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Home My WebLink About01 - Minutes - 09-12-2012Agenda Report #1 October 9, 2012 City Council Minutes City Council Special Meeting September 12, 2012 — 7:00 p.m. I. ROLL CALL - 6:30 p.m. Present: Council Member Hill, Council Member Rosansky, Mayor. Gardner, Council Member Selich , Council Member Henn Excused: Mayor Pro Tem Curry, Council Member Daigle Mayor Pro Tern Curry arrived at 6:48 p.m. and Council Member Daigle arrived at 6:35 p.m s II. PUBLIC COMMENTS REGARDING CLOSED SESSION'- None III. CLOSED SESSION - 6:30 p.m in the Council Chambers Conference Room C. CONFERENCE WITH REAL PROPERTY NEGOTIATORS (Government Code § 54956.8): 1 matter Property: Bayside Marina, 1137,Baysi-le Drive, Corona del Mar, CA 92625 Agency negotiator:,, ` Dave Kif£ Negotiating barties::� The Irvine Company Under negotiation: Instruction to negotiator will concern price and terms of payment IV. RECESS V. RECONVENED AT 7:00 P.M. FOR REGULAR MEETING VI. ROLL -CALL , Present: Council Member Hi11 Council Member Rosansky, Mayor Pro Tern Curry, Mayor Gardner, Council Member Selich, Council Member Henn, Council Member Daigle VII. CLOSED SESSION REPORT - City Attorney Harp announced that there are no reportable actions. VIII. PLEDGE OF ALLEGIANCE - Council Member Rosansky IX. NOTICE TO THE PUBLIC X. PUBLIC COMMENTS - None XI. CURRENT BUSINESS Volume 60 - Page 583 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 1. RENTAL RATES FOR COMMERCIAL MARINAS OVER CITY - MANAGED TIDELANDS. [100 -20121 Mayor Gardner emphasized that the item does not address residential piers, fuel docks or restaurants with tidelands, but is strictly about commercial marinas. Following a poll of those in the audience who wanted to provide comment on the item, it was the consensus of Council to allow each speaker three minutes to provide public comment. Council Member Henn explained the process that the Committee on Harbor Charges went through and noted that a representative of the "farina owners will have an opportunity to address Council for 15 minutes. City Manager Kiff provided a PowerPoint presentation which addressed the purpose of the meeting, the City's obligation to charge fair market value `for, the use of the tidelands, and the background and role - of the'Gommittee and ac'ti'ons taken. He discussed existing commercial uses in the Harbor, the Committee's process in handling commercial marinas, the Newport Beach Municipal Code (NBMC) and City Council policies, and the City Attorney's input on the issue. He presented steps taken so far and addressed revisions to the original lease proposal and appraisal results. In response to Council Member Daigle's questions, City'Manager Kiff stated that the base rate is not intended in the appraisals; fo` mirror percentage rent and that the leases should be structured to equal the higher rate. -He presented comparable rents, addressed the two separate classes of sates, and the Committee's recommendations relative to rent amounts based on changing from permits to leases and the terms of the leases. He also, detailed the Committee recommendations relative to rent for commercial marinas and other proposals submitted by stakeholders. Ted Robinson reported that he and his wife own 50% of Larson's Marina and addressed his;investments in�tl e property, including saving the shipyard. He spoke in opposition to' °the increase, noting, that the State has directed the City to provide appropriate and fair—management of the tidelands. Council':Nlember Henn clarified that the charges are related strictly to the footprint within the.inarina covered by the docks and will not affect the shipyard business. Council Member Rosansky added that it relates to marinas that are leasing slips. Council Member Daigle believed that the previous speaker may be referring to a pass - through cost. Matt Clabaugh reported that he has developed large, municipal golf courses throughout the State and addressed similarities between golf courses and commercial marinas. He expressed the opinion that there is no appraisal that could adequately state what marinas are worth. Glenn Highland, Rear Commodore at the Balboa Bay Yacht Club, noted that the Club has been in the Harbor since 1922 and operates a very large marina. He addressed Volume 60 - Page 584 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 membership and noted significant increases in marina vacancies due to the recession and increases in mooring fees. He listed steps taken by the Club to maintain their facilities. He expressed concerns with the economic consequences that may occur due to the proposed fee increases. Peter Swift reported that he fixes docks and has two projects that are currently on hold. He believed that one of the unintended consequences of the proposed increase will be that the marinas will not be worked on or maintained. Seymour Beek believed that Council has flexibility in determining fair market value and must consider the appraisals, but expressed the opinion that it is focusing on the high end of the appraisal which he thinks is too `much. He stated that the consequences have not been completely explored andIthat Cou_ ncil should not follow the numbers recommended in the staff report. Jim Walker, President of the Newport Beach Resident Association; expressed concern with the economic impact the increased -'fees may'have on the City. He> discussed the importance of the Harbor to the City ^and•- believed that the proposed increase is dramatic. He suggested spreading the cost with all the residents or creating a temporary sales tax so that everyone within Newport Harbor would share the costs. i - Gary Hill reported that he owns a,marine fuel dock ern the Harbor. He discussed the decrease in the number of fuel docks and'-believed` "that the extra cost will add hardships to the marinas. He stated that the, tidelands, are not a "gift" and that he pays a substantial amount of rent forpbemg on the water. He addressed Coastal Land Use policies regard ig "the goal of supporting marine businesses and believed that the proposed fee increases do not meet the 'g' al. Council Member Rosansky,.noted that the subject discussion does not include fuel docks. Jet Rudder expressed concerns with the proposed increases and wondered if the City id intends to put marine operators .out of business. John- allely reported that he owns a couple of commercial marinas, addressed the appraisals regarding submerged tidelands leased for short -term uses, referenced a recent acknowledgement by Duffy Duffield about his work as a Harbor Commissioners in the development of.the Harbor Area Management Plan and his comments that none of the Harbor Commission recommendations have been enacted by Council or the City Manager, and that-many small businesses along the waterfront will consequently fail. He wondered if that is the legacy desired by Council. Robert Lounsbury referenced a separate appraisal by George Jones, submitted previously to the City. He addressed the economic benefits to the City by waterfront businesses and believed that the proposed increases will kill a new marina project. He addressed joinder comparables and believed that they are not valid and the City should allow business owners to make their own business decisions. Bryan Williams noted an increase in dock vacancies and spoke in opposition to the Volume 60 - Page 585 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 proposed increases. William Dutton commented on his work as a commercial real estate agent and the affects of raising fees and discouraging businesses to succeed. He spoke in opposition to the proposed increases. Duffy Duffield reported the he rents a lot of slips and spoke in opposition to the proposed fee increases. He stressed the importance of encouraging and promoting businesses along the waterfront, and believed that the proposed increases will have the opposite effect. He stated that the fees must be econom_ ically feasible in order to sustain businesses. Dave New stated that he hopes that Council and,rstaff wbuld negotiate leases and expressed concern with increased vacancies becaiise of increased costs. Jack Hochadel, Balboa Boat Rentals, spoke iii opposition to the proposed fee increases and believed that the increases will be passed onAo smaller businesses:, He expressed concern with increased vacancies due to'the. new fees and believed that the increase is unreasonable. STET hoped that Council will consider the issue "eai;efully. Jim Parker, Marina Properties, spike in opposition to the proposed increases, as well as the process. He believed that the';concerns.66n ina owners seem be falling on deaf ears. Brad Avery believed that the City's intentions are good and that it was unfortunate that previous Councils slid not address,the matter. He expressed the opinion that current rates are at.ma&et value and suggested that Council consider spreading the increase through a longer phasing1peripd, Gary'Pickett addressed the'City's process and believed that no business owner could sustain with the proposed fee.increases. He addressed the Coastal Land Use Plan relative to supporting', marine ,.use and commented on Mr. Rasmussen's appraisal, noting that it does not.'indicate "the greater of'. He believed that the appraisals are flawed relative to the bccupancy rate and land value used, and referenced comments from George Jones regarding the appraisals and the process. He addressed previous proposals to'the Citywhich have been dismissed despite a commitment to pay higher tidelands fees. He-noted an increase in vacancies and believed that stakeholders are stuck in a monopoly by the City. Gary McKitterick distributed copies of his written comments and thanked Council for considering the matter. He agreed with the conclusion that the fair market rent for the tidelands should be charged, but believed that there is no competitive open market in Newport Harbor with respect to tidelands since there is a single landlord with a single tenant which could be considered a bilateral monopoly. He believed that tenants cannot make decisions because of a lack of information, the water parcel is restricted, and it impacts, the appraisal analysis. He referenced a letter that he submitted earlier regarding the appraisals. He added that marina owners are being Volume 60 - Page 586 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 compelled to pay excessive rates and encouraged the use of a valuation and validation methodology in assessing the appraisals and parcel values. He stated that there is no fair market determination and that a compelled transaction cannot be used as a comparable. Council Member Selich stated the Committee's charge and steps that were taken regarding the matter. He reported that in the Committee's analysis, going to -a percentage -rent basis was the fairest way to deal with all of the users in the Harbor because it would automatically adjust with changes in economic conditions. He addressed the need to develop a phased -in program in order,to obtain a market value. He noted that the appraisal information, along with additi6h' al research, indicate that most marinas in other jurisdiction use 25% of gross revenue where the water and land are jointly leased, and addressed the rate of 20% charged, by the County to existing marinas. He addressed primary upland support.relative to par- - king requirements. He noted that many Harbor uses have no upland','sup port and 'has7e no parking which burdens City streets. He addressed the spread of existing leases, in harbors with comparable rents, noting that 20% falls, in the, middle. He pointed",out that when considering all of the issues, the rates seem to be fair and pointed out'that 20% does not mean 20% of the total revenue but rather. is only 20% of the tidelands portion of the revenue. Council Member Selich took issue;- with.the opinion'that the Committee has taken a "take- it -or- leave -it" attitude and that o'ther. - proposafs,, ere rejected. He emphasized that the Committee has continuall'g tried to;%uork witbi,all the stakeholders on this matter to come up with a compromise: Council Member Henn noted that many of the Harbor marina operators are opposed to disclosing revenue, so the, I Committee developed an index approach in order to reach a compromise. He explained the methodology used in developing the index, including the application of antiappropriate vacancy` factor. He believed that this is a reasonable way to reaeh,a.fair niar,'ket value per-,square foot charge. He acknowledged that this method needs to be'impleii ented slowly and carefully to give people a chance to adjust their business models'over alonger period of time. Council, Member HennG' presented details of a separate phasing plan as an additional atteml)t.to reach a compromise. He explained that the index would be recalculated each yea , n order toy bring the marinas to an appropriate fair market rate. He r believed that it. would /be appropriate to return at the next Council meeting to review the lease template, further consider the index approach, and allow another opportunity for public input and'more discussion by Council. Discussion followed regarding the process and actions required at this time. Mayor Pro Tern Curry commended the Committee for their work and efforts on this matter.and commented on the willingness to compromise. He addressed the fairness and impact on businesses in the Harbor and stated that the proposed 20% of revenue charge has not been fully vetted. He commented positively on the index concept, agreed with the need for phasing, and indicated the he would be supportive of an Volume 60 - Page 587 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 alternative plan. Motion by Mayor Pro Tem Curry, seconded by Council Member Daigle to approve the stakeholders' alternative recommendation that scales from $.75 per square foot in 2013 to $2.00 in 2018, and includes lease options. Substitute motion by Council Member Rosansky, seconded by Council Member Selich to approve the Committee's recommendation whether it involves 20% of gross revenue or of the calculated index. Council Member Hill expressed support for calculations made on a square- footage basis. He noted that phasing is one of the most important aspects to this and that it would involve a change in doing business for many. He- suggested that.the rate remain at $.36 for 2013 and 2014, and subsequently move forward with the recommended adjustments which will then reach the 20 % -of- revenue fair market value in the year 2020. He indicated that this would allow businesses two yearstito recover from the current economy and six years to reach the,fair market value. Member Selich to focus on the 20% of the.'calculated index for the total number of marina's in the Harbor, to wait one year beforethe phasing period begins, and extend the phasing period to the year 2020, In response to Council Member Daigle'"sinquiry regarding use of an index by other marinas, City Manager Mff explained the methodology, -but stated that fair market value has not been reached. Maybr Gardner `indicated that she does not support waiting one year to--begin the increase, 'but believed that extending the phasing timeline would be5`more;'valuable. Slier ndicated support for the original substitute motion and allowing an extension of therphasing timeline. Gary Pickett stated that it-is -difficult to compete with The Irvine Company and believed that marinas would be willing`tovo }ianteei their revenue numbers. He added that 20% is still,-unacceptable when- others use'17% and 9.5 %. He indicated that he would like time�to consider th'e various.' proposals presented. Council Member Henn reiterated that 20% is the right number and stated that he would,prefer to have actual revenue numbers to calculate the index. Council Member Rosansky emphasized that the revenues would be needed for multiple years in order to calculate the index. Mayor Gardner`'stated that she will not support the amended substitute motion since she does agree with either the stated 20% or the extension of one year to implement the increases. Mayor Pro Tem Curry indicated that he will not support the amended substitute motion. Council Member Daigle stated the she will not support the substitute motion since it supports the 20% rate. Council Member Rosansky believed that there has been no incentive to upgrade the Volume 60 - Page 588 City of Newport Beach City Council Special Meeting Minutes September 12, 2012 marinas since they were paying the lower rate. Council Member Henn acknowledged that the increase is high, but indicated that the proposed phasing period is extremely generous in order to allow businesses to make the adjustments. The amended substitute motion carried by the following roll call vote: Ayes: Council Member Hill, Council Member Rosansky, Council Member Selich , Council Member Henn Noes: Mayor Pro Tem Curry, Mayor Gardner, Council Member Daigle Council Member Henn reiterated that this decision.' ie in relation to commercial marinas and that no one should assume that the same policies will be applied to other marine uses in the Harbor. f I i. Council Member Rosansky encouraged those, interested in submitting, comments at the next meeting to do so in a timely manner -and to submit them to City Manager Kiff. XII. ADJOURNMENT - 9:20 p.m. The agenda for the Special Meeting was posted on September 10, 2012, at 3:48 p.m. on the City Hall Bulletin Board located outside of the City of- Newport Beach Administration Building. Recording Secretary City Clerk Volume 60 - Page 589