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State tax break bill designed to lure yacht repair, create jobs

  • Colonial Group plans to upgrade its shipyard on Lathrop Avenue into the Savannah Yacht Center, a repair and refit facility capable of handling some of the largest yachts in the world. (photo courtesy Colonial Group)

A bill expected to reach the Senate floor for a vote on Friday could be the deciding factor in whether or not Savannah becomes a major East Coast hub for the repair and refitting of mega yachts, an industry that one study indicates could have an annual economic impact of $144 million to Chatham County alone.

“Georgia is poised to become a significant force in the yacht repair and refit industry currently dominated by Florida,” said Rob Demere, president and CEO of the Colonial Group Inc., a multigenerational Savannah business that has grown to be one of the largest privately held companies in the United States.

“We have a facility — Savannah Yacht Center — that’s second to none on the East Coast,” he said. “Coupled with Savannah’s charm as a destination, it should be a slam-dunk.

“But we can’t attract any of this lucrative business unless we level the regulatory playing field with Florida, which limits sales tax to the first $1 million of a refit or repair, effectively capping it at $60,000.”

In 2010, Colonial Group acquired the former Intermarine USA shipyard, just down Lathrop Avenue from Colonial headquarters, with the intent of using its additional berthing space to support existing terminal operations.

But, with the sale of its bunker operations in 2013, the company didn’t need as much berthing space and began to look at other possibilities for the property, which is home to one of the largest graving docks in the Southeast.

A graving dock is essentially a narrow basin that can be flooded to float ships, then drained to allow the ship to rest on a dry platform. It is used primarily to make the vessel accessible for construction, maintenance and repair work.

Colonial, which paid $10 million for the property in a bankruptcy sale, is committed to investing the estimated $50 million needed for facility capital improvements “provided that Georgia creates a regulatory framework that supports our ability to compete against our neighbor to the South,” Demere said.

House Bill 125 specifies that a boat owner would get a sales tax break on parts, engines and other equipment for a refit or repair, but only after the first $500,000 is spent.

Sponsored by Rep. Ron Stephens, it passed the House with no problem and now goes to the full Senate, where it is sponsored by Sen. Ben Watson.

The bill is similar in scope to legislation passed in Florida in 2015 that capped sales tax for repairs on a yacht at $60,000. New York also passed a law that same year capping sales tax on yachts in an effort to compete with Florida.

Provide jobs

In answer to critics who worry the bill gives the appearance of a tax break for the very wealthy while doing nothing for the average taxpayer, Demere said its intent is not to save the rich money, but to provide jobs for the average taxpayer.

An economic impact study commissioned by Colonial Group seems to bear that out.

The study, conducted by Michael Toma, Fuller E. Callaway professor of Economics at Armstrong State University’s Center for Regional Analysis, found that, when fully operational, the Savannah Yacht Center will support on a statewide basis nearly 800 direct and indirect jobs, as well as wages of $50 million, tax revenue of $5.5 million and $171 million in economic activity, annually.

“Without this, we won’t be saving anyone anything, because all this mega yacht repair and refit business will continue to go to Florida,” Demere said.

Watson concurred.

“What we have is a well-known Savannah company that wants to establish an industry that will bring jobs to the county and surrounding area,” he said. “They are willing to make a $50 million investment to do that, but they need to know that they can compete against Florida for the business.

The bill isn’t about saving yacht owners money, Watson said, it’s about bringing some of the money they spend to Georgia.

Trip Tollison, president and CEO of Savannah Economic Development Authority, agreed.

“We’re very excited at the possibility of creating some 150 direct jobs. These are good jobs, most of which pay upwards of $60,000 and there is tremendous potential beyond that, with up to 800 direct and indirect jobs in play,” he said, adding that the project has the added benefit of Colonial Group’s reputation for doing things right.

“With Colonial Group involved, there is no doubt they will create something that will make the community proud,” Tollison said.

“But, in order for us to achieve that potential, we ‘ve got to be competitive in capturing this very unique business,” Tollison said. “Florida provides an incentive in the form of a sales tax cut; Georgia does not. We have to give our Georgia businesses the ability to compete with Florida.”

Thunderbolt Marine, Inc., currently Savannah’s only major yacht refit facility, will also benefit from the proposed tax break, said company president Ernie De-Alto.

“We are absolutely behind this bill 100 percent,” De-Alto said. “It has a tremendous amount of potential to help us.

“For example, we were recently competing for work on a vessel that amounted to a $6 million project,” he said. “We lost that job to Florida primarily because we could not offer the same tax cuts.

“We need to be competitive everywhere.”

To suggest the proposed bill is just a cost-cutting measure for yacht owners is extremely naive, De-Alto said.

“The yacht owners will find the deals they need,” he said. “The loser will be the community that misses out, not only on jobs but on the economic benefits of having a big boat and its crew here for weeks or months, taking advantages of all the services our small businesses offer.”

While there will be some overlap between the two marine facilities, De-Alto said he feels there will be enough work to go around.

“The bottom line is this will be good for the community,” he said.

Watson agreed.

“By providing this tax break, we create both jobs and tax revenue we didn’t have before,” he said. “To me, it comes down to a matter of do we want the business or not.”

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