CITY OF SANTA BARBARA HARBOR

An investigation by the 2000-2001 Santa Barbara County Grand Jury found that the City of Santa Barbara Waterfront Department is well run and the Marina is well maintained. While there are several issues discussed herein that the Department, the Harbor Commission and/or the City Council should consider in due course, one area of concern stands out. This is the subject of the Marina Slip Assignment Policies, which have been criticized on and off since they were implemented 26 years ago. As stated below, this Grand Jury, like others before it, states strongly and affirmatively that the policies should be changed.

MARINA SLIP ASSIGNMENT POLICIES

INTRODUCTION

Suppose the City of Santa Barbara decided to build an upscale apartment complex along the waterfront and lease the apartments at somewhat below market rates. There would be no doubt a great response and a waiting list for the apartments would build. But what if the City adopted a policy that a renter of an apartment, upon deciding to move, could negotiate with a prospective tenant to take over the apartment and, upon payment of a transfer fee to the City, could pocket whatever premium could be negotiated with the new tenant? The people on the waiting list, unless they were willing to pay the premium, would just have to wait. The City would have conveyed a public asset—the value of the scarce resource of waterfront apartments—from the City to the people that just happened to be the first or current renters.

If this concept seems unrealistic, substitute "Marina slips" for "waterfront apartments" in the above paragraph and you have virtually the identical situation that exists today at the Santa Barbara Harbor. A person with a boat slip can transfer it to a buyer of his boat or, through a somewhat complicated partnership arrangement, to virtually anyone else, while people who have been on the legitimate waiting list for slips make little or no progress year after year.

Until recently, a person walking in the Marina area would confront numerous large signs on yacht brokers’ offices stating "Slips for Sale." This seemed odd to the Grand Jury because every slip in the Marina is owned by the City of Santa Barbara, not a yacht broker or the person whose boat happens to occupy the slip. These signs have now come down, possibly due to the Grand Jury’s inquiries, but there is no doubt that the same types of transactions to transfer slips are still occurring in these offices and elsewhere.

The general issue of slip assignments has been a subject for review by several past Grand Juries, and this year’s Jury decided to see if any forward progress had been made during the past ten or twenty years. The answer is no!

This Report is intended to explain that situation to the public and to call upon the Harbor Commission and the Santa Barbara City Council to exercise the leadership and political will to change what the Grand Jury and many other people consider to be an inherently unfair and improper public policy.

BACKGROUND

Slip permit transfers were first permitted as a matter of City policy in 1975. In 1982 the policy was reviewed and criticized by the State Lands Commission and the State Attorney General’s Office which recommended that the City Council, following a transition period, consider discontinuing its policy permitting slip transfers. Instead, the Council decided to raise the transfer fee, evidently on the theory that such an increase would stop the black market in transfers. This apparently satisfied the Lands Commission.

That same year, the 1981-82 Grand Jury pointed out that, while, there was a Waiting List (List) for slips, ". . . it has become useless. Estimates are it would take 175 years to reach the top of the list." The same policies, and subterfuges, that existed then still mean that only a very small number of people on the List ever obtain a slip by that method. The Santa Barbara News-Press reported in March 2001 that the person who was first on the list for a 60-foot slip had been there since 1995. The Waterfront Director told the Grand Jury that he had closed the List because it was unfair to take new applicant’s money when there was no reasonable likelihood that they would ever obtain a slip by that method. (See "The Waiting List," below.)

The 1989-90 Grand Jury reported that Harbor officials "acknowledged that the boat slip transfer policy is being subverted, and that slips are being sold by slip licensees who agree for a cash settlement to enter a partnership with the slip ‘buyer’ and subsequently remove themselves from that partnership, leaving the ‘buyer’ as the sole slip licensee." This is in addition to the transfers permitted under City rules whereby the licensee of a slip can sell his or her boat and transfer the slip license to the new boat owner (for a handsome fee in the form of a premium in the price of the boat and the "sale" of the slip). The 1989-90 Grand Jury Report indicated that Harbor officials believed these policies, "although admittedly open to manipulation," were " ‘the most fair’ for the marina constituency, that is, the present slip licensees."

Therein lies the problem. Treating the "marina constituency" as consisting only of those persons who currently have a slip license stacks the deck. If you are a person who would like to have a slip in the Marina but do not currently have one, you cannot expect any help from the Waterfront Department rules or from the policy-makers that govern the Marina because you are not part of the "marina constituency." Unless you are already in, the rules prevent you from getting in. Catch-22.

The Private Club

In effect, the City—a public entity—has created a private club on some of its most valuable property. With few exceptions, membership is closed except to those welcomed in by the current members of the club (through the transfer of a boat or by a bogus partnership arrangement). Most of the "membership fee" for those new members goes to the existing members, with a relatively small percentage amount going to the City as a transfer fee.

A person wishing to own a boat and have it berthed in Santa Barbara Harbor in his or her lifetime has no choice but to play by the rules that have been adopted for the benefit of the approximately 1200 persons who, technically, are licensees of slips owned by the City, but for most practical purposes have been granted "ownership" rights over those slips by the City. This means the newcomer has two options: (1) He or she can negotiate the purchase of a boat presently assigned a slip in the Marina, at an appropriate market premium over what the same boat would cost elsewhere (even 30 miles away) plus the slip "ownership" premium, and transfer the slip under the Waterfront Department rules; or (2) if he or she has a boat, he or she can go through a somewhat more dubious process of entering a partnership that over time, with the payment of money and the ultimate withdrawal of the other "partner," and the other boat, leaves him or her as the sole holder of the slip. This second method is explained below.

The Partnership Subterfuge

The Waterfront Department rules work well for a person willing to buy a boat that is presently assigned a slip. But what about someone who already has a boat and wants a slip? The policy allowing transfer of a slip with a boat doesn’t work for them. A small cottage industry of brokers and lawyers has, therefore, grown up to accomplish virtually the same result. Again, all it takes is money. A slip holder is identified with a boat for sale, or who for whatever reason no longer needs the slip. The new person enters into a partnership with the slip holder for ownership of the boat (which requires a payment to the City). After a reasonable amount of time the original slip holder resigns from the partnership, leaving the newcomer as the sole licensee of the slip. The original boat is moved or sold (at a normal market price since no slip is attached to it), and the new person tells the Waterfront Department that he has a "new" boat for his slip. The fee paid to the old slip holder for the partnership is roughly equivalent to the premium that would otherwise have been paid if the former slip holder had sold his boat with the slip included. It is the same result financially, achieved in a slightly more difficult way.

Whichever method is used is of little consequence to the people who constitute the List for slips maintained by the City. These unfortunates might as well be "Waiting for Godot," as their chances for actually obtaining a slip are almost nonexistent. As stated above, the Waterfront Director no longer accepts names for the List because he has quite commendably decided that it is unfair to charge a fee when there is little chance of their obtaining a slip by this means. (The Waiting List may reopen for smaller size slips, however.)

The Waiting List

According to a report from the Waterfront Department, from 1987 through 1998 there were 1250 slip transfers and 82 slips (6.2% of total) offered to people on the List. More recently, from 1996 through 1998 there were 365 transfers and 12 assignments from the List (3.3% of total). Even these dismal statistics are misleading when one realizes that there is not one List but multiple ones, based on boat size. Of the 12 assignments from the waiting list in 1996-98, ten were for the smallest two slip sizes, below 30 feet. This is probably because the smaller the boat, the lower the above-market premium the slip commands.

For 30-foot slips, 49 were transferred in 1996-98, none of which were from the List; for 35-foot slips, 81 were transferred, one of which was from the List; for larger slips, 72 were transferred, one of which was from the List. The idea that the List is long because people stay in their slips for a long time simply does not hold weight. The lowest number of transfers in any recent year was 88 in 1989. If the List worked the way one would normally think, it would move very quickly.

Sell, Don’t Die

There seemed to be some chance that these policies would be examined earlier this year when a tragic accident resulted in the death of a sea urchin diver. His boat, by normal laws of inheritance, went to his son, who did not wish to maintain ownership. Waterfront officials, however, took the position that he, unlike all of the other boat owners occupying slips in the Harbor, could not transfer the slip the boat occupied along with the sale of the boat. This was based on an interpretation of the transfer policy stating that only a spouse could take over the rights to a slip upon death of the licensee, not any other heir to the boat occupying the slip. After a few newspaper articles, an editorial, and a lawsuit settled out of court, however, the issue faded again from view. As a result people are left with the interesting policy that a boat owner can transfer his slip along with his boat to a total stranger, but not by inheritance to his son or daughter.

Having said that, the Grand Jury does not recommend allowing slip transfer between generations by inheritance. This would make the prospect of obtaining a slip through the Waiting List even smaller. Slip holders who wish a son, daughter or other relative to have an interest in their boat (and slip) should make those arrangements earlier in their lives.

Economics 101

The system works this way because of the basic economic law of supply and demand, and more specifically that applicable to scarce resources. There are about 1200 slips in the Marina, while there is an unknown, but clearly much higher, number of people who would like to license a slip. If the Marina were operated as a private business on "free market" principles, the license fee for slips would increase until it reached the market price. At that time all slips would be licensed and there would be no people waiting for a slip who were willing to pay the required license fee. This would maximize revenue for the City, but would not be an appropriate policy direction for a public entity.

The City, as a public entity, might choose instead to ensure that those other than the most wealthy were able to afford the license fee. Under this system, a more reasonable fee would be established, with new applicants being on a Waiting List and obtaining slips as current holders moved away, sold their boats, etc.

What the City has done has neither the economic purity and financial advantage to the City of the first method, nor the "fairness" of the second. The City charges a reasonable license fee, but allows, for the most part, the holders of the slips to control the transfers and therefore receive the "premium" between the actual market value of the slip and the value of the license fee. In other words, if the same boat costs $30,000 more in Santa Barbara than in Ventura, all or virtually all of that amount is a payment for the slip license, not the boat, most of which goes to the seller, not the City.

The City does charge a transfer fee, which can be considerable for larger boats, but the continued market for slip transfers indicates that the transfer fee is not an economic deterrent for such transfers (i.e., the City could charge more without eliminating such transfers). Example: A 37-year-old 32-foot sailboat offered at $20,000 plus $10,000 for the slip—A huge profit on an old boat. Investment in a slip, given supply and demand in Santa Barbara, is an excellent business opportunity.

Since the List does not work, the idea that the present policy is benefiting the public does not stand up. Since the transfer fee on boat sales (with slip attached) does not deter such sales, the idea that the present system is the best financial one for the City does not stand up. The present system, as was found by Grand Juries ten and 20 years ago, works for the benefit (financial and otherwise) of only one group—the existing slip holders.

Obviously the public doesn’t "need" boats, but it also doesn’t need RVs, SUVs, motorcycles or other toys. The issue here is not boats, but public access to public resources.

Why Does The System Continue?

Why does this situation exist? Probably for three reasons: (1) The approximately 1200 people who presently license slips are generally well-to-do, well-connected citizens whose views carry weight in City Hall and particularly on the Harbor Commission. (2) The City receives about $250,000 per year in transfer fees from the present system, a substantial portion of the cost of operating the Harbor. (3) Most importantly, other than the people on the List who evidently either will not or cannot afford to play the game the way the City has laid it out, few people in the City seem interested in reforming the system, even if it is demonstrably unfair and based on behind-the-scenes or above-market payments that benefit the few to the detriment of the many.

The Waterfront Director told the Grand Jury that he was concerned that a change in slip transfer policy would produce an underground economy of slip transfers that would not improve the current system, but would reduce revenue to the City. People would simply use the partnership subterfuge (described above) or other methods to evade the rules. The Grand Jury thinks these concerns can be overcome with appropriate diligence. First of all, an ordinance that imposes heavy penalties for violations should be passed by the City Council. Second, there should be a strict requirement that all changes in ownership, however small, be reported to the Waterfront Department.

There are practical constraints on cheating as well. Although it might be possible for a person to transfer his interest to another and not tell the Department (i.e., continue to pay for the slip, being reimbursed by the buyer separately), after the first transfer things start to get complicated. If A sells to B who sells to C who sells to D, A is in the position not only of continuing to be responsible to pay the Department for the slip, but also now has the credit risk for B, C and D (as does B for C and D, etc.). Most people are not going to want to be in A’s position, particularly if they are also breaking the law and facing a large fine if they are caught.

Being caught seems fairly likely as well. The Grand Jury found the Harbor Patrol to be quite diligent in its duties, and to be thoroughly familiar with the Marina and the boats and slip holders. The Harbor Patrol officers know the people in the Harbor. When person A sells his boat and slip (without reporting the sale) and ceases to appear, and person B begins using that boat, the Harbor Patrol will know.

The Waterfront Department also has precise records of who the licensee is for each slip, and what boat belongs in that slip. There are public records for transfers of boats, and for their ownership (available on-line), that could easily be checked periodically to be sure that ownership of the boat in the slip had not changed. A regular schedule of checking what boat is actually in which slip seems easily manageable (i.e., 1200 slips/12 months = 100 per month/20 work days per month = 5 slips per day). In reality, this could be done much more rapidly and regularly.

Conclusion

The present system is based primarily on the idea that it is somehow unfair not to allow the holder of a slip to transfer it along with the sale of his boat—that he or she would lose his or her "investment" (in something not owned). The one part of this that has merit is that the current slip holders came in under the rules as they exist. An immediate change to a system in which the sale of a boat left the buyer without a slip would cause a corresponding immediate decrease in the value of that boat, and without a slip available, the buyer might find it much more difficult to sell the boat. This creates a very strong interest by the current slip holders to maintain the status quo. Nonetheless, a reasonable transition period could resolve at least part of this issue.

The fact that there is no great public outcry to change the system does not excuse the Santa Barbara City Council from acting to correct a demonstrably unfair system based, to everyone’s knowledge, on behind-the-scenes and above-market payments that benefit the few and the wealthy to the detriment of the many. Finite public resources should be for the use of the public, not the privileged few. The slip assignment policies are—or should be—an embarrassment to the City of Santa Barbara and, perhaps following a short transition period, should be changed.

Finding 1a: There is a demand for Marina slips significantly in excess of the existing supply.

Finding 1b: While slips are licensed/permitted to individuals for their use, the slips continue to be owned by the City of Santa Barbara.

Finding 1c: The Waiting List for slips has not been an effective way for a person to obtain a permit or license for a slip.

Finding 1d: Waterfront Department Rules permit the seller of a boat to transfer the slip the boat occupies along with the boat.

Finding 1e: The selling price of boats that include the assignment of a slip in the Santa Barbara Marina generally is appreciably higher than the price the same boat would command if sold without the slip.

Finding 1f: The Transfer Fee that the Waterfront Department collects upon the sale of a boat (with slip attached) is generally only a small percentage of the "premium" collected by the seller in the price of the boat and slip over what the boat alone would otherwise cost.

Finding 1g: Many slips are effectively transferred by the "owner," who forms a partnership for ownership of the boat and license of the slip, and subsequently withdraws from the partnership, leaving the former "new partner" as the sole licensee of the slip.

Finding 1h: There are a significant number of slip transfers each year done within the Waterfront Department Rules.

Finding 1i: The Waterfront Department could charge considerably more for a Slip Transfer Fee without appreciably reducing the demand for such transfers.

Recommendation 1a: The Waterfront Department Rules should be changed (possibly after a limited, e.g., five-year, transition period) to eliminate the ability of a permit holder for a slip to transfer that slip along with the sale of a boat.

Recommendation 1b: Appropriate new Rules should be adopted, along with a strong City ordinance, to prevent subterfuges, around the basic idea that all slip transfers should be by way of the official Waiting List, and that attempts to circumvent this policy will be punished severely (e.g., major fine plus loss of slip).

Waterfront Administration Building

Administrative staff for the Waterfront Department is currently housed temporarily in a large immobile trailer in a parking lot next to Marina Three. While it appears to be adequate to house a staff of 15, there are no toilet facilities in the trailer, and it occupies several parking spaces that could generate revenue.

A permanent facility has been proposed to solve these problems. This would be a $2.5 Million structure replacing the current two-story wood Chandlery building, next to the Santa Barbara Yacht Club and adjacent to the beginning of the breakwater. Current planning envisions a typical Mediterranean-style white stucco/red tile roof structure that would house a new and improved Chandlery store on the ground floor, and waterfront administration and Harbor Patrol offices on upper floors. Construction is expected to begin in 2003, assuming that the plans are approved, all regulations are met, and funding is appropriated.

Although the Grand Jury understands the need for a better administration facility, it also questions whether a large, highly visible and expensive new building on the Marina is the way to go. A Mediterranean-style structure, while normal for most of Santa Barbara, seems out of place between the weathered-grey sawn wood construction of the Yacht Club and nearby marina buildings. The Yacht Club, which is right on the beach, is built high on pilings driven into sand to survive winter storms, strong surf and high tides, and it is thought that an adjacent building would have the same problems and design needs. Furthermore, stucco-over-wire mesh construction is susceptible to salt water absorption and perhaps is not the best design to survive a windy and salty marine environment.

Additionally, a recent soils report from Fugro West, a geotectonic company, found that the sandy soil under the proposed building could fail during a storm or earthquake and recommended that it be compacted for strengthening, though it does not believe the site would hold up during a major earthquake. As a result, structural engineers Ehlen & Spiess asked the City Council to promise that the companies would not be held responsible in such an event. The City Council agreed and complied, relieving those companies—but not the City—of liability in case of failure.

Finding 2: Construction of the proposed new Waterfront Administration building may not be practical at the proposed site as planned. Additionally, the Chandlery store would have to be compensated for months of inconvenience during construction.

Recommendation 2: Re-evaluate the need for this building, considering its cost, appropriateness to the environment, and proposed method of construction. Consider whether the second floor of the City-owned building nearby could be converted from its present use as a yacht brokerage office and training room to offices for Waterfront staff. Other sites should also be explored.

HARBOR WAY

Harbor Way, the traffic area between the Santa Barbara Maritime Museum and the Harbor Marine Works, is an area of extremely heavy movement of commercial trucks, automobiles, pedestrians, and occasional boat movement from the dry dock yard. There appears to be a need for relief in this possibly hazardous area. In this area, there are no sidewalks for pedestrians, who now must walk down the middle of Harbor Way. This is little different than pedestrians walking down the middle of a busy street in downtown Santa Barbara.

Ideas for improvement include removing several parking spaces, adding sidewalks, reducing private traffic, moving the Harbor Marine Works further west, restricting the size of vehicles allowed, and/or staggering delivery times for the merchants.

Finding 3: The area between the Maritime Museum and the Harbor Marine Works is a bottleneck, creating traffic problems for both vehicles and pedestrians in a small area.

Recommendation 3: The City of Santa Barbara Public Works Department should take action to correct these problems.

EAST BEACH ANCHORAGE

The open ocean east of Stearns Wharf and just off East Beach is commonly known among local mariners as Fool’s Anchorage, because it is a foolish place to anchor a boat given the total lack of protection. However, many do, and it is thus of some concern to the City and the Harbor Patrol.

Historically, many harbors world-wide have a traditionally free anchorage area for boaters just passing through, who need a temporary sanctuary without the cost and permanency of signing up for a marina berth. This is particularly true in Santa Barbara, where the marina is at limit to the point where it no longer offers a waiting list! It is also true for those salty boaters who, insisting on the traditional freedom of the sea, would never pay rent when they only have to throw an anchor over the side for free mooring.

As perhaps the only free place to live in Santa Barbara, the anchorage over the years has attracted a number of free-spirited vagabonds living, often for years, in a variety of boats of dubious seaworthiness. Many boats have no engine or sails and are, in fact, derelicts, but of considerable value to a close-knit livaboard community. Like similar cities, Santa Barbara has long tolerated this accommodation; however, times change, and it is now considering regulating the area through increased policing and charging rent.

A major problem for the area, even for the most seaworthy of boats and skilled skippers, is that Fool’s Anchorage is not a proper, protected anchorage at all, but just a spot off the beach. Santa Barbara Harbor, in fact, is not a harbor at all; except for the protected marina it is essentially a long beach broken up by the marina/breakwater and Stearns Wharf. Anchored boats have no real protection from surge and storms; they are simply anchored off the beach, in about 45 feet of water. They could just as well anchor off Leadbetter, Butterfly, or Goleta beaches. East Beach at State Street is simply more central for those who come ashore daily in dinghies.

Unfortunately, during the stormy winter months it is common for boats to break their moorings and wash ashore, even though harbor regulations require boats to move one-half mile offshore. (Presumably, there is less surge in deeper water. It also assumes boats have the required extra-long lines to anchor in such deep water—but, more than likely, it is not likely.) Unattended boats have no one to reset anchors. Boats drifting ashore often take other boats with them. Other boats may have improper or insufficient ground tackle. As a result, boats sometimes come ashore (five in just one day this year!) at East Beach, and getting them back in the water or taking them away is a major City concern, and cost.

Beached boats can become a City liability when (1) the boat is not registered and ownership is unknown, (2) the owner, typically, has no money for marine salvage and such boats are rarely insured, or (3) it is simply abandoned and there is no way to seek reimbursement or even establish responsibility. The City thus assumes the considerable cost of removing the boat, and a beached boat has no value.

Santa Barbara has considered dealing with this problem by asserting its right to regulate this area as tidal lands, and thus requiring boats either to leave or pay rent for mooring. A grant has been secured to explore and clean up the East Beach bottom. Following that, a system of permanent City-placed mooring may be put in place. Boats then, as in the marina, would be inspected for registration, compliant waste disposal, seaworthiness and safety equipment. Presumably, properly installed permanent moorings would eliminate the problem of beaching and make the area more attractive to legitimate boaters who can’t get a berth at the City Marina.

Finding 4: The East Beach anchorage is, in reality, a home to squatters who often live on non-navigable derelicts without proper toilet and safety facilities. These boats frequently break loose during storms and end up on the beach, at considerable cost to the City, and at risk to other anchored boats.

Recommendation 4: While this anchorage does provide affordable housing for some and should still be considered a traditional boaters' refuge, it remains that boaters must be responsible for not polluting the waters with their waste and not to invade East Beach with their beached boats. Permanent mooring and increased regulation may be one answer. However, it should also be noted that there might be considerable resistance to this major change to tradition, as well as obligating the City to provide equal marina-like services (i.e., storm protection, parking, restrooms, showers, security, etc.) in return for charging mooring fees.

NAVIGABILITY

During many Grand Jury visits to the Marina, an area of concern was the condition of some of the vessels. This led to discussions with Waterfront Department officials who shared the Jury’s view that quite a few boats might not be seaworthy. The present rules require only that a boat, if requested by the Harbor Patrol, be able to motor or sail around the inner harbor (i.e., inside the breakwater). The Jury understands that the Waterfront Department may soon recommend that these rules be changed to require that a boat be truly "sea" worthy, able to pass a navigability test outside the harbor area and into the open ocean.

A recent survey of West Coast marinas by the Long Beach Marine Bureau indicates that such a requirement is typical. A vessel that is not seaworthy may be a hazard to life and property and constitutes a public nuisance. Many marinas (some of which are privately owned and operated) go further and require all boats to meet more aesthetic tests on a regular basis, and have all required safety equipment on board at all times. Purely aesthetic rules may not be appropriate for a municipal marina such as Santa Barbara. On the other hand, the Marina is a significant tourist attraction for the City, so that citizens have an interest in the boats berthed there maintaining a reasonably attractive appearance.

The Waterfront Department Director and Operations Manager estimated that 5% to 10% of the vessels in the Marina would not pass a navigability test that requires going into the ocean for a reasonable period of time and returning. If a test were imposed that required an attractive appearance, the percentage would be much higher.

In its survey of the Marina, the Grand Jury made note of other issues, primarily the absence of current California registration stickers on boats. This problem was pervasive. Although this is a State rather than a local requirement, the Harbor Patrol should be more active in insuring that current registration has been obtained and is properly displayed on all vessels.

Finding 5a: Many boats berthed at the Santa Barbara Marina do not appear to be truly seaworthy.

Finding 5b: The present Waterfront Department Rules do not require boats to pass a navigability test that includes going into the open ocean.

Finding 5c: Many other West Coast marinas require open-ocean seaworthiness tests.

Recommendation 5a: Amend the Waterfront Department Rules to require an open-ocean seaworthiness test for all boats, if requested by the Operations Manager, no more frequently than twice per year.

Recommendation 5b: Direct the Harbor Patrol to check all boats during its regular rounds for safety violations, safety equipment, California or other registration, proper electrical cords, and similar matters of public concern, to note any violations found, with such violations to be subject of follow-on action by the Waterfront Department.

AFFECTED AGENCIES

City of Santa Barbara Administrator
All Findings
All Recommendations

Santa Barbara City Waterfront Department
All Findings
All Recommendations

Santa Barbara City Council
All Findings
All Recommendations

City of Santa Barbara Streets, Parking &
Transportation Operations Division

Finding 3
Recommendation 3