Commentary: ExplorOcean lease raises questions for Newport

On Nov. 25, I addressed the City Council regarding the lease of Newport Beach land to ExplorOcean. This was the last working session of the old council.

Subsequently, reporter Hannah Fry of the Daily Pilot produced a well-written and balanced article about what is happening in Balboa Village (“ExplorOcean expansion plan raises questions about Fun Zone’s future”), Dec. 11.

I am a longtime resident of Newport and an owner of and legal counsel to the Fun Zone Boat Co. The Fun Zone has operated in Newport Beach for 66 years.

We oppose the ground lease and option to lease the parking structure, since it is unfair to the Fun Zone and other Balboa merchants, their customers and the people of Newport Beach.

We have nine bullet points.

• There was no open bidding of this option to lease. Thus, the city has agreed to only one party, ExplorOcean. Why?

• The lease option is for a nominal sum of $2,500 for seven years and then $2,500 per year for an additional three years. The parking structure is tied up for 10 years by the option. This is a nominal sum to tie up the property. Why?

• An additional five-year option for regulatory approval within the lease means the parking structure could be in limbo for 15 years. Why?

• The lease is for 60 years, 10 years for the option to be exercised and then an additional 50. This is a long-term decision. Why?

•The city will receive income for 68 spaces at its current rate, and ExplorOcean will receive income above that on the current 68 spaces and all the income from the remaining 318 plus spaces. Fair?

• Article 18 of the ground lease provides that ExplorOcean may grant subleases, licenses, permits and concessions. This may or may not benefit the other Balboa merchants and their customers. ExplorOcean could freeze out any competition. How is this a public use of the property? Fair?

• Article 6.1.2 of the ground lease permits ExplorOcean to close the parking structure for up to 12 days, effectively giving the educational nonprofit the right to exclusive use during the highest-revenue days, such as the date of the Christmas parade. This would not be fair to the other Balboa merchants and their customers, and it would destroy the public nature of the parking structure and the Christmas event. Fair?

• No provision is made for a performance bond. What if ExplorOcean does not qualify to build the parking structure? Federal income tax records filed by ExplorOcean indicate a loss three years ago of $244,000, two years ago of $544,000 and a current loss of $1.4 million. Thus, over the last three years, according to public record, ExplorOcean has lost nearly $2.2 million. It may be difficult to qualify for a bond. How is Newport protected on the downside?

• The agreement has no provision for what happens if the state Coastal Commission does not approve the project or if it modifies the number of spaces. This should be addressed.

Attorney W. BRUCE VOSS, who practices in Irvine, represents and is part owner of the Fun Zone Boat Co. in Newport Beach.