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SR-07-14-1959-6RPRFLIMINARY REPORT TO THE CITY COUITCIL BY THE SANTA MONICA HARBOR COMMISSION July 14 1959 c° U J -11 . - CIII'7 IT,. -I -i Following the completion of its engineering report on the development cg�_ a r-rD. Santa Monica Marina, the George F. Nicholson firm of consulting enpned43 w was requested by the Santa Idonica City Council to prepare an economic study concerning the financial feasibility of the project. The Nicholson firm .submitted its economic survey in January, 1959, and the Council referred the report to the Santa Monica Harbor Commission for review and possible recommendations. During the past months, we of the Harbor Commission have made a thorough study of the Nicholson report. We also have looked into plans for the con- struction and operation of the Ventura Harbor District, Marina del Rey, Redondo Beaches Ifing harbor and Long Beach Marina. As a result of these studies, we have come to some firm conclusions, and tonight we are submitting to the Council our Preliminary Report. Our final recommendations will have to await some further information relative to financing methods and the clarification of a vital point of law. First, I want to stress that as members of the Harbor Commission and as citizens of Santa Monica, our sole interest is the betterment and advance- ment of our community. We are unanimous in our opposition to any step which might tend to sacrifice any of our city's historic beauty for short -range financial gain. However, our studies have convinced us that a pleasure -boat Marina will not mar the beauty of our harbor, that such an installation with supplementary structures would be of lasting financial benefit to our city, and that a Marina would be an aesthetic and recreational asset to the entire bay area. 2 From the dollars and cents standpoint, a modern, well- equipped pleasure -boat harbor and moorage facility would be a great financial boon to Santa Monica.. Right now I think we can all agree that this city is sorely in need of an economic stimulant. our citizens are faced with a double -edged problem -- the rising cost of government for a growing population and a reduction in tax revenue due to the commercial -plane cut -backs at Douglas. A beautiful Marina with hotels, fine restaurants, cabanas and other facilities to serve boat owners and their friends would give Santa Monica a brand new industry, completely in keeping with ourcityls scenic attractions and recre- ational advantages. We of the Harbor Commission truly believe that we now have within our grasp an ideal economic asset that would not only bring needed revenues to our city but add to its attraction for tourists, investors and desirable residents. The Nicholson report, along with many similar studies, has demonstrated and documented beyond question the pressing need for more pleasure boat facilities along the Southern California coast, especially in the Los Angeles area. Marinas currently in the planning or early construction stages find that their boat moorage and storage accomodations have been spoken for, years in advance of their completion. With Los Angeles County's population increasing steadily and the number of boat owners growing at an accelerated pace, it is hard to imagine an over - supply of boat facilities in this area. The "market" is here and waiting. Certainly, there can be no question as to the need for a Marina here. We have an ideal location. What remains to be determined is the proper size and the best methods of financing and operation. Let us quickly review the highlights of the Nicholson report. Using the existing breakwater as the base of a broad offshore mole lying parallel to the beach, Nicholson estimated the "protective" features t- the breakwater 3 extensions, rock fill, etc., would cost 4;3,722,000.; the mole and access roads would come to $1,054,000.; bulkheads, parking areas, dredging, etc., would cost $;3,531,277. and the revenue- producing facilities such as boat slips, boat storage, boat maintenance yard, yacht club, restaurant, fuel floats, etc., would amount to $,3,250,000. -•• or a grand total construction cost of $11,557,457. The capacity would be 1273 slip boats and 392 smaller boats in dry storage. The Nicholson minimum financing plan, which he termed the conservative or "austerity" approach, was based on an assumption which he repeats many times throughout the study -- that ['it would be impossible to build a self- . liquidating Marina to the standards that would be acceptable to the City of Santa Monica° -- that it would be necessary to finance at least the pro- tective works portion from some outside source such as the federal government, He pointed to the $;5,200,000. federal contribution which has been necessary at Redondo Beach and to the substantial U. S. government assistance which is being given to Marina del Rey for jetties and dredging. In capsule form, here were his suggestions: $3,722,000. in protective works to be paid for by the U. S. Government; 3,250,000. in revenue - producing features, financed by lessees; 4,585,225. remaining construction to be financed by the City of Santa Monica through sale of revenue bonds. According to Nicholsonts calculations, a Marina of this size would produce gross revenue of bbout $523,000. Operation and maintenance costs would amount to approximately $103,000., leaving a net profit from harbor opera- tions of $425,000. This, he said, would be sufficient to fund the $4,585,225. in city debt by using 30 -year revenue bonds bearing 52% interest. The report emphasized that the possibility of receiving federal aid would be very slight for a good many years to come. TL is understood that the 4 federal government, particularly the Corps of Engineers charged with the direct responsibility, believes that there has been sufficient federal help on harbors on this area until these Marinas become overcrowded. Nicholson went on to point out that Santa Monica was in a unique and advan- tageous position because our City owns its own tide and submerged lands and has the rights to any minerals lying thereunder, by a State grant given in 1917. He stressed that under the terms of this State grant, the city's share of proceeds from the development of its potential tidelands oil re- sources could be used for virtually unlimited harbor and beach improvements. In the event that the citizens of Santa Monica should decide to permit the development of their city owned oil resources, and should oil be found in paying quantities, Nicholson urged that the City finance the entire Marina project through a combination of oil revenues and revenue bonds, as Redondo Beach is planning to do. In that case, such revenue - producing facilities as boat slips, boat storage, etc., would be City -built and - operated. The City then would receive the entire proceeds from slip and storage charges instead of a percentage from lessee operators. The Harbor Commission took Mr. Nicholson's "austerity" plan as a base and from that we have worked out four variations which we have called Plans A. B, C, and D. Plan A is roughly Nicholson's basic proposal with a few alterations, and Plan B is the same with the city paying for most of the project (except for lessees' construction amounting to less than a million dollars), and operat- ing the boat slips, boat storage, owners' maintenance yard, parking and boat launching services. In all of our four plans we leave the building and operation of the yacht club, restaurant, and miscellaneous concessions to concessionaires. The cost of these structures would be $966,705. 5 Under Plan S we show more than double the gross profits of Plan A. with opera- tion and maintenance costs increasing to only $,130,000. annually. Our cost estimates may seem to be too conservative, but even should they be consider- ably more, we certainly show that the Cityos net income would be substanti- ally increased if the City should build and operate most of the Marina. Looking back to 1934, when Santa Monica completed the present breakwater at a cost of $650,000. -- of which about $200,000. of bond debt remains to be paid -- there is good reason to believe that this project was inadequate from the outset. In the light of the increasing demand for pleasure boat moorage and storage in Los Angeles County, our Commission began to wonder whether 1273 slips would be adequate to meet Santa Monicats potential needs. Perhaps a larger Marina was the answer if it could be achieved at a reasonable additional expenditure and financed properly. In simple terms, we extended the present 2000 foot breakwater (the backbone of the Nicholson plan) another 2000 feet northward. This permitted us to add 1920 slips for a total of 3193 and to double the dry storage space to handle 784 boats. (The proposed Marina del Rey capacity is 5700 slip boats.; We estimated that the enlarged Marina would cost a total of $17,479,000., or a little more than a 50, increase over the cost of the Nicholson proposal. This we called Plan C, in which total city costs would be $11,492,000. and the lessees' construction costs would be $5,987,000. With the Cityls functions confined largely to administration and heavy structure maintenance, we estimated that operational and upkeep costs would not be much greater than for the smaller harbor under Plan A. However, we discovered that net profits would not show a startling increase either -- $694,111. compared to $546,265. under Plan A. 6 Our objective in planning an enlarged Marina actually was twofold -- to take care of present and future demands adequately and to produce the largest possible net profit for the City. This we believe we have accomplished under our Plan D. Ilerc the City would build the boat slips, the boat storage and the maintenance yard, stepping up city costs to $1.6,492,617. Lessees would build the same facilities as under Plan B -- $9869705. -- yacht club, restaurant, fuel stations and other con- cessions. But gross profits from city operation of boat slips, boat storage launching facilities, owner maintenance yard and parking, plus fees and rentals from various concessionaires and lessees, would total $1,851,625. Our estimate of operation and maintenance costs under Plan D, amounting to only $200,000., may be too low; but even should these costs be tripled, the net profit to the city still would be in excess of $1,200,000. As stated in the beginning, this is in the nature of a Preliminary or Progress Report to you, the members of our City Council, and to our fellow citizens. As you can see, we have not been idle. Our Commission members have devoted many long hours to consultation, discussion and study. Our Commission is unanimous in the belief that a Marina with a larger capac- ity than that suggested in the Nicholson report would represent sounder planning for the future and would have many times more beneficial impact on our City, in terms of increased business activity, increased property values and new tax money. Under the heading of °Indirect Benefits" the Nicholson report very modestly estimated that a 1273 -slip Marina would produce about $150,000. annually in addition to direct income from operations. However, we noticed in the course of our studies that Victor Gruen and Associates, the consultants retained by 7 Redondo Beach to plan and design King Harbor, have estimated that its ultimate development of 1700 slips would result in a total indirect income for that city of $731,000. annually. Although our calculations represent only rough projections, based on the Nicholson report, we are convinced that they indicate clearly that the greatest possible net profit for the City can be achieved through city con- struction and operation of most of the important revenue - producing facilities. We also agree completely with Mr. Nicholson that a federal subsidy cannot be expected in any near future. if we waited for one, our Marina development would have to be postponed from five to ten years. We need action now! It must be remembered that even under the most favorable circumstances, it takes a long time to construct a project of this magnitude. At Redondo Beach, where the initial slip capacity will be only 1070, con- struction on the seawall began in June 1956 and was completed just under two years later. The building of the harbor's interior structures and revenue - producing facilities will begin probably after January 1, 1960 and may be completed in the late spring of 1961 -- an elapsed time of almost five years. Before we can make our final recommendations -- which I know that the Council ultimately expects us to make -- we need a legal opinion as to the use which the City can make of the net profits derived from the operation of the harbor, inasmuch as the proposed Marina would be built on tidelands which were granted to our city under a trust agreement. The point at issue is whether these harbor revenues can go into the cityts general fund or whether they can be used only for beach and harbor improvements, maintenance, etc. We would like to suggest that the firm of 01MUveny and Myers be retained to .furnish this opinion, because of their, specialized experience in matters pertaining to state tidelands grants. I The Nicholson report went no further in the study of financial feasibility than to estimate that a 1273 -slip Marina, with the major portion of its '41,557,459. construction costs contributed by the federal government and lessees, could produce enough revenue to fund a city revenue bond debt of $4,585,225. Because we have three alternative methods under consideration, we feel the need of competent and objective financial consultants to advise us on all possible methods of financing the Marina construction, along with relative costs. Vic have had some discussions with the firm of Stone and Youngberg, and from these conversations and consultation with others in the Los Angeles financial community we are more than ever convinced that we need expert guidance in order to arrive at the proper decisions. We would .like the City Council to give consideration at this time to the hiring of a firm of financial advisors for our Commission. On behalf of myself and my colleagues on the Aarbor Commission, I would like to thank all those who have assisted us with information and counsel in the course of our studies. I especially wish to thank the members of the ad- ministrative staff of the City of Santa Monica for their cooperation. Respectfully submitted, Elmer H. Dean Chairman Santa Monica Narbor Commission COST ESTIMATES - Summary 1:(ichols on' s Enlarged $ 248,118. b. Mooring 11B" Bulkhead Plan Plan 1. Offshore Construction a. Brcalwatcr Rehabilitation y 9859000. $ 985,000. (4360 lin. ft. plus 8001 lchg.wall $80,000.) 20001 Extension d. 2,0001000. b. 7601 Breakwater 697,000. 697,000. c. 16001 Breakwater 2,040,000. 2,040,000. d. 5001 Viaduct 294,030. f. Roads 5001 Brealuaater 100,000. e. Mole area bulkhead and fill 20001 759,072. 33,481. 35,000. Mole area bulkhead and fill 40001 1,518,144. ,,20,000.) 227,480. 247,480. Street Lighting 113,470. 1253000. Sewerage System 2. Other public financing a. Pier area $ 248,118. $ 248,118. b. Mooring 11B" Bulkhead 176,636. 176,636. e. Mooring "Alt Bulkhead (2560 lin. ft. plus 4001 launching wall $40,000.) 309,683. (4360 lin. ft. plus 8001 lchg.wall $80,000.) 541,796. d. Dredging (Sand trap cost 112,500 plus) 1,131,571. Dredging sand trap out but double Length 1,309,885. e. Main parking 3280 places plus 271,226. Main parking (1)1.25 additional $93,600.) 364,826. f. Roads 446,474. 500,000. Walks 21,421. 25,000. Landscaping 33,481. 35,000. Bldgs., Patrol Facilities (extra patrol boat ,,20,000.) 227,480. 247,480. Street Lighting 113,470. 1253000. Sewerage System 76,593. 80,000. Water and fire mains 210,419. 220,000. Underground Electrical Distribution 121,000. 135,000. Catalina and Sportsfishing Nharf 143085. 143,385. $3,530,957. $4,1520126. 3. Other improvements a. 11A119 1113", and "C" Slips (1273 or 113.,620 lin. ft. Q $43.00 /ft.) $2,064,528. "A11, "B ", and "C" Slips (Add. 1920 or 3193 slips 91,440 lin. ft.) (all 8p +8,) 4,572,054.. b. Boat Storage (392 capacity 8% + Bjo) 188,653. (784 capacity 8% + 8 %) 377,305. c. Small -boat oznlersl Maintenance Yard 8% + 8 %) 31,_259. _ 514,018. X2,2841 440. $5,000,377. 4. Lessees' Improvements a. Yacht Club 122,472. 122,472. Restaurant 153,195. 153,195. Fuel Stations 84,681. 84,681. Boat Repair Yard 66,485. 66,485. Miscellaneous concessions 559,872. 559,872. $LL 986,705. $ 986,705. GROSS DIRECT INCOME Gross Item Quantity Unit Computation Fee "A" Plan "B" Plan "C" Plan I'D" Plan Boat Slips 38,000 (of 111,270) lin. ft. @ $1.25 x 12 mo. 15 $ 85,500. $ 570,000. $ $ 82,296 (of 91,440) lin. ft. @ $1.25 x 12 me. 185,166. 1,233,440. Brokerage $ 1,050,000, sales /yr. @ 8% com. 20 16,800. 16,800. 33,600. 33,600. Boat Storage 350, 181 ay. (o. 392) lin. ft. C 50¢ /ft. x 12 mo. 15 5,700. 38,000. 700, 18t ay. (of 784) lin. ft. @ 54/ft; x 12 me. 1121[00. 76,000. Boat Launchings 10,000 yr. each @ $2.00 15 3,000. 20,000. 20,000 yr. each @ $2.00 6,000. 40,000. Boat Repair Yard 25,300 sq. ft. @ 20¢ /yr. 5,060. 5,060. 5,060. 5,060. Owner Maint. Yard 23,400 sq. ft. @ 2001yr. 4,680. 105000.. 23,400 sq. ft. 9,360. 20,000. Fuel floats (based on 3¢ /gal. gasoline, 1? fuel oil) 6,000, 6,000. 10,000. 10,000. Auto Service Station $100,000. plus sales 4 4,000. 4,000. 6,000. 6,000. I4ain Restaurant tu500,000. plus sales 3 15,000. 15,000. 25,000. 255000. Concessions on "Beach" 78,000 sq. ft. @ 400 /yr. 31,200. 31,200. 31,200. 31,200. Yacht Club 55,000 sq. ft. @ 20¢ /yr. 11,000. 11,000. 11,000. 11,000. Santa Monica Pier Hotel Area 120,000 sq. ft. @ 600 /yr. 72,000. 72,000. 72,000. 72,000. Motel, Cabanas, Concessions 224,000 sq. ft. @ 40¢ /yr. 89,600. 89,600. 89,600. 89,600. Public Telephones 10 plus booths @ $500. ea /yr. 92 4,525. 4,525. 6,525• 6,525. Sportfishing 60,000 passengers @ $3.50 ay. /trip 6 12,600. 12,600. 12,600. 12,600. Catalina Service 20,000 passengers @ $6.00 rnd/trip 6 7,200. 7,200. 7,200. 7,200. Parking Areas 935 (250 of 3,738) spaces C 50¢ per day net 170,000. 170,000. 170,000. 170,000. Harbor Cruise 80,000 passengers @ 50¢ /trip 6 a 2,400. 2,400, 2,400. 2,400 TOTAL GROSS DIRECT INCOME $546,265. $1859385• $ 694,111. $1,851,625. O V E R A L L S U M M A R Y Plan "A" Plan "D" Plan "C" Plan "D" Gross Direct Income $ 546,285. $ 1,085085. $ 694,111. $ 1,851,625. City Operating Cost 79050. $ 100,000. $ 85,000. $ 165,000.. City Maintenance Cost 24,116. 30,000. 30,000. 35,000. $ 103,466. $ 130,000. $ 115,000. $ 200,000. Net Direct Income $ 442;819. $ 955,385. $ 579,111. $ 1,651,625. City Cost $ 81288,059. $10,5722499. $11,492,24o. $16,492,617.. Lesseesf Cost 3,271,145. 986,705. 5,987,082. 986,705. Total Cost $11,559,2011. $11,559,24. $17,479,322. $17,479022.