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Call it a bill of sale for this high-end market

Owner of Viking Yachts feels new law has resulted in more tax revenue, jobs

New Gretna-based Viking Yachts has plans to hire more than 100 new employees.-(PHOTO BY AARON HOUSTON)

If you were looking for an example of the rich getting richer through tax incentives in New Jersey, the controversial bill signed by Gov. Chris Christie at the end of 2015 appears to be the perfect one:

People who bought yachts were given a massive tax break on their purchase.

But, less than a year later, there appear to be two results: The bill is growing business in the industry — and creating jobs in the state.

Pat Healey, CEO and president of New Gretna-based Viking Yachts, said the bill has had an immediate impact on the company.

Biz in brief
Company: Viking Yachts
Headquarters: New Gretna
Founded: 1964
Employees: 1,100
One last thing: The company also takes total control of the servicing of its product, with two facilities in Florida and one in New Jersey specifically for these issues.

So much so that Healey said the company — which manufactures all of its boats in the state — hopes to add more than 100 jobs to a workforce that already totals 1,100.

Healey said that plan can be attributed, in part, to the bill, which not only lowered the tax rate on yachts from 7 percent to 3.5 percent, it capped the total amount that could be paid at $20,000. It also limits the tax on yacht repairs.

Taking care of employees
Viking Yachts CEO and President Pat Healey said that, because the work his employees do is so specialized, retention is a major focal point of the business. As part of the care for the employees, workers are given competitive benefits and pay, and there are profit-sharing incentives for every employee at the company.
There’s even a full-time health care facility, where employees can get issues looked at and even pick up prescriptions.
“We have medical staff that’s here full time to take care of our employees,” he said. “We just opened a gym next door that’s 4,500 square feet with trainers for people before or after work; we’re doing our own rehab or physical therapies on anybody with injuries.
“We’re trying to take care of them from A to Z.”

The result: More repair work is coming to New Jersey.

“People who decided to buy their boat in Florida, or some other state with a more favorable tax rate than what New Jersey had, would often avoid bringing their boat back to New Jersey and simply use it elsewhere,” Healey said. “This affected our service yard because the work would be done out of state, which in turn relates to how many people we can hire and provide new jobs.”

Under the previous tax code, Healey said most of its demand for repairs was coming from its Florida facilities.

And while it may be too early to quantify how many more boats are being sold in New Jersey — such purchases, industry officials said, do not happen on a whim — an increase already is evident.

Lou Piergross, sales manager at South Jersey Yacht Sales in Cape May, said the traditional tax code wasn’t keeping people from buying a yacht, only from buying a yacht in New Jersey.

“It’s my opinion that people who can afford these boats are going to buy them anyway,” Piergross said. “The guys who bought these boats, they still bought them, but they just didn’t buy them in the state of New Jersey.”

Piergross said he’s seen a noticeable increase in business this year.

“We’ve had a lot more people that would’ve typically just bypassed us and went somewhere else,” he said. “They’re New Jersey residents that would’ve bought (outside of) New Jersey and now they are coming and buying here.”

Which is great news for Viking.

With most of its business coming from the manufacturing of its yachts, Healey said the company has continued to grow over the last 52 years.

“We’re, little by little, taking up the market share,” he said. “We have, right now, probably about 60 to 70 percent of the market share for this type of boat, and we’re whittling away and gaining more of it as this economy gets bigger.

“What we are is the No. 1 boat builder in the world for what we build. It’s a very select market with a lot of high-powered people.”

To ensure the highest level of quality for its products, Healey said the company has developed a production line on which it manufactures nearly every detail that gets put into its boats, which can sell for anywhere between $1 million to $10 million each.

“We have found that, if we don’t design it, engineer it, develop it and build it, it will not meet our specifications on a year-over-year basis,” he said. “You can go out and have vendors do things, but eventually they get too stretched out and the quality goes down.

“That’s why we build 90 percent of the product in-house, to control that quality.”

And when the boat is sold in state, Healey says a lot of people benefit.

“The boat not being in New Jersey also meant our local marinas would miss the income from dockage fees, fuel, supplies and other services,” he said. “Tackle shops would lose out on the sale of rods, reels and other fishing equipment, as would marine stores.

“Boats help create jobs in the building, the service and the enjoyment of them, so the lower boat tax is a win for a lot of people who work within the industry.”

E-mail to: andrews@njbiz.com
On Twitter: @sheldonandrewj

Andrew Sheldon
Array

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