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									                    CALIFORNIA BUSINESS MINUTE
                        -About the Businesses and Economy of California-
                                 California’s Salmon Season

                           An Economic and Business Review
        of the ‘Unknown’ Impacts to the Industry and Communities in the State

Along a 1,000 mile stretch of the Pacific Coast including all of California and nearly all of the
Oregon Coast, fishing towns and fishermen are dealing with the total closure of this year’s
coastal and river (pending) salmon season.

The reason for the closure is a sweeping decline in salmon runs along the Pacific Coast from
California to Washington but specifically in California which has seen significant declines.
Regulators are extremely troubled by the collapse in the state's most productive stock -- the
Sacramento River's fall run, which historically accounted for 80 to 90 percent of the salmon
caught off the state's coast.

The Sacramento River and its tributaries saw the
number of spawning fish drop from more than
800,000 just six years ago to slightly more than
68,000 last year. Experts are predicting that a little
more than 50,000 fish will be in the river this autumn.
The Sacramento fall spawning season was the last
great salmon run along the giant Central Valley river
system, including the Sacramento, American, Feather,
Yuba and San Joaquin rivers and nobody knows exactly           Chinook Salmon, photo courtesy; USFW
what has caused the decline of the salmon.

The National Marine Fisheries Service has pointed to a sudden lack of nutrient-rich deep ocean
upwellings caused by ocean temperature changes as a possible cause. Researchers say a
natural fluctuation in ocean conditions is driving salmon populations down, but other scientists
and regulators say the shift in ocean temperatures and currents does not sufficiently explain the
severe and unprecedented collapse. Some biologists say it is a combination of factors, including
agricultural pollution, water diversions from the delta and damaged habitat. The Pacific Fishery
Management Council has drawn up a list of about 50 potential explanations to be studied. Among
the potential contributing causes: water diversion from the Delta, pollution, sea lions and other
predators and problems with hatchery production.

So on April 11, the Pacific Fishery Management Council, a federal agency set up to manage the
Pacific Coast fishery voted to cancel this year's commercial and recreational salmon fishing
season extending 3 miles from the shoreline to 300 miles off the coast of California and most of
Oregon. The state Fish and Game took action to close all waters for fishing from the shoreline to
the 3 mile mark, and only an emergency ruling by U.S. Commerce Secretary Carlos Gutierrez
could change the requirement, and that, according to fisheries experts, is unlikely. The Council's
advisory recommendation will be forwarded to the National Marine Fisheries Service for approval
by May 1.

  CLOSED, California Salmon Season, a Economic and Business Review of the Unknown                     1
                         Impacts, by Tim Johnson, April 2008
The Council approved the measure in the hopes that it would help reverse the disappearance of
salmon from Californian waters.

But this is not the first time that the state’s fishing industry has been confronted by such an
impact, specifically for salmon. In 2006, commercial fishing operators in the state were impacted
by restrictions due to concerns related to Klamath River runs. A federal fisheries disaster was
declared. Apparently, this event would be a unique and solely one time impact, so there was
what could best be described as ‘heuristic’ or rule of thumb analysis by officials at that time to
understand the economic impacts. The commercial industry received $60 million in federal
assistance. No one did a full economic analysis. At best what was identified could have been
written on the back of a napkin. You would think that since then, officials would have been armed
with such information, specifically since a public policy decision of this magnitude would dictate
the need to know this information. And more importantly the need to possess this information to
be used in the formulation of and the subsequent implementation of a successful public policy
roadmap for the decision makers.

However, it is apparent that neither federal nor state officials have a good handle on the total
economic impacts from the salmon fishing industry on the Pacific Coast, let alone California as
it pertains to the closure and what it will mean to the state.

For example, the best information available about fishing in California comes from an economic
review of reports completed by the non-profit organization Caltrout. The Review examines the
reports completed by the U.S. Fish and Wildlife Service. The reports, The National Survey of
Fishing, Hunting and Wildlife Associated Recreation (conducted every five years by the U.S. Fish
and Wildlife Service) showed that in 2006, 1.7 million people that fished in California spent over
$2 billion and that over three-fourths of these were freshwater anglers. The last economic input-
output analysis completed to fully understand the economic implications was completed in an
earlier study by US Fish and Wildlife Service in 2001. The study identified that recreational
fishing activity generates $2.4 billion in retail sales with an economic impact of $4.9 billion. It also
generates $1.3 billion in wages and salaries and supports 43,000 jobs in the state.

Different journalists in their efforts to acquire such information as it pertains to the current closure
have identified a variety of economic impacts. The California Fish and Game Commission issued
one estimate that the loss of recreational ocean salmon fishing would result in a $167 million loss
to the state economy, equivalent to the loss of about 1,400 jobs. This analysis is based upon a
normal season, of which ocean salmon anglers contribute about $110,400,000 in direct revenues
to the State’s business sector. This comes from the 2007 US Fish and Wildlife report. Adding the
indirect and induced effects of this initial revenue contribution and the total benefit to California’s
economy is about $167,000,000. This is equivalent to about $63,000,000 in total wage earnings
to Californians, or about 1,400 jobs in the state.

However, news articles have State Fish and Game estimating the impact from the closure as
large as a $255 million with a corresponding loss of 2,263 jobs.

It is clear that there is no consistency regarding the economic impacts of commercial salmon
fishing industry in the state. And it is clear that if the number of vessels in the state’s commercial
fleet is 565 and if each vessel is valued at $150,000 the total economic impact has been
underestimated. And in addition, few if any numbers are available on corresponding tax
revenues that will be lost through sales, gas and hotel/motel taxes related to the secondary and
tertiary impacts created by this closure. Communities such as Bodega Bay, Ft. Bragg and even
San Francisco Bay communities should be receiving federal assistance in the way of technical
assistance in the form of grants from the US Department of Commerce’s Economic Development
Administration under the guise of ‘Sudden and Severe’ economic conditions.

  CLOSED, California Salmon Season, a Economic and Business Review of the Unknown                      2
                         Impacts, by Tim Johnson, April 2008
In response to the closure, Governor Arnold Schwarzenegger quickly declared a ‘State of
Emergency” in California as a result of the unprecedented closure of coastal salmon fishing by
the Pacific Fishery Management Council. The declaration directs the state’s Department of
Finance to make $2.7 million available to refund commercial salmon fishing permits for the 2008
season and directs the state labor agency to make all appropriate state grants available to help
workers displaced by the closure. He also directed the state Department of Fish and Game to
recommend additional steps to help the fishing industry and to protect fishery resources and to
seek the maximum possible financial and administrative assistance from the federal government.

In addition the Governor sent a letter to President Bush asking for his help in obtaining federal
disaster assistance.

The Governor also signed SB 562, a bill by Sen. Pat Wiggins, D-Santa Rosa, which appropriates
$5.3 million from Proposition 84 for coastal salmon and steelhead restoration projects by the
Department of Fish and Game. The money is expected to draw an additional $20 million in
federal matching funds for these projects.

The Industry
In the news article, Fishermen Brace for Salmon Season Cancellation, April 10, 2008, by Mike
Taugher for the Oakland Tribune presented the hardships for those in the industry.

                                               Randy Thornton, a charter boat owner and captain
                                               in Fort Bragg, is trying to replace his lost recreational
                                               salmon business with tours that combine crabbing
                                               and abalone diving – “abs and crabs,” he calls it.
                                               “I’ve goat a boat with no much to do,” Thornton said.
                                               "If they don't give me financial assistance, it will put
                                               me out of business, no question."

                                               "It's going to be a major hit to the town," said Jim
                                               Caito, co- owner of Caito Fisheries Inc., one of the
                                               state's largest fish processors.
Fort Bragg Harbor, photo by Bob Wall

Salmon make up 35 percent to 40 percent of his company's revenues, and Caito said there is no
other fishery that can be tapped to make up for the loss.

For consumers, Caito predicted higher prices for wild salmon, which will come mostly from
Alaska, and that wild salmon will become difficult to find this year. Last year, commercial salmon
boats brought 1.5 million pounds of salmon to California ports, and Fort Bragg was second only to
San Francisco in the amount of salmon hauled in to ports in California and Oregon.

Sit and wait, or try to find other opportunities. While many of California’s commercial fishing
operator practice entrepreneurship by trying to diversify their catch or find other corresponding
uses for their vessels, many recognize the dire issues that lay before them . . . the ultimate reality
that if the restoration does not occur, their livelihood is over and a dramatic impact to the Golden
State’s coastal fishing communities begins.

   CLOSED, California Salmon Season, a Economic and Business Review of the Unknown                    3
                          Impacts, by Tim Johnson, April 2008

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