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Maid of the mist lease ordered reopened

Niagara Falls Repoerter

Ontario calls for end of monopoly on dubious Glynn lease

November 03, 2009

By Frank Parlato Jr.

After a year and a half of the Niagara Falls Reporter pounding out stories, Ontario's tourism minister Monique Smith last week ordered the Niagara Parks Commission (NPC) to put the Canadian concession lease for the Maid of the Mist -- presently held by Lewiston businessman James Glynn -- out to bid.

This means for the first time Glynn will be facing competition for the right to offer boat tours in the lower Niagara River just under the falls. He has held a monopoly to provide boat tours on both the American and Canadian sides of the lower Niagara pool -- one of the premier water attractions in the world -- for 38 years.

Maid of the mist deal sunk

Despite the fact that his boat docks are located on public land belonging to the people of Ontario and New York state, Glynn has never had to bid on the concessions and has personally raked in hundreds of millions of dollars under the sweetheart deals.

While opening the process to competitive bidding will generate millions more for the Canadian public, the potential loss of the Canadian lease will be costly for the wealthy Glynn, whose Maid of the Mist boats attracted 2.2 million riders last year. Glynn grossed about $23 million. Confidential documents submitted to the NPC show Glynn netted more than $5 million on the Canadian side alone. He paid the NPC about $3.1 million in rent.

News of the opportunity to bid has attracted a cadre of potential bidders.

Ripley Entertainment, Alcatraz Media, CamPark Resorts, Xanterra Resorts and Entertainment Cruises have all expressed interest.

Hornblower Cruises, Circle Line, Circle Line 42, New York Waterway, New York Water Taxi, and Red and White are also expected to bid, while Disney and the Seneca Gaming Corp. have been mentioned as possible bidders.

The rent, tour boat experts say, is likely to double to $6 million annually or more when the competition for this lucrative attraction is awarded to the highest bidder.

Much of this news came as a shock to local people who consider Glynn's Maid of the Mist a kind of institution with perpetual rights to control the public waterway below the falls.

Glynn has done much to foster this thinking locally. Since 1971, he has operated in secret, and the public never knew, either in Canada or New York, what it was getting for rent on its own land, the public docks that gave the only access to waters directly below Niagara Falls. Glynn held the monopoly, but the terms were shrouded in mystery. During the last year, the Reporter made both leases public, publishing them in full online.

Once exposed to sunshine and evaluated, they revealed that Glynn's lease on the Canadian side was quite low, and it was even worse on the New York side.

Other factors triggered the competition as well.

A scandal that erupted in Ontario over revelations concerning an agency called eHealth, which awarded a billion dollars' worth of no-bid contracts just as two private concerns were complaining about their inability to bid on the Maid of the Mist lease, made the timing right.

And there was whistle-blowing NPC commissioner Bob Gale, who risked his reputation by going public with charges that the Glynn contract was a "dirty deal." He said it so often and so loudly that it threatened to become another scandal for the Liberal government.

Glynn's Maid of the Mist Corp. is, of course, unhappy. Spokesman Tim Ruddy vowed the company would take "whatever actions are necessary" to protect its position as the provider of boat tours.

"All options will be under consideration," he said in a tone implying litigation.

And NPC Chairman Jim Williams and General Manager John Kernahan, who fought diligently to preserve Glynn's lease even when it was clear others would pay far more, are expected to make the bid terms as difficult as possible for anyone but Glynn.

While Smith has ordered that "all interested parties get the opportunity to submit proposals in a fair and open competition," many feel Williams and Kernahan will not be fair in creating terms for the bidding, and instead will issue specifications that favor Glynn. The bidding is on a fast timeline and is supposed to be completed by this spring.

The Ontario government, Smith said, might appoint a "fairness commissioner" to work with the NPC to alleviate concerns of Glynn-bias.

It might be necessary since, wherever Glynn goes, secret things generally happen with various government officials, things that somehow benefit him rather than the public.

DYSTER AND GLYNN

In Niagara Falls, N.Y., for instance, Glynn secretly pledged to donate a substantial amount money to a fund set up to enhance the political plans of Mayor Paul Dyster by paying a portion of the salaries of key people in Dyster's administration.

The deal imploded when the Reporter revealed that Glynn was behind the questionable plan of having private citizens anonymously donate to pay a portion of government appointees' salaries. But it did not stop Dyster from hiring two key aides in his administration while Glynn and others secretly paid part of their first year's salaries.

Meanwhile, Glynn quietly contracted to purchase the Comfort Inn Hotel and adjacent retail stores along the West Pedestrian Mall. Before the public learned of it, Dyster asked the City Council to cancel and permit the state to buy out the existing West Mall sidewalk-vending lease. The buyout eliminated Glynn's main retail competitor.

Then USA Niagara -- a state agency created to help develop Niagara Falls -- authorized the spending of $7.9 million in renovations to the former commercial strip, replacing the old walkway with new cobblestone and other amenities in front of Glynn's hotel and stores. Both Glynn and Dyster sit on the USA Niagara advisory board.

It is unclear, with the potential loss of the Maid of the Mist lease in Canada looming, whether Glynn will still be interested in trying to seize more of downtown. Without control of the boat attraction, will he really want to run a shabby hotel and mediocre strip mall in the decaying heart of a city that is also home to the glamorous hotel and glittering stores of the tax-free Seneca Nation?

And with the shocking effect of sunlight on his formerly secretive doings, can state park officials still get away with their proposal to cut down trees and move the entrance of the Niagara Falls State Park right to the front of Glynn's new hotel?

In light of the revelations in Canada showing Canadian officials favoring Glynn over the public interest, the plan to move the park entrance will face even more scrutiny. Are New York park officials scheming to deprive the public for the welfare of one man, or does it simply look that way?

Moving the park entrance promises to be a real controversy if it goes forward. But then again, park officials have long been willing to do almost anything for Glynn.

Indeed it was for Glynn that they actually ended the Olmsted vision in Niagara Falls State Park. Frederick Law Olmsted designed the park as an all-green reservation in 1886.

In 1987, Glynn persuaded park officials to fell trees to make a giant parking lot near the Maid of the Mist entrance. The city lost millions in parking and local tourist business.

But Glynn got a parking built lot near his attraction. And from that point on, the Niagara Falls State Park became not Olmsted but big business, centered around Glynn's boat tour, a Glynn-owned souvenir store, corporate restaurants with paid parking, and a water attraction. The park saw itself in competition with the city -- a change ruinous to tourism in Niagara Falls.

HOW HE LOST THE LEASE

So how did it happen that the secretive Glynn finally got to be treated like any other individual who deals with public assets? It began in January 2008, when Tim Parker, general manager of Ripley Entertainment, repeatedly expressed an interest to NPC Chairman Jim Williams in bidding on the Canadian boat lease. Williams, claiming confidentiality, refused to tell Parker anything. So Parker filed a freedom of information request.

John Kernahan, general manager for the NPC, suddenly started drafting a new lease for Glynn, more than a year and a half before it was due. Williams and Kernahan then hurriedly scheduled a "due diligence" meeting, canceling it almost immediately and scheduling a vote to renew Glynn's lease instead. Williams and Kernahan declined to tell other commissioners about Ripley's interest.

One commissioner, Bob Gale, sensed something was wrong. The day before the board was to vote, he sent e-mails to other board members telling them, "We're rushing the Glynn renewal way ahead of schedule. Why?"

Later that morning, Ripley's Tim Parker called Gale and asked if he was aware of his interest in bidding on the lease.

"Bingo," said Gale. "Now I knew why they were rushing the Glynn lease."

Gale asked the board to wait for the next meeting to allow Ripley's a chance to compete, and Williams became enraged. Kernahan said a delay might cost the NPC a lawsuit or a disruption of boat service. The commissioners -- without knowing the full terms or seeing the actual lease -- voted to renew Glynn's lease on April 18, 2008, for 25 years, and left it to Kernahan and Williams to work out the details.

Gale filed a disclosure of wrongdoing with the Integrity Commission of Ontario and told the press it was a "dirty deal." It was soon discovered that Alcatraz Media had attempted in 2005 to be considered for a chance to bid on the Maid of the Mist lease, a fact not disclosed to other members of the NPC.

The NPC vote to renew Glynn's lease, however, did not constitute legal renewal. The Ontario Cabinet had to sign off. And Parliament held back while the investigation of the Integrity Commission was conducted.

THE SCANDAL GROWS

Meanwhile, the Reporter exposed the details of the hidden machinations of the NPC for the first time and began covering the burgeoning scandal. Soon after, Bill Windsor of Alcatraz Media sued the Canadian government. And things began to heat up.

A growing number of Canadians now began to call for the lease to be sent back for bidding, including the powerful citizen's group Preserve Our Parks, whose members regularly distributed the Reporter in Ontario.

A few members of Parliament, including Kim Craitor of Niagara Falls, said the lease should go to bid. The Niagara Falls city council passed a resolution supporting the same.

After all, why wouldn't you try to get the most you can. The NPC was losing money.

Since 2004, when Williams took over as chairman, the NPC plunged from a $3.7 million profit to a $4.3 million loss last year. The NPC laid off a third of its workforce and cut back the hours of those workers who remained, devastating local families.

The scandal grew. The president of the Parks Union (OPSEU Local 217), Bill Rudd, took a bold and controversial step. He officially called for a tender. And the Niagara Parks employees marched en masse to the falls to protest the NPC.

Then, in a striking event, after posting the Reporter's articles on the home page of union Web sites, the mammoth Ontario Public Service Employees Union called upon the minister of tourism to dissolve the NPC. Union president Warren "Smokey" Thomas said the parks are "deteriorating while the commission (decides) to renew the lease of the Maid of the Mist without going to tender."

In time, other newspapers began to cover the story. News of the Glynn controversy ignited throughout Canada as the Globe and Mail -- after the Reporter's series -- began a series of its own. The Hamilton Spectator, the Niagara Falls Review, Niagara This Week, the St. Catharines Standard, the Toronto Star and other Canadian publications came out with stories. As did The New York Times.

THE RENT WAS SECRETLY REDUCED

Then the bombshell exploded. The Reporter discovered that not only did the NPC refuse to allow other bidders, but they actually dropped Glynn's rent. It went from a flat 15 percent to a "sliding scale" that reduces the percentage as Glynn makes more money. It drops as low as 5.5 percent.

Williams and Kernahan at first tried to say Glynn's rent was increased. But the Reporter got hold of the secret term sheet of the new lease, and gave it to other media. Damian Alksnis, a forensic accountant for the Globe, concluded the NPC is "worse off ... under the new lease agreement -- exponentially worse off." In the first year alone, $626,700 worse off.

Why would you drop his rent?

The Integrity Commission issued its report, recommending a review of the Maid of the Mist lease renewal. Smith told the NPC to "go back and look at the process."

Williams said, "Nothing has changed from what the board (previously) considered," but he and his commission went through the motions and met again this last September, voting again to renew the Glynn lease with the rent reduction.

Now it was up to the minister of tourism. Williams and some of the liberals in her party were pushing her to sweep this under the carpet. Glynn had hired high-priced lobbyist Bob Lopinski -- who was a liberal darling and worked for Premier McGuinty.

Smith was under intense political pressure. And for a while she gave no signal of what she would do. Public opinion was against the NPC.

LIES OF JIM WILLIAMS

Kernahan and Williams seemed desperate to help Glynn. They began their own public relations campaign. They insisted that a change might cause the NPC to lose the brand name "Maid of the Mist."

The Reporter took on the task of repudiating each and every lie.

The Glynn corporation -- which calls itself "Maid of the Mist Steamboat Co. Ltd." -- has been in existence since 1971. But according to the lease, (6.03): "Tenant (Glynn) acknowledges that it does not claim any interest in or rights in the words 'Maid of the Mist' ... and NPC is free to use 'Maid of the Mist.'"

Next, Williams claimed no one could do what Glynn does. He compared giving people a boat tour to a trip to the moon.

"There's no other model," he told The New York Times. "You're asking for someone to say, 'We want you to build the space station.' Well, there's only one of a kind."

Glynn's spokesperson, Tim Ruddy, went further, telling the Niagara Falls Review that if Glynn was replaced, new boats would have to be built at the river's edge and would take five years to build. Tourists would be without rides below the falls. Five years to build a 70-foot steel boat? Odd, the 882-foot Titanic was built in three years.

But Ruddy was lying about boats having to be constructed on the riverbanks. In fact, Glynn lowered most of his boats by crane.

Williams then tried to make Glynn an institution.

"This is a unique lease, given that the business relationship between the parties has existed for over 100 years," he said.

Sure, boat rides existed below the falls for more than 100 years. But operators changed many times. Glynn has only been around since 1971. He has no family ties to anyone involved with the Maid of the Mist from its inception in 1818 until 1971. He certainly didn't conceive of having boat rides under the falls. Christian Schultz did that in 1807.

There is nothing "unique" about offering a 15-minute ferry ride. What is unique is the setting -- the amazing Niagara Falls. But there have been many operators of boat rides under the falls. And there will be many more. At one time, 40 different companies ran rowboat ferries.

Williams told The New York Times that a "clause" in Glynn's lease meant the NPC would run the risk of a lawsuit if it selected another operator. When asked to reveal the clause, Williams declined, saying it was "secret."

But there is nothing in the lease that requires renewal. In fact, it says Glynn may not sue the park for any investment made into structures or improvements.

A NEW AND BETTER TOUR

Finally, after the hullabaloo, Smith ordered the NPC last week to put the lease out to bid. Putting it to bid will not only increase revenues but also improve the service.

The tour could be so much better. Competitive bidding may bring more than mere revenue enhancement, but promote imaginative ideas for tourism.

Glynn's tour is primitive, to say the least. Glynn provides only one type of tour -- 15 minutes packed like sardines while standing on the deck of an old steel boat making a brief run along the American Falls and slightly into the mist of the Horseshoe Falls.

The current Maid of the Mist boats do not have seats or bathrooms. The company provides a blue garbage bag for raincoats. In summer, the mist can be refreshing, but in early and late season, tourists get drenched and cold.

Both Ripley and Alcatraz spoke of covered boats, downriver tours to the Whirlpool Rapids, wedding and dinner cruises, and night tours when the falls illumination can be seen.

Part of the bid terms should include the possibility of extending the season. There should also be a plan to eliminate long waiting lines. Glynn takes no reservations. In the height of the season, tourists wait hours for the 15-minute ride.

Meanwhile, estimates from tourism industry experts indicate the park will likely get at least $3 million and as much as $6 million more in rent than what Glynn is paying.

The NPC posted an operating loss of about $4 million last year, which means it could solve its financial problems just by putting the lease out to bid.

NEW YORK LEASE ALSO ILLEGAL?

Even though state parks in New York face severe shortfalls, Glynn managed to get park officials here to secretly reduce his rent from 10 percent to 4 percent in 2002 without letting anyone else bid.

Delving into the lease, we find Glynn doesn't even pay 4 percent. He pays no rent. In fact, the state pays him.

That's because he gets to keep 75 percent of the revenue generated through admission fees to the park's Observation Tower. Glynn got a check last year from the state for $586,300 in addition to the millions in profit his rent-free boat tours make. The unprecedented 40-year, no-bid lease awarded to Glynn was the longest ever in the history of the parks system.

Angela Berti, spokeswoman for the state park, said "no bids were taken because the Canadian agreement gives (Glynn) exclusive access to the river below the falls, making (him) a 'sole source' provider."

Berti said Glynn is the only one who could provide the boat tour, because he has a lease on the Canadian side that "allows (N.Y.) Maid of the Mist Corporation to dock its boats on the Canadian side."

But now he is likely to lose the Canadian lease.

Berti claims Section 163 of the New York State Finance Law as the legal reason for giving the lease only to Glynn.

But Section 163 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."

Glynn's Canadian lease expires in November 2009.

What was the basis then for a 40-year contract, granted in 2002, when Glynn's Canadian lease expires in 2009? Why would the state parks allow his lease to run 33 years beyond the expiration of the Canadian lease if sole source procurement is "limited to the minimum period of time necessary"?

If you need the Canadian lease to operate the New York lease, then Glynn's New York lease should have only gone to November 2009. Using Berti's own argument, Glynn's lease in New York should become null and void this month.

 

 

 
 
 
  Copyright © 2008 Frank Parlato Jr.