County Panel Rejects Marina Rent Increases

A commission overseeing Marina del Rey has rejected a proposal to increase rents the county receives from operators of thousands of apartments and boat slips because it included a provision extending operators’ leases for a fee to be negotiated later.

The county’s Small Craft Harbor Commission voted 3 to 2 on Monday against the proposal put together by county staff and marina operators.

A majority of the commissioners said the county could get higher fees for lease extensions if the question were negotiated after an agreement had been reached on the rent operators would pay.

“It is a terrible mistake to put these two things together,” said Commissioner Herbert Strickstein, who voted against the proposal. “We would be giving up the ability of the county to deal from a position of strength,” in lease extension fee negotiations.

‘Giving Away Millions’

Accepting the lease extension provision “would be giving away millions of dollars” in potential county revenue, said Louis Rogers, a commissioner who also voted against the proposal. Voting in the majority with Strickstein and Rogers was Commissioner David Boran.

Marina operators said they only agreed to a proposed rent increase, which would give the county an extra $2.6 million annual rent and a one-time payment of about $4 million, because they want the option allowing them to extend their 60-year leases by 39 years. They have said they will not agree to an increase unless it is linked to a lease extension.

During the meeting, Rogers urged the leaseholders to separate the two matters.

“If you would separate the two issues we would do our damnedest to make sure you get a fair share,” Rogers said to the operators present.

But leaseholder Jona Goldrich told the commission: “If you split them, we will be in arbitration for the next 10 years.”

The 800-acre marina is operated by 57 lessees who have built about 6,000 boat slips, 5,800 apartments and other businesses under county leases. Each operator pays a percentage of his gross income as rent to the county. In 1987, operators took in about $150 million and paid $15 million in rent.

Eventual County Property

The leases granted by the county do not have any provisions for an extension. At the end of the leases, all facilities, such as housing and boat slips, would revert to the county.

The county has urged marina operators to redevelop and expand their businesses to bring in more revenue, which would raise the rent paid to the county. Operators and commissioners agree that banks will not finance new development without the security of longer leases.

“You can’t redevelop on a short-term lease,” Goldrich said.

The county is demanding a rent increase because the original master lease calls for operators and the county to renegotiate the percentage paid as rent every 10 years. But of the 34 leases up for renegotiation, only nine have been settled. Disputes over rent have prevented agreement on other leases for as long as six years and have caused numerous lawsuits.

The proposal rejected this week is a “statement of intent” that outlines areas of agreement and lists outstanding differences, which include the size of an extension fee. The proposal’s terms would give operators and county officials six months to reach an agreement on all its provisions. Disagreements would be settled in arbitration.

Fees Up to $140 Million

Chris Klinger of the county’s Beaches and Harbors Department has said officials would hold out for an extension fee that could bring in an extra $120 million to $140 million.

But if the fee dispute goes to arbitration, the county could be forced to accept substantially less.

The commission is an advisory body that can only make recommendations to the County Board of Supervisors.

But Goldrich said he is reluctant to take his case to the supervisors without the commission’s support.

“I’d rather settle it first with the commission,” he said.

The commissioners later voted, over Strickstein’s objections, a 30-day delay in officially notifying the county supervisors that they rejected the proposal, so negotiations could continue.

“I think if we refer it back to staff, it will give them another 30 days to change a vote on the commission,” Strickstein said. “We’ve taken a vote, it is on the record and it stands.”