It’s nice to have a state-sanctioned monopoly. It’s even nicer to have a monopoly in an important, yet obscure profession, like the San Francisco Bay’s 60 bar pilots do. In 2014, the San Francisco Bar Pilots, who guide ships in and out of the Bay, collected their highest revenues ever in their 150+ year history, nearly $40 million, from the ships that called on the Bay Area’s seaports. After expenses, each pilot took home an annual income of $453,766 last year. And that income is for an estimated six months of work per pilot – indeed, at the urging of a pilot, the US Tax Court recently determined that a pilot working in the San Francisco Bay works so few hours that the IRS can consider it a part-time – job..
Despite their 2014 record-high revenues, $450,000 annual salary, and a less-than-full-time workload, the San Francisco Bar Pilots apparently still feel that they are underpaid, as they are currently seeking an 11% pay increase (yielding an additional $12.4 million over four years) from the California Legislature. As justification, they’re arguing that their expenses are increasing and they haven’t had a rate increase in 10 years. These are similar arguments to those used by the pilots when they asked the Legislature for a rate increase in 2011.
Fortunately, the facts have demonstrated that the pilots are much better navigators than they are financial planners. In 2011, the pilots projected that their income in 2014 would be $362,147 per pilot if they didn’t receive a rate increase. The ratepayers in the maritime industry disagreed, and argued that their incomes would grow without the need for rate increases. The Legislature agreed with the ratepayers and rejected the pilot’s requested increases. The result? The Legislature made the right choice. At $453,766 last year, each Bar Pilot made $91,619 more than what they told the Legislature they would be making.
But that’s not all: pilots also enjoy a generous deferred compensation and retirement package which pays recent retirees over $225,000 per year. And, the pilots make NO contributions whatsoever towards their own pension. In addition, the unfunded liability for the pilot’s retirement program could be as high as $650 million according to a 2009 study. A 10% rate increase would compound this unfunded liability by tens of millions of additional dollars.
These rates and pensions do not reflect the real world and are in serious need of reform by the state – as are many aspects of the state’s pilot licensing system. The state has essentially ceded this monopoly to a group of 60 secretive men. The state Pilot Commission refused to obtain information on how much or when each individual pilot actually works in exchange for this substantial income, and vehemently refuses to disclose this data when asked for in Public Records Act requests and when sued for in Court. In addition to refusing to disclose actual work records, the Pilot Commission is also currently suing the Fair Political Practices Commission in defiance of an FPPC Order that the Board enforce the conflict of interest provisions of the Political Reform Act. In many respects, while the pilots’ rates, income, and pension fund have aggressively grown to 21st century proportions, the attitude towards transparency in this monopoly still feels like the 19th century.
With significantly higher pay in 2014 than even the pilots themselves were expecting to earn, the inability of the system to address the existing $650 million in unfunded pension liability, and the ever present need for sunshine and disclosure reforms in this monopolistic system, there are numerous issues that need to be addressed before a $12 million pilot rate increase. The Legislature did the right thing in 2011 when it rejected the pilots’ arguments for a rate increase then and it should do so again now.