LBReport.com presents another in our series we've named "The Amnesia Files." In this series, we present archival data with perspective, revisiting actions by LB City Hall that taxpayers may have forgotten...and some officials would like taxpayers to forget.

These are more than past actions. They're past actions with present-day consequences. LBReport.com presents "The Amnesia Files" because, as George Santayana wrote, "Those who cannot remember the past are condemned to repeat it."

(June 13, 2008) -- LBReport.com has previously provided archival on-demand audio letting readers hear what city management told the public about the future costs of the Long Beach Aquarium of the Pacific.

LBReport.com now provides below access to archival written materials documenting what city management said in writing.

In an August 1, 1995 memo to Councilmembers, signed as approved by then-City Manager Jim Hankla, then-Director of Financial Management Robert Torrez wrote in pertinent part:

The financial feasibility report, prepared by an independent firm with input from city staff, forecast (subject to a number of caveats and qualifications) roughly 1.98 to 2.1 million Aquarium visitors a year.

Some LB residents disputed the prediction as overly optimistic, noting that Aquaria elsewhere were losing money and if LB's Aquarium really expected to be self-supporting, investors (bond purchasers) shouldn't require a taxpayer guarantee. Their concerns were dismissed as negativism by naysayers.

The Council approved backing the Aquarium bonds with a City Hall pledge to, in effect, service the bond debt with public money if Aquarium revenue didn't do so. That would be done by tapping LB's hotel room tax within the downtown Redevelopment area and all revenue within the Tidelands Operating Fund (excluding existing obligations). In addition, City Hall agreed to transfer the first $1.5 million in net profit from a City Aquarium Garage to the Aquarium each year.

Within a few years, visitors and revenue failed to attain predicted levels...and the City Hall's Aquarium bond bailout began impacting City Hall budgets. Then-city management asked the Council to authorize refunding the original bonds by issuing new bonds.

In an April 3, 2001 agendized memo, then city management (now under Henry Taboada) said the Aquarium had 1.8 million visitors in its first year of operation but "[s]imilar to the experience of all major aquariums, attendance has steadily dropped since the first year of operation. The Aquarium had 1.5 million visitors in FY 99 and 1.1 million visitors in FY 00. Recent studies concluded that the Aquarium's capacity is 1.1 to 1.4 million visitors per year. The reduction in attendance led to a corresponding reduction in Aquarium revenues."

The primary objective of restructuring the bonds, Councilmembers were told, was to "reduce annual debt service payments" which will "defer all or a portion of principal payments for the first five years, thereby significantly reducing annual bond payments during that period...After five years, the annual debt service for the new issue will increase ($8.3 to $8.8 million)..."

The refunding of the bonds had a separate unspoken effect: by reducing bond payments for five years, it effectively removed the Aquarium's failure to perform as predicted as an issue entering the 2002 election cycle -- when incumbent Mayor Beverly O'Neill, an Aquarium supporter from its inception, was seeking reelection...and it kept the issue off the table until at least 2005.

By then, some argued, the "Pike @ Rainbow Harbor" -- another development strongly backed by O'Neill -- would provide the so-called "critical mass" that would turn the Aquarium around. Again, thoughtful critics of the "Pike @ Rainbow Harbor" were dismissed as naysayers. The Council approved the plan and new bonds were sold.

Tucked away in the small print of the Preliminary Official Statement for the new bonds were further details: an analysis performed for the Aquarium after its original bonds were sold and visitors and revenue didn't attain predicted levels indicated that "the maximum capacity of the Aquarium may be 1.4 million visitors annually" and "to maintain a positive guest experience, the Aquarium may comfortably accommodate 1.1 to 1.4 million visitors a year." This differed from the original estimate "because it takes into account the actual floor plan of the Aquarium, traffic flow and length of guest stay and other factors to achieve a quality guest appearance."

How this could occur wasn't publicly discussed or pursued. Critics who warned that the two million visitor projection was overly optimistic were right...and were wrongly dismissed. Basic questions about how this happened and who was responsible weren't asked, much less answered...and no one was held publicly accountable.

In a subsequent (Sept. 2005) memo to the Council, then-City Manager Jerry Miller (who wasn't City Manager for the prior Aquarium bond re-fi in 2001) stated in his agendizing memo:

"It became apparent at that time that the physical layout of the Aquarium could not accommodate the 2.2 million visitors it was projected to draw. Since that time, an operational and capacity analysis has been conducted which determined that the Aquarium could reasonably accommodate 1.46 million visitors annually. The capacity analysis revealed that the AoP could not achieve attendance levels necessary to generate sufficient revenues to cover operating costs and the bond payments," Mr. Miller writes.

Again, no serious questions were asked publicly about these revelations.

Further on the Aquarium coming as "The Amnesia Files" build...only on LBReport.com.

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