Boating industry struggles to keep head above water in hard economic times

December 30, 1990|By Peter Jensen | Peter Jensen,Anne Arundel Bureau of The Sun

ANNAPOLIS -- Thanks to the protection of federal bankruptcy court, Roger R. Ramsey was spared the ignominious chore of watching an auctioneer sell his marina to the highest bidder tomorrow.

As it is, the Annapolis auction house will stay busy on the last day of 1990. Another foreclosed marina, Spa Creek Yacht Club in Eastport, is set to be auctioned in front of the Anne Arundel County Courthouse at 10 a.m.

In the booming economy of the mid-1980s, the prospect that two valuable marinas would be auctioned off in a single day would have been about as likely as a tidal wave on the Chesapeake Bay. But in the midst of what one boating industry veteran calls an "economic depression," it's just another day on the waterfront.

"As an industry, we overbuilt, we oversold, and we over-financed," said Mr. Ramsey, the owner of Berlitz Marina in Deale, who filed for bankruptcy shortly before Christmas. "A lot of people are contemplating doing what we've already done."

The Marine Trades Association of Maryland, the group that represents more than 1,200 businesses in the state's $1 billion boating industry, estimates that at least 26 of its members have gone belly up over the past year.

The National Marine Manufacturers Association in Chicago estimates that sales of new boats have dropped more than 40 percent from a year ago -- at a cost of tens of thousands of jobs.

Even the government has felt the pinch as revenues from boat excise taxes, licensing fees and marina fuel taxes have fallen dramatically.

"We know there'll be a lot more businesses closing in the next six months," said Mick Blackistone, executive director of the Annapolis-based trade group. "Forget recession. I'd call that an economic depression."

Nowhere is that more evident than in Annapolis, the self-proclaimed world sailing capital, where boat dealers, marinas and the companies that equip pleasure craft with everything from sails to sonars are numerous.

Until recently, many of those companies were considered to be relatively safe from economic turmoil, protected by their proximity to "recession-proof" Baltimore-Washington market.

But at Annapolis Yacht Sales, income is down 11 percent from 1989, according to the company's owner. At nearby Inter Yacht, a yacht brokerage firm, the company has survived a "year of treading water" while many of its neighbors have suffered far worse, said owner Alan Hamerstrom.

"Let's just say this is not the year I'm going to make my fortune," Mr. Hamerstrom said.

John Burgreen, owner of Annapolis Yacht Sales, said overall sales have been down only slightly from last year but that the drop in income has been substantial. Competitive pricing, sales incentives and a consumer preference for used boats caused much of the decline, he said.

"We always said, 'Boy, if I had the money, I'd buy a marina,' " Mr. Burgreen said. "Now look at it. On a scale of 10, I'd say we're at a 4 1/2 . Depression is a very good word for it."

Industry observers say the downturn really started two years ago, when concern over the federal deficit and a slowing economy caused increasing consumer caution about big-ticket purchases.

Since then, the likelihood of a worsening recession, the possibility of war in the Persian Gulf and a new federal tax on pleasure boats have only worsened the situation.

Beginning Tuesday, buyers of new boats face a 10 percent federal tax on purchases over $100,000, a measure approved by Congress to help trim the federal deficit.

The Linowes Commission, appointed by Gov. William Donald Schaefer to review the state's tax structure, has recommended a 2 percent personal property tax that would be applied to boats.

Though the state commission's findings have not been introduced to the General Assembly, even public debate over them has dampened consumer enthusiasm for buying boats, Mr. Blackistone said.

"The mere mention of putting taxes on something gives people second thoughts," Mr. Burgreen agreed.

Perhaps the best measure of the hard times facing the industry is kept by the state Department of Natural Resources. The DNR's Boating Administration collects a 5 percent excise tax whenever a boat is sold. The tax is the primary source of revenue for its Waterway Improvement Fund, which pays for such things as new boat ramps, buoys and dredging projects.

In fiscal 1988, the fund collected about $23 million. By next June 30, the end of the current budget year, the fund will have collected an estimated $13 million, a 43 percent drop over three years, said Patricia E. Shanahan, a spokeswoman.

Mr. Ramsey, who has owned the 78-slip Berlitz Marina for 13 years, doesn't need to hear the statistics to see the trend. In the fall of 1988, he watched his boat sales begin to slip, and even customers who already owned boats began taking them out of dry storage less frequently.

"We could have weathered a 10 or 15 percent drop in sales, but a 50 percent downturn killed us," he said.

Mr. Ramsey had a $1 million inventory of expensive powerboats and little money to make mortgage payments, so Annapolis Federal Savings Bank foreclosed. Mr. Ramsey said he sought bankruptcy protection to either restructure his financing or find a buyer for the 44-year-old marina.

Still, there is hope in the industry. Businesses that once specialized in new-boat sales are increasingly turning toward the used-boat market, and companies that repair boats are expected to do well in 1991.

"Some people think this may just be a purge for the industry, a leveling off back to reality," Mr. Blackistone said. "I guess we all hope that's the case."

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