October 2024

Update: The Moorings

By Bill Kenney

William “Skip” Kenney

There have been recent significant developments in the continuing saga of the proposed increase in the permit fees paid by the mooring permittees in Newport Harbor.  By way of background, almost all of what we know as Newport Harbor is owned by the State of California and is referred to as public tidelands.  Pursuant to the California Constitution and legislation more commonly known as the Beacon Bay Bill, the City of Newport Beach is obligated to manage those public tidelands in trust for the people of California.  The Constitution and the Beacon Bay Bill require the payment of fair market rent wherever private parties use or occupy these public tidelands.  

For many years the Orange County Sheriff’s Department contracted with the City of Newport Beach to provide police and fire protection throughout the harbor and to manage the moorings.  Those obtaining a permit for a mooring were required to pay an annual fee.  The annual fee for the permit was $10.00 per lineal foot for an onshore mooring and $20.00 per lineal foot for an offshore mooring irrespective of the length of the vessel.  Two of the requirements of the mooring permit were that the permittee must maintain a vessel on the mooring and that the permittee could not transfer the permit or rent the mooring.  Because the annual mooring permit fee was so reasonable, those who had mooring permits but did not have a boat would place a derelict vessel on their mooring in order to retain the mooring permit.  Also because the demand for moorings exceeded the supply, a black market for mooring permits was created.  To circumvent the non-transferability of the mooring permit the permittee would sell the derelict vessel and request that the buyer also be allowed to assume the mooring permit with the vessel which was allowed.  The new mooring permittee would then dispose of the derelict vessel and place his or her boat on the mooring.  

In 2010, to reduce the environmental risk caused by the derelict vessels and eliminate the visual blight, Ordinance 2010-26 was passed which eliminated the requirement that a mooring permittee must maintain a vessel on the mooring.  The Ordinance also sunseted mooring permit transferability but the sunset provision was later reversed by a subsequent City Council and the practice of selling the right to a mooring permit was allowed to continue.  As a result there currently is a tremendous equity value held by the mooring permittees.

In 2007 the Orange County Grand Jury issued a report which was highly critical of the practice selling the right to a mooring permit alleging among other things that private profits were being made from the sale of the right to mooring permits.  The Grand Jury report also was critical of the City of Newport Beach finding that the fair market rent for the mooring permits had not been reassessed for well over 10 years.  Interestingly, the Grand Jury report also recommended that the mooring rates “be based on a percentage of slip or berthing rates” in the harbor.

In response to the Grand Jury report, in 2010 the City Council increased the annual mooring permit fees significantly.  Following the Council’s revisions to the annual dock and pier permit fees, more commonly known as the dock tax, a successor City Council reduced the annual mooring permit fees in 2016.

The Beacon Bay Bill and local legislation require the City to revisit the annual fair market rents to be paid for the mooring permits every 5 years.  As a result the Harbor Commission recommended that an appraisal be conducted to determine the annual fair market rent that should be charged for an onshore mooring and that appraisal was completed and presented to the Harbor Commission in January, 2022.  That appraisal was followed by an appraisal of the annual fair market rent for an offshore mooring which was completed in December, 2023.  

In April, 2024 the Harbor Commission unanimously adopted the recommendation of the Ad Hoc Committee tasked with determining the fair market rents for the moorings and those recommendations were presented to the City Council for action.  

For years the mooring permittees have been represented by the Newport Mooring Association, (“NMA”), an organization made up of those holding mooring permits.  The NMA has been very active whenever matters pertaining to the moorings arise speaking at meetings, writing letters and lobbying appointed and elected officials.  During the period commencing with the release of the appraisal of the fair rental value of the onshore moorings and continuing through the review of the Harbor Commission’s recommendations with respect to fair rental value of mooring permits and consideration by the City Council, the NMA aggressively fought any increase in the mooring permit fees with some members even lobbying for a reduction.

Due to the pressure placed upon the City Council prior to their review of the Harbor Commission’s recommendations, a new proposal was put forth for consideration which would have grandfathered the current annual mooring permit fee for all current permittees so long as they held the permit.  The proposal also sunseted the permittees right to sell the rights to their permit.  

This new proposal was approved by the City Council on July 9th over significant opposition by the NMA.  In response to the City Council’s approval of this new proposal the NMA contacted state agencies, including the California Coastal Commission alleging that there is discrimination in the setting of permit fees specifically citing the different methods of determining the permit fees charged to dock and pier permittees and those charged to mooring permittees.

As a result of the NMA’s communications with the California Coastal Commission and other state agencies, the State Lands Commission, the state agency charged with overseeing the public tidelands, advised the City of Newport Beach that the Commission will be examining how the City has arrived at the fair rental value of mooring permit fees as well as dock and pier permit fees.  It is anticipated that this examination will be a long and divisive process with the end result most likely being increases in both the mooring permit and dock and pier permit fees.  In their communication, the State Lands Commission was also very critical of the City’s practice of allowing mooring permittees to sell the right to their permit and it is anticipated that sales of mooring permits will no longer be allowed.

At this point City staff is gathering the information requested by the State Lands Commission and will cooperate with the Commission during their review.  For now, the Ordinance approved by the City Council has been placed on hold pending the State Lands Commission review.  In retrospect it appears that the aggressive opposition by the NMA to the City’s legal responsibility to adjust the mooring permit fees may lead to mooring permit fees which are actually higher than those proposed by the Harbor Commission, the abolition of the permittee’s right to sell the rights to their mooring permit and the reappraisal and adjustment of the fees charged to the holders of dock and pier permits.

Stay tuned!

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