Port of Long Beach estimates $345 million loss if it takes over Queen Mary – Press Telegram
The Port of Long Beach could potentially lose about $354 million over five years if it takes over the Queen Mary and surrounding property, forcing it to increase its borrowing to as much as $700 million, according to a recent report included in a first look at the port. Budget for fiscal year 2023.
The Long Beach Harbor Commission will hold an early budget meeting on Monday, May 2.
Financial analysis of Pier H is not part of the currently proposed 2023 budget, officials said, because the transfer of the ship and surrounding land from city control to the port has not been completed. The city council, however, voted on September 14 to start the transfer process.
But the Port Department’s analysis provides new details about what it would cost the Port of Long Beach, the nation’s second-busiest, to resume operations at Pier H and the legendary Queen Mary.
In the cost analysis overview, revenue from the entire pier would be estimated at $4 million in 2023 and $8 million each of the next four years. It is unclear whether this includes revenue from the Carnival Cruise Lines cruise terminal.
For the same five years, however, operating expenses are estimated at $146 million, with another $10 million in debt service. It is estimated that an additional $236 million will be required in capital expenditure. In total, this represents a price tag of $392 million over the first five years of port control.
“If I understand correctly, they’re proposing to spend $392 million over five years to make $38 million,” said John McLaurin, president of the Pacific Merchant Shipping Association and longtime opponent of the Queen Mary transfer, in an email. . “At the end of the day, this is a ship that’s about 90 years old – still sitting in salt water, with 40 years of failures as an attraction/hotel.”
Still, city officials have repeatedly said the World War II ship is worth preserving, despite the high costs of doing so.
“This is an incredible opportunity for us to have control and see this pier become a jewel in Long Beach,” Councilwoman Cindy Allen said in September, days before she and her colleagues voted to negotiate with the port department to give operational control. from ship to port. “We will make sure she is well taken care of.”
Although Long Beach has long owned the Queen Mary, it has outsourced management of the ship to various third-party companies over the years, most recently to Urban Commons Queensway in 2016. Urban Commons and its parent company filed for bankruptcy at the early 2021, after the ship was closed for a year due to the coronavirus pandemic. The company relinquished its 66-year lease for the vessel and surrounding property as part of the bankruptcy, giving Long Beach operational control for the first time in 40 years.
A marine survey conducted in 2015, the year before Urban Commons Queensway took over the lease, found that the total cost of ship repairs could range from $235 million to $289 million. The city provided Urban Commons with $23 million to begin repairs, but how they spent that money has since been questioned.
After the city took control of the ship, it started about $5 million in immediate safety repairs. These included the removal of the wooden lifeboats suspended from both sides of the ship.
The Port Department’s report estimated that it would need 13 dedicated staff at Pier H and the Queen Mary, or about $2 million per year. The non-personal budget for 2023 is $25,540,953, with the two biggest chunks being $5,766,000 for street paving and $6,384,000 for rock levee repairs.
There is no mention of the abandoned submarine currently alongside the ship inside the rocky seawall.
Capital expenditures for the first year the port controls the Queen Mary are estimated at over $49 million, including $2.4 million for new security systems. Environmental compliance could average $1 million per year for the next four years.
But city officials said the Port Department was in a better position to operate the Queen Mary.
“The port is a department of the city,” Vice Mayor Rex Richardson said in September. “We are a city family. It’s important to work together. »
And while the numbers are high, they pale in comparison to the port’s overall budget. The first proposal is for $685.2 million in spending for 2023, with an additional $321.9 million in capital spending.
Port officials also pointed out that Pier H/Queen Mary’s budget is an estimate.
“Without any recent experience operating Pier H,” the report states, “actual results may be significantly higher or lower than the numbers presented.”