the franchise fee computation. However, when agreement is reached on the negotiations for the proposed changes in the franchise fee, a contract amendment will be prepared which will provide for these changes and for the exclusion of gross receipts from the sale of native handicraft. These changes will be effective with the concessioner's current fiscal year, which began October 1, 1973. If you would like any additional information, or assistance in conducting the proposed negotiations with the concessioner, please let us know. A bill for collection should be issued for the additional amount of $2,032 of franchise fee for 1972, which is due the United States. This amount represents the franchise fee on gross receipts from the sale of Indian merchandise, which receipts were improperly excluded from the franchise fee computation for 1972. HOWARD H. CHAPMAN. Enclosures. Mr. JAY S. STEIN, President, Yosemite Park and Curry Company, NOVEMBER 23, 1973. Through: Regional Director, Western Region Superintendent, Yosemite Our review of Schedule B, "Government Franchise Fee", of the Annual Financial Report shows that Indian Merchandise Sales of $270,991 were deducted from gross sales and not included in the franchise fee for computation. The concession contract with Yosemite Park and Curry Company does not provide for the exclusion from gross receipts of Indian merchandise sales. As a result, an additional franchise fee of $2,032 ($270,991 x .0075) is due the National Park Service. In January 1965, the National Park Service had adopted the minimum weighted franchise fee formula to be used in negotiating new contracts (and revisions in existing franchise fee provisions at the time of these renegotiations) with individual concessioners. Under the formula, gross receipts from the sale of genuine Indian and native handicraft are exempt from the formula. In addition, in lieu of the flat fee charged, a concessioner pays for any Government structure assigned, a reasonable charge based on the value of the Government-owned structure provided. The concession contract with the Yosemite Park and Curry Company was executed in May 1963 prior to the adoption by the National Park Service of the franchise fee formula. Subsection 9(d) of the concession contract provides that the franchise fee may be reconsidered within sixty (60) days after the end of the tenth year of the contract, which was September 30, 1973. This is to advise that we propose to enter into negotiations with respect to a revision of the franchise fee provision of the concession contract. In this regard, we are enclosing for your information a copy of our franchise fee formula. You will be contacted shortly concerning our proposal. Sincerely yours, Enclosure. RUSSELL E. DICKENSON, U.S. DEPARTMENT OF THE INTERIOR, Memorandum to: Regional Director, Western Region. Yosemite. Enclosed are two copies of an approved memorandum of today that negotiations be undertaken with Yosemite Park and Curry Company, a concessioner providing concession facilities and services for the public in Yosemite National Park, for an increase in the franchise fee rate pursuant to subsection 9(d) of Concession Contract No. NPS-WASO-IX-63-2. The memorandum contains the considerations on which the determination was based and our proposal with respect to the increased fee rate. Also enclosed is a letter to be transmitted to the concessioner advising that the Service proposes to enter into negotiations for a revision in the franchise fee rate. In addition, the letter points out that a review of the 1972 annual financial statement shows that Indian merchandise sales have been improperly excluded from the franchise fee computation. As a result, an additional franchise fee of $2,032 is due the United States. Negotiations should be undertaken with the concessioner on the basis contained in the memorandum. When agreement has been reached, the necessary contract amendment will be prepared in this Office for presentation to the concessioner for acceptance. In the meantime, we should be kept advised as to developments. Enclosures. RUSSELL E. DICKENSON. U.S. DEPARTMENT OF THE INTERIOR, Memorandum to: Director. Yosemite. Concession Contract No. NPS-WASO-IX-63-2, under which Yosemite Park and Curry Company (YPCC) is authorized to provide facilities and services for the public in Yosemite National Park, provides in subsection 9(d) that the franchise fee may be reconsidered within sixty (60) days after September 30, 1973. The present franchise fee consists of a flat fee of $5,000 plus a further sum equal to three-fourths of one percent (%) of the annual gross receipts. The minimum weighted franchise fee rate calculated under the formula comes to 1.55 percent. Also, pursuant to the franchise fee formula, concessioners are to pay a fee for the use of Government-owned buildings assigned, based on the value of the buildings. On this basis, it has been determined that a fee of $16,900 should be charged for the use of the buildings assigned. A 5-year financial summary is attached for your information. During the 5-year period (1968-1972) the concessioner operated on a profitable basis. Sales during this period averaged about $13.5 million with the average profit after taxes of about $595,000. The average rate of return on investment comes to 7.64 percent with the rate of return on gross receipts averaging 4.40 percent. It should be pointed out that during the past five years, dividends averaging $314,084 were paid to YPCC stockholders with total salaries of officers averaging about $184,000. Depreciation, a non-cash item averaged $745,000. While we do not consider the average rate of return to be excessive, we feel that this rate plus the other items mentioned above warrant increasing the franchise fee percentage rate to the minimum weighted percentage of one and one-half percent (12%). Therefore, we propose to enter into negotiations with the concessioner on the basis of a percentage of one and one-half percent of the gross receipts plus a fee of $16,900 for the use of the Government-owned improvements assigned. A comparison of the average amount of franchise fee and net profits over the past five years with the average amount that would have resulted, taking into consideration the reduced taxes, had the fee been on the basis of the one and one-half [percent] as now proposed, follows: Based on the foregoing, we recommend that negotiations be undertaken with the concessioner to increase the percentage of gross receipts franchise fee rate from three-fourths of one percent (%) to one and one-half percent (12%) and to substitute the present flat fee of $5,000 with the building use fee of $16,900. If you approve, please so indicate by signing the enclosed letter to the concessioner advising that we are prepared to undertake negotiations. Enclosures. JON FOUST. YOSEMITE, January 15, 1974. Re: C3823MCC Mr. HOWARD H. CHAPMAN Regional Director, Western Region San Francisco, Calif. DEAR HOWARD: Reference is made to Russell Dickenson's letter (attached) of November 23, 1973, addressed to me but submitted through you and the Superintendent of Yosemite. The communication reached me on Dec. 18, 1973. The Indian Artifacts aspect has been handled separately in a letter from Don Hummel, a copy of which is attached. With respect to franchise fees, rather than waiting for a formal proposal from the Park Service, we wanted you to have our thoughts on the subject. Our contract calls for reconsideration of the franchise fee within sixty days following September 30, 1973. We believe, however, there are compelling and substantial reasons why franchise fees should not be increased at this time. The uncertain position of our economy brought about by the Energy Crisis and the possible imposition of rationing makes the travel and recreation industries particularly vulnerable. While definitive legislation has not yet been passed, it is apparent that recreation activities will not be high on priority lists for fuel allocations. Past experience has taught us that recreation is the first casualty of an uncertain or declining economy even if fuel were available. Since the first gas-less Sunday (November 25, 1973), car counts at Yosemite are down 30% compared to prior year data. This could be disastrous if the trend continues, and according to statements made by William Simon, fuel shortages will be with us for ten years. We are also beset with rising product costs along with increases in minimum wage regulations recently promulgated by the State of California. It is apparent that proposed Federal legislation may further increase minimum wage rates. Phase IV regulations by the Cost of Living Council restricts increases in prices to cost increases, with no regard for profit margins, thereby causing us to lose ground to inflation. A further and compelling reason is our commitment of funds for improvement and replacement of substandard facilities. We still have 130 cabins without bath and 396 guest tents to replace. Much of our employee housing is substandard. We have committed approximately $3 million this fiscal year to a program of replacement. This is just the start as many more millions of dollars will be required to provide proper facilities to adequately service the park visitor. It is our understanding that the policy of the government as enunciated in Public Law 89-249 is that revenue to the government shall be subordinate to good facilities at reasonable rates. We believe that continuance of the present franchise fee is consistent with the intent of this policy. For this reason we respectfully submit that no change in franchise fee is justifiable at this time. Sincerely, Enclosures (3). Memorandum to: Regional Director, Western Region. JAY S. STEIN, President. JANUARY 30, 1974. Subject: 1972 and 1973 Franchise Fee Payments, Yosemite Park and Curry Company, Yosemite. In accordance with Acting Regional Director Novak's memorandum of January 18, 1974, we are enclosing a letter to be transmitted to Mr. Don Hummel, Vice Chairman of the Board, Yosemite Park and Curry Company, regarding payment of franchise fees on Indian merchandise sold by Yosemite Park and Curry Company for fiscal years 1972 and 1973. Enclosure, Mr. DON HUMMEL, Vice Chairman of the Board, Yosemite Park and Curry Company, Yosemite National Park, Calif. JOHN E. COOK. JANUARY 30, 1974. Through: Regional Director, Western Region Superintendent, Yosemite. DEAR MR. HUMMEL: This is in reply to your letter dated January 4, 1974, stating that the additional franchise fee of $2,032 from the sale of Indian merchandise sold by Yosemite Park and Curry Company (YPCC) in the 1972 operating year is not due. You further state that all sales of Indian merchandise were exempted by regulation adopted by the National Park Service in January, 1965. I wish to clarify this matter with you as it relates to YPCC. The present concession contract with YPCC was executed and effective in 1963. The present weighted franchise fee formula for concessioners operating in areas administered by the Service was adopted in 1965. Under the franchise fee formula sales from Indian merchandise would be eliminated. In a letter dated January 5, 1965, from the former Director Hartzog to you as Chairman, Western Conference National Park Concessioners, the following was stated: *** after careful consideration of the presentations made by your Conference on November 30, and in your letter of December 14, Mr. Carver has concluded that the franchise fee formula reflected in his letter to you of May 22 should be the basis to be used by this Service in its negotiations for concession operations, and he has asked me to inform you accordingly. Moreover, he has instructed me to follow this formula as a guideline in negotiating new contracts (and revisions in existing franchise fee provisions at the time of their renegotiation) with individual concessioners. * * * (Italic supplied.) The first franchise fee reconsideration period for the Yosemite Park and Curry Company pursuant to the contract was September 30, 1968. At that time, the Service applied the franchise fee formula to the company's operating results for the years 1963 through 1967, and the minimum weighted percentage franchise fee rate came to 1.55 percent. The Service felt that it would not be economically feasible to increase the franchise fee rate and bring it under the formula. The second franchise fee reconsideration period was September 30, 1973. You were advised by Assistant Director Jon Foust during his visit to the Park in early November, 1973 of our intent to enter into negotiations looking to an upward revision of the franchise fee. This was subsequently confirmed in writing. The present franchise fee formula would be applied in any such negotiation, including the exclusion of the gross receipts from handicraft sales. Consequently, if you wish to exclude such receipts, it can be considered during the current renegotiations. Unless such a provision is included in a contract at the time of negotiation, or in a subsequent amendment, there is no basis for the exclusion. We note from the annual report for the 1973 fiscal year which has just been received, that Indian handicraft sales in the amount of $163,632 have been excluded for the purposes of computing the franchise fee. Therefore, in addition to the $2,032 owing for 1972, an additional amount of $1,227 is also due for 1973. The amount of $3,259 should be remitted to the National Park Service on receipt of this letter. Sincerely yours, JOHN E. Cook, U.S. DEPARTMENT OF THE INTERIOR, NATIONAL PARK SERVICE, Memorandum to: Associate Director, Park System Management, National Park Service. Attention: Assistant Director, Concessions Management. From: Acting Regional Director, Western Region. Subject: Franchise Fee, Yosemite Park and Curry Co., Yosemite. A "Bill For Collection" was issued to the concessioner requesting payment of $2,032 for an additional franchise fee for 1972, for handicraft goods which were improperly excluded from gross receipts in the computation of the 1972 fee. The concessioner has responded with a letter addressed to the Director, through the Superintendent, voicing disagreement with the Service's contention that the sum of $2,032 is due the Government. This letter is enclosed. Under separate cover, we are transmitting the concessioner's annual financial report for 1973. The gross receipts for handicraft goods have been excluded from the franchise fee calculation again this year. We assume your office will make a determination regarding this franchise fee matter. FRED J. NOVAK. [NOTE.—The concessioner's annual financial report for 1973 is in the subcommittees' files.] DIRECTOR, National Park Service, Department of the Interior, Washington, D.C. Through Superintendent-Yosemite YOSEMITE, January 4, 1974. DEAR SIR: Reference is måde to collection demand for $2,032 for franchise fees on Indian Merchandise sold by Yosemite Park and Curry Co. for the fiscal year 1972. We submit that this sum is not due. All sales of genuine Indian merchandise were exempted by regulation adopted by the National Park Service in January 1965. These were excluded for the purpose of encouraging the sale of genuine and native Indian handicrafts. We operate under Contract No. NPS-WASO-1X-63-2 which provides in Section 22-General Provisions (a) "Operations under this contract shall be subject to the laws of Congress governing the park and the rules and regulations promulgated thereunder, whether now in force or hereafter enacted or promulgated". Sincerely, DON HUMMEL, Vice Chairman of the Board. |