Newport Moves to Begin Talks on Bay Club Lease

Leaving open the possibility of a citywide referendum on whether the exclusive Balboa Bay Club should continue to use public land, the City Council unanimously voted Monday to reappraise the property and begin negotiations on a new 50-year lease.

The vote came after more than 100 people packed the City Council chambers and for nearly two hours debated the future of the club, whether it pays enough rent to the city and whether the public has sufficient access to the bayfront.

The council will set up an ad hoc committee to handle the reappraisal and assess the club’s proposed plan for renovation. Council members said it could be more than a year before a proposed lease is drawn. Then they will have to decide whether it should be put to a citywide vote.

Club officials are seeking a new lease in order to secure loans for a $60-million renovation.

Speakers at a public hearing before the council were divided in their support for the club, a social landmark that counts among its 4,000 members some of California’s most influential and powerful people.

“A lot of community groups use the facilities,” argued Donald Olson, a 12-year resident of the club, which is seeking the new lease to secure a $60-million renovation. “It’s a community center and a plus. . . . It’s an unpaid public relations campaign for the city.”

Among those against the proposal was Frank Eisendrath, who said the site, donated by James Irvine in 1928, was never intended to be used by a private company. Eisendrath questioned the club’s $642,000-a-year lease, which he said is less than other businesses are charged per acre.

“Why is the Balboa Bay Club given preferential treatment?” Eisendrath asked. He said the club should be paying $2,066,000 a year.

His remarks, punctuated by loud applause, were among those made at the public hearing on whether the city should reappraise the Balboa Bay Club site and begin official discussions on renegotiating its lease with International Bay Clubs Inc.

The tony enclave sits on 14 acres owned by the city at 1221 W. Coast Highway. It was first leased to the club for 50 years in 1948.

Since then, Newport Beach city attorneys and club lawyers have issued conflicting legal opinions about whether the public should be allowed to vote on a new lease for the club.

The present city attorney, Robert H. Burnham, has concluded that the City Council has the power, but is not required, to approve a new rental agreement on its own. Another legal opinion issued in May by Bruce W. Sumner, an independent lawyer hired by the city, says the same thing, except that the council might want to put it to a public vote because of the “unique nature of the Balboa Bay Club.”

In January, 1970--the last time the club’s lease went to a vote--the public decisively defeated a proposal to extend the facility’s rental agreement from 50 years to 55 years. In 1986, however, the City Council voted to extend the club’s lease by 12 years and agreed to put up the city’s interest in the lease as security to help the facility obtain financing. The current lease expires in 2011.

As for the future, club officials say, a new 50-year lease is extremely important in obtaining loans for the $60-million renovation. Balboa Bay Club President Tom Deemer said that 50 years is the minimum necessary to obtain financing and that most banks require leases of 75 to 99 years.

So far, council members Evelyn R. Hart and Jean H. Watt say they think that the public should vote on the lease because of city charter provisions and because the city-owned site has been designated as state tidelands. As such, the choice bayfront property occupied by the private club is held in trust by the city for the benefit of the public.