HomeMy WebLinkAboutSS3 - Commercial Pier Permits HandoutAgenda Item No. SS3
March 13, 2012
COMMERCIAL TIDELANDS LEASE AGREEMENT
KEY TERMS & PROVISIONS
MARCH 13, 2012
Term: The specific term of each lease will be determined individually. Commercial leases must be at least 5 years
(based on the current Municipal Code) and no longer than 50 years. The remaining life of existing improvements,
as determined by a marine surveyor, will be relevant to determining the term. In some circumstances the recent
replacement of improvements will be considered in establishing the term.
Uses: Generally, consistent with existing uses, including marine - oriented activities, such as marinas, piers, docks
and related uses.
Option to Renew: This is a provision that may be applicable in instances where a lease is written for a relatively
short initial term, and it is contemplated that improvements to the docks or the upland property will occur during
the initial term. One or more renewals /extensions may be allowed (aggregating no more than 50 years total).
Generally, the renewal /extension term will equal the useful life of redeveloped improvements. Redevelopment
and other conditions may be required to extend /renew the term. Examples of conditions to a renewal /extension
could include: (1) Redevelopment project entitlement approval; (2) Approval of designs /plans /drawings;
(3) Obtaining project financing; (4) Entering a construction contract and (5) Completion of construction of
improvements during the initial term (exact time during initial term to be determined based on quality of existing
improvements). The tenant must pay the City's costs for all review. The City cannot pre- commit itself in the lease
to approve a project.
Option Fee: A fee must be paid to extend the term. The amount of the fee is set at $25,000 but may be adjusted.
The fee's purpose is to compensate the City for limiting its rights to re -take the premises and improvements at the
end of the initial term
Rent: Tenant must pay fair market rent based on the greater of annual "Base Rent" (calculated on per- square -foot
of tidelands area covered by the lease) or annual "Percentage Rent." Rent is payable quarterly. Rent is reconciled
annually at the end of each lease year. The tenant must provide an annual statement certified by the tenant and
prepared by CPA verifying revenue generated from the tidelands. Base Rent and Percentage Rent will be phased in
over the first 3 years. At the end of the 3rd year, Percentage Rent will equal 20% of gross revenue generated by
tideland uses. At the end of the 3rd year, Base Rent will equal the greater of $1.20 /SF (as adjusted for CPI) or 75%
of the average of Percentage Rent (based on a hypothetical 20% of gross revenues) during the first 3 years.
Rent Adjustments: Every 5 years, adjustments are made to Base Rent. Base Rent adjustment will equal 75% of
the average rent paid during previous 5 years. Every 25 years, a fair market adjustment will be made to all rents
and all other charges (such as security deposits).
Participation Rent: This provision ensures that the City receives a portion of profit earned by tenants if the
tenants use the tidelands as collateral for a financing or re- financing, or sells its business (or a part of its business)
that relies on use of the tidelands. Participation rent will be calculated as follows: (1) In the event of a change in
business ownership Participation Rent will be calculated at the greater of 5% of gross proceeds or 20% of net
proceeds; (2) In the event of a financing or re- financing, Participation Rent will be calculated at 20% of net
proceeds. Certain transfers (e.g., transfers among owners of the tenant, spousal /immediate family transfers) are
excluded from paying Participation Rent.
Security Deposit: 3 months' rent either by letter of credit, cash deposit or alternative forms of security
Capital Improvement Obligations: At the end of each lease year, Tenants must demonstrate spending at least 2%
of that year's gross revenue on capital improvements (i.e., improvements for which a city permit is required). This
must be substantiated to City satisfaction by invoices from third parties (demonstrating actual payment) or by the
value of such improvements as declared on permits. If a tenant does not meet the 2% threshold at the end of a
lease year, then the shortfall must be deposited into an escrow to be used for city- approved capital improvements.
A shortfall deposited into escrow is not counted towards future capital improvement obligations. Improvements
in excess of 2% shall be credited to future years. Funds may be used for capital improvements and /or required
redevelopment. Because capital improvement of the premises is expected during the term, any credits or funds
remaining in an escrow account at the end of the term shall not be paid to the tenant.
Assignment /Subletting/Transfers: All transfers, including encumbering tidelands with mortgages to finance
redevelopment, require City consent. Any costs of the City in reviewing a proposed transfer must be reimbursed
by the tenant.
Guaranty: In some circumstances, a guaranty of lease may be required from a third party to ensure the tenant's
performance.
IS927I812261.DOCX;5I
Tidelands Issues - Harbor Charges
Commercial Marinas
M=h 13 2012
City of Newport Beach
Tidelands Management Committee
Purpose & Responsibilities:
Establish long term visions for the major tidelands components,
including the upper bay, lower bay, beaches and other major
components.
Study and adopt aTidelands Infrastructure Master Plan (TIMP);
Research, consider, and recommend appropriate governance
structures; and
Identify and establish a Citizens Advisory Panel (CAP) to assist
the Committee, encouraging public input throughout the
process.
0
Ad Hoc Committee on Harbor Charges
Purpose and responsibilities:
Guidance re: the adjustment (up or down) of Harbor - related fees
and charges based upon ... the fair market value for use of tidelands
property — including:
The Balboa Yacht Basin
Commercial piers over City tidelands
Moorings — onshore and offshore
including setting in place a system or methodology to regularly update
these fees and charges.
To hold public meetings with stakeholders
To develop a recommendation to the full City Council as to:
Adjustments (up
or down) in
Harbor - related ... charges; and
A new restricted
fund to hold
any incremental
increase in revenue.
Committee on Harbor Charges
------------------------------------------------------------------
Overall Goal
To determine fair market revenue levels from Harbor uses to
appropriately fund Harbor Capital expenses.
Note: Whatever the fees will be, it won't be enough to meet
the local needs. But we need to set the fee profile to know
what the remaining funding gap will be.
7:
About NB Tidelands
After 70+ years, the City Council has put a specific focus
on looking broadly at the Harbor's needs. Needs include:
At least $160 million of projects, including $20 million for a
long range plan to dredge and maintain the harbor at near
design depth.
Tidelands Management Committee to produce a I 0 -year
plan for Harbor Capital Expenditures soon.
Past Progress:
Rhine Channel dredged ($4M City)
LNB dredging to start very soon ( —$2.8M City)
Total City commitment = —$7M
Committee on Harbor Charges
Work plan Outline
Analyze and determine fair market rates for;
Moorings — onshore and offshore — November 2010
Balboa Yacht Basin Slips — December 2010
Commercial Piers — Marinas — Spring 2012
Other commercial harbor permitee's - 2012
Residential Pier Fees (not this specific committee membership)
Review tidelands commercial categories with State Lands
Commission.
Place any incremental increase in revenue in Tidelands Capital Fund —
dedicate for dredging, harbor amenities and harbor services.
Ad Hoc Committee Workplan Phases
� Phase I — Completed
Cost of Service -Based Fees (updated Nov 9, 20 10)
Building permits, live- aboard fees, BYB wait list, more.
P Fair Market Value for use of public property (Nov -Dec 20 10)
BalboaYacht Basin slips, apartments, garages — set to market,
implemented slip changes over 3 periods.
Moorings rates increased — onshore and offshore — goes up over five
periods.
I'i
Committee Workplan - cont'd
--------------------------------------------------------------------------
► Phase II
Review Commercial Marinas (underway now):
Establish market lease rates for all Commercial Pier users
This includes moving to a "percentage of gross" lease system for Marinas
that are now under a per square foot rate.
Specific terms for other commercial uses will be determined in the near
future
Determine long -term capital plan for harbor capital projects,
amenities and harbor services
Tidelands Management Committee's work in 201 I, 2012
Tidelands Capital Fund per City's tidelands legislation.
Review actions to date and determine revisions to maintain
equity and fairness.
Adjustments made to BYB calculations in December 2011.
About Residential Piers
Phase III - Under consideration soon:
Making a determination (re: pricing or policy) regarding:
Residential pier fees; and
Rentals of residential piers for non - residential purposes.
State law recently changed (Jan 1, 2012) to allow the State
Lands Commission to charge fees on recreational piers in State
tidelands waters.
0
Commercial Marinas
Examples of Commercial Marinas
i-
Top 15 Largest Commercial Pier Permitees
California Recreation 239,500
Lido PeninsulaYacht Club
235,670
WREC Lido Venture
108,600
Ardell Marina / Brokers
56,000
Newport HarborYacht Club
44,800
Gugasian, Levon, & Zaroudi
35,100
Newport Marina
29,750
ETCO Investments
25,800
VMA Mariners Mile
24,000
Lido Park Place Condominium
23,040
Newport Harbor Nautical Museum
21,200
Vallely
17,417
Vista Del Lido
15,680
Waterfront Newport Beach
15,200
Newport Bay Towers
14,960
Currently
► 56 commercial pier permit holders
Large Marinas — 8 (12 Marina's)
► Smaller Marinas - 21
► Other uses;
❑ Yacht Clubs
• Restaurants
• Shipyards
❑ Charter
❑ Rental Boats
❑ Fuel Docks
One -year permits, renewed annually
Based on square footage of tidelands under permit
► Rate = $0.36/SF per year
► In 2000, rate was $0.28/SF per year
Proposal - Commercial Marinas
► Rent:
Percentage Rent set at 20% of gross income or
Base Rent /Min rent per SF - $1.20 /SF,
whichever is greater
Proposed Lease Terms
Term: 5 years - 30 years — (lease term linked to slip /pier
useable life)
Option to Renewal Term(s): One or more renewals OK
(total must be less than 50 years) With Option Fee
► Rent: As stated — Phased implementation over 3 years
► Rent Adjustments: Every 5 years, adjustments are made
to Base Rent.
Participation Rent — upon sale or refinance
Capital Improvement Expectation: Lessees must invest
minimum of 2% of gross revenue in Capital
improvements.
Changes since Workshop
k Revised Committee recommendation to:
Phase the increases over three years as follows:
Start Date
Gross
Min SF
01- Jul -11
0%
$ 0.36
year 0
01- Jul -12
10%
$ 0.66
year 1
01- Jul -13
15%
$ 0.96
year 2
01- Jul -14
20%
$ 1.20
Year 3
Capital Improvement Fund:
Lessee to provide invoices /Building Permit valuation that total 2% or
more of their annual income for capital improvement of their docks.
If 2% goal is not met, lessees would remit the difference to the City to
be held until they submitted invoices /Building Permit valuation in a
future year in excess of 2 %.
Lease Negotiation Process
May 1, 2012 and beyond (if approved by Council)
Individual lease agreements prepared /entered into — focus on
larger tenants first
Consultants assist City staff in negotiation /preparation
Arbiters /Pre - Review of leases presented to Council:
The Harbor Fees Committee and the City Manager
Goal = new rental rates apply after July 1, 2012
0
Next Steps
Feedback from this Study Session
Review /modify recommendations if appropriate
Public Workshop for additional discussion
Formal adoption by Council (Ordinance + Reso) on
April 1 0th
Rental schedule
Lease concepts
b, 2nd reading —April 24,h,2012
Implementation (as noted on previous slide)
For More Information
Dave Kiff, City Manager
dkiff newportbeachca.gr®y or 949 - 644 -3001
Michael Torres, Deputy City Attorney
mtorres(a�newortbeach _oy or 949 -644 -3131
Chris Miller, Harbor Resources Manager
cmiller(a7newportbeachca.gov or 949 - 644 -3034
7:
Brown, Leilani
From: Kiff, Dave
Sent: Monday, March 12, 2012 12:20 PM
Subject: FW: Tideland Fees - Commercial Pier Permits "RECEIVED ECEIVED AFTER AGENDA
Ffiifl -EC:" S55 3 -I3-jZ
For the record.
From: Doug Salisbury rmailto:doug(o)pelican1.net1
Sent: Monday, March 12, 2012 12:15 PM
To: Kiff, Dave
Cc: 'Mike Henn'; Selich, Edward; Rosansky, Steven; Torres, Michael; 'John Vallely'; 'Bob Black'; Rodheim, Ralph; 'David
Salisbury'
Subject: Tideland Fees - Commercial Pier Permits
Dear Dave,
I have just recently become aware that the City is considering a very significant and unrealistic increase in
the tidelands /commercial pier permit fees to the users of the tidelands. Further, I understand that future
fees may be based upon 20% of the gross income generated by commercial users with an additional 4% of
the gross income generated.
I can tell you that this type of increase would only serve to put many waterfront commercial business out of
business and /or their marina tenants. We have built and maintain all of the improvements, and we are
responsible for maintaining them. We are also responsible for dredging and for constructing and
maintaining our own seawalls and bulkheads.
Since many of the waterfront commercial pier permit holders lease some or all of their marina space to
users who have both land based and water based businesses within the commercial development, it would
be impossible to identify the gross income (rental) applicable to the tidelands area alone. In the case of a
fuel dock, (only 3 now remaining in the harbor) for example, the majority of rent is probably applicable to
the underground fuel tanks, lines and equipment on the land, but the rent includes both the land and water
area improvements. It would be impossible to determine what portion of the gross income and /or rental
income is related to the land use and to the water use separately because it is all in one lease for one
common use. Anyone who understands the marine fuel business would tell you that any added expense
would simply put them out of business. Our fuel dock is now in temporary closure with OCHCA due to the
fact that the tenant could not survive the down economy and the dramatic cutback in fuel purchases for
boats that has resulted for the past four years.
Significant projects like dredging the federal harbor waterways ($26 million projected cost) need to come
from the federal government, not the commercial waterfront businesses in the Harbor that are trying to
survive the difficult economic times. If Balboa Island needs a $70 million seawall and bulkhead
replacement, perhaps the owners should be responsible for a majority of the costs --- we already pay for
ours.
The City's general fund already receives significant funds from our properties, our businesses and the
businesses of our tenants. The Tidelands Fund already receives the annual fees we pay for our
commercial pier permit fees and from a portion of the public parking fees from the customers of our
businesses. I believe it also receives close to $2 million from the oil and gas revenues received each year.
If the Tideland Fund expenditures are too great then perhaps down sizing some of the $25 million it spends
each year rather than moving an unrealistic financial burden onto the harbor's waterfront users, many of
which are just barely surviving as it is. Can the staff and /or the salaries and benefits of our Harbor
i
Resources Department be cut along with some of the maintenance and improvement projects? A portion of
the General Fund should continue to be used to support the Tidelands because a portion of those funds
are generated as a result.
The City needs to lobby and put more pressure on getting additional funding for the Tidelands from the
federal government and from the State of California - - not from us. It would be the straw that breaks the
camels back!
I have had the honor of living and working in this community during my entire life. I own numerous
properties and business in the community - - and have for decades. My brother and I own and operate the
Harborside Restaurant and Grand Ballroom in the Balboa Pavilion and the Newport Landing development
a block away. We are proud to be apart of this community, and we want to be in a position where we can
stay in our properties and businesses and make some sort of reasonable return on our very significant
waterfront properties moving forward.
Respectfully,
Douglas L. Salisbury
3
ARDELL INVESTMENT COMPANY rH— -
2077 WEST COAST HIGHWAY RECEIVED
POST OFFICE BOX 1715 7 pp
NEWPORT BEACH, CALIFORNIA 92659 -Ioq MAR � 2 AM 11: 0 /
19491 6421626
OFFCE OF
T CF'i G! _RK
March 6, 2012 C�Ty l,r _ ,; ,, T BEACH
Mr. Dave Kiff, City Manager
City of Newport Beach
3300 Newport Blvd.
Newport Beach, CA 92663
Re: City Council's ad hoc Committee on Harbor Charges
Dear Mr. Kiff:
Thank you for inviting representatives of Ardell Marina, to the workshop on February 23, 2012. As a fifty
year owner of slips and docks in Mariner's Mile, we have extensive experience in managing a marina and
providing for ongoing maintenance of our property to insure the safety of our tenants and the
protection of the harbor. We take our position on the bay front seriously.
After reviewing the handout and evaluating the discussion at the workshop, as well as meeting with
other marina owners, we want to emphasize a number of issues. Please consider the following:
Our understanding is that the proposed policy will result in possible charges to our marina business of
20 to 24 percent of gross revenue within a short period of time, with little to no warning. Such a
significant proposal will severely affect our ability to run our business at a profit, particularly since we
will be unable to pass even a portion of the increase to boat slip tenants given that occupancy is the
lowest it has been in many years.
Ardell Investment Company has invested substantial amounts of capital in the construction of seawalls,
docks, ramps and guard rails without any contribution by a public agency. The City is comparing its
proposed 20 percent of revenue fee to the fees charged by the other public agencies. The significant
difference is that, in most cases, the public entities built the slips and docks they are leasing. A portion
of the lease charge is a return of their investment capital. This is not the case with the City of Newport
Beach as it has no investment in our facilities and accordingly, should be charging only for the lease of
the Tidelands.
We further understand the City is proposing to confiscate 4 percent of our gross revenues to be placed
into a Capital Improvements and Maintenance Account. This proposal impacts our business profoundly
for a number of reasons:
We keep our marina in pristine condition and do not feel the need of an outside party to
monitor the maintenance of the facilities or to.require us to set aside funds for their '
improvement.
Mr. Dave Kiff, City Manager
City of Newport Beach
Page 2
o The excellent condition of our marina is the result of ongoing maintenance by full time
employees devoted completely to this effort. Based on the comments made at the workshop, it
appears the City would not allow any of the 4% of gross revenue be used for maintenance, but
rather only for capital improvements.
a We are in the process of obtaining permits for sea wall repairs that will cost in excess of
$400,000. These repairs are required every ten to fifteen years and it will be some time before
an expenditure such as this will again be necessary. The decision to make such an investment is
jeopardized by such extraordinary exactions.
Real property value is always based upon the potential revenue it derives from its use. We will suffer a
large decline in fair market value of our property if this proposal is adopted.
The City's offer of a long term lease agreement for the use of the Tidelands does not appear to bring a
great deal of benefit to us given our over fifty years term use of Tidelands without any threat of
interruption. It is fair to assume that our historical use should continue with or without the need for a
lease agreement as a tradeoff for the exorbitant rental fees being proposed.
Furthermore, the terms and provisions of the lease appear to be completely unreasonable. It would be
an unusual lease in which a tenant must pay a fee for the renewal of a lease agreement, yet you propose
charging a renewal fee of $25,000. In addition, the City proposes to take a percentage of sales or
financing proceeds for our marina property on which the City has no ownership rights. Under no
circumstances would we sign a lease agreement that includes these provisions.
Lastly, we do not appreciate having our financial records scrutinized by City Auditors or incurring the
substantial cost of having a certified audit.
In an effort to achieve a solution to the issues at hand, we would like to propose the following:
Institute a graduated rate increase over a period of three years, starting with a 6 percent of
gross rate in Year 1 (or 3 times our current annual charge of $20,203), followed by an 8 percent
of gross rate in Year 2 (or 4 times our current annual charge of $20,203), then a fixed 10 percent
of gross rate in Year 3 (or 5 times our annual charge of $20,203) that continues for 3 to 5 years
subject to a review of how revenues are being used and the success of the Harbor dredging
project.
Have the City review each of the Harbor's Marina Operators annually and determine on a case
by case basis whether a 4 percent Capital Improvement and Maintenance Account is necessary.
Remove the terms and provisions of the lease agreement that provides ownership rights of our
property by the City. The City has never invested or maintained our property and therefore, is
not entitled the rights of ownership.
Mr. Dave Kiff, City Manager
City of Newport Beach
Page 3
We believe the City is trying to rush this new lease agreement without the marina operators having the
opportunity to have sufficient time to investigate our legal rights and determine the legality of the
proposed agreement. This process needs to be paused to allow us a fair length of time to research our
rights and formulate a united marina owner's response.
We would appreciate the opportunity to further the conversation with you in an effort to achieve our
common goals.
Very truly yours,
Gary Pic ett
Chief Financial Officer
cc: Carol McDermott (via email)
Tom Purcell (via email)
John L. Curci (via email)
Michael Curci (via email)
Councilman Keith Curry (via email)
Councilwoman Leslie Daigle (via email)
Councilwoman Nancy Gardner (via email)
Councilman Mike Henn (via email)
Councilman Rush Hill (via email)
Councilman Ed Selich (via email)
Councilman Steve Rosansky (via email)
Lido Peninsula Company, LLC RECEIVED
r�ECEIVED
Newport Beach, CA 92659
(949) 673 -1060 2U11 MAR 12 AM li= 07
March 7, 2012
Mr. Dave Kiff
City Manager
3300 Newport Boulevard
Newport Beach, CA 92663
Re: City Council's ad hoc Committee on Harbor Charges
Dear Mr. Kiff:
O-FICE OF
Th'E Ci i Y CLERK
CI jy CF ;;:.',PORT BEACH
Thank you for inviting us to the City Council workshop dealing with Tidelands fees. Although we
had some advance information regarding the City's direction on raising Tidelands Fees, we were quite
surprised by the far - reaching nature of the City's proposal. Our concerns are far more than simply
economic; as long -term shareholders in the development and future of Newport Harbor, we believe the
unintended consequences of the proposal, as presented, could radically alter the basic nature of what is,
without doubt, the centerpiece of our community.
As we all know, Newport Harbor is THE private residential harbor on the West Coast. It is utterly
unique in this regard, and this is undoubtedly a source of its broad appeal. Since the time of the Federal
dredging project in 1935, nearly all the improvements in the Harbor have been built and maintained by
private parties who owned the uplands adjacent to the water. They, along with the City, have been the
real stewards of the Harbor's development, creating a world- renowned destination that is enjoyed by
local residents and visitors alike.
As owners of the Lido Peninsula since 1947, we understand the dynamics of the Harbor. Our
primary concern at this point is that the proposed changes in Tidelands policy are happening too rapidly;
without the proper analysis and study, or public transparency, that such a shift in policy requires.
Furthermore, we believe the City may be overstepping its mandate as Trustees of the Tidelands for the
State of California by imposing terms that lack a legally supportable basis.
We understand that the Tidelands Fees have not been increased since 1995. We fully appreciate
that an increase is warranted. However, because the Tidelands Fee changes, as currently proposed,
have potentially significant social, commercial, and legal implications for the residents of Newport Beach,
we strongly urge that these Tidelands Fee changes be made through a deliberate process of analysis
that is supported by truly comparable open- market criteria.
Any discussions of Tidelands Fees should not lose sight of one central fact — that the Tidelands
by themselves have very limited utility and nominal economic value. Tidelands value comes only when it
is combined with the adjacent uplands that are necessary for parking, restrooms, and, most importantly
access to the water. Because the City controls only the Tidelands, it is the fair and appropriate allocation
of the income generated when the uplands and tidelands are combined to a common purpose — such as
in a marina use —that is at issue.
Mr. David Kiff
March 7, 2012
Page 2
Accordingly, we believe that any analysis that is intended to lead to a fair and equitable allocation
of income between tidelands and uplands should consider the following:
C The accepted rental rate for tidelands and uplands (together) from various port districts and
harbors up and down the Southern California coast is 25% of the gross income of the marina
operation. This has been proven, through legal challenges, to be all that a marina operator can
afford to pay for land and water.
In these cases, distinct from the Newport Harbor situation where there is private ownership of the
uplands, the marina is part of a larger project. The public entity that owns the property (such as a
city, county, or port district) provides the uplands with seawalls and dredging, "ready to build" the
marina. This is very different than the case in Newport Harbor where the uplands owner must
construct and maintain the very expensive bulkheads as well as provide the land itself for the
marina operation.
Therefore, the amount of the total gross income from the marina operation that can be fairly
allocated to the water (Tidelands) must be significantly less than 25% (that is the benchmark for
land and water). This is so that the uplands owner receives his fair share for participating in the
marina project. If he doesn't, it makes no economic sense for him to build a marina on his land
when he could be putting it a use that generates greater income for his property.
In the light of these facts, the City's proposal of 20% of gross receipts plus 4% for a capital
improvement fund makes no sense at all. The net of 24% leaves only 1 % to the uplands owner
who provides the land, bulkhead and access necessary for the Tidelands to generate anything
more than its inherent nominal value. This is clearly inequitable.
O Two of the data items that you referenced in our discussions — Bayshores and Swales — were not
open- market transactions and should not be considered in any fair rental determination for
Tidelands.
In support of the fact that these data items should not be considered for comparative purposes,
please reference the California State Lands Commission website:
(http: / /www.slc.ca.gov /Regulations /Regulations Home Page. html #Leasing and Permits ), Article
2.2003.a. 1.A which states that rent should be based on a percentage of annual gross income the
percentage being based on an analysis of the market for like uses and other relevant factors.
To do otherwise, in our judgment, would be contrary to the City's role as Trustee to the State
Lands Commission.
The City's concept of imposing a lease in place of the existing annual permit is unnecessary and
needlessly burdensome for both the property owners and the City staff which will be required to
administer the leases. The suggestion put forward that a lease will help an uplands owner create
value in his property misses the point that waterfront property has significant inherent value totally
separate from the tidelands. Further, this idea of "creating value" seems to run contrary to the
City's position in dealing with the mooring leases.
The inclusion of a capital improvement and maintenance fund (as set out in the proposed lease)
is completely unwarranted in light of the fact that we have constructed, maintained, and replaced
our marina improvements for over 60 years to a universally acknowledged high standard without
any guidance or support from the City. Also, since the City already has approval for capital
Mr. David Kiff
March 7, 2012
Page 3
projects, this condition of the lease appears to be a redundancy. Accordingly, it is difficult for us
to see how this 4% capital improvement fund is anything other than an unfair appropriation of our
open- market marina operation income.
Finally, the lease concept has the potential for abuse that could negatively impact the conditions
and appearance of the Newport Harbor waterfront. It will promote some operators to leverage
their marina income through financing. This could, in turn, create negative consequences when
business cycles change, leading to foreclosures, administrative headaches for the City as lessor,
and a deterioration of the quality of the waterfront that nobody in the community wants.
We propose that the lease concept remain discretionary, as it has been in the past. If an uplands
owner desires a long -term lease for financing purposes, the City can evaluate such requests on a
case -by -case basis and approve a lease if appropriate.
We believe there are several other significant issues that warrant closer analysis, not least of
which is the fact that the economic pressures of such an onerous lease rate will force operators and
uplands owners to reconsider the nature of their involvement with the Harbor. This could, over time,
significantly alter the character of the waterfront in unforeseeable ways.
In our opinion there has not been adequate time for the effected parties to fully come to grips with
all the potential issues. We request that the City provide a reasonable time for us and others in a similar
situation to investigate not only our legal rights but what the implications of these changes might be for
the future of Newport Harbor.
We value Newport Harbor as a resource and are committed to its long -term well -being as the
jewel of our City. We take great pride in our role as active members of the community and have long
enjoyed being an advocate for sound planning. We look forward to the opportunity to work together to
resolve the needs and issues of the Tidelands.
Sincerely,
LIDO PENINSULA COMPANY, LLC
John L. Curci Michael T. Curci
cc: Carol McDermott (via email)
Gary Pickett (via email)
Councilman Keith Curry (via email)
Councilwoman Leslie Daigle (via email)
Councilwoman Nancy Gardner (via email)
Councilman Mike Henn (via email)
Councilman Rush Hill (via email)
Councilman Ed Selich (via email)
Councilman Steve Rosansky (via email)
Thomas H. Purcell