This is a David and Goliath story. Actually, it’s one Goliath and one bully trying to crush one David.
Captain Dutch Meyer, founder and proprietor of Monterey Bay Sailing, likes to say that he was young when he started trying to elbow a place for himself among the wharflords at the end of Fisherman’s Wharf in Monterey. Now, after eight years battling the city property manager’s enforcement of the wharf members-only scheme, he’s no longer young.
It is also a story about unconstitutional waste of public funds. Not the millions of dollars given away by the Monterey City Council in 1991 with the ridiculous long-term ground leases on wharf space, but the thousands of dollars being given away now – yesterday, today, and tomorrow, by allowing profiteering to continue on expired wharf leases.
This saga of an anti-competitive cartel and monopoly came to the fore with another consent item, No. 12, on the July 21 City Council agenda. It was pulled off of the consent agenda at my request and became a nearly two-hour hearing that was continued to Sept. 1 for resolution. (Item 20 on the Sept. 1 council agenda involves a closely related item. See details below.) How it turns out will be a significant step toward determining whether the public will be able to regain some measure of control over our waterfront in Monterey.
To understand the current situation, we need to review the history of the space known as Concession #21, currently occupied by Monterey Bay Sailing (MBS). It is at the far northeast corner of Fisherman’s Wharf, and has been used for some type of maritime activity since before 1964.
Records show it was originally used for a “diving bell” for tourists to have an underwater experience, and then featured a glass-bottomed boat operated by Sea Life Tours. According to the 1958 Wharf Master Plan, Concession #21 is authorized to accommodate three boats and one water space. Tony Rappa is the master leaseholder on a lease in effect from 1964 to 2041. He paid nothing for the lease and has rarely if ever conducted any economic activity there himself and has almost never paid any percentage rent to the city.
In 2003, Rappa floated the idea of conducting an amphibious shuttle from #21, and received approval to construct a six-foot wide floating dock alongside the pilings for passenger boarding at water level. The shuttle was short-lived. Rappa then sublet the space to Monterey Bay Sailing in 2003 after the failure of the shuttle.
NO OTHER PLACE TO RENT A BOAT
Monterey Bay Sailing has continuously occupied #21 since then and eventually grew into an entrepreneurial success. MBS offered the unique services of sailing lessons, membership, bareboat rentals and overnights, as well as sailing excursions on the bay. In our whole National Marine Sanctuary, there had been no opportunity to sail a boat unless you owned it. Indeed, no other entity in the Monterey Harbor offers boat rentals of any type, a highly favored use in the Wharf Master Plan and Resolution 9000.
It seemed the perfect maritime activity for the Marine Sanctuary, with a fleet of six sailboats creating less pollution in a year than the fuel-guzzling whale-watching boats create in a single day. From a fledgling new business, MBS had grown to a customer count of nearly 4,000 by 2007.
The growing success prompted Dutch to inquire about expanding his use to match the growing interest in bareboat sailing. The Monterey harbormaster, Steve Scheiblauer, confirmed that Dutch Meyer had the right to conduct these activities from Concession #21 in a Sept. 10, 2004, letter. Responding to the possibility of expansion of MBS uses and the physical plant, Scheiblauer made the ominous comment that, “Some of these matters have a history with the council, and would require a substantial amount of work with individual councilmembers to have any chance of being passed.” He did not identify the members.
Things went along swimmingly from there until Dutch applied for an expanded water space in 2007 to permit the berthing of a third small sailboat at the north end of the pier. This attracted the attention of the city’s property manager, Rick Marvin, who apparently had not noticed that MBS had successfully been conducting sailing operations for nearly four years at Concession #21.
Marvin belatedly developed an interest in regulating MBS. The harbormaster and the property manager decided that MBS should pay Transient Occupancy Tax (TOT) for the occasional overnight stays on MBS boats. Scheiblauer told Dutch that any opposition to paying TOT would have a negative impact on the proposed expansion. Then Marvin insisted that Dutch obtain a building permit for an under-deck storage shed that had been built around 1993, long before Dutch took possession.
The city’s formal response to the application was a letter from the mayor on Oct. 31, 2007, telling Dutch that his application could not be processed because the floating dock installed by Rappa in 2002 to accommodate the amphibious shuttle must be removed or re-authorized. This was nonsense. The properly authorized dock had been there for four years and was integral to sailing operations. Unlike the big tour/whale watching boats, much smaller sailboats had to be boarded at sea level, not wharf deck level, and the floating deck made that possible.
JOSEPH HELLER WOULD BE PROUD
The nonsense quickly multiplied when Dutch was told that he couldn’t get a building permit for the existing storage shed until the dock was removed. But he was also told that the dock could not be repurposed or removed until the building permit was issued. Marvin had orchestrated a complete Catch-22, and used it to cast Meyer as a miscreant unwilling to follow the rules.
I got to know Dutch in the spring of 2008 as a student earning my bareboat captain’s license. He was then at a standstill with the city, hung on the horns of the Catch-22. I scoffed at his description of the dilemma. I had been a volunteer commissioner of one kind or another with the city for 20 years, and had known the city planning staff to be uncommonly cooperative and helpful to citizens seeking approval of legitimate projects. Thinking that this bottleneck was the result of misunderstanding or miscommunication, I agreed to act as his attorney in guiding this new use application to conclusion.
As it turned out, I could not have been more wrong. I have since discovered that the tour boat cartel, not the city staff, controlled that end of the wharf, as intended by the Wharf Master Plan and Resolution 9000, both of which were designed and intended to enforce the monopoly of the cartel. The cartel consisted of the original master leaseholders for whaling, fishing, and tour boat concessions at the northern end of the wharf – the Arcoleo, Bruno, and Shake families with sub-tenants such as the Ternullos and Blacks, who dated their “ownership” to 1964 and before. They are the reason no new boating activity had been allowed on the wharf in over 40 years.
During our initial meeting with Marvin and Scheiblauer in August 2008 to develop a consensus for moving forward, Marvin for the first time wheeled out the Wharf Master Plan (1958) and Resolution 9000 (the Tree House Rules, 1957). Having operated for four years, MBS was now discovered to have run afoul of these illegal documents. First Marvin told us that a “Minor Project/Change” application to wharf use was required. After submitting one in September 2008, Marvin told us “never mind,” that this has to be a “Major Project/Change” as he defined it. We submitted it in October 2008, even though it was exactly the same application as before but now was subject to Planning Commission review.
The “major use change” required was necessitated by the fact that Resolution 9000, while allowing “boat rentals,” did not mention sailboats, and the Wharf Master Plan did not allow Concession #21 to have six boats and two or three spaces like the other water concessions.
Marvin responded to the new application by still insisting on some form of overnight lodging tax, even though I had proven to him that extracting such a tax was illegal under the Monterey City Code. When I once again pointed that out to Marvin, he issued a Notice of Violation of the Wharf Master Plan on Nov. 13, 2008, stating that MBS had to cease and desist from operating as it had for 4 years.
The alleged violations were the subject of the pending application for a Major Use Change to the Wharf Master Plan. The only purpose for the Notice of Violation was to cast Dutch Meyer as an outlaw and to cloud his application with an “enforcement’ tag before the City Council.
TURNING A NON-ISSUE INTO AN ISSUE
The matter was then presented to the City Council in December 2008, with the discussion limited to a determination of whether overnight stays on the MBS sailboats (with showers) was an allowable use. Marvin’s recommendation was based solely on the point that overnight stays were not an allowable use because Resolution 9000 was silent on this point. Of course, it could have been said that whale watching was not mentioned and therefore was not allowed. But markets change, don’t they? The good ole boys in the cartel were permitted to adjust to changing markets, like whale-watching more than fishing, as they saw fit, just as long as newcomers like MBS were not given the same flexibility.
The council said “no overnights,” and referred the matter to the Planning Commission to review and recommend on the change/expansion of use.
Stated concisely, the MBS request was to be allowed to maintain the floating dock, berth two sailboats alongside, use a total of six boats, berth a third sailboat at the north end of the pier with a modest fend-off bar, and rebuild the storage shed in accordance with a building permit to be issued.
I should note that I discontinued my representation of MBS at this point due to failing health.
A word about the Wharf Master Plan is in order. It was first approved in 1958, soon after Resolution 9000. A complete copy of the plan maybe found at the city’s Planning Department website (under Waterfront Master Plan page). It is not as silly as the Resolution 9000, which I have dubbed the Tree House Rules, but it shares the same purpose – to restrict and define competition. Some benign features have been added over the years, such as sign and design guidelines, but its overriding feature is Appendix “C” – a list of tour/fishing boats by name for each water-related concession, and a limit of six boats per concession. Detailed rules are included for any changing of boats, which must be approved by the City Council. Why?
This is where the plan runs afoul of any legitimate governmental interest. What conceivable public interest does Monterey have in organizing a private business market and telling the tenants who could have which boats? Or approve one boat over another? What could be the reason to limit the numbers of boats that could use a concession? If one operator could profitably operate eight boats, why would the city limit the number of boats to six? The obvious answer is that the cartel wanted to limit competition among the cartel members to a maximum of six boats each.
According to its City Charter, Monterey should treat each lease as a separate transaction. That objective was ignored in its entirety on Fisherman’s Wharf, where all leases look very much the same and the city in effect negotiated with the Wharf Association for a blanket ground lease. Clearly, the city should not be negotiating with a cartel of six private businesses to define and limit the competition. But that’s what the wharflords wanted in 1958, and that is what the City Council gave them.
THE CARTEL MAKES THE RULES FOR THE CITY
So the game was stacked against a new entepreneur wo wanted to introduce a new and popular recreational activity to the closed wharf kingdom. When the six operators received notice of the pending MBS application, they met in November 2008 and unanimously voted to deny the MBS use/change in its entirety. Various inane reasons, including the absurd claim that there would not be enough parking for the new use, were cited. Now that Marvin’s notice had rattled their cage about the growing nuisance of a competitive sailboat rental business in their midst, the cartel began a full-court press to not only defeat the new application, but to eliminate this minor competitor entirely.
Richard Ternullo of Monterey Bay Whale Watching voiced strong opposition, saying any change to the Wharf Master Plan would cause him the others to “alter our schedules or inhibit us from safe and free access to our berths.”
Chris Arcoleo, longtime naster leaseholder of Concession #18, wrote:
“The Shake Family just purchased a 100ft boat for almost one million dollars to compete in whale watching; we definitely do not need more competition on the wharf. In these hard economic times we feel that there is enough competition. … No one from the city staff talked to us about the issues or how it would affect my business. …. Resolution 9000 was put into effect just for this reason.”
Bob Massaro, wharf administrator for the Fisherman’s Wharf Association, complained that the association should have been consulted as part of the process and said, “Clearly the suggestion from the city that ‘competition is good’ may read well in a book about marketing but does not apply in the current condition of the economy.”
Peter Bruno, master leaseholder for concessions 19 and 24–26, offered that “competition may be necessary, but this should be between existing businesses and not with an unrelated business.” Clearly “unrelated” meant not part of the original boating cartel on Fisherman’s Wharf.
Obviously, the wharflords had an expectation that Resolution 9000 and the Wharf Master Plan were designed to protect them from competition. No matter that MBS sailboats held just one to six passengers, versus 30 to 100 passengers in the big tour boats. MBS had grown its business to nearly 4,000 passengers in 2007, and the cartel was worried about this minor competition though MBS was in a very different business. In the cartel’s myopic view, every passenger who wanted the unique sailing experience in the Maritime Sanctuary was a sale lost to the cartel.
None of those letters said anything about safety. They focused on convenience and competition. Of course MBS had an impeccable safety record during the four years it had already operated at the wharf and no one had complained about safety.
At the Planning Commission hearing in February 2009, about 10 MBS customers or members spoke in support of MBS. Ternullo and a couple of other cartel members spoke against, and focused on a claim of unsafe maneuvering conditions during times of rough water and surges, rather than too much competition. However, Harbormaster Scheiblauer testified that the MBS plan, with the continued existence of the floating dock, would not cause safety problems, as indeed none had occurred during the four years of operations so far.
The staff report from the Planning Department, by Principal Planner Kim Cole, debunked the objections from the cartel members. The claims of increased competition were dismissed with “Staff recommends a competitive environment for its leaseholds.” She recommended approval of the changes requested by MBS and noted:
“The project is consistent with the Wharf Master Plan that encourages marine oriented uses. The proposal requires only minor changes to the Wharf Master Plan.”
Concession #21 occupies the most northeastern corner of the wharf by the inner harbor entrance with a small office at wharf deck level and a 20-foot by 50-foot water space alongside. Dutch proposed adding a berthing space at the north end of the pier in a water space of 15 by 45 feet, with a two-foot floating platform to fend the small sailboat off from the pilings. With a maximum 12-foot beam for the largest sailboat, MBS berthing arrangements are well within the 20 by 50 foot water space leased by Concession # 21.
On the other side of the inlet/bay is Concession #18, Monterey Bay Whale Watching, with its two 20-foot wide water spaces to berth two much larger tour boats. The SeaWolf (70’ long, 21’6” wide) is typically berthed in the forward water space and exceeds the width of its leased space by 18 inches and exceeds the length by six feet. It is not charged any extra rent for exceeding its leased water space.
PLANNING COMMISSION SIDES WITH MBS
The Planning Commission rejected the protestations of the cartel and unanimously approved the MBS plan, as recommended by staff and sent its recommendation on to the City Council. And that’s where things began to get a little bit weird. The tour boat cartel no doubt upped the effort in the back rooms to defeat the MBS plan. As a result, the Planning Commission recommendation was altered by Marvin in several important respects when it was finally presented to the City Council on May 5, 2009.
In a report prepared by Marvin and his boss, William Reichmuth, the classification for MBS was changed from “boats for hire” to “Sailing Activity Center,” with a definition that precluded Dutch from renting out his sailboats, a major feature of his business. In addition, the requested space at the north end of the pier was altered to a dimension unusable by MBS.
At the council hearing, the harbormaster (who is not a licensed Coast Guard captain) testified for the first time, directly contrary to his testimony before the Planning Commission, that he was very concerned about safety and the floating dock. Several licensed Coast Guard captains testified in rebuttal that the set-up was safe.
The members of the cartel raised their voices in front of the council, claiming they could not safely maneuver around #21 and that amateur bareboat captains who rented from time to time were creating hazards for collision. This was an entire fabrication, without even anecdotal evidence to support it. In over four years of operations, there was not one scintilla of evidence to substantiate a claim that the berthing and operation of sailboats off the floating dock at Concession #21 had created any safety hazard. Keep in mind that these much smaller, sailboats operated at 1 mph when leaving their berth.
When Dutch tried to correct the errors and deviations from the Planning Commission decision, Reichmuth abruptly but incorrectly claimed that Dutch was seeking a major change to the application and for that reason, the application should be referred back to the Planning Commission. What he must have meant was that the staff needed more time to devise a strategy for eliminating MBS as a competitor. Nonetheless, the council accepted his assessment and referred the matter back to the Planning Commission for further deliberations based upon the alleged “changes.”
Inexplicably, ten months went by before the matter was again presented to the Planning Commission in February 2010. During the year between the two Planning Commission hearings, the conclusion is inescapable that someone from the wharf got to the right city officials. Reichmuth, Marvin, and Scheiblauer presented a totally different report and recommendation than had been originally submitted and approved by the Planning Commission and again misrepresented the MBS application.
CITY OFFICIAL EMPOWERS HIMSELF TO KILL COMPETITION
Whereas the staff report in 2009 declared a city policy in favor of “a competitive environment for its leaseholds,” Marvin’s report in 2010 declared that his office was empowered to “address” issues such as “business competition and potential impact on long established wharf concessions.” No authority was cited for this policy (there is none), which is inimical to a landlord’s and the public’s best interests. Marvin’s report was, in effect, an admission that his primary purpose was to protect the monopoly of the cartel.
Next, Marvin proposed to eliminate the floating dock because the harbormaster now gave incorrect testimony to the effect that other boats needed #21’s water space in order to exit, and that the sailboats could be boarded from deck level without use of the floating dock. Marvin reduced the north water space to a size unusable by MBS. And he inserted a provision that Dutch could not mention whale watching or fishing in his advertising. Marvin now considered his portfolio of powers to include abridgement of free speech.
The Planning Commission saw this abuse of administrative power and rejected Marvin’s staff report and recommendation. Instead, it struck out most of Marvin’s language and reapproved substantially the same resolution that it had approved the previous year and sent it again to the City Council for final approval.
Once again, Marvin ignored the Planning Commission recommendation and rewrote Dutch’s application when he presented his own proposal to the council on April 6, 2010. Scheiblauer and Marvin presented the matter as a safety issue caused by MBS and succeeded in getting passed a resolution that ruined the MBS business for the benefit of the cartel.
Instead of a complete removal of the dock, the punitive conditions imposed at Marvin’s request allowed no berthing of boats at the dock, and only 30 minutes per boat to tie up for passenger boarding. No time was allowed at the dock for maintenance and upkeep of the boats. And Ternullo was allowed to exit through #21’s water space most of the time.
This meant that Dutch, at times a one-man show, had to leave his office to pick up a boat at its mooring and then to return to the dock to board new passengers for no more than 30 minutes at a time. As many of his customers were walk-up, he would have to do this continuously during the day, with the attendant loss of walk-up passengers and horrible inefficiency in business operations.
IMAGINE IF THE CITY LET YOUR NEIGHBOR TAKE YOUR DRIVEWAY
The free speech prohibition was included, as was a provision that MBS was “not conferred the full rights of other concessions currently existing at the wharf” (welcome, stranger!). I will not describe the other silly and punitive provisions, other than that the MBS rent was increased even though it was prevented from reasonably using its water space.
To put this in perspective for the layman, imagine that your next-door neighbor buys a huge RV, which cannot be parked on the street. Since his driveway is already full with his family’s automobiles, and his double garage is full of junk, he goes down to talk to his buddies at City Hall for relief. Together they decide that they will fabricate a story that you are a lousy driver who should not be entitled to use your driveway except to drop off your elderly mother after church on Sunday. This allows them to confiscate your driveway and require that you can no longer park your cars there but, instead, must allow him to park his RV in your driveway.
MBS is required to pay full rent to the city for its water space, but isn’t allowed to use it. Ternullo gets to use it whenever he wants, and he pays nothing for it, to either MBS or the city (which wouldn’t dare ask for it).
Since that time, April 2010, Dutch Meyer has refused to sign a lease amendment setting forth those ruinous terms and conditions; and he has continued to operate as he did before the final council action. Marvin on several occasions threatened to sue and evict, and Dutch has responded by reminding Marvin where he may be found for service of process. It would be fairly safe to say that no court in this state would enforce such punitive and unlawful conditions, and Marvin knows it. Such a suit would also, not coincidently, open the city up to many defenses based upon the illegality of Resolution 9000 and the Wharf Master Plan and the voidable ground leases on the wharf. Blatant abuse of government power does not play well in front of juries.
The standoff of over five years now comes to another head in a context that proves that city officials held the best interests of the cartel paramount over the interest of the public.
NO ROOM FOR SAILBOAT BUT ROOM FOR 65-FOOTER
The subject of Item #12 on the City Council consent agenda of July 21 was a staff recommendation that the council approve and authorize a huge, new twin-hulled 65-foot long, 27-foot wide whale-watching tour boat at the east side of Concession #18, which would more than double the passenger capacity of Monterey Bay Whale Watching. The staff report prepared by the city property manager is the usual model of obfuscation, intended to inform the council of as little as possible. No alternatives to the property manager’s recommendation are presented and the only rationale provided is that the Wharf Master Plan allows six boats at Concession #18 and this increase of capacity is going to increase the gross percentage rent paid by the concession (4%?).
Knowing that this council has four new members unfamiliar with the safety issues presented by the confiscation of MBS water space, and unfamiliar with the meaningless and all but abandoned Wharf Master Plan, the property manager glosses over the fact that this heavy steel double-wide boat is five feet wider than any other boat utilizing the northeast berthing space, and is seven feet wider than the 20-foot water space rented by Concession #18. Having spent the past four years trying to squeeze Monterey Bay Sailing out if its rented water space and its business under the guise of safety claims, he does a 180-degree turnabout from 2010 with the mendacious claim that the small sailboats, while a continuing safety problem, would be unaffected by the huge boat addition.
After the item was pulled off the consent agenda, a spirited exchange of viewpoints ensued. Ten to 12 supporters and users of MBS spoke to the safety issue and the misrepresentations of staff and cartel supporters who said safety was not an issue with this much bigger boat. Funny how what goes around, comes around, isn’t it? Either the cartel and the harbormaster were wrong in 2010, or they are wrong now.
Several alternatives to Marvin’s proposal easily present themselves. First and foremost would be to deny the request. This behemoth does not come close to fitting within the boundaries of the water space rented by Monterey Bay Whale Watching. Presumably there is a reason the water spaces in this bay are limited to 20 by 50 feet. It is to allow the rear water space boats to get out. The width of the Blackfin prevents that.
Other alternatives that preserve #21’s water space would include a condition that the Blackfin be required to move out any time Ternullo’s rear boat needed to exit the bay. Another solution would require the Blackfin to moor on the west side of concession #18.
All of those are sensible responses to Ternullo’s request to squeeze the Blackfin into a space that is too small. Instead, Marvin again chooses to usurp MBS water space rather than instruct Ternullo to eliminate the impact of Blackfin.
When the City Council decided to continue the matter to a later date, it ordered that MBS and the cartel engage in mediation to resolve the dispute. But the dispute is entirely of Marvin’s and Ternullo’s making, in that they intend to continue the taking of MBS property. I can’t imagine what MBS could want from mediation other than to be permitted to earn a living by conducting business as requested five years ago and as is Dutch’s right. Why should Dutch be required to change his use of his driveway when the problem is entirely of Ternullo’s making in buying a boat that doesn’t fit in his own?
Since it is obvious that the cartel, rather than the city, controls Concession #21, perhaps this finally puts the onus on the cartel to discontinue its efforts to put MBS out of business. I’m sure that if the cartel tells Marvin to do so, the city will be only too happy to give Dutch what he needs to run a successful business.
So will David overcome Goliath and the bully? It could happen with this mediation. But the backroom control of Fisherman’s Wharf will not end until the new council leasing policies are fully implemented. That could begin to happen tomorrow with the advertising of the Concession #18 space for offers by qualified bidders. The only way that does not happen is if the “fix” is still in to reward the longtime tenants and profiteers with the largesse of the city through backroom politics.
It is one thing to bemoan the outrageous profiteering that past improvident Council policies and decisions have wrought and quite another to stand by cluelessly to stop it when that right to profiteering has ended. Fifty years of feeding from the public trough is quite enough, thank you.
By Marvin’s actions, the city and the public treasury have lost an estimated $100,000 (best guess) in sub-lease rent that the public has been entitled to since Sept, 30, 2014. That is a waste of public money, an unconstitutional giveaway of public property to private persons. Does it require a lawsuit to see that city officials serve the public interest by taking this cash into the public treasury?
I hope not.
McCrone is a retired lawyer and, until recently, a member of the Monterey Planning Commission. His research and writings led the City Council to start reforming leasing practices at city-owned Fisherman’s Wharf, where numerous longtime leaseholders have reaped large profits by subleasing wharf space with no benefit accruing to the city.