Despite discussing myriad funding opportunities for economic development at the Crescent City Harbor, its board of commissioners is currently in a holding pattern until voters weigh in on Measure C next month.

Measure C is a citizens initiative that will appear on the Nov. 6 ballot in Del Norte County. If it passes, the measure would increase the transient occupancy tax (TOT) visitors to county hotels pay from 8 percent to 10 percent and would impose a 2 percent transient occupancy tax on spaces rented at RV parks in the county. The measure would only apply to lodging facilities and RV parks outside Crescent City.

Revenue generated from the increased tax would go to the Crescent City Harbor to pay down a $5.425 million U.S. Department of Agriculture loan used to rebuild the inner boat basin following tsunamis in 2006 and 2011. They new tax dollars would also be used to pay for repairs to harbor facilities such as Citizens Dock, the Whaler Island Groin and the outer boat basin seawall, according to the ballot summary.

There is no expiration date for the proposed tax, according to an impartial analysis of Measure C from County Counsel Elizabeth Cable.

“No matter how much money is generated by Measure C, after repayment of the loan, money can only be spent repairing and maintaining existing facilities,” Cable states in her analysis. “No other uses of funds are authorized.”

Dire financial straits

The proposal to increase the TOT for visitors to the county came about following months of discussion among harbor commissioners on how to make the port’s $270,000 USDA loan payment and close a $498,000 budget deficit.

According to Commissioner Brian Stone, the harbor’s deficit for this fiscal year is $348,000. He estimated that addressing depreciation at the harbor would cost about $3.3 million per year.

In terms of putting a dollar figure on the amount of repairs needed at the port, Stone said Tuesday it could be as high as $11 million.

Fixing the sea wall at Citizens Dock would cost about $4.4 million, he said. Repairs at Whaler Island Groin would cost $500,000, according to Stone.

The parking lot also needs to be repaved, Stone said. The Coast Guard Auxiliary building and a building that housed a sheriff’s substation are plagued with dry rot and need to be torn down, he said.

“There are certain things that have to be done,” Stone said. “This year we went in and put a roof on the old Englund Marine building and we put stuff in at other places. All we’re doing is putting out spot fires.”

If the harbor defaults on the USDA loan, according to Stone, the port could close and more than 850 people could lose their jobs.

In early 2017, Stone presented 11 options for reducing the harbor’s deficit and paying down its debt. He and his colleagues whittled down the list to three potential options: A sales tax increase similar to the 0.25 percent tax increase voters passed in 2014 that benefited the Del Norte County Fairgrounds; a property tax assessment; and a transient occupancy tax increase.

Stone said he and his colleague Wes White brought the idea of increasing the transient occupancy tax with added revenue going to the harbor to Crescent City Mayor Blake Inscore and City Councilor Jason Greenough and county Supervisors Bob Berkowitz and Gerry Hemmingsen.

The city representatives opposed increasing the transient occupancy tax, according to Stone.

Harbor Commissioners also discussed how they would go about putting a proposed tax increase before Del Norte County voters.

Stone said it was when he and his colleagues heard of a 2017 California Supreme Court ruling involving the Southern California city of Upland, which potentially allows for citizen-led tax initiatives to be subject to a 50-percent-plus-1 threshold rather than a 2/3rds majority vote to succeed.

“At that point in time, I was trying to rally support from individuals to get on board with either doing a sales tax or a property tax (increase),” Stone said, adding he met with the Fisherman’s Marketing Association in January 2018 to try to get their support. “The blow back was tremendous from the fishermen. They were unaware, like most people, that the harbor was in that shape. Following the meeting Rick Shepherd came to me and said what can we do? He says well, why can’t we do a TOT?”

Measure C takes shape

Shepherd, president of the Fisherman’s Marketing Association who is running for a seat on the harbor commission this year, said he was one of the original people who supported the idea of a citizens initiative to increase the TOT to benefit the harbor.

“They wanted to do a property tax or a sales tax and I said I didn’t think that would work, that a TO tax would be an easier to sell,” he said. “I just think (there are) too many taxes already in the state of California — we just went through one with the fairgrounds, that 0.25 percent — I didn’t think voters were going to go for it.”

Shepherd said he looked at TOT rates in other communities and realized that the tax in Del Norte County is extremely low. With the city’s TOT already at 10 percent, he said, after doing some research it appeared that increasing the county’s TOT by 2 percent “would generate just the amount that we would need to make the loan payment.”

Shepherd also noted the proposed 2 percent TOT on RV spaces within the county would only apply to people who stay for 30 days or less.

Shepherd and fisherman George Bradshaw teamed up with Don McArthur and John Roberts, who serve on the Del Norte County Unified School Board and Del Norte County Library Board respectively, to create Save the Harbor 2018.

Asked why Measure C didn’t include an expiration date, McArthur noted that the loan repayments will continue for 38 years.

“I am pretty confident that at the end of 38 years, they’re going to need to do things in the harbor,” he said. “It doesn’t seem an unreasonable amount of money to have available at that point.”

Needing to gather 704 signatures to place the initiative on the November ballot, the campaign turned in 1,107 signatures and wound up with 863 valid signatures.

Threshold needed for initiative to pass

Despite the decision in the California Cannabis Coalition v. City of Upland case, whether Measure C requires a 2/3rds majority or a 50-percent-plus-1 majority to pass is still uncertain. On Tuesday, a spokesperson for Cable’s office said the county counsel hasn’t taken a public position on the matter nor on how her office will advise the elections clerk following Nov. 6.

Bob Black, legal counsel for the Crescent City Harbor District, said Wednesday the question may be answered following the election.

“For example, if it doesn’t get 50 percent it’s not a question that has to be answered. If it gets more than 2/3rds, it’s not a question that has to be answered,” Black said. “If it falls in the middle, I have a feeling that a decision will have to be made and that decision will almost certainly come out of the county counsel’s office as an initial matter. It’ll be their duty to advise the Board of Supervisors whether to certify the election as having passed or not passed.”

Black also noted many jurisdictions throughout California may have citizen-led initiatives on the ballot and may have to answer similar questions via legal action.

“We may be able to stand back and kind of watch how the question resolves in other jurisdictions,” he said. “It’s complicated because the courts have not been totally clear on this point. They kind of opened the question and then didn’t answer it.”

Both Shepherd and McArthur say they’re hoping Measure C will pass on a 2/3rds majority vote. McArthur said he is proceeding with campaigning for Measure C on the assumption that the California Supreme Court decision in the California Cannabis Coalition v. City of Upland case will stand, making the required threshold for the TOT increase to pass a 50-percent-plus-1 majority.

“My assumption is that if it passes between 50-percent-plus-1 and 66 percent, that would be where you’d have a legal question and it would possibly be the subject of litigation,” McArthur said. “I would think at that point, and this is just me speculating, but at that point, the past initiative would be a potential revenue stream (to the) harbor and the harbor could make its argument that, yeah, we want this.”

Community feedback

When collecting signatures for the initiative and campaigning for it later on, McArthur said that he and the other proponents of Measure C found when people understand the harbor’s financial situation is due to the 2006 and 2011 tsunamis, they’re generally receptive to the proposed TOT increase.

“There is pushback from people who just don’t like taxes period,” he said, noting about $50 million of the $55 million in needed repairs following the two tsunamis came from the California Office of Emergency Services and the Federal Emergency Management Agency. “Five million was our share, and taxpayers elsewhere are paying for the rest of it, so it’s like a mortgage. You put a down payment down and the $5 million we agreed to is our down payment that enables us to have access to the $50 million, and it doesn’t seem inappropriate.”

Not everyone favors Measure C.

Samuel Strait, a local political commentator, said even though it appears an increased TOT would primarily affect visitors, that would be $250,000 to $300,000 taken out of the local economy “for an infinite amount of time.”

“There’s no end to Measure C,” he said. “It goes on and on and on.”

Strait said he’s also been involved with the harbor for years and while it’s dependent on the commercial fishing industry to continue to run, the fishing industry has been declining for about 30 years. The harbor’s financial situation isn’t recent, he said, and there are other ways it could have paid the $5 million contribution to rebuild the inner boat basin following the two tsunamis.

“They’ve got a lot of assets down there (that) they’re mismanaging without question and what they need to do is maybe part with a few of those assets to pay that debt off,” Strait said. “And turn the harbor into a privately-held marina where there might be some government oversight, but turn it into a private marina, let some guy make money off of it and if the thing gets massacred in the next tsunami, he’s the one that’s going to be holding the bag, not the harbor all the time.”

Meanwhile, Janet Wortman, owner of the Requa Inn in Klamath, said that while she supports anything that will benefit Del Norte County, no one asked her what she thinks of Measure C. With the proliferation of Airbnb spaces and vacation rentals, it’s getting harder to compete as a business.

Wortman said one of her biggest competitors is the Yurok Tribe’s Holiday Inn Express in Klamath. She said that since the Yurok Tribe passed an ordinance stating that any TOT the Holiday Inn generates would promote tourism in Yurok country. Measure C wouldn’t apply to the Holiday Inn Express, Wortman said.

“I’m a privately-owned business even though I’m Yurok and I live on the reservation, I don’t fall into that ordinance,” Wortman said. “If we both had the same room, theirs is going to be cheaper than mine because now I have a higher bed tax. It just would have been nice if somebody would have called and asked and said well, what would this do to you?”

Wortman also noted the original intent of Del Norte County’s TOT is to promote tourism. But, she said, “lots of it doesn’t come down here to support me.”

“It’s a tough one,” she said. “I don’t know how much of an impact it’s going to have on my business.”

What comes
after election day

If voters approve Measure C, it would mean the $262,000 the harbor pays to the USDA wouldn’t come out of its budget, according to Stone. That means, he said, the harbor district would be about $80,000 away from balancing its budget.

It also means that the port can move ahead with finding other funding sources to redevelop Redwood Harbor Village, formerly Harbor RV Anchorage, and build tiny houses, yurts, tent camping and other amenities for tourists.

“We’re looking at grants right this minute,” he said, adding that Harbormaster Charlie Helms was tasked with searching and applying for grants “to bring money into the community.”

Three of the Harbor District’s goals are to find funding to construct a 60-room hotel, improve camping sites and create a visitors center focused on tsunamis that would also serve as a place of refuge during an actual tidal wave.

The Harbor District is also actively searching for a tenant for the old Englund Marine Building at 201 Citizens Dock Road. There’s also been discussion about turning the building into an interagency visitors center.

“That will not only bring us back into a negative revenue situation, we’re trying to get into a positive cash flow situation,” Stone said. “This has been a very difficult time for the harbor and it just takes time to develop it.”

Alternatively, the failure of Measure C “could be a real problem for the harbor,” Stone said.

“I don’t know what we’re going to do if it fails,” he said of Measure C. “If it fails, then it’s going to be a real problem for the harbor because you’re looking at the potential of losing 850-plus jobs in our community and I don’t want to go there.”

Reach Jessica Cejnar at jcejnar@triplicate.com .

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