Business has gotten so bad at the marina in Long Beach that the coastal city recently took an extraordinary and controversial step: bailing out a private yacht club rather than watching it sink.
The Seal Beach Yacht Club at the city-owned Alamitos Bay Marina Center isn’t your typical rich man’s club; initiation fees are just $100 and monthly dues are $75. The club controls no slips, and many of its members skipper their own boats. The club doesn’t even have its own restaurant.
By contrast, the city’s largest club, the Long Beach Yacht Club, has a restaurant and slips. And the fees are commensurate: $9,000 for initiation and $225 a month.
Yet it’s the smaller club, which largely serves middle-class sailing aficionados, that has experienced a 40 percent decline in membership over the last several years, making it difficult to keep up with the rent.
“If things hadn’t changed,” said Jim Hanna, the club’s rear commodore and third in command, “we’d probably have ceased to exist.”
Things did change last month when the Long Beach City Council voted to reduce the club’s rent for two years to $4,905 a month, $3,000 less than before, effective May 1.
“It’s a common-sense business decision,” said Victor Grgas, the city’s property services bureau manager. “Do you want the space to go vacant and have a difficult time filling it with a qualified tenant? Or do you give them an opportunity to right the ship?”
The situation is not unlike that at many of Southern California’s marinas, including the nation’s largest in Marina del Rey, where some slips have gone begging for more than a year. Indeed, all over the world, yacht sales are down and the marine economy has taken a direct hit from the recession.
“Boating is a luxury item, so it will take some time to catch up,” said Dusty Crane, chief of community and marketing services for the county’s Department of Beaches and Harbors. “We’re kind of going through a metamorphosis now where the bigger yachts are being replaced by smaller (sailboats).”
While there are no vacant slips in Long Beach, said Robert Swayze, the city’s manager of economic development and cultural affairs, businesses near the marina are off by up to 15 percent. In a place like Long Beach, which defines and markets itself as a major coastal destination, this can have a major effect.
“So much here is tied to the water and those businesses are very important,” Swayze said. “We’ve become a destination city in terms of conventions and cultural tourism, and part of that draw is that we’re on the ocean, so we try to play that card as much as we can.”
Controversial move
Founded in 1961 by nine Seal Beach businessmen interested in traditional Corinthian, or wind-powered, yachting, the club later moved to Long Beach. Today, from a perch overlooking Alamitos Bay, it hosts weekly races; year-round cruises; a summer children’s program; and weekly dinners, dances and barbecues.
Club members said they are working hard to take full advantage of the two-year reprieve the city has given them by, among other things, reducing the initiation fee – which used to be $400 – and making stronger efforts at promotion.
“When you look at our dues and membership compared to other clubs in the area, it’s a good deal,” Hanna said. “This rent reduction will allow us some breathing room while we’re trying to get our membership back up to pay the bills.”
But bailing out the yacht club has proved to be controversial.
Tonia Reyes Uranga, the only council member to oppose it, said the deal smacks of favoritism.
“I ask myself if we’d have done this for any other business,” she said, “and I think the answer is no. If Joe Schmoe on the corner needed a break in his rent, would we do it? I don’t think so. In these tough times, we have to be careful about the messages we send. I believe that people are shocked.”
That’s exactly how Albert Ojeda, general manager of the nearby Stoll Engine Co., described his reaction upon hearing the news that a yacht club got a break. Located in the same center, the marine engine parts supplier reports business has declined by about 30 percent. Yet no one has offered the company a break in the rent.
“I think it’s unfair,” Ojeda said of the bailout. “I’m happy for the yacht club, but we’re struggling, too.”
However, Long Beach officials said they are looking at the bigger picture. In the current economic climate, finding a new qualified tenant for the nearly 6,000-square-foot facility could take up to a year, according to a Cushman & Wakefield study commissioned by the city.
Such a delay, in conjunction with the cost of building out the space for a new tenant, could cost Long Beach more than $162,000 – far more than the $72,000 to be lost by lowering the rent for two years, the study said.
“We concluded that this yacht club was going to fold and we’d be sitting there with a bunch of space very difficult to release,” said John Hancock, president of Bancap Marina Center Inc., an affiliate of Bancap Investment Group that manages the marine center for the city and shares in the center’s profits, and in this case, losses.
Joseph Magaddino, chairman of the economics department at Cal State Long Beach, said it’s important that the city support local marine-related organizations and businesses. But he understands why the concept might be a hard sell.
“The proximity to the ocean is something we all enjoy and it has a lot of economic cache,” he said. “I think it’s incumbent on elected officials to clearly articulate what the logic was in order to avoid possible misconceptions that this is a sweet deal for a bunch of fat cats. It’s not – this isn’t the kind of yacht club you see depicted in the movies.”
