Inside details of the sweetheart Maid deal exposed

James V. Glynn can’t be blamed for negotiating a sweetheart deal for his company. After all, he is not elected to protect the interests of taxpayers.

Glynn’s Maid of the Mist boats accommodated an estimated 900,000 passengers on the New York side last year. Thanks to an earlier sweetheart deal, he paid almost nothing in rent.

Over the years, Maid of the Mist boats were lowered into the gorge on the Canadian side where the only wintertime docks exist in the lower Niagara pool.

Gov. Andrew Cuomo inexplicably gave the granddaddy of sweetheart, no-bid deals to Maid of the Mist.

Governor Andrew Cuomo finally visited Niagara Falls last week and headlines everywhere simply repeated the mantra “Cuomo Saves the Maid of the Mist.” As far as I can tell, the media are missing the entire point.

What happened right in front of our own eyes was the culmination of a manufactured crisis and public fleecing rolled into one. The simple fact is that the boat tours were never in jeopardy of not being able to run from the U.S. side of the gorge. Cuomo didn’t save the world famous attraction, he saved a private corporation hundreds of millions of dollars at taxpayers’ expense.

The headline should have been “Cuomo Saves the Glynn Family Dynasty.” Cuomo and Maid of the Mist owner James Glynn signed a memorandum of understanding that will allow the company to store its fleet at the Schoellkopf Power Station site and continue operating from the American side of the gorge.

It was reported that the Glynns will invest $32 million into the NYPA-owned Schoellkopf site.

No one in the media asked, and it must be asked, “Is this an investment of hard money or will the Glynn family get credit for taking some of their old equipment from their commercial dockyard in Canada?

The opening and development of the Schoellkopf site might be good news if, and only if, the site is properly cleaned up from potential environmental hazards (see story on page 6). But the fact that it was, for all intents and purposes, gifted to the Maid of the Mist rather than made available through an open competitive bidding process means that it is worth far more to the Glynn family than any amount of startup investment costs they may incur regardless of the source.

According to the Governor’s office, the memorandum of understanding, which, as far as we know, has not been made public, will require the Glynn’s to pay State Parks $105 million over the remaining 30 years of the contract. This figure was increased from the original $39 million the Glynn family was to pay for his 2002 no-bid lease when they were the sole-source provider.
So it was duly reported that this figure is three times as much as it would have been under the existing contract signed in 2002.
A little investigative reporting goes a long way in showing how bad a deal this is.

First, the $105 million is not the rent for the boat ride alone. It is a combination of three things: The boat ride, a souvenir store, and the rent Glynn pays to the state in return for his right to operate the state-owned observation deck in the Niagara Falls State Park.

In 2002, the state built Glynn a souvenir store and people who board the boats or enter the observation deck exit through Glynn’s souvenir store. Glynn pays a scant 10 percent commission on sales, according to the 2002 lease.

The state, also in 2002, handed Glynn control of the observation deck and elevators and allowed him to keep 75 percent of the gross revenues from the state-owned attraction and pay a mere 25 percent back to the state.

Glynn’s rent for the boat ride is a paltry 4 percent.

To show you how ridiculously low the boat ride rent is for Maid of the Mist, consider that Hornblower, the winner of a fair and open competitive bidding process in Canada, is paying around 35 percent of boat ride sales for the privilege of operating across the border.

Now fast forward back to the new deal, which is said to be triple the original amount and a huge “win-win-win” for everybody, and Glynn will still only be paying us 12 percent on boat sales.

This is at most one-third of the true market value taxpayers might have realized if Cuomo would have followed the Ontario government’s lead and issued a request for proposals to conduct boat tours on the U.S. side.

Looking even further behind the numbers reveals that, based on projections from the 2002 lease, the boat tour rent is actually only about 45 percent of payments to the state in the Glynn lease.

If the same formula holds true, which seems likely, then the $105 million deal is really a $47 million deal when we eliminate the observation deck and souvenir store and count only the boat tour operations.

Remember, Hornblower’s $500 million deal is for boat tours alone.

So the $500 million deal for Ontario is in fact more than 10 times as much as New York will get over the next 30 years as a result of the Cuomo-Glynn deal.

Of course, the Canadian side does about twice as much business as New York.

Glynn did an estimated 900,000 rides on the New York side last year.

So if Canada is twice as valuable as New York, then fair market rent should be roughly half the amount in New York.
If Hornblower is paying $500 million to operate boat tours in Canada, then fair market rent for New York (for the boat ride alone) should be $250 million.

Even if you count the entire $105 million New York can expect to receive as a result of this sweetheart deal, the Governor still shortchanged the taxpayers of New York by almost $150 million. But, comparing apples to apples and boat tour to boat tour, you get the full sickening picture of how rotten this deal is.

Gov. Cuomo gave the New York boat tour lease, worth $250 million to Glynn for about $47 million. It wouldn’t have cost us one dime to issue an RFP to see what the open market would have produced. In fact there were six companies who were probably ready and able to do so, just having gone through the competitive process laid out by the Ontario government.
The reality is that Gov. Cuomo short-changed the people of New York out of $200 million. So much damage done in one, short trip.

Cuomo sure did “save” the Maid of the Mist Corp. And presented the Glynn family with a $200 million gift just in time for Christmas.

How much Pat Lynch, the Glynn family’s lobbyist, got paid to set up this deal is anybody’s guess. What favors Glynn will do for Gov. Cuomo down the line to show his gratitude for this stupendous gift of public money is anybody’s guess.

Now, and finally, to kill forever the fiction that Gov. Cuomo “saved the boat tours,” for the people of New York, the Niagara Falls Reporter contacted Terry MacRae, the CEO and President of Hornblower.

MacRae immediately told us he would “pay more than Glynn!” And he wants his chance to bid.

MacRae said he is willing to pay market rents, too. In other words, at rates comparable to what he has agreed to pay in Canada.

“As one of the largest tour operators in the U.S. and New York (Hornblower provides Statue of Liberty boat tours), and as a [taxpaying corporation registered to do business in NYS], we believe the only way to ensure that the state truly benefits, is to open the process for transparent and competitive bidding.”

We asked MacRae about the prospect of a competitive bidding process taking longer to complete than the one year left before Hornblower takes over operations on the Canadian side. Would Hornblower be willing to provide boat tours in the interim to passengers on the New York side?

“We will do everything we can so that there will be no lapse of service,” MacRae answered. “Niagara Falls, New York need never be without service.”

Then we asked him the $200 million question: It has been suggested that if the Governor did not do this deal with Glynn there would be no boat service in New York.

It is not true, MacRae insisted. “We will be happy to provide the (boat) services on the New York side - temporarily or permanently – [the latter would not require the building of any docks] and provide a market rent for it.”

Market rent? Similar to what Hornblower is paying in Canada, or what amounts to about 10 times what
Glynn is paying?

Yes, MacRae said. “The first five years (in Ontario) we have guaranteed payments of $60 million, just north of $12 million per year.”

So there you have it. MacRae is prepared to pay at least double what Glynn will be paying and probably more.

And that’s without the competitive bid process which might see the numbers go even higher.

The state’s argument that the reason they gave Glynn a lower rent is that the people are going to wind up with new dock facilities at the end of the 30-year lease sounds unpersuasive at best.

By the end of the lease all we will have are fully depreciated assets in need of repair. Then the taxpayers will likely be put on the hook to pay for Glynn’s grandchildren’s repairs. Imagine that!

The economic truth is, however, that the taxpayers are paying for the new dock facility one way or the other. Glynn is only advancing the money, but is getting a reduced rent to do it.

About $200 million worth.

When MacRae was asked if there is any chance Hornblower would sue for the right to bid on the U.S. lease, he simply stated he had “no comment at this time.”

(An email to Gov. Cuomo’s Press Department requesting comment did not elicit a response.)