Over the past 12 months, the Aquarium of the Pacific has been losing anywhere between $600,000 and $1.1 million per month depending on COVID-19 closures and restrictions. Now, the nonprofit institution is requesting a $5 million loan from the city, which the City Council will consider at its meeting tonight.
The loan would be funded through the Oil Field Abandonment Reserve, a portion of the Tidelands Oil Reserve Fund set aside for capping city-owned oil wells when production ceases. The loan would be backed by the Tidelands Operating Fund, which among other things is used to fund development, programs and maintenance along the city’s coast.
The facility would draw upon the loan monthly—with a formal written request by aquarium staff—based on estimated operating cash needs. Aquarium staff has determined cash flow requirements could range anywhere between $1.2 million and $10 million, but that the total likely will not exceed $5 million, officials said.
The loan could also be used to pay its annual rent of $2.2 million to the city, which owns the property where the aquarium is located.
Normal attendance generates enough revenue to cover all costs at the aquarium and build reserves, according to a city staff report. However, it remains unclear when cash flow will return to “normal” levels.
The loan would mature after 13 years, but aquarium staff expect to repay it in full “substantially sooner,” according to the staff report. The first semi-annual payment would be due six months after health orders allow the aquarium to fully reopen.
A Jan. 26 health order allowed the aquarium to reopen its outdoor exhibits with limited capacity after the winter surge forced another full closure.
“This is a good sign,” the staff report reads. “However, as the pandemic has proved, there are many uncertainties and the situation could change.”
LA County could loosen business restrictions next week if the current case and hospitalizations trends continue, which could allow the aquarium to reopen indoors with limited capacity. But officials in Long Beach, which has its own health department, haven’t yet made a similar announcement.
In March 2020, like all businesses, the aquarium closed its doors to slow the spread of the coronavirus. Due to the built-in costs of necessary feeding, cleaning, power, water and maintenance, both options leave the facility in the red each month, resulting in a net loss of $13 million in 2020, according to aquarium spokeswoman Marilyn Padilla.
On May 5, 2020, the City Council authorized a loan for the aquarium to cover its annual rent due in October. However, the aquarium did not need to use it.
“Despite our various levels of being fully or partially closed most of the year in 2020, we were still able to make our annual rent obligation to the city of $2.2 million without using the loan they offered last summer,” CFO Anthony Brown told the Post in an email.
The new loan proposal would terminate the 2020 loan authorization.
Attendance levels last year were a fraction of 2019 levels. On July 28, 2020, only 1,200 people visited the facility compared to 6,400 on the same day a year prior, according to aquarium data.
The aquarium’s 2020 operating budget was $38 million. Regardless of attendance, monthly operating costs at the aquarium are at least $2 million. Officials said they were able to get by due to more than $5 million in reserves and a $34 million Payroll Protection Program loan through the 2020 federal CARES Act.
There are some public concerns regarding the proposed loan, namely the funding and backing source. The Tidelands Fund also was hit hard by the pandemic, suffering millions in lost revenue.
The fund pays for a litany of programs, services and projects, including maintenance and improvements at the Long Beach Convention Center, lifeguards, tree trimming, and developments including repairs to the Belmont Pier and the controversial Belmont aquatic center. The fund experienced budget cuts for 2021 and a funding gap of more than $90 million for various projects was identified.
This is not the first time the Tidelands Fund would be used to back a loan. In 2016, the City Council approved a $23 million bond measure to front the money for critical Queen Mary repairs. At the time, the bond was to be repaid through passenger fees from Carnival Corporation with Tidelands merely a safety net. But last year, when all cruise ships were forced to drop anchor—still yet to resume service—passenger fees stopped rolling in.
The Tidelands Fund took another hit last year when worldwide oil futures collapsed and the pierce of oil in some cases dropped below $0 per barrel for the first time in history. While the impact on Long Beach wasn’t quite that dramatic, the price of local oil did dip well below projections, which halted local drilling and cut Tidelands revenue.
With around 2,000 city-owned oil wells in Long Beach, the abandonment liability is hefty. When a well is abandoned, the city and state are on the hook for the costs to cap it. Currently, the city’s total liability is more than $140 million, with more $100 million unfunded. The state’s liability is more than $900 million.
The city deposits about $6 million per year in the fund, but suspended the practice last year and may not contribute to it this year or the next, according to the city memo. Long Beach oil prices dipped as low as $11 per barrel last year but have rebounded significantly since. Crude oil prices worldwide are in the $64-$67 per barrel range, according to oilprice.com.