DATE: November 14, 2023
SUBJECT: HARBOR ISLAND WEST MARINA REDEVELOPMENT PROJECT
Title
HARBOR ISLAND WEST MARINA REDEVELOPMENT PROJECT LOCATED AT 2040 HARBOR ISLAND DRIVE IN SAN DIEGO:
A) ADOPT A RESOLUTION ADOPTING THE FINAL MITIGATED NEGATIVE DECLARATION FOR THE HARBOR ISLAND WEST MARINA REDEVELOPMENT PROJECT, ADOPTING THE MITIGATION MONITORING AND REPORTING PROGRAM, AND DIRECTING FILING OF THE NOTICE OF DETERMINATION; AND
B) ADOPT A RESOLUTION GRANTING CONCEPT APPROVAL TO HIW ASSOCIATES, L.P. FOR THE HARBOR ISLAND WEST MARINA REDEVELOPMENT PROJECT; AND
C) CONDUCT A PUBLIC HEARING AND ADOPT A RESOLUTION AUTHORIZING ISSUANCE OF AN APPEALABLE COASTAL DEVELOPMENT PERMIT TO HIW ASSOCIATES, L.P. FOR THE HARBOR ISLAND WEST MARINA REDEVELOPMENT PROJECT; AND
D) ADOPT AN ORDINANCE GRANTING AN OPTION TO LEASE AGREEMENT WITH HIW ASSOCIATES, L.P., WITH CONDITIONS, FOR A FORTY YEAR AMENDED AND RESTATED LEASE WITH ONE TEN-YEAR OPTION TO EXTEND.
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EXECUTIVE SUMMARY:
Harbor Island West Marina (HIWM), operated by HIW Associates, L.P., a California limited partnership (HIW), is an existing marina facility located at 2040 Harbor Island Drive on Harbor Island West in San Diego (Attachment A - Location Map) providing services and amenities to the boating community and waterfront access opportunities to the public. The proposed redevelopment of HIWM (Project) would completely redevelop the landside and waterside marina facilities. Landside improvements include demolishing and replacing existing buildings, parking and landscaping, and waterside improvements include replacing existing aged dock structures and reconfiguring slips to accommodate a wider range of recreational vessel sizes and create more slip opportunities for a greater diversity of boaters. Collectively, the redevelopment is expected to significantly extend the life of the marina and ensure its long-term viability. Construction of the Project is expected to begin within 18 months after all necessary approvals are received and take approximately two years. A phased construction schedule is proposed to allow portions of the marina to remain open during construction, minimizing displacement of boaters.
As Lead Agency under the California Environmental Quality Act (CEQA), the District prepared a Draft Mitigated Negative Declaration (MND) for the Project. The Draft MND was circulated for a 30-day public review period from December 5, 2019 to January 6, 2020. The District received one comment letter from the California Coastal Commission (CCC), and staff determined that these comments did not raise any significant environmental issues not already analyzed in the Draft MND. A Final MND has been prepared that includes the comment letter and responses, and clarifies the likely start date for construction, the number of parking spaces available to the public, and that the existing restroom building at the western portion of the Project site would also be demolished and replaced. Additionally, as a result of ongoing coordination with CCC staff, the project description has been updated such that the number of replacement docks increased from 10 to 11 and the number of slips increased from 603 to 623. None of these changes since the Draft MND was circulated for public review affect the environmental findings. With incorporation of mitigation measures identified in the Mitigation Monitoring and Reporting Program (MMRP), the Final MND finds that the Project would not result in significant adverse impacts to the environment. The Final MND, which includes the MMRP, has been prepared in accordance with CEQA, the State CEQA Guidelines, and the District’s Guidelines for Compliance with CEQA. The Final MND has been provided to the Board.
Pursuant to the District’s Coastal Development Permit (CDP) Regulations and the California Coastal Act, the Project requires issuance of an appealable CDP. As conditioned, the Project is consistent with the certified Port Master Plan (PMP) and Chapters 3 and 8 of the California Coastal Act. Pursuant to BPC Policy 357, concept approval is also required from the District.
To implement the Project, staff recommends the Board grant HIW an Option to Lease Agreement (Option), which includes an attached 40-year Amended and Restated Lease to HIW (A&R Lease), with one 10-year option to extend. The Option sets forth various preconditions that HIW must satisfy within 18 months of Option execution before the A&R Lease may be executed by HIW and the District, which preconditions are intended to ensure that the Project is successfully completed in a timely manner.
While the Option is in effect, HIW will be permitted to occupy the leased premises pursuant to and in accordance with its Current Lease1, including the requirement to pay minimum annual rent (MAR, currently set at $895,000 annually) as well as percentage rent due thereunder. In the event HIW timely satisfies the conditions set forth in the Option and the A&R Lease is executed, the aforementioned MAR will remain in place for the first two years of the A&R Lease, and in year three, the MAR will increase to of $1,811,000 with annual escalations in years three through five, with future MAR adjustments every five years thereafter. The A&R Lease also requires HIW to pay percentage rent when percentage rent collected exceeds the applicable MAR. The percentage rental rates, as discussed further below, are greater than those set forth in the Current Lease and would aid the District in future rent negotiations for tideland marinas.
RECOMMENDATION:
Recommendation
Harbor Island West Marina Redevelopment Project located at 2040 Harbor Island Drive in San Diego
A) Adopt a Resolution adopting the Final Mitigated Negative Declaration for the Harbor Island West Marina Redevelopment Project, adopting the Mitigation Monitoring and Reporting Program, and directing filing of the Notice of Determination; and
B) Adopt a Resolution granting concept approval to HIW Associates, L.P. for the Harbor Island West Marina Redevelopment Project; and
C) Conduct a public hearing and adopt a Resolution authorizing issuance of an appealable Coastal Development Permit to HIW Associates, L.P. for the Harbor Island West Marina Redevelopment Project; and
D) Adopt an Ordinance granting an Option to Lease Agreement with HIW Associates, L.P., with conditions, for a forty-year Amended and Restated Lease with one ten-year option to extend.
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FISCAL IMPACT:
The Board’s actions will have no immediate fiscal impact to the District. In accordance with BPC Policy No. 106, Cost Recovery User Fee Policy, HIW has been and will be responsible for all applicable costs associated with the entitlement, construction, and operation of the Project. If HIW successfully exercises the Option and enters into the A&R Lease, future rent revenue from the HIWM over the 50-year lease term (including the 10-year option to extend) is estimated to be approximately $29.3 million in net present value to the District.
Compass Strategic Goals:
This agenda item supports the following Strategic Goals:
• A vibrant waterfront destination where residents and visitors converge;
• A Port with a healthy and sustainable bay and its environment;
• A Port that is a safe place to visit, work and play; and
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
Background
HIWM was built between 1970 and 1972. Existing waterside improvements consist of 11 floating docks (approximately 146,000 square feet) with 620 boat slips and landside improvements consist of several buildings, shops, and paved parking (Attachment B - Existing Conditions). The existing landside structures include one single-story, two two-story wood-framed buildings, and a separate restroom located on the western portion of the site with a total plan area of approximately 23,000 square feet. These buildings currently provide space for offices, lockers/storage, janitor facilities, laundry, a restaurant, snack bar, deli/food service, visitor-serving retail, mechanical maintenance facilities and a chandlery, as well as a club room and locker room for users of the marina. There is a large asphalt parking area with 351 parking stalls.
Project Description
The Project includes the following components (also refer to Attachment C - Project Site and Concept Plan):
• Demolition of all existing onsite building space and reconstruction of new building space;
• Demolition of the existing paved parking lot and construction of a new paved parking lot increasing the number of parking spaces by 29 for a total of 380 spaces with 12 spaces available to the general public;
• Removal of existing landscaping and installation of new drought tolerant, non-invasive landscaping with an area for bicycle parking;
• Reconstruction of an existing public viewing deck and construction of a new 12-foot-wide waterside public promenade;
• Reconstruction of swimming pool and spa;
• Demolition of 11 existing docks providing 620 boat slips, and construction of 11 new docks providing 623 boat slips; and,
• Modernization of on-site utilities and lighting.
HIW also seeks a new 40-year Amended and Restated Lease with one 10-year option to extend, for construction, operation and maintenance of the Project.
As part of fulfilling BPC Policy No. 608 (Tenant Percent for Art Program), the Project provides for a public art component which may include functional artwork along the new public promenade and/or a contribution to the District’s Public Art Fund and/or a designated contribution to the Coronado Bridge Lighting Project. A more detailed description of the Project follows.
Buildings
All buildings onsite will be demolished and removed including the three marina buildings and a separate restroom building located on the western portion of the site, totaling approximately 23,000 square feet. Two new marina buildings and a western restroom building will be constructed totaling approximately 15,682 square feet. The two new marina buildings will be a maximum of 45 feet in height above grade and will be linked by a common linear roof plan that would create courtyard areas between the buildings. The pool and spa adjacent to the marine buildings will be reconstructed, with the pool remaining the same size at 1,200 square feet and the spa increasing in size from 75 to 100 square feet.
Parking
The existing asphalt parking lot will be demolished and repaved, decreasing the pavement area and thus impervious surface area from 122,000 square foot to 116,000 square feet. There will be an increase in 29 parking spaces, from 351 to 380, with 12 spaces available to the public.
Landscaping and Bicycle Parking
Existing landscaping will be removed, and new drought-resistant, non-invasive landscaping will be installed, increasing the overall landscaped, pervious area from 15,000 square feet to 18,000 square feet. An area for parking for 25 bicycles will be provided.
Public Promenade and Public Viewing Deck
The existing public viewing deck will be renovated and a 12-foot-wide waterside public promenade installed. Public access from the footpath along Harbor Island Drive to the promenade will be provided through the Project site and indicated with signage.
Utilities and Lighting
Landside improvements include the upgrade of utilities to current building standards and installation of new light-emitting diode lighting throughout the Project site. In addition, the Project will incorporate many features that conserve water and energy use. Increased energy efficiency will result in reduced energy usage by the redeveloped marina facility compared to the existing marina facility.
Docks
The docks on site currently contain a main dock/headwalk with 11 dock/headwalk extensions and 620 slips. These existing deteriorated docks will be demolished and the newly constructed docks (and slips) will be reconfigured to meet current marina standards.
The changes to the dock and slip configuration will result in the same number of docks as existing (11), but with a reduction in the overall size of the current dock facility from 146,000 square feet to 139,218 square feet (more than a 6,000 square foot reduction in bay coverage), and 3 additional slips (from 620 slips to 623 slips). The dock/slip reconfiguration provides for a wider range of vessel sizes, including the ability to accommodate smaller vessels down to 12 feet-in-length, which are currently not serviced at the marina.
The current marina dock configuration has 326 square concrete piles and four existing abutments. The new marina dock configuration will have a total of 237 round steel piles. The four existing abutments for the dockside access ramps will be reused. The number of access ramps and pumpouts will remain unchanged from existing conditions, whereas the fuel dock layout will be reconfigured. Approximately 33 dedicated fire standpipes will be installed on the new docks along with a dedicated fire protection system. The existing and new dock system includes secure gates controlled by an access system on the landside. No dredging is required, and there will be no net fill impacts.
Project Construction
Construction of the Project is planned to begin in 2024 and take approximately 24 months to complete over two phases. A phased construction schedule will allow portions of the marina to remain open to the public and businesses, as well as to avoid displacing boaters from the marina during construction. Public access to the waterfront will be available via portions of the promenade and two (of four) access gates that lead to the marina, and will be delineated with signage. Phase I of construction is planned to begin in 2024 and last 12 months. Phase II of construction is anticipated to begin between September and February 2025 and would end in the summer of 2026. Attachment D - Construction Phasing shows the Phase I and II construction boundaries.
Project Operation
Once the Project is operational, existing uses within the leasehold (e.g., recreational boating, sailing academy, yacht brokers, deli/food service, marine services, maritime-related office tenant space, support/mechanical, laundry facilities, restroom/showers, workout room, boater’s lounge, marine office/business center, and storage lockers) will continue in a manner similar to existing conditions, with use of marina facilities being driven by boaters in the marina. No new or expanded uses, nor increase in intensity of uses, will result. Given the Project’s decrease in the total building square footage and slight increase in the number of boat slips, both employees and visitors accessing and using the Project site are expected to be similar to existing conditions.
Mitigated Negative Declaration
A Draft MND for the Project entitled “Harbor Island West Marina Redevelopment Project” (UPD #MND-2013-80, Clerk’s Document No. 76065) has been prepared in accordance with CEQA (Public Resources Code Section 2100 et seq.), the State CEQA Guidelines, and the District’s CEQA Guidelines. The Draft MND was released for a 30-day public review period that began on December 5, 2019 and ended on January 6, 2020. One comment letter was received on the Draft MND from the CCC. The comment letter discussed issues related to sea level rise (hydrology/water quality, land use and planning), parking (transportation) and air quality as well as asked for clarification on slip utilization, lighting, bay fill and eelgrass mitigation. Staff prepared a written response to the comment letter and made some corresponding edits to the Final MND, including minor clarifications (shown in strikeout/underlined text) and inclusion of sea level rise figures. The additional information contained in the District’s responses to comments clarifies and further substantiates the conclusions contained in the Draft MND.
Additionally, as a result of ongoing coordination with CCC staff, the project description in the Draft MND concerning the docks and slips, and the number of public parking spaces, was updated in the Final MND. First, the number of replacement docks was increased from 10 to 11 and the number of slips was increased from 603 to 623. This change did result in additional impacts to eelgrass than were originally identified in the Draft MND. At the request of CCC staff, an Eelgrass Mitigation Plan was prepared by HIW, confirming that eelgrass mitigation could take place onsite. Eelgrass impacts, as mitigated, will remain less than significant. Second, the number of parking spaces available for public use was increased from up to 4 to 12 parking spaces.
The Draft MND revisions do not amount to a substantial revision under CEQA (CEQA Guidelines Section 15073.5) because they do not show any new significant environmental impacts and previously identified project impacts remain less than significant. Therefore, Draft MND recirculation is not required. Copies of the comment letter and staff responses to the comments are provided in the Executive Summary of the Final MND. The Final MND is available online and in the Office of the District Clerk, and was distributed to the Board for its consideration via a Board Memorandum dated November 9, 2023.
The Final MND finds that the Project would have no potentially significant adverse impacts to aesthetics, agriculture and forestry resources, air quality, cultural resources, energy, greenhouse gas emissions, land use and planning, mineral resources, noise, population/housing, public services, transportation, tribal cultural resources, utilities/service systems and wildfire. The Final MND finds that, with incorporation of mitigation measures identified in the MMRP, potentially significant adverse impacts to biological resources, geology/soils, hazards and hazardous materials, hydrology/water quality and recreation would be reduced to less than significant. The MMRP, which has been prepared in accordance with CEQA Guidelines Section 15047(a), identifies the environmental issue area, all mitigation measures, timing and the party responsible for carrying out the mitigation measures, and procedure for documenting the mitigation implementation. The MMRP is included as Attachment A to Attachment E - Draft Coastal Development Permit of this Agenda Sheet. The MMRP is also provided in Chapter V of the Final MND. Compliance with all the mitigation measures included in the Final MND is required as a Special Provision of the CDP for the Project.
The Final MND has been prepared in accordance with CEQA and the CEQA Guidelines. Pursuant to CEQA Guidelines Section 15074, prior to approving the Project, the Board shall: (1) consider the proposed MND together with any comments received during the public review process; (2) adopt the proposed MND only if it finds on the basis of the whole record before it that there is no substantial evidence that the Project will have a significant effect on the environment and that the MND reflects the lead agency’s independent judgment and analysis; and (3) adopt a program for reporting on or monitoring the changes which it has either required in the Project or made a condition of approval to avoid or mitigate significant environmental effects.
Concept Approval
Pursuant to BPC Policy No. 357, plans for new tenant development must be presented to the Board for approval if the project is estimated to cost more than $500,000. HIW is required to invest a minimum of $45,000,000.
The Project involves the repair, maintenance, replacement and redevelopment of the existing land based and in-water facilities at the Project site including the existing marina buildings, restroom, parking lot and landscaping, and existing marina docks (Attachment C - Project Site and Conceptual Plan). The Project will repair or replace aging infrastructure that is deteriorated and at the end of its serviceable life to accommodate a wider range of recreational vessel sizes, to provide more slip opportunities for a greater diversity of boaters including entry level boaters, and to ensure long-term operational viability of the marina. Staff recommends concept approval of the Project.
Coastal Development Permit
The Project site is located in Planning District 2, Harbor Island/Lindbergh Field, which is delineated on Precise Plan Map Figure 9 of the certified Port Master Plan. The Port Master Plan land designation within the limits of the Project is Commercial Recreation and the water use designation is Recreational Boat Berthing, Fueling Dock, and Sanitary Pump Station. The existing HIWM facility is consistent with the certified land and water use designations. The Project is for the repair, maintenance, replacement, redevelopment and continued operation of HIWM landside and waterside facilities, no new uses are proposed, and thus, the Project is also consistent with the existing certified land and water use designations. Therefore, the Project conforms to the certified Port Master Plan.
The Project constitutes “development” under Section 30106 of the California Coastal Act as it will involve the demolition and construction of structures. Accordingly, a Coastal Act authorization from the District is required. Pursuant to the District’s CDP Regulations, the Project has been determined to be an “appealable” development because it is a recreational small craft marine-related facility. Additionally, Coastal Act Section 30715 lists the sole categories of development that are appealable, and the Project is within these categories of development. Therefore, the Project requires Board authorization of issuance of an appealable CDP. Special conditions are incorporated into the CDP to ensure the Project’s conformance with the Final MND’s MMRP and related District and CCC staff requirements. The Project, as conditioned, is fully consistent with Chapters 3 and 8 of the Coastal Act.
Pursuant to the District’s CDP Regulations, a public hearing is required for all appealable CDPs. In accordance with Section 11.d. of the CDP Regulations, notices were mailed to certain property owners and occupants surrounding the project site, as well as the City of San Diego Mayor and Chief Operating Officer and the CCC, to inform them that a public hearing will be conducted on the CDP. Board action on the CDP may be appealed to the CCC pursuant to Chapter 7 of Division 20 of the Public Resources Code within 10 working days after the CCC receives a notice of the Board’s decision. After the CCC receives notice of the Board’s decision, if a written appeal is not filed within 10 working days, the Executive Director may issue the CDP immediately. District staff recommends the Board conduct a public hearing and adopt a resolution to authorize issuance of the CDP. A copy of the Draft CDP is provided as Attachment E - Draft Coastal Development Permit to this Agenda Sheet.
Option to Lease Agreement and Amended and Restated Lease
The Current Lease commenced August 31, 1981 and expired March 30, 2023, and HIW currently occupies the leased premises under the Current Lease’s holdover provisions. The Board previously authorized staff in open session to negotiate a lease extension based on HIW’s proposed redevelopment. Staff has since negotiated and drafted the Option to Lease Agreement (see Attachment F) with the Amended and Restated Lease attached thereto as Exhibit 1.
The Option has a term of 18 months, during which HIW will be required to submit the following key deliverables within the timeframes set forth in the Option in order to enter into the A&R Lease:
• Develop the Project plans from conceptual drawings to working drawings;
• Provide evidence of equity and debt commitments sufficient to complete the Project, including a source of funds for expenses related to Project construction;
• Obtain all required construction and development permits necessary for the Project;
• Provide a Performance Bond and Payment Bond in form and substance as required by the A&R Lease;
• Submit executed construction contract(s) with competent contractors; and
• Remains in compliance under the Current Lease.
Provided HIW timely satisfies the conditions set forth in the Option, then District and HIW will execute the A&R Lease, which contains the following key terms:
|
Minimum Investment |
$45 Million |
|
Lease Term |
40 Years with one 10-Year Option to Extend |
|
Lease Guaranty |
All owners of HIW will execute a Continuing Guaranty guaranteeing performance of all obligations under the A&R Lease accruing through the later of (i) five years following the A&R Lease Commencement Date and (ii) three years after completion of the Project. |
|
Minimum Annual Rent |
Year 1: $ 895,000 Year 2: $ 895,000 Year 3: $ 1,811,000 Year 4: $ 2,070,000 Year 5: $ 2,241,000 5-Year Minimum Rent Adjustments Thereafter |
|
Percentage Rent for Slip Rate |
Years 1-2: 22.00% Years 3-10: 22.50% Years 11-20: 22.75% Years 21-30: 23.00% Years 31-40: 23.25% Option Term - Lease Years 41-50: 25% |
|
Participation in Sale Proceeds |
2.5% |
|
Participation in Refinance Proceeds |
2.5% |
Future rental revenue from the HIWM over the 50-year A&R Lease (including the 10-year option to extend) is estimated to be approximately $29.3 million in net present value to the District. The percentage rental rates in the A&R Lease establish a valuable new comparable for the District to use in future marina rent negotiations, and the 150% increase in MAR over the first 5 years of the Lease achieves market rent for the HIWM and bolsters comparables for MAR on the waterfront.
Next Steps
Following Board adoption of the Final MND and MMRP, granting of concept approval, authorizing issuance of an appealable CDP, granting an Option to Lease, and staff issuance of the CDP after the 10-working day appeal period has passed, HIW will need to obtain other approvals before commencing construction, including Federal Aviation Administration approval, Regional Water Quality Control Board certification, U.S. Army Corps of Engineers permit and City of San Diego building permit approvals.
General Counsel’s Comments:
The Office of the General Counsel has reviewed this agenda and the attachments as presented to it and approves the same as to form and legality.
Environmental Review:
The Board actions complete the CEQA process for the Project.
The Board actions comply with Section 87 of the Port Act, which allows for the establishment, improvement, and conduct of a harbor, and for the construction, reconstruction, repair, maintenance, and operation of wharves, docks, piers, slips, quays, and all other works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient, for the promotion and accommodation of commerce and navigation. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the Project is consistent with the Public Trust Doctrine.
The Board actions conform with the Coastal Act process for the Project. If the Board authorizes issuance of an appealable CDP, District staff would notify CCC staff in accordance with Coastal Act Section 30717. The Executive Director would issue the CDP after the tenth working day after CCC staff notification, unless an appeal is filed with the CCC within that time frame.
Diversity, Equity, and Inclusion Program:
This agenda sheet has no direct DEI impact on District workforce or contract reporting at this time.
PREPARED BY:
Megan Hamilton
Senior Planner, Development Services
Amy Gerritsen
Program Manager, Real Estate
Attachments:
Attachment A: Location Map
Attachment B: Existing Conditions
Attachment C: Project Site and Conceptual Plan
Attachment D: Construction Phasing
Attachment E: Draft Coastal Development Permit
Attachment F: Option to Lease Agreement (with Amended and Restated Lease attached as Exhibit 1)
1Lease dated August 10, 1981 on file in the Office of the District Clerk as Document No. 14085, as amended by that certain First Amendment to Lease dated September 8, 1994 on filed in the Office of the District Clerk as Document No. 31805 (the “Current Lease”).