Simple Math Prevails in Marina Fuel Pricing Decision
by Carl Wagenfohr
CLEARWATER - The debate over the 2008-2012 business plan of the Clearwater Municipal Marina, fueled to a large extent by the conflicting profit motives of the marina and its commercial tenants, finally ended last Thursday as the City Council gave their blessing to a plan that will impose dramatic increases in slip rent and raise fuel prices.
The slip rent for recreational boats will rise to a market rate of $16 per foot per month by 2012, and the cost of the marina's commercial slips will rise 89-percent over the same period. The Council did make one concession to the operators of the marina's three parasail boats, eliminating a premium they have been charged over the standard commercial rate.
Fuel pricing received considerable discussion at the November 15th Council meeting, consuming nearly 30 minutes of the session. The city has been selling diesel fuel to its commercial tenants this year at a 9-cent per gallon loss. City staff had proposed increasing the pump price by 31-cents per gallon and reducing the commercial discount by 3-cents in an effort to return to profitability.
But with fuel cost being one of their major operating expenses, the marina's commercial tenants objected. Eric Spaulding, operator of the Queen Fleet of fishing boats, called the proposed increase "price gouging", and said that he would buy fuel elsewhere rather than pay 28-cents more per gallon of fuel.
In the end, it wasn't a sophisticated competitive pricing strategy that won favor, but simplicity. "I would make a suggestion before we send them [staff] off to do hours and hours of calculations, and that is we simply take the cost, add 20-percent as the pump price, and if they're a commercial operator, they get a 10-percent discount," he said; "It's very simple math." Doran's colleagues agreed, and approved the cost plus 20-percent pricing model.
Based on the marina's current accounting method, the current 9-cent per gallon loss on fuel sales to commercial tenants will be erased, and a profit of nearly 30-cents per gallon will be earned on fuel sold to recreational boaters.
But Doran's simple math does not cover the marina's entire fuel sales overhead. The cost of labor of the marina's fuel dock employees, 3.8 headcount that in 2006 cost the city $163,830, is not considered in the analysis of fuel sales profit/loss according to Harbormaster Bill Morris. Fuel dock labor costs are included only in the overall marina profit/loss statement.
If the marina's fuel sales operation were accounted for as a stand alone business, the price of fuel would have to be raised an additional 16-cents per gallon to recover the direct labor costs, that figure based on a 2006 sales volume of nearly one million gallons.
The marina's pump prices as of November 19 are $3.70 for gasoline and $3.42 for diesel fuel. Those prices will fluctuate frequently due to the volatility in the cost of the marina's fuel supply.
Return to Home Page
Return to Current Edition