Running head: Passengers Charters in San Diego: A New Management Strategy 1 Passenger Charters in San Diego: A New Management Strategy A Capstone Project by Diego de Waegh California State University Maritime Academy Passengers Charters in San Diego: A New Management Strategy 2 Abstract The Port of San Diego has recently been criticized for its ineffective management of illegal passenger charter operations, especially regarding small passenger vessels between 22-75ft in length). Illegal passenger charters are not permitted by the Port, the Coast Guard, or as is often the case, by both organizations. Illegal charters create a safety hazard to unknowing passengers and a loss of revenue to the Port. Currently, the Port of San Diego along with Harbor Police and the United States Coast Guard work in bilateral operations in hopes of decreasing illegal charter activity. Their combined efforts over the past few years, however, show little to no improvement in reducing illegal charter operators. As author of this project, I have firsthand experience with the issues illegal charters can cause. I manage a fleet of bareboat charter boats for Marina Sailing and spend the majority of my time at the docks, meeting passengers before charters and talking to other legal passenger charter operators. Legal charter operators have to jump through bureaucratic hurdles to run their businesses, and often they have to pay high premiums to Port authorized private marinas to pick up passengers. Using a well-structured system to increase legal charters, the Port of San Diego could capitalize on a steady revenue stream, all while increasing the safety of passengers in San Diego Bay by decreasing illegal passenger charters. Keywords: San Diego Boat Tours, Port of San Diego, illegal passenger charters, USCG ​ Passengers Charters in San Diego: A New Management Strategy 3 Introduction The Port of San Diego is a significant contributor to San Diego County’s local economy, with an economic output of roughly $4.4 billion in 2015 (Port of San Diego). The Port serves the local community in several ways: 1.Vastly different than most Ports globally, the Port of San Diego is also a managing partner of the San Diego International Airport. 2. The Port is a commercial hub for international imports & exports, dealing largely with imported cars and commodities. 3. The Port also acts as a base for several large military ships, aircraft carriers, and submarines. This is important since it pertains to national security. While most Ports have government stakeholders from various branches, in San Diego, the Navy is a top partner. San Diego is the number one Navy Base for the West coast, home to around 46 U.S. Navy ships and several other specialty vessels (Naval Technology). 4. In addition, the Port hosts tourists from all over the world by leasing land to popular waterfront hotels. 5. Furthermore, the Port manages the San Diego Harbor Police, a law enforcement agency responsible for patrolling: the San Diego International Airport, businesses on the Port land, and the San Diego Bay waterways. Passengers Charters in San Diego: A New Management Strategy 4 San Diego is a tourism hub for Southern California, boasting world renowned attractions such as SeaWorld, the convention center, Padres stadium, and seemingly endless miles of sandy beaches. In 2017, 35 million visitors to San Diego spent a total of about $10.8 billion in the local economy (San Diego Tourism Authority). In addition, San Diego is well located to see the whale migration and has excellent pelagic fishing. This influx of tourism has a strong effect on the Port of San Diego operations. The demand for passenger charters in San Diego Bay and cruises leaving out of San Diego increases year after year. The rise of new websites such as Yelp and TripAdvisor combined with the increasing popularity of social media platforms such as Instagram, give illegal charter business operators easy and cheap means of marketing their businesses. Since the existing regulatory system imposes barriers to entry and the enforcement of existing laws is inefficient, many boating tour operators prefer to avoid it altogether and run their businesses illegally. The Port of San Diego funds their operation with various streams of income. While the Port can successfully collect revenues from its real estate and wharfing operations, it has a harder time collecting fees specifically from small passenger boats on charters. Year after year, the USCG and Port of San Diego Harbor Police spend resources to decrease the amount of illegal passenger charters operating out of San Diego Bay. Their efforts hardly pay off because of the scale of the problem at hand. The scope of this project will focus on the Port of San Diego’s efforts to regulate passenger charters. The Port has a symbiotic relationship with the USCG; through bilateral operations they can enforce established safety and passenger transport regulations. This paper focuses on steps the Port of San Diego can take to further benefit from their relationship with the USCG and ensure safe waterways. The aim of the paper is to put Passengers Charters in San Diego: A New Management Strategy 5 forward a viable solution for the Port of San Diego to increase revenues from passenger charters and to incentivize illegal charters to comply with existing Coast Guard and Port regulations. For these goals to be achieved, the Port of San Diego needs to be presented with a realistic alternative to their current regulatory framework and the infrastructure they provide in regards to small vessel passenger charters. First, the stage will be set with an informative background section, explaining current USCG passenger regulations and Harbor Police operations, as they are both key in instrumenting a better solution to benefit from passenger charter fees. After the background section, the reader will be presented with current passenger charter issues facing the Port of San Diego. Finally, a proposed solution will be recommended based on well documented research, financial projections, current statistics and on the ground analysis. Literature Section There are two important parties responsible for managing passenger charters in San Diego Bay; the United States Coast Guard and the Port of San Diego. The USCG makes the rules and is largely responsible for regulating commercial boating operations nationwide, including passenger charters. The USCG can be seen regularly in San Diego Bay inspecting vessels for safety equipment, checking mariner credentials, and enforcing their boating code through citations and fines. On the other hand, the Port of San Diego is responsible for giving local marine businesses fair opportunities to operate in the bay. This is not an easy task, as it involves collecting passenger fees and providing adequate infrastructure. Currently, the Port handles small vessel passenger fees through third party businesses who are responsible for providing the Passengers Charters in San Diego: A New Management Strategy 6 infrastructure and permits. The Port of San Diego also helps the USCG with keeping boating passengers safe through their sponsorship of the San Diego Harbor Police. Definitions In order for the reader to gain a better understanding of this paper, below are some of the most commonly used terms and abbreviations. ● 6-Pack: A type of compensated passenger charter with a limit of six passengers. These are common for small fishing charters, small sailboat instruction, and other customer boat tours. ● Certificate of Inspection: COI shortened. This certificate is issued by the United States Coast Guard to vessels carrying passengers for hire. COIs are renewed yearly and give the operator the opportunity to carry as many passengers as the vessel can handle safely (United States Coast Guard). ● Passenger Charter: Shortened to Charter: A boating event in which passengers are paying for a tour. An example of a charter can be a sunset cruise in San Diego Bay, where passengers are paying an owner or company for a boat tour. Friends taking other friends out boating on their own vessel does not count as a charter, as there is no condition of a sale. ● District Code: Short for San Diego Unified Port District Code, the main piece of regulatory paperwork from the Port of San Diego. This code lays out the rules in San Diego Bay and Port of San Diego controlled land. This code also sets the authority of the San Diego Harbor Police. Passengers Charters in San Diego: A New Management Strategy 7 ● Illegal Passenger Charter: Often shortened as ‘Illegal Charter’ in this paper. This type of charter is not up to code with either the United States Coast Guard, the Port of San Diego, or any applicable state codes. Therefore, these types of events are considered running an illegal business operation. For the scope of this paper, illegal charters are breaking either business permit codes or passenger limit codes. This paper will not cover legal safety requirements for vessels, such as fire prevention systems, life jackets, flares, and sound signaling devices. ● Gross-Tons: Shortened as GT: A measurement unit for vessel weight. Used for classifying boats under United States Coast Guard regulations. For example, a 60 ft keel sailboat would be approximately 21 gross tons, a smaller 34 ft sailboat would be between 6-9 gross tons. ● OUPV - Operator of an Uninspected Passenger Vessel- This USCG license is issued to operators limited to six passengers and working on uninspected vessels. Usually for non-U.S. citizens or small scale operators. This is informally referred to as the 6-pack license in part because it allows operators to carry up to six paying passengers and crew on their uninspected craft up to 100 tons. ● USCG: United States Coast Guard: the main authority on the waterways of the United States. ● UPV - Uninspected Passenger Vessel - A passenger vessel which has not been formally inspected by the USCG.