Monterey cleans up after years of improper accounting.

Vocal opponents of the city’s plan to modernize leasing guidelines on Fisherman’s Wharf often point to the Tidelands Trust Fund as an example of the city’s mistreatment of wharf tenants. The common claim is that the city has been illegally siphoning rent from Fisherman’s Wharf properties into the general fund, shortchanging waterfront businesses.

The issue at hand is whether the city of Monterey disburses its waterfront revenues fairly. The two wharfs, parts of Cannery Row and all other property below mean high tide are considered “tidelands.”

The state constitution prohibits private ownership of these lands. In the early 1980s, the state of California began to require that all money generated from the tidelands – in Monterey, it’s almost entirely from leases – must be reinvested in the tidelands through a trust fund. This reinvestment could be in the form of park maintenance or added infrastructure on commercial sites.

In 1983, the city of Monterey created its Tidelands Trust. For the past 33 years, all revenue generated from Cannery Row leases have gone to the trust, which was $1.8 million for the 2015-16 fiscal year. The fund currently has a balance of $8.5 million.

Yet throughout the 1980s, the city of Monterey failed to funnel revenue from Fisherman’s Wharf leases into the trust. Starting in 1983, the California State Lands Commission pressed Monterey to bring its books into full compliance, and city officials pledged they would. But by 1987, when budget cutbacks eliminated the commission’s enforcement capacity, nothing had changed.

The improper placement of the funds did not come to light until 2014, when Jimmy Forbis, the city’s new finance manager, saw that only Cannery Row, and not the wharfs, was paying into the trust.

Forbis then contacted the State Lands Commission and initiated an audit of the prior seven years to determine whether the city was using funds from Fisherman’s Wharf and Municipal Wharf II to fund non-tidelands city operations.

What the audit revealed is that from 2007-2014, Monterey spent $12 million on the two wharfs’ properties and only brought in $10 million in rent.

That means that in practical terms, the city Monterey has subsidized the wharf tidelands by $2 million.

Monterey officially recategorized wharf leases to the Tidelands Trust Fund on July 1.

The State Lands Commission is expected to approve the city’s Tidelands Trust policy by the end of the year.