Still owe $33,075 in late fees stemming from 2003 audit

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View 2003 Audit Report

City Comptroller William C. Thompson, Jr. today issued an audit that found that the Staten Island Yankees failed to pay the City $570,202 in electricity, water and sewer costs and late payment charges, and faulted them for failing to properly count and report attendance.

“The Staten Island Yankees have blatantly ignored my Office’s recommendations to thoroughly report attendance at games and have prevented us from determining whether they should have paid base rent to the City,” Thompson said. “Auditors noted that internal control weaknesses over the recording and reporting or revenue from attendance made it impossible to know how much the Staten Island Yankees should have paid.”

The audit found that the team continues to make late payments, not report attendance based on turnstile counts, or adequately support the attendance that was reported.

Staten Island Minor League Holdings (doing business as the Staten Island Yankees) has a 20-year lease agreement with the City’s Economic Development Corporation (EDC) to exclusively use Richmond County Bank Ballpark. Under that agreement, the Staten Island Yankees are required to pay an annual base rent for actual attendance, for complimentary tickets, for “no shows” and for the team store, and percentages of revenues generated from special event net income and from advertising revenues.

As well, the agreement requires that the EDC pay the team a portion of the net income from the City’s parking lot adjacent to the stadium.

The new audit is the second in the last three years to reveal significant underpayments to the City. In June 2003, a Thompson audit disclosed that the team failed to pay $373,517 for electricity costs, fees on signage revenue, and late payment charges between May 2001 and December 2002. The team has since paid only $340,442 of that amount.

The new audit – covering January 2003 to December 2004 - detected similar problems. The audit determined that the team owed the City $377,052 for electricity use from June 2003 to December 2004, did not pay $24,887 for water and sewer charges, and did not pay $168,263 in late charges, including $33,075 not billed by EDC from the prior audit.

The team also did not remit required base rent during the audit period and were three to six months late with rent payments to EDC for signage revenue and sinking fund contributions. As a result, the Staten Island Yankees owe EDC $135,188 in additional late charges.

According to team officials, base rent was not due in either 2003 or 2004 because neither year’s total attendance reached 125,001 persons. If attendance dips below 125,001, the Staten Island Yankees do not pay any base rent. For the 2003 baseball season, the team reported a total of 104,916, of which 95,017 represented paid attendance. For 2004, the team reported 101,302 in total attendance, of which 83,771 represented paid attendance.

However, the Staten Island Yankees did not calculate and report attendance based on turnstile counts and instead (as noted in the earlier audit) scanned tickets into a computerized system that records tickets into a database, categorizing them as paid or complimentary. These records could not be reconciled to the attendance reported by the Staten Island Yankees on the Season Ticket Summary Reports for both years, to their own ticket records of individual game attendance, or to our manual count of tickets.

Auditors further noted weaknesses in attendance counting:

• Starting turnstile entries did not always follow the ending turnstile entries for previous days.
• Although the Staten Island Yankees use six turnstiles interchangeably at stadium entrances, at times they recorded the counts from only four or five turnstiles on a given game day.
• Closing turnstile entry totals from one game were not always listed as the opening turnstile entry totals for the very next game in 40 of the 450 reported instances. Auditors noted 19 instances in 2003 and 21 in 2004 in which ending turnstile counts for one game day did not coincide with the beginning counts for the next game day.
• Our ticket counts for a game held on August 17, 2003 showed that 1,962 people attended the game. But the Season Ticket summary Report submitted to EDC indicated that game was rained out and listed the attendance for the game as zero.
• Of the 92 ticket donation forms that the team processed for both years, 33 forms were not stamped “completed,” 89 forms did not indicate the name of the person requesting the tickets, 29 forms did not have an authorization signature, 51 forms did not have a “processed by” signature, 76 forms did not identify the seat numbers for the donate tickets, and three other forms did not have appropriate documentation attached.

The Comptroller noted that a new lease amendment was inappropriately executed in May 2004 to waive rent payments for the Staten Island Yankees’ team store during the baseball season, and that it would have to be paid during the off-season. This amendment never was presented to the City’s Franchise and Concession Review Committee (FCRC) for approval and was not submitted to the Comptroller’s Office for registration, as required.

“EDC should have followed these procedures when the amendment was established to maintain transparency in financial interactions,” he said. “The submission of such amendments for review and registration provides for an independent assessment of the implementation of the amendments, thereby also providing accountability for the City’s receipt of a fair share of rent for its leased properties.”

The audit, as well, determined that the Staten Island Yankees generally adhered to certain non-revenue-related requirements of its lease agreement with EDC.

Thompson faulted the Staten Island Yankees for ignoring nearly all recommendations in his previous audit, and today made 10 recommendations. The Comptroller urged the team to pay the $570,202 for electricity use, water and sewer costs, and late payment charges.

He also called on the team to comply with its lease by making all future payments on time, maintain accurate and complete documentation to support its attendance figures reported on Season Ticket Summary Reports to EDC, maintain accurate and sufficient documentation for all home game dates, rainout dates and rescheduled game date, and maintain accurate records for all turnstile activity used for home games.

Thompson further recommended that EDC ensure it receives the payments, including late fees, make sure that the Staten Island Yankees address the findings and implement the report’s recommendations, and ensure that all amendments to the lease are submitted to the FCRC for review and registered with the Comptroller.

In a response to the audit, Chief Operating Officer Joshua Getzler, who is a majority owner of the team along with his father, indicated the team will work with EDC to ensure that all payments are made and are “working to hone turnstile records, including potentially switching to an electronic scanning system at the turnstiles to ensure the records’ comprehensiveness.”