Letter to Editor: Caution urged on ferry lease

To the Editor:

We expect a lot of our town councilors, but we should not expect them to have the skills of a corporate lawyer. Thus, the councilors had understandable difficulty in analyzing the lease that Bay Ferries has proposed for signature by Atlantic Fleet Services (“Atlantic”) and the town.

When one councilor asked Bay Ferries’ CEO, seasoned corporate lawyer Mark MacDonald, why Atlantic and not Bay Ferries was signing the lease, Mr. MacDonald claimed that it is more difficult for a Canadian corporation [than an American one] to enter into a contract with an American town. In forty-one years of practicing law, I have negotiated dozens of contracts with Canadian companies. It is not a difficult task. A lease with both Bay Ferries and Atlantic is in the town’s best interests as the town will be twice protected.

Similarly, when Councilor Minutolo asked whether the lease allowed the town to back out if the Coast Guard imposed a 300 foot security zone that effectively prohibited development of a multi-use marina, Mr. MacDonald pointed to Section 6 of the lease. That section merely provides that Coast Guard approval of “Facility Security Plans” was legally required for Atlantic to operate ferry services. Nowhere does this section give the town the right to void the lease if the Coast Guard security zone is too large.

The section states the obvious, that Atlantic must comply with Coast Guard regulations to begin operations. The town should insist that the lease is void if the security zone is too large.

Similarly, another councilor repeatedly told citizens that the provisions of Section 5(a) of the lease, that Atlantic was taking the property “as is,” meant that the town would have no obligations to repair the pier abandoned by Bay Ferries in 2009. Oh that this were so.

“As is” refers to the current condition of the pier; the word “is” in the phrase “as is” is expressly a reference to the present.

Should the pier further deteriorate, the town, as the landlord, would have to repair or replace it. Section 5(b)(iv) of the lease is clear: Atlantic has “the right (but not the obligation) to make repairs and improvements” to the pier.

Instead, the town, under Section 7(d) of the Lease, must ensure the “continued availability” of the pier. If it collapses, the pier is no longer available and the town must repair or replace it. The town must, under Section 7(a) of the Lease, “maintain the Landlord Retained Area” to allow the continued operation of ferry services. Almost all the pier is in the Landlord Retained Area.

Making sure the lease places the obligation for maintaining the pier on both Bay Ferries and Atlantic is critical. We have yet to see the guarantee from the Province of Nova Scotia that is referenced at Section 4(c) of the lease, yet the council will vote on Oct. 16 to authorize the town manager to sign this lease.

The council must see the guarantee from the Province before it authorizes the town manager to do anything. Bay Ferries’ CEO MacDonald intimated that the guarantee might not be available until just before the inception of the lease on Dec. 1.

This is like buying a house without first obtaining a title search, a water test, and a radon test. Right now, the guarantee described in Section 4 is only a limited guarantee of “amounts otherwise payable by Tenant under this Lease.”

Thus, if Atlantic backs out of the lease in 2020 because the pier has collapsed and is no longer “available,” the Province of Nova Scotia owes the town nothing. Its guarantee would only be to pay what Atlantic was legally obligated to pay. If Atlantic can legally escape the lease, the Province can as well. Any guarantee must be unconditional.

Another problem with the lease is that it nowhere mentions the alleged $3 million in capital improvements promised by Bay Ferries in July of this year. The improvements itemized at Section 5(b) of the lease are all specific to ferry operations and, other than “alterations to the terminal building” can all be removed by Atlantic under Section 10 of the Lease and be sold or re-used by Atlantic.

Finally, Section 8(d) of the Lease expressly provides that Atlantic “shall, under no circumstances, be obliged to reconstruct or rebuild the terminal building.”

The two biggest problems with the property at 121 Eden are the deteriorating pier that Marine Atlantic, when it sold the land to MDOT, insisted be largely off-limits until repaired, and the terminal building that is subject to an Environmental Covenant because of asbestos, lead-based paint, and nearby petroleum-contaminated soil. This lease assures Atlantic that it needn’t deal with either problem.

The town has until Dec. 1 to sign this lease. Let’s insist upon a better lease, that both Bay Ferries and Atlantic sign, and a written guarantee by Nova Scotia that a good corporate lawyer can analyze.

If neither is forthcoming, we have a better choice. We can double the annual money that Atlantic is promising by raising the cruise ship fee by $2 per head and developing a cruise ship tender facility and multi-use marina of which we can all be proud.

Arthur Greif

Bar Harbor

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