Niagara Parks Commission Sued to void $500 Million Lease

A lawsuit was filed on February 26, 2009 against The Niagara Parks Commission and Maid of the Mist. The lawsuit asks the Divisional Court to issue a mandatory order requiring the Niagara Parks Commission to adhere to Corporate Policy CPM-03-02, the Niagara Parks Procurement Policy.  That policy provides specific requirements for seeking competitive bids for goods and services. 

Maid of the Mist was secretly given a 20-year lease that is estimated to generate over $500 million for Maid of the Mist.  It is believed that the lease will pay $78 million to The Niagara Parks Commission, but other parties asked to bid and were denied.  William M. Windsor says he and Alcatraz Media will submit a bid that should pay double - $156 million to The Niagara Parks Commission.

The lawsuit seeks to have the lease between The Niagara Parks Commission and Maid of the Mist voided because the Procurement Policy was not followed.  But the lawsuit may have much broader impact in addressing issues raised by Bob Gale, Protect Our Parks, OPSEU Local 217, and others saying the Procurement Policy has not been followed on many deals.

Bill Rudd, President of OPSEU Local 217 – the union of the employees of The Niagara Parks Commission, has said: “My concerns with the way Niagara Parks does business is directly related to their poor spending practices hurting the corporation. The conditions of the Park have deteriorated over the last few years and the number of the people employed has fallen significantly.  I care about both the people, the way our Park appears, and following proper procurement policy is one way to make sure that revenues accomplish the most.

Rudd says management has not taken steps to control waste.  “I have voiced my concerns to the general manager and several of the directors of The Niagara Parks Commission, and while they all have listened, little has happened to control wastage.  Instead they cut jobs of the local workers to limit their deficit. 

“Tendering of what we purchase and when we rent out our property is almost nonexistent, there is common belief that only people that are connected to certain commissioners will even know when we rent out park land, and the public is not treated equally.” 

Windsor and Ripley’s Entertainment inquired about bidding on the boat service, but The Niagara Parks Commission told them it was not considering bids.  Windsor began his efforts in August 2005, and Tim Parker of Ripley's began his efforts in January 2008.  In April 2008, The Niagara Parks Commission approved a 20-year lease for Maid of the Mist.  The lease was negotiated secretly, a year and a half before the current lease expires, and there was no tender.

The lawsuit, a Notice of Application for Judicial Review, was filed yesterday by Graydon Sheppard, Hamilton, Ontario-based solicitor representing William M. Windsor.  Case # DC 09-105JR is titled William M. Windsor vs. Maid of the Mist Steamboat Company Limited and The Niagara Parks Commission. Affidavits of William M. Windsor and Bob Gale accompanied the filing. This application will be heard by the Divisional Court, which is composed of a panel of three Superior Court judges.

When asked why he filed the lawsuit, Windsor said: “I have hoped that The Niagara Parks Commission would do the right thing, but they haven’t.  I have hoped the Ontario Integrity Commission would rule on Commissioner Bob Gale’s ethics complaint over the way the lease was handled to the exclusion of interested bidders, but nothing has been done yet.  I wrote to Premier McGuinty in hope that he might get involved.  Premier McGuinty wrote me, but he referred me to Minister of Tourism, Monique Smith.  Minister Monique Smith wrote me to say that I needed to take my issues to The Niagara Parks Commission.  Unfortunately, that’s the entity that I have a problem with, and The Niagara Parks Commission has never responded to me on any of my emails, faxes, and calls over the last several months.  So, I feel that this legal action is the best way to ensure that this matter is handled properly and according to the law.”

When The Honourable Monique Smith wrote to Windsor in December, she advised him that the Niagara Parks Act grants The Niagara Parks Commission the rights relative to leases.  Windsor said: “Based upon my review, the Niagara Parks Act actually seems to be silent as to leases.  Section 4(k) of the Niagara Parks Act does, however, say that the Commission may ‘make agreements with persons with respect to the operation by them of any works or services in connection with the Parks.’ ”

Under the Niagara Parks Procurement Policy, procurement of services in excess of $100,000 requires tender.  As with the Niagara Parks Act, the Niagara Parks Procurement Policy speaks to agreement for services.  The so-called “lease” to provide boat services is actually a revenue-sharing agreement (percentage of revenues with no fixed or minimum lease amount) for a service offered to visitors to the Niagara Parks.  The 20-year agreement is estimated to generate $78 million for The Niagara Parks Commission, so it dramatically exceeds the $100,000 threshold. 

The mandate of The Niagara Parks Commission is to “maintain economic self-sufficiency through the application of sound business practices.  One of the most important sound business practices is to obtain “fair market value” for assets and avoid financial problems.

“Our Mandate

“The Niagara Parks Commission is an Operational Enterprise of the Government of Ontario, incorporated by an act of the Provincial Legislature on April 23, 1887.  We are obligated to maintain economic self-sufficiency through the application of sound business practices and we must function under the terms set out in the Niagara Parks Act, the Memorandum of Understanding between the Minister of Tourism and the Commission and some sections of the Corporations Act. Along with stewardship responsibilities, Niagara Parks must fulfill a broad range of activities laid out by government, as detailed in the Act under General Powers and Duties (Section 4) and Regulations (Section 22).”

Windsor has said: “I am told that The Niagara Parks Commission has financial challenges. I believe they are operating at a deficit.  I have said that I am prepared to submit a bid that will pay twice as much as Maid of the Mist.  I imagine an additional $78 million over the next 20 years would resolve most, if not all, of those challenges.”

The published policies of the Province of Ontario provide, at the very least, a guideline for how leases are to be handled.  The Province of Ontario has a policy on leasing government land.  “Obtaining a fair return for public land will be achieved through the application of “market value”. (http://www.mnr.gov.on.ca/MNR_E005003.pdf)  “For purposes of this policy, market value shall be defined as that used by the Appraisal Institute of Canada (2007).  ‘Market value is the most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite for fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.’ ”

The Application Review and Land Disposition process is covered by Policy 4.02.01 (http://www.mnr.gov.on.ca/255939.pdf).  It says:

“3.4 (G) To maximize non-tax revenues.

“The Crown, representing the people of Ontario, should receive fair compensation when rights to public land are disposed of (disposition is defined as sale or lease).”

Section 4.0 of Policy 4.02.01 addresses “marketing:” 

“4.1 Public offerings may be made to applicants on the basis of first come, first served; request for proposals; public tender; public auction; public draw; MNR advertisement; or realty listings.”

Windsor says “First come, First served” does not apply in this case as the requirements for that are not met; the supply of such sites does not exceed demand (as there are no similar sites), and similar sites have not been previously offered, but not taken up, in another type of previous public offering (e.g. auction, tender or draw), within the preceding five years.”

Every other means requires “advertising.”  In the case of the Maid of the Mist lease, the deal was made privately and secretly.  None of the methods set out in 4.1 of Policy 4.02.01 were used: request for proposals; public tender; public auction; public draw; MNR advertisement; or realty listings.

Windsor says “the policies of the Province of Ontario are very clear.  Leases are not to be granted on a secret, private basis.  This seems to me to be a case of a deliberate violation of the policies of The Niagara Parks Commission and the Province of Ontario.  I believe such a violation would be an ethics violation.

Ethics is defined as “the rules or standards governing the conduct of a person or the members of a profession.”  Government employees are required to abide by the law and published policies.  The Niagara Parks Commission failed to abide by the published policies. 

Surely fiduciary duty is one of the most important ethical responsibilities of public servants.  A fiduciary duty is defined as “an obligation to act in the best interest of another party.”  The failure to abide by the published policies and the rush to approve a lease early without determining fair market value surely provides a violation of fiduciary duty.  Windsor says “I have stated that I am prepared to submit a bid that will double the amount of money that The Niagara Parks Commission will receive.  If revenues remain flat for 20 years at $26 million annually, the Maid of the Mist lease will pay $78 million.  My bid will provide detailed projections to show that I project paying $156 million.  Tim Parker of Ripley’s has stated that his proposal will also pay more.  I believe the failure of The Niagara Parks Commission to come to within tens of millions of dollars of “fair market value” must be viewed as a major breach of fiduciary duty.”

Integrity may be seen as “the quality of having a sense of honesty and truthfulness in regard to the motivations for one's actions.”  Windsor says “As I see it, the Integrity Commissioner must find that the rush to secretly get the lease approved 18 months in advance while Ripley’s was working feverishly to get the opportunity to bid did not reflect a sense of honesty and truthfulness in regard to the motivations involved.  If the Commissioners were told that no one had ever expressed interest in bidding, as I believe is the case, those who made such a statement lied.”

Niagara Parks Commissioner Bob Gale objected to the way the Commission handled the Maid of the Mist lease.  He questioned why such an important lease was renewed without finding out who else might be interested in it.  Gale filed a complaint with Ontario’s Integrity Commissioner saying the parks commission erred by not putting the lease out to tender.  Gale provided an affidavit in support of Windsor’s application that is part of the legal filing.

 Windsor has been trying since October 2008 to get The Niagara Parks Commission, the government of Ontario, the Minister of Tourism, or the Integrity Commission of Ontario to take action to correct this injustice.  “I finally gave up.  I began to fear that the Integrity Commission might whitewash what happened, and I doubt that the Integrity Commissioner has any actual authority to void the lease.  So, we filed our lawsuit.”

The union of the employees of The Niagara Parks Commission has many stories critical of the Commission on this issue posted on its web site at www.opseu217.com/mambo/.

Preserve Our Parks, a citizen’s group that works to protect Niagara Parks also has many stories critical of the Commission posted on its web site -- http://protectourparks.wordpress.com/.  Preserve Our Parks has written numerous letters to the Minister of Tourism trying to get something done about various issues with The Niagara Parks Commission.  Mrs. Patricia Mangoff, coordinator of Preserve Our Parks, recently wrote this to Minister Smith: “As an agency of the government that aims for financial self-sufficiency, why would the NPC not allow an RFP/competitive bidding process on the boat lease to generate the greatest financial benefit possible (potentially $50 million more)?”

Boat service has been provided at Niagara Falls since 1846.  The Province of Ontario and the State of New York lease the land to a third party so that boat rides can be offered at Niagara Falls.  Since the boat rides began 162 years ago, only one entity has held the lease rights.  These rights in Canada are granted by The Niagara Parks Commission. This is an exclusive that gives the lessee, Maid of the Mist, an exclusive monopoly with no competition whatsoever.

According to a recent article in the Buffalo News, 2,500,000 people take the Niagara Falls boat ride each year.  Windsor estimates the annual revenues to the lessee to be $26 million annually.  It is not known what prices have been charged over the years, but if the current revenue is generated for the next 162 years, the lessee will generate over $4.2 BILLION DOLLARS US.

There has been no indication that any company other than Maid of the Mist has ever been given the opportunity to bid on the lease rights.

If the Divisional Court finds in favor of Windsor, the Maid of the Mist lease will be voided, and the lease will be tendered for bid.  Windsor, Ripley’s, Maid of the Mist, and several others are expected to bid.

A ruling in Windsor’s favor will also establish that the Procurement Policy should have been followed on all agreements with The Niagara Parks Commission for goods and services.  This would open the door for many others to assert claims that their rights were violated when they were excluded from opportunities.