March 13, 2012
By Frank Parlato Jr.
While the Maid of the Mist is preparing to launch boats early this year because of an unusually clement winter, an icy wind is blowing over Albany and the New York State Office of Parks Recreation and Historic Preservation (New York Parks) concerning the boat tours below Niagara Falls and the future of a lease New York Parks created in 2002 with Maid operator James V. Glynn.
That chill wind is coming not from the direction of New York Parks -- who seem content to let Glynn continue to operate in warm waters, if he can, his tour boats, at an unseemly low rent -- but from Republican State Assemblyman John Ceretto of Niagara Falls, who thinks taxpayers should come ahead of Glynn's business interests.
Ceretto wants Glynn's lease reviewed and possibly terminated.
"New York State Parks has a lot of explaining to do," he said.
The reference by Ceretto is in context with a meeting that he and state Sen. George Maziarz set up for March 19 with the commissionerÊofÊNew York Parks, Rose Harvey, where they will seek answers to troubling questions.
The "explaining" mainly has to do with how Glynn got a 4 percent, 40-year license (lease) to operate his boat tour in the Niagara Falls State Park without public bidding, when across the border he paid 15 percent -- almost four times as much -- and over there they decided that was too low.
In Ontario, the Niagara Parks Commission (NPC) put the boat tour lease up to bid, and Hornblower Cruises and Events Inc. contested Glynn and other companies, winning the award by paying 40 percent -- more than three times as much as Glynn paid in Ontario and 10 times as much as he pays in New York for the same tour.
"Outwardly, it looks like the taxpayers have been burnt in New York," Ceretto said. "The State Parks have to justify why the rent is so low and defend their actions. And the burden lies with State Parks."
Glynn began operating boat rides in Niagara Falls in 1971. Before 2002, Glynn had a lease in New York where he paid 10 percent of boat tour sales. His rent dropped in 2002 from 10 percent to 4 percent as part of the terms of a 40-year lease.
The issuance of this lease was done without competitive bidding. The justification for not having the required bidding process was that Maid of the Mist was a "sole source provider," the only one that could provide boat tours in New York.
Section 163 of the New York State Finance Law requires competitive bidding on all leases of public lands, except in cases of "special circumstances." These special circumstances are required to be proven, justified and spelled out to the public in detail.
"The Procurement Record Checklist" obtained by FOIL requests shows that this "sole source" award had no justification or proof provided. The only argument offered was found in the lease and is unproven:
"'Maid of the Mist Corporation' is the 'sole' commercial entity with rights of access to provide scenic boat excursions from landings on both the American and Canadian sides."
It has been repeatedly said that Glynn's Canadian lease allows him to dry dock his American boats for winter storage in Canada. Docks supposedly cannot be built on the American side, thus precluding anyone other than the Canadian operator (Glynn) from operating on the U.S. side.
This, by the way, to the best of our knowledge, was never put in writing, but verbally asserted only after the Niagara Falls Reporter challenged the sole source lease three years ago.
With millions of public money at stake, verbal arguments don't hold water.
Even if that was the reason New York Parks gave the lease to Glynn, under the "special circumstances" provision permitting sole source procurements, how could the state enter into a four decades-long, rent-reducing lease without determining whether it is true?
Is it possible to build dry dock on the U.S. side of the river?
No independent engineering report was given at the time the deal was struck that proved docks cannot be built, or, in the alternative, that boats could not be hoisted in and out each season, precluding the need for winter docks.
New York State Finance Law, Article XI, Paragraph 10.b.(ii) says:
"Sole Source Procurement ... shall be limited to the minimum period of time necessary to ameliorate the problem that restricted the contract to (bidding by) only one company."
The requirements of limiting the time of sole source contracts, the requirement of publishing terms of sole source contracts, and the requirement for New York Parks to have published procurement policies and revenue contract policies were all violated in the Glynn lease.
New York Parks failed to make available for public inspection a summary of the circumstances, and material and substantial reasons why a competitive procurement was not feasible as required by New York State Finance Law Section 162 10. b (ii). Why did New York Parks, in 2002, not charge a similar rent to that paid in Canada for the same tour?
Why did New York Parks not obtain any proof to justify sole source provider status before the lease was approved?
Nowhere in the files is there even notice that Glynn paid almost four times as much in Ontario as he was to pay in his 2002 no-bid lease with New York.
But there is a deeper problem.
If New York Parks in 2002 believed it was true (without proof) that docks could not be built on the U.S. side and there was no other way to get boats in and out in New York in winter, and they were dependent on the same Canadian operator to provide the New York tours, then why did New York Parks decide Glynn's New York lease should extend past the expiration date of his Canadian lease, which expired in 2009?
An Aug. 5, 1996 memo from J. Dennis Hanrahan of New York Parks to Douglas Boettner of the New York Comptroller's Office reports that New York Parks spoke with Robert Brooker, a bookkeeper for Ontario's NPC, on July 29, 1996, and Brooker said that the NPC "will be renegotiating their agreement with Maid of the Mist Corporation rather than bidding it when it expires in 2007." New York Parks communicated with Brooker, a bookkeeper, in 1996, six years before the lease was renewed, and on this basis gave Glynn a lease in 2002 for 40 years.
Why would New York Parks accept the word of a bookkeeper at the NPC?
Commissioners approve leases. Even if all 12 NPC commissioners, in 2002, said they were going to renew Glynn's Canadian lease in 2009, their authority for such a statement is nil. NPC commissioners are appointed to three-year terms. Between 2002 and 2007, nine of 12 commissioners' terms expired and they were replaced. Whatever NPC commissioners "intended" in 2002 was meaningless by 2007, when 75 percent of the decision-makers were new.
Factually, what Brooker said about NPC's "intent" to renegotiate was false. Glynn lost the lease in 2009. New York Parks should have known there was no guarantee Glynn would have the Canadian lease beyond 2009, when his lease expired.
New York Parks should have -- if they followed the law -- renewed Glynn's lease for seven years, so it ran until 2009, concurrent with his Canadian lease, if it was true they honestly believed the Canadian operator was the only one who could operate in New York.
Instead, New York Parks gave Glynn a lease expiring in 2042, 33 years beyond the expiry of the Canadian lease.
If Parks were right in 2002, and it is impossible for anyone to operate the New York tours without the Canadian lease, then Hornblower, the new Canadian operator, will be the next U.S. operator.
If, however, New York could provide docks -- and the sole source argument was false to begin with -- then New York must invalidate Glynn's lease, since it was procured under false pretenses, build docks and put the boat tours up for competitive bidding.
It is clearly in the interest of the people to have competitive bidding, which, based on Ontario's bidding experience, is likely to bring State Parks, during the next 30 years, close to $75 million more, about $2.8 million per year, on what are approximately half-a-million boat tours per year.
At Glynn's 4 percent New York rate, he pays about $280,000 in rent on $7 million annual boat tour sales in the park.
One argument New York Parks is likely to make to try to keep the public from getting fair rent (and saving themselves embarrassment) is that Glynn contributed $5 million toward a $25 million New York Parks capital project to improve Glynn's operations in 2002.
The drop in rent from 10 percent to 4 percent more than offsets the $5 million Glynn contributed. His rent, reduced from 10 percent to 4 percent, gave him a savings of more than $500,000 per year for 40 years (or $20 million).
Certainly, the state could have put up the additional $5 million and, of course, it should have, if it meant reducing Glynn's rent by many times $5 million.
New York Parks also -- shockingly -- gave him control of the observation deck and elevators in 2002, bringing him an additional $1.1 million per year or more in revenue.
More than 1.6 million people per year pay $1 admission to go to the observation deck or down to the bottom of the gorge to his boat ride. Glynn keeps 75 cents. The state gets 25 cents.
Funny, the state used to charge 25 cents before 2002. Glynn immediately raised the price to a dollar. The entire increase went to Glynn.
The state also built Glynn a souvenir store and designed it so it required all people who went on his boat ride or the observation deck to exit through his Maid of the Mist souvenir store.
The extra 1.6 million people forcibly herded through his souvenir store annually must have earned him something over the past decade.
The $25 million also built new, high-speed, air-conditioned elevators that go down faster to Glynn's boats.
It also eliminated the old observation tower that one viewed when they went on elevators up and away from his boats. Before the $25 million "improvement," people had the option to go up to the tower or down to the boats. The state eliminated the tower, so people had (like with his souvenir store) no option once they got on the elevators but go down to where Glynn's enterprises -- in this case, boats -- awaited.
The state handed control of one attraction to Glynn, the observation deck, eliminated another attraction, the tower, gave Glynn a souvenir store, and forced everyone through his store.
Then reduced his rent for his boats by more than $500,000 a year for 40 years.
In the nine years of the lease so far, he saved $4.5 million in rent and made $8 million from the elevators and observation deck, plus whatever he made from the new souvenir store.
Not bad for $5 million.
"Can the lease be broken?" Ceretto asked. "I want answers. Much of it came to light because of Hornblower's agreement."
Glynn got a deal where (based on what Hornblower bid) he pays $2.5 million per year less than market value for 40 years in return for a one-time investment of $5 million.
If the lease is not broken, Glynn will keep his New York lease at 4 percent for the next 30 years, and the people of this generation will be deprived of getting anywhere near a fair rent for what may be the premier boat tour attraction in the world, while the people in Canada rake in hundreds of millions to invest in their parks.
One man, John Ceretto, assemblyman for Niagara Falls, seems to want to do something about it.
He wants fair rent for the boat tours under the falls.
"New York State Parks has a lot of explaining to do," Ceretto said. "I look forward to listening to them."
The formerly secret, sweetheart 2002 lease between New York Parks and the Maid of the Mist Corp. can be read online at www.niagarafallsreporter.com/2002lease.pdf.