City of Newport Beach “Quickie” Tidelands Fee Hikes September 17, 2010 A Study in Poor Process Inequity & Abandonde

1. City of Newport Beach “Quickie” Tidelands Fee HikesSeptember 17, 2010A Study inPoor ProcessInequity&Abandonded Commitments

2. How Did We Get Here? • 2001 noted local Tidelands Appraiser, George Jones, was retained by City for new tidelands appraisal. • Jones appraisal notes that many tidelands that don’t have upland property actually have greatly diminished value compared to those that have uplands. • City doesn’t like results, throws out Jones appraisal.

3. 2006 Harbor Fees Study • City paid approximately $125,000 for very flawed “Harbor Fees Study” • Study takes about three years to be finalized • Study’s flaws pointed out by stakeholders, Harbor Commissioners, etc. • City drops HFS as a basis for fee increases

4. Meetings with City Staff • January 2010 - • At City’s request, NMA met with City Staff and Harbor Commissioner to start tidelands appraiser selection and process. City sought input from NMA claiming to want transparency and accuracy. • February to March, nothing heard from city • April 2010 – • NMA meets with City Manager, top City Administrators, and City Councilman. At meeting City suggested a 50% increase based on CPI; in lieu of implementing said increase the city agreed to commission professional appraisal. Cooperative effort confirmed, city agreed to include NMA in RFP process, share information in spirit of equitable conclusion. • May through July 2010 – • Multiple requests made by NMA to City Staff for status on tidelands appraisal RFP, Cost of Services Study, and any related materials. City responded that nothing mooring related was in the works.

5. City Abandons Commitments • End of July – • Unilateral change of plans: City Manager requests formation of City Council Ad Hoc Committee on Harbor Fees to study and address harbor fees. • August 24 – • First Ad Hoc Committee meeting, NMA asked to attend. Meeting is closed to general public. One day earlier City Manager sends NMA his draft proposal for methodology to determine new mooring fee, resulting in potential tripling of annual mooring fees.

6. City Intentions & Timeline • City Manager and Councilmen state they have no intention to conduct tidelands appraisal • City intends to re-characterize moorings as “private use of public property” and utilize internally, unilaterally generated methodology to justify rate hike • Sept. 15 NMA meets representatives meet again with ad hoc committee members, City Manager, City Attorney (and staff) to discuss the NMA Preliminary Response to their proposed mooring fee increases. Despite NMA request for more time and evaluation, Ad Hoc Committee sets 2 week deadline for NMA to provide more input regarding mooring rates as a percentage of slip rents at various harbors on the California coastline. The NMA plans to suggest appropriate adjustments and alternative methods of determining mooring fee adjustments. • October 12 City Council is likely to vote on mooring fee increase. • Other tidelands fees are not yet addressed, no commitment to review tidelands accounting

7. City’s Responsibilities Under Tidelands Grant from State • “….city shall establish separate tidelands trust fund…city shall deposit in the fund all money received directly from or indirectly attributable to, the granted tidelands in the city.” • Tidelands funds must be spent on the tidelands only • The city is obligated to file annually with the SLC a detailed statement or receipts and expenditures by it of all rents, revenues, etc…. • When was last appraisal sent to State? • “…the city or its successors shall make no discrimination in rates, tolls, or charges for any use or service in connection therein.”

8. City’s Tidelands Accounting -Expenses • City grossly exaggerates tidelands expenses by excessive allocation of indirect/unrelated costs • City’s 2008-2009 Tide & Submerged Land Fund expense projections: • Fire - $11,945,154 • Police - $8,243,033 • Harbor Resources - $2,035,450 • Estimated Ending Fund Balance: <$19,367,554>

9. City Tidelands Accounting – Revenues Going to General Fund Rather than to Tidelands Fund • Vessel Unsecured Property Tax and Possessory Interest Tax; approximately $1.5 million returned to city from County annually • Junior Lifeguard fees - $814,000 annually • Surfing program - $410,000 annually • Various Grants, several million dollars annually • Marine Charter taxes • Vessel fuel taxes • Vessel sales taxes • Transient occupancy taxes • Increased taxes assessment for waterfront homes • Ocean front encroachments

10. Problems with Harbor Fees Quickie Increases • City is opting out of independent professional appraisal – how can they determine appropriate fees? • City not practicing proper accounting of Tidelands Revenues – understated income, overstated expenses • City using tidelands revenues for general fund expenses in violation of State Tidelands Grant • In establishing Fair Market Value a professional appraisal is essential • Such an appraisal would employ multiple methodologies to assure an accurate outcome • City using arbitrary comparison in their in-house proposal • City using poor process, very limited transparency and hurried outreach

11. Recommended Process • Mooring holders are in support of equitable tidelands fees • Fees need to be established after utilizing independent and professional services • Process needs to remain transparent, fair and consistent • At April meeting City suggested a 50% increase based on CPI; in lieu of implementing increase city agreed to commission appraisal • City should honor its commitment to initiate a professional and credible appraisal. • Proper process and fair treatment of the public is not met by the single methodology approach utilized in the non-professional, internally generated analysis offered by the city thus far