Port of L.A. gives Wilmington marinas compensation reset, credit

LOS ANGELES — The recreational boating marinas of Wilmington could use a facelift and revitalization to improve their overall condition and increase demand for slips. To help marinas in the Cerritos Channel make improvements and remain viable the Port of Los Angeles Board of Commissioners approved two resolutions on April 14 to recalibrate how rents are collected and provide marina operators with a credit for pre-approved improvement projects.

Each of the nine marinas in the Cerritos Channel will pay a new rent amount through Oct. 31, 2020. Marina operators would pay the Port of L.A. a minimum rent based on 75 percent of their average annual gross receipts for the previous three years.

The port also approved a permit amendment to provide Wilmington’s marinas with as much as a 25 percent rent credit, which would be applied toward funding for improvement projects approved by the board.

Both Harbor Department and port tenants have deferred renovations at Wilmington’s nine marinas. Factoring in what port staff stated as a 15 year decline in pleasure boating the nine marinas reportedly experienced an 18 percent decline in revenues between 2005 and 2014.

Port of L.A. staff stated the city’s Harbor Department has not established a long-term plan for marina improvements.

“As a result, deterioration of the marinas goes mostly unrectified except for emergency and patch repairs,” port staff stated.

Complicating matters was the Harbor Department’s 2005 “cease work” instruction that caused marina operators to hold off on making any improvements, according to port staff.

“Tenants have suspended work on their projects and waited on the future development plans for the East Basin/Cerritos Channel,” port staff stated. “Due to dynamic market conditions the Harbor Department has not finalized a development plan for the East Basin/Cerritos Channel. The tenants have not been instructed to resume the marina improvement projects.”

To address declining participation and marina deterioration the Port of L.A. borrowed a plan from the Port of San Diego. Both ports are working harbors where recreational and commercial vessels have to co-exist.

“To combat further decaying of physical assets, shrinking revenues to the Harbor Department and its tenants, and to allow time to develop a longer term development strategy for the Wilmington marinas, it is proposed to develop a solution to this issue using the San Diego model,” port staff stated.

The Port of San Diego experienced struggles in the 1990s which led to port lowering percentage rents to allow marina operators to gradually make improvements. Demand for slips soon caught up with improvements, according to Port of L.A. staff.

“A similar positive effect may occur for the Wilmington marinas should the Harbor Department initiate similar measures,” said Port of L.A. staff. “Without action to remedy the current situation it is anticipated that the marinas will continue to deteriorate and the revenue will continue to decline.”

Marina operators could receive a credit of up to 25 percent of its percentage rent. The windfall for marina operators could be $250,000 per year, allowing them to improve their respective boating venues during the next few years.

“Funding of these improvements is intended to stem the tide of deterioration and allow the Harbor Department time to evaluate the long-term development plan for the East Basin/Cerritos Channel,” according to Port of L.A. staff.

The board’s separate approval of an economic performance methodology as the standard to collect annual rents from marinas allows the port to keep up with other harbors and fairly assess how it collects its compensation.

“The current minimum fixed annual compensation [used, most recently, from 2010 to 2015] was based on a modified land and water value,” Port of L.A. staff explained. “This method results in disproportionate minimum rent totals for marinas with larger footprints even though the water area is the primary economic driver for marinas.

“In many of the marinas, the current method effectively made the fixed rent exceed 20 percent of the gross receipts, stressing marina viability and reducing capital available for maintenance of long-term improvements.”

Resetting the minimum annual compensation would result in a potential loss of revenue (roughly $50,000 per year) for the port.

Wilmington’s marinas are home to more than 1,400 slips and about 87 liveaboards.