But how the city takes care of those areas is subject to state regulation. Those rules require the city to charge "fair market" rents for use of public assets.

The city chose two appraisers to assess a fair market rent based on factors including rents for similar properties in the private sector. The city split the difference between the two appraisals to come up with 52.5 cents per square foot.

Rent increase opponents have suggested the city or the council challenge these state mandates or set its own, lower version of fair market rates because there doesn't seem to be any real impetus to increase the rent now.

But council members have said the proposed increases are steep because past councils have shied away from taking on the updates.

Furthermore, the city could land in hot water if it doesn't play by the rules.

According to Sheri Pemberton, the State Lands Commission external affairs division chief, if the city doesn't comply, the commission can let city officials know they are in violation of the regulations and possibly work it out. Depending on the city's response, the commission could pursue legal action.

She said the commission periodically reviews jurisdictions' income and expenditures to ensure that "the revenues are being used in a manner that's consistent with the grant."

The city has cited a 2011 California State Auditor report that found that because the commission has not managed public lands effectively, "the state has lost millions in revenue for the general fund," as a reason for changing harbor use rents now — as opposed to years ago, or in the future after the economy has recovered more.

Beyond its responsibility to the state, the city has said it will use the money from the increases on harbor infrastructure improvements.

Already, staff reports have said, the city has dipped into its general fund to pay for large capital projects, like lower bay dredging.

Critics counter that the dock owners are also paying for some coastal beach-related costs, which means beachgoers and visitors are benefiting on their dime.

In response, the council's Tidelands Management Committee has recommended that the council create a sequestered capital improvement fund so that the money raised by the rent increases will be used only for the benefit of the harbor — not coastal beaches.

An ordinance to create the fund will likely go before the full council next year.

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Q: So what does all this have to do with the Christmas Boat Parade?

A: A lot.

Stop the Dock Tax representatives have said they've been left no choice but to boycott the parade, and that regardless of public input, the increases will move forward.

"Every year we joyfully spend thousands of dollars to decorate our homes and boats for over 1 million visitors to enjoy," group Chairman Bob McCaffrey wrote in an email newsletter. "We voluntarily spend this money so that children and adults alike can experience this special city that we cherish."

But, he continued, the parade "doesn't happen" if harbor homeowners "turn off the switch."

Parade Chairman David Beek, who agrees that the increases are a "money grab," said a boycott won't hurt the city — it'll hurt residents. The parade is not run by the city, but by the Newport Beach Chamber of Commerce.

"Honestly … the whole thing kind of caught us off guard," he said last week. "I completely understand their frustration, but to boycott the boat parade? Really?

"The average Joe is going to go, 'You've got these really rich people on the bay with their docks, they're going to throw a temper tantrum, they're going to hurt everybody with their inconvenience.'"

But McCaffrey said that the group doesn't have plans to back down.

"We thoroughly understand the ramifications of this boycott on our business community, residents and visiting tourists. This is not a cavalier decision — we realize it will have an economic impact," he wrote. "This is a decision borne out of frustration with our city government that has chosen to treat its residents in a high-handed manner."

jill.cowan@latimes.com

Twitter: @jillcowan