Audit finds New York Mets underreported revenue, overstated deductions and still owe money from previous audit assessments

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New York City Comptroller William C. Thompson Jr. released an audit today stating that the New York Mets owe the City close to $1.2 million. That amount coupled with the near $3.4 million the team has failed to pay from previous audit assessments brings their debt to more than $4.5 million.

"Given the City's dire financial condition, it is critical that the Mets live up to their fiscal responsibilities and pay the more than $4.5 million due," Comptroller Thompson said. "I'm disappointed that the Mets have ignored their obligations under their lease."

Requested by the Department of Parks and Recreation, the audit covered Jan. 1, 2001 to Dec. 31, 2001. The Mets' lease with the City permits the team exclusive use of Shea Stadium during the baseball season. The Mets are allowed to sell tickets, provide food and souvenir concessions, operate a restaurant and catering services for the Diamond Club restaurant, the Grill Room Bar and luxury suites, provide parking, provide cable television broadcasts, sell stadium advertising, and conduct post-season baseball games.

Auditors found that the Mets:

· Underreported Skybox net income by $40,878, which resulted in $20,439 in fees due the City.

· Did not report $362,102 in concession and wait service revenue because their subcontractor did not report those sales to them.

· Did not report $19,800 in advertising revenue because they overstated their bad debt expense. As a result, the Mets owe the City an additional $6,759.

· Overstated the deduction allowed for payments to Major League Baseball by $6,929,804. The Mets reported their net operating revenue to Major League Baseball, and Major League Baseball uses these amounts in its revenue sharing calculations. However, the amounts deducted by the Mets were not the actual payments as defined in the lease and should not have been deducted. As a result, the Mets owe the City additional fees totaling $476,557.

· Overstated the credit allowed for new stadium planning costs by $471,934 because they included costs incurred in years before the lease amendment took effect and costs expended in 2002 that the Mets would be allowed to apply to their 2002 rent. Thus, the Mets owe the City an additional $471,934.

· Took an unallowable credit of $203,126 for maintenance costs. Under the terms of the lease, the City is responsible for maintenance of Shea Stadium. Moreover, the lease does not contain a provision that allows the Mets to receive reimbursement credits covering expenses for maintenance work that they claim to have performed. Therefore, the Mets owe the City $203,126.

As a result, the audit recommends that the Mets pay the City $4,560,631. That includes $1,178,815 for the fees due as a result of the current audit and $3,381,816 owed the City from two prior audits.

A prior audit, issued in January 2003, found that the Mets underreported $13,475,218 in advertising revenue, $4,870,964 in concession and wait service revenue and $17,044 in Skybox revenue. In addition, with regard to payments to Major League Baseball, the Mets deducted $47,411,806 from their reported revenues, rather than the $19,645,398 to which they were entitled. The January audit noted that the Mets still had not paid $83,186 as part of a previous 1997 assessment. As a result of both, the Mets still owe $3,381,816.

The current audit recommends that the Mets ensure: that all Skybox, concession, and advertising revenues are reported on their rent statements; that a deduction is taken for only the portion of payments from admissions and local cable receipts that were actually made to Major League Baseball; that only planning costs incurred within the calendar year are claimed as credits; and that credits are not taken for items that are not specified in the lease.

The audit also recommends that the Parks Department ensure that the Mets pay the City $4,560,631 in fees from all three audits. Thompson noted that, if the Parks Department and the Mets continue to disagree over the fees due, the agency can take immediate action through arbitration or litigation.

The Mets, in their response, disagreed with the assessments of all three audits and indicated that they "made payment in full of all undisputed amounts." According to their response, the Mets have paid $590,113 of the $4.56 million owed.

"The amount the Mets owe from this audit is startling, but when you add millions more from previous audits, this pattern becomes particularly troubling," Comptroller Thompson said. "It is in everybody's best interest that the Mets pay the full amount due to the City as soon as possible."

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