Orange County supervisors Tuesday are poised to vote on a $1 billion-plus public-private revitalization project for Dana Point Harbor, although officials have so far declined to specify how much of the county’s $1.2 billion in projected harbor costs are expected to be paid out of park funds meant for the entire county.
The 66-year development deal would lease much of the county-owned harbor to a team of three private developers, through a business entity they formed called Dana Point Harbor Partners LLC.
The private team would build the buildings, take on financial responsibility for dredging and other harbor maintenance (estimated at $414 million), and manage the property – including collecting rent from boat slips, shops, restaurants and other tenants. The company would pay a portion of its revenues as rent to the county, estimated at $717 million over 66 years.
After the developer’s payments are accounted for, the county is responsible for an estimated $1.2 billion in harbor costs over the next 66 years – about $1 billion of which is for sheriff’s Harbor Patrol services – according to the county staff report.
The harbor patrol costs are currently fully funded by the existing harbor revenues the county receives, according to the county.
Going forward, county revenues from the harbor might not be enough to cover the county’s $1.2 billion in projected harbor costs, officials said.
Part of the $1.2 billion cost would paid from the countywide parks fund if the harbor revenues to the county aren’t enough, according to the county.
The county would first draw on money generated in Dana Point Harbor, which is collected into Fund 108, said county spokeswoman Molly Nichelson. If that’s not enough, she said, the costs would be paid out of the countywide parks fund, Fund 405, which supports parks, trails and bikeways throughout the county parks system.
Nichelson didn’t have an estimate for how much is expected to be drawn from the countywide parks fund.
Asked June 12 for a breakdown of how the $1.2 billion would be paid for, Nichelson provided an emailed response at 5:35 p.m. Monday, saying, “The County’s budget is done on an annual basis and as such it will be determined during each year’s budgetary process.”
“It is our projection at this time that funds will come from [county funds] 108 and 405,” she added via text message, referring to the harbor and countywide parks funds, respectively.
The $1.2 billion in projected county costs for the harbor “will not be fully funded by revenues generated in the Harbor,” Nichelson wrote.
The countywide parks fund, Fund 405, “has been identified as a potential supplemental revenue source to cover costs, as with other sites in the County Park System,” she wrote. “However, the Board [of Supervisors] may decide to apply other revenues during future budget approval processes.”
Asked for a rough estimate of how much of the $1.2 billion would come from the harbor fund versus the countywide parks fund, Nichelson seemed to change her position, saying all of the money would come from the harbor fund.
“Projections are that 100 percent would come out of [Fund] 108,” she wrote.
Asked how that is possible if, as she said earlier, the $1.2 billion “will not be fully funded by revenues generated in the Harbor,” Nichelson said she answered what she could for the day and would follow up Tuesday.
The supervisors probably will decide in the future how much of the countywide parks fund to use for harbor patrol services, amid concerns that Dana Point Harbor revenues are actually subsidizing Sheriff’s Department harbor patrol in other coastal areas, according to a person close to the county speaking on the condition they not be identified.
The lack of details about how countywide park funds will be impacted has spurred concern among environmental and park conservation groups.
Several groups wrote a letter asking county supervisors to delay Tuesday’s vote until it’s clear how the harbor revitalization, located in the supervisors’ 5th District, will affect funding for parks countywide.
“This arrangement is patently unfair and jeopardizes park priorities and projects in Districts 1, 2, 3, and 4,” states the letter from Friends of Harbors, Beaches and Parks and other groups.
“No one district should raid the budget for such a district-specific project shortfall and it certainly puts the onus on the County to solve what really is the Fifth District’s deficiency.”
Fifth District Supervisor Lisa Bartlett represents south county and has been the supervisors’ point-person on the harbor revitalization. She didn’t return a phone call and text message Monday afternoon asking about the countywide park fund concerns and whether she has answers to the unanswered questions to county staff from last week, including how the $1.2 billion county responsibility for the harbor would be funded.
In a commentary for the Orange County Register last October, Bartlett said the public-private partnership model with Dana Point Harbor “will result in a higher quality project in a more expeditious timeframe.”
“This is an important point because, prior to the approval of the public-private partnership, the county anticipated shouldering the full cost and responsibilities of the project,” Bartlett said in the commentary.
Voice of OC, on July 12, asked Nichelson for additional financial details of the proposal that were not explained in the staff report, including whether the $1.2 billion would come from the countywide parks fund.
Nichelson didn’t have answers until 5:35 p.m. Monday, saying she couldn’t get a hold of certain county staff members Friday because they take the day off as part of a “flex” schedule.
Her responses Monday evening left several of the questions unanswered. One question, asked July 10 and again on July 12, that was unanswered was how much in revenues are projected to go to the private developers. The county staff report lists revenues to the county but not the county’s private-sector partners in the revitalization.
Nichelson also didn’t have an answer regarding whether the developers have any renderings of what the proposed buildings in the public harbor would look like. That information was not included in the agenda documents for the $1 billion-plus project.
Separately, the business entity the county is scheduled to pay $20 million to build a dry storage building for boats does not have the required state registration to do business in California, according to state officials.
The business entity is “Dana Point Harbor Partners Drystack, LLC,” which the proposed county contract says is “affiliated” with the main development companies in the proposed revitalization deal.
It is not listed in the California Secretary of State’s online database of business registration filings, and the state agency said they do not have a record of it.
The business registration is required for an entity to do business in California, said Diane Bliven, a business programs technician with the agency.
“Even if they had registered at some point and closed it down, it would still show it in my database, but I don’t see anything like that at all,” Bliven said.
Nichelson, the county spokeswoman, didn’t immediately return a voicemail seeking comment Monday evening after Voice of OC learned of the apparent non-registration.
Voice of OC also called the proposed lead developer of the marina portion of the project, Bellwether Financial Group, late Monday and left a voicemail asking about the apparent non-registration.
Operating an unregistered company could have legal implications.
“We aren’t going to go after anybody [for not being registered], but any contracts that may have been entered may not hold up in court if you’re not registered,” Bliven said. “Most banks won’t open up a bank account for a company if they aren’t registered with us.”
If supervisors move forward with the proposal Tuesday, the county and developers would have up to 120 days to hammer out the details of the new marina design and layout, future prices for boat slips, a plan to manage boats during and after construction, and waitlists for use of the marinas.
The private development team consists of three Newport Beach-based companies: Burnham-Ward Properties to build and operate the commercial space, Bellwether Financial Group to overhaul and manage the wet and dry marina, and R.D. Olson Development to build and operate two hotels.
In the run-up to supervisors choosing a development team for the project, the winning team hired a pair of well-known lobbyists – Roger Faubel and David Ellis – who have raised thousands of dollars in campaign contributions for local elected officials.
County staff estimate the development companies will spend $337 million constructing and developing Dana Point Harbor, with $20 million in public dollars out of the harbor fund, which is comprised of money generated in Dana Point Harbor and is legally restricted to being used in and around the harbor.
After the Orange County bankruptcy in 1994, county departments dedicated part of their annual budgets to paying for the recovery. Activists are concerned parks money freed up after those payments ended will be monopolized by Dana Point Harbor.
Orange County spent $1.5 billion on bankruptcy debt instead of public services, according to the National Public Radio affiliate KPCC.
“Our government buildings are in incredible disrepair,” said Supervisor Todd Spitzer in 2017, around the time the last of the main bankruptcy debt payments was made, according to KPCC. “Our county parks have been neglected because money has been siphoned off and we’ve been importing other people’s trash into our landfills to pay off our debt.”
The activists’ recent letter about Dana Point Harbor said, “Capital improvements, land acquisition, and deferred maintenance suffered and all had to be carefully prioritized.”
“Now, after nearly a year of a fully functional budget for OC Parks—the Revitalization Plan proposes to use nearly $7.6 million annually for just the Harbor—encumbering the funds for future generations.”
Mike Wellborn, president of Friends of Harbors, Beaches and Parks, said the group is not opposed to the revitalization project but has concerns about the project’s environmental impacts and transparency surrounding its funding. He said the lease should have been discussed by the county Parks Commission before coming to supervisors.
“We really just want the board to put this item off for another month or two until details related to the environmental issues, and the fiscal issues related to impacts to the OC Parks budget, can be sorted out more clearly,” Wellborn said.
Merchants, boaters and Dana Point residents have waited more than two decades to see changes to Dana Point Harbor. Most of the Harbor’s structures were constructed in the early 1970s and have not been remodeled or refurbished since then, according to a county staff report.
Jim Miller, president of the Dana Point Harbor Merchants Association who owns two businesses at the Harbor, said the revitalization is long overdue. Businesses frequently experience major issues with water, sewage, plumbing and other basic infrastructure, Miller said.
“The harbor is in better shape now than it ever has been…some things require much bigger dollars than just painting a building or putting a roof on,” said Miller.
Miller is supportive of the project and believes the developers will preserve the “family character” of the harbor and make it more accessible to the general public.
“We’ve been waiting 20 years to see this change happen…the harbor can’t continue the way it’s running,” Miller said. “This is the best way to do it — it’s a $300 million-plus project that doesn’t come out of county funds. That’s about as good as it gets.”
The Dana Point Boaters Association also responded to concerns from parks conservation activists in a newsletter Monday. Although the Boaters Association agrees the rising cost of the Harbor Patrol is a problem, they say it’s a larger funding issue that shouldn’t stop the county from moving forward with the revitalization.
Instead of delaying the approval of the lease agreement, they added, “the County must identify and implement a strategy to reduce the unsustainable burden of escalating harbor patrol costs, which is a County-wide issue, not one limited to Dana Point Harbor.”
The Dana Point deal comes soon after the county’s top real estate official, Scott Mayer, left the county after five years as chief real estate officer. County records show he participated in the June 26 Board of Supervisors meeting, but has since left his job.
In a June 27 memo to supervisors, county CEO Frank Kim noted Mayer would be leaving the county July 5 “to pursue other efforts,” without further details of where he was headed.
Mayer was replaced as chief real estate officer by Thomas A. “Mat” Miller, who has been involved in county real estate projects for years in his capacity as an attorney with the County Counsel’s Office.
Contact Nick Gerda at ngerda@voiceofoc.org and follow him on Twitter @nicholasgerda.
Contact Thy Vo at tvo@voiceofoc.org and follow her on Twitter @thyanhvo.
Brandon Pho is a Voice of OC intern. He can be reached at bpho@voiceofoc.org.
Kassidy Dillon is a Voice of OC intern. She can be reached at kdillon@voiceofoc.org.