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Bill McCrone has a question for the folks at City Hall, and it’s a simple one: What’s the hurry?

Specifically, why are city officials renegotiating lease terms with Chris Shake for the Fisherman’s Grotto on Fisherman’s Wharf, where the city lease doesn’t expire until 2021. And why are they renegotiating lease terms with the Surfside entity for the London Bridge Pub property at the foot of the wharf, where the current lease still has 20 months to run.

Those renegotiations are the topic of a closed-door meeting of the council tonight.

McCrone is a former planning commissioner and longtime critic of the city’s leasing practices at the wharf, which he has researched extensively. In a letter to the city, he notes that the City Charter requires the city to collect fair market value on its properties. He asks how the city can calculate fair market value so far in advance.

“The California Constitution and numerous other state and federal laws prohibit government officials, elected or appointed or employed, from giving away public property for less than adequate compensation to the public.  If you extend these two outrageous ‘ground’ leases or enter into new leases at less than FMR (market value), you will be defrauding the public and giving public property to private persons for free,” McCrone wrote.

McCrone, a retired lawyer, also argues that Surfside holds the master lease on the pub property and profits handsomely by subleasing the property, performing little or no service of value in the process. He says that’s a violation of city regulations.

Surfside, headed by the Cannery Row Co.’s Ted Balestreri,  “is doing nothing more than managing a well seasoned property but receives 60% to 70% of the rent for management.  Five % to 10% is the market rate for commercial property management.  No matter how you paper it, extending Surfside’s management for more than 10% of gross rents is a fraud on the public,” McCrone wrote.

“The good ole boys are at it again.  The dust has hardly settled on the recent election before they have once again forced their noses under the tent to reap enormous public subsidy for their commercial operations.  The reasons to refuse this premature negotiation are now more numerous than they have been the past two or three times the Council has refused their requests.”

The Partisan emailed various city officials this morning to ask why the city would consider renegotiating the leases early. City Manager Mike McCarthy replied only that that was something under consideration. The Partisan could not determine late Tuesday what if any action the council had taken.

The City Council two years ago began efforts to reform leasing practices at the city-owned wharf, largely because several longtime leaseholders were operating at sweetheart rates bestowed on them decades ago. In some cases, those leaseholders are profiting handsomely by subleasing the properties, with none of the profit going to the city.

Wharf tenants responded with a public relations campaign accusing City Hall of seeing to out local businesses and replacing them with chain operations able to pay more. The businesses also complained that the city was seeking the shorten the length of the leases, making it difficult for the tenants to obtain financing. A handful of leases have expired during the debate and the city is negotiating with Bay Area firms to fill a couple of the spaces, but city officials maintain they recognize the value of unique, local operations.

The merchants’ resistance to various reform measures was fortified in November when longtime Councilmember Libby Downey, a leader of the reform effort, lost her re-election bid. She was ousted by Dan Albert Jr., the former school official who received considerable financial support from wharf interests. For practical purposes, the wharf interest generally enjoy support from a council majority.

In his letter, McCrone argues that any council member who has received more than $500 from wharf interests should recuse themselves.

“You ought to pass an ordinance to limit campaign contributions,” McCrone wrote. “Your self-serving failure to do so has initiated a strong sentiment among citizens to take this issue to the polls with a charter amendment.”

Comments on this entry are closed.

  • Jason Reed February 7, 2017, 10:17 am

    I agree with Bill.

  • Bob Coble February 7, 2017, 11:19 am

    McCrone is right. The city charter needs to be followed. I like the Wharf tenants but NOT the fact that they continue to have extremely low rent rates despite the Charter requiring market rates. What’s even worse is that some of them make a small fortune by subletting some or all of the wharf property they’re renting, and charging much higher rates to the sub-tenants.

  • john moore February 7, 2017, 11:52 am

    I understand McCrone’s position.

    Long term land leases require the tenant to build the structures and maintain them for the lengthy lease terms. At the conclusion of the lease, usually the landowner, the City, gains ownership of the sturctures and improvements in its worn condition.

    Because of the longer term of land leases. as they arrive at the later years, a tenant may find that a large expenditure is needed, but it is not feasible to expend the money because the lease term is near. In that case, the Tenant must renegotiate the terms of the lease, extending the term and price to reflect the new improvement to the property. For example, assume a forty year land lease and that after thirty-five years a new expensive 40 year roof is needed. With only five years left on the lease, the tenant will not make that improvement without an extension of the lease term so it can amortize the new investment over a term of years.

    What I have said does not exclude political hanky-panky. My point is that long term land leases, whether public or private, have the inherent tension that I have described.

    • john moore February 7, 2017, 2:17 pm

      The problem with the Wharf leases is that there are three players, not just two. Decades ago, the city granted land leases to Lessee 1. Lessee 1 then enter a lease with the operator, lessee 2. Because lessee 1 obtained the land lease at very favorable rates, it makes a profit by charging lessee 2 a much higher rate. So when lessee 2 needs a near end of lease improvement as I described above, and needs a lease extension, lessee 1 won’t allow it without a lease extension for it.

    • Willard McCrone February 9, 2017, 1:13 pm

      The idea that tenants of long term ground leases need more time to amortize maintenance is a neon canard. None of the long term tenants on Fisherman’s Wharf have “financed” any maintenance – ever. Not only do they not finance, but they simply don’t do it until their premises are falling into the Bay. John’s theory is a way to claim occupancy on ground lease in perpetuity, which is the expectation of long time tenants and why I call them “Wharf Lords”. They believe they have a feudal right to possess public property to pass on to their families forever, with the outrageous pubic subsidy. Commercial, private landowners NEVER extend ground leases, for to do so is to defeat the bargain made by the landowner – full possession of the improved property and full market rent at the expiration of a ground lease. Yet all of the tenants on the wharf got 30 to 50 year extensions in 1991, defrauding the public of millions and millions of dollars.

  • bill leone February 7, 2017, 12:00 pm

    Political campaign contribution reform is a primary concern of the Monterey County Democratic
    Central Committee. If you’re interested in making a significant difference in local politics, This Issue is one you can actually get involved with. So, I recommend contacting the Center For Change, at 1238 Fremont Blvd, Seaside, or call 831-866-678-3367, or 831-277-4726, visit online at info@montereycountydemocrats.org or drop in at the next meeting, which is February 28th, at
    6:30, at 931 Market Street Salinas.
    Yes, you can do more than write snarky comments in the Partisan from the comfort of your living room. You can actually Do something to make a difference.

  • Judy Karas February 7, 2017, 12:13 pm

    In addition to Bill McCrone, local resident Jim Heiland spoke out against the wharf leasing rates some years ago at the council meetings. It’s important to let the city know that people are watching what’s being done and holding city officials accountable in negotiations and leasing operations.
    I recently did some research on housing on Ft. Ord lands. There was a lawsuit by a Seaside resident, a Mr. Kaatz, who brought suit against K and B Bakewell re: its purchase and sale of 105 acres of residential property that were formerly part of the Fort Ord military base.   Kaatz claimed, among other things, that immediately after the City purchased the property from the United States Army in July 2002, it conveyed the entire acreage to a developer, K & B Bakewell Seaside Venture, LLC (K & B Bakewell), for a fraction of its fair market value.  See: http://caselaw.findlaw.com/ca-court-of-appeal/1145164.html This company is still trying to get more land at Ft. Ord, I believe–or did it get another sweetheart deal from the city of Seaside?

  • Judy Karas February 7, 2017, 12:47 pm

    I forgot to mention that the property which K and B Bakewell purchased for $6 million was the entire Seaside Heights property–and how many houses did they put up there, how much profit made? I don’t mean to change the subject–it’s just that there are a number of people who have done well by city officials.

  • Rebecca J. Kistler February 12, 2017, 12:08 pm

    Looks like a complete take-over by the good ole boys, I’d say! Why let greed and stupidity rule the political scene everywhere? Can’t someone stand up for the logical and FAIR way to get rid of such negative time spent needlessly? Come on, People; show the spirit of fairness and don’t let your greed take over everything you do and think!!!!!!!!!!!!!! YOU CAN DO THAT if you wish it to be done!