2013-10-17 / Around Town

Council to Weigh Yacht Club Lease

By Tom Shevlin

Will the city stay the course, or will it opt to review its lease terms with the Newport Yacht Club?

City Council members will be asked to weigh just that when they next meet on Wednesday, Oct. 23.

Last week, councilors were provided with a memo from City Manager Jane Howington that recommended that no changes be made to the 40-year lease agreement. However, upon receiving that report, Councilor Michael T. Farley renewed concerns that he had expressed several months before and implored his fellow councilors to bring the lease back in line with its original language.

According to Farley, "the guidelines of the lease provided that the lease payment term should be approximately five percent of the assessed value of the property…If the guideline were followed, the lease payment would more than double to $102,505 per year."

However, Howington, who began looking into the lease after a council directive earlier this summer, determined that while the property may have seen its assessed value increase, overall the arrangement has remained true to the spirit of the original 1993 lease.

And, while the current agreement isn't due to expire until Nov. 1, 2023, the lease does provide that either party can initiate a review of its terms on a five-year basis, and seek out appropriate changes provided that a "substantial deviation from the general guidelines is found."

That's exactly what councilors were looking for when, earlier this summer, they directed staff to take a critical look at the lease to determine whether any additional revenues could be gained through the club's annual lease payment.

According to Howington, "a review of the Yacht Club's tangible and intangible benefits to the City has not revealed any substantial deviation from the general guidelines of the existing agreement. Lease payments are adjusted annually for [inflation], the property is maintained, and major capital infrastructure improvements are scheduled."

According to the terms of the lease, each year the Newport Yacht Club is responsible for an annual base rate payment, which is adjusted based on the consumer price index and compounded each year. In addition, the club also pays tangible and real property taxes on their structures, equipment and improvements.

According to data collected by the city, in 2012, the club paid a total of $64,080 in taxes and lease installments, up from $63,059 in 2011 and nearly $20,000 more than 1999 when it accounted for $44,321 in combined revenue to the city.

More broadly, over the past 14 years, the yacht club has contributed a grand total of $796,590 to city coffers through annual lease and tax payments.

But Farley took issue with that assessment.

"The Newport Yacht Club is a valued and important partner with the city," he said. "The yacht club membership is not looking for a handout. They want to pay a fair price. Until now, our city manager has refused to take them up on their offer. That needs to change. It is clear to anyone with a calculator that there is a substantial deviation between $102,505 and $50,103. It is clear to the Newport Yacht Club, it is clear to the City Council, it is clear to the voters. I hope it becomes more clear to the City Manager tonight."

In her report, however, Howington noted that in addition to its financial contribution, the club also provides other "intangible benefits" to the city, which are harder to quantify.

As Howington noted, those intangible benefits "have been maintained and, in some cases, expanded."

Among those intangible benefits are slip space for a total of four harbormaster vessels, the use of hauling equipment by the city, and access to a shared utility building and parking lot.

In addition, Howington noted that the club is responsible for the maintenance of an abutting seawall, provides special event space for city events, organizes youth sailing programs, oversees various regattas, and has recently undertaken significant improvements to the property and dock infrastructure, including the installation of a wave attenuation system that helps safeguard other city-owned docks. The cost of that project, estimated at $800,000, is being borne by the club's membership.

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