National Park Service: $1.0 Million in Public Funding from the Delaware River Port Authority ("DRPA") to the Independence Visitor Center Corporation (IVCC)

Tuesday, January 4, 2011

$1.0 Million in Public Funding from the Delaware River Port Authority ("DRPA") to the Independence Visitor Center Corporation (IVCC)

Private Benefit and Inurement - Public Dollars Serving Private Interests: Independence Visitor Center Corporation ("IVCC") Is Not A "Small, Emerging and New Business" as per DRPA's Grant Requirements; DRPA's and IVCC's Corporate Governance - Conflicts of Interest with Funding when John Estey Chairs Both DRPA and IVCC

On November 19, 2010, the Philadelphia Inquirer reported that the "DRPA funneled more than $13 million to groups, some with ties to board,"

"DRPA [Delaware River Port Authority] officials repeatedly have said in the last two years that they were out of the economic-development business... That followed the DRPA's pledge in July 2008, during public hearings for bridge toll increases, to end its spending on such projects."

On November 15, 2010, the Philadelphia Inquirer Editorial Board published the following,

"The Delaware River Port Authority has finally proven the existence of an alternate universe in which it must be located. In an era of dire government budgets and municipal bankruptcies, it's somehow sitting on a gigantic pile of spending money.

Despite the temptation to keep found cash, many people actually try to return it to whomever it belongs. One might even be so starry-eyed as to hope the DRPA would give its extra money back to the public - a notion likely to make one of its officials laugh so hard as to choke on his toll-funded wasabi-and-panko-crusted ahi tuna steak at the Palm."

On August 9, 2010, the Philadelphia Industrial Development Corporation ("PIDC") reached an agreement ("Funding Agreement") with the Independence Visitor Center Corporation ("IVCC") whereby PIDC would funnel $1.0 Million in economic development funds from the Delaware River Port Authority ("DRPA") to the IVCC.

The details of this Funding Agreement reveal the inherent conflict of interest that has emerged through the entangled web of allegiance and responsibility between two agencies designed to serve the public--DRPA and IVCC.

John Estey is the Chairman of the Board of of Directors of both the DRPA and the IVCC. His law firm, Ballard Spahr, has represented both of these organizations for years. The PIDC Funding Agreement appears to show the ways in which public funds may have been used for the personal gain of those involved in these organizations.

This $1.0 million "economic development" grant from DRPA via PIDC (approved by PIDC on 6/25/10) to the IVCC is telling is various respects:

1) The DRPA resolution (See Exhibit) regarding the PIDC funds stated a distinct purpose for the money:

"DRPA intends to invest its economic development dollars allocated or reallocated by the Board today for Pennsylvania projects, that support small, emerging and new businesses and expansion or relocation projects that will improve the region’s economic climate." (emphasis added).

However, the Independence Visitor Center Corporation clearly is not a small, emerging, or new business.

2) Mr. Estey appears to be caught in a conflict of interest with regard to serving as Chairman of both DRPA and IVCC and directing funds to be granted from one organization to the other through this PIDC pass-through. Additionally, while these funds are meant to pay for operations of the IVCC, there's no way to show that they are not being used for legal fees to Ballard Spahr. The IVCC may argue that none of the DRPA funds, the taxdollars, etc., go to fund its legal fees with Ballard Spahr, for example. But that would be like when the large Wall Street banks claimed that no Federal bailout funds from the Troubled Asset Relief Program (TARP) were going to pay ridiculous executive bonuses.

3) Based on information in the PIDC-IVCC Funding Agreement, the IVCC sought out the public funds from the DRPA in the amount of at least $1.0 Million. The funds are a grant that the IVCC does not have to repay. The IVCC plans to use this substantial public gift for capital improvements and operations at the Independence Visitor Center.

"IVCC has requested a grant from DRPA in the amount of $1,000,000"

"DRPA approved the use of funds subject to the Revolving Loan Fund Agreement for IVCC on June 25, 2010 for the Project;"

"The Grant Funds issued pursuant to this Agreement are to be paid as a grant, and not as a loan. IVCC shall have no obligation to repay any of said Grant Funds used in accordance with this Agreement."

"The IVCC is pleased to submit this proposal to PIDC for a DRPA grant in the amount of $1,000,000. This grant will support both capital projects at the Visitor Center, as well as operations."

4) The Funding Agreement gives DRPA control of the funds, elements of the project, and certain operations at the IVCC. These arrangements create avenues for further cross-dealing between those involved at the DRPA and IVCC.

Control - "IVCC acknowledges and agrees that DRPA shall, in its sole discretion, reasonably determine if the Project has been completed or if Project Termination has occurred"
Indemnification and Legal Counsel - "IVCC agrees to indemnify, defend and hold harmless PIDC-LDC, DRPA, and their respective officers, directors, employees and agents, from and against any and all losses, claims, actions, damages (including consequential damages), costs, expenses (including but not limited to court costs, attorney's fees, and expert's fees), liabilities, and judgments, including..."
Counsel Approval (Ballard Spahr?) - "IVCC must, upon written notice from PIDC-LDC or DRPA, at IVCC's sole cost and expense, including without limitation attorneys' and expert's fees and court costs, resist or defend such action or proceeding by counsel approved by the PIDC-LDC in writing..."

5) The Funding Agreement provides interesting background on the IVCC, including some hints as to their other sources of funding.

Operating Budget

"The IVCC's operating budget for FY 2010 is approximately $3.7 million. Approximately 1/3 of that amount is provided by the National Park Service and Commonwealth of Pennsylvania grants (although no State funding has been approved this fiscal year). The remaining 2/3 must be raised from other sources or generated internally (through concessions and license agreements). As with many nonprofits, the IVCC is constantly searching for new sources of funds to enable us to carry out our mission. It is anticipated that a portion of the DRPA grant funds will be applied to the IVCC's FY '10 and FY '11 Operating Budgets in order that we can balance the budgets for these years."

In other words, approximately $1,233,210 comes from the NPS and Commonwealth of Pennsylvania:

$850,000.00 - NPS
$383,210.00 - Commonwealth of Pennsylvania

Based on the foregoing, $2,466,790.00 "must be raised from other sources or generated internally (through concessions and license agreements)."

Approximately $500,000.00 from DRPA will be used in both FY2010 and FY2011. Thus, the IVCC "must" raise $1,966,790.00 from other sources or generate this "internally through concessions and license agreements." One could argue that concessions operated through third parties is not generating funding internally.

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Exhibits:

DRPA-09-095 Allocation and Reallocation of Previously Authorized PA Project Funds

Funding Agreement, PIDC-IVCC Agreement, 8-9-2010

Background on The Constitutional’s disputes with the NPS and Independence Visitor Center

The Constitutional Walking Tour of Philadelphia (“The Constitutional”) offers guided walking tours of the Independence National Historical Park area by providing a primary overview of Independence Park and visiting more than 20 of Independence Park’s most historic sites including the Liberty Bell, Independence Hall, Carpenters’ Hall, Declaration House, etc.

From 2005 to 2010, the Independence Visitor Center Corporation sold tickets for The Constitutional’s various tours only at the IVC’s main information and sales desk. The IVCC has received a 20.0% (twenty percent) sales commission on each ticket that it has sold for The Constitutional (ranging on average in gross price from $12.50 to $17.50). Since 2005, The Constitutional has requested to also license a dedicated ticket sales booth from the National Park Service and IVCC on fair, reasonable and non-discriminatory terms commensurate with Ride the Ducks and Philadelphia Trolley Works, for example. Additionally, since 2005, The Constitutional has requested to also license marketing opportunities and commercial use authorizations from the National Park Service and IVCC on fair, reasonable and non-discriminatory terms.

The Independence Visitor Center (“IVC”) is owned and operated by the United States of America - National Park Service (“NPS”), which then sub-contracts with the Independence Visitor Center Corporation (“IVCC”), a taxpayer supported public charity, to manage the IVC.

The IVCC and NPS have preferenced third parties including Ride the Ducks and Philadelphia Trolley Works, and the IVCC and NPS have discriminated against The Constitutional Walking Tour. The National Park Service has enabled the creation of this unfair business environment. The National Park Service and the IVCC have ignored and circumvented Federal management and concessions laws for the sale of goods and services at Independence National Historical Park that require open, transparent, competitive and appealable processes awarding concessions contracts for the sale of goods and services including tours.

To facilitate the administration of the National Park Service System, the Secretary of the Department of the Interior, acting through the NPS, is authorized under the National Park Service Organic Act (“Organic Act”) to carry out twelve categories of activities, none of which include transferring administrative responsibility to a private party [i.e., IVCC] or engaging in cooperative administration with a private party [i.e., IVCC]. 16 U.S.C. § 1a-2(a)–(l). Rather than grant the NPS discretion in its dealings with park concessioners, Congress established “carefully controlled safeguards against unregulated and indiscriminate use” of the parks in the National Parks Omnibus Management Act of 1998 (“Management Act”), which governs all national park public accommodations, facilities, and services. 16 U.S.C. § 5951 et seq.; see also 36 C.F.R. Part 51.2 (“policy underlying concessions contracts”). The safeguards are not limited to nationwide policy: Congress also manages the parks with significant visitor traffic on a park-by-park basis. See, e.g., 16 U.S.C. §§ 21–40c (Yellowstone), §§ 91–110d (Mount Rainier), §§ 212–218a (Abraham Lincoln’s Birthplace), and §§ 410z–410z-5 (Boston National). One of the dozens of national parks managed by specific statutes is Independence National Historical Park (“INHP”). 16 U.S.C. §407m–407s. As such, compliance here going forward would require the NPS, first, to reassume from the private IVCC the NPS’s duties “to administer, operate, manage, lease, and maintain” properties at INHP pursuant to 16 U.S.C. § 407s; second, to award “all proposed concessions contracts … through a competitive selection process” pursuant to 16 U.S.C. § 5952; and, third, to issue commercial use authorizations in a rational manner pursuant to a reasonable interpretation of 16 U.S.C. § 5966(c).

The IVCC and NPS have arbitrarily and randomly selected business partners in a non-competitive and clandestine manner; as such, the actions of the NPS and IVCC have from an economics perspective stifled competition, innovation and consumer choice. Ultimately the IVCC’s actions have enabled prices to increase for its preferred vendors to strengthen the for-profits’ financial performance. Visitors to Philadelphia will be better served when the IVCC’s management, manners and methods are fundamentally changed. This would include having the National Park Service abide by Federal concessions management laws. Specifically, this will entail only having the NPS award concessions sales contracts and not having the IVCC involved in any of the selecting, awarding, contracting and managing of Independence Park’s third party concessions, including inside the Independence Visitor Center. This is the model that is practiced in virtually every other of the 390 (three hundred ninety) National Park Service units across the United States (in 49 states) including at Yosemite, Yellowstone, Statue of Liberty, etc. Additionally, visitors and all stakeholders will be better served once the operation of the taxpayer funded IVCC is totally transparent and accountable. While part of the issue centers on a publicly funded charity competing against the private sector (i.e., by offering guided tours and services), it more so has to do with the manner in which the IVCC and NPS operate and discriminate against third party concessionaires, tour operators and vendors in a random and arbitrary fashion (i.e., with the licensing and leasing ticket sales kiosks by the IVCC to third party companies, for example).