When Richard Cloward gazes across San Diego Bay on a postcard-perfect spring day, he sees far more than the average tourist or local resident. Beyond the charming snapshot of picturesque sailboats, cruise ships and a bustling waterfront, Cloward, executive director of the San Diego Port Tenants Association, sees the long-fought struggles, hard work and ongoing compromises it takes to successfully maintain a working waterfront.

"It’s a real balancing act," says Cloward, 58. "The tenant association's goal is to work with the port district, promote port commerce, protect port tenants and find common issues all the tenants can agree on. Believe me, it’s not easy."

The port tenants association's landlord, the San Diego Unified Port District, manages San Diego Harbor and the airport at Lindbergh Field. Additionally, it oversees an impressive chunk of the city's prime real estate: all of the nonmilitary tidelands property along San Diego Bay, including Harbor and Shelter islands.

The port controls 2,992 acres of water and 2,017 acres of tidelands, the latter figure not counting the airport (474 acres) or some South Bay property recently acquired. More than 500 private businesses lease tidelands property or structures from the port. These businesses create nearly 28,000 jobs and generate roughly $6 billion annually in sales and payroll, reports a 1999 study, "Economic & Fiscal Impact of the Port of San Diego," prepared by SourcePoint, a not-for-profit research firm run by the San Diego Association of Governments.

The total contribution of the port to the region's economy is 102,000 jobs and $7.2 billion annually in total business sales. These estimated impacts include direct, indirect and induced economic activity.

Of the 500-some tidelands businesses, more than 200 are members of the tenants association, which has a sometimes stormy, tenant-versus-landlord relationship with the port. The nonprofit organization was formed in 1989 and has a 27-member board of directors. It acts as a sort of union, to increase port tenant members' leverage in discussions with the port district on issues like rent increases, lease options, water quality issues and tidelands development. It also works closely with the port on environmental issues such as storm water runoff, non-point source pollution and other bay pollution issues.

"The port tenants association is the most important group to come along since the port was formed," says Kip Howard, owner of Downtown’s Allegis Development Services and a longtime participant in tidelands businesses. "It has been instrumental in making sure the port conducts business in a proper fashion."

Two people — Cloward and his former wife, Sharon Cloward, who is director of membership and marketing — run the day-to-day business of the port tenants association. "The biggest and most adversarial issues between the port and the SDPTA now are tenant rent increases and lease issues," Cloward says. "We’re also very concerned that future port development protects existing waterfront businesses rather than just building a lot of hotels and restaurants. We want to maintain a viable working waterfront."

SDPTA members — and port tenants, overall — are an eclectic bunch. They include shipbuilders, retailers, sport and commercial fishermen, aerospace and airport industries, the hospitality industry, manufacturers, automobile importers, marinas, yacht clubs and more, many with just one thing in common: The port is their landlord.

The port district was formed in 1962 and charged by the city to promote fisheries, navigation, recreation and commerce on the tidelands. It has three revenue operations: the airport, maritime activities and real estate.

In its 1998-99 annual report, the port shows it generated $166.8 million in revenue in fiscal 1998, spending $152.2 million and ending with a $14.6 million profit. The airport earned about $100 million in revenue for the port in FY 98-99, but by law airport monies must remain within the airport and cannot be used for capital improvements anywhere else in the port's jurisdiction. Airport operations on the tidelands directly employ about 5,000 people and contribute more than $3.54 billion in business sales to the San Diego region, says the SourcePoint study.

The largest percentage of the nearly $55 million the port earned in real estate revenue last year came from tenant rents. It is the real estate branch that funds most of the port's capital improvement programs in the tidelands, which is why the SDPTA takes such an active role in monitoring the port's expenditures of that money. (The issue of the port's current governance will change if Senate Bill 329 passes in the state legislature and the resultant agency — the Regional Infrastructure and Transportation Agency — is created. See sidebar page 55.)

Altogether, real estate business operations directly and indirectly employed 18,630 people in the port's travel and commercial sector, states its 98-99 annual report. This sector includes the convention center, hotels, restaurants, retail outlets, marinas, sport fishing and several other categories. Historically, the port capital improvement projects funded largely by real estate earnings have had a profound impact on the economic revitalization of San Diego.

"Early tidelands projects like the convention center and Seaport Village have been an economic engine for the San Diego region and are responsible for the Gaslamp Quarter and Downtown redevelopment, says Peter Litrenta, senior vice president of Manchester Resorts and former executive director of the SDPTA.

Seaport Village, completed in 1980, was a pioneer in attracting people to the waterfront. The 11-acre shopping center was designed to recreate the feel of a 19th century port town. It has 75 tenants and is the largest group of specialty retail businesses on the tidelands. Expansion plans for an additional 180,000 square feet of retail, restaurants and entertainment venues have been on the drawing board for nearly a decade, but financing problems continue to hamper the development.

"We still intend to go forward with the Seaport Village expansion and are in negotiations with those who can make it happen," says Anne Taubman, president of Seaport Village.

The Ferry Landing in Coronado is the second largest tidelands retail center. It has about 25 stores and employs about 422 people.

The San Diego Convention Center, a key port development, first opened in 1989. The port paid $160 million cash to build the 760,000-square-foot meeting hall and then leased it to the city of San Diego for $1 a year for 99 years. As a major visitor attraction, the convention center hosted 39 conventions and trade shows in its last complete fiscal year. Doing so involved attracting 330,300 out-of-town delegates and contributing $247.9 million to the local economy.

Completion of the $216 million convention center expansion, followed by the building of two nearby hotels — the bayfront Hyatt Regency's 750-room second tower and a 1,200-room hotel at the former Campbell Shipyard site — are the port's top priorities, says Paul Speer, chairman of the San Diego Port Commission. The expansion is scheduled to be completed in September 2001.

"We need to move the hotel expansions forward as quickly as possible," says Speer. "They are key elements to the convention center expansion, the new ballpark and the whole area. We hope we can come to an agreement with the developer."

Paul Speer says harbor-front hotel expansions are key to all Downtown improvement. (photo/lambertphoto)

Both hotels are slated to be built by Manchester Resorts, which developed the existing Hyatt and Marriott next to the convention center. Although the Hyatt tower expansion had an official groundbreaking ceremony in March, financing difficulties continue to delay the project. The port and Manchester representatives remain in negotiations as of press time.

Manchester's Litrenta knows how important the hotel projects are to the tidelands and says he's hopeful the financing will be worked out soon. "These two hotels will be a great contribution to help keep San Diego tourism dollars flowing," Litrenta says.

Another important revenue sector for the port is its industry and trade sector. It consists of more than 150 private firms on the tidelands engaged in manufacturing, maritime commerce, commercial fishing, wholesale trade, transportation, business services and other industrial activities.

The SourcePoint study reveals these firms employ nearly 12,190 people. Since the General Dynamics Convair plant closed in the early 1990s, with the attendant loss of 5,000 jobs, the port's largest employer in this sector is National steel & Shipbuilding Co., with 2,946 workers. In a twist of fate, NASSCO was bought by General Dynamics in late 1998 and turned into a subsidiary, making GD again the tideland's largest employer. Other large tidelands companies in this category include Solar Turbines Inc., Southwest Marine, Teledyne Industries, BFGoodrich Aerospace Aerostructures Group (formerly Rohr Inc.), Continental Maritime of San Diego and Kelco Biopolymers.

In the past, the port's maritime operations had to be subsidized by real estate revenue. But, says Commissioner Speer, that may be changing as maritime revenue rose in 1998-99 to a record-breaking, self-supporting $11.2 million, a 26 percent increase over the previous year. And the port plans to continue expanding its maritime sector.

Notable increases in the port's commodity imports included cement, newsprint, Australian citrus and Chilean avocados and steel. Soda ash and sodium sulfate are the largest import, with 587,939 tons coming in last year.

Vehicles imported by Pasha Services at the National City Marine Terminal increased 38 percent in FY 98-99. Pasha recently signed a three-year agreement with the port to import about 75,000 Volkswagens to National City, making San Diego the primary point of entry for VWs on the West Coast. The port also is looking for more container space for companies like Dole at the Tenth Avenue Marine Terminal.

San Diego’s cruise ship industry also is slowly growing. The port's annual report says that ship calls to the port were up 21 percent in FY 98-99. Approximately 11,921 passengers came to San Diego by boat and contributed some $7 million to the region's economy.

In 1992, the port's board adopted a five-year capital improvement program that encompassed 87 projects totaling $242 million. Since that time, the port has made several significant expenditures in various tidelands areas. These include:

• Since 1996, Imperial Beach has received $604,880 from the port for a number of public art projects. The port also allocated more than $12 million for improvements to public lands on the waterfront to enhance tourism and commerce, including improvements to the pier and expansion of Dunes Park.
• In 1998, the port funded acquisition of 1,300 acres of property from the Western Salt Co. in Chula Vista on behalf of the state and leased it to the U.S. Fish and Wildlife Service for a bay wildlife refuge and nature center.
• In 1999, the port purchased the San Diego Gas & Electric Power Plant in Chula Vista for $110 million, exchanged waterfront parcels of land with BFGoodrich and acquired some 83 additional acres. Plans are to remove the power plant, extend H Street for access to the waterfront from Interstate 5 and realign Marina Parkway to allow for major commercial (possibly a major theme park) and other developments on about 176 acres.

"We have created some very good development opportunities on the waterfront in Chula Vista," says David Malcolm, the port commissioner who represents the South Bay's largest city. "In the next 10 years, we will see many positive changes along the South Bay waterfront."

The next capital improvement project likely to take place on the tidelands revolves around the port's North Embarcadero Alliance Visionary Plan, a collaboration among the port, the city of San Diego, county government, the Navy and the Centre City Development Corp.

The North Embarcadero Plan encompasses a broad range of public and private projects from Seaport Village to Lindbergh Field designed to draw more people — locals and visitors alike — to the waterfront. It includes landscaping, a long pedestrian esplanade, improvements to the cruise ship terminal, office projects, improvements to the Broadway Landing, Grape Street and Maritime Museum piers, a 600-room hotel on the now-empty Lane Field site, a parking structure, better view and traffic corridors and a floating museum on a retired aircraft carrier, the Midway. The Environmental Impact Review is being finalized now, and the Coastal Commission is expected to vote on the plan this month.

Within this plan, the status of the Midway Museum has drawn the most fire. Environmentalists want the project blocked, saying too much bird habitat would be displaced by the floating museum, which would be berthed near Navy Pier. Mitigation sites for the museum are being finalized. The port may remove the Midway from the overall plan if this issue is not resolved soon.

Also on the port's horizon is the Harbor Island Master Plan, which proposes to revitalize and develop several empty properties in this area. Port staff is drafting alternative development concepts, doing additional feasibility studies and hosting public workshops on this project. A lack of financing killed plans last year for a port-approved hotel on Harbor Island.

Another controversy involving the port and many of its tenants is one of an almost philosophical nature: How much of the former mud flats should be turned over to the booming tourism industry and how much should remain for more traditional waterfront businesses like boatyards? Nowhere is this discussion more heated than in Shelter Island, where the port is working on a new master plan.

The new plan involves the realignment of open space, an increase and redistribution of parking spaces, a hotel, a vacated portion of the North Harbor Drive right-of-way improved with parking, walkways, landscape improvements and view corridors to the water, connections to the upland community and a compromised Kettenburg Boatyard layout. The plan was approved in concept in 1998, but is being refined with continuing input from residents and port tenants.

One of the main points of contention came about in March, when the port went against an earlier $50,000 consultant's study and voted to sharply reduce the size of the Kettenburg Marine boat repair yard from about 100,000 square feet to about 45,000 square feet. It sided with some Point Loma residents who want better bay views, room for a public plaza and one or more restaurants on the boatyard site.

Kettenburg, operated by Shelter Island's Driscoll Boat Works, has been on the site since the early 1920s. It provides equipment that few other boat- yards offer. In addition to a full-service repair yard, it also has areas where boaters can have their vessels hauled from the water to do their own repairs.

This latter service would disappear if the port reduces the size of Kettenburg.

"If the current plan goes forward, services that Kettenburg has provided for 80 years will disappear, including all the do-it-yourself work," says Tom Driscoll, whose family-owned company operates Kettenburg and several other boating-related operations on San Diego and Mission bays. "But it isn’t a done deal yet. We’re still negotiating with the port for a compromise that will work for everyone."

As San Diego boatyards shrink and disappear, a study by M.J. Barney Associates says local boatyards are already at or near capacity. And, spurred by the booming economy and elimination of luxury tax on the sale of yachts, there is a projected growth in the demand for boat repairs. The problem here boils down to money, says Driscoll.

"The port is under a lot of pressure to develop their capital improvement programs," says Driscoll, a member of the port tenants association. "There is a huge demand for money for projects like the convention center and the North Embarcadero plan. That money comes from tenants, and operations like ours don’t generate as much money as hotels and restaurants."

The San Diego Sportfishing Council is supportive of keeping Kettenburg functioning, and Catherine Miller, spokesperson for the council, shares many of the worries about the future of the port as a working waterfront.

"As the port moves forward with its plans, it needs to maintain existing businesses on the waterfront," Miller says.

Miller's grandfather founded H&M Landing in 1935. And though the sport fishing industry is having a banner year with record numbers of fish being caught on both long and short trips, the North Embarcadero plan could affect the sport fishing industry by impacting parking, which is crucial to the industry, Miller says. Part of the plan calls for building a new hotel or expanding existing hotels on Westy's lumber yard site on North Harbor Drive. The site is now a 185-space parking lot primarily used by fishermen and boaters.

"If we lose parking, we lose boats," Miller says.

Cloward expects that the port's expansion projects will be slow and incremental. He and others like Driscoll and Miller advocate that future development should be a livable blend between tourism and working waterfront, and say the two are compatible.

"I hope the port wakes up one day and realizes there are enough hotels on the waterfront and that visitors actually like to watch people working on boats," Cloward says. "Many of the port businesses have to be on the water. Hotels and restaurants don’t have to be located on the water in order to function. But you can’t put a marina in Julian."