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New York City Comptroller William C. Thompson, Jr. today released an audit stating that the New York Yankees owe the City nearly $3.6 million.

The audit found that the Yankees generally adhered to the provisions of their lease agreement with the City and had an adequate system of internal controls over their revenue collection and reporting functions. However, the audit disclosed that the Yankees underreported their revenue by $9,070,960 and overstated deductions against revenue by $34,489,804, thereby owing the City $3,599,575 in additional fees.

“The Yankees have been extremely cooperative in meeting to discuss this matter, but nevertheless disagree on the amount of money owed the City,” Thompson said. “We must work together to ensure that New York City gets every dollar it deserves.”

The Yankees’ lease agreement – which expires December 2005 - requires that the Yankees pay the City the greater of either an annual minimum rent of $200,000 or a percentage of revenues from gross admission, concessions, wait service, per-paid parking and a portion of cable television receipts. The Yankees can deduct payments made to Major League Baseball, sales taxes, and 25 percent of property insurance premiums for the stadium from gross revenue before calculating rent payments.

The Yankees are allowed to deduct from the calculated rent certain costs incurred for maintaining the stadium. In addition, a December 2001 amendment to the lease allows the Yankees to deduct new-stadium planning costs incurred annually for five years. For the audit period, the Yankees reported gross revenues totaling $384.4 million and paid the City $9.9 million.

The lease agreement allows the Yankees exclusive use of Yankee Stadium during the baseball season and permits the Yankees to sell tickets, provide food and souvenir concessions, provide parking for season ticket holders and offer cable television broadcasts. The City’s Department of Parks and Recreation administers the agreement.

Among the specific findings of the audit:

• For 2001 and 2002, the Yankees underreported their cable television receipts by a net amount of $6,925,290, resulting in the Yankees owing the City additional rent of $692,529.

• In 2001 and 2002, the Yankees reported concession revenue of $92,488,561 - $1,241,444 less than what was reflected on the Yankees books and records. Accordingly, the Yankees owe the City $99,583 in additional rent.

• For the 2001 baseball season, the Yankees underreported paid attendance by $33,214, resulting in the Yankees owing the City $20,990.

• For 2001 and 2002, the Yankees overreported deductions taken for payments to Major League Baseball by $34,481,362, resulting in the Yankees owing the City $2,733,975 in additional rent.

• The Yankees overstated their revenue-sharing deductions for 1997 to 2000 on their Statements of Rent. The Yankees claimed deductions totaling $70,940,082, when they were only entitled to deduct $50,236,418. Accordingly, the Yankees owe the City additional rent totaling $1,691,485.

The audit recommended that the Yankees: pay the City $3,599,575 in additional fees, ensure that revenue from cable television, concessions, wait-service, and pre-paid parking is accurately reported to the City and all appropriate fees paid; ensure that annual paid attendance is accurately reported to the City; deduct only those payments to Major League Baseball that relate to gross admission receipts and local cable television receipts from their calculation of rent due the City; and, include only those new-stadium-planning costs incurred within the calendar year as deductions from rent due.

The Comptroller also recommended that the New York City Department of Parks and Recreation ensure that the Yankees pay the additional fees and follow through with the recommendations in the audit.

In their response to the audit, the Yankees agreed with $2,456,592 of the $3,599,575 audit assessment. But the Yankees did not provide adequate documentation supporting the contention that the remaining $1,142,983 is not due to the City.