Judge Finds Fault With San Francisco’s New Dock Fee

SAN FRANCISCO (CN) – A private yacht company says San Francisco charges excessive docking fees to commercial charter boats in violation of the Commerce Clause, and a federal judge seems to agree.

U.S. District Judge Jon Tigar ruled Monday that Lil’ Man in the Boat Inc.’s lawsuit against the city survives a motion to dismiss, since the $220 landing fee doesn’t confer much beyond allowing the company to use a small portion of the harbor to load and unload passengers.

The company has been running chartered excursions in the San Francisco Bay aboard the yacht “Just Dreaming” since 2006, using the north side dock of Pier 40’s South Beach Harbor as its pick-up and drop-off point. The dock, the company points out in its lawsuit, isn’t secured or protected and the city rarely inspects or maintains it.

In 2016, the city raised its landing fee for commercial vessels from $160 a day to $220, and also imposed a new requirement that commercial vessel operators hand over 7 percent of their gross monthly revenues when the revenue fee exceeds the base landing fee.

The 2016 landing agreement also forced operators to sign a waiver saying they wouldn’t sue the city.

Lil’ Man in the Boat filed a federal class action against the city in 2016 after it refused to sign the agreement and was locked out of South Beach Harbor.

“South Beach Harbor is the hub of San Francisco Bay charter activity for the entire Northern Bay Area, and the ability to load and unload passengers from South Beach Harbor’s north side dock is critical to the viability of businesses like plaintiff’s. In effect, defendants have a monopoly on commercial passenger landings within the city and county of San Francisco,” the lawsuit says.

“Well aware of their power, defendants impose excessive fees on commercial charter vessels engaged in interstate commerce as a condition of landing at the port. These fees bear no relationship to costs created or services provided by defendants to these vessels, and vastly exceed the amount defendants charge recreational vessels that are not engaged in interstate commerce and use port services more extensively.”

Lil’ Man in the Boat claims the fees are diverted to the city’s general fund, rather than to upkeep of the docks.

In his ruling, Tigar took issue with the company’s argument that applying the landing fee to commercial vessels and not recreational ones is discriminatory. Tigar said the company cited no case to support that theory under the Dormant Commerce Clause, which allows such fees as long as they aren’t excessive and don’t discriminate against interstate commerce.

But Tigar did find that the company showed the fees are excessive. “Plaintiff has plausibly alleged, however, that the landing fees are ‘excessive’ when compared with the benefits the north side dock confers,” Tigar wrote. “Plaintiff claims that defendants allow commercial boats like Just Dreaming to use only a ‘small portion’ of the dock, neglect maintenance of the dock, and divert landing fee revenues to the city’s general fund. As the court found in its Tonnage Clause analysis, these allegations make it plausible that defendants are realizing a profit from the landing fees while providing only minimal services.”

Tigar also found the fees could be an illegal violation of the Tonnage Clause, a federal law that restricts states from imposing taxes on cargo.

“Fees that are diverted to general revenue funds and that are not actually used to defray the costs for which they are collected violate the Tonnage Clause,” Tigar wrote. “Here, plaintiff has plausibly alleged that some portion of the landing fees go to the city’s general funds, rather than for the services for which they are collected.”

Tigar cited the city budget, which projects a roughly $1 million surplus for the South Beach Harbor for all but fiscal year 2015-16, and lists the harbor’s rent as $500,000.

“Together, these line items suggest that the South Beach Harbor’s revenue exceeds its expenses by over $1.5 million,” Tigar wrote. “Of course, the surplus is for the South Beach Harbor as a whole, not for the north side dock specifically, and the budget does not make clear which revenue line represents the landing fees. This means it is difficult to say what role, if any, the landing fees have in contributing to the $1 million surplus. Nevertheless, at the motion to dismiss phase, the court agrees with plaintiff that the fact of the overall harbor surplus, together with plaintiff’s allegations that the north side dock is small, unsecured, and poorly maintained, raise a plausible inference that the landing fees are going to general revenues and not to provide services at the dock.”

Tigar also sided with Lil’ Man in the Boat on the waiver, calling it overly broad and possibly unconstitutional.

“Notably, defendants cite no case that has upheld a general litigation waiver as a part of a contract to use government property,” he said.

The city did not respond to emailed questions and requests for comment. The attorney for the boat company was not available to comment by press time.

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