Well,
that got the blood boiling, didn’t
it?
We
thought we’d gotten rid of the guys who teased us with the ferry and then shut
it down. But no. Here they are again, running the ferry terminal building and
making money off of it.
I
swear, every person I’ve run into since the D&C story hit the streets has been
apoplectic over this. And I admit it: I was fuming right along with them,
scowling and cursing over my breakfast last Thursday. But I’ve been poking
around a bit. And it looks to me like there’s more — or less — here than
meets the eye.
Here
are the facts:
In
2001, the City of Rochester signed an
agreement with Canadian American Transportation Systems. The agreement gave
CATS the right to operate a fast-ferry service between Rochester and Toronto —and to
lease and manage the terminal building.
CATS
would be responsible for maintenance, repairs, and improvements. It would pay
$1 a year in rent for 40 years. And the agreement stated specifically that CATS
could “lease space in the terminal to subtenants.” That, obviously, means that
CATS could earn money from the ferry terminal.
Was that a
“sweetheart deal”? Some of us may think the city gave away too much, but a
couple of things are worth noting.
First,
city officials — and many others — wanted the ferry to succeed. They were
convinced that the ferry could generate a lot of economic activity for the
region. And more economic activity, you may have noticed, is something we
sorely need.
The
ferry was a risk from the outset. Everybody knew that. And the people most at
risk were the people who had invested in CATS. One observer puts it this way:
The city’s investment risk was building the ferry terminal. But CATS was buying
a $50 million boat (yes, with a good bit of help).
Second:
A nice ferry terminal with restaurants, stores, and services could help the
ferry succeed. But developers weren’t exactly lined up at the door, pleading
for the rights to the terminal. The terminal was a shell. The operator would
have to fix the place up inside, find tenants, manage the place, pay for
insurance: not a short-term investment.
In
addition, the stores and services in the ferry terminal needed to be compatible
with the ferry operation. You wouldn’t want an adult bookstore there, just as a
for-instance. And you’d want the hours of the terminal compatible with the
ferry operation.
So
it made sense to have the terminal operated by people with a vested interest in
the ferry itself.
Thus:
CATS.
CATS,
in turn, subleased the retail space in the terminal to its affiliate Maplestar
— perfectly legit under the city’s agreement.
Maplestar is a
completely separate entity from CATS. But as we all know, two of the principals
of CATS — Dominic DeLucia and Brian Prince — are principals of Maplestar.
This
kind of arrangement isn’t unusual. And there’s nothing inherently shady about
it. Like many companies, CATS had investors. Some of them may have wanted to
invest in the ferry but may not have wanted to be involved with the terminal.
Austal Ships, which built the ferry, for instance, was a principal of CATS but
not of Maplestar. CATS was set up as a transportation company, Maplestar as a
real-estate firm.
In
February 2004, CATS asked the city to sign that controversial “non-disturbance
agreement.” This, as city officials have pointed out, is a common procedure in
commercial real estate, designed to protect tenants and sub-tenants. The small
retailers who were renting space in the terminal were spending money fixing up
their space. And when small retailers need loans in such situations, it’s
common for banks to insist on a non-disturbance agreement. The agreement says
that the subtenants can stay in the building even if the major tenant is forced
out.
The
terminal’s subtenants included businesses like Abbott’s and California Rollin’
— and Maplestar. So when CATS was forced out, Maplestar, like the other
businesses in the terminal, was protected. As long as it does a good job
managing the terminal, Maplestar’s there legally.
Hindsight’s
great, and you can wish now that the city had done something to lock Maplestar out.
But what?
If
the city had not signed the non-disturbance agreement, the retailers might have
had trouble getting loans — and Maplestar might have had trouble getting
tenants for the terminal.
And
remember this: In February 2004, there was no sign of trouble. The terminal was
under construction. The ferry had been built. It had completed its sea trials
and was preparing to set out for Rochester that very
month.
The
argument will continue about the mayor’s judgment in this deal. But let’s be
honest. We’re mad because we helped Delucia and Prince get a ferry, and then
they seemed to become the gang that couldn’t shoot straight. What we really
want is to punish them.
Stay
tuned…
I’m
not all worked up about Maplestar managing the terminal’s retail end, as long
as it does a good job. I am getting a
little twitchy about something else: the parking lot adjacent to the terminal.
CATS
had the rights to that, too. Does Maplestar’s sublease give it the right to
manage — and make money off of — the parking lot?
In
her discussion with me on Monday, City Attorney Linda Kingsley said no. But her
wording was instructive: “It’s our position that we control the parking lot.”
And then she added: Maplestar “may feel otherwise.”
Does
that mean Maplestar might insist on controlling the lot? Might take the city to
court over it? “They can try,” said Kingsley. But, she said, the parking lot
“is not described in their sublease.”
This article appears in May 18-24, 2005.
