VENICE RIPPED OFF FOR OVER A MILLION
By Patrick McCartney -  Research by Venice Town Council:
(This article was written circa mid-1980s when Venice actually had a Town Council ! – what is a million dollars, then, worth now ?  Editor)

The oil site the City of Los Angeles leased out in 1964 (1965) on the public beach in Venice has been a sweet deal for the City.  Los Angeles has received millions of dollars in royalties and taxes from the site currently operated by Damson Oil.  But, after a brief flurry of improvements in Venice twenty years ago, the City has short-changed Venice residents repeatedly since.  Close to one million dollars intended for improvements in Venice have been diverted in the past, and another million dollars (and growing) is sitting in a special fund waiting to be spent, despite attempts by Parks and Recreation to use it. 
   
In fact, hardly any money from the Beach Improvement Capital Fund has been spent in Venice in over ten years, principally because,  as one City Hall insider told me,  "Pat Russell doesn't want to see the money go to anything but the Pavilion.  It's at a political standstill."  Al Carmichael of the City's Parks and Recreation Dept. told me that Russell is "holding out.  She would like to tear down the Pavilion and provide more parking."  While Pat Russell waits, Venice deteriorates.
   
Since the City sold an oil-and-gas-rights lease to Socony-Mobil for an initial bonus of $1.9 million that was on land owned by Los Angeles, the City bought the right to 16 and 2/3 percent royalties on every barrel of oil produced during the 35 years of the lease's life.  On top of that, the City obtained the rights to another eight percent of the money derived from sale of any gasoline distilled from the oil.  Of the City of Los Angeles' 14 leased oil sites, only Venice and Rancho Park are located on City property, entitling the City to an owner's share of the revenues.

To understand how favorable this is to the City, you have to know that, for the oil sites in the City not on property owned by Los Angeles, the City is only entitled to a per-barrel wellhead tax.  The Venice 16 and 2/3 percent oil royalty alone is worth ten thousand times more than that to the City.  Because the oil pools tapped by Mobil from the one-acre site were within the coastal zone,  the State Lands Commission restricted the use of the funds to coastal-related expenditures.  The Commission reserved the right to approve of any expenditure over $50,000.  When revenues from the Mobil lease were received by the City, they went into a special account, the Beach Improvement Capital Account.   Twenty years ago, in the days when Jack Kerouak was writing beat fiction in Venice and the beat café, the Gas House, was being leveled to bring Venice "up to code".   Mayor Sam Yorty took NONE of the City's responsibilities under the Tidelands Trust and restricted $1.65 million of the $1.9 million, Mobil bonus, to "development, maintenance and improvement of beaches".   Yorty wrote the Parks and Recreation Department that "the City has a policy of investing such revenues in the properties from which the oil was extracted."
   
That was good news for Venice, which in 1965 was in the trough of a long decline begun, not surprisingly, by the discovery of significant deposit of oil in the Venice-Marina area in 1929. Anyway, from the first $1.9 million, Venice Beach was allocated $893,000 with the remainder going to other Los Angeles City Beaches.  Before long, the first of many transfers of monies intended for Venice occurred, when $304,000 of the Venice allocation was subtracted and given instead to the construction of the Cabrillo Fishing Pier.   © Patrick McCartney
   
Oil Revenue Research on Venice Beach Oil Site Research by Arnold, Carol, Charles….etc. (Venice Town Council)
1911-1919:  Introduction to submerged and Tidelands. 
Los Angeles is trusted for about 40 square miles of these lands in Santa Monica and San Pedro.  Lands in Santa Monica are under Parks and Rec.  Whereas San Pedro lands are under control of three agencies:  Parks and Rec., City Council, and Harbor Commission. Section #45 of L.A. City Charter imposes specific limitation on expenditure of funds derived from State Tidelands, mostly for Harbor.  L.A. gets Venice lands April 10, 1917, amended by statute in 1945.

1945: Chapter 1513 amends Act of 1917 pertaining to former City of Venice. Gives lands to City of L.A. for among other things: "improvement, construction, and use of, and for parks, playgrounds, streets, boulevards, bathers, bath houses and beaches."  This grant, however, excepted any property held under, through, or from a Mexican grant or patent within the boundaries and jurisdiction of the said former City of Venice.      For land off San Pedro, all trust monies had to be used for commerce, navigation and fisheries.  In Santa Monica Bay, in addition, the City may also develop its lands for recreation, i.e. the construction of beach facilities, bathing houses, access roads, etc.

Dec. 1960: Ocean Front Walk replaced with asphalt: $12,240. Petroleum Administrator reported that Venice has 90 oil and gas wells producing 223,920 barrels per year.

June 1962:  Council approves oil and gas lease to Standard Oil on Oakwood playground. It is called Brooks Oil and Gas Lease.  Standard is signing up owners in about 212 acres to drill for oil and gas. Parks & Rec. move to establish under oil drilling district.

June 18, 1962: Councilman charges that many of the proposed improvements under the Tideland Bond Act have not been completed and that much of the bond fund may have been frozen indefinitely for other purposes.

July 1962:  1957 Bond Fund monies still not spent.  Parks and Rec. refuses to present timetable for future expenditures.  City Council had requested itemized breakdown of funds expended on projects and list of future projects.    

Figures showed Venice got $1,833,000 out of $23 million spent by Parks and Rec.  $2 million was still unencumbered and $14 million in bonds was still not issued. The Venice monies from 1957 Park Bond Fund went for:   1) 19 Senior Citizen Recreation Centers; 2) Lagoon Park development; 3) parking lot; 4) equipment;   5) landscaping;    6) Recreation Parking;   7) Beach Walk;  8) Lifeguard Headquarters;   9) South Beach Service facility;  10)  Sanitary conveniences;  11)   Groin reconstruction. These were termed projects completed.

Aug. 1963:  City Council approves urban oil drilling district for Standard Oil on Oakwood playground.

Jan. 19, 1965:  City Council approves four Standard Oil drilling districts in Oakwood and authorizes Union Oil drilling district for Venice Beach.

April 1965:  Capital projects proposed in Venice from Oil Bonus Fund.  TOTAL - $893,000    Cabrillo Beach allocated $100,000

April 1965: City accepts Socony-Mobil offer for Oil and Gas lease #135 for Venice. (next to Venice Pavilion. Editor)

April 1965: $404,000 allocated for construction of Cabrillo Fishing Pier; $439,000 allocated to Cornell, Bridges and Trolier to prepare
master beach plan; $36,600 for refurbishing of Venice Pavilion. (Which never happened!  Editor)

May 1965: City invests $1,500,000 from Oil Bonus Fund in Treasury Bills, maturing August 1965 at 3.7%.
June 1965 L.A. City Council adopts disbursement schedule of Socony-Mobil grant:   TOTAL:  $1,650,000

"The Board of Parks and Rec. no longer had a policy under which oil revenues recovered from public properties should be used for further capital improvements in the form of land acquisition or development."

June 1965:  Final discussion on extension of Venice Fishing Pier.  Both City and State are considering a new pier at a different location "to disperse a greater number of piers along the coastline, to allow greater public access and minimize traffic problems in area."  Total cost of initial project: $874,000.

Aug. 24, 1965: Joint Committee on Tidelands writes to Arthur Spaulding that the committee's studies show that "the terms and purposes of tidelands trusts in Calif. are extremely diverse.  Some are carefully drawn…and others are vague and tend to impede development of the subject lands because of uncertainties about…disposition of funds…"  It proposes new legislation to bring about uniformity and stability of administration over tide and submerged lands held in trust.   (Rip off starts here. Editor)

Oct.  1965:   Jesse Unruh supports Tidelands Bill.  Critical of use of tideland oil funds by City of L.A. Establishes strict accountability by Auditor General and State Lands Commission.  Any expenditure of $50,000 must be approved by State, 60 days prior to expenditure, by State Lands Commission.

Nov.  1965: Venice Planning Committee recommends against spending any monies on Venice Fishing Pier because of traffic problem area.  Parks and rec. gives OK to the deletion.

Dec. 10, 1965:  Mayor Yorty's office understands that $1,650,000 was "restricted by terms of the original trust to the development, maintenance, and improvement of beaches.  City has policy of investing such revenues in the properties from which the oil was extracted, as in the case of the beach oil revenues.”

Jan.26, 1966: Mayor Yorty advises Financial Committee of Parks and Rec. That a portion of oil revenues is included in Depts budget to partially finance operating expenses.   (Here we go. Ed)

The policy to use part of these funds for operating expenses started in 1959-60 budget. The City Council in Dec. 1965 wanted the Dept. to restrict use of these oil funds to finance capital developments and improvements in park system.  Parks and Rec. rejected this proposal and refused to be pinned down.

June 1966: City Council adopts Park and Rec. recommendation for allocation of funds giving $893,000 to Venice.

Aug.1 1966: Park and Rec. agrees to turn $404,000 over to Cabrillo Fishing Pier. The State Wildlife Conservation Board to pay other half.

Oct. 1966 Petroleum Administrator reports in annual report that "the 1966 discovery of oil beneath the City's leased lands at Venice by Mobil should have an important bearing on City's oil and gas income in 1967 and later years." Venice well was
producing 573 barrels per day, and a second well was producing 500 barrels per day. (1964-65: $13,470,000   1965-66:$13,800,000)

Dec. 1966:  City Attorney Arnebergh writes to Braude that oil funds at Venice "could also be used for the maintenance and operation of improvements and facilities related to the trust
purposes."  Tidelands funds, he says, cannot be used for the general operating purposes of Parks and Rec.  Purposes have to be at beach and have a statewide public significance.

Dec.  1966:  State Wildlife Conservation Board against expansion of Venice Fishing Pier.  City and State enter into joint agreement to finance Cabrillo Fishing pier using $404,000 of Socony-Mobil bonus. Parks and Rec. establishes major items should be lifeguard headquarter building at Venice

Prior to Dec. 1967:  Venice originally allocated $893,000 from oil bonus monies.  Subsequently, $304,000 was given to Cabrillo Fishing Pier leaving a balance of $489,000. (PKM note: If this is the difference in Venice amount, figures are off by $100,000)

April 13, 1967: Board of Parks and Rec. agrees to split revenues from gas and oil lease off Hyperion with Dept. of Public Works.  Agreement approved by State Lands Commission.

June 29, 1967: Dept. of Public Works and Parks and Rec accept gas/oil lease #137 from Standard Oil for bonus of $1,078,000.00   Terms: 
             1. 16  2/3% of all oil and natural gas sold to city
             2.  8% of all gasoline sold
             3.  3 years to commence drilling
             4.  30% to Board of Public Works. 
             5   70% to Parks and Rec. from bonus monies.

Mar 19 1972:  Clark Brown of Venice visits Pat Russell asking how Venice Oil monies are spent.  Councilwoman Russell writes to Roger Arnebergh, City Attorney, and says that many people want to know what happened to Venice Oil monies.  He pointed
Out that the San Pedro lease is quite strict and so recreation uses, such as a museum, could probably not be built with oil revenue monies.  The Venice grant is more lenient.  This got Bernardi going and he got the money for Cabrillo (Museum).  The Venice lease, as amended in 1945, gave L.A. extraordinary leeway in leasing. The Commerce and Maritime Museum in Cabrillo is Oked, however.  No monies can be put into a public improvement fund.  The Trust "does not authorize a city to use monies or the income from such monies for strictly local improvements."  Lands granted in Venice may be used for recreational beach facilities.

April  1974:  Parks and Recreation asks State Lands Commission to approve transfer of funds for Cabrillo Museum development.  According to the letter, "funds previously approved for demolition of Lick Pier were transferred to Cabrillo, and were replaced by transfers from smaller accounts from other tidelands oil funds.  Of the projects dropped, 1 restroom on the peninsula estimated at $93,830 had its funds removed.   Phase #1 monies savings from phase #2 and #3 given to Cabrillo.  ©  Venice Town Council

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