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By Tim Pickering, Laguna Beach; Timothy Pickering, Phoenix, Arizona; and Dennis Pickering, Dana Point
More than 20 years ago, celebrated race car driver Dick Simon assembled several parcels of land adjacent to the railroad tracks in Doheny Village and created Dick Simon Marine. His enthusiasm for speed lent itself to the successful marketing and sales of a variety of high-end racing boats and concierge services for several years. In 2003 this boat sales, storage and service facility was sold to the Pickering family, who have focused on maintaining a similar operation and renamed it Dana Point Marine & Storage (DPMS).
In 1999, South Coast Water District (SCWD) acquired 30 acres for $1 (probably valued at more than $50 million) along San Juan Creek and on the other side of the railroad tracks from us. In 2007, in the process of seeking to make the property productive, SCWD decided to build a boat and RV business. The impetus was Orange County Harbor’s need to store boats during their revitalization process, which was initiated in 2003, as well as the pending closure of El Toro’s massive boat and RV storage facility.
By this past fall, the harbor revitalization project that began as a $6.9 million refurbishing and remodeling project had been recast as a $200 million re-development project and was put on hold until a master developer could be identified. Also, in August 2015, the El Toro facility announced it would close on Jan. 31. It published a list of 122 facilities where their 3,000 customers could relocate, and since then El Toro has indeed closed, thereby eliminating both of SCWD’s anticipated sources for boats and RVs.
As SCWD has spent about $1 million of reserve funds on their boat and RV storage property, which is 99 percent complete, the board of directors feels obliged to make a return on their investment. DPMS is concerned!
Without SCWD’s intended boat and RV customer sources, how will it acquire their customers? Until the summer season begins, SCWD could share the few customers that arrive each month with DPMS and add to their losses. Over time, should SCWD’s 6-acre facility share a proportionate number of customers with DPMS’s 2-acre storage facility, both would have less than 25 percent occupancy, and both would fail.
Alternatively, SCWD could cut their rates, which would be “patently unfair” as described by one of the board of directors, as they have no debt service to pay, are the recipient of substantial property tax funds (to which their competitors contribute), have the financial benefit of operating as a nonprofit organization and can continue to fund expenses from increased water rates, in-house staff, materials, equipment or new bond issues.
In the small business world, newly projected customer losses warrant a revised proforma, although it has yet to be considered by SCWD.
The California Water Code addresses the disposition of extra land, which can be leased or sold to the highest bidder. However, property development for “recreational purposes” is also allowed according to SCWD’s legal counsel’s recent memorandum. To that point, DPMS has never used its storage facility for recreational purposes in more than 12 years, and by example what other land-based storage facilities provide recreational resources on its property?
As opposed to a competitive private sector business, public utilities such as SCWD are considered a government “franchised monopoly.” The following federal and state references are intended to protect private sectors’ business from them:
Bureau of the Budget Bulletin 55-4, Jan. 15, 1955 – President Eisenhower, SBA Author: “The Federal government will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels.”
California Business and Professions Code: “ 17000: This chapter may be cited as the Unfair Practices Act. 17001: The Legislature declares that the purpose of this chapter is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices by which fair and honest competition is destroyed or prevented.”
Moreover, there are no comparable financial threats to a public utility. If the SCWD facility fails, the Board of Directors and their employees are protected as the losses can be covered with use rate increases, bonds, county taxes or a state bail out. In contrast, the DPMS owners are held personally liable and stand to lose all their collateralized business holdings, personal property and assets when the bank’s ubiquitous default loan term is applied to a commercial borrower: “Lender in good faith believes itself insecure” once SCWD starts competing with them.
As previously stated in a letter to the SCWD board of directors “… we’d ask that the SCWD directors wait and limit their offering to only the Dana Point Harbor boat owners, so as to not adversely affect the 122 small boat and RV business owners by virtue of having an overwhelmingly unfair advantage over tax-paying small businesses.”