Vote to Take Over Queen Mary Carries Risks and Benefits : Landmark: Investment group headed by Joseph F. Prevratil has proposed managing the ship for a few years while the city ponders development plans.

The City Council took a chance when it voted to take over the money-losing Queen Mary, and no one seemed to feel entirely comfortable with the decision.

“My head tells me this probably isn’t a good business decision, but my gut tells me it’s what the people want,” said Councilwoman Doris Topsy-Elvord, who voted to save the ship.

Mayor Ernie Kell opposed keeping the ship because of the “extreme risks.” But the mayor said he would be a Queen Mary booster in light of the council vote.

Now that the fate of the Long Beach landmark has been decided, the city is expected to turn to an investment group headed by Joseph F. Prevratil to make the Queen Mary successful. A former executive director of the Harbor Department, Prevratil is now a city consultant overseeing the convention center expansion.

Prevratil has plenty of experience with the Queen Mary. He oversaw its operation for the Wrather Corp., which ran the ship until 1988.

He maintains that he can run the financially troubled ship, including the hotel, at a profit by changing the way it is operated.

The $10 admission price would be eliminated to increase foot traffic, he said. New attractions, such as children’s rides, would bring in money.

“If you provide reasonably priced entertainment and the setting is safe, people will come in very large numbers,” Prevratil said.

Special attractions such as concerts and sporting events would be held in the Spruce Goose Dome. If voters give their approval on the November ballot, a card casino also could be put in the dome, he said.

Prevratil has proposed managing the Queen Mary for three to five years, until city leaders determine whether the ship fits into its development plans.

A plan to create a tourist harbor surrounded by restaurants and shops in downtown Long Beach has won preliminary approval from city and harbor officials.

The consultants putting together the plan, Ehrenkrantz & Eckstut Architects of New York, have said the Queen Mary could be incorporated into the development. Their final plan is scheduled to be presented to city officials in the next few weeks.

Last week’s debate on the future of the Queen Mary was set against the backdrop of Long Beach’s recent setbacks: The Navy has decided to close its station and move its ships out of town, cutbacks in the aerospace industry have filled unemployment offices, and several large development projects have been put on hold.

To make matters worse, the Walt Disney Co. announced earlier that it had scrapped its proposal to build a massive theme park in Long Beach.

The entertainment company also decided not to renew its lease to operate the Queen Mary. Disney acquired the lease when it took over Wrather in 1988.

Assistant City Manager John F. Shirey, whose voice may have tipped the scale in favor of the Queen Mary during last week’s vote, maintained that Long Beach cannot afford to take another hit to its reputation and business environment. He likened the city to a company with stock traded on the New York Stock Exchange.

If the city were to abandon the Queen Mary, Shirey said, “I think there would be immediate suspension of the trading of our stock because it would be plummeting too fast.”

The tangible benefits of having the Queen Mary in town include $1 million a year in annual taxes for the city. It also provides hundreds of jobs.

A recent report by the Los Angeles-based consulting firm Economics Research Associates also indicated that about $50 million a year is spent at the Queen Mary and elsewhere in Long Beach because of the retired ocean liner.

In addition, the Queen Mary is a draw for the Long Beach Convention and Entertainment Center, which creates business for downtown hotels, restaurants and stores, Shirey said. A $95.5-million expansion of the convention center is to be completed by July, 1994.

Shirey’s main opponent before the council was City Auditor Robert E. Fronke, who retired Friday.

Fronke pointed out that the consultant’s report said the ship needs about $6 million in immediate repairs and maintenance to make it safe and another $21 million in additional work over the next five years. After that, maintenance is expected to cost about $5 million a year.

Fronke advised the City Council to let the Long Beach Harbor Department sell the ship to a Hong Kong firm for $20 million.

“We feel any operator will have a tough time making the cash flow,” Fronke said.

Of about 30 people who testified before the council--residents, business people, preservationists and ship employees--only four wanted to see the ship leave town.

But time was quickly running out for the Queen Mary.

Harbor officials, who have had jurisdiction over the ship since 1978, were negotiating with prospective buyers and were ready to sell.

The council worried about the financial viability of the ship. Operators of the Queen Mary have lost money in all but one of the last 10 years, according to the ERA report.

Disney, which operated the ship under a lease with the city since 1988, lost as much as $10.8 million a year.

But Prevratil said the high losses posted by Wrather and Disney do not mean that he cannot operate the ship at a profit.

The ship generated operating profits for Wrather from 1983 to 1987, Prevratil said. But a loss was posted because of tax write-offs for ship improvements and interest on corporate loans.

That assessment is supported by the ERA report, which showed that the Queen Mary generated for Wrather annual operating profits as high as $7.5 million.

A Disney spokeswoman declined to comment on her firm’s losses or whether Prevratil could run the ship at a profit.

Disney will continue to run the Queen Mary’s tours, restaurants and shops until the end of the year.

The entertainment company closed the ship’s hotel and banquet facilities Wednesday and laid off about 400 of the ship’s 1,200 full-time and part-time employees.

Before the city can find a new operator, the Board of Harbor Commissioners must transfer title of the Queen Mary to the city. A meeting to approve the transfer is scheduled for Oct. 12.

City and harbor officials are negotiating over how much money the Harbor Department will contribute to the immediate repairs and maintenance the Queen Mary needs.

The Board of Harbor Commissioners has offered $4 million but the City Council has requested the full $6 million.

If his group secures a lease, Prevratil said he plans to spend about $5 million a year to maintain the ship.

If the ship proves successful, the city will negotiate with the operator to make the remaining $21 million in repairs, Shirey said.

The Queen Mary was built in Scotland and launched by Cunard Steamship Co. Ltd. in 1934. Long Beach purchased the ship for $3.45 million in 1967, and then spent $66 million over the next four years to refurbish it. The city has leased it to various operators over the years.