straight forward way would be through a loan from a commercial bank. If Finance Authority of Maine (FAME) or some other government program could provide loan guarantees, it would enable the lenders to classify the assets in a preferred risk category. This would increase the likelihood of loan approval and would increase the percent of the value that could be financed. An alterative financing mechanism would be through a bond issue. The least costly bond option is a government obligation (GO) that puts the name of the city behind paying back the bond. The cost of capital for a GO is currently several points lower than a commercial loan. Direct loans from the Federal government would be another and potentially superior alternative for financing creation 4
of community-based permit banks. This would require new legislation, but a program could be modeled on the current legislation for industry financed buybacks. To explore the economic feasibility of this concept, I constructed a strawman permit bank based on vessels that were listed for sale during the summer of 2006. A total of 10 vessels were selected with a combined asking price of $3.8 million. The vessels range in size from 46 to 74 feet with prices ranging from $150 thousand to $575 thousand. The ratios of asking price to the average annual groundfish revenue for those vessels (FY2001 – FY2005) range from 0.85 to 2.49. ACE allocations based on the use of FY2001-FY2005 catch history of the permit bank vessels are calculated and revenues associated with utilization of those allocations are projected based on the same target TAC and prices projections used for the economic feasibility analysis of the sectors. The ACE leasing fee as a percentage of revenues that would pay back a $3.8 million loan for vessel acquisition is calculated to be 16.3% of ex-vessel price from the catch associated with the leased ACE. Assuming variable operating costs equal to 38% of gross revenues (the same assumption used in the sector analyses), the permit bank yields close to $2 million annually in net revenues to sector vessels after payment of the lease fees necessary for loan repayment. The permit bank then quickly builds a substantial asset base which it could use to purchase additional permits. Operational and Regulatory Issues for Community-based Sectors Perhaps the most important constraint on sector development (community-based or otherwise) is the difficulties and cost involved with formation of a sector. There is a need for provision of extension services for prospective sectors (particularly for preparation of environmental assessments) and/or for a financial facility whereby sectors can apply for a loans or grants to defray the costs of sector development. Currently, approval of a new sector can only be done though a framework or an amendment. This creates considerable uncertainty as to whether the sector will ultimately be approved and when. A process could be set up allowing NMFS to authorized new sectors, but the Council would sacrifice some control over sector development in the fishery. Alternatively, the councils could initiate some region wide ruling allowing for sectors in every fishery with the final approval resting with the Councils and NMFS. Current regulations create a rolling period of catch history to be used for allocations. Sectors lock into a catch allocation as a percentage of the TAC based on the ratio of their catches during the five years relative to total commercial catches. However, the years used for allocation to future sectors continue to change. Rolling baselines have the advantage of creating sector allocations that more closely match recent catch composition of the sector vessels but create a number of potential problems as well. Perhaps most problematic is the fact that permit holders within a sector that make their catch history available to other sector members will see their potential future allocations eroded. This presents a particular problem for sectors that might want to form permit banks to make additional catch history available to its members since the value of these permits would quickly erode. The Council recently passed motions recommending that sector regulations be changed to create fixed and consistent baselines for all sector allocations for a given fishery. This would eliminate much of the ambiguity and perverse incentives created by current rolling baseline allocations. It creates more security for individuals who make their ACE available to other members of the sector thereby facilitating consolidation within the sector and reduction of fixed costs. It also provides more security for permit banks that its permits will not be devalued over time if the ACE is made available to other vessels. 5
Page 1 and 2: Community-based Sectors for the New
Page 3 and 4: Table of Contents Executive Summary
Page 5: Community leaders in Portland and P
Page 9 and 10: 1.0 Introduction The groundfish fis
Page 11 and 12: Although Amendment 13 effectively e
Page 13 and 14: somewhat vague on how the allocatio
Page 15 and 16: 2.2 Experience with Existing Sector
Page 17 and 18: me to explore the idea further and
Page 19 and 20: period is that which was used to de
Page 21 and 22: shown above in Table 2. Revenue pro
Page 23 and 24: Table 3a: Port Clyde Sector Revenue
Page 25 and 26: ecruitment and could be either high
Page 27 and 28: increased. They also have caught a
Page 29 and 30: 3.2.1 Strawman Sector Structure and
Page 31 and 32: Table 8: Portland Sectors A and B V
Page 33 and 34: discussed earlier these price proje
Page 35 and 36: Table 9b: Portland Sector A Revenue
Page 37 and 38: Table 9d: Portland Sector B Revenue
Page 39 and 40: Table 10b: Portland Sector A Revenu
Page 41 and 42: Table 11b: Portland Sector B Specie
Page 43 and 44: vessels would be leased to sector v
Page 45 and 46: is ostensibly to reduce excess capa
Page 47 and 48: Table 15: Projected Total Revenue,
Page 49 and 50: later. However, rolling baselines c
Page 51 and 52: 4.4 Communities without Catch Histo
Page 53 and 54: opportunities for consolidation of
Page 55 and 56: References Alexander, Yvette 2006.M
Page 57 and 58:
Appendix A: Landings and revenue pr
Page 59 and 60:
Appendix B: Groundfish Price Model
Page 61 and 62:
Appendix C: Sector Proposals Submit
Page 63 and 64:
Port Clyde Community Sector Glen Li
Page 65 and 66:
Full Retention All fish caught 1. e
Page 67 and 68:
Reasons for Existence: 1. end overf
Page 69 and 70:
Gloucester Fixed Gear Sector Peter
Page 71 and 72:
New Bedford Channel Trawl Sector Ri
Page 73 and 74:
Point Judith / Southern New England
Page 75:
Pier 6 Initiative Michael Walsh Req
show all

Community-based Sectors for the New England Groundfish Fishery

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?