Photo credit: Diana Lejins

Under the arrangement, City Hall wouldn't repay the Harbor Commission; LB's separately governed Redevelopment Agency would reimburse the Port for the cost of public improvements in the Harbor area within the North Redevelopment Project Area. Repayment would come solely from additional tax increment from the Port's Middle Harbor Project or if that project doesn't begin within five years, from additional tax increment from the Port's Pier S project.

A 1993 agreeement between the Port and RDA is also being amended regarding the RDA agreement to repay a $30 million loan by the Port to build the LB Convention Center. A $27 million balance on the loan now payable from downtown hotel room tax isn't currently being repaid because payments are being deferred due to RDA's obligation to support payment of the Aquarium debt bonds. Under the new arrangement the $27 million balance will be paid from additional tax increment received by RDA from the Pier S project. If Pier S doesn't proceed within five years, the debt would be repaid "from any unobligated legally available North Long Beach Redevelopment Project Area funds."

The requested action at the June 22 Harbor Commission meeting came directly from City Manager Pat West, who isn't part of Port management. To view City Manager West's memo to Harbor Commissioners, click here.

Harbor Commissioner Dr. Mike Walter asked why Port management hadn't provided a report and recommendation on the transaction. After PoLB Executive Director Richard Steinke offered a politely non-responsive response, outgoing Harbor Commission President James Hankla said:

Commission President Hankla: I think it's important to put this in context. The context is that under ordinary circumstances, our Executive Director advises us on business pertaining to the Harbor Department and the City of Long Beach. This is a horse of a different color. This is about patriotism and apple pie. It's not about the business of the Port. It's whether we are all part of one city. I think that the salient questions for the Commission here are two really. Are there reasonable expectations that we will be repaid pursuant to the methodology that's been set forth? And secondly, is there now a reasonable expectation that we will be repaid from the funds that we advanced for the construction of the Convention Center back in 1993?...It's not Port business per se, it's really city business and I think that's why we haven't gotten a recommendation from our Executive Director.

But that's not how Harbor Commissioner Dr. Mike Walter saw it:

Commissioner Walter: ...I think the big question is why all this reshuffling of the Aquarium's debt has to be done so quickly. This is so fast it appears almost like a panic...I suggest that the proposal to help the Aquarium is truly the triumph of hope over financial experience...

After posing multiple questions to city staff, Commissioner Walter said he would vote for the item, but added: "I deal in finance a lot...and if we had a trustee responsible for investing our money, and the trustee came up with this proposal, I'd question his fiduciary competence."

But when the vote was taken, Walter joined his fellow Commissioners in voting for it.

The prospect of tapping future North RDA money to reimburse the Port for bailing out City Hall's obligation to pay Aquarium bondholders didn't sit well with Vice Mayor Val Lerch who was in the audience. When public comment was invited, Vice Mayor Lerch came to the podium and said:

Vice Mayor Lerch: I am here not as the Vice Mayor but a resident of the 9th district and the North Project Area committee. I'm quite concerned about what happens should the Middle Harbor fall flat...Eventually at risk...will be the North Long Beach people. It will suck the life out of improvements of North Long Beach. It'll suck the breath out of us, because ultimately we'll have to pay that should the Middle Harbor fail...I haven't looked at it, I haven't seen the whole thing but listening to what's happening here today, I see it also impeding the possibility of us trying to create new bonds in the north area because we have this looming debt out here. There's a whole bunch of things that could affect the North Long Beach community...[W]e're going to have to look at this and see how it's going to effect North Long Beach and redevelopment...I'm concerned about that.

Outgoing Commission President Hankla responded to Vice Mayor Lerch tersely: "Mr. Vice Mayor, let me tell you that North Long Beach is not only sustained but thrust forward on the strength of the Port of Long Beach, and we hope to be able to provide that service for many years to come."

The Harbor Commission's 5-0 vote followed.

LBReport.com provides unedited, on-demand audio coverage of what took place. To hear it, click here (48 mins, 27 MB MP3).

The action came on the final day of the incumbency of Harbor Commissioner Hankla...who as City Manager in 1995 recommended that the Council approve potentially tapping public money to pay debt bonds that financed the Aquarium's construction and related infrastructure. The debt service on the bonds was supposed to be paid from Aquarium attendance, but visitors and revenue fairly soon fell short of official predictions. City management acknowledged at the time the possibility of tapping public money but called that prospect very unlikely.

To hear archival audio of that 1995 Council session, including the words of then-City Manager Hankla and responses of then-Councilmembers, click here.

A summary account of the Harbor Commission action was moved in a June 25 newsflash by the LB Business Journal with a further report promisedn July 7.