Critical Report Prompts Latimer to Reopen Rye Playland P3 Deal

John Jordan | May 9, 2018

From left, Westchester Deputy County Executive Ken Jenkins, County Attorney John Nonna, County Executive George Latimer and Director of Operations Joan McDonald

WHITE PLAINS—A critical report citing breaches and potential significant liabilities to be borne by taxpayers has caused Westchester County Executive George Latimer to explore the county’s options on either renegotiating or perhaps terminating its contract with Standard Amusements, LLC to operate Rye Playland.

Westchester County Executive Latimer, who was highly critical of the 30-year public-private partnership deal for the operation of Rye Playland during the election campaign last year, plans to meet with Standard Amusements as well as hold discussions with the County Board of Legislators on how best to proceed. He said the results of the report “reopens the dialogue on the future of Playland.”

“We have a contract in place… whether or not we renegotiate the contract, whether we terminate the contract or were we to feel that we needed to accept the contract as is, those are the options that are before us,” Latimer told reporters at the press conference on May 7. “Those are options that the Board of Legislators and the Executive Branch will work together toward and the people of Westchester will have a say in as well.”

Standard Amusements partner Nicholas J. Singer released a short statement in response to the release of the county’s report, “We are pleased Westchester County has completed its review and look forward to engaging with the county to resolve any concerns as expeditiously as possible,” he said.

Latimer, who also resides nearby the amusement park, released a report authored by Joan McDonald, director of operations, and County Attorney John Nonna that cited potential breaches of the contract by Standard Amusements and also significant increases in the future capital costs at Rye Playland. The Westchester County Board of Legislators, overwhelmingly approved the contract with Standard Amusements, negotiated under prior Westchester County Executive Robert Astorino, in May 2016.

The report released on May 7 states that a Department of Public Works/Transportation and Parks Department review estimates the state of good repairs necessary at Playland to be $125 million. That estimate is far above the repairs called for in the Standard Amusement contract that require Standard Amusements to invest $27.5 million in capital projects (including $14 million for rides) and holds Westchester County to be responsible for $33 million in repairs, plus $9.54 million associated with the pool reconstruction.

The report states the county could be responsible for an additional $65 million to as high as $95 million in additional capital costs, depending on investments made by Standard Amusements. McDonald was critical of the capital costs studies that were undertaken in connection with the contract.

McDonald also noted that the county believes the attendance estimates in the contract with Standard are overestimated, noting that Playland has recently averaged approximately 500,000 visitors each year. Standard Amusements has projected that Playland’s attendance would double to 1 million by 2020. The report also noted that Standard assumes revenue growth of 33%, 35%, 24% and 9% in years one to four of operation, respectively. The county described those attendance and revenue projections in the report as “a very optimistic and likely unrealistic assumption” that it added were not backed up by any market survey data.

McDonald said the county is seeking a “fair deal.” Nonna noted, “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?”

While county officials say the park is safe and in fact opened on May 12 for the 2018 season, Latimer noted Playland will require significant capital investment in the future. The County Executive, based on a walk-through of the property last month, said, “Candidly, the park shows the wear and tear of having insignificant amounts of capital put into it over the last eight years.”

Some of the other contractual or financial issues cited by Latimer, McDonald, Nonna and the administration’s report include:

• Standard Amusements owing $1.25 million to the county in its initial payment obligations.

• The county could be responsible for between $1.5 million to $2.5 million in personnel and fringe benefits costs associated with Playland employees for up to 10 years.

• Revenue sharing would not begin until year 11 of the agreement and since payouts are based on a net revenue basis, the county’s profit sharing could be minimal.

• Latimer was critical of five extension/contract modification agreements reached between Standard and Westchester County prior to the Latimer administration taking office. The last extension dated Dec. 20, 2017, the county charges reverses the order of investment obligations and now requires Westchester County to fulfill its 50% threshold obligation by Jan. 31, 2019. Previously, Standard was required to invest $3 million in new rides before the county reached its 50% threshold. Now, Standard is required to invest the $3 million 90 days after the county reaches the 50% threshold.

• The County Executive charged that these extensions/contract modifications were entered into without the approval of the County Board of Legislators.

• Standard Amusements had informed county officials that Jacob “Jack” Falfas was to be a key person to professionally manage Playland, but the county has learned that he has left the company and to date has not been replaced by Standard Amusements.

The county at the press conference also stated that it wants to conduct an audit on the purported $4 million Standard Amusements has already spent in connection with the Playland contract.

Latimer stressed that Westchester County will be operating Rye Playland during the 2018 season and the park will open on schedule on May 12. The park first opened to the public on May 26, 1928.

The Westchester County Board of Legislators in May 2016 voted 13-4 in favor of the contract with Standard Amusements for a 30-year management contract of the 280-acre property. Those improvements are to include new rides and attractions, as well as upgrading food choices, picnic areas, and restaurants and renovating grounds and buildings. Westchester County agreed to spend $32 million for 11 capital projects to rehabilitate the infrastructure at Playland, including rides, gaming and concession improvements, as well as shoreline rehabilitation.

The battle over the future of Rye Playland has lasted more than seven years. The county issued an RFP for a developer to revitalize the park back in 2011 and the county signed a memorandum of understanding in 2012 with Sustainable Playland, which bested 12 respondents of the RFP. In April 2013, the county signed an asset management agreement with that firm. However, in June 2014 the county abandoned the $34-million project after it failed to secure sufficient support from the Westchester County Board of Legislators and later negotiated a new deal with Standard Amusements.

John Jordan
Editor, Real Estate In-Depth