Advertisement
Advertisement

No new lease granted for Belmont Park

Share

A proposal to grant a new lease to the operator of Belmont Park was rejected Monday by the City Council, potentially placing in jeopardy future improvements to the iconic Mission Bay attraction, including the still-closed Plunge swimming pool.

Unwilling to kill the matter entirely, the council agreed to bring the matter back in 60 days with the hope that lease terms more favorable to the city could be negotiated.

“I don’t think the deal is dead,” Council President Todd Gloria said.

Advertisement

However, Belmont Park’s operator, Rancho Santa Fe-based Pacifica Enterprises, raised concerns about its ability to complete a major overhaul of the decades-old oceanfront venue without a commitment to a long-term lease that would not expire until 2069. The current agreement ends in 2038.

“The Plunge is in serious jeopardy without this deal and completion of the park is in jeopardy,” Pacifica President Dario De Luca said following the hearing.

Without approval of the lease on Monday, De Luca said his company will lose out on a deal to take over the roller coaster from its long-term operator. The deadline for consummating that deal is the end of this month. The coaster is the only part of the park not currently controlled by Pacifica.

“If we lose this opportunity, the park will remain in a mismanaged, incomplete fashion as it has been for the last several years,” De Luca told the council.

In voting to not approve the proposed lease, the council followed the lead of Councilman Ed Harris, whose district includes Belmont Park. He argued that Belmont is a valuable piece of real estate that warrants a much higher rate of return to the city, despite the millions of up-front dollars Pacifica is investing.

“It is improved, there’s no doubt, but that doesn’t mean it was horrible before,” Harris said. “This is about getting the right amount of money for our assets. This is a 7.2-acre oceanfront piece of property that over last 26 years, we’ve only got $1.6 million for it.”

Since taking over the attraction nearly two years ago, Pacifica, with its partner Eat Drink Sleep, has already invested $25 million in updating the park, with the addition of two major restaurants, expanded entertainment offerings, a rooftop glass-enclosed event space and new restrooms. It also has plans to spend nearly $6 million on the repair of the nearly century-old Plunge and the building that houses it.

Because of years of deferred maintenance and exposure to salt air and ongoing corrosion, the pool closed earlier this year, and the original $1.2 million estimate to repair them has ballooned to $5.9 million. Under the terms of the proposed lease, the city has proposed a rent credit of $5.2 million to help cover those costs. As part of Monday’s action, city staff was asked to come back with a plan to complete repairs at the Plunge.

Under the current 50-year lease, which was entered into in 1988, the city is entitled to 5 percent of revenues from food, entertainment and other venues at the park. The new leases proposes a range of 3 percent to 6 percent from food, alcohol, game rooms, miniature golf, proposed valet parking, and the health club and pool operation.

Minimum rent would rise from the current $863,000 (before the rent credit) to $900,000, which would increase 2.5 percent annually. After five years, when a lease extension to 2069 would kick in — provided the required improvements are completed — the minimum rent would jump to $1.1 million.

The city estimates that it would collect $150 million in rent payments through the course of the proposed 55-year agreement if Pacifica were to also take over operation of the roller coaster.

“I hear people from the community appreciating your efforts, and we appreciate it so much we want to squeeze more money out of you,” said Councilman Scott Sherman, who joined Councilmembers Lorie Zapf and Mark Kersey in voting against the motion to reject the lease. “This is a very good deal for the city… I don’t know why we’re squawking about this.”

A report from the city’s Independent Budget Analyst did raise concerns about the lengthy term of the lease and noted that the proposed rent percentages are less than what is charged by other California cities for ground leases. At the same time, though, the report points out that Pacifica has already made substantial improvements that have yield higher rent payments than what the city had anticipated.

During the last fiscal year, the city collected $667,243 in rent for Belmont Park, not including the roller coaster, compared to $407,184 the previous year, after taking into account the remaining rent credit, according to the city’s real estate assets department.

Pacifica in 2012 took over operation of Belmont, two years after the previous operator, Wavehouse, declared bankruptcy. Tom Lochtefeld, doing business as Wavehouse, sued the city for $25 million, claiming that the city had denied him his right to redevelop the leasehiold to build a hotel. The case was dismissed with a settlement. The terms were not disclosed.

In addition to the ongoing makeover of the park, Pacifica has also proposed investing $2.5 million to increase the number of parking spaces in the parking lot south of Belmont from 463 to 571. In doing so, that will provide for 90 paid valet spaces and 18 additional free spaces. Some council members raised objections to the addition of paid valet parking.