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New Rochester mayor faces tough ferry decision
January 2, 2006

The city of Rochester New York has a new mayor--former police chief Robert Duffy.

Among the tough choices Duffy faces is what to do about the fast ferry that Rochester bought last February with a $40 million loan.

The ferry is operated between Rochester and Toronto, Canada, by Bay Ferries Great Lakes as manager for the city-owned Rochester Ferry Co.

Delayed start up of the operation contributed to its making a $10 million loss in its first 10 months. The City Council last month gave tentative approval to additional borrowing to keep the ferry venture going.

Now the Rochester Democrat & Chronicle Reports Mayor Duffy as saying he'll decide this week on whether he'll support finding another $11.5 million for the project.

Marine Log

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Changed subject title of thread to:

Rochester-Toronto ferry demise

from original:

Rochester-Toronto ferry up in the air

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[ 02-05-2006: Message edited by: bulbousbow ]

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$11.5M ferry question still unanswered
City Council delays decision on whether to borrow more
Brian Sharp/Staff writer
January 4, 2006

The fate of the high-speed ferry will remain undecided until at least next week as city leaders said Tuesday they again were postponing a decision on whether to borrow another $11.5 million for the ship.

City Council President Lois Giess said she offered Mayor Robert Duffy more time, and Duffy said he gladly took it.

"We are just going through that process of learning, understanding it," Duffy said. "I'm not trying to signal anything to anybody. ... I certainly understand the urgency."

The money is needed to ensure a full season for the Rochester-to-Toronto ferry, which exhausted its reserves after a midseason startup in 2005.

City Council was poised to act on the $11.5 million proposal last month, then Duffy asked for a postponement until he took office. The council went ahead with legislation authorizing the ferry board to borrow the money but not until Thursday or later. The date had been perceived as a deadline, furthered by a statement attached to the legislation noting a "firm commitment" to call a special council meeting today or Thursday to appoint members to the ferry board if Duffy agreed to go forward.

"It was never set in stone," Giess said, adding later: "I know we have a critical time frame. I don't think a few more days jeopardizes that time frame."

But City Councilman Benjamin Douglas, who serves as ferry board president, said further delay puts the project in further jeopardy, particularly when it comes to marketing the ship in Canada. A lack of marketing was partly blamed for low ridership and multimillion-dollar losses.

"It is a little frustrating to then find that opportunity is again slipping through our fingers," Douglas said, and to those who minimize the significance of Tuesday's decision: "They don't understand. They don't understand the urgency."

The city backed a $40 million loan and created Rochester Ferry Co., which then bought the ship last February. Rochester Ferry hired Bay Ferries Great Lakes LLC to manage the ship. Service began June 30 and continued into last month. However, the first year financial report showed $10 million in losses, with Bay Ferries still owed $2 million of that total. Maintaining the ship and skeleton crew will cost another $430,000 this month alone.

"We urgently need to have a decision in a timely fashion if we are going to be successful," said Douglas, who agreed to hold off until next week. "If Mayor Duffy is not ready to move forward ... we should give him that time. This project cannot go forward without the support of the mayor."

Duffy had maintained as late as Tuesday afternoon that he was prepared to make a decision by week's end. Instead, he will take the time for sessions with Giess, Douglas and Bay Ferries' leadership, among others.

"We will not unnecessarily delay anything," he said.

Duffy will go to Albany today for Gov. George Pataki's State of the State address but does not plan to lobby for state tourism dollars for the ferry while there. That work will come soon enough, however, as Duffy said he plans to make monthly trips to the capital to lobby for increased state aid to Rochester.

Rochester Democrat and Chronicle

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Toronto Port Authority Responds to Cancellation of Rochester Ferry
January 10, 2006

TORONTO, - The President and CEO of the Toronto Port Authority, Lisa Raitt, today issued the following statement in response to the decision by the Mayor of Rochester and City Council to discontinue support of the high speed ferry service between Rochester and Toronto.

"Naturally, the Toronto Port Authority is disappointed by the decision of Mayor Duffy and Rochester City Council to discontinue the high speed ferry service between our two cities.

"It is unfortunate that the vessel suffered startup challenges in its first two seasons and was never able to realize its full potential, despite having handled over 250,000 passengers, 38,000 vehicles and achieving high levels of customer satisfaction.

"The International Marine Passenger Terminal will continue to host Great Lakes cruise ships and we will pursue alternative tenants and uses for the facility.

"We are proud that we were able to open Canada’s first new border crossing in the past 40 years. This is a first class facility with state of the art customs service. It is regrettable that the ferry was cancelled before it could achieve commercial success."

Canoe Inc.

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Feelers already put out on ferry
Big questions are how much city can get, how long it'll take
Brian Sharp and Steve Orr
Staff writers
January 13, 2006

While the field of potential buyers for Rochester's high-speed ferry may be limited, selling the ship should not be difficult, officials said Thursday.

News of the ferry's availability already has spread worldwide through the network of ship brokers and prospective buyers, and the city already has begun receiving inquiries.

The question becomes how much the city can get and how long it can afford to wait for the best offer.

"You're not going to have to go all over the country, and you're not going to be able to sell it on eBay," Rochester's corporation counsel, Thomas Richards, said of the pros and cons of the market. "The significant thing that influences the value of this boat is to develop interest in it from more than one buyer. That will take a little time. You have to be patient."

Mayor Robert Duffy announced Tuesday that the city was getting out of the ferry business, which lost $10 million in 10 months last year. The decision halted a two-year run crippled by shortened seasons and fraught with problems.

"There's not a large number of fast ferries sold each year, but there is a ready market," said Thomas Roberts of Compass Maritime Services, a Fort Lee, N.J., ship broker.

Roberts said the sale could be accomplished relatively quickly — within a month or two, which includes time for prospective buyers to inspect the vessel.

Richards said a timeline should take shape quickly but for now the expectation only is to sell the ferry before the St. Lawrence Seaway closes in December. He said it is not imperative to unload the ship before the summer season as most interest likely will come from year-round operations.

Recouping costs

City leaders are beginning work on a plan to estimate how much of Rochester Ferry Co.'s estimated $42 million debt will remain for the city. Richards estimates the city will get no less than $20 million for the ship. The city paid $32 million at a federal auction 11 months ago. "If we could find the right people, there's real value here," Richards said, stressing that this is not a fire sale.

Former Mayor William A. Johnson Jr., the lead supporter of the ferry, continued to decline comment Thursday.

The city first must repay $2.5 million owed to manager Bay Ferries Great Lakes LLC, which otherwise could place a maritime lien on the ship and block the sale.

Richards said he was unclear whether the Toronto Port Authority could obtain a lien, given its contract guaranteeing $250,000 annual rent for 14 years. He said the plan is to negotiate with the Canadians.

Easy sell

As for selling the ship, the city could give exclusive rights to a single broker, or engage several brokers who would compete for the fee. Ship brokers typically earn a fee of 1 to 2 percent of the sale price, city officials said.

"I can't imagine it's going to be difficult to sell her," said David Buzanoski of the ship brokerage Jacq. Pierot Jr. & Sons.

Compass and Pierot are especially familiar with the ferry: Both companies were hired a year ago to appraise the vessel as it moved through a federal foreclosure auction after the initial owner shut down. Pierot valued it at $30 million and Compass placed the value between $25 million and $30 million, according to court documents. How much the ferry will fetch now is the key question.

Among the things that are different now versus then is a $1.3 million engine upgrade, and reinstated warranties that cost Rochester Ferry about $300,000 annually, Richards said. The foreclosure canceled warranties, leaving the engine fix as an out-of-pocket expense for the upstart operation last year.

Roberts didn't want to provide any estimate of the ship's sale price, though he did say Richards' $20 million base figure wasn't unreasonable if prospective buyers are satisfied the ship is in good shape.

Where will it go?

Where the ferry might end up is another open question. Many ferry operators use vessels that — like the Spirit of Ontario — were built for use on specific routes, Roberts said. The vessels have the size, speed, amenities and cargo space that the operator wants for the market he is serving.

That doesn't mean that ferry operators won't be interested in buying Rochester's vessel, he said. But because they may have to shoehorn it into an existing operation or even modify it to fit their needs, "it's a slimmer chance to find a buyer who's willing to pay up," Roberts said.

Still, he said, when the ferry went up for auction a year ago, he heard from four or five ship brokers representing clients interested in buying the ferry. None submitted bids, but Roberts plans to contact them again.

Before the city bought the ferry last year, Istanbul Fast Ferries, a Turkish company, and American Sealift, a company affiliated with J.F. Lehman & Co. of New York City, inspected the vessel and were considered potential bidders. But both companies backed away without disclosing their reasons.

Not on Great Lakes

John W. Waggoner, president of an Indiana company that operated the ferry for its original owner, said it is too large and too costly to operate in any market on the Great Lakes.

"That vessel needs to compete with an airline on a route like Miami or Fort Lauderdale to the Grand Bahamas, or in Greece, for example," said Waggoner, whose Hornblower Marine Services also advised the Duffy administration on the viability of continuing operations.

Waggoner, whose company now operates a smaller high-speed ferry on Lake Michigan, said the Spirit of Ontario "is a great piece of hardware. ... I don't think they'll have any problem selling it."

Rochester Democrat and Chronicle

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City needs $3.1M to buy out ferry contracts
Brian Sharp
Staff writer
January 13, 2006

City officials estimate they will need $3.1 million to continue existing high-speed ferry contracts, or buy them out if necessary, according to legislation before City Council.

The Council is scheduled to vote Tuesday on borrowing $9.4 million from the city insurance reserve . The total is reduced slightly from Mayor Robert Duffy's initial estimation of $9.5 million.

Other expenses include repaying manager Bay Ferries Great Lakes LLC, which is owed $2.5 million; warranties; payments on the $40 million borrowed to buy the ship and begin operations last year; and maintenance, personnel and insurance until the ship is sold.

The main contracts outstanding involve Bay Ferries and the Toronto Port Authority.

Duffy announced Tuesday that the city was shutting down the ferry after a troubled season in which the operation lost $10 million in 10 months. The city bought the ship at federal foreclosure auction after the initial operator shut down in 2004.

Addressing City Hall employees during his weekly "roll call" today at City Hall, Duffy said: "I do believe there's going to be somebody who is going to want to come in and bring a service to that port ... we are not going to give up on that port."

Rochester Democrat and Chronicle

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Ferry deal shows Duffy has firm hand on reins
Decision to pull plug suggests he's a strong leader, though skeptics question his motives
Joseph Spector
Staff writer
January 14, 2006

Mayor Robert Duffy could have easily gone a different route.

In December, City Council approved borrowing $11.5 million to keep the high-speed ferry solvent for one more year. Duffy could have taken office Jan. 1, had money to run the ferry for a full season and then waited to see whether it would become financially viable.

But Duffy, in his 10th day in office Tuesday, made the first decisive action of his administration: He pulled the plug and plans to sell the ship to limit losses to taxpayers.

The decision has been big news not only for what it means to the city's economy, but also for what it says about Duffy's leadership.

Criticized by some during the mayoral campaign for lacking the skills to run a government, the retired police chief has already proven to many leaders that he can make prompt decisions and have a clear vision for Rochester.

Yet skeptics question whether the Democratic mayor sought only to make the best political move, spun it to suggest the project had run amok and relinquished a last opportunity to make the ship a success.

Either way, most leaders agree on one thing: Duffy has shown, at least so far, that he's not afraid to make hard choices.

"It clearly shows that he's a strong leader and willing to make tough decisions once he has all the facts," said Bill Nojay, a Republican critic of the ferry. "What has always been disturbing about the ferry project is how many people supported it without really understanding it."

Duffy's decision also raises other questions: If he was able to cut ties with one of the city's flagship projects, what else may be on his chopping block? How much of predecessor Mayor William A Johnson Jr.'s initiatives will remain intact?

Already, there are indications he will revamp the Neighborhood Empowerment Team program, which Johnson established and which a report this week found has not met its mission of improving city streets.

While he won't let on what other changes he will make, Duffy said that city services will be closely examined during his first 100 days in office. He denounced critics who, he said, had suggested, "I was going to be someone's puppet and not make my own decisions."

"If something does not work well, we are going to work very hard to improve it," he said. But if it can't be fixed, "I'm not afraid to say that we are going to stop doing something."

Making the choice

Duffy and his staff are quick to point out that the decision to end ferry service to Toronto wasn't a snap judgment. As he built his transition team and interviewed candidates for his administration, Duffy and his advisers also spent much of December reviewing ferry documents provided by the outgoing Johnson administration.

Duffy is known as someone who likes to "review the data," as he often says, before making a decision.

The ferry issue was no different. Aides said he was often seen carrying home stacks of information to read at night and attended every meeting of his staff when the ferry was discussed.

Deputy Mayor Patricia Malgieri said Duffy kept pushing advisers to seek out all information about the ferry and do so without bias. She and Duffy said that it became clear to them only close to his inauguration that the ferry faced too many financial hurdles to continue.

Still, staff met up until late Sunday at City Hall to debate whether there were other options. "Until the end, he would say 'Is there anything that we didn't talk about in favor of the ferry?'" Malgieri said.

Then they had to convince the public. As police chief for seven years, Duffy developed an ability to defuse controversy and build community confidence in his decisions, local leaders have said. He was rewarded by winning more than 70 percent of the vote on Election Day.

The ferry presented a similar challenge. He and his staff recognized that they had to make a strong case to sell the ship — a case, Duffy said, that had to be based on facts.

During his 12-minute televised speech at 5 p.m. Tuesday, Duffy gave examples of why the service should end:

One, it would keep losing millions even under the rosiest picture; and, two, tax dollars should be used for other purposes — such as hiring more police.

"It was brilliant," said Timothy Kneeland, a Nazareth College political science professor. "Ten days into his administration he makes a decision that was rhetorically nicely justified."

Kneeland said Duffy was also able to brush back questions about his ability to lead: Would he be an empty suit, overhandled by advisers and beholden to the legacy of Johnson, who backed his candidacy?

"We don't make decisions because they're popular or because they're easy or because they're cheap. We make them because they're right, and I think that's what he did," said Dennis Mullen, president and chief executive of the Greater Rochester Enterprise.

Moving forward

But not everyone is cheering what Duffy did. Some city officials, including Johnson, spent long hours trying to salvage the ferry after the ship's original owner ended service in 2004.

They were hoping for a full year of operation to give it a chance to work. Johnson, the project's main backer, has refused to discuss Duffy's decision. Others, including Council President Lois Giess, say they commend Johnson's efforts.

Some officials have taken issue with how Duffy noted that some ferry contracts, in particular a $250,000-a-year contract to dock the ship in Toronto, had been "discovered" by his staff, suggesting that it had not been known to the public.

City Councilman Benjamin Douglas, who heads the city-run Rochester Ferry Co., said the contracts were public for months. He said he respects Duffy's decision, but charged that facts are being twisted.

"You step off the path when, postmortem, you try to blame people and blame them unfairly," he said.

Fellow Councilman Adam McFadden contends that Duffy is seeking to borrow $9.5 million to sell the ferry, so why not borrow the $11.5 million and see whether the ship can sustain itself.

"It was a political decision," he said. "Killing it now makes it Bill Johnson's mess. Killing it in a year from now makes it his mess."

Duffy said it was clear that another year of operation would have just put the ferry deeper in debt. He added that the decision was not about politics or trying to criticize the Johnson administration.

"We were able to come to the table without being emotionally attached to the project from the start and look pragmatically at it," he said.

Duffy's decision has also raised new questions about whether Johnson's administration had let the project spiral out of control. Duffy said it appeared that City Hall staff spent so much time on the ferry that government resources were strained.

Brian Curran, who recently retired from City Council and had long been a ferry critic, said the analysis by Duffy and his staff indicates how the project lacked clear oversight.

"We were in a situation where people were operating on the basis of hope and imagination instead of dealing in fact and practical objectives," he said.

"And when you do that, you almost always end up with serious problems."

Rochester Democrat and Chronicle

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Ferry follies: From comedy to tragedy
By JOHN BARBER
January 14, 2006

It was barely six months ago that the Toronto Port Authority opened a new, $11-million terminal building for the already bankrupt Rochester ferry, which floundered through a second season before going kaput for good this week. This final failure gave TPA chief Lisa Raitt, famous for her ability to reveal shining light in the blackest pictures, the chance to hail her brand-new, now-useless terminal as "a wonderful piece of infrastructure."

With mothballs arriving to confirm the wonderfulness of this latest waterfront boondoggle, the TPA is busy pouring even more millions into yet another ferry operation serving yet another route that nobody wants to travel -- across the Western Gap to the bankrupt island airport.

The project, including a new boat, terminal and dock walls, is budgeted at $15-million. Revenue from all the passengers who abandoned the island airport long ago, leaving it with the merest handful today, is supposed to pay for it. (This is known in wonderful-infrastructure circles as "the Rochester model.")

And if that doesn't work, the TPA can always fall back on its most reliable source of capital funding: outrageous lawsuits against the city.

There couldn't be two better examples of the misallocation of public resources than these interlinked, binational ferry follies. Though neither is as vast a swindle as the good old SkyDome, they are textbook examples of how easily money-hungry corporations, non-accountable institutions and glad-handing freebooters can hijack a rational public-works program to serve their own interests, public be damned.

But the folly wouldn't be complete if there weren't already an important and popular ferry service in Toronto, one that carries well over one million passengers a year, actually makes money, is among the most valuable, postcard-worthy tourist attractions in the city and, despite all that, is pathetically underfunded.

What can one say about the condition of Toronto's famous, five-boat fleet of island ferries? Mainly this: Thank goodness for the Canadian Coast Guard, which regularly mandates safety upgrades and maintenance. And three cheers for the genius mechanics who keep the ferries' ancient engines turning over -- they're the local equivalents of those famous Cubans with their smooth-running Hudson and DeSoto sedans of the same vintage.

"We could definitely use an infusion of capital funding," said ferry manager James Dann, adding that all five boats "could all use a big infusion of dough."

Although the ferry operation delivers an average of about $500,000 in annual profits to the city, the cost of maintenance varies between $50,000 and $250,000 each year. In other words, the $11-million of public money invested to build a new Rochester ferry terminal, which saw use for no more than three months and is now obsolete, would maintain the island ferry fleet for more than 40 years.

In truth, the island ferries need more than the bare minimum of upkeep they now receive. Mr. Dann freely admits that the Onigara, the only one of the five to carry paying passengers year-round, should be replaced. But as he always tells the battered old boat's complaining passengers, there's no money for that and no plan to find it.

But forget the boats -- look at the terminal. It is a disgrace. Shabby, grim and difficult to find, it couldn't be better designed to dampen spirits and repel tourists. It is the most achingly obvious missing occasion on the central waterfront. Going there is like stepping back into East Germany.

You can't even use a debit or credit card to buy tickets for the island ferries. They are the last legitimate cash-only business in Canada.

The story of the Rochester ferry and the new one planned for the airport couldn't be more different. The former, promoted by private interests in the United States and floated with large pools of government money, was a virtual luxury liner. After swallowing the same Kool-Aid that befuddled public authorities south of the border, our own port authoritarians bulled ahead with their lavish terminal even after the U.S. freebooters had fled the scene, leaving the ferry service in bankruptcy.

The fewer passengers it attracted, the more resources it consumed -- and nobody at any stage ever asked local taxpayers whether or not they wanted to play along.

The new airport ferry is likewise being built to serve private interests -- would-be regional airlines of the sort that abandoned the facility long ago -- despite the yawning absence of the traffic needed to finance it.

Now that even federal Liberals are musing about decommissioning the unloved, underused little airport, the port authoritarians will likely speed up their plans to equip it with a spanking new ferry and matching terminal.

Heaven forbid that the public should have a say in how this public money is disbursed. They might choose to do something sensible -- like properly supporting an existing ferry system that is wildly popular with locals and tourists alike.

The Globe and Mail

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Proposal to sell the fast ferry on eBay
Cathy Orosz
January 17, 2006

You can't really sell something the size of Rochester's Fast Ferry at the used car lot.  But what about America's biggest garage sale: eBay? 

Although some have joked about the idea, it's no laughing matter at Auction and Go in Webster. 

"This is not a joke," said owner Linda Viola.  "We are very serious about doing this for the City." 

Viola says they'll forego their commission and even cover any fees, all to help Rochester recoup some of its loss. 

"We don't want to see the City going down any further than they already have, and we want to try and help them get out a little bit." 

It might not be that much of a stretch.  They sell plenty of big-ticket items at Auction and Go. 

"We've done cars, boats, motor homes, RVs," said Viola.  "We shipped a limo to Spain.  We've done everything from jewelry to a $900,000 motor home." 

From classic cars to custom jeeps, they've posted it all on eBay.  Most items are stored inside their Webster facility, but obviously the ferry would have to stay at the port.  Auction and Go would send one of its professional photographers to take pictures and then post them online. 

The City could also set a reserve price which means the ferry wouldn't sell unless it reached that magic number.  So there's really no risk. 

"If they put a limit on there of $40 million, it won't sell unless it reaches $40 million," explained Viola. 

A City Spokesman says this is not something Mayor Bob Duffy will consider.  The City's plan is to form a task force and seek out a professional broker. 

"First and foremost, the City is responsible to taxpayers," said Gary Walker.

WROC-TV

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FBI Investigates CATS Use Of Public Money
Jane Flasch
January 17, 2006

Rochester, NY -- The FBI is investigating the use of taxpayer money for the fast ferry project.

They were first contacted by the Johnson Administration last year, when the city took over troubled ferry service from the former operator, the Canadian American Transportation Service (CATS).

CATS, the privately owned company that first ran the ferry when it arrived in Rochester, shut down after only 80 days in service because of money problems.

When the courts ordered CATS to leave offices on the second floor of the terminal building, they left behind some important information.

Former City Attorney Linda Kingsley said, "There were things that were left behind in various formats on computers that we owned and had control of…there were records that raised concerns with us, that we felt had to get into the right hands."

Last spring, Kingsley turned over the documents to the FBI and the state attorney general's office.

At issue is $14 million in loans and grants CATS obtained from the state, and another $1.3 million from the city.

Former Mayor Bill Johnson said, "There's federal and state money in this deal with CATS. We know that several people have been asking what happened to that money."

In reality, little taxpayer money has gone directly to CATS.

According to state and city officials, most of the money was wired directly to the Australian ship builder Austal to purchase the $42.5 million ship.

However the principal investors in CATS, Brian Prince and Dominic DeLucia, drew suspicion because they were not forthcoming with information about investors and business dealings. Because it was a private company, its books were never shared with the public.

The confiscated computer documents include dealings between CATS and other private companies.

According to Johnson, the state comptroller's office has launched an audit of the city's role in loaning CATS $1.3 million.

Johnson said, "I don't understand why they have to spend a lot of time looking at that, when they clearly could be looking at CATS and others, and they aren't doing that."

Both the FBI and the state attorney general's office confirmed that they are conducting investigations, and that CATS is the focus of the investigations.

Representatives of CATS did not return calls to 13WHAM News, but have stressed all along they have done nothing wrong.

Johnson said he released this information to make it clear that the city has nothing to hide. It was the city that alerted authorities to these documents in the first place.

13 WHAM-TV

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Rochester City Council Approves $9.5 Mil To Pay Ferry's Bills
January 18, 2006

Rochester, NY -- On Tuesday night, the Rochester City Council approved Mayor Bob Duffy's request to borrow $9.5 million from the city's reserve fund to pay off last year's ferry expenses.

The money will cover the ferry's expenses through the summer. Duffy said that any money left over once the bills are paid will be returned to the reserve fund.

Duffy administration officials would like to move as quickly as possible to sell the ferry.

However, some leaders feel they may not need a broker to make the sale because there is some worldwide interest in the ship. City Attorney Tom Richards said the administration is looking to "push every opportunity there is to push" to sell the ferry at the best price.

For now, the ship can't go anywhere until the St. Lawrence Seaway opens on March 15.

13 WHAM-TV

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Taxpayers Poured $85 Million Into The Ferry
Jane Flasch
January 18, 2006

Rochester, NY -- The original ferry owner has been under investigation since last spring--and inquiring minds want to know what happened to the millions of dollars that were sunk into the ferry.

The ferry was sold as a private enterprise that was designed to give Rochester's economy a boost, but from the day it launched, taxpayers assumed the biggest risk.

Canadian American Transportation Systems (CATS) raised $12.7 million -- mostly in bank loans.

Taxpayers had already kicked in more than $16 million.
Fourteen million in loans and grants came from New York State, another $1.3 million from the City of Rochester, and just over $1 million came from the Office of Federal Homeland Security.
 
Records left on computers when CATS vacated the terminal building raised questions of potential criminal conduct.

Former City Attorney Linda Kingsley said, "There were a lot of corporate entities, there were a lot of business dealings, there were documents that raised questions to us."

According to state and local records, most of that money went directly to the Australian ship builder Austal, who happens to be an investor in CATS.

Austal owned 22.5 percent of the company. That is perfectly legal, but again, questions arose.

CATS was also paid $1.1 million directly -- in money that was supposed to be used for security equipment at the terminal and on the ship.

Until the investigation is over the former mayor's administration is saying little about what was in those computer records.

Former Mayor Johnson said, "We didn't destroy or do anything to those, except to turn them over to the correct authorities."

The FBI and the state attorney general's office are still investigating.

Representatives of CATS did not return calls to 13 WHAM News.

The final tally on taxpayer money won't happen until the ship is sold. However, if you add the money borrowed for the Rochester Ferry Corporation, and the costs of upgrading the terminal and Port of Rochester, taxpayers have kicked in $85.5 million.

That is more than six and a half times what private investors spent.

The attorney general's office confirmed that the investigation has been going on since last spring, but won't predict when it will be completed. The FBI’s comment was: “No comment.”

13 WHAM-TV

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Interest in the Fast Ferry route
January 18, 2006

Tuesday, Rochester Mayor Bob Duffy raised a big question when he mentioned that he's getting phone calls from a famous Rochesterian interested in the fast ferry route.

Tuesday night, after the city council approved $9.4 million to pay for ferry costs and debts this year, Mayor Duffy mentioned he's getting some famous interest in the ferry route. “I've received a call from a very well known name in Rochester who has called twice in the last week, who has an interest in bringing a service back here,” Mayor Duffy said.

He also said this about the interested party, “It's a name that has been around for a long time and if it comes to be, we'll make sure you know but he has expressed some interest in this and he wants to test the waters a little bit in terms of would he want to bring one here."

Duffy says it's a famous man who lives outside of New York State. Of course that could be thousands of people, but at least one with enough money to do it is Tampa Bay Buccaneer's owner and Rochester native Malcolm Glazer. NEWS 10NBC contacted Glazer's office in Tampa about our specualtion, but did not get a response.

NEWS 10NBC called City Hall for more information on Wednesday. Officials gave the following response, “the sale is not going to be done in public.”

The city has already received interest to buy the ferry from the Government of Turkey, officials toured the ferry in Rochester last year. The U.S. military has also been mentioned as a potential candidate. Mayor Duffy says he's still convinced that a private company will take a chance on the ferry route, but only if the financial numbers are right.

WHEC-TV

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Duffy urged to go slowly on ferry dock
Brian Sharp
Staff writer
January 19, 2006

Rochester — City leaders will recommend to the mayor that plans for developing the Port of Rochester go forward but that designs for the area should not include options for the ferry terminal.

Staffers met Wednesday and discussed the future of the port in light of the demise of the high-speed ferry service. Their recommendations will now go to Mayor Robert Duffy, said City Councilman Robert Stevenson, whose district encompasses Charlotte.

Boston-based planning consultant Sasaki Associates was hired last fall to design an urban village on what today is mostly a parking lot. The 30-acre target area surrounds the terminal and valuable waterfront staging area. Its borders are roughly Lake Avenue, Ontario Beach Park, the CSX rail line and the Genesee River.

The $16 million terminal opened in 2004. Given that it had a designated use, it was not included in Sasaki's assignment, Stevenson said.

Considering other uses for the terminal "was not something that was ever discussed as an option," he said.

After Duffy announced an end to the Rochester-to-Toronto ferry last week, some in his administration, including Corporation Counsel Thomas Richards, suggested that the terminal be tossed into the planning mix. Ideas included using part of the space for a hotel or converting the second floor to a restaurant. Sasaki principal Varoujan Hagopian said including the waterfront property south of the terminal would add a new dimension to development possibilities.

Instead, Stevenson said the recommendation is to wait and see whether a private operator steps forward to restart ferry service and what space needs to be reserved for such an operation. He said it is unlikely that a smaller ferry would need the entire staging area, which can accommodate about 200 vehicles.

"Anything smaller would carry far fewer vehicles, if it would carry any vehicles at all," Stevenson said, adding that Sasaki ultimately must consider the terminal before delivering a master plan in mid-May. "I'd like to see it included because there is an awful lot of queuing area that would never be used again."

All this talk and recent developments with the ferry have left Philip Fici with mixed feelings. The 68-year-old lives in Greece and is a regular at LDR Char Pit, the diner at 4753 Lake Ave. On Wednesday, Fici sipped coffee at the diner. He was seated near a window with a view of the quiet ferry terminal with the ship docked alongside.

"It's a shame the way things worked out. I can't believe the way things worked out," Fici said.

Still, he remains optimistic. "We have a lot of potential here. ... We need someone to help it. We need someone who has the right mind to do it. Do the right thing down here and you've got a gold mine."

Sasaki is being paid $375,500 to develop a master plan under the existing contract. To expand the scope of the plan now would require restarting a market analysis, under way this month, Sasaki's Hagopian said.

Either way, Hagopian said, his firm still should be able to present concept alternatives for the area next month.

While loss of the ferry has economic consequence, he said, "it's going to make the site a lot more developable. The ferry eats up a lot of surface land."

Duffy said Wednesday that he would take the recommendation under consideration and wanted to discuss the matter in detail with Stevenson. Duffy has said any discussion of options for the terminal is complicated by a contract granting leasing rights to Maplestar, a subsidiary of former ferry operator Canadian American Transportation Systems. While nothing should be done to preclude a ferry service returning someday, Duffy earlier this week called such ventures "very risky" and reiterated that any future service must operate without a city subsidy for the foreseeable future.

Rochester Democrat and Chronicle

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Future of lease with Toronto remains up in air
Gary Craig
Staff writer
January 18, 2006

Who knew what when?

That question has been fodder for media, politicos and talk show hosts ever since officials with the new City Hall administration announced last week that they had "discovered" a 14-year lease between the Toronto Port Authority and the Rochester Ferry Co. LLC.

At his news conference Tuesday, former Mayor William A. Johnson Jr. reiterated what officials with his administration and members of the ferry board said last week: The pact was no secret and was amply documented in public actions by the ferry board.

"One matter that has been widely, and erroneously, reported is a 'secret' lease with the Toronto Port Authority," Johnson said.

But, when it comes to the lease for Toronto terminal space, the most pressing question for the new City Hall administration is not who knew what when. Instead, the question is: Can the city get out from under this 14-year commitment?

And that question might not be answered for months to come. The contract remains in effect as long as the Rochester Ferry Co. exists. And the ferry company, which owns the Spirit of Ontario ferry, needs to stay in existence at least until the vessel is sold.

"They own the boat," Corporation Counsel Thomas Richards said of the Rochester Ferry Co. "They have the contracts. ... The city does not."

Under the 67-page lease contract, the city does not guarantee any outstanding debts with the Toronto Port Authority.

That leaves open the question of liability for any unpaid bills. Former City Corporation Counsel Linda Kingsley said last week that, under the contract, the city should not be responsible for any future years of payments once the ferry company is dissolved.

But current city officials aren't so sure, and say they plan to meet with Toronto Port Authority officials to determine the future of the lease agreement.

Ken Lundy, the engineering and operations chief for the Toronto Port Authority, said the ferry company is current on its payments. Under the contract, the company pays $62,500 (Canadian) each quarter — adding up to a $250,000 annual commitment.

"Nobody's in default in this deal," Lundy said. "They made their first quarterly payment. There's nothing in arrears."

'Nothing nefarious'

On June 13, the Rochester Ferry Co., or RFC, met, and one of the key issues under discussion was the lease agreement, minutes show. The lease was set to start June 28 and last 14 years, according to the minutes. The contract includes provisions for extensions after the 14 years, and even for the possibility of a second ferry operating between Rochester and Toronto.

"The City of Rochester, notwithstanding the expressed desires of the (Port Authority), is not guaranteeing the RFC's obligations, and bears no obligations in the event of a default by RFC," the minutes state.

City Councilman Benjamin Douglas, the president of the ferry board, said Tuesday the lease agreement was the best deal available at the time, and the previous ferry operator — CATS — operated under a similar lease.

"There is nothing nefarious about (the lease)," he said. "We don't gain anything by paying more than we have to. It's the lowest price we could negotiate, and we were continually trying to negotiate a price lower than that."

The lease also requires the ferry company to pay some utility and janitorial costs for operation of the Toronto terminal. The company paid a little more than 7 percent of the utility costs and paid janitorial costs based on the percentage of the terminal used by ferry management, Lundy said.

The contract also established a mediation and arbitration process to settle disputes, with Canadian courts serving as the ultimate arbiter. Neither city officials nor Port Authority officials will say whether they expect to use the formal process to negotiate a settlement.

City Council voted Tuesday night to spend $9.4 million to resolve outstanding ferry-associated costs, other than the debt to purchase the vessel. Under the legislation, $3.1 million is estimated to cover the cost of continuing or terminating ferry contracts, including those with Bay Ferries, the management company, and the Port Authority.

Discussions 'really limited'

On Tuesday, Johnson chafed at what he said was the perception created by the media, the Duffy administration and ferry company board member Karen Noble Hanson that the lease agreement was a secret.

Information about the lease agreement was available in the June 13 ferry board minutes and even on the city Web site, Johnson said. He noted that the Democrat and Chronicle had copies of those minutes, obtained through a Freedom of Information Law request, but had not reported on the lease until Duffy cited it last week when announcing that he planned to stop subsidizing the ferry. (The Democrat and Chronicle filed the FOIL request in August in an attempt to obtain ferry ridership numbers that the ferry company had refused to release.)

Democrat and Chronicle coverage on Jan. 11 noted that ferry board members and City Council members said the lease was no secret to them, and was an expected expense to ensure the availability of the Toronto terminal.

Hanson, ferry executive committee member and secretary, said in a Jan. 12 Democrat and Chronicle story that, while she knew about the annual fees paid to the Port Authority, she never actually saw the 14-year contract and first learned of it from the Duffy administration weeks ago.

A review of the minutes of the June 13 meeting shows that Hanson, in fact, made the motion to approve the lease — and later signed the minutes of that meeting. Hanson said Tuesday that she participated in that meeting via conference call.

Hanson, who was criticized by Johnson Tuesday morning for her comments in the Democrat and Chronicle last week, said Tuesday afternoon that she doesn't recall whether she saw the actual lease contract, and regretted if her recollection was faulty about some of the specifics that were discussed.

Hanson, chief financial officer for the Episcopal Diocese of Rochester, told the Democrat and Chronicle last week — and reiterated Tuesday — that she had wanted staff to try to renegotiate the costs of the lease at a later time.

Regardless of "who knew what when," the major issue was the lack of time to address concerns about contracts because of the constant pressure to ensure the ferry operated, Hanson said.

"The opportunity to have real discussions about contracts was really limited," she said.

In the end, the contract — though portrayed by the Duffy administration officials as a surprise to them — had little to do with the decision to end ferry operations, Richards said.

"I wasn't that surprised" that there was such a lease, he said. "We bought the boat. We had to take it to Toronto to dock it.

"Let's suppose Toronto gives it to us for free," he said of the terminal. "It's not enough (to keep the ferry afloat financially)."

But Toronto's insistence on the lease costs proved something else, Richards said.

"It shows that nobody else was willing to put any money into this venture, that nobody else was willing to take the risk," he said.

Rochester Democrat and Chronicle

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Mayor open to gambling at port
Duffy says he will explore the idea, meet with leaders, residents
Joseph Spector and Brian Sharp
Staff writers
January 21, 2006

Mayor Robert Duffy said Friday that he's open to the possibility of adding video lottery terminals at the ferry terminal to help revive the area once the ship sails away for good.

Having the slot machine-like devices on the debt-laden ferry and at the terminal has been debated since the boat first launched in 2004. But with Duffy's plan to sell the city-owned ferry, there's increasing concern about the Port of Rochester's future.

That concern has rekindled talks about adding gambling to the terminal, a tourist area in Charlotte along Lake Ontario. But any VLT proposal would face major hurdles, including a skeptical state Assembly and questions about the city's rights to use the ferry terminal.

Still, Sen. Joseph Robach, R-Greece, whose district covers Charlotte, has been aggressively pursuing VLTs at the terminal. He met with Duffy recently to seek his opinion, and Duffy said Friday that he's open to exploring the idea. Duffy's stance differs from that of his predecessor, William A. Johnson Jr., who supported VLTs on the ferry but not necessarily at the terminal.

Duffy said it's too early to say whether he would push the state Legislature to pass a law allowing VLTs at the terminal. He wants to meet with lawmakers and discuss the matter with Charlotte residents and businesses.

Still, Duffy said, "I'm going to keep an open mind to anything that will bring economic viability to our city."

And Duffy, who took office Jan. 1, said that legalized gambling in the city might be beneficial — even though he admits he's never been to a casino.

"If we say no (to legalized gambling) inside of Rochester, our residents will still go elsewhere — we just won't see the revenue and the jobs," he said.

Gov. George Pataki, for the third year in a row, opened the door to expanding VLTs by proposing this week in his state budget to add three VLT facilities statewide. Currently, five racetracks have VLTs, including Batavia Downs and Finger Lakes in Farmington, Ontario County.

Pataki said Friday that it would be up to communities to decide whether they want to apply for a VLT license.

But even if Duffy backed the VLT idea, it's going to be a tough sell in the state Assembly, which has rebuffed Pataki's efforts to expand gambling. In 2004, the state Senate approved putting VLTs on the ferry, only to be sunk by Assembly Speaker Sheldon Silver, D-Manhattan.

Assemblyman Joseph Morelle, D-Irondequoit, who had backed VLTs on the ferry and attended the recent meeting with Robach and Duffy, was not optimistic that the Assembly would support VLTs at the terminal.

And Morelle said there are other obstacles that should be addressed before VLTs are considered. For one, the city doesn't even know what rights it has to the terminal because of a complex lease agreement with the ship's original private owners.

Also, he said, putting VLTs on the ferry was a different scenario from putting them at the terminal, something Johnson had also pointed out in the past. At the terminal, anyone could walk in and play, raising concerns about the social ills of gambling. On the ferry, people would have had to pay to ride the boat and VLTs would have been an added amenity.

Pursuing VLTs at this point, Morelle said, "would demonstrate a sense of panic that I don't think exists. It sells short the Charlotte community."

Robach disagrees, saying "it's imperative that Monroe County have that opportunity to help our economy here and add to tourism — and I think there is no better place than at the port."

During a meeting with Charlotte merchants Friday, Duffy and Robach's talk about the possibility of VLTs drew applause.

"Now you've got a draw down here besides just a boat," predicted Mike Manioci, co-owner of JAM's Nutty Bavarian, a terminal store that has closed for the winter months.

"Maybe you get 500 or 600 people down here during the day," he said, looking around at the empty terminal, "instead of what you've got down here (now) — nothing."

Rochester Democrat and Chronicle

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Senator Alesi asks NYC to purchase fast ferry
Joseph Spector
Staff writer
January 24, 2006

Could the high-speed ferry end up sailing the waters around New York City?

That's an idea being pursued by state Sen. James Alesi, R-Perinton.

He talked Monday with both Rochester Mayor Robert Duffy and New York City Mayor Michael Bloomberg about the idea of Rochester selling the boat to the Big Apple.

"I'm very excited about the prospects," Alesi said. "There's no guarantee, but the first chapter is open."

New York City officials had no immediate comment on the brief meeting Alesi had with Bloomberg in Albany, where Duffy and Bloomberg were in town lobbying for state aid.

Duffy said he's open to any opportunity to sell the boat for fair market value.

"I would be happy if New York City had an interest in buying the ferry, and we would make ourselves available to them," he said.

Rochester officials have been seeking a buyer for the ferry since Duffy decided earlier this month to pull the plug on the service to Toronto.

The ferry took on more than $10 million in losses since the city bought it in February from private owners, who stopped service in 2004 after less than a year of operation.

Duffy said last week that he had received interest in the ferry from New York City harbor operators.

Alesi said he told Bloomberg that the boat could be used either for city ferry commuters or in the city's redevelopment of Governors Island, the former military installation off Manhattan's southern tip.

He said Bloomberg in their five-minute conversation "seemed warm to the idea."

"It's a ready-made, $35 million ferry with two seasons under its belt," said Alesi.

Duffy has said the city expects no less than $20 million for the ship it bought for $32 million. The city has received interest from firms around the world.

The state invested $14 million in loans and grants for the ferry when it was under private ownership, so Alesi said that a sale to New York City would at least retain the state's investment and prevent the hiring of a costly broker.

Rochester Democrat and Chronicle

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Law limiting ferry confirmed
Foreign-built ship under Bahamas flag can't sail only to U.S. ports
Brian Sharp
Staff writer
January 25, 2006

The pool of potential buyers for the high-speed ferry is shallower than initially thought, as officials confirmed Tuesday that maritime law prohibits the ship from ever traversing between two U.S. ports.

Federal law requires that ships doing business between U.S. ports be American-made and -flagged. The ferry is neither, having been built in Australia and still sailing under the Bahamian flag.

"That's the problem," said John Woods, a maritime lawyer in New York City who sits on the Maritime Law Association board. "They've got to find a buyer that will take it out of the U.S." — or another operator that will sail to Canada, he added.

Bay Ferries Great Lakes LLC, which managed the ship, operates two such international routes between Maine and Nova Scotia.

The legal snag is potentially significant in determining how much taxpayers ultimately will owe on the failed ferry venture. Mayor Robert Duffy this month decided to end the Rochester-to-Toronto service and sell the ship, then start repaying more than $40 million in debt.

Corporation Counsel Thomas Richards has said the expectation is the ship would leave the Great Lakes, and the best scenario is to attract serious interest from two or more buyers.

"The real issue is how much we get for the ferry, and how fast we sell it. That trumps everything," Richards said Tuesday.

Minutes earlier, the ferry board voted to borrow up to $9.4 million from city insurance reserves for shut-down expenses. That money will be repaid once the ship is sold with the rest going toward debt.

Separate sections of federal code dealing with passenger and commercial traffic combine to limit the ship's value in the U.S. market, said Kevin Corsaro, spokesman for the U.S. Bureau of Customs and Border Protection.

Richards said he was just beginning to understand maritime applications of the law but added it's too early to say who might be a serious buyer. City and state officials had mentioned the New York harbor as a possible home for the ship. Duffy has said a liaison for a group of Turkish investors also has contacted the city. Richards said the city will decide in the next couple of weeks whether to hire a broker to sell the ship.

Rochester Democrat and Chronicle

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Ferry terminal still tied up
Failed operators retain control till 2044; city looks at options
Steve Orr
Staff writer
January 30, 2006

In the knot of ferry-related contracts that Mayor Robert Duffy now wants to unravel, one pact may have more lasting implications than all the others.

That is the deal that ceded control of Rochester's gleaming ferry terminal — until May 31, 2044 — to the failed ferry operators themselves.

A legal concession by city officials two years ago, which went unnoticed at the time but stirred controversy later, allowed the operators to retain their lease on the city-owned terminal's commercial space even after they pulled the plug on the Toronto-Rochester ferry less than three months after service began.

Their company, Maplestar Development, pays the city just $1 per year and keeps all the rent it collects from the terminal's restaurants and shops. It also may have some claim on adjacent berthing areas where visiting vessels can tie up.

Now that Duffy has canceled the struggling ferry project altogether and has begun looking toward new development at the Charlotte port, the long-term lease has become problematic.

"We need to aggressively look at whether we can get control of that space again. I think it's important," said City Council President Lois Giess. "We really need to have that space to develop the harbor town that we want. That's obviously critical if we're going to start getting cruise ships come in or some alternative (ferry) service."

Back burner

The existence of the lease also could prove embarrassing in light of the disclosure last week that the business dealings of the ferry operators could be the subject of criminal investigations by federal and state authorities. The principals behind Maplestar and Canadian American Transportation Systems, the sister company that ran the ferry, are businessmen and local natives Brian F. Prince and Dominick DeLucia, former city officials say.

Prince and DeLucia did not return telephone and e-mail messages seeking comment. Neither did their lawyer, David L. Rasmussen of Rochester.

Both Mayor Duffy and his corporation counsel, Thomas Richards, have said they went to break or buy out the Maplestar lease. A spokesman said last week that the city will concentrate first on selling the ferry, which the city acquired after CATS halted the service in September 2004.

"It (the lease) is on our mind. We know it's there. We're going to get to it. Clearly, that is not one of our priority areas at this time," Duffy spokesman Gary Walker said Wednesday.

Walker declined to discuss the lease in any detail.

"When we get to the Maplestar lease, the goal is to do the best thing we can for taxpayers. Part of that is not to put our negotiating stance out there in public," he said. "We'd rather not have to resolve it with legal action."

Non-disturbance

When the city and CATS came to terms in 2002 on the planned ferry operation, the city agreed to lease the terminal to the company for 40 years at $1 a year. The lease included control of both the interior commercial space and the exterior berths along the Genesee River shoreline.

After being explicitly assured that the lease would be voided if CATS failed to operate the ferry as planned, City Council approved the lease in August 2001, along with other elements of the ferry project. The lease was signed the following month.

In December 2003, with construction of the vessel nearly completed and work well under way on the $19 million terminal, CATS subleased the premises to its sister company Maplestar, a maneuver allowed under the lease agreement.

And two months after that, Mayor William A. Johnson Jr. signed a "non-disturbance" agreement guaranteeing that Maplestar would retain control of the terminal space until 2044 even if CATS dropped the ferry project.

CATS, of course, did just that, halting ferry service in September 2004 after less than three months of operation. The firm later defaulted on loan payments, and the Johnson administration ended up purchasing the vessel at a foreclosure auction in early 2005.

Linda Kingsley, who was the city's top lawyer under Johnson, said Maplestar argued that it needed the lease guarantee so it could borrow money to do necessary construction work in the terminal. The company argued that banks wouldn't lend money, Kingsley said, unless they had some assurance that Maplestar was in the terminal-management business for the long haul.

"We felt this was a normal clause, that we needed to get this terminal developed and this is the thing to do. No one thought it was unusual. Now everyone loves to second-guess this," Kingsley said. She said Maplestar did indeed do the construction work, though she did not know whether it obtained a loan to pay for it.

At the time, Johnson said last week, nobody would have minded the arrangement because people regarded the CATS-Maplestar owners as "heroes" for their efforts to bring the ferry to Rochester and help finish the River Street terminal.

"The only reason (critics) are upset now is what happened in the aftermath," Johnson said.

Lingering issue

Johnson and Kingsley have said previously that they tried to buy out Maplestar when the city was negotiating a settlement with CATS and preparing to purchase the ferry but could not afford to do so. In fact, the non-disturbance agreement that Johnson had signed was incorporated into the settlement agreement, which was approved by a federal judge.

Former City Council member Brian Curran, a harsh critic of the ferry project who also is a lawyer, said, "Even though that agreement was probably not legal when it was executed, it now is enforceable because it was made part of that settlement."

Current city officials do not want to discuss how they might try to end the lease, spokesman Walker said.

In the meantime, Maplestar continues to control the terminal space leased to restaurants and shops. The city controls the public space at the terminal and exterior areas, including the berth where the ferry currently is tied up.

Kingsley said the city had informed Maplestar that it believed it had control over all the berths along the Genesee River shoreline by the terminal where vessels can tie up, though she said Maplestar "kept indicating to us in writing they didn't agree." The issue "never came to a head," she noted.

Several of the remaining tenants at the terminal spoke positively about the company's performance as landlord.

"Maplestar, in my eyes, has done everything they could to help us. They would bend over backwards for us," said Bill Briggs, co-owner of Lakeside Floral and Antique Gallery.

"We don't have a problem with them. Everything has been fine," said Mike Bauer, owner of the Cheeburger Cheeburger restaurant in the terminal.

Several business owners, including Briggs, said Maplestar has reduced their rent in the slow winter months.

Only three of the seven surviving retail businesses in the terminal are open. The other four, including the Cheeburger franchise and Lakeside Floral, plan to reopen in March.

Rochester Democrat and Chronicle

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$7M center, aquarium proposed for port
Misty Edgecomb
Staff writer
February 1, 2006

Offering travel across Lake Ontario didn't prove successful, but local scientists hope that probing what's under the waves could offer the Charlotte waterfront a rebirth.

A proposal for a $7 million Great Lakes research and educational center, including an aquarium, is gaining momentum as the city plans for the future of the terminal at the mouth of the Genesee River.

Initially, the State University College at Brockport, which is behind the plan for the Lake Ontario Natural Resource Center, had considered building the facility within Hamlin Beach State Park.

But after the ferry debuted last year, the port became a more desirable location, said William Condo, a Charlotte resident who is volunteering his time to promote the project. With the ferry's demise last month, the research center has emerged as a key to redevelopment, he said. "This suddenly turned out to be the most viable thing that might happen down there."

Supporters have secured more than $300,000 for the center from several federal sources, with the support of Reps. Louise Slaughter, D-Fairport, and Thomas Reynolds, R-Clarence, Erie County.

And SUNY Brockport President John Halstead has made the project his No. 1 priority for federal funding, according to Joseph Makarewicz, distinguished professor of environmental science and biology at SUNY Brockport and one of the researchers behind the center.

Halstead on Tuesday described the proposed center as "a strategically located icon for educational programs, job creation and the study of environmental issues."

Halstead met with Rochester Mayor Robert Duffy to discuss the project, but the mayor wants more information before he makes a commitment, city spokesman Gary Walker said Tuesday.

"[Duffy's] initial blush is that it's an exciting project with lots of promise," Walker said.

Since last summer, the city and the college have been negotiating the terms of a memorandum of agreement, stating their support for the project and proposing a location just north of the ferry terminal. However, discussion slowed when then-Deputy Commissioner of Community Development Larry Stid died in November.

Recently, City Councilman Bob Stevenson encouraged consideration of the research center, which he recalled from discussions nearly 10 years ago, he said. "We're looking at everything," Stevenson said of the redevelopment effort.

And so, Sasaki Associates Inc., the firm the city hired to plan for the ferry terminal's redevelopment, is including the Lake Ontario Natural Resource Center in at least one of its alternative plans for the port, said Varoujan Hagopain, principal planner. The center's location, however, is not set in stone, he said.

"It could be on the river, it could be farther up, farther down. It could be in the terminal building. It could be anywhere at this point," Hagopain said.

Sasaki Associates, which is based in Watertown, Mass., is preparing several different concepts for the port and is expected to present its proposals by May.

Meanwhile SUNY Brockport is finalizing the details for a research facility that may employ as many as 10 people and attract dozens of researchers from throughout the Great Lakes region, Makarewicz said.

The port would allow research vessels to dock, and projects could run the gamut from invasive species to contaminants, fisheries to watershed issues, he said.

"On the American side of Lake Ontario, there are no research facilities," Makarewicz said.

Faculty and students from most of the local colleges and universities already collaborate with SUNY Brockport through the Great Lakes Research Consortium, and a number of their activities could be shifted to the center, he said.

Research efforts based at the Brockport campus a few miles inland have brought in more than $15 million in grants over the past 20 years for studying the Lake Ontario watershed. With the research center, the potential for securing research funds would only increase, Makarewicz said.

Classrooms and an auditorium would also offer both Brockport faculty and local elementary and high schools the opportunity to conduct classes on-site, offering students hands-on ecology and biology.

And a small aquarium of lake-dwelling plants and animals, paired with an educational outreach program, could attract visitors to the port to learn more about Lake Ontario, he said.

"One of the things the port needs is seven-days-a-week, 12-months-of-the-year activity there," said Condo, a public relations consultant who is volunteering his services because he believes the center would be good for his community.

Business owners in the empty ferry terminal said Tuesday that the center sounds like a good idea.

"Any attraction that could bring people here would be a positive thing," said Kiran Patel, owner of Quizno's sub shop.

Bill Briggs, who owns the Lakeside Floral and Antique Gallery, liked the fact that an aquarium and educational center could draw families to the lakefront.

"If you go to any of the major cities, there's always an aquatic zoo on the waterfront," he said. "I think it would be great."

And if researchers at the center are successful in addressing the water pollution problems near the Genesee River outlet, local businesses would get a double benefit, said Tom Beaman, owner of the California Rollin' II Sushi Bar.

Even the center's researchers could make a big difference for nearby restaurants, he said.

"Every person is going to help," Beaman said.

Rochester Democrat and Chronicle

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City settles a ferry debt
Nearly $3.2 million paid to ship's manager; contract buyout pending
Brian Sharp
Staff writer
February 1, 2006

The city has settled up with Bay Ferries Great Lakes LLC for debts covered by the ferry manager, cutting the company a check for nearly $3.2 million.

Doing so drained more than one-third of the $9.4 million that City Council agreed to loan from city insurance reserves to pay expenses for shutting down the ferry service.

City officials still must negotiate a buyout of their three-year contract with Bay Ferries. Monday's check for $3,192,374.59 was for expenses Bay Ferries covered to date for the city-created Rochester Ferry Co. More than one-third of the total was spent on fuel for the 774-passenger ship.

Mayor Robert Duffy decided Jan. 10 to end the Rochester-Toronto service after the operation lost $10 million in 10 months. Rochester Ferry was broke and Bay Ferries had covered an estimated $2.5 million in expenses at the time of Duffy's announcement. In a Jan. 12 letter to City Council, Duffy noted that and shutdown costs were "best estimates at this time" for shutting down the service.

A follow-up memo was sent to City Council members before their Jan. 17 vote authorizing the $9.4 million internal borrowing. The memo itemized more than $650,000 in additional, outstanding debts at various payment stages, resulting in the figure of nearly $3.2 million. That adds to a restructured $40.5 million debt used to buy the ship and pay most 2005 expenses.

Ferry board member Gary Walker, who also is spokesman for Duffy, said the $9.4 million estimate was conservative. The legislation built in a $500,000 contingency. The ferry board will be receiving detailed reports on a monthly basis of expenditures drawn from reserves. The board last met Jan. 24. The next board meeting has not been set.

Rochester Democrat and Chronicle

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Toronto ferry deal raises legal issue
Gary Craig
Staff writer
February 5, 2006

The Toronto Port Authority has always considered Rochester to be the financial safety net for the now-dead ferry operation, according to a Port Authority official.

That stance, if upheld by courts, could leave the city on the hook for any outstanding debts under a 14-year lease agreement between the Port Authority and the Rochester Ferry Co., the entity established to own and operate the ferry.

"As we were doing (the contract), they wanted to set up the Rochester Ferry Co. and we wanted something behind the agreement," said Ken Lundy, the engineering and operations chief for the Toronto Port Authority.

The 2005 lease agreement, which set the costs and terms for the ferry service to use a recently built terminal in Toronto, says nothing about obligations on Rochester's part.

That fact has created a somewhat ambiguous legal question for current city officials, who are trying to determine whether the city is responsible for lease payments once the ferry company disappears.

Former Rochester officials involved in the contract negotiations contended that the city wouldn't be responsible should the Rochester Ferry Co., or RFC, be dissolved, records show.

"The city of Rochester, notwithstanding the expressed desires of the (Port Authority), is not guaranteeing the RFC's obligations, and bears no obligations in the event of a default by RFC," according to minutes from a June 2005 Rochester Ferry Co. board meeting.

Former corporation counsel Linda Kingsley said that, as the minutes indicate, Port Authority officials wanted the city to be a guarantor under the lease, but the Rochester Ferry Co. refused. In turn, she said, the city has no financial risk under the deal, which required the ferry company to pay $250,000 (Canadian) a year to the Port Authority for docking and terminal use. That could add up to almost $3 million (American) for city taxpayers.

The contract also stipulates charges for the number of passengers and cars using the terminal but, without the ferry service, those costs would cease.

Mayor Robert Duffy announced in January his decision to pull the plug on the ferry service, saying the costs and risks were too great.

The Rochester Ferry Co. will continue to exist until the ferry is sold, after which it likely will be dissolved. And then city officials will have to determine whether the city is responsible for the millions that could be owed if the Port Authority wants payment for the remaining 13 years on the lease.

"We do believe that the city of Rochester backs that agreement," Lundy said.

Corporation counsel Thomas Richards said in a recent interview that the city hasn't ruled out that it might have to make payments to the Port Authority.

"There is a potential obligation in terms of the Toronto lease," he said.

Protection from liability?

For now, the contractual issues are largely hypothetical because the Rochester Ferry Co. still exists and its payments are current. Plus, City Council recently approved legislation from the Duffy administration to set aside more than $9 million for outstanding ferry-related costs, including costs that may be owed to the Port Authority and Bay Ferries Great Lakes LLC, which was contracted to operate the ferry. Last week the city pulled $3.2 million from that fund to reimburse Bay Ferries for debts it built up with the ferry operation.

City officials are trying to determine their obligations under the lease, said communications director Gary Walker.

Operating under New York laws, the city created the Rochester Ferry Co. as a limited liability company, or LLC. Common in the private sector, an LLC provides the city with a level of protection from liability.

The lease agreement, if ultimately the center of a legal imbroglio, could test just how much protection there is.

City taxpayers served as guarantors for agreements between Bay Ferries and the Rochester Ferry Co., as well as for the $40 million loan the ferry company secured from the Export Finance and Insurance Corp., an arm of the Australian government, to buy the ferry.

But no such guarantee was etched into the Toronto terminal lease agreement.

The deal did establish mediation to resolve any disputes. Should those attempts fail, outstanding legal issues would be resolved in Canadian courts, according to the agreement.

That fact could give city officials pause. In Canada, the losing side of a civil case typically pays all legal bills for both sides, said James Harbell, a Toronto-based lawyer who specializes in municipal law.

'Piercing the veil'

The fact that the lease contract does not state that the city guarantees unpaid costs is not, by itself, a legal safeguard, according to lawyers in both Canada and the United States.

In corporate law, there is a term known as "piercing the corporate veil," which means a successful legal attempt to show that a legally established entity is, in essence, no different from its creator.

The same concept carries over to municipal law, both in Canada and the United States.

If it could be proven that the Rochester Ferry Co. was nothing more than an arm of City Hall, then a case could be made that the city is responsible for debts, lawyers say.

In New York or Canada, however, it's not difficult to create a stand-alone LLC immune from liability, the lawyers say.

"It really doesn't take much to maintain enough difference between the two to avoid the 'piercing of the veil,'" said William Moehle, a local lawyer who serves as town attorney for Brighton.

The Rochester Ferry Co., for instance, maintained its own financial and banking records and operated at the behest of its board. Those steps could be enough to shield the city, said lawyer Charles Valenza, who served in the 1980s as Monroe County attorney.

Of course, city officials hope the legal issues stay academic. And officials with the Port Authority and the city appear inclined to try to resolve any issues amicably.

But should the issue make its way to the courts, the fight could provide fireworks — arcane legal fireworks.

"It's one of those things that's almost like a law school exam problem," said Jeff Wilker, a Toronto-based lawyer who specializes in municipal law.

Rochester Democrat and Chronicle

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