Charging Fair Market Rent for Harbor Uses
A majority of the waterways in Lower Newport Harbor are considered tidelands. They are owned by the State of California (State) and are assets of the public. State legislation in 1978 assigned most of the nearby tidelands to the City of Newport Beach (City) to administer under the State's rules. The City, therefore, serves as "landlord" on behalf of the State. One of the State's rules is for the City to set rents at fair market value. The Harbor's tenants are those who rent these public assets for a specific private use - like operating a marina, a concession on a pier or berthing at a mooring.
The City did not review the charged rent of the tidelands until 2011. At that time, charges for commercial harbor renters had gone up about 24% since 2001, while some marina slip rates had increased between 67% and 152% during that same period. If the City did not take action and charge an appropriate rent for the use of the tidelands, the previous charge could have been considered a "gift of public funds", which is prohibited under the California Constitution (Article 16, Section 6).
To address this issue, the City met with the harbor renters through various workshops and meetings to discuss harbor rental rates in 2011 and 2013. The City Council also revisited the charges in 2012, 2013 and 2015 during their study sessions and meetings. Additionally, the City also obtained several independent appraisal to provide guidance as to what might be current market value. Copies of the latest two independent appraisals are available for viewing by clicking on the links below.
The City allocates revenues and expenses associated with Tidelands under the guidance of the 1974 legislation, which directs us to take any revenue associated with Tidelands (parking, rent, oil sales, etc.) and use that to pay Tidelands expenses (dredging, other harbor maintenance, lifeguarding, etc.). The Tidelands expenses almost always exceed Tidelands revenues, in part because most of the ocean beaches are Tidelands - and the life-safety calls associated with residents and visitors are expensive. All of the City's financial accounts - including the Tidelands Fund - are audited annually as required by law.