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Home My WebLink About26 - Establishment of Harbor Fund1 NEWPORT REACH City Council Staff Report I Agenda Item No. 26 February 12, 2013 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Finance Department Dan Matusiewicz, Finance Director 949 - 644 -3123, danm @newportbeachca.gov PREPARED BY: Evelyn Tseng, Revenue Manager APPROVED: v U TITLE: Establishment of a Newport Harbor Capital Fund ABSTRACT: Having received input from the Tidelands Management Committee and harbor stakeholders, staff is seeking direction to seek the consent of the State Lands Commission to create a Newport Harbor Capital Fund ( "Harbor Fund "). The Harbor Fund is proposed to capture the incremental increases from the recent tidelands rent adjustments (e.g., moorings, commercial and non - commercial piers, Balboa Yacht Basin, etc.). The Harbor Fund will finance capital improvements and maintenance activities within Newport Harbor. RECOMMENDATION: 1. Review, provide comments, if any, and approve staff's proposal for the funding and use of the Harbor Fund. 2. Authorize staff to seek the State Lands Commission's approval to establish the Harbor Fund. 3. If and when the State Lands Commission consents to the creation of the Harbor Fund, direct staff to return to the City Council with a resolution and City Council Policy formalizing the Harbor Fund's revenue and expenditure allocations. FUNDING REQUIREMENTS: There is no fiscal impact related to this item. The current budget allows for the resources needed to seek the consent of the State Lands Commission to establish the Harbor Fund and to prepare the associated resolution and City Council Policy. Establishment of a Newport Harbor Capital Fund February 12, 2013 Page 2 DISCUSSION: Over the past few years, the City of Newport Beach ( "City ") has reviewed its administration of public tidelands property within Newport Harbor. As a result of this comprehensive review, the City adopted new permit and lease templates and adjusted commercial and noncommercial tidelands rent to fair market value (over 3, 5, or 8 periods) and to avoid a violation of the Beacon Bay Bill (the 1978 legislative grant from the State, as amended), California Constitution Article 16, Section 6, Newport Beach Municipal Code ( "NBMC") Title 17, and City Council Policy F -7. In meetings with harbor stakeholders, a concern was expressed regarding the allocation of monies received from harbor tidelands rent. Specifically, the concern was rental money received from harbor tidelands would be spent on ocean tidelands. To address this concern, staff recommends seeking the consent of the State Lands Commission (as required by Section 1(i) of the Beacon Bay Bill) to create a Harbor Fund. The Harbor Fund would receive the net incremental increase in rent received from harbor tidelands users. The Harbor Fund may be used by the City to: (1) reimburse the General Fund for monies loaned to the tidelands funds for Newport Harbor improvements and maintenance activities; and (2) pay for the improvements and maintenance activities provided in the Five -Year Tidelands Capital Plan for Newport Harbor as approved by the City Council on November 27, 2012, as it may be updated and amended from time to time by the City Council after consideration at publicly noticed City Council meetings. Staff presented the proposal to the Tidelands Management Committee on January 16, 2013, and the Tidelands Management Committee recommended that this item be brought to City Council for action. Staff has identified the net incremental rent received from the following sources as appropriate for deposit into the Harbor Fund: (1) Tidelands revenues derived from the Balboa Yacht Basin as a result of Resolution No. 2010 -134, or any successor resolution; (2) existing moorings as a result of Resolution No. 2010 -132 and Resolution No. 2011- 5, or any successor resolutions; (3) existing large commercial marinas as a result of Resolution No. 2012 -96, or any successor resolution; (4) existing commercial tidelands uses resulting from Resolution No. 2012 -98, or any successor resolution; (5) existing residential piers resulting from Resolution No. 2012 -120, or any successor resolution; and Establishment of a Newport Harbor Capital Fund February 12, 2013 Page 3 (6) new or revised Newport Harbor tidelands leases for those properties listed below: Property /Lease Name I Address American Legion Bahia Corinthian Yacht Club Balboa Bay Club Balboa Island Ferry Basin Marine Galley Cafe Golden Hills Property, LLC (OC Dock/Harbor Marina) Heritage Yacht Sales Lido Island Community Association (Antibes Marina) San Pedro Bait Barge Schock Boats 215 East 15`h Street 1601 Bayside Drive 1221 West Coast Highway 78 Agate Ave. 401 Palm St. 829 Harbor Island Drive, #A 829 Harbor Island Drive 3333 West Coast Highway 829 Harbor Island Drive 701 Via Lido Soud Channel Harbor Entrance 29`' Street end To determine the amount of net incremental rent received by the City, the rent charged immediately preceding the year in which the initial increase in rent is charged under such resolution(s) shall be used as the base (i.e., if an increase, or series of increases, begin to take effect in 2013, 2012 should be used as the base, etc.). The base year shall remain unchanged following a harbor -wide appraisal (i.e., if 2012 is the base year for large commercial marinas and an appraisal occurs in 2018, 2012 shall remain the base year for purposes of this Harbor Fund). For revised permits or leases that are in replacement of a prior lease or permit, the amount of increase under the revised permit or lease, compared to the most recent annual accounting of income under the old lease or permit shall be deposited. Establishment of a Newport Harbor Capital Fund February 12, 2013 Page 4 Using residential piers as an example: Fifty -Two and One -Half Cents ($0.525) Rent Phase -in Table and Adjustment The phase -in period for residential piers shall begin in 2013. The rental rates charged as of 2012 shall be used as the base amount. In 2012, the rent for a residential pier permit was $100 /year. In 2013, the rent for a 1,139 square foot residential pier will increase to $199 /year. For 2013, $100 (the base amount) shall go to the Tidelands Fund; $99 ($199 subtracted by $100) shall go to the Harbor Fund. In the future, $100 shall continue to go to the Tidelands Fund annually. All amounts over $100 shall go to the Harbor Fund. The base amount does not change if the owner of the pier changes and /or the pier is renovated /reconfigured. However, if the use of the pier changes from residential to another non - residential use, the entirety of the rent shall go to the Tidelands Fund. Once approval of the State Lands Commission is obtained to create the Harbor Fund, staff will return to the City Council with a resolution and City Council Policy formalizing the allocation of monies into the Harbor Fund. Please note, while all incremental rent derived from the harbor will go into the Harbor Fund, other tidelands revenues may also be deposited into the Harbor Fund, at the City Council's discretion. ,; W_ , ([A- ([A- ([A- ([A- Fully General $ 100 $100] /5)+ $100) /5)+ $100] /5) + $100]/5)+ Phased -in Example $100 2013 Rent 2014 Rent 2015 Rent Rent (A) Example #1 - $ 100 $ 199 $ 299 $ 398 $ 498 $ 597 1,139 SF Example #2 - $ 100 $ 229 $ 358 $ 487 $ 616 $ 748 1,426 SF Example #3 - $ 100 $ 445 $ 790 $ 1,135 $ 1,480 $ 1,827 3,480 The phase -in period for residential piers shall begin in 2013. The rental rates charged as of 2012 shall be used as the base amount. In 2012, the rent for a residential pier permit was $100 /year. In 2013, the rent for a 1,139 square foot residential pier will increase to $199 /year. For 2013, $100 (the base amount) shall go to the Tidelands Fund; $99 ($199 subtracted by $100) shall go to the Harbor Fund. In the future, $100 shall continue to go to the Tidelands Fund annually. All amounts over $100 shall go to the Harbor Fund. The base amount does not change if the owner of the pier changes and /or the pier is renovated /reconfigured. However, if the use of the pier changes from residential to another non - residential use, the entirety of the rent shall go to the Tidelands Fund. Once approval of the State Lands Commission is obtained to create the Harbor Fund, staff will return to the City Council with a resolution and City Council Policy formalizing the allocation of monies into the Harbor Fund. Please note, while all incremental rent derived from the harbor will go into the Harbor Fund, other tidelands revenues may also be deposited into the Harbor Fund, at the City Council's discretion. Establishment of a Newport Harbor Capital Fund February 12, 2013 Page 5 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, staff recommends the City Council find the establishment of a Harbor Fund is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the allocation of tidelands revenue to the Harbor Fund contemplates the continued use of existing facilities, with no expansion of proposed uses. Further, staff recommends the City Council find this item is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the Harbor Fund will be used to meet operating expenses within the tidelands. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted by: an Matusiewicz Finance Director Attachments: A. Tideland Funds Revenue Flow Diagram _O LL N rC N C- f� 4J F-