CCLME.ORG - HNC Article 5 (commencing with HNC 76) Ch. 2 Div. 1
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HNC Sec 76-77.1 Recreational Marinas (DEPARTMENT OF BOATING AND WATERWAYS)

SECTION 76-77.1

76. It is the intent of the Legislature that Harbors and Watercraft
Revolving Fund moneys be used to implement the intent of Section
71.5 by providing loans directly to private recreational marina
owners for the development, expansion, and improvement of boating
facilities. It is the further intent of the Legislature that
borrowers receiving loans not charge unreasonably high boat berthing
fees at their harbor facilities, but that those borrowers be entitled
to charge rates that provide for servicing of borrowed indebtedness
obtained to develop those facilities, provide for other expenses
incurred in operating the facilities, establish reasonable reserves
for repairs, maintenance, and replacement of those facilities, and
provide a reasonable return on the borrower's invested capital.

76.1. "Private marina owner" means a profit-oriented business
enterprise which owns and operates, or intends to develop and
operate, a small boat recreational facility providing boat berthing
on a wet or dry storage basis and other improvements commonly found
in a facility of that type on privately or publicly owned waters
within this state.

76.2. "Recreational marina" means a marina owned by a private
marina owner which is used by the public primarily for recreational

76.3. (a) The department may make loans to private marina owners
for construction costs, not including planning, design, and other
similar expenses, to develop a recreational marina. Loan funds from
the department may be utilized for berthing facilities, dredging,
parking, public access facilities, restrooms, vessel pumpout
facilities, oil recycling facilities, utilities, landscaping,
receptacles for the purpose of separating, reusing, or recycling all
solid waste materials, and other incidental boating-related
(b) No loan made by the department to a private marina owner shall
exceed 75 percent of the funds annually budgeted for purposes of
this article.
(c) The department shall not make a loan to a recreational marina
that restricts access or bars the public other than what is
consistent with general commercial business practices.
(d) Any private marina owner who purchases facilities previously
developed with a department loan is eligible to apply for a new
construction loan from the department.
(e) (1) The department may also make a loan to a recreational
marina for the purpose of refinancing an existing loan, subject to
the following conditions:
(A) Not more than 70 percent of the proceeds from the loan shall
be used to refinance an existing loan.
(B) Not less than 30 percent of the loan proceeds shall be used
for construction activity authorized under this section.
(C) The loan applicant shall provide documentation to the
department proving to the satisfaction of the department that the
existing loan prohibits the addition of a loan in second position.
(D) The loan applicant shall meet all other requirements under law
for loan qualification, and any other applicable term or condition
of law.
(2) This subdivision does not prohibit a person from applying for
a loan under subdivision (a).

76.4. (a) An application for a loan under Section 76.3 shall be
filed with the department and shall:
(1) Include a feasibility study containing sufficient information
and detail to demonstrate that the project is engineeringly and
financially feasible.
(2) Be processed with due diligence, giving consideration to the
needs of the borrower and the interest of the public in preserving
the integrity of the Harbors and Watercraft Revolving Fund.
(3) Include evidence of compliance with the California
Environmental Quality Act (Division 13 (commencing with Section
21000) of the Public Resources Code).
(4) Include all costs incurred by the applicant in processing and
obtaining loan proceeds.
(b) The costs of brokerage fees, planning studies, and all other
costs for the preparation of the loan application shall be borne by
the applicant.

76.5. In processing applications under this article, the department
shall give priority to applications from private marina owners who
have not received previous loans from the department. If the
department finds a proposed loan project is feasible, the loan
request shall be submitted to the commission for its advice and

76.6. Loans made under this article shall include, but are not
limited to, the following terms and conditions:
(a) The annual rate of interest charged by the department shall be
a rate equal to 1 percent per annum plus the prevailing rate of
interest existing in the marketplace for lending institutions' most
creditworthy borrowers. For purposes of this article, the prevailing
rate of interest existing in the marketplace for lending
institutions' most creditworthy borrowers means the prime or base
rate of interest.
(b) The department shall require collateral in the amount of 110
percent of the loan.
(c) The repayment period of a loan shall not exceed 20 years, or
be longer than the length of the borrower's leasehold estate,
including renewal options, if the loan is based upon a leasehold
estate of the borrower.
(d) All loans shall amortize the principal over the term of the
loan. However, a loan shall become due and payable in full if the
borrower sells or otherwise transfers the recreational marina
developed with departmental funds, unless the transfer is, by reason
of the death of the borrower, to the borrower's heirs, or the
transfer is to another business entity controlled by the borrower in
a transaction that does not result in a material change in control or
ownership of the recreational marina.
(e) The department's loans shall not be subordinated to any future
loans obtained by a private marina owner, except in those cases
involving loans acquired for refinancing previous senior loans.

76.7. (a) All loans made by the department to private marina owners
shall be funded from the Harbors and Watercraft Revolving Fund.
(b) All loans, including those loans previously made under Section
35300 of the Financial Code, shall be repaid by private marina
owners to the Harbors and Watercraft Revolving Fund.
(c) Private marina owners receiving loans made by the department
shall not charge unreasonably high boat berthing fees.
(d) The department shall monitor the berthing fees of the private
marina owners receiving department loans to ensure that these rates
are reasonable and not exorbitant.

76.8. The department shall adopt regulations to implement or make
this article more specific, including standards for the approval of
loans, which shall include, but not be limited to, definitions of
collateral, standards for the payment of loans, weighing and ranking
criteria to qualify and prioritize the loans, and the form of
documents to be used to evidence loans. The purpose of the
regulations shall be to ensure that loans made under this article
conform with customary commercial practices. No loans shall be made
pursuant to this article from funds appropriated in the Budget Act of
1999 until the loan approval standards have been approved by the
Department of Finance. Any subsequent changes to the loan approval
standards shall also be approved by the Department of Finance.

77. (a) The department, subject to the approval of the Director of
Finance, may borrow funds from the Harbors and Watercraft Revolving
Fund when a borrower has defaulted from any financial obligation and
funds are required to protect the security interest of the department
with respect to any loan made under Section 76.3.
(b) The funds borrowed under this section shall be repaid within
three years from the date of the approval of the Director of Finance.
The repayment shall include the principal amount of the loan, plus
interest equal to the rate of earnings of money deposited in the
Surplus Money Investment Fund at the time the loan is approved by the
Director of Finance.
(c) A maximum of ten million dollars ($10,000,000) per year may be
used for purposes of this section.
(d) The borrowed funds may be used to do any of the following:
(1) Pay any administrative and legal expenses incurred in
connection with those defaults.
(2) Acquire through negotiated purchase or bid at auction any
property which serves as collateral for those defaulted loans.
(3) Pay any costs of operating and maintaining a recreational
marina acquired as a result of a failed loan, until the marina is

77.1. The department, upon whatever terms and conditions it deems
proper, may sell or otherwise dispose of property serving as
collateral for a defaulted loan made under Section 76.3 or may
operate, contract to operate, or let property involved in the
default. All proceeds from any action of the department pursuant to
this section shall be deposited in the Harbors and Watercraft
Revolving Fund and credited towards the repayment of the defaulted