Council OKs Nonprofit Plan to Run Queen Mary : Revenue: Philanthropist Gumbiner promises $2 million to support a five-year leasing deal. The tourist ship is expected to reopen later this month.

The City Council rejected two last-minute bids to buy the Queen Mary and voted to lease the ship to a nonprofit group, despite a warning from the city auditor that the group is underfunded.

Under the five-year agreement approved Tuesday by the council, local philanthropist Robert Gumbiner will donate $2 million to the nonprofit RMS Foundation Inc. to reopen the tourist attraction later this month. Joseph F. Prevratil, who ran the Queen Mary in the mid-1980s, will oversee operation of the ship.

In addition, Gumbiner and Prevratil have pledged to launch a nationwide campaign to try to raise a reserve fund of $3 million to $5 million to keep the Queen Mary open if the tourist attraction has problems generating enough revenue.

The council approved the lease unanimously despite a warning from City Auditor Gary Burroughs that the new operator should have $5 million to pay for the cost of reopening the ship and to weather a start-up period when attendance may be sparse.

The Queen Mary has been closed since Dec. 29, when the previous operator, the Walt Disney Co., decided not to renew its lease. Disney reportedly lost up to $10.8 million a year on the ship.

“You’ve got to have $5 million,” Burroughs said. “I don’t know when those monies will be raised.”

Burroughs suggested that the council delay its decision and study offers by two investment groups that wanted to buy the ship and operate it in Long Beach. The groups offered from $3.5 million to $5.5 million.

One of the groups, Queen Mary Preservation Trust, sued the City Council after its bid was rejected last December.

Another group, headed by Program Control Corp. of Westlake Village, renewed its $5.5-million offer to buy the ship.

But the council’s position has been to keep the Queen Mary as city property for three to five years, until officials decide whether it fits into future development plans.

So the council moved forward with the operating lease on the strength of Gumbiner’s and Prevratil’s reputations.

Gumbiner is the founder and chairman of the board of FHP Health Care. Prevratil, former executive director of the Port of Long Beach, is a consultant overseeing the nearly $100-million expansion of the city’s convention center. Prevratil ran the Queen Mary for the Wrather Corp., which was acquired by Disney.

“I’m willing to write a check for $2 million tomorrow to begin this,” Gumbiner told the council.

Even the council members who once wanted to sell the Queen Mary strongly supported Prevratil and Gumbiner.

“I think we have two people with steel fists who want to make it happen, and I want to support them,” said Councilman Douglas S. Drummond, a former proponent of selling the money-losing ship.

City Manager James C. Hankla said he was satisfied with the group’s $2 million plus the commitment to raise funds.

“We’re going to have to wait and see if (Prevratil’s) operating plan is successful,” Hankla said.

The City Council initially awarded the lease to Prevratil on Dec. 22. His initial proposal was backed by investors who wanted the ship to make a profit, but Prevratil later turned to Gumbiner’s nonprofit foundation, a change that required Tuesday’s council approval.

The lease requires the nonprofit group to pay the city $165,000 the first year and $240,000 a year thereafter, along with a percentage of food and beverage revenues.

Any operating profit would be used to maintain and restore the historic ocean liner, said Prevratil, who plans to sign the lease this week. The ship should reopen later this month, he said.

The Queen Mary Preservation Trust, composed of Orange County and local businessmen, used its lawsuit to force the council to hear its new purchase proposal.

The suit alleged that the council violated state law and the City Charter in the way it awarded the contract in December to Prevratil’s group.

Last week, however, the Preservation Trust agreed to drop the lawsuit if it could present its new proposal to buy the ship and operate it in Long Beach.

The group offered about $3.5 million for the ship plus a lease payment of $240,000 a year for use of the surrounding land.

But the deal with Prevratil’s nonprofit group was virtually sealed. The day before the vote, Prevratil’s group had taken over responsibility for security of the Queen Mary. The city had spent $170,000 on ship security since Disney left, Assistant City Manager John F. Shirey said.

The council listened to a Preservation Trust spokesman but did not have questions about his proposal.

At one point, spokesman John Thompson tried to get the attention of Vice Mayor Jeffrey A. Kellogg, who was writing during the group’s presentation. An obviously annoyed Kellogg told Thompson that he could write and listen too.

Shortly after, Councilman Ray Grabinski berated Thompson for being disrespectful to a council member.

“I’m a little disappointed, naturally, a little confused as to why there were no questions,” Thompson said later. “I basically made a speech and sat down.”

Nevertheless, the group’s lawyer, John Fellows III, said the lawsuit would be dropped.