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Marina owners concerned about new fee structure

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By CURRENT BOXHOLDER

Marina owners are concerned about how the Tennessee Valley Authority’s new fee structure for public land use will impact Norris Lake’s economy.

“On the whole, TVA is extracting up to $1 million from the Norris Lake economy,” said E. L. Morton, director of the Campbell County Chamber of Commerce, in reference to the new fee structure’s impact. Morton believes the new structure will have a statewide impact of about $20 million.

“Campbell County is the largest county-marina economy in the state and the TVA lake system,” Morton said. “We’ve got more marinas in this county than any other county in the TVA region. And Norris Lake has more marinas than any other lake in the TVA system. So clearly, Norris Lake has more to lose than any other lake in the TVA system.”

In order to absorb higher fees, some business owners fear they will have to pass the cost to customers, which could impact the tourism industry.

“We’re in a competitive environment,” Morton said. “The industrial belt vacationers have their choice of Dale Hollow, Norris Lake and Lake Cumberland. We compete for the same customer very often. When our price points go up, we lose competitive footing. These TVA increases are going to force a higher price point for goods and services from our marinas.”

There hasn’t been a consistent fee structure over the years, TVA spokesperson Travis Brickey said. It is TVA’s intention to make the structure more fair and consistent.

Commercial operators, or marina owners, own private property next to the lake, but must use TVA property to provide access to the lake.

“TVA property is public property,” Brickey said. “It’s commercial operators who are operating part of their business or all their business on TVA land.”

Some of these commercial operators may own private property down to the 1020 contour elevation, but must use TVA property below that elevation to provide lake access and other services to customers. TVA charges business owners fees for use of this public land.

The way TVA charges a commercial operator varies depending on the agreement the owner has with TVA and the land-use rights the business owner is granted in the deed.

However, many of the marina owners have revocable license agreements that allow them to use TVA land, and build and maintain structures on it.

“Majority of our license agreement holders paid TVA an annual fee based on the amount of TVA land they used,” Brickey said.

This fee was generally about $300 an acre with a four-acre minimum.

“We also have some agreement holders who have been paying us a percentage of gross with some as high as 5 percent,” Brickey said. “It’s over the board.”

TVA is seeking to change the fee structure in to make it more fair and consistent across its system, which includes other reservoirs besides Norris Lake.

“Typically, the newer operators are paying more for rent,” Brickey said. “We want to make everything fair for everyone. What we’re doing is bringing it up to being a more standardized fee system throughout the TVA system. Whether you’re in Bristol, Va. Or in Paducah, Ky., we want to be fair and consistent.”

The new structure begins Jan. 1, 2013.

“We’ve been rolling this out for a while now,” Brickey said.

TVA’s been meeting with commercial operators, which are people that operate businesses, such as marinas, on public land.

“They can choose the fee structure that’s in their best financial interest,” Brickey said.

One of these options involves paying 7.25 percent of the fair market value of the portion of public property the business uses each year. This amount will increase by 2 percent every year. TVA has approved a list of appraisers, and if a commercial operator chooses this option, he or she must pay for an appraisal. After five years, either TVA or the commercial operator would have the opportunity to have the property reappraised. Whoever seeks the reappraisal would pay for it.

The other option is to pay four percent of gross revenue earned, 2 percent of restaurant sales and 1 percent of boat, motor and fuel sales. There is also a minimum requirement of $1,062 per acre. If four percent of the gross sales exceeds the minimum requirement, the commercial operators, don’t have to pay it.

“To make sure you give it a fair effort to provide commercial opportunities and not make it a private use,” said James Adams, TVA’s senior manager for company and public recreation, in reference to the purpose of the minimum requirement. “We want people to make a fair attempt at running a commercial operation.”

The minimum requirement is based on population classifications. Norris Lake touches five counties, some of which fall into different population categories. While some of these counties are smaller, where the minimum requirement is $636 per acre, Campbell County is mid-sized and the minimum is $1,062 per acre.

While Brickey anticipates some commercial operators will face substantially increased fees under the new rate structure, he believes it is designed to create a more fair and competitive environment.

“Many commercial operators have enjoyed rents that are far below fair market value rates,” Brickey said. “The new fee structure is designed to level the playing field so operators pay fair rent regardless of where they are located in the TVA system. This (offers) a competitive advantage for some operators.”

The new fee structure has created a large increase to the fees for some marina owners, which has also generated complaints.

“I just personally feel that it’s a very unjustifiable increase in price,” said Larry Collier, general manager for operations at Stardust Marina.

Gary Farwick owns Flat Hollow Marina and has a revocable license agreement with TVA. In previous years, Farwick has paid $5,040, which is common for marinas the size of Flat Hollow Marina, he said. Under the new fee structure, Farwick faces a 1,000 percent increase and will have to pay $50,000, he said.

“I’m going to have to add $50,000 to my costs and my revenue. Competitively this is a problem for me,” Farwick said.

Farwick said he is going to have to pass the cost to his customers.

“Which will make it more expensive for anyone to enjoy the lake,” Farwick said.

Stardust was charged about $6,900 every year for a revocable license agreement. During the first year of the new fee structure, Stardust will have to pay a minimum of $45,654, Collier said. He believes it will increase to over $60,000 the following year.

Collier doesn’t think TVA has considered the ramifications the new fee structure will have on the lake economy. A portion of the cost can be passed to the customers, but only a small one, Collier said.

“As a marina operator you can only charge so much for a slip or a cheeseburger,” Collier said. “After that, you price yourself out. I’m already trying to determine the amount of employees I can afford to hire this upcoming season and the amount of services I can cut.”

There are about 200 to 400 jobs on Norris Lake, Morton said.

“And clearly the seasonal jobs are very important,” Morton said. “They employ school-age employees. Those paychecks buy things like school clothes and school supplies. That’s a huge economic factor for families in Campbell County.”

Farwick believes it would be easier to handle the fee in a three-year phase rather than all at once.

“We should pay something for using the facility of the water,” Farwick said. “The question is ‘how much?’ We’ve asked them (TVA) to phase (this fee) in, but they refused.”

Collier also advocated phasing in a fee increase. If the price was increased by 100 percent, Stardust could probably ingest it, Collier said. If they had introduced a 100 percent increase, and gradually increased it by that much each year, it would have been more manageable, Collier said.

“This way, the marinas would have time to adjust,” Collier said.

TVA currently collects $400,000 from commercial operators through fees. Adams doesn’t know how much more money will be generated through the new fee structure.

The money generated through increased fees will go to maintaining public areas throughout the TVA system, Brickey said.

“(The money) is not earmarked,” Adams said. “There’s not a fund this money goes to.”

TVA maintains 293,000 acres of land for public use, according Adams. These public areas include boat ramps, picnic areas, public access areas and day use areas, which are used for such recreational activities as hiking and picnicking.

“We spend much more money on these facilities than we will collect through these fees,” Adams said.

“TVA gets no tax appropriation,” Brickey said. “We are solely funded though power. This is a good opportunity for us to look at the areas we maintain. We make it look nice, people want to return and spend money in the area.”

Another objection Farwick has to the new fee structure is not all marinas on Norris Lake will be subject to the new fee structure.

Only 16 of 25 marinas on Norris Lake will be subject to the new fee structure, Farwick said.

“That’s not fair at all,” Farwick said. “It’s a whole bunch of marinas that won’t have to pay for this.”

Some of the marina owners will continue to pay different fees because their deeds give them different land-use rights, and some are subject to different agreements, Adams said. TVA is attempting to employ a standardized fee structure, but different marinas have varying levels of access to TVA lands through deeds.

“There are 24 marinas, 21 will be paying,” Adams said. “There are a couple that will not be paying TVA, but other public entities. There are different land rights on different reservoirs. In every case (you have to go) and look at the specifics.”

TVA has revocable license agreements with the owners of 13 of the marinas on Norris Lake. These owners don’t have the right to construct water use facilities on the public land. The license agreement is the vehicle that gives them the right to be there, Adams said. Either party can terminate the agreement within 30 days. TVA has offered these marina owners new license agreements that give them the right to be there, but charges them for it, Adams said. These agreements make them subject to the new fee structure.

For four of the marinas on Norris Lake, the private ownership extends to the 1020-foot contour elevation. Whether or not the owners of these marinas will be subject to the new fee structure depends on if their deeds give them the right to construct.

Two of the marinas on Norris Lake are paying other government entities, and TVA intends to honor those agreements until they expire, Adams said.

Lakeview Boat Dock has a 19-year lease with TVA, which will expire in 2018.

“We signed an agreement with them several years ago,” Adams said. “It will expire in a few years. When it does we will make a new agreement similar to everyone else.”

The lease is different than a revocable license.

“The agreement we have with Lakeview (includes a charge),” Adams said. “They’re not using the property for free.”

When some of the agreements expire, they will all become consistent, Adams said.

Five marinas won’t be subject to the new fee structure because their deeds give them the right to construct. When TVA sold some land as private land, it held rights to restrict its use to commercial recreation. However, in the deed, owners were given the right to construct water use facilities on the public land.

Some feel the new fee structure is like a tax.

“The percentage of gross receipts really amounts to a sales tax,” Farwick said. “Are we trying to drive business away from Tennessee and Campbell County?”

“What governmental body has the ability to take a portion of your gross income?” asked David Merritt, from the Shoreline Alliance, a group that is dedicated to fighting TVA’s new fee structure and regulations. “That’s a tax, they (TVA) don’t have taxing authority,” Merritt said.

The Shoreline Alliance has been working through the summer, growing, holding meetings, mailing information and spreading the word. Members of the Shoreline Alliance have spent time in Washington D.C. speaking with congressmen about this.

 

“It is not a tax, it is a way of determining an amount of rent based on how well a business is doing,” Adams said. “This is not a tax, this is a fee for commercial operators to be on public lands, to be there and operate a business. It is very incorrect to call it a tax.”

The new rate structure isn’t all that is drawing complaints.

“It’s not just the fee structure,” Merritt said.

TVA is going to place new regulations on campgrounds. These include a requirement that campers vacate sites for two weeks out of every year. Porches must be no larger than 14 feet by 24 feet, and be conveyed to the campground.

“We have campers that’s been up there for 30 years,” Cedar Grove Marina and Campground owner Jeff Norris said. “At least 25. They leave, they leave the porches.”

A portion of the campsites also has to be reserved for short-term campers.

“Short-term sites are a maximum of 21 days,” Norris said.

“We’re very passionate about it,” Merritt said. “The structure they’ve put in place has already put several business owners out of business, with the promise of more to come. We think it’s poorly thought out, without any regard to the long-term economic impact to (cities) and counties (and) businesses that rely on tourism to the tourism to the waterways.”

 “We found out about this in (late February) and formed the Shoreline Alliance,” Merritt said. “It’s picking up steam, and has been all year. Now, we’re getting donations from all kinds of marinas. We have members all across Tennessee, Alabama, Kentucky and Georgia.”

Merritt is from the Memphis area.

The Shoreline Alliance is raising money, and awareness because it wants to file a lawsuit against TVA.

“That’s why we’re raising money,” Merrit said. “And we need the funds desperately. Because time is running out. Nobody’s getting paid to do this.”

Money donations go to mailing and legal fees.

The Shoreline Alliance has also received donations from bait shops, boat owners and private citizens.

Merritt feels the purpose of the new fee structure is to raise revenue, but it will actually cause TVA to lose revenue.

“My own personal opinion is the people who make these decision don’t understand business,” Merritt said. “They’re going to run people off instead of increasing (revenue). (TVA is) going to price out those people who are in lower or middle income levels.”

TVA waterways run through many poorer areas, Merritt said. With the new fees, recreation won’t be as available to regular people because commercial operators will have to make up the cost by raising the prices for goods and services.

 

Marinas on a revocable license agreement that will be subject to the new fee structure:

Cedar Grove Marina and Campground

Straight Creek Boat Dock

Lone Mountain Dock

Stardust Marina

Whitman Hollow Marina

Blue Springs Boat Dock

Twin Cove Marina

Union County Boat Dock

Flat Hollow Marina

Greasy Hollow Boat Dock

Sequoyah Marina

Indian River Marina

Waterside Marina

 

Marinas where private ownership extends to the 1020 foot contour elevation:

Deerfield Marina

Norris Landing Marina

Sugar Hollow Boat Dock

Springs Dock and Resort

 

Marinas currently on a lease agreement and paying another government entity:

Norris Dam Marina (State)

Beach Island and Campground (Union County)

 

Marinas currently on a lease agreement with TVA

Lakeview Boat Dock

 

Marinas that own property with specific rights in their deed for commercial recreation:

Hickory Star Marina

Mountain Lake Marina and Campground

Pointe Marina

Powell Valley Resort

Shanghai Resort