By Frank Parlato Jr.
October 13 2009
Of course, for readers of the Reporter, the secretive doings of park officials on both sides of the Niagara, meant to favor Lewiston businessman James Glynn, are well known.
In New York, parks officials gave Glynn what may one day be iconic of 21st-century corruption — the sweetest of leases — where the public pays Glynn, the tenant, for his right to use public docks to operate his lucrative Maid of the Mist boat rides.
It is mildly comforting to know then that the Niagara Parks Commission (NPC) is not far behind in ineptitude or corruption.
The NPC commissioners, who normally operate in secret, reaffirmed on Sept. 25 their earlier decision to extend Glynn’s lease by 25 years and throw in this sweetener: Reduce his rent.
They had been “ordered” by Ontario Minister of Tourism, Monique Smith, who many allege is deeply buried inside Glynn’s capacious pocket, to re-review and make sure the lease was the best one the government could get.
Smith’s signals behind the scenes seemingly show she wants to help Glynn and the re-review was a formality meant to help quell the public outcry started when former NPC commissioner Bob Gale broke ranks with other commissioners and exposed what he called the “dirty” Glynn deal.
Smith now will have to decide whether she will recommend to Ontario’s Parliament, headed by Premier Dalton McGuinty, what the NPC’s approved– extending Glynn’s lease and reducing his rent without seeking competitive bids.
Curiously, the NPC, in their re-review of the lease, chose not to contact any of multiple parties who expressed interest in bidding. Smith did not require them to do so.
Alcatraz Media offered to pay almost $100 million more than Glynn over the life of the lease. Ripley Entertainment offered more than $25 million more.
Seneca Gaming, CamPark Resorts, and Entertainment Cruises also expressed interest in bidding.
NPC Chairman James Williams and General Manager John Kernahan — both whom have been accused of being so helpful to Glynn that, if they are not on his payroll, they should be — have made multiple arguments why Glynn should be the only one considered.
One is that Glynn owns the name “Maid of the Mist,” and loss of that name would hurt business.
The Reporter, however, uncovered the 1989 lease between the NPC and Glynn. It was kept secret from the public based on archaic Ontario confidentiality laws. The Reporter, being American, chose to publish the lease online.
According to Paragraph 6.03, “Tenant (Glynn) acknowledges that it does not claim any interest in or rights in the words “Maid of the Mist” … NPC is free to use ‘Maid of the Mist’ in identification of its structures, retail or promotional material.”
Williams, foiled then attempting to make Glynn seem an institution, said, “This is a unique lease, given that the business relationship between the parties has existed for over 100 years.”
Untrue. Glynn’s corporation — the “Maid of the Mist Steamboat Co. Ltd.” — has been in existence only since 1971, when Glynn bought the “assets” of a former, similarly named Maid of the Mist Steamboat Company. As an asset purchase, rather than a stock purchase, his boat tour operation has legally existed only 38 years.
Sure, boat rides existed below the falls for more than 100 years. But operators changed many times. Glynn has no family ties to anyone involved with the boat service from its inception in 1818 until 1971.
Glynn didn’t operate the business for the first 153 years. He didn’t conceive of the idea of having boat rides under the falls. That was done by Christian Schultz in 1807.
Glynn has a 38-year, not 100-year relationship with the park.
The next fallacy Williams offered was that no one but Glynn is capable of providing a boat ride under the falls. Williams told The New York Times, “There’s no other model. You’re asking for someone to say, ‘We want you to build the space station.’ Well, there’s only one of a kind.”
History, however, reveals there have been many operators of boat rides under the falls, ever since William Forsyth and Parkhurst Whitney began the first rowboat ferry service in 1818. At one time, 40 different companies ran rowboat ferries.
In 1846, the Niagara Falls Ferry Association launched the first steamship christened “Maid of the Mist.” In 1885, R.F. Carter and Frank LeBlond launched a “Maid of the Mist” oak steamer that got closer to the Horseshoe Falls. Using the same name, this is the same tour Glynn offers.
Still, there is nothing “unique” or “impossible” about offering a 15-minute ferry ride. What is unique is the setting — the amazing Niagara Falls.
Many boats are suitable to provide this service. Experienced captains and crews are available. Other companies could procure boats and lower them by crane as Glynn has done with most of his fleet since 1971.
Then, before Jim Williams knew we had a copy of the 1989 lease, he told the press that a “clause” in it meant Glynn would sue, causing the NPC “significant financial liability,” if the NPC selected another boat operator. One reporter asked him to reveal the clause. Williams declined, saying it was “secret.”
We checked the lease. There is nothing in it that indicates Glynn can sue if it is not renewed. In fact, it has an expiration date, which means it was expected it would end.
Paragraph 5.06 of the 1989 lease states that the tenant “shall deliver the Demised Premises, building and equipment located thereon, to the Landlord at the expiration of the Lease in a state of repair equivalent to that required to be maintained by it during the Term.”
The real issue, however, is not what NPC officials say, but whether this lease is the best possible deal for the public.
The NPC’s approval of a 25-year lease extension has been reported extensively throughout Canada. The media focused on the fact that, in spite of established companies trying to get a shot at the lucrative contract and willing to pay more than Glynn, the NPC chose not to listen to other offers.
The Canadian media failed to report one other significant issue: The NPC Web site says, “The lease will provide increased rental payments to NPC.”
Like almost everything else, this is not true.
The present lease has Glynn paying a flat 15 percent of gross sales.
The NPC Web site states, “The existing flat rate paid to the NPC … has been replaced with a sliding scale rate starting at a higher level and declining incrementally as new revenue targets are achieved.
“This is designed to protect NPC revenue streams during years in which visitation is down and provides incentives to MOM to perform at levels that exceed previous historic highs. …
“The base amounts upon which the rental rate is applied is tied to 2009 fares.”
What Williams doesn’t say is that the “target level” where rent rates start going down is based on 2003 levels. Buried beneath terms like “incentives,” “revenue targets” and “protect revenue streams” is that the rent goes down “incrementally” after sales reach the “revenue target.”
Williams and Kernahan chose a “revenue target” that, they may have argued, “exceeded previous historic highs,” but in reality was set “at about a 2003 level,” according to Kernahan’s report to commissioners.
2003 was the year of the SARS (Severe Acute Respiratory Syndrome) scare. Tourism was off by 28 percent.
Some revenue target.
During 2004-08, Glynn averaged $19 million. In 2003, he grossed $11.5 million.
In the last decade, Glynn averaged 1,854,632 Canadian riders annually — except for 2003, when he had only 1,249,773. The lease was structured so that Glynn would pay slightly more rent (17.5 percent) until he reaches the gross dollars of the SARS year, then it goes down rapidly to 12.5 percent, 8.5 percent, 6.25 percent, and finally 5.5 percent.
Once he hits $17 million, his effective rent becomes less than 15 percent. Every additional dollar is paid at 5.5 percent. If the proposed lease had been in place in 2008, when Glynn grossed more than $23 million, he would have paid $682,000 less rent, compared to the present rate of 15 percent.
Williams said this sliding scale was devised for “revenue stream protection,” since it raises the first $11.5 million of Glynn sales by 2.5 percent — about $300,000.
So NPC makes $300,000 more if Glynn has a SARS-like year.
And loses more than $600,000 when he has a typical year.
Revenues in 2007 and 2008 exceeded $20 million.
The NPC would have gotten only 14.4 percent if they had had this new formula in effect in 2005. In 2008, it would have been less than 12 percent.
Using projected rate increases for the next 25 years, the NPC will lose on average a million or more per year. This new lease was clearly done to reduce the rent of the current operator. Parliament should have experts look closely at this. Meanwhile, the NPC manages 4,200 acres of public parkland. They lost $4.3 million in 2008. Park employment has fallen from 750 to under 500 during the last few years.
“Maintenance projects have and will be delayed throughout many areas of the park this season,” Kernahan said last April. “Costs continue to rise and revenues drop. … A reduction in hours of work (to) 37.5 hours per week for seasonal employees who normally work a 40-hour week or more (was required).”
The NPC deferred maintenance, closed services and cut investment. Some places in the parks look shabby.
They can’t pay their bills. They could not even make their annual $1 million payment in lieu of taxes to the city of Niagara Falls. They can’t conduct normal maintenance, are slashing the hours of the lowest-paid employees, and lost $4.3 million.
But they lowered Glynn’s rent, when others, probably Glynn himself, would have paid substantially more.
It’s up to Premier Dalton McGuinty’s cabinet to approve or reject the lease. And for Monique Smith to recommend the lease or say the deal is a stinker.
So why would McGuinty and Smith reduce Glynn’s rent?
Why would anyone?
