Tourism: Concession Conceived and Built
It’s now a successful tourism hub of 16 shops, five restaurants and several annual events, but Old Town’s Bazaar del Mundo complex was very different when businesswoman Diane Powers first asked for the site’s concessions contract in 1971.
The weed-strewn, dilapidated property only had a boarded-up motel, and Powers was the sole bidder, she said.
It gave her a lot of clout with which to negotiate. Powers forged a 10-year deal for the Old Town site that was renewed for another 10 years. Through a series of business deals, adding properties and other ventures in the area, she negotiated two additional five-year extensions, she said.
However, the last of those extensions runs out in June of 2001, and the state’s Parks and Recreation Department plans to open Bazaar del Mundo’s concessions contract up for bid this summer, said Dianna Martinez, a concessions specialist with the San Diego Coast District, the state agency that oversees the park.
“We’re in transition as a park right now,” Martinez said of Old Town. “What you see is a lot of old leases where we were so desperate that we just kind of let anything go. And what you’re going to see is where we’re headed.”
Although she was well aware her lease was ending next June, Powers had hoped to renegotiate an extended agreement directly with the state, she said.
“I’ve been talking to the state about this,” Powers said. “I understand this is what their intentions are, so I will have to be one of the bidders on the proposal.”
Because the Bazaar del Mundo contract hasn’t been renegotiated for more than 20 years, the law requires it must go through the public bids process, Martinez said.
Bazaar del Mundo’s prospects have brightened since the early 1970s. It had sales of $24 million last year, which is the highest in the state park’s system, Powers said. Old Town has more than 7 million visitors each year, reports say.
Powers’ rent payment is currently 7.5 percent of Bazaar del Mundo’s sales, Martinez said.
According to Powers, she paid about $1.7 million last year.
The rent percentage started at 3 percent in 1971, with the understanding that Powers would invest heavily in the development of the complex. Powers claims she has invested millions.
Since then, the rent percentage has grown to 6 percent, then 7 percent, then 7.3 percent for 1996.
Now, bidders will be asked for a rent percentage of between 3 percent and 7.5 percent, Martinez said.
Similar to the deal Powers had at first, bidders will be expected to make a $2 million to $7 million investment in the property, and the contract’s rent percentage would be calculated accordingly, Martinez said.
The money would go toward both capital improvements and fulfilling long-held plans of restoring the complex’s buildings to 1800s architecture, Martinez said.
Open To State Requests
For her bid, Powers said she’ll look into the maintenance and facelift requests the state is seeking.
“I really have to see what they have in mind, because I know there will be some capital investment involved in it, and I’ve got to see where their priorities are,” she said.
“If the requirements are financially feasible and make good business sense, I’ll certainly try to fulfill them.”
The San Diego Coast District has commissioned a feasibility study about splitting the concessions contract into as many as five parts, Martinez said.
According to Martinez, the proposal packet should be available by this summer. She expects the bids will be due by January 2001, and the new concessions deal should be complete by that summer. There is room in the timeline for possible legal appeals, she said.
The plans, in the preliminary stages, must be approved by Gov. Gray Davis and the state Legislature as part of the state’s fiscal budget for 2001, Martinez said.
“It isn’t final, so there may be a couple of hearings on the budget packet that we submitted,” she said.
Although current contracts tend to be for 10 years, the capital improvement plans prompted the San Diego Coast District to ask special permission for a 20-year contract.
Martinez said they may not use it, but wanted to have the option. It would balance how much applicants want to invest in the property with how long it would take to make a profit.
If an applicant has a plan to invest $7.5 million, for instance, then a 20-year contract option would be exercised, she said. If the best applicant plans to invest $2 million, though, the contract length would likely stay 10 years.
The expense to restore the buildings would affect the rent a concessions operator would pay directly to the state, Martinez said.
“We’d like some money to come back to the park,” she said. “Right now, Diane Powers’ rent goes into the general state fund and supports all state parks.”
The bidding process is changing, she said.
“It’s a little bit new, because we’re getting more interest,” Martinez said. “With more people interested, we’re getting a little more liberal like that. Before, we’d put something out to bid and no one would bid on it. We were desperate. We’re not desperate any more.”
