May 7, 2018 - On the heels of public concern, and members of the Westchester County Board of Legislators calling on the County to revisit the Playland deal with Standard Amusements, Westchester County Executive George Latimer charged Director of Operations Joan McDonald and County Attorney John Nonna with examining the County’s agreement with Standard Amusements. The report, now released publicly, details serious issues with the contract that will leave the County investing millions of dollars without seeing a significant return on investment. Read the report.
County Executive George Latimer said: “We are talking about a park that serves residents of this community. There are people who live in this County for whom Playland is an important recreational facility. No government creates recreation on the belief it is going to be profitable – it is a service for quality of life. It is important to understand, whatever the usage of Playland is, there are parts of this County and people in this County, for whom that getting on a bus or train and going to Playland, is a wonderful part of their experience living in this County. That needs to be part of this public policy discussion. I’ve often talked about my youth in a poor urban part of this County, I remember very well getting on a bus to go to Playland a few times each summer. Going from one of the more urban packed portions of this county to this wonderful facility owned by the County and affordable out on the water. For kids today who enjoy Playland, this is very important. This is part of what makes Westchester - Westchester.”
McDonald said: “It is important for the taxpayers and the residents of this County to have a fair deal – which is what a private CEO would do also. They would want to make sure this is a good deal for their shareholders and the County Executive is doing the same thing for his shareholders – the taxpayers.”
Nonna said: “The legal issues are really driven by three overall issues, first, is Standard Amusements capable of meeting its obligations under this agreement and have they met them? Second, if the likely financial impact over the length of the 30 year agreement is not beneficial to the taxpayers can we renegotiate to make it more equitable and fair? And finally, if we can’t renegotiate, can we terminate the agreement? Is that more beneficial for the taxpayers? What is best for the taxpayers is our responsibility – and that is the way we have to look at the legal issues.”
The report has been delivered to Standard Amusements and their attorneys. The County will be reaching out to Standard Amusements for a meeting shortly.
Watch the full press conference.
Issues Identified in the McDonald / Nonna Playland Report
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The Astorino Administration privately allowed for five extensions on payments to Standard Amusements without the prior approval by the County Board of Legislators.
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After the contract with Standard Amusements was approved by the County Board, the Astorino Administration amended the contract without Board of Legislators approval and changed a material element.
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There was never a detailed assessment of the renovations needed to be done at Playland, the County now knows the Park realistically needs $125 million worth of renovations. That could cost the County $65 - $95 million extra to complete.
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Thirty County Employees work at Playland and the Playland Beach and Pool – while the Standard Amusements agreement covers 100 percent of their salaries, only 30 peercent of their fringe benefits are covered under the agreement.
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The agreement only covers the County’s expense of $400,000 for County Police and Seasonal Park Rangers, but the cost of these services is $655,000. The County would have to cover the $255,000 shortfall.
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The County receives no profit sharing until roughly 11 years after Standard Amusements takes over management of the park and even that is highly uncertain.
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Standard Amusements’ revenue and attendance growth assumptions are overstated – estimating one million people in attendance, a 50 percent increase, by 2020.
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The County is investing significantly more money than Standard Amusements, and does not appear to ever receive a corresponding benefit.
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To date, Standard Amusements has only paid $1 million to the County of initial payments it was required to make and still owes $ 1.25 million.
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Standard Amusements claims it spent about $4 million, of the $27.5 million that they are required to spend. The County has asked for an audit of expenses to date and Standard Amusements has yet to produce that document.
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While, Jacob “Jack” Falfas was initially named by Standard Amusements as a key person to professionally manage Playland, he has since left the company and they have not replaced him or even offered a replacement.
Areas of Significant Concern
Extensions
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The Astorino Administration privately allowed for five extensions on payments to Standard Amusements without the prior approval by the County Board of Legislators.
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Another change that was made is more serious, and has to do with a material change to the contract. After the contract with Standard Amusements was approved by the County Board, the Astorino Administration amended the contract privately and changed a material element. The Astorino Administration changed the order of payments and allowed Standard Amusements postpone its obligation to invest $3 million in new rides, until the County had already invested 50 percent of the funds that were approved by the County Board approximately $30 million in renovating the park. The Astorino Administration made these changes without Board review and without Board approval.
Financial
Capital Investments –
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Before the Standard Amusement deal, the County estimated that approximately $75 million dollars in capital investments (excluding the pool) would have to be spent to bring Playland to a state of good repair.
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As negotiations with Standard Amusements evolved, the decision was made that the County would be responsible for $33 million plus pool reconstruction of $9.5 million. Standard Amusements is responsible for $27.5 million in investment, $14 million of which is for rides. According to the Agreement the County would also be required to make additional investments for the maintenance of the park.
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When the Latimer administration came into office in January, McDonald directed DPW/T and Parks to complete the assessment of capital needs at Playland. That estimate is complete and as of April 1, 2018, the state of good repair estimate is $125 million including the pool.
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Since those investments were not detailed in the Agreement, they would be the County’s responsibility and could cost the County more than $65 - $95 million even if depending on investments made by Standard Amusements.
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Additionally, the way the contract is written anything that Standard Amusements spends money on, from lunch money to surveyors, can be counted towards their “investments” in Playland. Under the Contract, the County is putting in significantly more money than Standard Amusements, and does not appear to ever receive a corresponding benefit.
Expenses -
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There are currently 24 County employees budgeted at Playland and six at the Playland Beach and Pool. An MOU between the Westchester County Board of Legislators and the County Executive guarantees County employment for these employees. The salaries of these employees totals $1.9 million per year not including fringe benefits.
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While the Standard Amusements agreement has their salaries covered 100% only 30 percent of their fringe benefits are covered under the agreement.
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The agreement also only covers $400,000 for County Police and Seasonal Park Rangers, but the cost of these services is $655,000 – the County would have to cover the $255,000 shortfall.
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We project the County will be responsible for $1.5 - $2.5 million in personnel costs and fringe benefits for up to ten years.
Revenue Sharing -
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While the deal has Standard Amusements sharing the profits with the County, the County receives nothing until Standard Amusements has fully recouped its Initial Payments ($2,250,000) and Manager’s Investment ($27,500,000). According to Standard Amusements the County would not be receiving any profit share until at least 11 years after Standard Amusements took over management of the park.
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Since revenue share is based on a net income number, Standard Amusements is able to pay a higher rate to their investors or pay themselves a higher management fee and avoid paying the County any revenue share.
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Standard Amusements’ revenue and attendance growth assumptions are overstated. Attendance at Playland in 2016 was 505,000. Standard Amusements’ pro forma assumed doubling this number to one million by the fourth year, 2020.
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Professional Management