HomeMy WebLinkAbout18 - Balboa Yacht Basin•
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0 `� MAYOR AND C11
Newport Beach City Council
AGENDA ITEM 18
November 8, 1999 Council Meeting
NCIL
MANAGER
ISSUES:
1. Is the City Council desirous of considering the concept of privatizing the
management of the City's Balboa Yacht Basin?
2. If so, does the City Council want the City Manager to circulate a Request for
Proposal (RFP) for the management of the site?
RECOMMENDATION:
That the Council authorize the City Manager to use the RFP process for
management of the Balboa Yacht Basin.
Alternative:
Direct the City Manager to place this item on the November 22nd agenda to
review the management proposal submitted by the BellPort Group, with the possibility of
directing the City Manager to conduct negotiations based on the proposal.
BACKGROUND:
The basin and berthing were constructed in the 1940's. The City obtained The
Irvine Company's leasehold interest on the 7 -acre site in 1981 and has managed the site
since that time. In 1982 the City obtained a $2.5M loan from the California Department
of Boating and Waterways (CDBW) and In 1983 another $800,000 loan for CDBW to
rebuild the marina, which was in poor condition. The loans were for 30 years at a 7.9%
interest rate. Two reductions in the interest rate have taken place and the current loan
interest rate is at 4.5°x. The site contains 163 slips and 10 side ties, a caf6, a yacht
brokerage, a shipyard (leased until 6/30/10), 3 apartment units and 44 garage storage
units. The City has annually spent approximately $130,000 annually in salary and
maintenance costs. The FY 99 -00 budget estimates this property will provide
$1,321,129 in revenue.
Newport Beach City Council
Agenda Item _
Paae 2
DISCUSSION:
The first basic policy issue before the Council is whether there is interest in
changing from a City managed Balboa Yacht Basin to management by a private entity
under contract to the City. This is the only yacht basin under City ownership and
management. The City Manager believes there are specific services where the City is
the natural and best provider, and there are other services where the private sector has
more expertise, experience and resources. Managing a yacht basin is not a typical City
service, and for the long term, it would be in the best interest of the City to solicit
proposals and compare capabilities to provide quality management services to the
Balboa Yacht Basin.
Slip rates, apartment and storage rents have historically been slightly less than
market rates, based on survey information. Based on marina services currently being
offered by the City, there appears to be substantial potential for offering more and higher
quality services under a management contract.
City Council Policy F -7 addresses the manner in which the City will provide
stewardship to City owned and managed properties. The policy states, "...the City will
continually evaluate the potential of all City owned property to produce revenue. ...In all
negotiations regarding the lease, management contract, concessions, sale or similar
action regarding a non - residential income property, the City shall seek revenue
equivalent to the open market value of the highest and best use; and wherever possible
the City shall conduct an open bid or proposal process to insure the highest financial
return." Based on the F -7 policy, the City Manager is requesting authority to prepare
and distribute a Request for Proposal (RFP) for the management and operation of the
Balboa Yacht Basin.
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F -7
INCOME PROPERTY
The City owns and manages an extensive and valuable assortment of property
including streets, parks, beaches, public buildings and service facilities.. The City also
owns and operates a yacht basin, a mobile home park, a luxury residential development
and various other income properties. Most of the income property is tidelands, filled
tidelands or waterfront. Unencumbered fee value of income property is estimated at
upwards of one hundred million dollars, and income typically contributes ten percent
of all City revenues.
As owner of property, the City is the steward of a public trust, and state law requires
the City to maximize its returns or be subject to a charge of making a gift of public
funds. Nevertheless, the City Council recognizes the importance of this property not
only as a revenue generator, but also as a means to provide otherwise unfeasible uses
and facilities to benefit the community.
In managing its property, the City will continually evaluate the potential of all City
owned property to produce revenue. This may include leasing unused land, renting
vacant space, and establishing concessions in recreation areas or other similar
techniques. The City Council will evaluate the appropriateness of establishing new
income properties using sound business principals and after receiving input from
neighbors and users.
The policy of the City Council is that income property be managed in accordance with
the following:
A. Whenever a lease, management contract, concession, sale or similar action
regarding income property is considered by the City, an analysis shall be
conducted to determine the maximum or open market value of the property.
This analysis shall be conducted using appraisals or other techniques to
determine the highest and best use of the property and the highest value of the
property.
B. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income property shall include review of an appraisal or
analysis of the use being considered for the property conducted by a reputable
and independent professional appraiser, real estate consultant or business
consultant.
1
3
F -7
C. The City shall seek, whenever practical and financially advantageous, to operate
or manage all property and facilities directly with City staff or contractors.
D. In all negotiations regarding the lease, management contract, concession, sale or
similar action regarding a non - residential income property, the City shall seek
revenue equivalent to the open market value of the highest and best use; and,
whenever possible the City shall conduct an open bid or proposal process to
insure the highest financial return.
E. Whenever less than the open market or appraised value is received or when an
open bid process is not conducted, the City shall make specific findings setting
forth the reasons thereof.
Such findings may include but need not be limited to the following:
The City is prevented by tideland grants, Coastal Commission guidelines
or other restrictions from selling the property or converting it to another
use.
2. Redevelopment of the property would require excessive time, resources
and costs which would outweigh other financial benefits.
3. _Converting the property to another use or changing the manager,
concessionaire or lessee of the property would result in excessive vacancy,
relocation or severance costs, which would outweigh other financial
benefits.
4. Converting residential property to another use or opening residential
leases to competitive bid would create recompensable liabilities and other
inequities for long -term residents.
5. The property provides an essential or unique service to the community
that- might not otherwise be provided were full market value of the
property be required.
6. The property serves to promote other goals of the City such as affordable
housing, preservation of open space or marine related services.
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F -7
• F. Generally, lengths of leases, management contracts, concessions or similar
agreements will be limited to the minimum necessary to meet market standards
and will contain appropriate reappraisal and inflation protection provisions.
Also, all agreements shall contain provisions to assure complete audits
periodically through their terms.
G. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income property shall be conducted by the City
Manager or his designee under the direction of any appropriate City committees
prior to consideration by the City Council.
H. To provide an accurate accounting of actual net revenues generated by the City's
income property, all costs and charges directly attributable to the management of
a specific income property shall be debited against the gross revenues collected
on that property in the fiscal year the costs are incurred. Costs and charges
include property repairs and maintenance, property appraisals, and consultant
fees, as authorized by the City Council, City Manager or by this Income Property
Policy.
Adopted - July 27,1992
Amended - January 24, 1994
Amended - February 27,1995
Amended - February 24,1997
Amended - May 26,1998
Formerly F -24
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MEMORANDUM
Newport Beach Fire and Marine Department
Office of the Fire and Marine Chief
DATE: October 29,1999
TO: Homer Bludau, City Manager
FROM: Tim Riley, Fire and Marine Chief
SUBJECT: City Marina
Balboa Yacht Basin Site (see Exhibit A)
2. Total Births =173 (see Exhibit B)
Slips =163
Side Ties =10
a) Two side ties reserved for City use but often rented on temporary basis
b) One side tie used at pumpout location
3. Apartments = 3
Three (3) two- bedroom, one -bath apartments (approximately 950 square
feet). Apartment rental includes one single car garage.
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5.
Storage garages = 44
37 Rented
3 included in apartment rental
2 used by City
2 used in Cafe lease
Cafe (1)
Square feet = 902
Lease 10 year (Three (3) five (5) year extensions)
10 year expired 12/98
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0
• Homer Bludau
October 29, 1999
Page 2
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6. Yacht Brokerage (1)
Square feet = 780
One year lease expires 7/15/00
7. Shipyard (1)
Square footage = (Land = 20,700; Water = 2500)
Lease Term 25 years, ending 6/30/10
8. Current Revenues (Fiscal 1997/98 actual)
Slips
1,116,671
Apartments
48,964
Garages
36,496
Cafe
26,991
Yacht Broker
16,220
Shipyard
75,807
Total Revenue for Site
1,321,129
9. Operational Expenses (Fiscal 98 actual)
Salaries and Benefits
87,885
Maintenance and Operations
43,798
Total Expenses
131,683
10. Operational cost as a percentage of revenues
Slips only =11.7% (131,683 divided by 1,116,671)
Site as a whole = 9.9% (131,683 divided by 1,321,129)
FROM : CREATIUE SCREENWORKS
Mayor Dennis O Neil
City of Newport Beach
Dear Mayor,
FAX NO. : 7146920601 Nov. 08 1999 10:05AM P1
BALBOA BASIN YACHT CLUB
P.O. Box 100
Balboa Island, CA 92662
"RECEIVED AFTER AGENDA
PRINTED "_IWfS 11 -4-gq
1 am writing to you on behalf of the members of Balboa Basin Yacht Club. By way of
background, you should know that our Club was formed in 1989 and its members
currently rem 50 of the 163 slips, as well as numerous garages in the Balboa Yacht Basin.
It has come to our attention that the City is considering privatizing the management of the
Basin and is undertaking the process of `Requests for Proposals" from third party firms.
We understand that this includes, but hopefully is nut limited to, the BellPort Group, the
current operator of the marinas controlled by the Irvine Company.
The Yacht Basin has always been a unique marina because of its configuration within a
small residential community, the neighboring restaurant, and the adjacent shipyard. This
unique nature is complimented by the fact that this is the only City operated marina in
Newport Harbor, which provides needed competition to other operators, and has always
provided excellent management services to the tenants of Balboa Yacht Basin. The
November 8th Council Meeting Agenda states that "there appears to be substantial
potential for offering more and higher quality services under a management contract ".
We disagree in the strongest terms. The services provided by the City have always
been well- received and appreciated by the tenants.
We believe it is a majQE conflict of interest to consider awarding a management contract to
the BellPort Group. Since they also manage the Irvine Company marinas, you would be
helping them create a monopoly in the operations of marinas within Newport Harbor.
The future ramifications and fall -out from such a contract could be devastating to the
Balboa Yacht Basin.
The marina has operated smoothly and at high occupancy rates since the City obtained the
leasehold interest from the Irvine Company in 1981. The only period of substantial
occupancy decline was in 1995 when slip rates increased 21 %, a figure far beyond normal
standards. We strongly believe that outsourcing to a third -party manager could drive slip
rates up to even higher levels, especially with an incentive based fee structure, and could
easily cause drastic occupancy decline, obviously resulting in a decline in overall net profit.
Add to that the lack of appeal to potential renters once rates reach a certain level and you
have the formula for a partial filled marina for quite some time.
FROM : CREATIUE SCREENWORKS FAX NO. : 7146920601 Nom. 08 1999 M OSAM P2
In the November 8th City Council Agenda, it indicates that the City Manager;believes
there are services where the private sector has more expertise, experience, and resources.
Based on the extraordinarily suceessfid history of the Balboa Yacht Basin we dun's believe
the City needs to outsource the management!!! It is comparatively simple to keep rents at
market rates merely by comparisons of slip fees and amenities with other marinas within
Newport Harbor. The City should maintain direct control of this wonderful asset and
continue providing the excellent service that has been provided over the years. This
certainly can be done in compliance with City Council Policy F -7 to maximize City
revenue through City management of the marina.
The members of the Balboo Basin Yacht Club take particular pride in our marina. We are
a very closely knit group and spend an extraordinary amount of time on and around the
docks as compared to most boaters. Our contribution, invisible to City personnel,
includes policing for debris both on the docks and in the water, identification of security
hazards, enforcement of the City's rules and regulations amoung slip tenants, and a
security control through an informal "marina watch" program. We feel the safety,
organization, and cleanliness of our marina has been achieved, in some part, by the
members of our Club, giving us a vested interest in it's operation.
We account for nearly one -third of the tenancy of the marina and our roles are growing.
We are a proud Club and will remain together. As such, we are hopeful our voice and our
opinion on this issue will be heard. We will stay together in a marina, we hope it can
continue to be the Balboa Yacht Basin.
Respectfully,
Mike Jacobs
Commodore, Balboa Basin X.C.
(714) 692 -1177
cc: City Council Members
City Manager
NOU -08 -1999 09:31 7146920601 99% P.02