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by Lorelei Stevens
The process of putting together an industry-funded
groundfish buyback is mind-boggling. On the West Coast, the Fishermen’s
Marketing Association has produced a
succinct report outlining the background and components of the
Pacific buyback plan. The report is available online at www.trawl.org.
(Steven Kennedy photo)
NEW BEDFORD, MA - The process for putting together an industry-funded
buyback is mind-boggling. It would require fishermen from ports
as diverse as Portland, Gloucester, Chatham, and Montauk to devise
a single plan capable of winning approval from two-thirds of all
groundfish permit holders casting ballots in a regionwide referendum.
Still, some fishermen, terribly worried
about the economic devastation that is likely to stem from Amendment
13 to the groundfish plan, say the industry must keep the self-funded
buyback option open.
That’s the kind of mixed reaction
fishermen had during an impromptu series of meetings held by Northeast
Region Sea Grant Programs in ports from Maine through New York
in June and July to explain the complex buyback process allowed
by the Magnuson-Stevens Fishery Conservation and Management Act.
The timing of the meetings was spurred
by the need for the industry to figure out if it wants to move
forward with developing a plan before a congressional authorization
for $10 million in outright federal buyback funds expires on Sept.
30.
That money wouldn’t have to be paid
back to the government, but another $45 million in loan funds
to bankroll the self-funded buyback would. When it authorized
both the grant and loan funds earlier this year, Congress linked
the two, although the loan money is not under the same kind of
immediate expiration deadline.
The self-funded buyback idea was considered
so important and so complicated that industry representatives
in the port of New Bedford asked Sea Grant to hold a second meeting
there on the evening of July 7.
Madeleine Hall-Arber of the Massachusetts
Institute of Technology (MIT) Sea Grant program, Leo Erwin of
the National Marine Fisheries Service (NMFS), and Chris Kellogg
of the New England Fishery Management Council were among those
on hand to explain the program and answer questions.
About 30 fishermen and shoreside support
business people attended.
According to a fact sheet distributed
at the meeting, the program basically works like this.
Industry people who think the buyback
is a good idea must get together on their own and design a business
plan that describes the kind of buyback “the fishing industry
wants, is willing to pay for, and will likely approve” in
a future vote by permit holders.
Funding for the buyback can come from
any source or combination of sources, but the focus at this time
is on using a government loan to pay the permit holders who want
out of the fishery.
The repayment obligation for this loan
falls on the permit holders who remain after the buyback is complete.
These remaining permit holders must agree to repay the loan via
a system of landing fees. Those fees cannot
exceed 5% of the dockside value of the fish sold after the buyback.
The loan interest rate is 2% above the
US Treasury cost of borrowing from the public. The principle and
interest must be repaid within 20 years.
Once industry proponents design a business
plan, the New England council must: hold a public hearing; review
and approve the program as an amendment to the groundfish plan;
and then formally request the buyback.
NMFS must then review and approve the
buyback request and fishery management plan amendment, prepare
implementing regulations, approve the loan, request bids from
permit holders who want out, and conduct the referendum based
on those bid results.
Not surprisingly, all this takes time
— a lot of time.
“This is a long process,” said Erwin. “The fastest
is two years up to four years.”
Not enough money The
industry people attending the July 7 meeting in New Bedford had
trouble with a lot of what they heard.
Rodney Avila, a newly appointed member of the New England council,
noted that previous buybacks had taken about 79 permits out of
the fishery for around $25 million.
“It looks like the government wants to buy 900 permits with
$45 million,” he said. “How?”
Erwin responded by saying that the buyback program leaves it up
to industry to come up with a plan that specifies what the reduction
in permits should be.
He and others also pointed out that the industry always had the
option of coming up with a plan and then seeking additional funding
from Congress.
However, Hall-Arber cautioned, “The industry has to keep
in mind what it can afford.”
Pacific coast plan Cindy Smith
is a former aide who worked in the office of US Sen. Ron Wyden
(D-OR) on the buyback legislation and is now with the Massachusetts
Division of Marine Fisheries.
She explained that the industry people in the Pacific coast groundfish
fishery, which was declared a disaster in 2000, began working
on a buyback plan almost immediately after the program was added
to the Magnuson-Stevens Act through the 1996 Sustainable Fisheries
Act. Only now are they about to cast ballots in a referendum on
the plan.
Hall-Arber observed that the Pacific coast fishermen were able
to persuade their fishery management council to adopt a sector
allocation system so that each sector already knew how much fish
they would have access to.
As the New England council prepares Amendment 13, sector allocation
will be among the options it takes to the public.
“It’s important to have your views expressed on that,”
Hall-Arber said. “That could affect the buyback.”
The Fishermen’s Marketing Association has produced a succinct
report outlining the background and components of the Pacific
coast buyback plan. It explains a lot of the thinking that went
into the plan as well as the details of how the plan will work
if approved by permit holders.
The report is available online at www.trawl.org.
Crew, tax implications
Some people
in the audience wondered about what would happen to crew members
and shoreside infrastructure under a buyback plan.
Erwin explained that the process as described in the Magnuson-Stevens
Act only entails harvesters.
“It’s basically just geared toward the vessel owner/permit
holders,” he said.
And some fishermen asked pointed questions about the tax consequences
of a buyback, leaving the impression that the federal government
would be the big beneficiary of such a plan.
“Say you bought out my boat for $1 million. I’d have
to pay $200,000 in taxes on that money and the people left in
the industry would have to pay back $1 million,” said one
fisherman.
The tax question is a difficult one, Smith explained, because
of a “quirk” in Congress that all tax bills have to
originate from the House Ways and Means Committee and the committee
hasn’t been interested in taking it up.
“You’re not the first people to be worried about the
tax implications,” Smith said. “It’s a problem
that needs to be resolved. Capital Construction Fund restructuring
is needed.”
Survivors object
All of these questions left several New Bedford area fishermen
wondering how this could possibly work.
If the buyback is supposed to make it possible for the remaining
permit holders to survive economically, what happens between Amendment
13, which is due to go into effect next spring, and the years
it will take for a buyback to become a reality?
“That’s one of the real challenges,” Hall-Arber
admitted.
Sandwich, MA fisherman Ron Borjeson strongly objected to the whole
idea of a self-funded buyback, pointing out that many vessels
have already dropped out of the groundfish fishery over the last
decade.
“The basic precept of a buyback — overcapacity —
is absurd,” he said. “This industry has continuously
showed that the weak go by the wayside and the strong survive.
The people in this room are the survivors and they want to stay
in the fishery.”
Jim Kendall, a former scalloper and outgoing member of the New
England council, summed up the feelings expressed by fishermen
at the meeting this way.
“New Bedford at this point is not in favor of an industry-funded
buyback for a whole host of reasons,” he said.
Next step
According to Hall-Arber, fishermen at other meetings indicated
an interest in more discussions about a possible buyback.
Sea Grant will be sending out a questionnaire to all permit holders
at some point in the near future.
“We’re not sure if we’ll do that immediately
or wait” for the council to determine the direction of Amendment
13, she said, acknowledging the potential impact the amendment
options may have on people’s opinion of a buyback.
For more information, including how to obtain copies of various
easy-to-read fact sheets and backgrounders on the program, call
Hall-Arber at (617) 253-9308 or e-mail her at arber@MIT.EDU.
