Kentucky/Tennessee Marinas Look to WRDA to Resolve Government Lease Issues

Editor’s note: Marina operators interviewed for this article did not want to be identified, given the fact that the U.S. Army Corps of Engineers regulates their businesses, and the marina operators expressed fear of the possibility of retribution in the form of delaying or denying proposed projects; increased arbitrary administrative fees; and/or increased biases against marina industry issues. Marina Dock Age also made requests to members of the Corps Nashville District to talk about these issues, and no one responded to requests for comment.

As Congress prepares for the next Water Resource Development Act (WRDA), marinas in Tennessee and Kentucky are voicing their concerns about lease agreements with the U.S. Army Corps of Engineers, who oversees all marina concessionaire properties within the Cumberland River Basin. Congress reauthorizes WRDA every two years; it is the main mechanism for funding and direction of the Corps missions and the activities that support them.

The Kentucky/Tennessee Marina Association (KMA/TMA) has long been focused on the relationship between the Corps of Engineers and its marina concessionaires. Last fall, it was a big topic of discussion at the annual association conference, said Michele Edwards, association executive director.

Despite marina operator’s reluctance to be openly critical of their regulator, the Corps, they are eager to discuss their experiences within their marina association and with their federal representatives in Washington.
In 2018, the marina association hired Jeff Speaks, a lobbyist with JBS Communications, to represent its marinas on issues they were having with the Corps.

“It’s in the government’s best interest to have a much better relationship with marinas than they do right now,” Speaks said. To assist the lobbying efforts, the marina association is asking its members to write to their representatives in Congress.

“For any association working together on anything, their direct communication with their members of Congress is crucial,” Speaks said. “It’s important for members to hear from these marinas individually to tell their stories.”

KMA/TMA’s main complaint: their relationship with the Corps of Engineers, which affects many aspects of their businesses. “If you’re not having a good relationship with the Corps, WRDA is the remedy,” Speaks said. Through his work with KMA/TMA, they have tried to talk with the Nashville District about its policies and actions and how marinas feel they can best help the Corps meet its objectives, but the Corps has not responded to their efforts.

“The relationship between the regulated and the regulator is very important,” Speaks said. “The Corps doesn’t view it as important. The Corps Nashville Real Estate Chief has informed marinas on multiple occasions that many of KMA/TMA’s issues are out of their hands and the only way to make changes is through their elected officials.”

Since local businesses are unable to communicate locally with the Corps about their issues, KMA/TMA is going to Congress instead to discuss the structure of operating leases on Corps-owned land.

Lease Terms
The main issue facing marinas’ ability to make long-term investments on Corps property is the need for longer lease agreements. Speaks said the length of leases varies from district to district, but in general, districts will not issue leases longer than 25 years and in some cases, only 10- to 15-year leases. The inconsistency from district to district creates disadvantages from one facility to another. Ultimately, the short lease terms prevent concessionaires from securing the financing, or re-financing, needed to expand facilities or make improvements.

“The Corps doesn’t see recreation from the eyes of the marina industry and what we’re going through,” one marina owner said anonymously. “It’s a very large bureaucratic agency that has multiple missions and no expertise from the marina standpoint.”

The Corps’ Civil Works program does, in fact, have many missions, including flood control, commercial navigation, aquatic ecosystem restoration – and recreation. Many marinas feel like the Corps does not think its recreation mission is as vital as the other missions. In the Corps’ defense, it has also been faced with extremely tight budgets and never-ending short falls. However, from the marina operator’s perspective, the Corps depends on marinas to financially support its recreation mission.

“Private investment is the only real way the Corps can fulfill its recreation mission because Congress has not given them the funding to build marina infrastructure,” said another marina owner.

In 2016, the Corps published statistics on its recreational value to the nation. For the Corps’ Nashville District, the report said its facilities support 17,576 marina slips, helping to support 21,575,327 visitors to the district, including 5,887,691 boating trips. This recreation generates $705,381,590 in visitor spending within 30 miles of Corps lakes; $416,182,227 in sales within 30 miles of Corps lakes. In total, visitor trip spending supported 8,418 jobs and $263,047,724 in labor income.

Some of those working hard to operate Corps-leased facilities feel like the Corps relies heavily on those visitor numbers to show Congress that the Corps is doing its job on recreation. “But it’s the lease holders that are fulfilling the Corps’ congressionally mandated mission to provide recreation on government waterways. The lease agreement and the relationship has many flaws,” according to an owner of multiple marinas on Corps lands.

One marina operator recognizes, in part, where “we went to sleep as an industry,” with regard to Corps lease agreements. A few decades ago, marinas operated on Corps leases that provided incentives – the more investment made, the more deductions it received off the amount of rent paid to the federal government. Then, the Corps came out with a new lease agreement structure about 20 years ago. Some marina owners even advocated for the new lease agreements.

“They had a problem filling out the report on how to pay rent,” the marina owner said. “You did need an accountant to do it. It wasn’t hard, but it took some time.” Leases went from a complicated formula that incentivized marina development to a simplified flat fee rate, from 2.1 to 4.5 percent, depending on overall revenue. The more facilities make, the more they pay in rent. There is no longer any incentive to re-invest in the marinas – no deductions on rental fees.

Revenues and Fees
Marinas on Corps-managed properties have further trouble providing the necessary amenities to customers, like restaurant and fuel service, because low margins on these profit centers make it difficult to meet rental payments across the board, and in some cases, can be a disincentive to providing those services. KMA/TMA has requested for years that restaurant and fuel revenues be calculated separately from rental payments at a one percent rate. The Corps rental fee, up to 4.5 percent of a marina’s gross, is a primary reason for higher fuel and food prices at marinas, according to the association.

“Part of the whole problem is this is a government agency; they don’t look at things like a business,” Speaks said.

The other issue with marina lease agreements that the association is advocating against are administrative fees that started popping up a few years ago and specifically, the lack of guidance or accounting on such fees.
“First of all, the Corps initiated a fee with no due process. They did not do any public notice,” Speaks said.

Concessionaires already pay rent to the government, up to 4.5 percent, which, he said, should cover administrating the marina leases. As example, if a marina wants to put up some new security light poles, it must get approval from the Corps, per lease agreements. In response, the Corps will agree to send approval letters for the request, after it receives a $500 administrative fee.

“And it’s not a policy that’s the same Corps-wide in how it’s administered,” Speaks said. “It’s different district by district.” Often times, operators cannot obtain invoices for the fees, even when requested, and Speaks said, sometimes the requests come by email. “That’s not proper government accounting, and not professional,” he said.

Transactions like that or approvals for on-site changes used to be managed by the Corps’ local resource manager, who operates each individual reservoir. That individual no longer has authority to approve anything, Speaks said, and now most transactions must run through the district real estate office.

According to Speaks, the current Chief of Nashville’s Real Estate Division pulled all authority into Nashville, so the local lake managers and area managers out in the field have no authority to make any decisions on marina leased properties. This process takes much longer, and the marinas report having no personal relationships with local Corps managers. “We don’t know what the lake managers and area managers are responsible for anymore as we never see them and their authority has been taken away by the Nashville Real Estate Office, apparently so that office can access more administrative fees,” said one marina owner.

Members of KMA/TMA see it as a money grab from an agency that’s underfunded, and as concessionaires, they are required to get approvals for just about anything – from adding slips to chopping down a dead tree on the property. KMA/TMA Executive Director Edwards said that the previous Commander of the Nashville District, Colonel Stephen Murphy, informed marina owners at a spring workshop in Nashville that he would work on moving more control and decisions back out to the local managers, but marinas have reported to the association that has not happened.

Progress
KMA/TMA, working with Speaks, has its sights set on influencing Congress to make changes in WRDA that would help remedy these issues. It has already made some progress on this issue at Capitol Hill. The fiscal year 2020 House Energy and Water Appropriations Committee Report, which accompanied the appropriations bill, includes some language related to revenues and administrative fees, in the committee report.

“Improving public access to and usage of Corps facilities and the continued enhancement of those facilities are significant policy objectives,” the report said. “The committee has heard concerns that current Corps policy and actions related to the fees placed on gross revenue have discouraged the enhancement of facilities and amenities at certain properties. The committee directs the comptroller general to complete a study on how to enhance recreational opportunities and property enhancements, including a review of the impact of gross revenue fees.”

Regarding “unpredictable administrative fees,” the report also directed the Corps to brief the House committee on the current Corps policy on administrative fees, including statutory authorization, policy guidance documents and a description of when and how much variation is allowed for various activities and across district offices.

“We got language into the Energy Bill, so Congress is recognizing us,” Speaks said. “From our perspective, this helps lay the groundwork to address these two issues, along with the issue regarding lease terms, in the upcoming WRDA.”

In late 2019, KMA/TMA sent letters to the leaders of the House Committee on Transportation and Infrastructure (T&I) and the Senate Environment and Public Works (EPW) Committee in support of addressing these issues in WRDA. To stay on track with its two-year schedule, Congress must pass a WRDA bill in 2020.

“The goal for KMA/TMA is to achieve more favorable lease and rent terms so its members can re-invest/improve their marina facilities; inform Congress of the important role marinas play in helping the Corps fulfill its recreation mission; and improve the marina/Corps relationship.”