A recent study conducted by The Washington Economic Group (WEG) based in Miami, concludes that Florida’s harbor pilot system functions like a monopoly that limits the number of available pilots and inflates pilots’ salaries to an average of $368,000 per year. The study also concluded that the current harbor pilot system causes Florida to lose jobs, income, economic output and revenues for the state.

“The rates at which state-licensed harbor pilots are paid are the result of a system that stifles competition versus the benefits of an open market,” said Antonio “Tony” Villamil, principal economic advisor for WEG. “Harbor pilots are compensated three times as much as occupations requiring similar responsibilities and experience,” according to the study.

Among other things, the comprehensive study examined harbor pilot rates in Florida and around the country and compared those rates to the earnings of air traffic controllers, ship captains and commercial airline captains.

“A more open and market-driven system would correct this inequity and result in new public revenues for Florida, jobs within related industries, and lower costs for consumers,” added Villamil.

The study found that Florida’s 14 ports were served in 2008 by just 88 pilots, who were paid approximately $50 million in fees by cargo and passenger vessel operators whose ships frequent the state’s ports. Those costs, in turn, are borne by consumers who purchase goods transported through Florida’s ports or vacationers who cruise through state waters. The study found that reducing Florida’s fees to levels comparable to the incomes of air traffic controllers would result in as much as $35 million in direct annual savings. In addition, the WEG study concluded the change in fee structure would result in:

§ 4,096 permanent jobs created in a broad range of industries throughout the state
§ $52 million per year in additional earning for Florida workers
§ $56 million more in state GDP
§ $69 million in increased statewide economic output each year
§ $13 million in new fiscal revenue for federal, state & local governments

“As a result of this monopoly, harbor pilot fees have continued to grow, and ultimately it is Florida consumers who are bearing the burden,” said Michelle Paige, President of the Florida Alliance of Maritime Organizations (FAMO), which commissioned the study. “This study suggests a need for the pilot system to be transformed from a state protected monopoly to a competitive system that is both safe and efficient. The time has come to level the playing field so that a larger pool of qualified maritime professionals has the opportunity to offer their services to help ships safely port in Florida.”

The 2009 WEG study found that harbor pilots in Florida now average $368,717 in compensation, compared to $111,870 for air traffic controllers and $225,000 for commercial airline captains flying international routes. The report also found that harbor pilot rates are paid 60 percent higher than ship captains of U.S.-registered ships and 235 percent higher than non U.S.-registered ship captains. Meanwhile, unlike harbor pilots, ship captains bear full liability for the safety of the ship and its crew. The pay for Florida pilots also greatly exceeds that for other Florida workers in port communities including area firefighters, as the chart below details.

*Source: Bureau of Labor Statistics 2008
**Source: Bureau of Labor Statistics 2007

In Florida, most ships (non U.S. registered cargo and passenger vessels) are required to obtain the services of a state-licensed harbor pilot when entering or leaving any of the 14 seaports. The state’s 88 harbor pilots are regulated by the Department of Business and Professional Regulation (DBPR), established in1974. DBPR, authorized to oversee harbor pilot licensing and fee structure, is governed by two separate state-appointed boards. Instead of being competitively based on supply and demand, the pool of eligible pilot licenses has historically been kept low and not subjected to free market conditions. Licenses are issued by the state Board of Pilot Commissioners, half of whom are harbor pilots. A second panel, the Pilotage Rate Review Board, considers applications from local port pilot association for pay increases.

Meanwhile, in the 35 years since the DBPR regulatory framework was established, progress in navigation, radar and communications technology has changed dramatically allowing ships to be driven and docked with greater safety and precision.

“Pulling in and out of ports safely and without incident is paramount to our ability to do business, which is why we fully appreciate the extra pair of eyes and knowledge that pilots offer,” said Jennifer Nugent-Hill of Tropical Shipping. “As such, our industry has invested heavily in improving shipboard technologies that enhance safety and navigation. Each safety layer is necessary and helpful, but a more reasonable harbor pilot structure that allows for open market competition is both long overdue and healthy for business and consumers.”

According to a 2003 WEG study, Florida’s seaports had a $17.2 billion impact on the state’s gross economic output, with indirect impacts adding another $18.1 billion for a combined economic impact of $25.3 billion.

Last year, legislators allowed for a budget provision that tasked the Office of Program Policy Analysis & Government Accountability (OPPAGA) to review the licensing and compensation for Florida’s harbor pilots, as well as provide legislative solutions should their findings show a need to update current policy. OPPAGA has already begun this process and the final report is scheduled to be released in December of this year.