Maid of the Mist attempts to defend New York Legal Challenge

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Maid of the Mist Corporation, the U.S. company that currently operates the boat service at Niagara Falls from the American side, has filed a response to the legal action filed by William M. Windsor to void the lease in New York State. Windsor filed his legal action on March 4 with the New York State Office of the Comptroller. It was directed to the Contracting Agency: New York Office of Parks, Recreation and Historic Preservation (“Parks Office”) and the Successful “Bidder,” Maid of the Mist Corporation.

The Parks Office failed to advertise or tender this contract for bids, so Windsor was denied the opportunity to participate in the procurement process. “No bids were taken and no public hearing was held because the Canadian agreement gives the company exclusive access to the river below the falls, making it a ‘sole source’ provider," said Angela Berti, a spokeswoman for Niagara Falls State Park in a statement to the Buffalo News in 2008.

According to the web site www.NiagaraFallsBid.com, when Windsor became aware of this statement in a newspaper article, he began investigating. He first contacted all government authorities in Canada and the United States to determine if there could be any validity to a claim that Canada controls the water beneath the Falls. The response was unanimous: the waters of the Niagara River are jointly used by both Canada and the United States by a long-established agreement. Windsor then obtained a copy of the lease between the Niagara Parks Commission and Maid of the Mist Steamboat Company Limited, the Canadian legal entity owned by James V. Glynn of Lewiston, New York (“Canadian Lease”). The Canadian Lease contains no such provision.

Windsor feels his legal action should result in a cancellation of the 40-year contract that Maid of the Mist Corporation obtained in 2002, and the contract should be tendered for bids.

Maid of the Mist Corporation responded to the legal action on March 11. The response was authored by Marc Brown of Phillips Lytle in Buffalo and was filed with Charlotte Breeyear of the New York State Office of the State Comptroller's Bureau of Contracts.  Brown stated that it is well settled under New York State Finance Law that a sole source procurement for services may be made without a formal competitive process. A “sole source provider” is the situation when there is no other bidder that could possibly provide the service. That is true, but that is not the case here.

Brown also stated that “It arises under unusual circumstances.” But this does not seem to be an unusual circumstance.

In his legal filing, Brown attempts to claim that Maid of the Mist Corporation was designated as a sole source provider because of its lease under “its Canadian corporation Maid of the Mist Steamboat, Ltd.” with The Niagara Parks Commission (“Canadian Lease”). According to the Ontario Bureau of Government Services, Maid of the Mist Corporation does not own the Canadian corporation. It is a separate and distinct legal entity, with different officers and board members, and the stock is not owned by Maid of the Mist Corporation.

Brown further claims that the Canadian Lease “allows Maid of the Mist Corporation to dock its boats on the Canadian side.” Windsor says this is false. Windsor provided a copy of the Canadian Lease to the New York State Office of the State Comptroller, and there are no provisions whatsoever granting any rights to the Maid of the Mist Corporation to dock its boats on the Canadian side. The Canadian Lease is with Maid of the Mist Steamboat Company Limited (“Steamboat”). Maid of the Mist Corporation is not mentioned anywhere in the lease. The United States is not even mentioned anywhere in the lease. There is no provision whatsoever indicating that Steamboat can allow any other legal entity to do anything on its leasehold.

In fact, Section 5.10 of the Canadian Lease specifically forbids Steamboat from subletting any part of the premises without written consent. Therefore, to allow a U.S. corporation to legally dock boats on the Canadian leasehold, a written consent of the landlord was required, and no such consent has been provided by Maid of the Mist or the Parks Service. Furthermore, Section 5.10 of the Canadian Lease says that such consent may be unreasonably withheld. This means that the ability of anyone other than the Canadian tenant to use space in Canada is totally at the whim of The Niagara Parks Commission.

The Canadian Lease was executed in 1989 and expires in November 2009. This means that the lease that the Parks Service claimed as justification for naming Maid of the Mist a “sole source provider” is about to expire. The Parks Service had no assurance that Maid of the Mist Corporation could even perform on the contract for the last 33 years of the U.S. contract (2010 to 2042) as there was no assurance that dock space in Canada would be available once the current Canadian Lease expired.

Brown attempts to claim that docking boats on the Canadian side is an unusual circumstance because he claims there is insufficient room to dock boats on the United States side of the river. Windsor says this is false, irrelevant, and is not an “unusual circumstance.”

This claim by Brown seems irrelevant to the Parks Service. It is the Winning Bidder’s responsibility to provide the service, and if the Winning Bidder cannot fulfill the terms of the contract, they should not have the contract.

This is not an unusual circumstance. There are many ways that Maid of the Mist Corporation could dock and/or store its U.S. boats.

1. Maid has two boats that have long operated from the dock at Niagara Falls State Park on the United States side of the river; Maid could simply keep their boats docked there.

2. During the winter season, Maid could remove their boats from the river by crane and transport them to storage at any number of locations in Niagara Falls.

3. Niagara River is approximately 27 miles from the Falls to the rapids; Maid could lease dock space on either side of the river somewhere along the 54 miles or so of shoreline and simply navigate the boats to Niagara Falls State Park to start each day.

4. Another option would be that the winning bidder in a tender process in the U.S. could lease space from the operator of the boat service on the Canadian side. That should not be a problem if Steamboat holds the lease in Canada. If Windsor wins the tender in Canada, he says he will agree to lease dock space to the winning bidder in the U.S.

5. The Niagara Parks Commission could also be asked to provide such a provision in its lease that allows the U.S. contract-holder to dock its boats there.

The bottom line to Maid of the Mist Corporation's defense is that the Parks Office in New York State determined that the docking of boats in another country justified the Parks Office to designate Maid of the Mist Corporation as the sole source for this service. This is not reasonable, fair, or equitable.

The position that Maid of the Mist took on this matter is completely different from the position they took just a week ago in Canada. As reported in Niagara Falls Review, the Canadian argument presented to Minister of Tourism Monique Smith was that it would be impossible for a newcomer to get boats onto the Niagara River to provide the service. That position was ridiculed far and wide in newspapers such as the Niagara Falls Reporter. So, this week, it’s that the only place for an American company to dock boats is in Canada. We wonder what next week will bring.

According to the New York Finance Law, the procurement of goods and services by the State of New York should be carried out responsibly and should be effectively managed in accordance with generally accepted procurement principles of competition and obtaining value for money. With this contract, there was no competition. With this contract, the State of New York did not obtain value for money.

Windsor says he is prepared to bid substantially more than Maid of the Mist for this contract, and he has advised the State of New York that he believes there will be many other bidders. The recent award by the National Park Service of the Statue of Liberty and Ellis Island ferry contract had many bidders. Windsor anticipates that the current ferry operators in New York will bid on this contract, including Hornblower Cruises, Circle Line, Circle Line 42, New York Waterway, New York Water Taxi, Entertainment Cruises, and others. It is believed that Ripley’s wants to bid in New York as they have made clear their desire to bid in Canada.

The State of New York did not receive value for money in this contract. The Canadian Lease pays 15% to the government. The proposed new lease in Ontario starts at 17.5%.  The New York lease pays only 10%.

A review of Article XI, Section 163 of the “New York State Finance Law” makes it clear that New York State’s objectives are to facilitate each state agency's mission while protecting the interests of the state and its taxpayers and promoting fairness in contracting with the business community.

The state's procurement process shall be guided by the following principles: To ensure that contracts are awarded consistent with the best interests of the state.

It is not fair to the taxpayers or in the best interests of the taxpayers to receive far less revenue from this unusually long lease than could be realized in a competitive tender. There is no fairness in the business community when many interested bidders are shut out of the process.

Section 163 also states: “…procurements shall be competitive, and state agencies shall conduct formal competitive procurements to the maximum extent practicable.” The Contracting Agency didn’t even try to pursue formal competitive procurement of this contract. All the Parks Service had to do was add a requirement that any bidder had to obtain dock space somewhere other than at Niagara Falls State Park.

Section 163 also says: “State agencies shall minimize the use of single source procurements and shall use single source procurements only when a formal competitive process is not feasible.” A formal competitive process was absolutely feasible in this case.

Section 163 also says: “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.” There was no valid basis for this “sole source determination.” But this clause makes it clear that such determinations are to be limited. In this case, there was no basis for a 40-year contract when the alleged reason for the sole source provider designation could not be assured past November 2009. The Canadian Lease expires in November 2009, so New York State has no justification for how it entered into a contract for 33 years beyond that date.

Windsor said today: “It really doesn’t matter how you look at this contract. It was a mistake that it was issued without a tender, and it was a mistake to issue it for 40 years based upon the facts.”

It is not known when the New York State Comptroller’s Office will render a decision in this matter, but a decision is expected fairly soon.