COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Parks

DATE:

December 7, 2007

BOARD MEETING DATE:

December 18, 2007

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

David G. Holland, Director, Department of Parks

SUBJECT:

Parks Department Report Investigating Costs and Advantages of Private Management of the Coyote Point Marina through a Long-Term Lease or Operating Agreement Related to Findings and Recommendations of a May 17, 2007 Grand Jury Report

RECOMMENDATION:

1) Accept the Parks Department Report Investigating Costs and Advantages of Private Management of the Coyote Point Marina through a Long-Term Lease or Operating Agreement in response to the 2006-07 Grand Jury report; and

2) Accept Department recommendations contained herein related to that Report; and

3) Direct the County Manager to instruct the Directors of the Parks and Human Resources Departments to work with their staff to determine the organizational structure and classifications best suited to meet the business needs of the Marina.

VISION ALIGNMENT:

Commitment: Responsive, effective and collaborative government.

Goal 15: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

This activity contributes to the goal by ensuring that all Grand Jury findings and recommendations are thoroughly reviewed by the appropriate County departments and that, when appropriate, process improvements are made to the quality and efficiency of services provided to the public and other agencies.

BACKGROUND:

After an investigation of the Coyote Point Marina, the San Mateo County Civil Grand Jury on May 17, 2007 issued a final report titled Coyote Point Marina: A Valuable Asset Deserving Effective Management. A written response to the report from the County Manager was submitted to the Board on August 14, 2007, which the Board accepted. In the response, the County concurred with all five Grand Jury recommendations including #1, #2, and #3 which state:

The Board of Supervisors should direct the County Manager to:

1)

Instruct the Parks Department to investigate the costs and advantages of private management of the Marina through a long-term lease or operating agreement to insure that the County’s investment in the Marina is preserved and enhanced.

2)

Report the findings and conclusions of this investigation to the Board of Supervisors by December 31, 2007.

If the Board of Supervisors concludes that private management of the Marina is not desirable or feasible, the Grand Jury recommends that the Board of Supervisors direct the County Manager to:

3)

Reorganize the Parks Department to create a separate management structure for the Marina, headed by a qualified and experienced harbormaster.

The Parks Department, at the direction of the County Manager, proceeded with recommendation #1. On September 26, 2007, after a public Request for Proposal process, the consulting firm of Dornbusch Associates of Berkeley, California was selected to conduct the investigation and prepare a written report on their findings and conclusions.

The Draft Final Report (Report) was completed on November 21, 2007 and was made available for public review at the Marina Office, the Parks Administrative Office, and on the Parks Department’s website on November 26, 2007. Direct mailings were also sent to all current berthers notifying them of an opportunity to discuss the Report at the regular public meeting of the Parks and Recreation Commission on December 6, 2007.

At the December 6, 2007 Parks and Recreation Commission meeting, a public review of the Report and the Parks Department recommendations related to it was held. A representative of the Coyote Point Yacht Club expressed concerns about raising fees, reducing staff, and cutting service levels to improve the fiscal position of the Marina. He also stated that most berthers felt the Marina was well run and wanted public management to continue. The Commission voted to finalize the Draft Final Report and forward it to the Board for acceptance. The Commission also voted to approve the Department’s recommendations related to the Report, and forward them to the Board for consideration and acceptance.

The Parks Department is submitting the Report and recommendations for the December 18, 2007 Board of Supervisors meeting to satisfy Grand Jury recommendation #2 above.

Discussion

Dornbusch Associates investigated a number of areas of the Marina’s operations and management including analysis of the cost advantages of private operation, analysis of current management structure versus private management, a general financial and operational review comparing public and private marinas, the ability of a private operation to meet the Marina’s capital needs, and the ability of a private operation to increase occupancy and desirability of the Marina for boaters. In the process, Dornbusch Associates contacted Marina and Department staff, berthers, managers of other bay area marinas, other public agencies holding private marina contracts, and reviewed fiscal, performance, and operational documentation from the Marina.

The Report generally gives good marks to the Marina management staff and states that the Marina is being managed reasonably well and is fiscally sound. It was found that service levels are good and berther satisfaction is high. The investigation also found that Capital Projects are being completed in a timely manner and that marina staff have the requisite skills for their jobs. The Report notes that staffing levels at the Marina are higher than expected and compare less unfavorably with most other marinas’ staffing to berth ratios. Also noted was an examination of berth rental rates which showed that in a number of categories of berth sizes were lower than what could be reasonable charged for what is being offered.

The Report indicates there are potential fiscal advantages to having a private operator manage the Marina such as lower operating costs (approximately $141,100 to $215,600 through staff reductions and lower levels of employee benefits), higher revenue (approximately $131,800 through raising berth fees by approximately 15%), and higher rates of occupancy (through contract incentives with a private management firm). The Consultant estimates that a private contractor or concessionaire would be expected to generate total annual cost savings and revenues of $272,900 to $347,400 with an offsetting management or contract fee of $64,100 to $102,500.

The investigation also found that a private firm could successfully manage the Marina and that there are a number of such examples in the Bay Area. Private entities have been shown to yield better financial results through increasing slip rates, and reducing staff along with paying lower salaries and fewer benefits. Most public agencies seem to be satisfied with their private marina operators, however some noted reoccurring issues or problems over capital projects/expenditures and ongoing maintenance/repairs with their private operators. Also, one agency was not able to reach agreement to enter into a private management contract and another has needed to take disagreements to arbitration twice in the last four years.

The Report also points out that the Marina is facing major long-term capital costs as the aging docks will soon need significant repairs and eventual replacement. However, the Report points out that information on these capital costs is not complete enough to make the best informed decisions on what the preferred type of private management agreement should be and how the finances of such an agreement could be structured in the most advantageous way for the Marina. These long term capital costs would not only impact the type of private management agreement the Marina could enter into, but also impact the cost of a long-term contract as a private operator would want higher management fees if they took on more financial burden or assumed increased risk.

After reviewing the Report, the Parks Department is making the following recommendations regarding the Report and the Grand Jury’s conclusion that private marina operators might provide better Marina management:

1)

Postpone any decision on entering into a private management agreement for three years and then conduct a similar investigation to ascertain if private management would be more cost-effective and financially advantageous.

2)

Complete the in-progress capital improvements to the Marina docks within these three years to return all berths to a serviceable condition.

3)

Within this three year period obtain complete and accurate fiscal information on long-term capital costs (specifically dock repair/replacement for the next 20 years) to prepare more accurate long-term fiscal projections and facilitate an understanding of the debt service burden related to long term financial risks a future potential management concession, or lease agreement would assume.

4)

Consider and implement, where possible and practical, the Report’s cost saving, revenue enhancing, and management methodologies to improve Marina finances, services, and overall management during this three year period.

5)

Continue and expand current marketing and amenity improvements to increase the Marina occupancy rate during this three year period.

The Consultant’s investigation shows that there are some areas of Marina operations and management where private management could be financially advantageous for the Marina. However, Department staff feels that by postponing a decision on entering into an agreement for three years, the County would be in a better position to execute a private management contract, long-term lease, or concession agreement based on more reliable fiscal and operational information. Staff finds that while the Marina’s fiscal reserves could be enhanced upon entering into a private management agreement, a premature commitment to a long term agreement could cause significant problems and be more costly than necessary. Also, during a three year period, many of the revenue enhancement, cost cutting, and management methodologies highlighted in the Report could be undertaken to put the Marina in a better fiscal and operational condition for any future negotiations with a private management firm.

If the Board concurs with staff and decides to postpone entering into a private management agreement for the Marina, staff recommends that the Board direct the County Manager to proceed with Grand Jury recommendation #3 above during this three year period. Any such review and realignment of positions would be a logical and desirable part of the Department’s recommendations to implement management methodologies to improve finances, services, and overall Marina management (#4 above).

FISCAL IMPACT:

There is no fiscal impact to the Marina at this time in accepting the Report or Department recommendations. There may be future fiscal impacts based on decisions made separate from any action taken on this item. The Coyote Point Marina is an Enterprise Fund that receives no General Fund money