A Day in July
Click Long Beach Collusion for background on how the city council circumvents laws and constituents' wishes
Long Beach Grants 66-Year Lease to Queen Mary Operator
The following transcripts from the July 7, 1998 council meeting
reveal the decision-making process of the City of Long Beach.
Transcript from agenda item 21:
Staff Reports and Developer Presentations - Part I
Long Beach City Hall
"5 Million...will be put in a segregated capital repair fund only at the time the Queen Mary also contributes their share...6 million..." - Susan Schick
Director of Community Development Susan Schick: Madam Mayor and members of the city council, the Disposition and Development Agreement and the attached Ground Lease have been negotiated based on five principles that were discussed in great detail with the Queen Mary team and City team that started this discussion and we believe they also carry out the intent of the council direction when the council authorized an exclusive rights to negotiate to consider a longer term Ground Lease at the Queen Mary and the 45 acres surrounding it.
First, we need to continue the partnership that's been in place given the 20-year lease entered into between the Queen Mary and the City of Long Beach in July of 1995. This lease is in existence; there is nothing we can do to terminate it unless the parties are in default and that's not the case, and so the reasonable thing to do, to accomplish the next four objectives, was to consider a longer term lease which is limited under the tidelands to 66 years.
The second principle is to stimulate new development. Obviously, the 45 acres surrounding the Queen Mary has a strong potential for commercial development but we need to do something working with the private market place to stimulate that development.
Three, we did not want any new risk to the city other than that which had already been accommodated and dealt with in the existing 20-year lease. We did not want any new capital investment from the city's perspective.
And finally, in order to stimulate the development, we had to structure a ground lease that provided a reasonable return to the city but that also provided for the private market place to take the development risk, not the City of Long Beach.
With those principles in mind, we have negotiated a 66-year lease that would start, based on the action taken by the the city council in July of 1995. The business transaction is structured so that the basic transaction involving the Queen Mary, this is the ship itself, would stay in place. As you know, when that lease was negotiated in 1995, the transaction was structured so that we would get a percent of the gross sales that were made from the Queen Mary and that concept continues in place and would be a part of this new lease. Basically, this gives us the guaranteed revenue stream because the Queen Mary itself is doing quite well and the city's return is close to a million dollars a day, in terms of ground lease obligations. And we expect that to grow in a substantial fashion over the life of the new lease.
As to the elements that we really refer to as the waterfront elements, we need to structure a separate type of transaction. I might mention before we discuss the waterfront elements, the Dome and the Events Park lease will stay with the current structure that's in place. The Catalina Express will be under the jurisdiction of the QSDI organization however, all the revenue will pass through to the city, based on the current transaction that's in place and that's basically 5% of the permitee's gross revenues...and that as you understand, will grow over time.
As for waterfront elements, we needed to structure something that would stimulate private development but not involve the city in any substantial risk or capital contribution. To do that, we've structured a lease which accounts for approximately 44 acres and we've set up a rent structure that provides the city 5% of the gross sales coming from that...44 acres over the life of the lease. However, we do have the ability...we have structures of part of the ground lease - a transaction that will allow a 9% return on the developer's cost prior to the city receiving its share of the rent. Our projections show that over the next five years we may not receive a substantial payment but after that, probably be getting anywhere from five [sic] to the tenth year we should receive a reasonable return on that waterfront development.
The transaction is structured in a fashion that is typical of ground leases when we're dealing with high risk, and a series of difficult uses for which there's no histroical history. By that, I mean, it allows for developers return prior to the [inaudible] getting a return, however to the extent there is a reasonable return to the developer given their investment, then we participate in a commercially viable fashion - 5% of gross sales after a reasonable return to a developer should work out well for the city over the life of this lease.
We are continuing the concept regarding the Queen Mary that provides for a city oversite in term of the maintenance of the Queen Mary. We consider that an important element in the transaction. The Queen Mary has been well maintained - we have oversight over that. We do have a specialist that works with the Queen Mary's staff to assure a good maintenance plan which maintenance plan is approved by the city manager on an annual basis.
In terms of capital improvements...we were not interested in involving the city in a long-term process of securing and using...new city funds. The general fund of the tidelands for capital repair. So what we have structured, is a transaction in which the city, under the lease, would provide for a capital repair fund using the 5 million dollars that was originally transferred to the Port. That's the remaining balance as you recall, 6-1/2 million was transferred from the Port along with the ship. A million and a half of that has been funded for teak deck project which is basically the 'roof' of the Queen Mary and had to be repaired to avoid damage to the ship itself. So, 5 million of that fund will be put in a segregated capital repair fund only at the time that the Queen Mary also contribues their share which will be a 6 million dollar contribution. Should that be contributed, that fund will be set up. In addition to that, 20% of all future incremental increases in rent over the million dollars they're already getting, plus the 'pass-through' for the Catalina Express, will be contributed to that fund if the project proceeds as we anticipate, that will go up to 30% upon completion of Phase II.
Now this gives a long-term revenue stream from the project itself. It's almost a boot-strap operation for capital repairs in which the project's success will contribute to the capital fund and that fund then, under the direction of the city manager, will be allocated solely for capital improvements to the ship. That, we think will provide a long-term stream of revenue to assure that those capital issues that are quite frankly, normally the obligation of the lessor are undertaken, however there's no further call from the city beyond that sequestered account for capital repairs. The rest of the responsibility is that of the Queen Mary.
Environmental Impact Report, as you know, has been completed and certified by the Planning Commission and that summarizes the business points of the transactions and I'll be glad to answer any questions.
Mayor Beverly O'Neill: Thank you very much. Gentlemen, we're not going to have hearing right now, so if you would be seated, we have other presentations first. But please, we will have hearing from the community in a moment. This is on the business transaction now. We would like to have the presentation on the plan itself and I'd like to have the representative is it you, Mr. Prevratil?
City Manager James Hankla: Madam Mayor...?
O'Neill: Yes...
Hankla: Before we do that, I wonder if I could add two additional items. In the event there's an incentive provision in this lease that provides that, in the event that the Phase II of the project is not initiated, then the rent goes up by 20%. The city's rent...furthermore, at the completion of Phase II, the city's participation in terms of the set-aside increases from 20% to the capital maintenance fund from 30%, I mean to 30% from 20%.
O'Neill: Thank you very much, please.
"The objective facts speak for themselves" - Joseph F. Prevratil
Joseph F. Prevratil: Mayor Beverly O'Neill, members of the city council, Mr. Calhoun, Mr. Burroughs, and Mr. Hankla, as most of you know, I'm Joseph Prevratil. I'm the president of the Queens Seaport Development, Inc. In the past five years, the Queen Mary has made some extraordinary progress. In the recession-ridden and dismal days of '93 and '94, the last three years have been remarkable. In '97, just last year, we've produced 26 million in revenue and gave the city 1.5 million in bed tax and rent. And we made a million dollars profit last year. As a matter of fact, in the last five years, '93 through '97, we paid the city 2.1 million in rent and 2.3 million in bed tax for the total of 4.4 million dollars.
In 1998, thanks to a good economy, and people having discretionary income again, the success of Titanic the movie, and the opening of the new Scorpion submarine next week, we expect to do 30 million in revenues - pay the city over 2 million in bed tax and rent and should make well over 2 million dollars in profit. Attraction attendance in '96 was 281,000; in '97 it was 323,000 and in 1998 through this last holiday, attendance is 313,000. Therefore, attendance alone in '98 will double over '97. For the three-day 4th of July holiday, attendance this year was 45% over last year. Plus, we have contracts and the hotel and catering business for the years 1999 and 2000 which amount to over 6.2 million dollars.
There is no longer any question of the Queen Mary's economic viability. Our core business, the atttraction, the hotel; the food and beverage are very solid. in the last 3 years, the core business of the Queen Mary has been properly developed and a firm foundation laid to go forward with our development before you tonight. In September of last year, we began a process of planning for the major refurbishment of the Queen Mary and a long-term development of the 45 acres adjacent to it. We retained the nationally respected architectural firm of Ehrenkrantz, Eckstut and Khun, the same architects who designed Queensway Bay, who are also urban planners and have a strong reputation in historic preservation as well, to create the design for the project. They have designed a development concept before you today that has three main goals: Maintain the Queen Mary as the centerpiece of the development, and be sensitive to her historic preservation, open up the waterfront of the Queen Mary to the public, from the wharf level, and make the development a real "people place". The plan before you will accomplish these goals.
In addition to the design team of E E & K, the rest of the team consisted of KAKU & Associates to do parking and traffic studies, Pat Gibson is here this evening (the president of the firm), Coatin and Associates to do the benefits to the city analysis, Price-Waterhouse to do economic feasibility, Adamson and Associates to do costing and Gary Felgemaker of the city's Building and Planning Department, did the EIR which was certified on June 25, 1998 and of course, our own staff.
We are proud of our development concept. It is the distillation of a number of years of thought and examination of different ideas and concepts. It emphasizes what we are. We are in the attraction and special event business. We are not a retail entertainment complex, and therefore, we are primarily complementary verses competitive to the Oliver McMillan project on this side of the bay. We're in the attraction, hotel, food and beverage, parking and special event business and we accomplish our goals being sensitive to the historic significance of the Queen Mary, the centerpiece of the development. Tonight you will hear form Dr. Knox Mellon, former head of the California Office of Historic Preservation and a nationally recognized preservationist who will verify some of our efforts in historic preservation. We are also pleased with the progress of our restoration efforts - some of which are the teak deck repairs, the Veranda Grill, the Main Hall floor and certain suites. I was also gratified a few years ago, to receive the Preservationist of the Year Award from the Long Beach Heritage Coalition.
I recognize that there are some people who you may hear from tonight who disagree with the way I operate the Queen Mary. But the simple point is, the Queen Mary is run well, it is maintained well and poised for future growth. The objective facts speak for themselves. As a matter of fact, approximately one half of the first phase development of 25 million dollars will go toward the refurbishment of the Queen Mary. That's not just the HVAC plumbing and electrical, fire and safety systems, but most importantly, also remodeling all of the hotel and meeting rooms on the ship and the public places. Plus, we're adding a new attraction and an updating of the Queen Mary exhibits and tour.
The terms and conditions of the long term lease - 66 years, also provides for capital expense repair fund on the future rents for the future capital requirements of the Queen Mary as Mr. Hankla pointed out. It should also be noted that we currently employ 750 employees with a payroll of 14 million per year. 70% of those employees live in Long Beach. They pay their rent or mortgage, buy groceries and gas and pay taxes. Therefore, under any conservative economic multiplier, we have an economic impact on the local economy of at least 30 million per year. When this development is fully built out, we will employ 1800 employees. We are asking you today to approve the recommendation of the city manager to authorize an extension of 48 more years to our current lease for the total of 66 years. Upon which, you know, our financing is also conditional - a DDA [Disposition and Development Agreement] consistent with our overall development plan and other points in the recommendation. Of course the financing of our developement is key. We have a commitment of 26 million for Phase I of our development from a well-known New York investment banking firm, known both in the United States and Europe. Not only is there a commitment to this first phase of 26 million, but based on securing the lease extension and continuing growth of our core business, Phase II plans of over 100 million dollars in financing are being worked on by SPP Hambro and Company. I have Mr. Neil Powell, Chairman of the Board of Hambro here this evening and I will ask him to confirm for you SPP Hambro's financial commitment to us.
Mayor, and members of the city council, I believe in Long Beach, so do our employees. It is an exciting time to be in a revitalized Long Beach - the convention center expansion, the Long Beach Aquarium of the Pacific and its phenominal opening success, Rainbow Harbor and now, the waterfront at the Queen Mary. I have always been an optimist. I don't believe in negativism - even in the dark days of '93 and '94. I have faith in our employees, the Queen Mary, the city and our vision for the future. Queens Seaport Development, Inc. in the city of a real public-private partnership - and it works for both sides. I am proud of that. It is this kind of partnership, the entrepreneurial spirit, that has made this country great. We are pleased to be part of that process.
Tonight I'm asking you to approve our conceptual plans and the lease extension. Permit me now to introduce Stan Eckstut who will walk you through the project. Alan Coatin is also here, who will briefly discuss the benefits of the project to the city, and of course, I'm prepared to answer any questions you might have and Mayor, at whatever appropriate time you feel thereafter, to call upon Dr. Mellon and Mr. Powell, I'll leave that to your discretion.
O'Neill: I...if they're just going to make some statements, I would like all of them to come and sit in the front row so that we maybe have a chance to hear them quickly as part of the presentation.
Prevratil: Certainly.
Phase II of the Queens Seaport Development: Illustration of proposed 5-story parking structures, Science Fiction Hall of Fame, yacht club marina and hotel, restaurant at the Queen Mary's bow and the ice skating rink. This plan calls for the demolition of London Towne, the construction of "infill" buildings next to the ship and retail shops on D Deck, the Queen Mary's former working alleyway.
O'Neill: Yes, Mr. Eckstut?
"...it's a party ship, it's a party street, it's a place for lots of fun and celebration day and night..." - Stan Eckstut
Project Designer Stan Eckstut: Madam Mayor, members of the council, my name is Stan Eckstut I'm the principal of the architectural firm that is consulting the applicant here. I'm going to rely on the slide show behind you which is also visable to the audience. If I can introduce the conceptual plan, it's a vision of a entertainment district alongside the Queen Mary - this is a view of a model. It's a pleasant, walkable environment...waterfront activities will certainly dominate the view. We've brought all the development right up alongside the Queen Mary and they're tending to...have as much activity in the water as on the land.
The emphasis has always been on the outdoors...a variety of environments all linked together with access for the public along all water edges. As you'll see, the plan is a very practical one. It's market driven to be built in stages and it is...carrying out the Queensway Bay Plan. It proposes to expand the use of the Queen Mary by making many parts of it more accessible, particularly to the ground level...and a greater variety of services and attractions on board...with an expanded level of activities on the ship. There's also significant new activities on the land right adjacent to it and in the Dome and in the water to create a critical mass of activity that makes both the Queen Mary and the city much more of a destination.
There's all kinds of events that have occurred that have demonstrated the ability to attract many different types and large numbers of people to a water's edge and to add to the wonderful array of waterfronts that now exist in this city...on the ship and the daytime, nighttime as well, 7 days a week, all year long.
It's a plan that takes into account all of the existing resources that are on the sight; the ship, the dome, the water edges, Catalina Express, the Events Park, and recognizes also, the land is very long and very wide. You can't expect people to walk all over it. We're using significant parts for parking so we can keep the cost of the structured parking down. This is the plan, if you'll recall - the Queensway Bay. We're very much keeping to the overall intent approved by council of both sides of the river - very diffferent activities... and much more of an events, more of a "party"...approach to the Queen Mary side than the towntown urban district around Rainbow Harbor and the tidelands property.
First and foremost...proposing to introduce a new boulevard so that we can make much more of a favorable first impression to people so we will be putting in a new landscaped boulevard. Many of you might remember when we did the original Disney work. The first thing that Disney was concerned about...is that the first impression that people have be a positive one and oriented to the water. So we're going to have everybody at the end of this new boulevard arrive at the waterfront square or the new square on the river front by the Queen Mary and really have a sense of the great place of the city...before they go into parking...
The first impression is...so important to hotel guests [or] anyone arriving for Events Park...we also took a look at other destinations. This is an overlay of citywalk...we want to keep everybody close to the ship itself...more relevant than citywalk is 3rd Street Promenade because we're still doing a public place we're not doing a gated theme park and it's interesting, of the three blocks of 3rd Street Promenade, are about the area that people would probably walk (about 1200 feet). We're trying to keep within that comfortable distance so that people do not feel like they're being spread out all over and lose the sense of a[n] urban type of a[n] experience.
So we are proposing a great new street, a quay along the Queen Mary as if it had pulled up to a great city and then there's a great wharf alongside of it and with it a new square and a new waterfront marina. And all the activity's pushed up alongside the Queen Mary to make it seem even much greater than it already is. [Showing a slide that looked like downtown Singapore] ...probably not this kind of crowd all the time but the idea of a water edge where there really is a lot going on we don't need a lot of different streets... we want one, great new street that's just going to parallel the Queen Mary and the water edge and bring everybody together.
This is a section through that street looking towards the Dome [depicting rows of carnival booths] ... probably will have a lane in each direction; parking on both sides. We can close the street to traffic when we have big parties and big parades. But basically, it's a place that everyone's...going to have an easy time getting to, particularly hotel guests... Then there'll be buildings along the street and, of course, much new and improved access to the Queen Mary... This is a picture of New Orleans, we don't have the right images yet, but the whole idea of the street, just like the ship; it's a party ship, it's a party street, it's a place for lot's of fun and celebration day and nighttime...lots of celebration, lots of ways of enjoying yourself, maybe a little different than downtown - just to add to that party feeling of Long Beach.
...At the ends of this street, we're going to have an Events Plaza and Events Dome at one end ...a great set of steps that will take you up to a new level of the Dome with service below and at the other end, the Events Park, new and improved over what we even have today. So we have two anchors at the end of the street. The great Spanish steps in Rome is a kind of an inspiration - that if we can make a great stair at the end, with a plaza at the top, we can get into the Queen Mary, into the Dome and it will be a wonderful place to...view...this new street.
At the other end of the street, the great band shell in the Events Park, [a] place with lots of performances, lots of different festivities - and that's the other anchor at the end of the street... And of course, just lots of casual fun not necessarily programmed all the time. We have a water plan that goes with the land plan that assures access to and from downtown. Catalina Express has the ability to move in and out as well, and new and improved marina facilities to go alongside the hotel.
This is one of the options we looked at, in addition to the Queen Mary hotel rooms being upgraded. A second hotel, smaller, which will be right up against the new marina with water taxi, Catalina Landing, the restaurant floating out at the very edge where we have 'riff raff' today. This is a view if you arrive from the water. If you're coming from downtown, the first impression is not just the Queen Mary, but other new and improved and appropriately designed lower scale pieces to fit in, and the summary of the principles is very simple. We've basically brought everything up against the Queen Mary; a great new street, anchors at both ends, parking, convenient but not dominanting the view, [only 5 levels!] generally not ever visable from the water's edge, and lots of activity in the water. It translates into a plan that's had a significant amount of refinement. We've costed it, we've looked at circulation, it shows a variety of new uses on the ship as well as on he land.
We're going to obviously have to stage this. The first stage of this is to make the very edge along the Queen Mary look complete. We're starting out with ice skating facilities. We hope to be able to provide continuous promenade along the waterfronts so more people can enjoy the water edge than exist today...There's a whole series of on-board improvements as well as on the land itself - parking structure in the first phases for the hotel parking so that we can continue to service the hotel. And a series of new infrastructure improvements to guarantee public enjoyment of the water edge.
We intend to do a lot of on-board improvements not just the hotel rooms but the food and service and a significant amount of attractions improved...in the first phase...in this inital five year, maybe even sooner period, we can really get a totally new and wonderful experience with the improved Queen Mary.
The second stage is much more complete - lots of additional infrastructure, many more attractions and a significant amount of new retail entertainment along the new street. that we're putting in, plus the hotel... we'll even be putting in a Catalina Express terminal and the structured parking in this phase is significant, it's up to 3500 spaces - that's with the rest of the land still being used for surface parking. Our goal is, at this stage, to really complete the street and have as much activity and continuous attractions from one end to the other. [A la the Great Eastern].
The third phase rounds out the two ends - a completion of a much more enhanced Events Park with band shell and completion of the improved Dome and attractions to it. In addition, a lot of infill building; pavilions alongside the Queen Mary...every phase is designed to add new and improved attractions to it all. So, this is the plan that we're putting before you. It's about extending the fun and entertaining that's on the Queen Mary, out, down and through the whole district. It's to integrate all the existing resources...much greater waterfront activity; autos are convenient, but out of sight...the most important thing is it's just another great quality waterfront to add to the city's collection, and with that, probably pass this on to our economic consultant to show you how this is all justified. Thank you.
"This is an untried and somewhat experimental element..."
- Economic Consultant, Alan Coatin
Economic Consultant Alan Coatin: Good evening Mayor O'Neill, members of the council, I'm Alan Coatin. I'm the head of a company called CPR Coatin we are the fiscal analysts for this project and I'm here to tell you briefly about some of the benefits that we feel the project will bring to your city. There are four principles that we;ve used, this is a[n] untried and somewhat experimental element. We've tried to be very conservative in our projections, we've assumed no inflation, we've used stabilized values, we've dealt with attendance and patronage levels that we have, in a very general way, validated. We've not used the bubble effect...where the first couple of years an attraction gets extra people. ...range estimates for the new attraction we have deliberately used the low end of the ranges. What does this add up to? Well this adds up to the...about 1-1/2 million dollars a year at stabilization when the project is complete.
The 3...bars on the left show how it is built up: the on-board, which is about a quarter of it, to the waterfront development, which is about three-quarters of it and then, by phase. There are three phases. This one virtually immediate, this one in 1999, this one in about 3 years and this one in about 6 years. And the largest phase is the second phase.
The colors are somewhat significant because...the big yellow area that you see is the added hotel room revenue that comes from both the upgrading of the Queen Mary and the new hotel. The large red area is sales tax and the bottom area is the increased property tax. To look at it very briefly, by phase, for the on-board, you have the bulk of the on-board work...in the first phase because that's when all the room upgrades will occurr, which is why you get the big hit in new...occupancy hotel tax. Then there will be continued improvements and opening of a new restaurant and night club in this second phase - bringing the total to 373, 000 a year.
Looking at the waterfront...is relatively little in the first phase where the big emphasis is going to be on improving the Queen Mary. In the second phase...that's when we get our new hotel, the yacht club hotel and the new marina. Some of the Quay Street retail is put in here and the rest of it is put in here, bringing our total to about 1.2 million.
...This is really important because this describes the fact that these benefits, both the fiscal benefits and the public benefits will enhance rather than compete with projects on the other side of the channel. The critical element in changing tourism is to lengthen the stay. This project will add materially to Long Beach. The combination of the Science Fiction Hall of Fame, a much enhanced Queen Mary, the Events Park [and] the Dome, will significantly expand the time that peple can spend between one side of the water and the other side of the water and complement the aquarium and the Oliver McMillan project. The fourth point is quite important. The leisure tourist dollar is expandable. The project provides another venue which is complementary; it will add to the amount of money being spent in your a city rather than compete.
The fiscal impacts are non-competitive. They mostly involve hotel patronage and attractions...such as the Science Fiction Hall of Fame with their own separate market. This is an interesting map. This is a promotional magazine called,We're Los Angeles. It is distributed in many hotels including the Queen Mary; it lists six areas that are actually highlighted invarious colors: Beverly Hills, Hollywood Santa Monica, Pasadena, Universal City and the Beach cities. There's a dot in Long Beach for the Queen Mary. This project, together with Queensway Bay and the aquarium, will provide the ciritical mass to make Long Beach itself a district; a whole area worthy of separate designation in the tourist market.
The return on public investment. Most retail projects often require either public grants or some sort of public infrastructure and the return of some tax benefits. None of these apply here. In accordance with the third and fourth of the five principles which Susan Schick articulated, there is no public investment. The only use of city funds involves the release of city funds transferred in 1992 from the Port to the city for Queen Mary infrastruture.
Once completed, this project will yield a market land rent. Furthermore, the project will generate 1-1/2 to 2 million dollars per year and unencumbered...public revenue. This excludes the rent which will be several million dollars a year by the time the project is mature. Finally, the project will add about 1000 new jobs, bringing the work force to 1800. The total payroll is approximately 34 million and the minimum total economic impact...to over 50 million dollars a year. That concludes my presentation and I will be available as will the other speakers for questions.
O'Neill: Thank you, Mr. Coatin. Next speaker...Dr. Mellon.
"Hopefully, communication between ownership and preservationists will expand as repair of the ship continues"- Dr. Knox Mellon
Dr. Knox Mellon: My name is Knox Mellon and I appear before the Long Beach City Council this evening to speak in support of the Queens Seaport Development Corporation's request for extension of the Queen Mary's lease. I've been involved with California historic preservation for almost 25 years. I directed the Sacramento Office of Historic Preservation and served as the state's first historic preservation officer. Recently, there has been growth and change within the preservation movements statewide particularly in terms of interaction between private and local government sectors. One example is concern with the urban-built environment. Local government has become increasingly aware of valuable structures, sites and objects worthy of preservation. Governing bodies better understand historic preservation's income-generating and tax-revenue potentials. The Queen Mary is a good example.
I was delighted to see coverage provided by local newspapers of the former Soviet submarine Scorpion which will join the Queen Mary as a tourist-generating attraction. I believe this has tremendous potential. Currently, the public is eager to view historic equipment, and man-made objects be they blimps, blimp hangars, ships, submarines, aircraft and armaments of various kinds.
Tourist response to the newly-opened aquarium is additional evidence of economic vitality. The Queen Mary is a genuine historic artifact deserving of preservation. I have visited the ship at least a half a dozen times and on each occasion, been impressed with the interpretive program efforts as well as attention to on-going maintenance - not an easy task for a vessel of its size and vintage. Hopefully, communication between ownership and preservationists will expand as repair of the ship continues. The Queen Mary is clearly the most famous luxury liner still afloat and one whos history spans more than sixty years (including highly visable use as a troop carrier during WW II). It is a tribute to the city council that the name Long Beach has now become synonymous with this famous ship. Preservation goals have been achieved. It's now time for Long Beach to benefit economically. An extension of the Queen Mary's lease, combined with Joe Prevratil's leadership, will, I believe, generate needed revenue for both the public and private sectors. I urge an extension of the lease. Thank you very much.
O'Neill: Thank you, Dr. Mellon. Are there others that were part of the presentation, Mr. Prevratil? And this is the last speaker that you have? Thank you, Mr. Powell.
"We are affiliated with [one of] the ten largest banks in the world" - Neil Powell
Neil Powell: Good evening Madam Mayor and council people. I'm pleased to address you. My name is Neil Powell and I'm Chairman of SPP Hambro. We are affiliated with [one of] the ten largest banks in the world. ...we're pleased to have been engaged by the QSDI...to provide capital for Phase I...which has been described this evening. We have secured commitments with the 26 million as described here and we're very excitied about...starting to work on Phase II, which is, you know, is 100 million dollars and that would be launched early in 1999. It went out that the ability to secure these commitments is conditioned [sic] upon the attainment of the 66-year lease. Without that lease, it will be impossible to attain those commitments, and of course, it will be impossible to therefore proceed to Phase II. I would just like to leave you with those words, and again, we're very excited about this project. We think it's a great thing for Long Beach and we're very pleased to be here this eveing.
O'Neill: Thank you Mr. Powell. Does that conclude the presentation by the city and also by the Queen Mary Seaport? At this time, I would like to ask for four people speaking in opposition to this plan to come forward. Four people speaking in opposition, and then, I will ask four people that are speaking in favor. Mr. Toshares?
Public Comment - Part II
Activists Ann Cantrell and Colette McLaughlin wait to address the council.
"Nobody's addressed the maintenance of the ship..." - Tommy Toshares
Tommy Toshares: Tommy Toshares...City of Long Beach; resident for 56 years. We went over this in '93...we went over the condition of the ship extensively. I think Mr. Drummond spent a lot of time in holds and the upkeep of the ship and what was supposed to happen in those developments. No one's ever addressed, really, the paint - the lead-based paints and everything else that's in the holds of the ship. Nobody's addressed the maintenance of the ship, really thoroughly like we did before [Rados Reports].
...back then, I was against even keeping the ship, however, now that we do have the aquarium on land that will attract a lot of people, hopefully for a lifespan of 30 or 40 years...I had a class, one time in 'life-spans of businesses' - how long they last...it's amazing. You take the overall picture...as far as a lot of businesses in Long Beach, like the Reef restaurant and some things of that sort, they really didn't live out the life expectancy of a business...
Now we're tying up 70 million dollars-worth of property, I can't understand. 70 million dollars - we have a lot of junk down there now - we got that Russian submarine...get Iraq to get one of them old super tankers and park down... I just think we're tying up over 60 years...of the extensive 48 acres and probably a million and a half per acre for 66 years. I've seen the same plan, same picture, the same thing - anybody can write it up and say what [they're] going to do, but it never happens. Thank you.
O'Neill: Thank you, Mr. Toshares. There'll be only four speakers and I see five, so someone needs to be talked out of this go around, please.
"I would recommend the substitute motion to delay
decision on a lease extension of the Queen Mary" - Diane Rush
Diane Rush: My name is Diane Rush, I reside at 217 South Knott Avenue in Anaheim. Madam Mayor, members of the council and staff, I was surprised this week, I received something in the mail, completely unsolicited by me - a batch of petition forms that were signed, overseas, by many of the Queen Mary's former masters, officers and crew that were endorsing the Queen Mary Foundation. After my talk, I will give these to the city clerk so that she can distribute them.
I have four points that I would like to cover tonight. Number one, as the president of the Queen Mary Foundation, I would recommend the substitute motion to delay decision on a lease extension of the Queen Mary. Tom Hennessy [columnist] asked the question, "Why should the council so quickly commit the increasingly valuable Queen Mary acreage for the next couple of generations? Why are other developers not being invited to submit proposals and bids?"
Also, I encourage the council to enforce current lease agreement as it pertains to maintenance schedules. I just received today the performance reports on the base maintenance for the last two years - and I do thank you for that Mr. Calhoun, you acted very promptly. I will look those over.
Also, I would like to respond at this point to something that Susan Schick had commented upon. She claimed that there was going to be...the remaining 5 million dollars in the Queen Mary Fund that was allocated by the Port in 1992 for immediately needed repairs and maintenance, would not be released until an additional 6 million dollars generated by the Queen Mary was added. Now that was not part of the original agreement so that should be looked into as well.
Three, investigate the claims and performance of the current lessee of the Queen Mary. Look into where the monies are coming from and I encourage you to look at the past performance and where the money has actually gone.
Is it true that the 3 councilmembers who will be taking office on the 21st had never seen Prevratil's development schemes even though Prevratil said they fully endorsed his plans?
Finally, bring expertise into the decision-making process. The council may jeopardize its credibility if it automatically defers to only one or two administrators on an issue of such complexity. It has been suggested that decisions in Long Beach are sometimes made without appropriate consultation with experts and public input.
In summary: 1. Delay decision until the facts are in. 2. Enforce existing terms, otherwise it is difficult to believe future agreements will be honored. 3. Ask questions. Contradictions exist in claims made by the Queen Mary's lessee, in the contracts, the EIR and the actual performance of the lessee. 4. Consult with marine architects and other experts before agreeing to a proposal destined to failure. You can always say 'yes' later. For now, consider the options. Thank you very much.
O'Neill: Thank you. Next speaker please.
"Joe, many of your imposing ideas...have just not worked out, despite the quick approval by the city council in the past, for a lease extension with no other developers being invited to submit proposal and bids" - Thomas Murphy
Thomas Murphy: Thomas Murphy. Joe Prevratil you are already holding a 20-year lease on the city-owned Queen Mary and the adjoining 45 acres. You are now asking to extend the contract for another 40 years. I'm not against the extension of the lease. Let's be realistic, Joe, many of your imposing ideas in the past, I'm sorry to say, have just not worked out despite the quick approval by the city council in the past, for a lease extension with no other developers being invited to submit proposal and bids. I think this time around it would be a good business practice to wait, Joe, why the rush, Joe? Let's wait, Joe, for the three new council members to be sworn in before any extension of the lease is to be considered. After all, they will have to live with their decision if they grant your request for an extension, for the next four years.
As a business owner myself, I do not go along with city officials that the opening of the Aquarium of the Pacific will make the Queen Mary project potentially more desirable. It should increase attendance...Joe there are only so many banquets and social events held yearly in Long Beach. If the aquarium and banquet facilities, from all reports are booked to capacity, that leaves the Queen Mary and other hotels fighting for the few remaining banquets that are still available...
Council members, to be fair to Joe, Joe should be given, not a 40 year lease extension at the present time, instead, some kind of a binding agreement, in writing, that when he gets investors with sufficient financing in escrow...for his ambitious proposed 200-million dollar project, then the council shall extend his contract 40 more years. In business I say trust but verify...I like to verify or we can deny reality and let our children pay for our mistakes later on. Thank you very much.
O'Neill: Thank you. Next speaker...
"I'm sure you remember recently the Tokyo event. I do not believe that the residents...thought that was good maintenance of our resource worth millions of dollars..." - Colette Marie McLaughlin
Colette McLaughlin: Colette Marie McLaughlin. Honorable councilmen and Mayor O'Neill, I think that residents that have spoken are optimistic. We have hope that you will listen to the needs of our future generations. I found it interesting that Ms. Schick agrees with me, that we should do the reasonable thing. This is one of Long Beach's greatest resources...
This is an asset that we own, the citizens and you. Mr. Prevratil said that what makes this country great is this type of deal. I disagree. What makes this country great is the hard work of people and their willingness not to be subsidized by the government to make money. Mr. Prevratil's program is asking for substantial subsidies
which you call incentives. If you are going to give this person subsidies to get rich off of our assets, I believe it would be the American way to make it competitive...not subsidizing someone who has a million dollars...
I'm sure you remember recently the Tokyo event. I do not believe that the residents in general, thought that was good maintenance of our resource worth millions of dollars and you were gracious enough to stop that. I hope that you also consider stopping this.
As a person that is insured by FHP, I also am concerned about his ability to manage. I was in FHP for over 20 years (since the '70s) and my family. I was pleased with that organization - extremely happy. The doctors were happy, the service was good. Once Mr. Prevratil came on the board of directors, it changed. I'm concerned that his management style, that cut the doctors that served the people, might cut services of our resource to the citizens and the tourists that come to our city.
I know that a lot of people might visit that asset more if you didn't charge so much for so many things to get on board or to visit it. You are our stewards. It is your responsibility to take care of the assets of our city because our children will be paying for your decisions. I hope that you will consider that there [are] other options of letting other people be involved in this decision competitively because that is the American way. Thank you.
O'Neill: Thank you very much. I'd like to ask for four speakers that are speaking in favor of this please.
"We got 400 people behind you" - George Medak
Convention and Visitor's Bureau George Medak: Thank you, Mrs. Mayor, members of the council, Mr. Calhoun; Mr. Hankla. My name is George Medak, I live at 6230 Majorca Circle in Long Beach. I'm here... speaking on behalf of the Long Beach Convention and Visitor's Bureau. Their 400 members and board of directors have asked me to state very clearly the position in support by the CVB of the Queen Mary proposal. This city council in four years has done more, in my opinion and in the board's opinion, than any council ever has done to promote tourism and guests in the City of Long Beach.
Queensway Bay, the aquarium, Oliver McMillan, I can go on and on - this just adds another jewel to that crown. It sends a clear message to the tourist industry that Long Beach is on the tourist map. It shows a commitment to Joe's project. I bet his finance guy would like to know that this thing is being heavily subsidized.
(Laughter from the right wing.)
It really secures returns and provides future economic stability and income to the city. We like to see that TLT, the money spent in the community. The restaurant, tours, the people that deal with tourism; the hotel operators are behind us 100%. I thank you very much. Every time I come here, it's a lesson in patience to see how you do this. Thank you, and, uh, we got 400 people behind you. Thank you very much.
O'Neill: Thank you very much.
"...the Queen Mary is well regarded around the country" - Steve Edney
Steve Edney: Madam Mayor, honorable city councilmen, I stand in support of this, uh
O'Neill: Please identify... tell us your name
Edney: My name is Steve Edney and I'm vice president of the Seafarer's International Union and I'm in support of this project, not only because we represent the workers on the Queen Mary, but because of the attraction which it brings to the City of Long Beach which benefits the whole area. I've had the good fortune to travel around the country with the Labor Unions putting on labor shows across the country, and I can tell you, the Queen Mary is high on the list whether it's in Phoenix, Arizona, New York, New Jersey, Minneapolis...the Queen Mary is well regarded around the country. I just happened to be in New Orleans this last ...April and we have a show there. We drove...260,000 people to that show and I can attest to what the gentleman talked here about a waterfront development here. There was great crowds of people here and I look forward to the day when we have about 1600 people working on the Queen Mary and I look forward to the day when Long Beach will take its rightful place in the attraction of the country. And I'm sure, with this exciting program that I've seen laid out here today, we will make it. Thank you very much.
O'Neill: Thank you very much, sir.
"We're in support of Mr. Tallichet's plan..." - Frank Gil
Frank Gil: Madam Mayor, city council members, my name is Frank Gil. I'm the representative of the labor group on the Queen Mary. I'm here speaking in favor of the lease. 66 years may seem like a lot, but it's no more than the 66-year lease that the Reef [restaurant] got, the Shoreline Village got, and the Hyatt Regency got. And the Reef, which is our neighbor, is ironically owned by a previous Queen Mary operator, David Tallichet. We're in support of Mr. Tallichet's plan...and uh, we...
O'Neill: Mr. Prevratil's plan...
Gil: We'll show this council, we'll show this council that we have labor peace down there and I keep hearing about these new developers...where were these new developers in 1920...in 1992, when the Queen Mary was left to die and belly-up like a dyin' whale. Where were these developers then? The only person I saw was Joseph Prevratil there and he's done a remarkable job at turnin' this ship aroun'.
(Applause from the right wing.)
Gil: We're with him! We'll back him up with money, marble and chalk. But we're finished, we don't have any more to give. It's up to you. It's up to you, this city council, to give him the opportunity to run with this football and make the City of Long Beach a "must-see" city on everybody's travel agenda. Thank you.
O'Neill: Thank you very much, Frank.
"We're in strong support of this much-needed development project..." - Ryan Alsop
Vice President of Government Affairs for Long Beach Chamber Ryan Alsop: Good evening, Mayor and all members of the city council. My name is Ryan Alsop, I'm the vice president for Government Affairs for Long Beach Chamber and we're here tonight to voice our strong support on behalf of our nearly 2000 member businesses and support of the Queen Mary Seaport project. We believe that the Queen Mary Seaport will continue the implementation of the Queensway Bay Plan, enacted by this council, that complements the development across the bay at the Rainbow Harbor, the new aquarium, the planned tidelands retail and other entertainment development projects. And, we believe a completed Queen Mary Seaport, without a doubt, contributes to the continuing revitalization of downtown, creating an all-new attraction that complements a convention center, marina, hotels, and the entire Pine Avenue District. This project is the next step in our city's quest to increase our presence regionally, bolster tourism, expand our job base, and enhance our economic climate. Again, we're in strong support of this much-needed development project and we're in support of the implementation of a longer-term lease. Thanks.
O'Neill: Thank you, sir. I know many of you are here that wish to speak, that will not get a chance to speak this evening.
Most people in the council chamber that evening, were employees of the City of Long Beach or of RMS. By contrast, Queen Mary preservationists had left work early to attend the meeting. Mayor O'Neill provoked the few who had come to defend the Queen Mary and she escalated the conflict by forcing the audience to stand and be counted as either "in favor" or "opposed" to the lease extension.
O'Neill: I'd like to see all of those that are opposed to the plan please stand up. Thank you very much.
(Five or six stood up)
Rush: But we're not being paid off!
(Some laughter from the left wing)
O'Neill: (Mechanically) Thank you. I'd like to see, I'd like to see all of the people that are in support of the plan please stand up.
A J.P. mobster: We're not bein' paid off either!
(Approving roars from the right wing.)
Review by the Council - Part III
O'Neill: Thank you. Thank you, very much. Thank you. Council members, I'd like to bring this to you for a moment, is this, or would you like more discussion on this or is this...all right, I'll bring this to the council. Councilman Kellogg.
Councilman Jeffrey Kellogg: Madam Mayor, I would just like, we haven't had the opportunity to get with our city auditor to speak and I don't know if that was the intent of you...but I'd like to hear.
O'Neill: No, I, I - thank you for reminding me. Gary, please come forward.
Kellogg: Thank you, Madam Mayor.
O'Neill: Gary Burroughs, our City Auditor.
"What this new lease does, is, it limits the city's responsibility..." - Gary Burroughs
City Auditor Gary Burroughs: Madam Mayor, members of the council and members of the audience and citizens of Long Beach. As I sit here tonight and I watch this proceeding, I think maybe where I might start, what I might say is to contrast tonight to 1992 or 1995. This is 1998 and I remember as one who was a skeptic and one who had reservations about investment in the Queen Mary in 1992. What that came from, was, if I looked at the track record, if I looked at the history of the financial operations of the ship, (and Joe and I argued about this from time to time) but my conclusion was that they were not profitable operations. There had not been sustained positive cash flows. In fact, my judgement was there had never been a positive cash flow from the inception of the operations of the vessel through 1992.
But beginning in the last couple of years, and this has been substantiated by Joe's financial statements which have been audited, not by outside certified public accounting firms - there have been profits, there have been positive cash flows. The other concern I had was because we did not have an asset that produced positive cash flows, is that the city was exposing itself to the potential of sizable and material significant amounts of capital improvements or capital repairs.
What this new lease does, is, it limits the city's responsibility for capital improvements - much more so than had been limited in any other lease and secondly, the confidence of whether or not the Queen Mary has a financial cash flow and...financial resources. I am more confident that those resources are there and they're there in sufficient amounts to pay for those capital repairs. So, when I look at today verses 1992 and 1995, I think there is a substantial difference. When we look at a fund that's going to be created, and I don't really know who gets the credit for this, it wasn't me but it was Mr. Prevratil or Mr. Hankla or Susan Schick, but a fund that gets created in the future, to fund potential future capital improvements which is also a limiting process for the City of Long Beach. ... over time, will literally grow to a lot of money...if you can kind of picture our subsidence fund today which has hundreds of millions of dollars in it, it won't be of that magnitute, but it might be of 30 million, 40 or 50 million dollars which...down the road, our children, our grandchildren can make decisions on how they want to spend that money; because that money is still under the authority of the city manager at that time.
This agreement calls for a participation on the part of the city and the citizens of this city if Joe were to sell this leasehold. I didn't have that in prior leases. So, in this case, we get a percentage of the sales price...and yet the city still has the oversight for the maintenance and the operation of the ship so that there's still control, there's still city oversight for that. I've had reservations in the past...I'm a sceptic but I don't want to become a cynic. I think where Joe's at, at this point, he's proven that this ship has made some substantial turnaround. There is positive cash flow - major change in how capital improvements will be handled in the future. I am supportive of this lease as it's now drafted.
O'Neill: Thank you, very much. Councilman Kellogg, were you finished and then? I'll go to the next speaker.
Kellogg: I had some questions...I just had, really, some quesitons, Madam Mayor, uh.
O'Neill: Okay...
Kellogg: If it's appropriate?
O'Neill: Certainly.
I was in favor of selling the ship because... there was no plan,
long range... but it is our ship - Councilman Kellogg
Kellogg: I don't know whether it would be with Mr. Hankla, Ms. Schick or Mr. Burroughs - there's questions that came up - a few questions and one is, on the tenant operator that we're looking at, to extend this lease - if they have fulfilled their lease obligations to this point. That's number one, number two - the financials of the business partners have been reviewed and verified that their abilities to help fund this project has taken place. Number three was that we do have some type of protection or return on investment when and if there is a profit on it and, the final point, number four, that fund is that Gary Burroughs mentioned, if there are assurances of that fund will be truly set aside and not be utilized to be borrowed on liened against in the future generations for balancing the general fund, for example.
Really those were my four questions. I don't know who [are] the individuals who ha[ve] the answers, but, I would like to have, at least on the record, because those are my concerns that we share exactly, Gary... There's no question of the fact that some of us who had dealt with the Queen Mary more times...it's almost like an annual event . There's no question of the fact , when there was the issue, number one, of whether we sell the Queen Mary or not. I was in favor of selling the ship because of exactly what Mr. Burroughs said it was just...there was no plan, long-range, but it is our ship. It 's the City of Long Beach who owns it, that decision with the majority of the council said, 'No, we're going to take it back and all the responsibilites'. So, it became my responsibility to work with everyone to try to make this a project that is beneficial to the entire city - as well as all the other issues we talked about from an attraction's standpoint. So, today as we've talked, just the question about those four items. If I could have those answered. There is really a fifth one and the question has come up, why a 66-year lease? I know the answer, but I think it should be said again. Not just for the supporters of the Queen Mary but from our staff - why they feel comfortable, and that would be my fifth question, Madam Mayor, why...they believe the 66-year lease is required.
O'Neill: Mr. Hankla.
"We have an engineer...down at the Queen Mary to do nothing
more in life than to harass Mr. Prevratil..." - James Hankla
Hankla: Madam Mayor, let me try to answer those questions in reverse order, if I can recall. First of all...when Disney had it's proposal for downtown shoreline, Disney was quite unhappy with a 66-year lease. They wanted a 99-year lease and were prepared to go back to the state and request...legislation to change the law to do that. But in the event that Mr. Prevratil were unsuccessful, and let's say that he were unsuccessful at some point in time where there were substantial remainder in terms of unadvertised debt. Every lender wants to have the assurance that he has sufficient time to step into the shoes of the lessee and recover his money. That is the reason that this lease is postulated at 66 years. Same lease, by the way, for the Reef restaurant, for the Hyatt Hotel; virtually every one of our tideland leases, the same terms...will receive with regard to the tidelands' and shorelines' parcels so they're...it's not anything extraordinary about that.
Relative to the fund, it is set up to be a trust account. Certainly the city auditor is one who is a careful watchdog over the trust funds of the City of Long Beach. I would tell you that it would be city policy...you will embrace that policy annually. It would require, after it's established, a change by the city council through ordinance, in order to change that trust policy.
Now, Mr. Kellogg, I apologize for my lack of recollection of the earlier numbers for the questions...
Kellogg: The other...Madam Mayor, the review of the financials of business partners verify their ability, and then the question of the tenant operator, have they fulfilled their lease obligations?
Hankla: With respect to the financial capacity of the financial partners in accordance with the DDA, that process, that evaluation and that validation, is something that happens prior to the execution of the lease documents. So, we will certainly be doing that along with our attorneys as well as the city auditor, we should be able, without a problem I think, based upon what I know about this, the financial partners, to make those certifications. Finally, and help me once again, the second thing that goes - with your memory?
(General laughter from the rail and audience at the City Manager's humor.)
Kellogg: The lease...uh (laughing) well, we can't fire you! You quit.
[City Manager had announced his retirement earlier that month]
(Laughter.)
Hankla: That was the genius of it!
(Laughter.)
Kellogg: So the, the uh, lease obligation at this point, has it been fulfilled by the operator?
Hankla: We have an engineer that we station down at the Queen Mary [Ed Pirbonic] to do nothing more in life than harass Mr. Prevratil. And he does that with great degrees of success and periodically I hear anguished cries from Mr. Prevratil that 'you're being too tough on us.' But nevertheless, that...monitor, who is a marine engineer, I believe, a licensed marine engineer is down there overseeing the construction on behalf of the city as well as overseeing the maintenance. And he provides us with reports on an on-going basis which I think correctly indicate those areas that need more concentration as well as those areas where the lessee's doing a very good job. So I believe that that answers your question.
Condition of rivets in starboard shaft tunnel at frame 27. This was mentioned in the Rados Report in 1992 along with several other structural concerns. To date, this has been unattended and the millions of dollars allocated for repairs have been spent on the Queensway Bay redevelopment project.
Kellogg: And the financial obligations, as well, if any?
Hankla: The financial obligations are current.
O'Neill: Councilman Donelon.
"I get sick and tired of hearing these guys who
come down here and just pick on Joe Prevratil"- Councilman Donelon
Councilman Mike Donelon: Thank you, Madam Mayor. First of all, I look out in the audience and I see a lot of people that I've worked with over the past four years who I have a tremendous amount of respect for and I would like to apologize for a most obnoxious comment from Miss Rush from Anaheim. These people are NOT paid off people. They have tremendous class, commitment to the City of Long Beach and with all due respects, you don't come in this chamber and accuse some of these very fine, hard-working people of simply being here because they've been paid off. That's NOT true and I find it very, very offensive.
(Applause.)
First of all, I would like to comment on the few statements that were made by members of the public...
O'Neill: Please sit down Miss Rush!
Donelon: One, one comment was, was...
O'Neill: Miss Rush...
Rush: I have the right to rebuttal!
O'Neill: (Shutting off the podium microphone) I have cut you off. You have been cut off...
Donelon: ...whether we should wait...
O'Neill: (To me) Please sit down!
(Applause from the right wing of the chamber:)
Donelon: ...is that we should lay this over for the new city council. I assure you, this council, over the past four years has worked dilligently on the oceanfront in the City of Long Beach and had worked tirelessly with Mr. Prevratil on different options for the Queen Mary. We know this ship inside and out and the council before us had also worked on many Queen Mary issues. So, to delay this thing, I think, would be absolutely ridiculous. I think you have a panel that's very educated in the property, the lease and the operator, so to lay it over, I don't think would make any sense at all.
It always amazes me, I'm going to say this because this is, like my last, second-to-the-last-meeting - of all the really good things that we've done in the City of Long Beach, and I think this project is a very good project, there are probably four or five people that show up at that podium and uh, Mr. Medak, sometimes I wonder how I deal with it!...that are against practically every good, positive development the city has ever done...
(Applause.)
Donelon: And what amazes me, is especially on a project like this, number one, I have got no anti phone calls. And it's those same four people, five people, with no support. We have worked so very hard to do the right things in this oceanfront...to turn this city around and I can look back at what was said when we started the Queensway Bay Development and the Aquarium of the Pacific and say that 'you guys were wrong!' And I think you're going to be wrong about this one. And I get sick and tired of hearing these guys come down here and just pick on Joe Prevratil. There's nobody else that owned up, that signed up, to do something with the ship and he's worked his tail off and sir, I hope you make millions of dollars!
(Wild applause from the chamber's right wing.)
...Private enterprise working with the public ...yes, you potentially can make a lot of money but so can the City of Long Beach and that's what that oceanfront is for. And I think what we're doing here today...and I feel relatively confident that the council is going to approve this lease extension, to me, is a final step in what we've been doing for the past four years to launch this city into the next century. And I am incredibly proud of what we've done and what we're about to do here tonight ...
And I'm willing to hand you the football and let you run like hell and I hope you score touchdown after touchdown. But you have to do me one favor, my address is going to change from 333 West Ocean to 3747 Gundry Avenue and I want to come to the ground-breaking 'cause I want to be a part of all the success that I know you're going to have with the Queen Mary and the surrounding property. I am 110% supportive. I thank you, Mr. Prevratil, your staff and all of you for coming down here today. I think working together as we have in the past four years; we've set this town up for success. And I thank you all very much.
O'Neill: Councilmember Shultz...
"We can't be wrong every single week" - Councilman Shultz
Councilman Jerry Shultz: Thank you Madam Mayor. As I was sitting here this evening listening to the staff report on the project, I was doodling with my pencil and I was thinking, now who would the first four people be that come down here and speak against this project? And I wrote down four names and would you believe I had them exactly right?
(Raucous laughter from the right wing.)
Now think about that. Here's a room of 150 people, how was I able to pick out the four people that I thought, and correctly picked, would be opposed to this project? There are those people who come down here and are opposed to virtually everything that we do. And I think that's sad, because much like the book,The Boy who Cried Wolf, you come down here week after week after week and you criticize everything we do, everything we say; everything we vote on. The problem with that is, eventually, when we least expect it, you may very well have an issue...that is worthwhile, and we may just not be listening. We can't be wrong every single week.
Now let's look at some comments we heard tonight. Tommy. Tommy seems to think that anything more than sixty years ...of age should be discarded. Tommy that puts you and ol' Tom there in a precarious position, doesn't it?...
(Laughter from the right wing.)
...and I've been on the Queen many times in the past six months and I can tell you the project he's done up there is amazing! In fact, I'm surprised we don't hear from those opposed to the Ipe (Ee-pay) wood project thanking Mr. Prevratil for his innovative way to save the rainforest. He's taking the planks off the Queen Mary, slicing them in half lengthwise and reusing them - amazing idea! Yet I hear no one thanking him for that.
Photograph taken in the late summer of 1998 showing gaps forming between the planks of decking at the after end of the Sun Deck on the port side. Notice the quarter coin placed in the gap. This area has been "refurbished" twice since October 31, 1995. Yes, it is amazing!
Diane wants to know why no other developer solicited. Well, I've been listening to this now for quite a few years and in all those years I have yet to hear a developer come down here and offer anything even close to what Joe Prevratil has come up with. You know, some years ago we put out an SOS - save our ship. Joe's the one that took it, and I think Joe has saved our ship. He did a great job of it.
Thomas Murphy. 'Wait for the three new councilmembers'...Tom, contrary to what you may think, we work hard here. And there is no lame duck session in this council. We will work 'til the last minute, we will make tough decisions 'til the last minute - why hold it over? Whether it's this three or three new ones, hey, we're for the same reason.
We make our decisions based on what's best for the city and contrary to what we heard from the lady from Anaheim, in that one word, that had to do with payoffs - I'm offended too. We don't do business like that in this city - never have, never will. We may disagree, as we often do; we do it like ladies and gentlemen.
Colette, you're still concerned about subsidies. How many times has our city manager explained to you about subsidies? Colette, I don't think you'll ever get it, so I give up on that one.
(Laughter from the right wing.)
Finally, I really think it's time we come up with a new acronym. We've been criticized a lot in the past for one that was bantered around some months ago. I have a new one - got your pen there, Colette? These are the words - you know who you are - Those Opposed to Refurbishing Plans Envisioned to Develop Our Ship. I'll do that slower, Those - Opposed - to - Refurbishing - Plans - Envisioned - to - Develop - Our - Ship. And of course, that spells out TORPEDOS. You mariners out there, you know exactly what a torpedo was designed for. And with that, I close my comments, I will support the plan.
O'Neill: Councilman, Councilman Robbins...
"I've seen the ship in a lot worse condition
in the last 9-1/2 years than it's in today..." - Councilman Robbins
Councilman Les Robbins: Thank you Madam Mayor. There is no way that I can even begin to follow that. That's pretty good, Jerry. I think you said a lot of things that a lot of us, uh...
O'Neill: You'd think he was leaving, not you...
Robbins: Well, yeah, I know. And I'm going to put in my request right now, Joe. I'd not only like to be there for the ground-breaking, I'd...like to get an invitation when it's all done and finished, and uh, we actually show the community what we can do here in the city. Well, I won't be 120 years old but I'll definitely not be a member of this council.
I was here before Disney and I was here during Disney on the ship and I was here when Disney closed the door and turned out the lights and left. And left everybody holed in a horrible situation. I was here when we were trying to decide what to do with the ship and Joe was the only person that came into this council chambers and walked up to that microphone and basically said, 'I'm willing to try to make this a going concern again'.
And some of the people here today, that are critical of this plan, were not critical of Joe at that point in time and of course, they stood here and encouraged this council, which was not unanimous in our decision to keep the Queen Mary in Long Beach...and we talked about...there were suggestions that we take it out and sink it and turn it into a fishing reef, and there were suggestions that we sell it to the Chinese and suggestions that it go to Japan for awhile and suggestions that it just go away, where ever that was...
But this city council has pretty much stayed the course, I think, with the Queen Mary and continued to believe that the ship belonged in Long Beach and had a future here. And I think like so many other issues that we've dealt with in the last four, five, six years, we've never lost sight of the ultimate goal and the ultimate goal with the Queen Mary was decided a couple of years ago when we did decide that it's not going anywhere and that it would stay here...on that side of the harbor and not come over here and that we would...leave the Queen Mary and do the best that we could with it.
Joe's proposal here tonight - I feel very good that Mr. Burroughs, our city auditor, has stood before us and indicated his support for the project and his belief that it's doable and that it will generate not only revenue for the operator of the Queen Mary and the individuals involved in the project, but certainly the city as well. I feel kind of like Mike does. Uh, I don't care how much money Mr. Prevratil makes off of the Queen Mary because if Joe's making money, the city's making money and what's good for them is good for the city. And that's really all that this city council should really be concerned about - is the long-term best interests of this city, the people that live here, the people that work here and the people we hope to get to come here to spend their hard-earned money. It's a good project, it's not what I would consider to be a grandious project, it's not something like Disney was talking about, but at the same time, it's a good, viable, doable project and it's going to serve the Queen, it's going to serve that part of the bay, and it's going to, of course, serve the city.
Well, I mean, comments by the Convention and Visitor's Bureau folks are something that I've always listened to very carefully. They understand this better than anyone. The value of the Queen Mary to this city, I think, goes without saying, and now that we've got some other things going, I don't think it would be appropriate for us to basically say, 'okay the Queen Mary has served it's purpose and it's time to let it go and move on'. Just quite the contrary is the case. We've got attraction on attraction now, and we can build, uh, we can certainly build on this and, uh, when I was on the ship within the last several weeks - I've been on the ship several times - I was pretty impressed with the condition of the ship and with what I see going on, on the ship.
I've seen the ship in a lot worse condition in the last 9-1/2 years than it's in today. And I think it's probably in the best shape today than it's been in since I have been a member of this city council. And this project here, and what this city council is being asked to do tonight, will give the Queen Mary and Mr. Prevratil and the people that are going to invest in this project, the economic wherewithall to continue the renovation of the ship and continue to do the things that we'd all like to see done to the Queen Mary so that we can restore it to something closer to where it once was.
Appearance of inner hull near stem casting on the port side of E Deck. Weld marks can be seen where the stem casting and plating were replaced after the collision with the light cruiser, Curacoa in 1942.
So, I think with that, Madam Mayor, I am certainly very supportive of this tonight. It's probably the last significant vote and decision that I'm going to make as a member of this city council. I'm very proud to cast my vote tonight...it seems to me that people think we should lay stuff over for the next council. Maybe we just ought to pass a charter amendment that says in the last two months of an outgoing council, we don't vote on anything and we let the new people do it 'cause it kind of seems to be the battlecry when people can't get their way. But I think it's absurd to say that this council, this current sitting council, should not be the ones to decide the fate of the ship when, in fact, we have been the ones deciding the fate of the ship for the last 9-1/2 years. And we've come a long way, baby! And we're not done yet - and I have all the confidence in the world that this project will be finished and that we will have an attraction where the Queen Mary currently sits...everything else that will not only complement everything else that's here in the city, but as a stand-alone attraction, will probably keep people over in that area for probably about two days and I think that Mr. Hammond and George Medak from the Convention and Visitor's Bureau always think about...how we can get people here and how long we can keep 'em - that's really the goal of our Convention and Visitor's business and this certainly enhances our ability to do that and, I mean, the way we're going right now, we're goin' to get 'em here and keep 'em here for about a week - and that's exactly what we want to do.
O'Neill: Councilmember Drummond:
"Although he [Prevratil] was not in a position to provide capital,
the other bids were even worse" - Councilman Drummond
Councilman Doug Drummond: I agree with Les Robbins and my other colleagues about the circumstances of the ship, but I would like to add a few points to it. As Les Robbins said, Disneyland turned off the lights and left. Well, we forget, they even took the linen [not to mention cutting the phone lines] and they did.
The Port had handed us the Rados Report which showed the condition of the vessel. I went on board with a funny orange costume and a hardhat and a flashlight and went to every point in that report. I was pretty convinced that the ship was not saveable - I mean that. I didn't think that we had capital, I didn't think anyone else had capital - it just wasn't there. I really, truly didn't have a lot of faith in Joe Prevratil and I'll apologize to him now because I think he did the impossible - without capital.
With that, he started with a five-year lease and with a five-year lease, you can't even borrow to add any capital even to buy linen, and then in addition to that, finally, clawing his way upward, he showed that we had to move forward and we had to give him 20 years so that he could borrow and make some progress. He did, and he made that progress. He's in the black today and that's fascinating to me.
There were talks about selling the vessel, and of course, all we have to do is look to the Titanic today and
that movie for some experience because the Titanic and the Queen Mary share riveted, steel plate construction - not modern welded seams - riveted plates. We also, when we were working on that vessel to prepare her to be displayed, we removed engines, took out watertight compartments - they don't exist anymore, and as a result, it would be virtually impossible to move that ship over an open sea over long distances because those riveted plates move slightly when being moved through open sea at any speed at all. They leak. There are no engines on board; there would have to be auxiliary pumps. It would be very, very, very risky to take her anywhere.
Well, slowly, he moved it forward. Finally, we're in a position to really do a good job with the ship...when we made that decision on the lease, we did go to bid. There was only one viable bid and that was Joe Prevratil, and although he was not in a position to provide capital, the other bids were even worse. They had no experience to go with no capital, so we accepted Joe's bid and we moved forward and here we stand.
Well, I also went aboard that ship a couple of weeks ago and looked at those areas where the decks were repaired. I was really impressed. But, honestly, Joe took me to areas that were absolutely dismal and showed me that they had to be done too - nothing was concealed.
Well, we have created the property for the future of the ship. And to do that we have to provide other facilities there that bring in income so that we can deal with the higher cost of maintenance. The lease includes that maintenance oversight. I'm really convinced we have a great opportunity. I want to thank Joe Prevratil for another thing, and that is, he brought Stan Eckstut here to give him advice to do the job. Stan Eckstut built Baltimore Inner Harbor - did an absolutely fascinating, wonderful job and I appreciate that. Then he took another step and built Rainbow Harbor for us, and we all know what a great, great thing that is. And now, his professional expertise is there for the Queen Mary.
Obviously, Joe, you don't have to worry about me anymore, I'm supportin' you. Thanks.
O'Neill: Councilmember Lowenthal...
"...anybody who has any lease in this city can always sell that lease...I just want to make sure...the lease never be assigned until after the completion of Phase I" - Councilman Lowenthal
Councilman Alan Lowenthal: Thank you. Since we're all giving [a] brief overview of our history of the Queen Mary...I came on the council in 1992, I represent the Queensway Bay, I represent the Queen Mary and the downtown waterfront. When I came on the council, we did not know at that time what to do with the Queen Mary...I remember having...wanting to be the chair of the Tidelands and Harbor Committee and had gone to their then mayor, Mayor Kell, and asked him to chair that [meeting] since the harbor was in my district. And he wasn't quite sure and he let me chair one meeting, and that was the meeting in which I made the motion to bring the Queen Mary back from the Harbor Department along with the 6.5 million dollars, and then, he removed me as chair of the Tidelands and Harbor Committee as chair. But I still think my one meeting was a memorable meeting as the chair, I did a great job as chair of that committee for one meeting...
(Applause from the audience.)
I will look back at that very fondly as one of my finest, highest points as the chair...of the committee. Over the years, I've been a great supporter of the Queen Mary...I applaud the vision that we've seen today by Ehrenkrantz and Eckstut and Khun, the architects...we've all known how difficult, during the deepest parts of the recession in this area, what the struggle was and how Mr. Prevratil perservered during this great struggle. We all worried together; it was a collective worry. We were all in this together, we were never quite sure. We listened to our city auditor and our city manager and the council kind of took a collective breath and held our breath and said, 'we're going to go forward with this'. We were not sure, we had lots of comments on whether we were making the right decision or not, but we still went forward. And today, we're at a point where...and we knew even then that to move this development forward, it would need a long-term lease. It would need a lease to secure the capital.
As I understand, I have one question about this issue and then I want to make the, as the councilmember I want to make the motion, that in Phase I, we know that the 25 or 26 million dollars has been pledged but we do not go forward with the Disposition and Development Agreement that we're approving today that will not go forward until, as Mr. Hankla had mentioned, until that 26 million dollars (to answer Councilman Kellogg's question) until that 26 million dollars is there, until we have validated that, we do not move forward. So, no matter what we do tonight, unless we see that 26 million dollars and count it with our little hands, we're not moving forward on this and that's part of the agreement. And that 26 million dollars basically allows us, with our city's...also the 5 million dollars that we have on our side that we've kept back...that was a council decision at the discussion with the city manager to hold back that money until we were at a point tonight where there is real money out there. Phase I will allow us to bring that ship up to the standards that really need to be brought up to...Phase II, and that's the guarantee tonight, Phase II, once that ship is up to speed, will allow Mr. Prevratil to go forth, that's the 140 million dollars, and that's really for the continuation of the infrastructure improvements and the real retail and the Promenade...Phase III is the final completion of the project.
I too, would like to see Mr, Prevratil make a lot of money. But I'm also concerned, as my other colleagues are... that the council and the city make money. My major concern is for the city. The only...point about this that concerns me is that the sale or assignment of the lease, that is, that any time in the future, anybody who has any lease in this city can always sell that lease...And I just want to make sure...[and obtain assurance] from the city manager and from Mr. Prevratil that what we agree to...that they work out in their negotiatons...the lease never be assigned until after the completion of Phase I. That's really what we're committing to and on the record that we do that. And I think that would be part of this agreement anyway... At least the money has been put into the ship, upgrading the ship. And we know then, that if at some point in the future, the lease is going to be assigned to someone else, the investment has...already been made into the upgrading of the ship.
O'Neill: Would you like that answered now?
Lowenthal: Yeah, I would like that [inaudible]
O'Neill: Mr. Hankla...
Hankla: Madam Mayor, certainly that is the condition which we can arrange for. I have spoken to Mr. Prevratil about this. The only circumstance which would perhaps not fall under that prohibition would be an assignment in lieu of foreclosure wherein the lender would have every right to step into the shoes of the lessee
and perform, and of course, we couldn't ...prohibit that.
Lowenthal: That's fine. I just want to ensure that...is this city doing due dilligence?...as this city moves forward, that we are assured [the] first phase goes forward...I'm just trying to do due dilligence...and I would certainly accept that.
O'Neill: We have two other speakers and I come back to you for the, the...
Lowenthal: For the motion. And then I'll just, I'll hold off and make the motion.
O'Neill: Very good. Councilman, or Vice-Mayor Topsy-Elvord.
"Joe was the only person who stepped up to the plate and he won that round" - Councilwoman Topsy-Elvord
Councilwoman Doris Topsy-Elvord: Thank you Madam Mayor and colleagues. I would just like to say that I'm really excited. I remember the first critical vote that I cast when I came in in 1992. I believe it was the fifth vote, to save the Queen. Because there were jobs that people had been on for some time, and they needed their jobs. So many people were down here that the council was packed and we did save the Queen.
I'm a positive person and I'm a risk-taker, otherwise I wouldn't be here on the council. You have to be a risk-taker to even run for city council. And you have to be a positive person to think that you, as one person, can make a difference. I think that now, and I thought it then. We had nay-sayers then as well as now but you know, 66 years is not so long. I'm older than that lease already...I have...grandchildren and, you know, they're going to live long enough to see the end of this lease. We had a vision, we wanted the Queen Mary to succeed, Joe was the only person who stepped up to the plate and he won that round. He had a vision, and the vision was good.
I was on the Queen Mary Friday night, eating dinner in the Sir Winston Room [sic] and I was amazed at the number of people on the ship. The decks were packed...it was wonderful to see and I was really happy that such a crowd was there...there were so many people there it was difficult really getting off of the ship. I applaud Joe for his vision, I applaud the council for it's vision and I'm happy to move forward again for the sake of the Queen Mary; for the sake of the city. The Queens Seaport Development will only enhance Rainbow Harbor and enhance the aquarium and after all, that's what we all want, I do believe. I wholeheartedly support this development.
O'Neill: Councilmember Kellogg...
"...Joe Prevratil...[is] very much like the character in the movie, The Music Man..." - Councilman Kellogg
Kellogg: Thank you Madam Mayor. I just have a few more questions...I've always said Joe Prevratil has got some tremendous abilities and fondly referred to you very much like the character in the movie,The Music Man, where...your salesmanship is wonderful. And that's one of the assets you need for something such as this...so I apologize if I'm not going to sit here and give the history of the Queen Mary for the umpteenth time and why I love Joe...
...quite frankly I look at the seriousness of 'I've got an asset and it's a rusting asset' and it's already...sitting in salt water and in 66 more years that asset that we, the city, own - there's a lot of things that are going to have to take place. So, I wish everyone a success on many things but my biggest concern is...the questions I had as far as an investment for the citizens of Long Beach. Alan Lowenthal brought up one point I just want a little bit clarified because...a lot of people said 'let's wait for the next council.' If I'm following this process correctly, when this final draft of an agreement it has to come back, Mr. Hankla, to the city council (and that's probably not going to be in two weeks) and we're going to assume it's going to be about all the issues resolved when the new council has a chance, is that ...?
Hankla: That's not correct. This is a lease that is subject to the conclusion, the successful conclusion of elements contained in the Development and Disposition Agreement, unlike other Development and Dispositon Agreements which frequently lead to, if you transfer the property, this leads to the execution of a leasehold interest, so it will not come back to council after this week.
Councilman Kellogg concluded with this revealing comment:
So then, the questions that Mr. Lowenthal brought up, which I think is critical... you used the word, "assign" and I don't know if you were talking about what we have - guarantees that if in a 66-year investment...the potential of that being sold is probably great...and my understanding is, we want to have some assurances that the first phase is complete, and if I'm putting words in your mouth correct me, but...if there was a sale of this investment to another party, we have assurances that that sale cannot take place until after the first phase is done? Okay, and that's... legally...you can do that?
Hankla: Subject to the rights of the lender, to stand in the shoes of the lessee in the event of a default. And frankly, in the event of a default, the first thing the city would want, would be, to see the lender step into the shoes of the lessee.
Kellogg: ...The other point that came up, is, they talk about the 66-year lease - other people have that and if I missed it, I apologize, the return on the investment to the people of Long Beach? I know in the Queensway Bay - there's a formula in there - is this going to be generating that same type of return, when and if there is a profit?
Hankla: In this particular agreement, our...right to receive rent is subordinate to a 9% return on investment by the lessee. The Queensway Bay (and that's incremental revenue) the Queensway Bay is subordinate to a 12-1/2% preferred return to the development.
Kellogg: And the reason behind that?
Hankla: The reason behind that is currrently, the basic value of the leasehold is in the ship itself which has already been bought and paid for by the city over time.
Kellogg: And a final point, there was a question...I don't know if this is the appropriate time or not - there was always questions about the name, trademark - whatever you want to refer to - is that addressed in this agreement at all? The trademark of the Queen Mary? Or is that not even something to be dealt with at this time?
City Manager James Hankla gave an indication of RMS' future intentions:
There is a separate licensing agreement that covers the... trademark and copyright provisions and we are exploring with the...copyright council, trademark council; further protections and further registrations with the patent office.
Kellogg: So, if I summarize and said that our city auditor,...our city manager and all our economic people feel very comfortable with this lease at this point, the return on investment when and if that takes place, and all the provisions - everyone's comfortable with it and we can move forward. Madam Mayor, I, like everyone else...it only benefits the City of Long Beach for the Queen Mary to do very well...my concern has always been...it's a very rare asset in many ways and I've always been very concerned...the financial side of it. 'Cause the citizens of Long Beach are the ones that own it and, I say that again just because people forget, it's our ship. We have somebody operating it so when we say, 'Joe's nice to do the repair work', it's our ship and if he doesn't do it or we don't have the provisions that it's done, we're going to have to do it anyway. And that was one of those famous battles back then about how we're going to have an economic plan for it. So, Madam Mayor, I'll be supportive tonight and hopefully it's everyting we've said it's going to be and I look forward, as I've told Mr. Prevratil, when we did the review of it, all the things he's talking about were not as important to me as the financial side and the return on investment to the taxpayers of Long Beach, and those questions seem to be answered and we can move forward and hopefully to another strong addition to the City of Long Beach.
O'Neill: Mr. Calhoun, [sic] before the motion is made, is there a motion that needs to be made about the EIR that was approved by the Planning Commission?
Hankla: Madam Mayor, the motion needs to reflect that the decision-making body of the lead agency, that's the city council of the City of Long Beach, reviewed and considered the information contained in the final EIR which was approved by the Plannig Commission on June 25, 1998 and they basically considered that before approving the projects, that's pursuant to 13 CAL. code regulations article 1509; C, article 17.4.
O'Neill: Councilman Lowenthal...
Lowenthal: In making the motion, I, first I have to say that I could not have said it as well as Council...as uh, Mr. Hankla, the last part about the EIR... we have reviewed and considered the EIR , that 14.0 and all that stuff we're not quite sure about...we do request - I make a motion to request that the city attorney prepare and authorize the city manager to, to execute the Disposition and Development Agreement and Ground Lease to include the Queen Mary and adjoining property with the Queens Seaport Development, Inc.
O'Neill: I'ts been moved and seconded. You heard the motion, does it need to be repeated? Please record your vote on item # 21 and after the reading of the results of this vote, we will take a five minute break.
Shelba Powell City Clerk: The motion carried unanimously.
(Thunderous applause and roars of approval from the right wing.)
The vote was unanimous in favor of granting the lease extension.
[Editor's note: After the meeting, I approached the rail to speak with Councilman Shultz. I reminded him that two years prior, the Queen Mary Foundation provided him with research material. This concerned the ships, Caronia and America, which both sank while under tow. Shultz used the information we supplied and took credit for it as his own project (which did, in fact, help to dissuade the council from approving the Grand Tour proposal). I then asked Shultz to look out for the Queen Mary's welfare.]