12:00pm | Welcome to Friday, and a CityBeat “fact-checking commentary.”
There was a lot of news coverage–some good, some bad–regarding the recent City Council decision to reduce rent charged by the city to Bancap Marina Center, Inc., on an city-owned Alamitos Bay commercial property leased by a yacht club.
In the discussions that followed, including some on this web site, there was also a lot of misunderstanding about the whole issue, who it involved, what was at stake and what it all meant.
First, let’s start with some facts: On April 20, the City Council voted 7-1 to approve a $3,000 per month reduction to Bancap on city-owned property in Alamitos Bay. Bancap, a local real estate investment firm, leases the property from the city and then sub-leases the property to a handful of tenants, including the Seal Beach Yacht Club, or SBYC.
Under the terms of a 25-year lease signed by the city and Bancap in 1994, Bancap pays the city a flat lease rate. Last year, this was just over $450,000.
In addition, Bancap keeps 6 percent of the gross rent collected and 30 percent of its profits from sub-leasing the various the properties covered in the lease. This amounted to just over $61,500 last year.
The remaining 70 percent of Bancap’s profits go to the city coffers–just over $140,000 last year.
Bancap intends to pass along the rent reduction to the financially struggling SBYC, who is edging close to default and might have to vacate.
Keep in mind that the property is restricted by state tidelands laws to tenants that are either marine-related or visitor/tourism-related.
Based on separate analyses by Bancap, Cushman-Wakefield and the city, the “best case” scenario would see the city lose 13 months of rent if the SBYC vacated–six to find a tenant, four months to prepare the property and three additional months of free rent typically offered by the city in such leases. In addition to the lost rent, the city would also be on the hook for the cost of the property upgrades for the new tenant, estimated in the analyses to be about $60,000. The lost rent and construction costs total just over $162,000.
Of this amount, the analyses found that the city is likely to lose $110,000 if SBYC vacated and Bancap the remaining $52,000.
The two-year rent reduction plan, on the other hand, would cost the city a total of $72,000 ($3,000 X 24 months). In addition, under the reduction plan, the city will recoup some of the $3,000 per month reduction by a monthly payment from Bancap of 30 percent of their rent profit or $900, which ever is less. At a minimum this would recoup nearly $21,600, leaving the city to pay $50,400 over the two-years to help keep the SBYC in place.
Looking at these numbers, and the estimated reduction in losses over two years to the city of $59,600 ($110,000 – $50,400), the City Council agreed, 7-1, to approve the two-year rent reduction plan.
So those are the basic facts.
Now, I am not asking you to agree or disagree with what the Council decided on. There are those that will consider the rent reduction a taxpayer bailout of Bancap and there are those that who will believe it is preferable to have a paying tenant generating revenue for the City’s coffers than not have one.
But let’s take a look at some of the misconceptions that were brought up. First, it appears that many people believe that the SBYC is a bunch of millionaires looking to fill their humidors and brandy snifters with a squirt from the public teat (FYI–your intrepid writer is terrified of the ocean and has no connection to any of the yacht clubs).
First, from a factual standpoint, it is worth noting that not all yacht clubs are the same. The SBYC is far from the elitist “rich-man’s” club it is being portrayed as.
Keep in mind that the SBYC, located just south of the Seaport Marina Hotel, is the cheapest of the “Big Three” sailing clubs one can join in Long Beach, according to city documents presented to the Council. It costs $100 to join and $75 per month in dues. Roughly the cost of a cable TV package with a couple of premium movie channels, according to Charter Cable.
Located on the tip of the Alamitos Bay peninsula, the Alamitos Bay Yacht Club, by comparison, costs a steeper $1,000 to join and $98 per month. The Long Beach Yacht Club, located in Naples, costs a substantially higher $9,000 to join and $225 in monthly membership fees.
And it is not all cigars and brandy at the SBYC. One of the club’s most prominent services is offering classes that teach kids to sail 8-foot and 14-foot boats. Kids don’t even have to belong to the SBYC or have a boat to join the classes. And while both ABYC and the LBYC also offer extensive youth programs, SBYC offers the lowest rates—about $250 for an eight week first-timers course, or roughly 30 percent lower than the next nearest advertised rate for a similar class at the other clubs. By comparison, a one-day trip to Disneyland for a family of four costs $280 just to get in…and no one calls Disneyland a “rich man’s” club.
Quite a few people also brought up the question of why City Hall should be helping a Seal Beach club–that perhaps there was something “less-than-Long Beach” about a club with the name Seal Beach in it. Well, in reality, according to the SBYC, the club was founded in 1961, moved to Long Beach in 1964, and has been here ever since.
Also, I don’t think that a lot of people that slammed the SBYC for even daring to ask the city, through Bancap, for a rent reduction realize what an exorbitant amount in annual rent the club pays compared to the other yacht clubs in town. This despite all three being in the same relatively high property value area surrounding Alamitos Bay.
Here are some statistics from the city: The ABYC pays $15,000 a year in rent for 102,279 sq. ft. of city property.
The LBYC pays $10,705 per year for just over 70,000 sq. ft. of city property.
The Seal Beach club, on the other hand, pays nearly $95,000 a year for its 5,925 sq. ft. city-owned facility, or 633 percent more than the next closest yacht club for property that is 6 percent the size.
In addition, the SBYC’s rent is adjusted upward based on the consumer price index each year, while the other two clubs face adjustments once every five years.
Perhaps, in retrospect, this is the question that we in the media should have been asking–why the horrible rent disparity?
Another theme of many discussions on this topic was the suggestion that there was government collusion involved in the rent reduction—that campaign contributions from two prominent executives of Bancap somehow “bought” the vote.
Here are some facts: city election records show that only three of the eight Council members voting to approve the reduction received campaign contributions from top Bancap executives Steve Conley or John Hancock in their last campaigns. The total amounts are: Andrews, $200; DeLong $1,400; and, Lerch, $350.
You will note that four Council members that voted to approve the Bancap rent reduction–Rae Gabelich, Suja Lowenthal, Patrick O’Donnell and Gerri Schipske, received nothing from Conley or Hancock.
The only Council member to raise questions about the rent reduction and vote against it, Tonia Reyes-Uranga, also received nothing from Conley or Hancock in her most recent race, nor did Council member Robert Garcia who missed the vote on the rent reduction.
Just to step away from facts for a second and apply some logic, keep in mind that your intrepid writer is normally one of the first to bring up the idea of contributions buying votes, and I have written on it extensively, but this really stretches the realms of logic to suggest these small amounts bought this vote.
For example, Council member Andrews, who received a $100 contribution from both Conley and Hancock, raised $99,423 from 324 contributors for his 2008 race. This means the two Bancap donations amounted to two-tenths of one percent, or 0.2 percent, of his entire bankroll for the race. Council member DeLong received 0.4 percent of his last race’s contributions from Conley and Hancock and Council member Lerch received 0.7 percent.
Interestingly, Garcia himself became an object of some discussion when, two and half hours into the April 20 Council meeting, he got up to use the restroom and during his seven minute trip missed the vote on two agenda items, including the rent reduction.
Numerous people suggested that there was something more sinister than bladder control behind the move. The fact is that the rent reduction motion was affirmed by six full votes, including votes by four Council members that had no connection to Bancap and it would have made no difference to the outcome how Garcia voted.
Well, I hate to say it, but sometimes government conspiracies aren’t real. Sometimes there is only a lone gunman, a UFO really is just a weather balloon, and a bathroom break is just a bathroom break.
And, occasionally, elected officials act on the best information they have. In this case, at least for seven of the Council, it was a simple matter of all the facts telling them that this rent reduction was better in the long run for the city.
If LBPost or the Press-Telegram did not speculate on why Garcia left the room or how the campaign contributions to three Council members somehow “bought” a total of seven Council votes, perhaps that is because speculation is not fact. Straight new-reporting journalism requires that you actually ask someone why they left the room or show the documented connections between Bancap contributions and how they might impact the “yea” votes at the dais. You know, like detailed above.
As I said, I am not asking you to agree or disagree with what the Council decided on. I am simply asking you to take a look at all the facts and make your decisions based on them. Remember the oft-quoted phrase, “We are all entitled to our own opinions, but we are not entitled to our own set of facts.”
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