(1)Existing law provides for the licensing and regulation of pilots for the Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun, by the Board of Pilot Commissioners for the Bays of San Francisco, San Pablo, and Suisun in the Transportation Agency. Existing law establishes pilotage rates and surcharges that are paid to licensed pilots by vessels piloted in those bays. Existing law establishes those pilotage rates and surcharges, and provides for changes to them based on the number of pilots licensed by the board and recommendations by the board to the Legislature. Existing law requires each licensed pilot to submit a monthly account to the board of all moneys received by the pilot for pilotage services.

This bill would revise and recast those provisions and would require that certain surcharges be separately identified on the pilots invoices and in their monthly account to the board. The bill would, until January 1, 2021, additionally authorize a technology surcharge, not to exceed a cumulative amount of $1,200,000, to recover pilots costs for navigation software, hardware, and equipment authorized by the board on or after January 1, 2017. The bill would require the board to submit a schedule of all pilotage rates and surcharges to the Office of Administrative Law for publication in the California Regulatory Notice Register and to post that schedule on the boards Internet Web site. The bill would require an independent audit of all charges collected by pilots to be conducted annually by a public accountant selected by the board.

(2)Existing law requires the Board of Pilot Commissioners to review and evaluate pilotage expenses in making recommendations to the Legislature to adjust certain pilotage rates. Existing law establishes procedures for any party directly affected by those rates to petition the board for a public hearing. Existing law requires the board, at the conclusion of the hearings, to review and evaluate the evidence and to submit to the Secretary of the Senate and the Chief Clerk of the Assembly a copy of its findings and recommendations for a final determination.

Existing law requires each vessel to pay a board operations surcharge to compensate the board and the Transportation Agency for the services and incidental expenses of the board and agency. Existing law requires those moneys to be deposited in the Board of Pilot Commissioners Commissioners Special Fund and continuously appropriates those moneys for the compensation and expenses of the board and its officers and employees.

This bill would instead require the hearing on a petition to be before an administrative law judge, as provided, who would act as a finder of fact. The bill would prescribe procedures for the conduct of those hearings, the review of evidence, and the filing of decisions. The bill would require the board to review and evaluate the administrative law judges decision and either submit the decision to the Secretary of the Senate and the Chief Clerk of the Assembly or prepare and submit a written statement of its reasons for not doing so. The bill would require the administrative law judge to be compensated by the board from revenues from the board operations surcharge. By authorizing the expenditure of continuously appropriated funds for a new purpose, the bill would make an appropriation.

(3)Existing law requires that moneys collected from a pilot trainee surcharge and a pilot continuing education surcharge be deposited into the Board of Pilot Commissioners Commissioners Special Fund and continuously appropriates those moneys for pilot trainee and pilot continuing education programs, respectively.

This bill would create the Pilot Trainee Special Fund, require moneys collected from the pilot trainee surcharge to be deposited into that fund, and continue to continuously appropriate those moneys for pilot trainee programs. The bill would also create the Pilot Continuing Education Special Fund, require moneys collected from the pilot continuing education surcharge to be deposited into that fund, and require those moneys, upon appropriation, to be used for pilot continuing education programs.

(4)Under existing law, a pilot who is carried to sea against the pilots will or unnecessarily detained on board a vessel, as provided, is entitled to receive $600 per day, plus expenses, from the owner, operator, or agents of the detaining vessel.

This bill would increase that amount to $2,028 per day.

(1)Existing law provides for the licensing and regulation of pilots for the Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun, by the Board of Pilot Commissioners for the Bays of San Francisco, San Pablo, and Suisun in the Transportation Agency. Existing law establishes pilotage rates and surcharges that are paid to licensed pilots by vessels piloted in those bays. Existing law establishes those pilotage rates and surcharges, and provides for changes to them based on the number of pilots licensed by the board and recommendations by the board to the Legislature. Existing law requires each licensed pilot to submit a monthly account to the board of all moneys received by the pilot for pilotage services.

This bill would revise and recast those provisions and would require that certain surcharges be separately identified on the pilots invoices and in their monthly account to the board. The bill would, until January 1, 2021, additionally authorize a technology surcharge, not to exceed a cumulative amount of $1,200,000, to recover pilots costs for navigation software, hardware, and equipment authorized by the board on or after January 1, 2017. The bill would require the board to submit a schedule of all pilotage rates and surcharges to the Office of Administrative Law for publication in the California Regulatory Notice Register and to post that schedule on the boards Internet Web site. The bill would require an independent audit of all charges collected by pilots to be conducted annually by a public accountant selected by the board.

(2)Existing law requires the Board of Pilot Commissioners to review and evaluate pilotage expenses in making recommendations to the Legislature to adjust certain pilotage rates. Existing law establishes procedures for any party directly affected by those rates to petition the board for a public hearing. Existing law requires the board, at the conclusion of the hearings, to review and evaluate the evidence and to submit to the Secretary of the Senate and the Chief Clerk of the Assembly a copy of its findings and recommendations for a final determination.

Existing law requires each vessel to pay a board operations surcharge to compensate the board and the Transportation Agency for the services and incidental expenses of the board and agency. Existing law requires those moneys to be deposited in the Board of Pilot Commissioners Special Fund and continuously appropriates those moneys for the compensation and expenses of the board and its officers and employees.

This bill would instead require the hearing on a petition to be before an administrative law judge, as provided, who would act as a finder of fact. The bill would prescribe procedures for the conduct of those hearings, the review of evidence, and the filing of decisions. The bill would require the board to review and evaluate the administrative law judges decision and either submit the decision to the Secretary of the Senate and the Chief Clerk of the Assembly or prepare and submit a written statement of its reasons for not doing so. The bill would require the administrative law judge to be compensated by the board from revenues from the board operations surcharge. By authorizing the expenditure of continuously appropriated funds for a new purpose, the bill would make an appropriation.

(3)Existing law requires that moneys collected from a pilot trainee surcharge and a pilot continuing education surcharge be deposited into the Board of Pilot Commissioners Special Fund and continuously appropriates those moneys for pilot trainee and pilot continuing education programs, respectively.

This bill would create the Pilot Trainee Special Fund, require moneys collected from the pilot trainee surcharge to be deposited into that fund, and continue to continuously appropriate those moneys for pilot trainee programs. The bill would also create the Pilot Continuing Education Special Fund, require moneys collected from the pilot continuing education surcharge to be deposited into that fund, and require those moneys, upon appropriation, to be used for pilot continuing education programs.

(4)Under existing law, a pilot who is carried to sea against the pilots will or unnecessarily detained on board a vessel, as provided, is entitled to receive $600 per day, plus expenses, from the owner, operator, or agents of the detaining vessel.

This bill would increase that amount to $2,028 per day.

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: 1312 Hearing Date: 4/12/2016

SUBJECT: Bar pilotage rates

DIGEST: This bill revises and recasts certain provisions that establish pilotage rates and surcharges that are paid to licensed pilots by vessels that are piloted in Monterey Bay and the Bays of San Francisco, San Pablo and Suisun; modifies the pilotage rate-setting process by incorporating an administrative law judge in those proceedings who will act as a finder of fact; requires the clear publication of all rates and surcharges plus an annual audit of all charges collected by pilots; and, imposes on the industry a technology surcharge, as specified, for five years, to recover pilots’ costs for navigation software, hardware and equipment.

ANALYSIS:

Existing law:

1. Provides for the regulation and licensure of pilots for Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun by the Board of Pilot Commissioners (Board) within the Transportation Agency.
   
2. Specifies that the Board shall consist of seven members appointed by the Governor and one ex-officio non-voting member (the Secretary of the Transportation Agency). Two members are pilots licensed by the Board; two are industry members (one from the tanker industry and one from the dry cargo industry); and, three public members who are neither pilots nor work for companies that use pilots.
   
3. Prescribes the rates of pilotage fees required to be charged by pilots and paid by vessels. The rates involved are set forth in Sections 1190 and 1191 of the Harbors and Navigation Code. Section 1190 relates to bar pilotage for every vessel inward or outward bound over the San Francisco Bar, which lies west of the Golden Gate Bridge, and charges vary, depending on a vessel’s gross registered tonnage and draft. Section 1190 also authorizes an increase in the pilotage rates if the number of pilots licensed to work on the Bays falls below a specified number, or if the Board determines that there has been a catastrophic cost increase to the pilots. Section 1191 of the Harbors and Navigation Code relates to charges for transits that originate and are concluded inland of Golden Gate Bridge – charges for these transits are flat amounts, with the amounts varying with the places at which the transit begins and ends.
   
4. Stipulates that the Board shall recommend that the Legislature, by statute, adopt a schedule of pilotage rates providing fair and reasonable return to pilots engaged in ship movements or special operations if rates for those movements or operations are not specified in Section 1190 of the Harbors and Navigation Code.
   
5. Provides that a vessel using pilots for ship movements or special operations that do not constitute bar pilotage shall pay the rate specified in the schedule of pilotage rates adopted by the Legislature.
   
6. Provides for a movement fee as is necessary and authorized by the Board to recover a pilot’s costs for the purchase, lease, or maintenance of navigation software, hardware, and ancillary equipment purchased after November 5, 2008 and before January 1, 2011.

This bill:

1. Revises and recasts certain provisions (Sections 1190 and 1191 of the Harbors and Navigation Code) that establish pilotage rates and surcharges that are paid to licensed pilots by vessels that are piloted in Monterey Bay and the Bays of San Francisco, San Pablo and Suisun, as specified.
   
2. Authorizes until 1/1/ 2021 a technology surcharge, not to exceed a cumulative amount of $1.2 million to recover pilots’ costs for navigation software, hardware, and equipment authorized by the Board on or after 1/1/2017.
   
3. Requires the Board to submit a schedule of all pilotage rates and surcharges to the Office of Administrative Law (OAL) for publication in the California Regulatory Notice Register and to post that schedule on the Board’s Internet Web site.
   
4. Requires an independent audit of all charges collected by pilots to be conducted annually by a public accountant selected by the Board.
   
5. Adds an administrative law judge (ALJ), experienced with ratemaking, to the ratemaking recommendation process and provides that the evidentiary hearing shall be a quasi-judicial proceeding, with the ALJ acting as a finder of fact.
   
6. Prescribes procedures for the conduct of the ALJ hearings, the review of evidence, and the filing of decisions and prohibits ex parte communications with the ALJ adjudicating the hearing or any members of the Board. Also, requires the Board to review and evaluate the ALJ’s decision and either submit the decision to the Secretary of the Senate and the Chief Clerk of the Assembly or prepare and submit a written statement of its reasons for not doing so. Additionally, provides that the ALJ shall be compensated by the Board from the Board operations surcharge, as specified.
   
7. Creates the Pilot Trainee Special Fund and requires that moneys charged and collected each month from the pilot trainee surcharge must be deposited into that fund and used only for pilot trainee programs.
   
8. Creates the Pilot Continuing Education Special Fund and requires that moneys charged and collected each month from the pilot continuing education surcharge must be deposited into that fund and used only for pilot continuing education programs.
   
9. Increases damages paid to a pilot who is carried to sea against his or her will, or unnecessarily detained on board a vessel, from the current rate of $600 per day, plus expenses, from the owner, operator, or agents of the detaining vessel, to a new rate of $2,028 per day, plus expenses.
   

Background

Brief Historical Perspective. Bar pilots have been guiding ships into San Francisco Bay, one of the most treacherous passages in the world, since at least 1835. The work that bar pilots performed was so important that one of the first legislative enactments by the newly formed California Legislature that met in San Jose in 1850 was to address the regulation of bar pilots.

California’s history of piloting parallels to a large extent the history of pilotage throughout the United States. Prior to the American Revolution, pilotage was regulated by colonial legislatures. They generally provided for the commissioning of pilots, apprenticeship requirements to become a pilot, specified the type and size of pilot boats used in the service, and established fees to be charged. When the United States Constitution was adopted, it recognized that pilotage fell within the domain of the federal government because it involved regulation of instruments of foreign commerce. One of the first acts of the newly formed Congress in 1789 was to recognize the existing state laws regulating pilots and delegate to the states the authority to continue to regulate pilotage because of its unique character.

Bar pilots are responsible for steering an arriving vessel through the Golden Gate of San Francisco Bay, the Bay waters and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River and its tributaries. When a vessel approaches the “SF” buoy several miles west of the Golden Gate Bridge, a bar pilot boards the ship and takes navigational control. (Pilots in San Francisco are called “Bar Pilots” because they board and disembark ships just beyond a treacherous sand bar which provides a natural obstacle to shipping.) It becomes the pilot’s responsibility to guide the ship to its berth. The bar pilots provide service to all types of vessels, from 100-foot tugs to 1000-foot supertankers.

Pilots are generally mandatory in every major port throughout the world and their pilotage service is paid for by the vessel owner/agent. As noted above, the San Francisco Bar Pilots have been state regulated and licensed since 1850 to pilot vessels to various ports in the Bay Area such as San Francisco, Oakland, Redwood City, Martinez, Richmond, Pittsburgh, Vallejo, Rodeo, Antioch, Stockton, Sacramento and more recently including Monterey.

Purpose of SB 1312. According to the author’s office, this bill is intended to enhance navigational safety and make a series of common sense reforms to the pilotage rate setting process in the San Francisco Bay and river pilotage system. The author’s office believes these changes will ensure continued and improved support of the state’s comprehensive oil spill prevention and response regime, improve public safety and navigation, and protect both the environment and the state’s maritime economy. The author’s office points out that the industry and pilots both support re-establishment of the navigational technology surcharge which was allowed to sunset in 2011. This bill provides some relief to the pilots by giving them access to the revenue garnered by this surcharge to recover their costs for navigation software, hardware, and equipment.

Prior/Related Legislation

AB 1432 (Bonta, 2015), increases pilotage fees and rates, as specified, for commercial vessels calling on ports in San Francisco, San Pablo, Suisun, and Monterey Bay, including the Sacramento River to the Port of Sacramento and the San Joaquin River to the Port of Stockton. This bill also reinstitutes a navigation technology surcharge for the purchase or lease by the pilots of navigation hardware and software to enhance navigation safety. (Senate Inactive File)

AB 2287 (Swanson, of 2012) stated the intent of the Legislature to enact legislation that would require a 2nd bar pilot for safety in the San Francisco Bay and its tributaries for ultra large container vessels, and what the appropriate compensation is for the 2nd pilot. (Held in Assembly Appropriations Committee)

AB 2042 (Huber, 2012) would have eliminated the Board of Pilot Commissioners, effective January 1, 2022, and transferred the Board’s functions and duties to the Secretary of Business, Transportation and Housing. Also, would have recast and reenacted certain provisions that regulate pilotage for those bays, as provided. (Held in this committee at author’s request)

AB 907 (Ma, 2011), among other things, would have increased pilotage fees and rates, as specified for Monterey Bay and the Bays of San Francisco, San Pablo and Suisun and established a fuel surcharge for all vessel moves using pilotage service to be determined by the board. (Failed passage in this committee and was subsequently gutted and amended for other purposes)

AB 1025 (Skinner, Chapter 324, Statutes of 2011) made the following substantive changes to existing provisions of law relating to bar pilotage : (a) modified the definition of “inland pilot” to mean a person holding an inland pilot license prior to January 1, 2011 and deleted all references to inland pilots, (b) required the Board’s assistant director be appointed by the Secretary of Business, Transportation and Housing, instead of the Governor, and to serve at the pleasure of the Secretary, (c) recast certain provisions relating to violations of safety standards to require the executive director instead of an assigned commission investigator to perform investigations, make findings and recommendations and report to the Board, and (d) authorized the Board to charge an examination fee, as specified, to each applicant to the pilot trainee training program.

AB 1888 (Ma, Chapter 455, Statutes of 2010), among other things, revised the terms for members of the Board who are licensed pilots and members who represent the industry and exempted from those pilotage fees and surcharges noncommercial vessels that are maritime academy training vessels and vessels owned and operated by nonprofit museums or foundations. These vessels would be subject to the Board operations surcharge.

SB 300 (Yee, Chapter 497, Statutes of 2009) established a surcharge for payment of navigational aids for bar pilots and revised the pilotage rate based upon the current number of bar pilots.

SB 1627 (Wiggins, Chapter 567, Statutes of 2008) made numerous substantive, clarifying and technical changes to the body of law relating to the Board of Pilot Commissioners by injecting ongoing and continuous legislative oversight and administrative responsibility within the existing pilot licensing framework, without altering the Board, its charge, or composition and without changing current pilotage rates, pilot pension benefits, or duties and responsibilities of current, past or future licensed pilots. Also, directed the State Auditor to conduct a comprehensive performance/financial audit of the Board.

SB 1217 (Yee, Chapter 568, Statutes of 2008) required the Board of Pilot Commissioners to appoint a physician or physicians who are qualified to determine the suitability of a person to perform his or her duties as a pilot, an inland pilot, or a pilot trainee in accordance with specified requirements. Also, required the Board to terminate a pilot trainee or suspend or revoke the license of a pilot or an inland pilot who fails to submit the prescribed medication information required by these provisions.

AB 852 (Leno, Chapter 129, Statutes of 2005), among other things, authorized revenue generated by the pilot boat surcharge to be used to pay for pilot boat design and engineering modifications intended to extend the service life of existing boats, in addition to the existing purpose of purchasing new pilot boats.

SB 1303 (Torlakson, Chapter 560, Statutes of 2004) made a minor change to an existing provision of law relative to representation on the Board of Pilot Commissioners by clarifying that the Board’s two industry members must be substantial users of any of the waters of the Bays of San Francisco, San Pablo, Suisun, or Monterey.

SB 1353 (Perata, Chapter 765, Statutes of 2002) established a schedule of incremental changes (through January 1, 2006) to the rates and special surcharges that bar pilots may impose on vessels that move in and out of the Bays of San Francisco, San Pablo and Suisun.

SB 637 (McPherson, Chapter 177, Statutes of 2001) allowed San Francisco bar pilots to pilot commercial vessels calling on ports in “Monterey Bay” by including Monterey Bay within the system of state regulated pilotage for the Bays of San Francisco, San Pablo and Suisun.

SB 2177 (McPherson, 2000) would have applied existing provisions of law relative to the regulation, licensing, and management of pilots for the Bays of San Francisco, San Pablo and Suisun to persons who pilot vessels into or out of the waters of Monterey Bay. (Held in Assembly policy committee at author’s request)

SB 2144 (Perata, Chapter 394, Statutes of 2000) made various modifications to provisions of law governing the licensing of bar pilots.

SB 1109 (Burton, Chapter 786, Statutes of 2000), among other things, required a vessel owner and its operators to defend, indemnify, and hold harmless, a bar pilot from any liability and expenses in connection with any civil claim suit as action arising out of the pilot’s performance of the pilotage services, except for acts of willful misconduct.

AB 951 (Wiggins, Chapter 261, Statutes of 1999) codified the agreement on bar pilotage rate increases reached between the San Francisco Bar Pilots and the Pacific Merchant Shipping Association.

SB 1741 (Johnston, Chapter 1115, Statutes of 1996), among other things, established a schedule of bar pilotage rate increases that were phased in over a three-year period (1997-99).

SB 496 (M. Thompson, Chapter 711, Statutes of 1995) revised the formula the fiduciary uses to calculate the quarterly adjustment for pilotage rates. Also, changed the schedule of pilotage fees for ship movements and internal operations, as specified.

SB 2068 (Johnston, Chapter 385, Statutes of 1994) increased the pilotage rate from 60.70 mills to 64.88 mills and required the Board to temporarily reduce the additional charge, as specified, if maintenance and repair costs of two pilot boats are less than $200,000.

SB 238 (Lockyer, Chapter 1192, Statutes of 1993) increased the rate of the additional pilotage charge from 60.56 mills per high gross registered ton to 60.70 mills. Also, included inland pilots, as defined, in the pension benefit program.

AB 1768 (Papan, Chapter 1653, Statutes of 1984) among other things, established a unified system of state regulated pilotage whereby inland pilots became members of the San Francisco Bar Pilots Association and the combined group assumed joint responsibility for all pilotage moves on the pilotage grounds (San Francisco, San Pablo, and Suisun Bays and all other ports included therein.)

AB 1061 (Agnos, Chapter 1306, Statutes of 1983) increased pilotage rates and pension benefits, as specified.

AB 2027 (Felando, 1983), among other things, would have created three classes of pilots (pilots, inland pilots, and company pilots) and would have repealed existing law relative to the Legislature establishing pilotage rates. (Held in this Committee at author’s request)

AB 3603 (Brown, W., 1982) would have provided a unified system of state regulated bar and inland pilotage. (Dropped at author’s request in Senate Finance Committee)

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

California Cotton Ginners and Growers Associations
Pacific Merchant Shipping Association
Western Agricultural Processors Association
Western Plant Health Association

OPPOSITION:

International Organization of Masters, Mates and Pilots

San Francisco Bar Pilots Association

ARGUMENTS IN SUPPORT: Writing in support, the Pacific Merchant Shipping Association (PMSA) states, this bill "Creates clear responsibility and accountability for the ratemaking recommendation process by reinstituting the use of Administrative Law Judges as fact-finders for all rate change recommendations, and require the clear publication of all rates and surcharges plus an annual audit of the same. SB 1312 creates this new level of transparency and accountability without any disruption to operations by codifying existing rates and surcharges that are already in place and governing licensee conduct.”

Additionally, PMSA notes, “The current ratemaking system for state pilotage has resulted in unsuccessful rate increase proposals being brought before the Legislature in 2004, 2011, 2012, and 2015. While industry opposed each of these rate increase bills successfully, it is our belief that these bills failed primarily because the current pilot rate-setting system is broken. Without Legislative or Administration confidence in the integrity and objectivity of the process of rate-setting itself, these failed attempts at rate changes which have manifested themselves over the past decade will just continue to reoccur over and over again and continue to place the Legislature in an awkward position. Our coalition supports this bill’s creation of a system with the necessary objectivity and unimpeachable integrity necessary to re-establish confidence in this system."

ARGUMENTS IN OPPOSITION: Writing in opposition, the San Francisco Bar Pilots Association states, “The Board is comprised of members with extensive knowledge in marine transportation and maritime practices who provide valuable insights to tackle unique issues regarding pilotage, rates, safety and shipping in general. Accordingly, the Board should be consulted to fully vet many of the issues raised in SB 1312. Last year, AB 1432 (Bonta) was introduced to enact the pilotage rate recommendations of the Board following an evidentiary hearing held pursuant to the existing long-standing statutory and regulatory rate setting process. SB 1312 adds yet another bureaucratic step to the process of determining pilotage rates on San Francisco Bay. It does not remove the Legislature from the process. In fact, it may increase the number of bar pilot issues being brought before the Legislature. This bill seeks to change the rate making process by adding a third layer of bureaucracy (the addition of an ALJ) which may only increase the frequency of pilotage rate legislation that the Legislature will ultimately have to approve. In short, legislators will still be required to vote on rate bills in the future. A similar process in which an ALJ was used for rate hearings existed in 1991-1995 and was repealed by its own terms due to mixed reviews of its efficacy and cost by both the industry and pilots. In fact, there has been no showing that existing law is inadequate to address these concerns or that the Board has been petitioned by the industry to address these concerns.”

Furthermore, the San Francisco Bar Pilots Association argues that "there are a substantial number of provisions in this bill that are best left to the Board to address without the need for additional legislation. A change to the rate setting process will take a minimum of two years to pass and implement – yet, as currently proposed in this bill it is likely that the Legislature will remain heavily involved in the rate making process."

DUAL REFERRAL: Senate Judiciary Committee