How many times have you heard the story of that old car that has been sitting in a barn covered up in the corner for 20 years, only to find out that it is worth $1 million? That is what the discussion of the Newport Harbor slip/mooring/tidelands fee hikes reminds me of.
The harbor has been covered up in the corner in that barn for 20 years and the City Council has just discovered that it is worth more than they have been getting for it. This of course goes the core of why government shouldn’t be in the business of property management and development. Government by its nature is cumbersome and slow to react (on purpose, to protect us).
I would love it if the harbor and its assets could be sold to the highest bidder and we could get the government out of the business altogether. Unfortunately, we can’t get rid of government. The tidelands (basically any land that is wet) are owned by the state of California. The state has delegated its responsibility for stewardship of these public lands to the city of Newport Beach. This is good, as the city is a whole lot more responsive then the state could ever be.
The city has ownership of all the land under the water. All the moorings are owned by the city. They have leased out several of the moorings as a block to certain tenants, as well as individual moorings. The city also owns several properties adjacent to the tidelands such as marinas (private and public), manages and operates pump-out stations, maintains the piers, dredges the harbor and keeps the harbor clean.
The city uses the fee revenues to offset the cost of running the harbor, beaches and tidelands. If the city collects more money than it costs to run the tidelands, all additional money goes to the state. Needless to say, there has never been a surplus – the city says that the costs are about $5 million more than it receives in revenue.
The city finally looked into that old barn and has discovered that they have been under-charging rent for the various facilities. They have been charging rents for moorings so far under the market that they have had a waiting list with people on it for over 20 years. Now that the city is charging “market” rates, in accordance with the study prepared for the council, there isn’t a waiting list.
It has taken the City Council several years to study and implement the “market” rates for their assets. Now, what happens if the city’s lease rate is too high? What happens if the vacancy rate for city moorings gets to be twice that for private moorings? The answer would be to lower the lease rate and have more leases. Would that take the city three years to study, hold hearings, and then implement?
If the harbor were privately owned, do you think that the owners would have let rents at below-market rates for well over a decade? Don’t you think that the owners would have been actively looking over their assets and maximizing returns for stock holders/owners? Absolutely – or they wouldn’t be in business for long.
The city should privatize the harbor.
Put out a master lease of the entire harbor. Have that master lease be based on a percentage of the gross income, so that if the master tenant makes more money, so does the city. This allows the tenant to maximize its income – they can make deals on the fly, by whatever the market will bear.
They can also look at other opportunities to maximize revenues. Imagine if other city assets were brought into the harbor, like Marina Park. If the park were developed in such a way as to cater to water recreation and boating, could you increase revenues? Would Marina Park be more usable? With all the beaches on the Peninsula, do we really need just another park? Make it special! Make it part of the master harbor lease!
Let’s be creative! Put the marketplace to work!
There are companies that specialize in this. Newport should get the car out of the barn and show the country how services should be provided.