Just when boat dealers were expecting a promising recovery in boat sales this year, the state’s luxury sales tax, which went into effect July 1, 2011, seems to have dashed their hopes.
The traditional start of the boating season — the July 4 weekend — is only three weeks away, but the sales of new boats remain low, boat dealers are complaining. In fact, many boat owners are downsizing to smaller, more economical vessels, said one dealer.
“I have had several people come in to sell their 40-footers and settle for something under 25 feet,” said Tim Hogan, a Waterford boat dealer, who noted that some people may be downsizing, but they are not giving up boating altogether. But he is unhappy at the low level of new boat sales.
The state’s luxury tax, gas prices and a host of other factors are all buffeting an industry in the throes of change. Some who watch business trends also note that the recent recession as well as demographics — the aging of the state’s population — are also affecting the industry.
Eleanor Mariani, director of the boating division of the state Department of Energy and Environmental Protection, said the number of people applying for a safe boating certificate slipped by 6 percent over the past four years. In 2007, Connecticut had 112,163 registered boat owners. This dropped to 105,499 in 2011, she said, and 75 percent of these now own a boat under 25 feet in length.
Don MacKenzie, vice president of Boats Inc., an East Lyme dealership, pointed to the state’s luxury sales tax as the reason for the drop in boat sales. Under the state budget which went into effect July 1, 2011, not only did Connecticut’s base sales tax rate increase from 6 percent to 6.35 percent, but officials established special luxury tax rates for expensive motor vehicles, boats, jewelry and clothing. A 7 percent sales tax is levied on boats that cost more than $100,000.
An expensive recreation
Boating has never been an inexpensive activity.
In addition to paying high taxes and gas prices, boaters annually can spend at least $6,000 on upkeep. This includes winter storage fees, mooring, shrink wrap to protect the boat and general maintenance.
“Since the storage costs — about $100 per foot — go by a boat’s length, many enthusiasts are also downsizing their vessels,” said Greg Oseep, a United Technologies employee, who has been boating for more than a decade. Each year, he said, he sees the number of boaters decline because people can’t afford to boat anymore.
“Although gas prices are an essential factor, I believe it is the additional cost of keeping a boat that makes the activity all the more expensive,” Oseep said.
In addition, boat manufacturing costs have increased, by 5 percent to 6 percent in the past three years, because of the increased cost of raw materials, including the petrochemical fiberglass, said Grant Westerson, president of the Essex-based Connecticut Marine Trades Association.
Mariani, of DEEP, blamed the recession and gas prices for people not being able to spend as much on recreation, and she predicted that the number of boat owners in the state will continue to drop.
“When recession hits, boats are one of the first things you decide not to use or buy,” said Tony Sheridan, president and CEO of the Chamber of Commerce of Eastern Connecticut. But, he said, this may not necessarily be only because of the recession. The state has a rising number of older residents and, he said, operating a boat can seem too laborious for older couples.
But Westerson was more bullish on the coming season “if the weather cooperates.”
He recalled that 2010 was a good year for the marine industry because there were more “sunny weekends forecasted.” That same year, gas prices started tumbling as well, going down by 70 cents per gallon, which encouraged more people to go out on the water. But at the current average rate, which has hovered in the past week at about $3.80 per gallon — according to AAA’s website — a 40-foot motor boat would burn hundreds of dollars worth of fuel a day, Westerson said.
“Sure, people may not cruise all the way to Long Island, but their boat can still be their summer cottage where they can hang out with their family,” he said.
Those who cannot afford either of these, prefer to “boat pool” and share the gas money with friends in order to keep their expenses low, Westerson said.
Amy Clark, a boat-owner from the Noank section of Groton, agreed, but added, “For me and my husband, gas prices are not that much of a determinant when we compare the costs of a three-day holiday to Disneyland to a two-week family vacation in Block Island.”
Since Rhode Island is one of the less expensive states to cruise, the Clarks — who have owned a 46-foot Post Sportfish for almost a decade — plan a visit every year.