City Panel Tentatively OKs Shipyard Lease, Chides Harbor Dept.

A Los Angeles City Council committee has tentatively approved a new lease with Terminal Island’s largest commercial shipyard, but not without some harsh words for the Harbor Department’s handling of the company and the agreement.

The proposed 10-year lease with Southwest Marine Inc. drew criticism Tuesday from the council’s Commerce, Energy and Natural Resources Committee because the agreement has been in negotiations since 1986 and falls short of the 20-year lease sought by the shipyard.

Harbor-area Councilwoman Joan Milke Flores, who chairs the committee, said she was particularly sensitive to Southwest Marine’s position, because it is the last large shipyard in Los Angeles Harbor. “They’re so vital to the community. If we lose that shipyard, it’s almost over,” she said.

The lease with Southwest Marine to operate at berths 240Z-241 was scheduled for action in early 1986, according to a report to the committee. But the negotiations dragged. During the talks, Southwest Marine has been paying rent on a month-to-month basis for use of the 18-acre site.

Originally, the port’s staff agreed to the shipyard’s request for a 20-year lease and the port commission said it would consider such a lease if Southwest Marine made significant capital improvements to the facilities.

But the port’s staff later recommended a 10-year lease, arguing that a new dry dock purchased by Southwest Marine, at a reported cost of $24 million, was a moveable asset that could be taken away if the company relocated its shipyard. They also recommended that the rent be renegotiated after five years.

Under the terms of the lease, which is retroactive to 1986, the shipyard would pay $74,000 a month during the first five years. The rate for the last five years would be set next year.

Under questioning by the council committee, Mark Richter, the port’s assistant property manager, acknowledged that negotiating the lease had taken more time than port officials had expected. He also said the proposed agreement offered the shipyard less than it wanted. “They’re not delighted, but they’re certainly satisfied,” he said.

But the council committee members were not. “So the lease is only good for six years?” a surprised Council President John Ferraro asked port officials.

Added Flores: “I think it’s ridiculous that you have to renegotiate for the other five years” on the proposed lease.

Although it tentatively approved the lease, the committee, at Flores’ urging, did not schedule the agreement for final approval before the full council. That action would be taken, she said, only after the committee hears from the shipyard.

Shipyard officials declined comment Thursday.

Southwest Marine, which employs 870 workers, opened its Terminal Island facility in 1981, taking over the site vacated by Bethlehem shipyards.