This note is regarding the memoranda of March 17 and May 19, 1999, from
Larry Williams of Williams Kuebelbeck & Associates, concerning increased
marina revenue resulting from the rebuilding and reconfiguration of docks
A through E.
I agree with the essential conclusion of the memos, but there are several
technical points and several elements of "social engineering" that I
believe have been neglected by Williams Kuebelbeck.
These are details, but details that could prove disastrous when it comes
time to generate consensus among the marina community for proceeding with
the project. Let's see if we can get them ironed out now.
The berth rate comparison table:
Berth rates shown for Berkeley and other municipal marinas need to be
increased to reflect possessory interest tax, which is not paid by
berthers at private marinas. This is on the order of $0.15 per foot per
Marketability of the Berkeley Marina is very poor for boats that draw more
than 7 feet, and the situation is likely to become worse in the future.
This will remain the case even after marina dredging, due to the extensive
shoal areas outside the harbor extending well beyond the limits of any
practical dredging project. This does not affect powerboats, but the
Berkeley Marina environment is far more desirable for sailboats and these
will continue to be the core market segment.
If the average size of a berth in the rebuilt docks is 41 feet, and the
market value of a 41 foot berth is $6.00/ft, that does not mean that this
is the average market value of all the berths. It only applies to that
size. Larger berths might be worth more, smaller berths are certainly
worth less on the current market. The revenue depends on the size
distribution and the pricing structure, and I don't think we can assume a
linear relationship between berth size and price.
Berths take up area, not length, and the marina area is fixed. This means
that more linear feet of small berths than large berths can be built in an
existing marina. There are also fixed costs associated with each berth,
which argues in favor of fewer berths of large size. But the net result of
these two effects has not been analyzed rigorously - at lest not in any
information made available to the Marina Plan Subcommittee at this time.
SOCIAL ENGINEERING ISSUES
Who does the marina serve? The Berkeley Marina has other goals and
objectives in addition to generating revenue. If part of the marina is
re-designed to accommodate predominantly larger and more expensive boats,
there will necessarily be a shift in the demographics of the owners.
Specifically, the average income of the average boat owner will become
The cost of acquiring and maintaining a boat is a very strong function of
its size. My data indicates that it varies by the length to at least the
3.5 power. That is, if you double the size, the costs all go up by a
factor of at least eleven. One way to explain this is that boats are
essentially sold by the pound. That would lead to an exponent of 3.0,
assuming geometric similitude (a valid assumption for boats of similar
type). However, a pound of big boat tends to cost more than a pound of
small boat, for reasons that need not be explained here. So the exponent
is greater than three. Other surveys of the used boat market have found
the price/size exponent to be closer to 3.7.
Maintenance costs generally follow a fixed percentage of new replacement
value, so they vary by about the same exponent.
Some examples: A typical 22 ft sailboat might be worth about $4,000. A 44
ft. sailboat of similar type, age, and condition might be worth about
$45,000. A 66 ft boat might cost $187,000. (These numbers probably seem
high for the 22 ft boat and low for the larger boats, because the exponent
of 3.5 is conservative - it's really a little higher, for most types of
boats and through most of the size range we're concerned with.)
The result of this is that at $5.00 per foot, the 22 ft boat pays fully
one-third of its value in berth fees every year. But the 44 ft boat pays
six per cent of its value every year. The 66 ft boat pays only two per
cent of its value every year.
Which group of boat owners is more likely to make a location decision
based on price? The small boat owners, of course. For them it's a big part
of the cost of owning the boat. For the big boat owner, it's lost in the
noise, and the decision to berth in Berkeley or elsewhere is driven
entirely by other factors.
From the point of view of marina planners, this means that the market will
support a highly progressive rate structure. Bigger boats will pay much
higher rates, but it will be difficult to attract new berthers to the
smaller berths if the rates are significantly increased.
This suggests that the dock reconfiguration should emphasize the bigger
berths, as recommended by Larry Williams. But this also implies a dramatic
shift in the average value of the boats in these berths, and a
corresponding shift in the demographics of the average berther. Increasing
average berth size on docks A-E from the current 28.9 feet to the proposed
41 feet will mean that the value of the average size boat increases by a
factor of about 3.4. If we assume that berthers spend a constant
percentage of their income on their boats regardless of income (probably
not an entirely valid assumption, but you get the idea) then we're
shifting our average berther's income up by a factor of 3.4.
The marina currently contains a lot of small and "low value" boats owned
by grad students, recent graduates, and local non-professionals. Do we
want people in these demographic categories to continue to be able to buy
a small boat and berth it here in Berkeley?
If demographic diversity is of any importance, if serving Berkeley
residents is of any importance, then it's essential to include an ample
supply of smaller berths in the rebuild plan.
This is not the same as catering to boats that are of low value due to
poor condition and neglect, as is the case with some larger boats that are
little more than derelicts. Because both the value and the normal
operating costs of a boat are such a strong function of size, it's
reasonable to conclude that any owner who claims inability to maintain
their boat in reasonable operating condition due to economic constraints
has a boat that is too big. I don't think we mind seeing the non-operable
larger boats forced out due to higher rates. But we do mind seeing
well-maintained small boats being forced out - or not able to afford
access in the first place - because there are no berths available in that
size range at a reasonable price.
Also note that this is not an argument for maintaining 20 ft. berths.
Vacancy statistics seem to show that demand for this size is declining.
But it is an argument for building new small berths in the lowest size
categories for which demand is still strong.
The revenue calculations by Willimas-Kuebelbeck assume that the marina
will introduce a two-tiered rate structure, charging more for the new
berths on docks A-E than for existing berths of similar or perhaps greater
desirability. But the existing berths on the south side of the marina will
continue to have better access to the yacht club, the best restaurant, and
the Cal Sailing Club's crew pool. It's hard to imagine proximity to Chavez
Park on the north side being seen as a desirable feature - in fact it
might be a significant negative factor, from the point of view of the
owner of a large yacht. Consider parking loads during peak summer weekends
as the popularity of the park increases, especially during events like the
annual kite festival.
A two-tiered rate structure will not be transparent to the berthers. It's
hard to see how it can be justified to the Berther's Association, and
their activism is often motivated by a strong sense of fairness. Berthers
on the new docks will all want to be on the waiting list for more
economical berths on the other docks, reducing availability of those docks
to new berthers and increasing administrative workload.
The plan for rebuilding and reconfiguring docks A through E, and the
associated economic analysis, should be modified as follows:
1) Show your work.
We don't have a clear comparison of the various berth size options in
terms of berths per square foot of marina. That is, if the berths are
re-built at a smaller average size but using the same density guidelines
and water use area as proposed, how many more linear feet could be
accommodated? Several variables (water use area, average berth size, and a
rate differential with respect to the remainder of the marina) are being
changed simultaneously in the economic analysis. We need to see the effect
of each one individually in order to decide which ones we want to adopt.
Also, we don't see the estimates of fixed overhead cost per berth, or the
effect of berth size on parking load. (Note that boats carry crew or
guests roughly in proportion to the square of their size, especially for
short-duration trips on summer weekends when parking is most likely to be
Perhaps your experience with marina design is such that you can
confidently internalize some of these factors, rather than perform a
rigorous analysis, and still produce a reliable result. However, this
needs to be stated if this is the case. Subjective evaluation is usually
based on experience, but some of this basis might not be transferable from
previous marina projects to Berkeley.
2) Propose a consistent rate structure.
My opinion is that the two-tiered rate structure simply will not fly. But
I also agree that there is considerable room to generate more revenue, not
just from new berths but from the entire marina, given a realistic and
progressive rate structure and some improvement in basic amenities. Please
see the proposal on my web page at www.well.com/user/pk/watefront for more
details about rate structure.
The recommendations and economic analysis should reflect a new but
consistent rate structure for the entire marina.
Thank you for your attention to these comments