The Nautical Museum bought the land the Fun Zone occupies in 2006. The bumper cars and Scary Dark ride closed in September 2006 as part of a gradual plan to phase in the museum.
Now, it has plans to use the patio where the carousel is located for community events and educational programs, said museum President Rita Stenlund.
The carousel was built in 1951 and was at Santa's Village in Scotts Valley, north of Santa Cruz, until being restored and placed in the Balboa Fun Zone in 1985.
Since the 1930s, there has always been a carousel at the Fun Zone.
Although the Ferris wheel and other attractions will remain, Moore said the surrounding businesses are worried about the disappearance of the carousel.
"We're all afraid of it being an empty patio next year," Moore said. "Many people are concerned about being in business next summer … I'm concerned it's going to have a negative impact on the whole area."
The full plans for the soon-to-be-vacant space will be unveiled at a Newport Harbor Nautical Museum event Oct. 22.
Stenlund said she sees the change as part of a revitalization of Balboa Village.
"Our commitment is keeping the fun in the Fun Zone," she said. "The plans for our new project, ExplorOcean, will demonstrate that and we want so much for the community to see those plans … I believe it will tell the story of our changes and show our commitment to creating a place where new memories will be created."
According to Daily Pilot archives, preliminary expansion plans released by the museum last year included a parking garage, theater, weather station, cafe and gift shop.
Denise Delgado of El Paso, Tex., watched her 11-year-old son and 19-month-old daughter ride the merry-go-round on Tuesday afternoon. She said she thinks when the carousel is gone, the area will be less friendly for vacationing families like hers.
"Maybe families with little kids will want to go somewhere else," Delgado said. "We would."
Gay Wassall-Kelly, a longtime resident and representative member for Balboa Village on the city's Economic Development Committee, said her friends and neighbors were shocked when they heard of the carousel's closing.
"I don't see why it doesn't fit with the museum," she said. "I think they need to keep the Fun Zone with it or the draw is completely gone."