DATE: April 11, 2023
SUBJECT:
Title
REDEVELOPMENT OF THE MARITIME MUSEUM OF SAN DIEGO:
A) RECEIVE PRELIMINARY PROJECT REVIEW PRESENTATION FOR PROPOSED REDEVELOPMENT OF THE MARITIME MUSEUM OF SAN DIEGO; AND
B) ADOPT A RESOLUTION AUTHORIZING STAFF TO COMMENCE ENVIRONMENTAL REVIEW IN ACCORDANCE WITH THE CALIFORNIA ENVIRONMENTAL QUALITY ACT FOR THE REDEVELOPMENT OF MARITIME MUSEUM OF SAN DIEGO AT EMBARCADERO BY MARITIME MUSEUM ASSOCIATION OF SAN DIEGO (MARITIME MUSEUM); AND
C) DIRECT STAFF TO OBTAIN FROM THE MARITIME MUSEUM, AT THEIR SOLE EXPENSE, BOTH (1) AN HISTORICAL PERFORMANCE AUDIT OF THE EXISTING LEASE AND (2) AN EVALUATION OF THE MARITIME MUSEUM’S PLAN OF OPERATIONS FOR THE PROPOSED REDEVELOPMENT PROJECT TO BE DELIVERED IN ONE OR MORE REPORTS IN A FORM AND CONTENT SATISFACTORY TO DISTRICT STAFF FROM ONE OR MORE QUALIFIED, INDEPENDENT, THIRD-PARTY CONSULTANTS.
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EXECUTIVE SUMMARY:
The District entered into a 40-year lease with the Maritime Museum Association of San Diego (Maritime Museum) on July 1, 2004 to operate a maritime museum located at 1492 North Harbor Drive in the City of San Diego (Attachment A - Location Map). The Maritime Museum of San Diego is open to the public and visitors may tour historic vessels including the Star of India, Berkeley, Californian, and similar vessels (Vessels), as well as temporary exhibits of visiting historic and replica ships, and exhibitions of historic watercrafts and works of art representing maritime history. Other ancillary offerings and uses include educational programs, sale of retail gifts, special events, excursions, charter operations, and the sale of food and beverages. The District entered into three subsequent short-term Tideland Use and Occupancy Permits (TUOPs) with Maritime Museum for land and water parcels as additional museum Vessels were acquired and needs arose for dedicated volunteer parking spaces.
The Maritime Museum is proposing to redevelop their entire premises with new facilities including an approximately 14,000 square foot structure that will include galleries, an educational theater, café, museum store, public access terraces, administrative offices, and back of house functions, all of which will be built on a pile supported pier at their current location (Attachment B - Project Renderings). In addition, the Maritime Museum proposes to reconfigure their dock area and mooring locations of their Vessels for the purposes of enhancing the aesthetics of the operation from the vantage of the Embarcadero; safeguarding the Vessels from tide and weather events; and to create a more enticing venue to attract increased admissions to the museum (collectively, the “Project” or “Maritime Museum Project”).
Staff is requesting feedback and direction from the Board of Port Commissioners (Board) on the Project and is seeking authorization to commence California Environmental Quality Act (CEQA) review for the Project. In addition, to ensure the future success of the Maritime Museum of San Diego and to address any deficiencies in the current operations, staff recommends that the Board direct staff to obtain from the Maritime Museum an historical performance audit of the existing lease and an evaluation of the Maritime Museum’s plan of operations for the proposed redevelopment project. At the April Board meeting, staff is not requesting any approvals for the Project, project design or project description, any lease terms or financing for the Project, or for any other approvals necessary to carry out the Project. Any feedback provided by the Board on the Project will not be binding on the District, and the Board, in authorizing commencement of environmental review and providing feedback, reserves its sole and absolute discretion to approve, disapprove or condition the Project and adopt all feasible mitigation measures, a project alternative, including the No Project Alternative, and a Statement of Overriding Considerations, if applicable, and any other approvals necessary to carry out the Project. Further, the District is not committing to fund any portion of the Project. Staff will return to the Board at a future meeting to present additional analysis and any documents covering business terms as well as any other items requiring District approval for this Project.
RECOMMENDATION:
Recommendation
A) Receive preliminary project review presentation for proposed Maritime Museum of San Diego redevelopment; and
B) Adopt a Resolution authorizing staff to commence environmental review in accordance with the CEQA for the redevelopment of the Maritime Museum of San Diego at Embarcadero by Maritime Museum; and
C) Direct Staff to obtain from the Maritime Museum, at their sole expense, both (1) an historical performance audit of the existing lease and (2) an evaluation of the Maritime Museum’s plan of operations for the proposed redevelopment project to be delivered in one or more reports in a form and content satisfactory to District staff from one or more qualified, independent, third-party consultants.
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FISCAL IMPACT:
Preliminary project review and authorization from the Board to commence environmental review in accordance with the CEQA will not have a direct fiscal impact to the District. The proposed Project is expected to generate future revenues for the District which are currently being evaluated by staff as part of the due diligence process and will be presented at a future meeting.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A vibrant waterfront destination where residents and visitors converge.
• A Port with a comprehensive vision for Port land and water uses integrated to regional plans.
• A Port with an innovative and motivated workforce.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
The Maritime Museum is a California not-for-profit organization that has operated on the Embarcadero for 75-years. Home to one of the most extensive collections of historic vessels in the world, the Maritime Museum of San Diego is an established cultural institution on the waterfront serving the public. Several Maritime Museum Vessels are listed as historic landmarks and places, in the Guinness Book of World Records, and recipients of designations and awards by the Governor of California. In the hopes of adding to their list of commendations, the Maritime Museum is involved in a joint effort to seek inscription by UNESCO as a World Heritage Site. To create an improved visitor experience, the Maritime Museum is proposing to redevelop their leasehold as further outlined below.
Project Proposal Summary
The proposed Maritime Museum Project would include the development of approximately 14,000 square feet of entirely new facilities that would include galleries, educational theaters, a café, museum store, public access terraces, administrative offices, and back of house functions, all built on a pile supported pier. The two-story building would provide the Maritime Museum with expanded space for the educational programs offered to local schools; terraces accessible to the public; a café for use by ticketholders and the public; and a dock and dine dock for use by recreational boaters.
In addition to the museum building, the Project would reconfigure the docks and mooring locations of the Maritime Museum’s Vessels. A 2017 report conducted by Lord Cultural Resources concluded that shifting the Star of India further from the Embarcadero could result in increased admission sales based upon analysis of other, similarly positioned institutions (Attachment C - Lord Report). Moving the Vessels away from the Embarcadero would also serve to make them more visible to the public, and less prone to damage and subsequent required maintenance due to extreme weather events. The proposed reconfiguration of the docks would require an expansion of the existing leasehold water parcel. The Maritime Museum has provided staff with a phasing plan for construction that intends to allow for continuous operations through completion of the Project.
The proposed Project was presented to California Coastal Commission (Coastal) staff in July 2020 and May 2021. Coastal staff communicated concerns regarding the size and extent of the Project, uses proposed, and the implementation of the proposed public access. The Project has been modified several times in response to feedback from District and Coastal staff to incorporate additional public access. The proposed Project would require further analysis with regards to the District’s Port Master Plan (PMP) and Port Master Plan Update (PMPU).
Staff is in negotiations with the Maritime Museum on a term sheet for an Amended and Restated Lease to include updated Lease terms, and to incorporate the various parcels covered under their three existing TUOPs into one single document, and an expansion of the leasehold water parcel. If the Board authorizes staff to commence environmental review, staff will return to the Board at a future meeting to request the Board’s consideration for granting an option to Lease to the Maritime Museum, and as well as, but not limited to, concept approval and consideration of the CEQA document.
Project Funding
The Project is currently projected to cost $28M. The varied funding sources provided for in the Maritime Museum’s proforma (Plan) include the following:
The $1.5M of state grant funds awarded by the California Coastal Conservancy are reserved for expenses related to design and environmental review. These funds must be spent by December 31, 2024. The Maritime Museum has experience in raising significant funds for projects. In 2011 the Maritime Museum raised over $6M to build a 200-ton replica of the San Salvador, the galleon on which Juan Rodriguez Cabrillo became the first European to make landfall in San Diego.
Operations and Performance Analysis and Due Diligence
As part of the due diligence process, staff recommends obtaining from the Maritime Museum an historical audit of the existing lease and an evaluation of future operations to develop recommendations that would help to ensure the future success of the museum. The findings and recommendations would then be reported back to staff for review and reported to the Board as part of the continued negotiations for an option to Lease. Further, staff would continue to analyze the economic feasibility of the Project relative to the tourism and attractions market in San Diego. Staff will continue to conduct due diligence and work with the Maritime Museum to further refine the funding Plan for the Project and present that information to the Board at a future meeting along with proposed business terms.
Expanded Operation
The proposed Project would increase useable space for existing uses such as the retail gift shop, educational programs, and event spaces, and would add new uses such as a café which would add a new revenue-generating opportunities to the operation. To operate the larger facility, the Maritime Museum plans to partner with experienced local operators in those fields. The Plan provided by the Maritime Museum indicates the expanded facilities would result in increased revenue to the District upon completion and stabilization of the new facilities. The Plan also projects significant increases to the food and beverage revenues generated by the Maritime Museum of San Diego largely due to a contemplated sublease with a well-known local restauranteur to operate the Project’s café and event catering. All of the expanded uses would be analyzed during the CEQA review.
Recommendation and Next Steps
The proposed Maritime Museum Project would greatly enhance an iconic cultural attraction on San Diego Bay and increase attendance and public visitorship, as well as attract more visitors to the waterfront. Staff recommends the Board authorize staff to commence environmental review for the redevelopment of the Maritime Museum of San Diego. During the environmental review process staff will work with Maritime Museum to continue refining business terms, draft necessary documents and other items that will be required in connection with the redevelopment. In addition, to ensure the future success of the Maritime Museum and to address any operational deficiencies, staff recommends that the Board direct staff to obtain from the Maritime Museum an historical performance audit of the existing lease and an evaluation of the Maritime Museum’s plan of operations for the proposed redevelopment.
General Counsel’s Comments:
The Office of the General Counsel has reviewed this agenda sheet and attachments, as presented to it, and approves the same as to form and legality.
Environmental Review:
The preliminary project review presentation, including without limitation, the proposed project description, direction to staff, and obtaining Board authorization for staff to commence environmental review for the proposed Maritime Museum Project in the city of San Diego, California, is consistent with, and in compliance with, CEQA Guidelines Section 15060, which authorizes a lead agency to conduct preliminary review of an application for permits or other entitlements for use before commencing formal environmental evaluation of a project. Any project, including the proposed Project, requiring the District or the Board’s discretionary approval resulting in a physical change to the environment shall be analyzed in accordance with CEQA prior to such approval.
The current Board actions are not to approve the Project, including the design, project description, any leases or any other approvals required to carry forward the Project. The Board reserves its sole and absolute discretion to approve or disapprove the Project and consider the environmental document and any mitigation measures, if applicable, as well as any and all other permits or entitlements for use that may be required at a future date. Therefore, no further CEQA review is required for the current Board actions.
The Board actions comply with Section 35 of the Port Act, which authorizes the Board to do acts necessary and convenient for the exercise of its power. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the Board action is consistent with the Public Trust Doctrine.
The Board actions do not construe as approval or disapproval of the Project and do not allow for development, as defined in Section 30106 of the California Coastal Act, or new development, pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations. However, development within the District requires processing under the District’s CDP Regulations. Future development would remain subject to its own independent review pursuant to the District’s certified CDP Regulations, Port Master Plan, and Chapters 3 and 8 of the Coastal Act. The Board’s direction in no way limits the exercise of the District’s discretion under the District’s CDP Regulations. A CDP will be required for the Project, as well as other possible entitlements, and will be analyzed as part of the CEQA analysis and presented to the Board for its consideration in the future.
Diversity, Equity, and Inclusion Program:
This agenda sheet has no direct impact to District workforce or contract reporting at this time.
PREPARED BY:
Stella Karl-Ruiz
Assistant Asset Manager, Real Estate
Annette Dahl
Department Manager, Real Estate
Attachment(s):
Attachment A: Location Map
Attachment B: Project Renderings
Attachment C: Lord Report