The Board of Pilot Commissioners for Galveston County Ports on Tuesday amended a tariff rate increase charged against vessels calling on local ports to a one-year agreement that would see the tariffs raised by 16 percent, representatives of the cruise business said.
“We knocked two years off the agreement,” said Brad Boney, secretary of the commissioners. “We hope this works and we don’t have to go through this again.”
The tariff rate increase, which would have raised rates 30 percent over the next three years, had long been a point of contention between several maritime groups and the Galveston-Texas City Pilots Association.
The association, a group of 16 pilots, is a state-sanctioned monopoly regulated by the board members who must approve tariff rates on oil tankers, cruise passenger ships or other vessels calling at the ports of Galveston and Texas City.
The Port of Galveston, Florida-Caribbean Cruise Association, Carnival Corp. and Royal Caribbean Cruises filed a lawsuit in September over the pilot board’s August vote to increase tariff rates charged against vessels by 30 percent over the next three years.
Despite the changed rate increase, officials representing the cruise lines were not pleased with Tuesday’s decision.
“We’re disappointed with what was decided for 2016,” said Terry Thornton, vice president of marketing and planning with the Florida-Caribbean Cruise Association. “We left today with a lot of uncertainty about what the 2017 and 2018 costs will look like. But we’ll do the best we can to work together with the pilots to come to a resolution.”
The amended tariff deal was proposed by representatives from the Galveston-Texas City Pilots Association.
“Industry likes multiyear deals,” said Paxton Crew, an attorney representing the pilots. “But a court opinion said it was against multiyear tariff agreements. And most of the increases were in years two and three. So, to avoid some of those issues, we modified the order.”
Despite the modifications, the cruise lines would still have to pay a 15 percent to 16 percent rate increase as a result of Tuesday’s decision, Thornton said.
The biggest contributor to the rate increase is the pilots’ plan to replace the engines in their boats at a cost of $2.4 million over three years.
The pilots also intend to add eight deckhands as a means of improving safety. Currently, the pilot and boat operator are the only two people on the boat.
To add eight deckhands will cost $600,000 a year, or $75,000 per person for salary and benefits.
The shippers have been paying the increased rates during litigation.
Tuesday’s hearing came after months of litigation, including a failed mediation hearing.
“My hope, after the pilots paid a visit to Florida, was that we might have an agreement with Carnival,” Boney said during the meeting. “But that didn’t happen. Then there was a filing in the district court. I knew nothing was going to happen in mediation. Now, here we are and we have to do this. We have to do right by the community. I don’t want to hamstring the pilots and be responsible for a screw-up.”
Shippers and the cruise industry argue the pilot board erred in voting for the increase because the pilots association failed during a hearing in August to show enough evidence to support the hike.
Both sides during Tuesday’s hearing called witnesses to speak to whether the hike would have a positive or negative effect.
The 2016 rate increase would have a $0.32 increase per person for Liberty of the Seas, pilot officials said.
The maritime groups’ defense centered around the $6.3 million net income the pilots bring in each year and what they termed a generous compensation package.
“Hearing testimony from experts, both from the cruise lines and from the port, it seems they stressed economics more than safety,” Chairman Kenny Koncaba said. “I’m on the position that you can’t put economics over safety. Honestly, we can’t afford to be wrong about this.”
During discussion about proposed changes, pilot commissioners kept returning to talk of safety, though the commissioners expressed support for some of the cruise lines’ concerns.
“In preparation for this hearing, I went over both sides’ points in the original hearing,” Commissioner Trey Hill said. “I feel similarly today … safety is our primary concern. But economics is a huge factor. The one thing I see is that everyone here is a huge beneficiary of Galveston County, its water and ports.”
Commissioners voted unanimously to approve the pilots’ proposed changes to the original three-year deal.
Under the terms of Tuesday’s vote, pilots must come to the board to move forward with any additional rate increases in the future.