Hornblower Demanding NY Open Up Bidding on Maid of the Mist Boat Tour Concession

Hornblower's Terry MacRae has hired a lawyer.

Attorney Edward Kehoe represents Hornblower.

In short, Hornblower has put it in writing.

New York State is leaving more than $100 million on the table, and Hornblower doesn’t appear ready to let them get away with it just yet.

The Reporter has obtained a copy of a December 19, 2012 letter, to New York State Parks Commissioner Rose Harvey by an attorney representing Hornblower Yachts LLC, demanding that New York State put the recently revised Niagara Falls boat-tour concession up for open and competitive bidding.

The letter was sent in response to Gov. Andrew Cuomo’s December announcement that New York State Parks (Parks), the New York Power Authority (NYPA), and James Glynn’s Maid of the Mist Corporation signed a memorandum of understanding (MOU), agreeing to modify the terms of Glynn’s 40-year no-bid contract to conduct tours on the U.S. side of the Falls.

Edward G. Kehoe, a partner with King & Spalding in New York City, states that his client, Hornblower, is “prepared to offer at least twice the amount that has been reported as (The Maid of the Mist’s) payments to New York [$105 million], or more than an additional $100 million over the remaining life of the license. And Hornblower can guarantee there will be no interruption in tour-boat service from the New York side of the Falls.”

As previously reported, the MOU purportedly grants Maid of the Mist access to construct a winter boat storage and maintenance facility on the former site of the Schoellkopf Power Station at the base of the Niagara Gorge on the U.S. side.

Glynn lost access to the only existing boat storage facility to Hornblower when his company failed to secure the rights to the Canadian boat-tour concession earlier last year, in an open and competitive bidding process against five other companies.

Beginning in 2014, Glynn would no longer have had the ability to perform under the New York license without Cuomo’s intervention, leaving Hornblower in the position of sole source provider of boat tours at the Falls.

In his letter, Kehoe argues that New York State’s revision of Glynn’s 40-year, no-bid contract is against the law since Maid of the Mist only got the long-term lease because of its designation as a “sole source” provider.

That status evaporated when they lost the Canadian rights.

“New York State awarded Maid the 2002 License without putting the concession out to a competitive bid, pursuant to an exception in the New York Finance Law… However, circumstances have changed since New York State issued the 2002 License, including Maid’s recent loss of the Canadian concession,” Kehoe wrote.

The audacity of the new Glynn-Cuomo deal is exposed by holding a mirror up to it and calling on New York State to recognize the legal inconsistency of allowing Glynn to build new facilities on the U.S. side now, after enjoying the benefit of being a sole source provider since the 1970’s, because he had the Canadian lease providing control of the only accessible docks.

Kehoe writes that “[u]nder its Canadian concession, Maid then possessed exclusive control of the docks and storage facilities on the Canadian side to winterize, store, and maintain all of its tour boats, and there are no comparable docking and storage facilities on the New York side. Maid therefore argued, and New York State agreed (in 2002), that the concessionaire who held the Canadian concession also should hold the New York concession on a sole source basis.”

Kehoe’s letter to the Commissioner reiterates that “[b]eginning in early 2014, Hornblower will pay in excess of $500 million to the Canadian government over a period of 30 years; and Hornblower -- not Maid -- will control the docks and storage location that has been the sole boat storage and maintenance facility for all times prior.”

“Maid has no basis to argue that the 'sole source ' exception enables it to avoid competitive bidding now, having lost the Canadian concession to Hornblower…,” wrote Kehoe.

Hornblower is seeking a copy of the MOU from State Parks, because they believe that revising Glynn’s agreement to such an extent as to include the construction of new facilities and a modification in licensing fees does clearly show that State Parks is creating, in essence, a new contract.

Given the ambitious scope of this project, and how drastically it modifies the original terms of Glynn’s 2002 agreement, Hornblower maintains that State Parks must allow competitive bidding to take place for the Schoellkopf site renovation and the U.S. license.

“Under clear and settled New York law, where changes to a public contract have the effect of creating a new contract, competitive bidding is required. That is the case here, and New York law requires that New York State open the proposed new concession to competitive bidding,” Kehoe wrote.

According to Kehoe, “[n]ot only is competitive bidding required by law, it is also in the best interest of New York and its citizens because public bidding, with the competitive nature of the recent Canadian bidding process as a guide, is likely to result in multiple bids, and a more lucrative concession for the people of New York than what the press has reported, are the terms of the unenforceable memorandum of understanding with Maid.”

That’s for sure. Hornblower has already started the bidding process with an opening bid, in effect, of over $100 million more than the deal Glynn and Cuomo cooked up.

While taxpayers in Niagara Falls, Ontario will be enjoying 30 years of increased revenues, it remains to be seen how the events on the U.S. side will play out.

Hornblower has now demonstrated that New York State, by shortcutting the legal process, is preparing to leave at least $100 million in revenue over the next 30 years on the table.

Hornblower appears determined, however, to make the case that New York State must conduct an open and competitive public bid for the boat tours. The deal Glynn cut with the Governor may not be settled yet, and Hornblower’s latest move certainly indicates that they have no intention of giving up on New York State.