The people of New York are not getting a fair rent from one of their tenants -- James V. Glynn of Lewiston, operator of the Maid of the Mist in the Niagara Falls State Parks.
Right across the river, in Ontario, the province recently demanded fair rent from Glynn, who, as in New York, has for decades leased land and dock space for his Canadian Maid of the Mist operations. Ontario put that lease out to bid.
For 22 years, Glynn has been paying 15 percent of boat tour sales in Ontario, now about $3.5 million per year, while he keeps the other $20 million or so on the approximately 2 million annual boat tours. The competitive market system proved that ratio was wrong.
After all, nature provides the real attraction -- the waterfalls. The people pay the cost for upkeep of the park that helps make the surroundings an attraction.
Glynn merely provides the boats. Yet somehow, it worked out that Glynn got most of the profits. Six major companies, including Glynn, put in bids.
The winning bidder -- Hornblower Cruises and Events -- offered a complicated bid that has many components, including more money, improved tours and a better pre-boarding experience. Hornblower's offer translates to $13 million per year, almost $10 million more per year than Glynn was paying.
Hornblower, according to conservative sales calculations, will pay as much as 40 percent starting in 2014. Glynn was paying 15 percent in Ontario.
Now consider: Glynn pays only 4 percent in New York.
If Ontario can get 40 percent for what is essentially the same tour, why would New York get only 4 percent?
Fortunately, we have a few intelligent Republicans in the state who at least have the temerity to investigate and ask the question.
"Everything is on the table," Assemblyman John Ceretto told the Niagara Falls Reporter about the Maid of the Mist tour boat operations in New York.
Ceretto and state Sen. George Maziarz are planning to explore whether the present New York lease is in the best interest of taxpayers.
Maziarz said he sent a letter to Rose Harvey, commissioner of the New York State Office of Parks Recreation and Historic Preservation (Parks) to set up a meeting concerning the Maid of the Mist boat tour lease in New York.
Of course, there are a lot of things concerning the lease to be discussed.
The fact that Hornblower has won the Canadian lease may make it impossible for Glynn to continue his New York Maid tours after 2014. According to Glynn, the only place to store boats in winter is on the Canadian side where Hornblower will have an exclusive lease.
Hornblower may be the next New York operator.
According to Maziarz, part of the meeting between him, Ceretto and Harvey will focus on whether there is a valid lease with Glynn, whether it is ripe for termination, whether it was entered into properly, and whether it is in the best interest of the people to continue with Glynn -- who has 30 years remaining on his "lease" -- or to have open, competitive bidding, which, based on the Ontario 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 is 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 state park.
"I'm a true believer in the competitive bid system," Ceretto said, showing a bit of his hand. "You get the best price, the best service. It keeps government honest. I would like to see that happen here."
Maziarz said he would be interested to see if Harvey and Parks' lawyers think the public is best served by taking the position that Glynn has a valid lease for another 30 years.
The question becomes, as Ceretto put it, "If we have been shortchanged, then do we have a valid lease? Can we break the lease, or not break it?"
One thing is pivotal to both men. The boat tours must go on. The attraction must continue on the American side. Secondly, the people must get a fair rent.
When told the people of New York get only 4 percent rent, while Hornblower will pay 40 percent in Ontario, Ceretto said, "It sounds like we were shortchanged."
It was argued by Glynn, when he got his New York lease renewed in 2002, that since there is no place on the American side to build dry docks, he had to have the sole right to operate the tours, since he could store New York boats on the Canadian side.
This argument permitted him to avoid the required competitive bidding.
But is it true that one cannot operate a boat tour on the New York side without the help of Canada? Or was that a ruse, a convenient lie proffered to avoid competitive bidding?
Based solely on his own argument, since Glynn lost the Canadian lease, then the New York lease must go to Hornblower in 2014.
If Hornblower agrees to pay comparable rent to what the company agreed to pay in Canada, or if it goes up for bid, then the New York side's rent could go from $280,000 to $2.8 million annually.
If, however, New York could provide docks (in other words, if the sole source argument was false to begin with), then New York ought to invalidate Glynn's lease -- since it was procured under false pretenses -- build docks and put the boat tours up for competitive bidding.
A third alternative -- one that does not favor the taxpayers -- is to try to persuade Hornblower to let Glynn store his boats on the Canadian side and allow Glynn to continue at 4 percent.
There are many arguments one could offer to suggest the whole 2002 New York Glynn lease renewal requires termination.
Indeed, the more you study it, the more you realize it was meant as a sweetheart deal for Glynn.
From 1971 until 2002, Glynn paid 10 percent of gross boat tours sales. It was secretly reduced to 4 percent for a 40-year lease without public notice or open bidding.
Angela Berti, spokeswoman for the state park, said Glynn was the only one who could provide the boat tour, because he had a lease on the Canadian side that "allows (N.Y.) Maid of the Mist Corporation to dock its boats on the Canadian side."
She said the New York State Finance Law was the legal justification for giving the "single source" lease to Glynn.
"No bids (for the New York lease) were taken because the Canadian agreement gives (Glynn) exclusive access to the river below the falls, making (him) a 'sole source' provider," she said.
The length of Glynn's New York lease -- which runs until 2042 -- the longest in State Parks history -- should make the lease invalid.
Section 163 of The New York State Finance law reads:
"The term of a single source procurement contract shall be limited to the minimum period of time necessary to ameliorate the circumstances which created the material and substantial reasons for the single source award."
When Parks and Glynn signed the lease in 2002, both parties knew Glynn's Canadian lease expired Nov. 30, 2009. There was no guarantee Glynn's lease was going to be renewed. If it is true that whoever has the Canadian side must have the New York side, what was the justification for giving Glynn a 40-year lease in New York, when his Canadian lease expired in seven years?
Why did Parks officials allow his lease to run 33 years beyond the expiry of the Canadian lease, when sole source procurement is "limited to the minimum period of time necessary"?
Part of the justification, perhaps, was a $25 million upgrade to the observation deck and elevators and other buildings Glynn uses.
Glynn contributed $5 million of the $25 million.
In return, he got his rent reduced from 10 percent to 4 percent -- 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 the $5 million.
Ten years into the lease, he has already saved more than $5 million in the difference in the rent between 10 percent and 4 percent.
When the state entered into their $25 million partnership with Glynn, and the 40-year, 4-percent lease, they determined to demolish the observation tower above the observation deck -- so that the elevators only went down to Glynn's boats, eliminating the only panoramic view of the falls on the American side. This attraction often slowed down the elevators leading to Glynn's boats.
Besides removing the tower, they 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 new Maid of the Mist souvenir store.
The $25 million also built new, high-speed, air-conditioned elevators that go down faster to Glynn's boats, fixed up the deck, fixed up his buildings and restrooms, and improved or provided other amenities for him.
In addition, Parks gave Glynn control, for the first time, of the observation deck and elevator, and the right to collect fees for its usage. More than a 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.
The state handed control of one attraction to Glynn, the observation deck, eliminated another attraction, the tower, and gave Glynn a souvenir store, along with a 40-year lease.
Then reduced his rent.
Not bad for $5 million.
He got a deal where (based on what Hornblower bid) Glynn is paying $2.5 million per year less than market value for 40 years in return for a one-time investment of $5 million.
The net result of this sweetheart lease is that Glynn doesn't pay 4 percent. He pays zero. In fact, the state pays him. The 56-page agreement can be seen at www.niagarafallsreporter.com/2002lease.pdf.
Glynn's projections show that, in 2011, his tour boat operation in the park grossed $6,918,000. Fees from the observation deck and elevators brought in another $1,158,000, for a total of $8,076,000.
He paid the state 4 percent on the boat rides -- $276,720. His 75 percent share of the deck and elevators earned him $868,000. The net result is, the state in effect paid Glynn $592,000 in 2011.
Of course, when they meet with Ceretto and Maziarz, Parks officials are going to be reluctant to admit the 2002 lease was a sweetheart of a mistake.
Consider the embarrassment Parks will have to endure when the lease is canceled and revealed as the mother of all sweetheart leases.
This is where men like Ceretto and Maziarz come in. They were elected to protect the people.
Glynn's move, of course, is to try to keep his New York lease at 4 percent and keep it for the rest of the 30 years. In short, he hopes to deprive the people of this generation of getting anywhere near a fair rent for what may be the premier boat tour attraction in the world, while the people in Canada will rake in hundreds of millions.
Even if we grant Glynn pays the full 4 percent without the offset of the elevator fees, New York only gets $280,000 per year at 4 percent. Ontario gets $13 million per year. New York, about $9 million over the next 30 years. Canada gets $500 million.
Canada will be able to use that money to improve parks. The people of New York will use the money to help one man get richer.
Some politicians, mainly Democrats, have already started lobbying to keep Glynn at his low rent and are trying to get the Canadians to persuade Hornblower to allow Glynn to dock his boats on their land.
Let's see what happens when Parks meets Maziarz and Ceretto -- two men charged with protecting, not the Parks' reputation, but the public.
| Niagara Falls Reporter | www.niagarafallsreporter.com | March 6 2012 |