January 9, 2020 Ms. Amanda Ackerman, Executive Director Pilotage Rate Review Committee Department of Business and Professional Regulation P.O. Box 5377 Tallahassee, Florida 32314-53 77 RE: Application for Change of Rates of Pilotage at Ports of Jacksonville and Fernandina by: St. Johns Bar Pilot Association and Fernandina Pilot, LLC Dear Ms. Ackerman: We have completed our review and investigation of the above referenced application dated October 1, 2019 and hereby present our findings to the Pilotage Review Committee, as required by Florida Administrative Code Rule 6JG14-22.007(4). Cdr. Galen Dunton, U.S.C.G. Retired, Contract Consultant Department of Business and Professional Regulation RichardH.Law, cl¾, Contract Consultant Department of Business and Professional Regulation IC Report Page 1 REPORT OF THE INVESTIGATIVE COMMITTEE DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION PILOTAGE RATE REVIEW COMMITTEE APPLICATION FOR CHANGE OF RATES OF PILOTAGE AT PORTS OF JACKSONVILLE AND FERNANDINA BY ST. JOHNS BAR PILOT ASSOCIATION AND FERNANDINA PILOT, LLC The following report and attached materials were considered by the investigative committee and are forwarded to the Pilotage Rate Review Committee for its action. This report will follow the following fonnat: Pages EXECUTIVE SUMMARY 1 CERTIFICATION OF INFORMATION PRESENTED IN APPLICATION 6 ANALYSIS OF DATA FOR REQUEST FOR CHANGE OF RATES 7 EXHIBITS 1. Detailed Explanation of Requested Rates 31 2. Pilotage Revenue by Tonnage Layers - Present and Requested 32 3. Pilotage Fees for Selected Vessels 33 4. Number of Handles and Fees Paid by Customer 34 5. Pilot Compensation 35 6. List of Active and Retired Pilots 36 7. Consumer Price Index Tables 37 IC Report Page 2 REPORT OF THE INVESTIGATIVE COMMITTEE DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION PILOTAGE RATE REVIEW COMMITTEE APPLICATION FOR CHANGE OF RATES OF PILOTAGE AT PORTS OF JACKSONVILLE AND FERNANDINA BY ST. JOHNS BAR PILOT ASSOCIATION AND FERNANDINA PILOT, LLC EXECUTIVE SUMMARY General Comments Port of Jacksonville The Port of Jacksonville is the second largest and one ofthe most difficult ports in terms of piloting in Florida. Excluding the 25.7 mile stretch from downtown Jacksonville to Green Cove Springs (a rare transit for pilots) the primary length of the port from sea buoy to downtown is 28 nautical miles. The average handle time is the second longest in Florida, at 4.5 to 5.0 hours, compared to the longest in Tampa at 7 .5 hours. The St. Johns River poses significant challenges to the pilots with strong currents, crosscurrents, turns, and bridges. Some channels within the port narrow to 300 feet and the channel to Green Cove Springs is only 200 feet wide. Seas at the sea buoy can be some of the roughest along Florida's east coast, making pilot embarking and disembarking particularly dangerous. Port of Fernandina The Port of Fernandina is one of Florida's oldest ports. The distance from the sea buoy to the Port is 11.8 nautical miles. The Port is not as difficult as Jacksonville but cross currents at the entrance channel and at the Amelia River can be severe and dangerous. Although it can serve vessels with 34-foot draft, the port has not developed the infrastructure, nor does the area generate the volume of business to compare to the traffic in the ports of Jacksonville, Miami or Tampa. The primary customers consist of break bulk (paper and lumber) vessels and small to medium sized container vessels. The majority of vessels have tonnage ranging from 5,000 to 20,000 GRT and lengths of less than 500 feet. The port had been served primarily by a single pilot for decades, with intermittent backup from a Jacksonville cross-licensed pilot. In 2016, the pilot organizations for the ports of Fernandina and Jacksonville were combined and currently there are four Jacksonville pilots that are cross-licensed in Fernandina. The pilots have performed safe and reliable services in both ports for many years. We have received no complaints from users of the port regarding their ability to timely respond to the needs of the port or the quality of their services. We also received no opposition to the application by users of the port. IC Report Page 3 REPORT OF THE INVESTIGATIVE COMMITTEE DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION PILOTAGE RATE REVIEW COMMITTEE APPLICATION FOR CHANGE OF RA TES OF PILOTAGE AT PORTS OF JACKSONVILLE AND FERNANDINA BY ST. JOHNS BAR PILOT ASSOCIATION AND FERNANDINA PILOT, LLC Rate History Port of Jacksonville The last three rate increases raised the rates by 5% in October 1993, by 6% in May 1997, and a three-phase increase approved in a 2001 rate application that increased rates by 6% in January 2002, 6% in January 2003, and 6% in January 2004. An application requesting three consecutive annual rate increases of approximately 8.0%, 7.85%, and 7.35%, respectively; which, when compounded, would have increased rates 25% by the third year was made on September 8, 2008 but the rate application was denied by the Rate Review Board (Committee). Port of Fernandina The last rate increase in Fernandina was effective January 1, 2011 , which increased draft and tonnage by 10%. Current Rates - Both Ports Jacksonville Fernandina Date of last change 1/112004 11112011 Draft $21.20 $25.35 Tonnage $.0464 $.0575 Minimum Draft/Tonnage 15'13,000 ORT 15 '13,000 GRT Detention of Pilot $200/hour ($400 max) $250/hour ($500 max) Cancelled sailing $200 ½ full fee Pilots Kept on Board $250lday + transportation $250lday + transportation Failure to Amend ETA $200/hour ($400 max) NIA Standby of Pilot $200/hour (no max) $250/hour (no max) Towing Full fee NIA Shifting within zone ½ full fee $250 Shifting zone to zone Full fee NIA 2 IC Report Page 4 REPORT OF THE INVESTIGATIVE COMMITTEE DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION PILOTAGE RATE REVIEW COMMITTEE APPLICATION FOR CHANGE OF RATES OF PILOTAGE AT PORTS OF JACKSONVILLE AND FERNANDINA BY ST. JOHNS BAR PILOT ASSOCIATION AND FERNANDINA PILOT, LLC Rate Analysis The following schedule presents the effect of the requested rates for a small (minimum size) vessel in both ports (The draft and tonnage (GRT) are authorized minimums and the length (LOA) and beam are an estimated example): Current Small Vessel 15', Draft 3,000 GRT, LOA 300', Beam 50' Requested Jacksonville Fernandina Draft $ 318.00 $ 380.25 $ 405.00 GRT 139.20 171.00 62.50 LOA NIA NIA 225.00 Beam NIA NIA 187.50 Total $ 457.20 $ 551.25 $ 880.00 Fixed Charges $ 115.00 Total Pilotage Fee $ 995.00 Percentage increase for Jacksonville: 117.7%; Fernandina: 80.6% Current Large Vessel 35', Draft 60,000 GRT, LOA 700', Beam 100' Requested Jacksonville Fernandina Draft $ 742.00 $ 887.25 $ 1,050.00 GRT 2,784.00 3,420.00 1,350.00 LOA NIA NIA 875.00 Beam NIA NIA 850.00 Total $ 3,526.00 $ 4,307.25 $ 4,125.00 Fixed Charges $ 115.00 Total Pilotage Fee $ 4,240.00 Percentage increase for Jacksonville: 20.2%; Fernandina: <1.5%> Exhibit 2 presents the entire handle list in various layers of tonnage so the Rate Review Committee can evaluate the effect of the requested rates on different sized vessels. The smallest vessels would see increases of 118% per handle and the pilotage fee for the largest vessels would increase only 5.6%. Whereas the overall increase in pilotage fees using the requested rates is 26%, the loss of 126 large vessel handles in 2020 only increased the total revenue by 16%. The requested fixed changes per handle for port control ($100) and training and technology ($15), would produce $440,000 assuming handles of 3,826. 3 IC Report Page 5 REPORT OF THE INVESTIGATIVE COMMITTEE DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION PILOTAGE RATE REVIEW COMMITTEE APPLICATION FOR CHANGE OF RATES OF PILOTAGE AT PORTS OF JACKSONVILLE AND FERNANDINA BY ST. JOHNS BAR PILOT ASSOCIATION AND FERNANDINA PILOT, LLC Projected Traffic and Revenue Jacksonville Port Authority (JPA) accounted for 2800 ofthe 3700 handles in 2019. Doug Menefee, Director of Port Operations for JP A stated that traffic is expected to remain level for 2020 and the foreseeable future. However, the pilots informed us that one cargo operator (CMA) relocated 100 handles to Tampa in May of 2019, which reduced pilotage revenue by $280,000 in 2019 and $475,000 in 2020. Another operator (MOL) reduced handles for a large cargo vessel by 26 handles, or reducing revenue by $120,000 in 2020. Menefee stated JP A is working on bringing new cargo business from Europe, Asia, and the Caribbean, potentially increasing handles by 52, but no firm commitments have been made. JP A recently signed an eight year contract with Carnival Cruise Lines which accounted for 87 handles in 2018. The requested rate would increase the pilotage fee on the Carnival Elation from $3,900 to$ 4,600. Comparable Rates The nearby ports of Savannah, Brunswick and Charleston all have substantially higher pilotage rates than the current rates in Jacksonville. Fernandina, which accounts for less than 5% of total traffic in the two ports, also has pilotage rates less than the three competing ports. If the requested rates are approved, the Jacksonville and Fernandina rates will remain twelve to twenty-five percent less than the three competing ports. Page 10, section 8 of the pilots' application presents detailed information on comparative pilotage fees and percentage variances with Jacksonville. Section 4 of the Investigative Committee report presents additional tables and analysis of comparable rates. The Investigative Committee has not received any information (positive or negative) from port authorities, terminal operators or other users of the port, regarding the pilots' request to increase rates of pilotage and how if any, the requested rate may affect competition among the nearby ports.