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.”