I live in Wilmette, the village just north of Evanston. It is a pleasant place if a little sleepy. However, we currently have a controversy brewing over Wilmette Harbor. The harbor is where the North Shore Sanitary Channel enters Lake Michigan. To quote Wikipedia, “The North Shore Channel is a drainage canal built between 1907 and 1910 to flush the sewage-filled North Branch of the Chicago River down the Chicago Sanitary and Ship Canal.” Of course, that quote doesn’t quite do justice to the harbor. Where the channel meets the lake, there is a lock that keeps the nasty stuff out. Wilmette Harbor is actually a picturesque place with a Coast Guard station and space for 300 or so boats.
The kerfuffle is all about who will run the harbor. It is owned by the Metropolitan Water Reclamation District (MWRD), a regional government entity tasked with maintaining water quality, not accommodating boaters. Hence, they have outsourced the management of the harbor. For the last 75 years, the Wilmette Harbor Association has had the gig. The Wilmette Harbor Association’s lease has expired and they and other parties have bid to run the harbor, notably Wilmette Harbor Management. Following a murky process, the staff of the MWRD recommend the Wilmette Harbor Association’s bid be accepted even though it was lower than Wilmette Harbor Management’s. The MWRD’s commissioners voted against granting Wilmette Harbor Association the lease and now it is uncertain whether the harbor will be open this summer. For Chicago Tribune articles on this soap opera, see here and here.
I don’t own a boat so don’t have a whole lot at stake in this fight. However, there is an interesting operations question at the heart of the conflict. The Wilmette Harbor Association and Wilmette Harbor Management have very different ideas about how manage the queue for slips at the harbor.
Here’s how the Wilmette Harbor Association has been running the show (Is Wilmette Harbor wait list the best plan?, Chicago Tribune, Apr 3).
“I think it’s very important for everyone to get a fair shake,” said Sabine Herber, executive director of the Wilmette Harbor Association. …
It’s the most equitable system, Herber said. Even if you don’t have a boat, you can walk in the door and put your name on the wait list, she said. It cost $25 a year to be on the list. And depending on the kind of boat, your wait may be one year or 18.
Currently, there are about 165 people on the wait list, Herber said. …
The Wilmette Harbor is small, she said, and the recommended course for new boaters is to start small. The size of boat for the wait list is capped at 22 feet, she said, but after permit holders are in the harbor for three years, they can put their names on the change of mooring list for larger slips.
There are currently 106 people on the change of mooring list, Herber said.
And here’s how Wilmette Harbor Management would tackle the problem.
“Demand will always outstrip supply when you grant perpetual licenses,” said Fritz Duda, a director of Wilmette Harbor Management, one of two groups to outbid the Wilmette Harbor Association. …
In contrast to the current wait list model, under Wilmette Harbor Management’s plan, the 300 or slip holders at the harbor would have to join a public online bidding process for slips.
There would be some “premium” 10-year slips available for additional cost, as well as 5-year and annual slips, Duda said. Without a long-term capital plan, it’s not yet possible to know how many slips of each type would be allocated, he said. The harbor would also have boat clubs to open more access, he said.
OK, at this point, I should acknowledge that Wilmette might as well be a French term for “Land of First-World Problems.” Owning a boat on Lake Michigan is a luxury and the tribulations of how to allocate boat parking may not be of universal concern but it does raise some interesting question of managing scarce resources. It effectively comes down to whether you think it is better for people to spend time or to spend money. Wilmette Harbor Association prefers to have everyone wait it out while Wilmette Harbor Management is in the second camp, happy to blow up the wait list in favor of having people open their wallet.
Wilmette Harbor Management’s approach is very much in line with typical economist recommendations. Putting slips up for bidding will assure that they go to the boat owners that value the slip the most. Now I can see two counter arguments against auctioning off slips. One is actually made by the Wilmette Harbor Association director in the article:
As for Harbor Management’s lottery system, Herber maintained it would favor the wealthy and leave many boat owners high and dry.
Yes, it is true that if a resource is in high demand, the price will rise and the less affluent will be squeezed out. That is particularly concerning if we are talking about what is largely a public resource. For example, if you view national parks as part of the America’s patrimony, it’s hard to argue against keeping admission prices low so they can be enjoyed by a wide swath of the population. Along those line, the Park Service has tried to keep scalpers from monopolizing popular camp sites or hiking permit. That argument doesn’t seem to hold much water here. As I noted, boating is a luxury and I am not sure that having a perpetual slip at Wilmette Harbor is in the same realm as seeing the Grand Canyon once in your life.
A second argument against a bidding scheme is that it creates uncertainty for owners. Boats last a long time, and how much a boater values owning one will depend on the convenience of using it not just over one summer but over several. Not knowing whether one can have a slip from one year to the next may keep some from the harbor. Having some slips that are leased for multiple years addresses that. Furthermore, if the transaction prices are available over time, it should be possible to estimate how much boaters value the certainty of long-term leases.
It should also be acknowledged that the existing process that the Wilmette Harbor Association has the potential to distort decisions. By letting slip holders use the harbor essentially for perpetuity creates problems. Keeping your boat Wilmette this year gives you the option of being at the harbor next year. If giving up your slip means going to the back of the line if you change your mind, then boaters have an incentive to hold onto a slip for longer than they otherwise would. Bidding out slips every year offers the possibility of moving in and out of the harbor depending on how much one expects to be able to sail in a summer.