TAX CONFERENCE

The recently enacted "American Jobs Creation Act" gives significant tax breaks to a number of U.S. industries--including shipping.

MARINE LOG and BLANK ROME will present a senior level seminar CHANGES IN U.S. TAXATION OF SHIPPING INCOME in Stamford, Conn. on April 5 & 6, 2004

Make sure you know how the new tax rules work!

February 9, 2005

Budget slashes Navy shipbuilding

Confirming plans that had been widely leaked, the Bush Administration FY2006 budget slashes $1.7 billion from Navy shipbuilding.

"I'd have to say it's the worst budget we have seen in the last 10 years," Cynthia Brown, president of the American Shipbuilding Association, is quoted as saying by one Virginia newspaper.

The budget request includes $9.4 billion for Navy shipbuilding--and also provides for the Navy's aircraft carrier strength to go from 12 ships to 11. That has all sorts of implications, depending on which carrier is selected for elimination. Prime candidates would appear to be the Mayport, Fla.-based USS John F. Kennedy and Japan-based USS Kitty Hawk. These are the only remaining conventionally powered carriers.

Kitty Hawk is already slated for decommissioning in 2008, when the next nuclear-powered carrier--the George H.W. Bush--enters service. That leaves the Kennedy as the most likely option. However, that ship is homeported in the state where the President's brother is governor. Some Navy sources have reportedly been saying "some of our oldest carriers are not in the worst material condition," which could be a convenient reason not to pick the Kennedy. This one is going to be fiercely battled out in Washington.

Meantine, the FY 2006 budget funds procurement of four ships (two less than previously projected): a Virginia Class Submarine, an LPD-17 San Antonio Class amphibious transport dock ship, a Littoral Combat Ship, and a T-AKE dry cargo and ammunition ship.

Procurement of the first DD(X) is pushed out to 2007. And procrement of Virginia Class submarines goes down to one a year over the next six years.

New generation ships with FY 2006 funding include:

CVN-21. $565 million to continue advance procurement. This ship class features an innovative electrical generation and distribution system, larger flight deck, and a smaller crew (by at least 500) than the aircraft carriers it will replace. Construction will start in FY 2008.

DD(X). $716 million for advance procurement. The budget also includes research and development funding of $1.1 billion for continued development of this multi- mission surface combatant. The ship will provide precision and high--volume fires, at sea and in support of forces ashore. The lead ship will be funded in FY 2007, and another four funded through FY 2011.

Littoral Combat Ship. $613 million, including $249 million in research and development funds for ship construction. This new ship will be a fast, agile, stealthy, relatively small and affordable surface combatant capable of operating in shallow water close to shore. Navy plans include 21 ships for FY 2006-2011.

Virginia Class Submarine. $2.4 billion to continue procurement. This new attack submarine has state-of-the-art stealth and enhanced features to support Special Operations Forces and diverse missions in coastal areas. Procurement will be one ship per year through FY 2011.

Something to keep an eye on in Pentagon budgeting is research. Interestingly, Navy research funding for "Advanced Submarine System Development" goes from $85.7 million in FY 2004 to $88.2 million in FY 2005 and $162.9 million in FY 2006.

In the works at the Advanced Technology Office of the Defense Advanced Research Project Agency is a program called Tango Bravo. Essentially, it's aimed at coming up with a design for a nuclear sub that has pretty much the same capabilities as the Virginia class, but tht would be a lot smaller, cost a lot less and make use of such innovative technology as shaftless drive and housing a torpedo delivery system outside of the pressure hull.

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