Imperial Beach Pier Finances May Sink City

It stands out like a white elephant in Imperial Beach: 1,500 feet of pier stretching into the Pacific Ocean, pulling the city into a financial quagmire that threatens to sink the town.

In 1988, the pier, the tiny community’s only landmark, was seen as Imperial Beach’s economic savior. That same year, the City Council voted to spend $2.9 million in money that the city did not have, and could hardly afford to borrow, to reconstruct the pier, which was damaged in the winter storms of 1983 and 1985. The thinking at the time was that the pier would pay for itself; so far, it hasn’t produced a penny.

The history of the city’s pier is a study in errors and mishaps, city officials readily admit. The City Council accepted without checking a businessman’s rosy predictions of how much money the pier would bring in; the businessman now has slashed his prediction by more than two-thirds. The need to cater to a protected bird led to added costs; the boats that were supposed to ferry eager fishermen haven’t arrived, and even if they did, the rubber guards to protect the boats from damage aren’t in place.

But that sort of thing is par for the course in Imperial Beach. This, after all, is the city that in 1986 and 1987 lost $300,000 in a bad stock market investment, that fired its police force in 1983 as a cost-saving measure and that suffered the embarrassment of seeing its former treasurer convicted of stealing $2,000 in city parking-meter money.

So, to the jaded residents of Imperial Beach, the promises initially made by Christopher Boomis, owner of Imperial Beach Sportfishing Inc., the company that acquired the rights to the pier, seemed too good to be true. Apparently, the City Council thought otherwise.

Boomis estimated that a sports fishing business planned for the new pier would bring in $150,000 to $500,000 a year for the financially strapped city. The city never studied the pier proposal to get a more accurate figure.

Skeptics, and there are plenty of them in Imperial Beach, pointed out at the time that the old pier, which had also included a fishing boat business, never brought in more than $12,000 a year for the city.

“To think that we could get $350,000 or so a year from the pier was ludicrous. But the council was sold when the lessee told them the expected revenues would more than offset the cost of the pier in the long run. There was never a study done,” said Milford Portwood, Imperial Beach’s representative on the Board of Port Commissioners.

A one-page estimate that Boomis gave the council on May 12, 1988, projected that two 105-foot fishing boats would work 365 days a year, make three trips per day, and carry 80 passengers per trip at $20 each. He estimated that the two boats together would bring in $9,600 a day.

According to Boomis’ figures, which also included a percentage of receipts from the sale of food, beverages and other items, the city would get $277,546 annually from its lease agreement with his company.

In a recent interview in his downtown San Diego office, Boomis scaled back his projections considerably. He now estimates that when the boats are put into service, they will bring in about $3,000 a day--less than a third of the original rosy projections--and work only eight months out of the year.

Boomis said the more modest estimate resulted from “a more realistic assessment of the operation.”

To date, Imperial Beach has yet to see a penny from its pier investment.

Instead, the pier has helped drive Imperial Beach to the brink of bankruptcy and put the city in danger of dissolving. Last month, finance director Richard Jung warned that a new source of revenue had to be found or the city might not be able to pay its bills in January. The city’s fate may have been sealed last week when voters rejected a 5% utility tax, intended to raise $450,000 annually, that the City Council had favored as a stopgap measure. The tax measure lost by 80%.

Even if the measure had passed, Imperial Beach would still have to struggle to meet the annual debt on the pier. In 1988, the city issued $2.8 million in taxable bonds to pay for the pier. A $2.3-million balloon payment is due in 1995. The city is paying $355,000 in interest payments and $110,000 in insurance for the pier every year.

Last month, an effort to refinance the bonds at a lower interest rate failed when a Del Mar bond brokerage firm decided the city was a poor credit risk.

Meanwhile, the $465,000 annual expenditure for interest and insurance on the pier represents more than 10% of the city’s current $4 million operating budget.

“It’s really an albatross. The sad thing is that the pier is a necessity . . . . But we’ve been carrying the baby (Imperial Beach) in the bath water, and now we’re throwing it off the pier,” said Patricia McCoy, a longtime community activist, in comments about the city’s predicted bankruptcy.

Eight months after its dedication, local residents are asking what went wrong with the pier. More specifically, they are demanding to know why the pier ended up as an economic boondoggle. Not surprisingly, the answers do not come easy in Imperial Beach.

Recently, Mayor Henry Smith unleashed another surprise. City council members were shocked last month when Smith announced that he had uncovered an $800,000 cost overrun in construction of the pier. If Smith is correct, it would suggest that the $2.9 million pier actually cost $3.7 million.

Over the past two years, city officials have commonly put the cost of the pier at $2.9 million. A spokesman for Healy-Tibbitts, the San Pedro-based company that built the pier, said his company charged Imperial Beach $2.5 million for the construction. The city also had to pay for engineering and other costs.

However, former Councilwoman Lorraine Faverty said that last week the city’s finance office gave her a computer printout showing that the pier’s total cost was a little more than $2 million.

“In Imperial Beach, you can’t get a figure anywhere that corresponds to a figure gotten anywhere else for the same contract,” said Faverty, who in 1983 was appointed to a seven-month stint on the council to finish the term of a member who was forced out of office for conflict of interest.

“Join the crowd. That’s legendary,” said Vice Mayor John Mahoney, when told that a reporter was unable to get Imperial Beach officials to pinpoint the exact cost of the pier. “I don’t know where or how the report emanated that the pier experienced an $800,000 cost overrun. I recall no change orders that the council was asked to approve for those expenses.”

The pier has played a major role in Imperial Beach’s financial crisis. But the crisis developed despite warnings from Port District officials that the city was negotiating an unfavorable lease with Boomis.

Early in 1988, Portwood, at the request of the then city manager, asked Port District officials to review a proposed lease agreement between Imperial Beach and Boomis’ company. Portwood acted at the request of the then city manager. A March 24, 1988, memo from Port Director Don Nay to Portwood warned that the agreement “appears to be oriented very heavily in favor of the tenant at this point.”

Nay’s report also warned that “overall development (of the pier) contemplates substantial public expenditures in order for the project to be feasible.” Nay also pointed out that “the lease is quite vague and devotes very little space to describing the public expenditures to be made.”

Portwood said that he shared Nay’s findings with Imperial Beach city officials, but the memo evoked little change in the final lease agreement.

“The most significant change they made was reducing the length of the lease from 55 to 30 years,” Portwood said. “There were a lot of problems with the lease. They (Boomis) have exclusives on everything. For example, the city cannot allow anybody but Boomis to build a restaurant near the pier. There were accusations that some things were switched at the last moment to benefit him. Some things happened there that are really suspect.”

City Councilman Bud Harbin, who worked on the lease agreement, said the document he approved stipulated that the city would provide temporary parking for the pier for a period of 18 months. The version that was adopted included a supplement that obligated the city to provide temporary parking facilities for three years, Harbin said.

“The next thing I knew, the council said we were going to approve the contract. I assumed that the parking provision hadn’t changed, but the final draft included a supplement to provide parking for three years,” said Harbin.

Boomis denied that he took unfair advantage of city officials and said his understanding of the lease agreement does not include “a definite time frame for parking.”

“I’ve been told that the final contract presented to them (council) was changed. Why would they approve it if it was changed?” said Boomis. “If I had to do it all over again and know what I know now, I would never do business in Imperial Beach. I’ve never seen a city run quite like this one. I wouldn’t build in that city if they gave me the land, and any builder who does would be foolish.”

The lease agreement is one of many mistakes exposed in the wake of the pier debacle. In retrospect, Harbin said the city “gave away” $25,000 that was not included in the original price of the pier.

When Imperial Beach put the pier construction out for bids, the city got no takers, said a spokesman for Healy-Tibbitts, the company that built the pier.

“They had a very tight schedule for the contractor,” said the spokesman, who asked that his name not be used. “They wanted 1,000 feet put up before the least tern began its breeding season (in June, 1988). They also said the contractor would be liable for any damages incurred by the city if the bird was disturbed.”

“Well, under those circumstances, we stayed home. And so did everybody else. They got no bids,” he continued. “Then the city offered to pay, as an incentive, $5,000 a pier bent beyond bent 42 and up to a certain amount. We got a $25,000 bonus for finishing five bents before the bird arrived in June.”

(A bent is a section of pier about 20 feet long. The least tern is a protected endangered species that breeds in the waters around San Diego Bay between June and September.)

Harbin and the construction company spokesman said the $25,000 inducement was offered because Imperial Beach Sportfishing had promised to have two charter fishing boats working off the pier as soon as it reached 1,000 feet.

Seventeen months later, the fishing boats still have not arrived. Boomis said “there is no set date for these boats to be in operation” in the contract he signed with the city.

“I heard that they wasted the $25,000 they gave us because the fishing boats didn’t come in,” said the Healy-Tibbitts spokesman.

Boomis said the boats are currently being retrofitted at a local shipyard and could be in the water next month. But Vice Mayor Mahoney said that even if the boats were ready for service, they could not be used at the pier because lack of money prevented the city from installing the rubber bumpers needed to prevent the boats from slamming into the pier.

More recently, Imperial Beach officials have discussed the possibility of ceding the pier, beachfront and tidelands to the Port District. If Imperial Beach could unload these treasured assets, the city would save about $1.5 million a year, Harbin said, and the Port District would have its first property facing the ocean and not San Diego Bay.

“If the Port District took over the pier and beachfront, we’d be in hog heaven. But the reason why they’re hesitating now is because of the contract with the sports fishing business,” said Harbin.

Portwood agreed that the city’s lease with Boomis and Imperial Beach Sportfishing would be an obstacle if the Port District were interested in acquiring the pier, beachfront and tidelands. He added that in 1984, the Port District voted against acquiring the properties.

“Now that the city is broke they’re asking the port to take over the land again, when it’s encumbered with a lease that the port staff counseled against,” said Portwood.

Despite the possible roadblock presented by the lease, Portwood said the Port District is reviewing the city’s request.

While city leaders and the Port District are scratching their heads to find ways of keeping Imperial Beach above water, Richard Kuhlemeier, a developer and frequent council critic, jokingly offered a solution to the city’s financial problems.

“We ought to stop making the interest payments on the bonds and tell the investors that they can come and get their pier if they want it,” chuckled Kuhlemeier. “I mean, what else could happen to the town that we haven’t already seen?”