Presentation to City Council Regarding Newport Harbor

Mooring Fees and TransferabilityNovember 9, 2010

Issues

1. Harbor Mooring Fees – Chip Donnelly

• Budgetary Analysis – Patricia Newton

2. Transferability – Dan Gribble

3. Transferability Document – Bill Moses

4. Recommendations and Summary – John Fradkin

Harbor Mooring Fees• Methodology used for rate increase is arbitrary and not

independently, professionally verified

• Relative value of moorings versus slips is different in Newport than other harbors due to quantity of moorings compared to slips and supply – demand issues

• Very high upland values in Newport Beach distort relative value of tidelands so tying mooring fees to slip costs is unreasonable

• City previously set a “market value” in 1996 and using a CPI based adjustment the fully indexed rate would be $29/ft., from the current $20/ft.

Harbor Mooring Fees• Comprehensive revenue plan needs to be developed

before any fees are changed– Discriminatory to do it piecemeal

• Previously the City promised to look at other fees when they raised mooring fees but never did

• Substantial fee increases will drive many on fixed incomes out of the harbor

• NB General Plan allows for affordable boat storage – p. 381, R8.6, “Provide moorings as an important source of low cost public recreational access to the water and harbor.”

Harbor Mooring FeesBudgetary Analysis• Fee increase is not justified or reasonable

– There is no cash flow analysis that includes the proposed fee increase

– Ongoing costs should be considered separately from one time capital expenditures

– Funds from the Federal Government are not included

Harbor Mooring FeesBudgetary Analysis• Sources of revenue not represented in City’s

analysis – PIT (Possessory Interest Tax)– Unsecured property tax returned to City– Tidelands boat storage contribution– Potential rental income from vacant mooring– NMA cash flow projection shows $2.6 million

surplus in 2017 – City is est. at $6 million

Tidelands Harbor Expenditures (Revised)

2011 2012 2013 2014 2015 2016 2017Harbor Resources (Sal/Ben)1 $533,248 $543,913 $554,791 $565,887 $577,205 $588,749 $600,524Ongoing Harbor Maintenance Costs2 $3,840,000 $3,916,800 $3,995,136 $4,075,039 $4,156,539 $4,239,670 $4,324,464Total Ongoing Harbor Costs $4,373,248 $4,460,713 $4,549,927 $4,640,926 $4,733,744 $4,828,419 $4,924,988One-Time Harbor Capital Requirements $6,925,000 $6,925,000 $6,925,000 $6,925,000 $2,300,000 $2,300,000 $2,300,000

Total Harbor Costs (est) $11,298,248 $11,385,713 $11,474,927 $11,565,926 $7,033,744 $7,128,419 $7,224,988

Cumulative Harbor Costs

(est) $11,298,248 $22,683,961 $34,158,888 $45,724,814 $52,758,558 $59,886,977 $67,111,965

1Direct costs only. Does not include any other City overhead - City Attorney, City Manager, Admin Services, etc.2Assumes 2% inflation on ongoing costs

Tideland Harbor Revenues- City Proposed Mooring Increases

2011 2012 2013 2014 2015

Onshore and Offshore Moorings $700,000 8% $714,000 8% $728,280 7% $742,846 7% $757,703 7%

Proposed Mooring Rate Increase $207,795 2% $425,401 4% $651,519 7% $886,512 9% $1,130,719 11%

Residential Pier Permit $30,000 0% $30,600 0% $31,212 0% $31,836 0% $32,473 0%

Commercial Pier Permits $566,000 6% $577,320 6% $588,866 6% $600,644 6% $612,657 6%

Interest $75,000 1% $76,500 1% $78,030 1% $79,591 1% $81,182 1%

American Legion $138,120 2% $140,882 1% $143,700 1% $146,574 1% $149,506 1%

BYB - Slips $650,000 7% $663,000 7% $676,260 7% $689,785 7% $703,581 7%

BYB - Garages $35,000 0% $35,700 0% $36,414 0% $37,142 0% $37,885 0%

Balboa Bay Club - Marina Only $689,000 8% $702,780 7% $716,836 7% $731,172 7% $745,796 7%

Balboa Island Ferry $75,319 1% $76,825 1% $78,362 1% $79,929 1% $81,528 1%

Galley Café $20,511 0% $20,921 0% $21,340 0% $21,766 0% $22,202 0%

Basin Marine Shipyard $70,000 1% $71,400 1% $72,828 1% $74,285 1% $75,770 1%

OC Dock Lease $47,755 1% $48,710 1% $49,684 1% $50,678 0% $51,692 0%Subtotal Tidelands Harbor Water-Related

Revenues $3,304,500 36% $3,584,040 38% $3,873,331 39% $4,172,760 41% $4,482,693 42%

Water Adjacent Revenue & Other Revenue Sources

Water-Adjacent Activity Revenues

Beacon Bay residences $928,177 10% $946,741 10% $965,675 10% $984,989 10% $1,004,689 9%

BYB - Apartments $27,000 0% $27,540 0% $28,091 0% $28,653 0% $29,226 0%

Balboa Bay Club - All Non-Marina $2,401,000 26% $2,449,020 26% $2,498,000 25% $2,547,960 25% $2,598,920 25%Subtotal Tidelands Harbor

Water-Adjacent $3,356,177 37% $3,423,301 36% $3,491,767 35% $3,561,602 35% $3,632,834 34%

Other Revenue Sources

Unsecured Property Tax $800,000 9% $800,000 8% $800,000 8% $800,000 8% $800,000 8%

Posessory Interest Tax $700,000 8% $700,000 7% $700,000 7% $700,000 7% $700,000 7%Tidelands Boat Storage - minimum residential $700,000 8% $700,000 7% $700,000 7% $700,000 7% $700,000 7%Monthly Fees - vacant moorings (est. 100 at $8/day) $ 292,000 3% $ 292,000 3% $ 292,000 3% $ 292,000 3% $ 292,000 3%

Total Other Revenue Sources $ 2,492,000 27% $ 2,492,000 $ 2,492,000 $ 2,492,000 $ 2,492,000 Total Tidelands Harbor-Related

Revenues $9,152,677 100% $9,499,341 100% $9,857,098 100% $10,226,362 100% $10,607,526 100%

Projected Tidelands Harbor Revenues – Net Surplus/(Deficit)(including City mooring fee increase and 2% inflation)

2011 2012 2013 2014 2015 2016 2017

Subtotal Tidelands Harbor Water-Related Revenues $3,304,500 $3,584,040 $3,873,331 $4,172,760 $4,482,693 $4,606,268 $4,734,011

Subtotal Tidelands Harbor Water-Adjacent $3,356,177 $3,423,301 $3,491,767 $3,561,602 $3,632,834 $3,705,491 $3,779,600

Total Other Revenue Sources $2,492,000 $2,492,000 $2,492,000 $2,492,000 $2,492,000 $2,492,000 $2,492,000

Total Tidelands Harbor-Related Revenues $9,152,677 $9,499,341 $9,857,098 $10,226,362 $10,607,526 $10,803,759 $11,005,611

Total Ongoing Harbor Costs $4,373,248 $4,460,713 $4,549,927 $4,640,926 $4,733,744 $4,828,419 $4,924,988

Surplus (Deficit) Water Related & Tidelands Rev - Exp $4,779,429 $5,038,628 $5,307,171 $5,585,436 $5,873,782 $5,975,339 $6,080,624

Cumulative Surplus (Deficit) Water-Related $4,779,429 $9,818,057 $15,125,228 $20,710,664 $26,584,446 $32,559,785 $38,640,409

One Time Capital Requirements $6,925,000 $6,925,000 $6,925,000 $6,925,000 $2,300,000 $2,300,000 $2,300,000

Federal Funds Avaialable for Capital Project (estimated) $2,000,000

NMA Surplus (Deficit) Total Harbor Rev over Capital Requirements ($145,571) ($1,886,372) ($1,617,829) ($1,339,564) $3,573,782 $3,675,339 $3,780,624

Cumulative Surplus (Deficit) Total Harbor Rev over Exp ($145,571) ($2,031,943) ($3,649,772) ($4,989,336) ($1,415,554) $2,259,785 $6,040,409

Comparison City Mooring Fee Increase to NMAOne Time Capital Expenditure Paid for in 7 - 8 years with NMA ProposalComparison City Mooring Increase to NMA 2011 2012 2013 2014 2015 2016 2017

Onshore and Offshore Moorings $700,000 $714,000 $728,280 $742,846 $757,703 $772,857 $788,314Proposed Mooring Rate Increase City $207,795 $425,401 $651,519 $886,512 $1,130,719 $1,187,255 $1,246,618City Total Proposed Mooring Revenue $907,795 $1,139,401 $1,379,799 $1,629,358 $1,888,422 $1,960,112 $2,034,932Percentage Total Existing Revenue Sources 10% 12% 14% 16% 18% 18% 18%

Proposed NMA Rate Increase(CPI Index=45% rise2011 & 2% inflation) $315,000 $321,300 $327,726 $334,281 $340,966 $347,785 $354,741

Total Proposed NMA Mooring Revenue $1,015,000 $1,035,300 $1,056,006 $1,077,126 $1,098,669 $1,120,642 $1,143,055Percentage Total Existing Revenue Sources 11% 11% 11% 11% 10% 10% 10%

NMA Surplus (Deficit) Total Harbor Rev over Cap Req.- City Mooring

Fees ($145,571) ($1,886,372) ($1,617,829) ($1,339,564) $3,573,782 $3,675,339 $3,780,624 NMA Surp (Def) Total Harbor Rev

over Cap. Req. NMA CPI adj. Mooring Fees $ (38,366.00) $ (1,990,473) $ (1,941,623) $ (1,891,795) $ 2,784,029 $ 2,835,869 $ 2,888,747

NMA Cumulative Surplus (Def) Total Har Rev over Exp -$38,366.00 ($2,028,839) ($3,970,462) ($5,862,257) ($3,078,228) ($242,359) $2,646,387

Transferability• City condoned the process of selling mooring

rights:1. Recommending to interested parties that the only practical way to

attain a mooring was to buy a boat on a mooring since the waiting list was so long – the value of that right became a function of market demand and inflation

2. The majority of moorings have been transferred in this fashion for over 50 years

3. The City of Newport Beach has itself sold moorings as recently as 2004…does that not indicate acceptance of the practice?

4. City of Newport has followed the same practice as other ports such as Avalon, Morro Bay, Port San Luis, and Pillar Point.

5. As recently as June 2010 the City and County Board of Supervisors formalized transfers on page 13 of the Mooring Administration contract with the Harbor Patrol.

Transferability• The proposed elimination of transferability

will harm existing mooring holders on a massive scale

1. Unfair to existing mooring permit holders who in good faith followed the established and accepted practice and only wish to be able to recoup their investment if they move out of boating

2. Since the City embraced and encouraged that practice they have the obligation to protect the value of that asset for their citizens

A Reasonable OptionTransferability Document Strikes an Appropriate Compromise

Worthy of True Consideration by Council Members• Who worked on it?• HRD Staff members Rossmiller, Miller, Stakeholders, both City Attorneys, City Revenue Department,

Harbor Commissioners & Mooring Master Plan Committee Citizen Group; Harbor Master Deputies

• How long in the works? Over three years

• Who reviewed it?• Harbor Commissioners Duffield, Collins, Beek, Corrough, Rodheim, Lawrenz, Rhyne, Rossmiller, Miller,

Stakeholders, MMPSC, Harbor Patrol, Dave Kiff, both City Attorneys, City Revenue Dept.,

• Who liked it?• All Harbor Commissioners, MMPSC, Harbor Patrol, NMA and other stakeholders• Former City Attorney reviewed and encouraged process and ideas, current City Attorney, David Hunt,

reviewed twice and would like to re-word “rental”• Dave Kiff supported the concept for over a year

• Where is it now?• In the City’s court, everyone wonders why no input from Council until formation of ad hoc Committee.• Worthy of full consideration by City Council between now and their vote on mooring fees and transferability

Transferability Document providesWell thought out solutions

What does the Transferability Document Do?• Improves and updates definitions and terms currently in the Ordinance• Improves public access with both short and long term rental of empty, or

underutilized moorings• Generates additional income to City with predictable, year-round rental

opportunities, effectively allowing City to double dip from mooring permit fee and additional income from rental.

• Defines entities that may be mooring permit holder(business entities, trusts, yacht clubs, etc.)

• Allows for Multi Vessel Mooring Systems• Clearly spells out permit requirements: name of responsible person, city’s

rights, provides for proof of liability insurance,

Transferability Document - Transfers

• Sets rigid qualifications for transferees and permittees• Establishes Mooring Permit Transfer Fee (new income to city)• Eliminates mooring speculation• Limits transfer to one offshore mooring per 12 month period• Addresses unpaid fees and consequences• Gives Harbor Resources discretion on transfers• Mooring vacant 60 days after transfer may be used for long term rental• No live-aboards on long term rental moorings• Allows two mooring permit holders to trade moorings for mutual

convenience• Addresses revocation and surrender of mooring permit

Transferability DocumentProvides solutions to significant issues:

• Stops people from buying and selling moorings for profit– Word crafted a document that provides solid language to

prevent the buying and selling of moorings– Allows those who have used long standing, condoned

methods to acquire a mooring to transfer the mooring to another individual when necessary

• Improve transfer process– Sets out clear definitions, conditions and process for

controlled transfers

Transferability Document – A “win – win”

Adoption of the Transferability Document suggestions would support the interests of all mooring stakeholders including the City of Newport Beach, improve public access by way of short and long term rentals, and it would generate new revenues for the city for its forecasted capital expenditures in the harbor.It is a “win-win” that the Council should consider

Recommendations• Adjust mooring fees in a fair and reasonable

manner• Adopt the Transferability Document amending

Section 17.01.030 of Chapter 17.40 and Section 17.60.040 of Chapter 17.60 of Title 17 of the NB Municipal Code

• Consider additional sources of income for the City• Charge same $ per foot for all tidelands boat storage

– Moorings and piers– Estimated minimum $700,000 in the first year from boats on private

piers• Charge fee on mooring transfers• Charge fee for long-term rental of vacant moorings

SummaryThe City Manager’s proposal – “Outcome of changes to mooring fees

and policy should be fair, reasonable, and legally defensible.”– Is not reasonable

• Indexes mooring fees to expensive upland real estate values– Is not fair

• Make dramatic changes to mooring transferability in a cavalier manner while ignoring Transferability Draft Document approved by Harbor Commission

– City Needs to do the right thing, not just the legal thing• While the City may feel it is on firm legal ground by drastically altering the

city’s transferability policy, are they on firm moral ground? Is a complete reversal of the city’s long sanctioned method the right thing to do to the mooring stakeholders. Are they punishing the many for the actions of a few?

Alternative Proposals– Mooring fees should be immediately indexed to the Consumer Price Index

using the date of the last mooring fee increase (Jan. 1996) as a base point and shall be indexed annually going forward.

– No changes shall be made at this time to the rules regarding mooring transferability. Transferability Document needs to be studied and adopted in the future.