This is the second time in the past two years that the Navy has paid a company for scrapping rights for a penny. The former aircraft carrier USS Forrestal’s scrapping rights were obtained by All Star Metals of Brownsville in a contract signed in October, 2013 for a penny as well. That ship was towed to Texas earlier this year to begin the scrapping process.
While ESCO Marine will have possession of it, the Navy will actually continue to be the owner of the carrier as it’s being dismantled. While ESCO Marine won’t own the carrier itself, it will take immediate ownership of all the scrap metal produced during the dismantling process. The scrap will then be sold to offset the costs of scrapping the carrier, and any remaining money will be profit for the company.
It didn’t have to be this way. The Saratoga could have remained alive if a nonprofit or state had stepped up to claim the carrier. It had been available for the past 12 years to any state or nonprofit organization that wanted it to use as either a museum or memorial for public display. During that time there were no viable offers made to use the carrier in one of these ways, so the Navy decided to scrap the ship.
The Navy decommissioned the Saratoga in 1994, and it’s currently docked at the Naval Station Newport in Rhode Island. ESCO Marine is expected to tow the carrier to Texas where the scrapping will take place.
All is not lost if you wanted to get in on a deal like this. According to the Navy, the former aircraft carrier USS Constellation is expected to be available for a similar fate in the near future. Again, the navy is expected to pay to have someone scrap the ship.
From a personal finance perspective, the contract can be a good thing or a bad thing depending on the way that you look at it. At first glance, paying someone to scrap a ship that obviously has value would seem to make any taxpayer red with rage. The hundreds of millions it took to build the ship came from the taxpayers, and the carrier obviously has scrap value worth more than the cost of scrapping it. Why didn’t the Navy try to get money for the scrapping rights rather than pay the company to do it since it has value?
On the other hand, it costs the taxpayers a lot of money each month to have the carrier just sitting there unused. The Navy estimates that it costs $100,000 a year to maintain and keep each ship secure. And in many cases, it costs the government millions to scrap ships. They probably figured it would end up costing the taxpayers even more money if they had tried to get a better price.
What are your thoughts? Should the Navy be giving scrap rights to businesses or should they be trying to make some money when they give these rights? Is there a better way they could do this to ensure the taxpayers get the highest value from the ships that they paid for?