Under "Fiscal Impact," city management's agendizing memo states:

The loan is from the Oil Field Abandonment Reserve in the Tidelands Oil Revenue Fund Group. This reserve currently has $34 million and is accumulating funds to pay for the cost of permanently abandoning wells when the Tidelands oil fields close. Much more than $34 million will be needed to pay for oil field abandonment and the Reserve is being added to, currently at the rate of about $6 million a year, except for the suspension in FY 20, and the anticipated suspension in FY 21 and possibly FY 22 due to the City's financial constraints as a result of the pandemic. the main costs for oil field abandonment are estimated to come later than 2035, although Federal, State or economic actions could make it earlier.

While there is a need to provide funding for oil field abandonment on an annual basis from oil revenues before oil revenues drop too low, there is no immediate need for the cash in the Oil Field Abandonment Reserve. The Oil Field Abandonment Reserve funds an be lent as long as loans are repaid before oil field abandonment costs are incurred.

Although repayment of the loan by the Corporation over the 13-year term, and potentially substantially sooner, seems likely based on its historical performance, it is not assured. As a result, the loan is backed by the Tidelands Operating Fund Group (Tidelands Fund) that gets much of its operating revenue from oil and from 5 percent of the Port's revenues. If the Aquarium does not repay its loan on a timely basis, the Oil Field Abandonment Reserve will be made whole by the Tidelands Fund.

The long-term financial well-being of the Tidelands Fund appears challenging, even with debt service paid by that fund declining in the next few years. The Fund has relatively high and not easily reduced operating costs. In addition, the beach area supported by the Fund has substantial capital needs.

There are also the substantial unfunded obligations with regard to Oil Field Abandonment Reserve that will require diversion of an increasing portion of the annual oil revenue to the Reserve. This is because oil revenues will decline with natural productivity loss from older wells, while the contributions needed for the Reserve will likely stay the same or increase. A higher price for oil would substantially help, both from a revenue viewpoint and the potential of exploration extending the life of, and production from, the oil fields. Based on current projections, there is a significant deficit expected in the Tidelands Fund in FY 21 due to low revenue from parking and Urban Commons, and the Aquarium (if they do not receive the proposed loan). Oil revenue is currently expected to be higher than budgeted and may partially offset other lower revenue and reduce the expected shortfall.

Notwithstanding how well oil revenues perform, it appears likely that at least some Tidelands reserves will need to be used in FY 21. For at least a few years beginning soon, increased oil revenue is likely due to contractual terms, independent of oil prices, but the cost of funding the reserve for oil field abandonment may significantly offset the revenue increase.

In the context of this financial situation, the proposed Corporation loan is backed by the Tidelands Fund. The Tidelands Fund has responsibility, not for the loan itself, but to repay the loan if the Corporation is unable to do so. The status of the loan will need to be watched; if the Corporation has trouble repaying the loan, the Tidelands Fund will need to set aside funds to repay the Well Abandonment Reserve.

The backing of the loan by the Tidelands Fund is a potential, but unlikely, financial burden on the fund; however, backing the loan is in the best interests of the Tidelands Fund. The loan backing will help the Tidelands Fund in the long run by assisting the Aquarium to return to normal financial operations as soon as possible and to allow the Corporation to make normal rent payments to the Tidelands Fund from Corporation revenues.

There will be severe impacts on the Tidelands Fund if the Corporation cannot make normal rent payments, but at present, it is considered unlikely that the Corporation will fail to make rent payments or fail to repay the loan on a timely basis. If the loan is approved by the City Council, it will be managed by the Financial Management Department and the draw authorization will be approved by the Assistant City Manager based on a draw request from the Corporation. Appropriation increase requests needed to technically authorize the loan draws to the Corporation will be brought to the City Council after the fact in future citywide Budget Adjustment City Council letters.

Sponsor

Sponsor

The Aquarium operator (Aquarium of the Pacific Corporation) is a 501(c)(3) non-profit entity. and the City Council has for years let the Aquarium operator prevent public an press access to its decisionmaking board meetings and reflective minutes, effectively enabling closed-door approval of its operations.

The Aquarium's most recent IRS Form 990 tax return -- visible at this link period major salaries at p 32. It indicates Aquarium President/CEO Dr. Jerry Schubel (who retired in 2020) was paid during the tax return period a base salary of $369,240, plus bonus and incentive compensation of $87,500, plus other reportable compensation of $9,693, plus retirement and other deferred compensation of $64,355, plus non-taxable benefits of $11,919 for a total of $542,707.

Others in the seven highest paid among Aquarium management were paid (total sums) between $184,357 and $260,340, The Aquarium's newly hired replacement for Dr. Schubel didn't respond when LBREPORT.com asked for his salary in 2020.

Sponsor

Sponsor

The Aquarium board (members here) currently includes Molina brothers Mario and John. Like most other Aquarium Boardmembers, who include former Mayor Bob Foster and former Planning Comm'r/former LBCC Trustee and current LBUSD Boardmember Doug Otto they are uncompensated, .

John Molina is a co-founder of Pacific6 which, through a subsidiary operates "LBPost.com" Prior to its mid-2019 acquisition by Pacific6, LBPost.com was owned/operated by Cindy Allen through her subsequently divested ETA Advertising. In November 2020, Ms. Allen (endorsed by Mayor Robert Garcia and nearly all Council incumbents) defeated Reform Ticket candidate Robert Fox and she is now one of LB's two shoreline (Tidelands impacted) Councilmembers along with 3rd district Councilwoman Susie Price.

To date, neither Ms. Allen (despite her years operating a LB press outlet) or Councilwoman Price (a now six year Council incumbent) or any other LB Council incumbents or any LB press outlets have supported LBREPORT.com's position seeking public/press access to Aquarium board meetings.

Sponsor

As previously reported by LBREPORT.com in 2020 -- but unmentioned in city staff's agendizing memo -- the Aquarium operator, sought and apparently qualified for the federal taxpayer Paycheck Protection Program loan program in an amount up to $2.5 million. Responding to an emailed request (July 9) for a simple narrative on why the Aquarium sought relief under the PPP program, Aquarium CFO Anthony Brown replied via email (July 9, 2020)

The Aquarium sought relief from PPP program because more than 75% of its revenue is admissions and admissions related. Despite the facility being shut down completely from March 14 - June 11, a significant number of employees were needed for essential duties, including but not limited to monitoring life support systems and feeding and taking care of the live animals. The Aquarium also maintained staff to prepare for reopening and to offer educational programs and lectures online during the closure to stay engaged with the public.

LBREPORT.com also asked at the time which salaries, if any of the top compensated Aquarium officials had been reduced during the COVID-19 pandemic and if so by roughly how much, and CFO Brown replied: "Top compensated Aquarium officials took a pay cut, which was made effective in April 2020."

In the mid-1990s, city officialdom under Mayor O'Neill's administration told LB taxpayers the Aquarium could likely meet its annual debt service from its operations. (Then-press outlets variously called members of the public who questioned this "naysayers,") Within a few years, the Aquarium's performance showed naysayers were right. Aquarium supporters then claimed the issue resulted from a lack of "critical mass" that would be resolved when the "Queensway Bay Entertainment and Retail" project would provide a regional attraction Today, it has been rebranded as the "Pike Outlets" with franchised and hopping center type retail and food offerings.

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