Commercial Fisher

Eric Rosvold

Any views expressed are entirely my own

The Problem

• Fishing Rights, as administered by the State and Federalgovernments have created a “wealth” Issue

• It has made financing entry into commercial fishing, inthe traditional sense, difficult for a new generation offishers wanting to operate as sole proprietors

• Local fishing businesses may have a net worth of 4 ormore times than before fishery rights were established

• The ease of selling parts and pieces of that fishingbusiness for retiring owners threatens coastalcommunities with the potential loss of that economicactivity

• There is no methodology to sell the entire business to apartnership because of limitations established by Stateand Federal laws governing those fishing rights

Value of Fishing RightsStatewide

Longline IFQ - $1.2 BillionLimited Entry Permits -

$353.8 Million

Value of Fishing Rights inPetersburg

$160 Million

My Involvement

• After the Advent of IFQ’s

• Necessary to purchase additional sharesto keep fishing business viable

• Value of fishing rights soon exceeded costof vessels and equipment

• Working with CFAB, fish companies, andother banks in financing those purchases

• Realized the potential degree of difficultyin selling the business as a whole entity

Value of Fishing Rightson a typical Fishing

Vessel

$4.5 million

Fishing Business

• Vessel, Equipment & Gear

$785,000

Fishing Rights

$4,515,095

Gross Value

$5,300,095

Typical Fishing Vessel Season

• Fishes 7 months a year

• Employs 4 to 5 crew

• Longlining a medium amount of IFQ

• Seines and Crabs

• 3 months available to pursue otheropportunities

• 2 months for maintenance issues

Gross Value & Income Calculation

58'X20' combination fishing vessel 575,000.00$

Seine equipment: winch-block-skiff-seine 75,000.00$

Longline equipment: hauler-shelterdeck-gear 75,000.00$

Crab equipment: hauler-gear 60,000.00$

Equipment Value 785,000.00$

Limited entry permits Catch in lbs. Ex vessel price gross income

Salmon Seine 40,000.00$ 1,200,000 0.15 180,000.00$

SE Tanner and Brown Crab 150,000.00$ 30,000 3.00 90,000.00$

270,000.00$

Federal Longline IFQ market value pounds net pounds gross income

SE Sablefish 640,211.00$ 11.00$ 58,201 36,667 4.00 146,666.52$

WY Sablefish 1,184,942.00$ 11.00$ 107,722 67,865 271,459.44$

Central Sablefish 1,184,942.00$ 11.00$ 107,722 67,865 271,459.44$

2A Halibut 840,000.00$ 21.00$ 40,000 40,000 4.00 160,000.00$

3A Halibut 475,000.00$ 19.00$ 25,000 25,000 100,000.00$

Value of fishing rights 4,515,095.00$ 949,585.40$

Gross Value of fishing Business/Equity 5,300,095.00$

Gross Fishing Income 1,219,585.40$

To Sell to a Buyer

– Sales Price $5,300,095

– Down payment = $1,325,023

– Annual payment = $450,324

Traditional P&L for BuyerGross Fishing Income $1,219,585.40

Traditional Owners

% share

Traditional Owners Share Seine $72,000.00 0.40

Traditional Owners Share Crab $36,000.00 0.40

Traditional Owners Share Longline $256,388.06 0.27

Gross share before expenses $364,388.06

Insurance $20,125.00Communication expense $2,500.00

Repair and Maintenance vessel & equipment $34,500.00Licenses and permit fees $2,500.00

Moorage, crane rental, utilitites $4,500.00

Warehousing $3,000.00

Professional $3,600.00

Operating Supplies $4,887.50Total Expenses $75,612.50

Traditional ROENet Share before taxes $288,775.56 5.45%

Net cash after payment ($161,549.28)

Annual Payment $ 450,324

Owners’ easy way out

• Sell the fishing business, in pieces, viabrokers

• Fishing business, disassembled,essentially leaves the community in whichit was established

• Trickle down effects repair & supplybusiness, local and fish taxes, crew jobswith families leaving town

An Alternative ScenarioThis will have owner(s) taking a larger share

Future Owners Share Seine $90,000.00 0.50

Future Owners Share Crab $45,000.00 0.50

Future Owners Share Longline $664,709.78 0.70

Gross share before Expenses $799,709.78

Insurance $20,125.00

Communication expense $2,500.00

Repair and Maintenance vessel & equipment $34,500.00

Licenses and permit fees $2,500.00

Moorage, crane rental, utilitites $4,500.00

Warehousing $3,000.00

Professional $3,600.00

Operating Supplies $4,887.50

Total Expenses $75,612.50

Future ROE

$724,097.28 13.66%

Annual Payment $450,324Net Cash after payment $273,772.44

What does that do to crewshares?

Traditional Future 5 crew 5 crew

Crew shares Seine $108,000 $81,000 $21,600 $16,200

3 crew 3 crew

Crew shares Crab $54,000 $40,500 $18,000 $13,500

5 crew 4 crew 5 crew 4 crew

Crew shares Longline $693,197 $284,876 $138,639 $173,299 $56,975 $71,219

Crew share total $855,197 $406,376 $178,239 $212,899 $86,675 $100,919

Traditional

Owners % of gross income 0.24

Crew % of gross income 0.70

Future

Owners % of gross income 0.60

Crew % of gross income 0.33

Crew shares/Fishing Rights

Expense

crew

owners

Expense

crew

owner

rights

Traditional Alternative

Community Development ProjectSolution

• One or more buyers forms LLP/CDP to purchasethe business allowing, for instance, an existingcrew be an owner

• Owner would hold sales contract with aParticipation Financer providing some funds andmanaging financing details

• LLP/CDP holds all assets and is tied to theCommunity in which it is registered

• Regulatory changes needed in State andFederal programs to allow fishing rightsownership by LLP/CDP to properly collateralizelending

From the seller’s perspective

•seller holding of sales contract minimizing immediatetax burden on sale-Allows sale of entire business within the community inwhich it operates•Participation financing from outside institution lessensrisk to seller•????•????•????

From the New Owners Perspective

•Fishers able to partner combining assets andtalents, sharing risk, and all fishing rights,proportionate to their owner ship share

•Easier/possible to collateralize with financiers

•Partners can determine whom needs to be onboardwhile fishing

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From the Community Perspective

• Keeps that Fishing business intact locally, retaining thecharacter of community and the economic activityassociated with that business

• Appears to be in keeping with the original Intent ofFederal and State Fishing rights programs?

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Work in Progress

Thank You