Court deals blow to dredge owners
“Manson’s vessels were engaged in a dredging project, not in the transportation of goods for hire.” First District Court of Appeal
Shippers in California waters are exempt from property taxes on their boats if they’re carrying freight or passengers. But sludge isn’t freight, a state appeals court says, so a construction company will have to pay taxes to Contra Costa County on its barges, tugs and scows.
Manson Construction Co. was hired by the Army Corps of Engineers in 2013 to dredge Oakland’s harbor and make it deeper for larger ships. The vessels, based in Contra Costa County, carried the sludge and other dredged material to disposal sites and dumped it.
Claiming a tax exemption for 10 boats in 2013 and six in 2014, a company representative said they were carrying freight because “so long as someone is hiring you to move it, it’s considered freight.” County assessors disagreed and were upheld Monday by the First District Court of Appeal in San Francisco.
Carrying sludge was just a “byproduct” of “the dredging work the vessels were hired to perform,” Justice Ioana Petrou said in the 30 ruling, which affirmed a Superior Court judge’s decision against the company. “Manson’s vessels were engaged in a dredging project, not in the transportation of goods for hire.”
The property tax exemption for freight and passenger vessels of more than 50 tons was approved by the voters in 1914 as a state constitutional amendment designed to help the shipping industry and encourage companies to locate their home ports in California, Petrou said.
She said the state Supreme Court applied the exemption in 1958 to include barges and tugs hired by oil companies to ship their products within the state. The courts have also granted exemptions to owners of sportfishing boats that took customers out for fishing or sightseeing, ruling that they were carrying passengers.
But Manson was hired to deepen the harbor, not to transport materials, the court said, and “the dredged waste was not ‘ goods’ like the petroleum products.”
Ronald Gangloff, a lawyer for Manson, said the company was disappointed by the ruling, but it was “not very farreaching” and a further appeal is unlikely.