The city is proposing to increase fees on commercial uses in Newport Harbor nearly 300 percent or more to bring in more revenue for the tidelands projects.
The issue was brought up during Tuesday’s City Council study session.
The current rate is $0.36 per square foot per year for businesses such a private marinas that use public tidelands. The city staff is recommending the rate be raised to a minimum of $1.20 per square foot or 20 percent of gross income, whichever is greater.
The Tidelands Management Committee backs that recommendation, and implementing the increase in stages over the next three years.
Proposed new lease terms would establish leases of five to 30 years, depending on the slip/pier usable life, with one or more renewals available with paymet of an option fee. Every five years there would be adjustments to the base rent and lessees would be required to invest a minimum of 2 percent of gross revenue in capital improvements. The details of each lease would be determined individually.
City Manager Dave Kiff explained that the fair market rates were determined by appraisal methods that included comparable leases in the harbor and similar existing county marinas.
If approved by the City Council, the new rental rates would apply after July 1 of this year.
The changes in the lease agreements have both benefits and detriments, Kiff said. The benefits include the lessee being able to “finance longer term improvements” and have some assurance that they do have a long term use of the tidelands. Currently they are year-to-year and could potentially be moved at any time, Kiff said.
“The feedback that I have heard about detriment, is that any time you get into a percentage of gross [income] discussion, the city is in your business and we’re nosing around and looking at what you’re making,” Kiff said.
Gary Pickett, CFO of Ardell Marina, spoke to the council during public comment, arguing against the proposed changes. The new lease agreement “does not work” for the commercial marina operators, Pickett said, for many reasons.
“It has many flaws,” he said.
Newport Harbor is unique compared to most other Southern California harbors, Pickett said, in that many of the commercial marina operators have purchased land, and built sea walls, parking lots, ramps and other items to run the marinas and the city did not participate in any of these efforts, he said. This makes Newport Harbor different than any of the harbors researched by the city staff in the report, Pickett argued.
“The city’s proposal does not consider this enormous investment that has been made in the development of these marinas over the years,” Pickett said.
Pickett said he and the other commercial operators recognize the issues and want to work with the city, but want to find something more agreeable for both parties.
Pickett said they had ideas to make up the needed funds, but could not go into discussion because of public comment time constraints, but that he would like the city to consider these other options.
Proposed participation, refinancing or sale fees are a “harsh penalty against a harbor partner,” Pickett said.
The dynamic of the harbor would be greatly affected, Pickett said. Local businesses and jobs will be lost, he warned, if these new terms are implemented.
Pickett also argued that the city did not follow a proper process to establish the value of the use of the tidelands, but would be willing to work with the city on this issue.
“We stand ready to assist you to come to an agreeable solution,” Pickett said in closing.
Several other members of the public commented against the proposed changes, urging the council to consider other options to raise funds for the tidelands.
Mayor Pro Tem Keith Curry said that everyone he has talked to about this issue acknowledges that fees need to be raised for the various tidelands projects, but he is sensitive to others’ concerns.
Councilmembers voiced their concerns that not everybody will be pleased and the city has been down this road before with other necessary fee increases.
Curry said he does realize that the changes were sprung on those affected and they haven’t had much time to take it all in and consider other options.
Curry suggested the council take some time and allow the harbor community to come forward with realistic ideas that might make it work for everybody.
Councilwoman Leslie Daigle also agreed that they need more time, to get input from the community and tidelands user groups as well as consider the value of the uplands.
The family owners who have made improvements are “who has really built our harbor and given it it’s value,” and the city needs to work together with them, Daigle said.