40 SALMON GEAR LIMITATION 



averaged $8,210. If owners' shares are deducted as part of 

 actual labor costs — the proper treatment — profits averaged 

 $5,013. 



These figures, however, overstate the actual net return to 

 vessel owners from purse seine operations. Much of the equip- 

 ment employed has been fully depreciated for tax purposes, 

 and many of the hulls are being depreciated on a cost basis 

 which bears no relationship to present construction costs. Thus 

 the average depreciation reported for tax purposes ($3,100) 

 is not representative of current costs. Analysis of these boats 

 indicated an average replacement value for hull, motor, and 

 equipment of about $72,000, while the value of the skiff 

 was estimated at $5,000. This would represent the cost of a 

 new vessel, comparable in size, equipment, and construction 

 to those actually surveyed. Annual depreciation on this basis 

 would amount to approximately $5,000 (assuming a life of 

 15 years and scrap value of $12,000 for the vessel, and a 5- 

 year life for the skiff) rather than the survey figure of $3,100. 

 On an investment of approximately $77,000, a net return of 

 only 3.9 per cent could be expected. 



It is also important to note that the costs reported for 

 income tax purposes do not include payment for various types 

 of repair and maintenance work performed on the boats by 

 owners. Yet it is an established fact that owners do much of 

 this work. Even if no account is taken of the value of these 

 services, the expected rate of return on the investment required 

 for a replacement purse seiner would be somewhat lower than 

 the rate of return that could be earned from a savings and 

 loan account. 



Earnings are also highly unstable. We were able to obtain 

 some operating statements from owners of seiners covering 

 ten years of operation. Net incomes ranged from a high of 

 $17,000 to actual net losses, with an average income of 

 less than $4,000. 



These -figures also indicate that without so-called ''incentive 

 payments," the purse seiners in our sample would have yielded 

 virtually no profits even on the basis of depreciation based on 

 book value. On a replacement cost basis the entire fleet would 



