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-- NYC loses $3 million more in foregone revenue --

The New York City Department of Parks and Recreation overpaid Ferry Point Partners LLC nearly $6 million and lost more than $3 million in license fees due to its lack of oversight at Ferry Point Golf Course, according to an audit released today by New York City Comptroller William C. Thompson, Jr.

“The Parks Department absolutely dropped the ball when it came to the Ferry Point Golf Course,” Thompson said. “The Parks Department failed to not only ensure the timely completion of this project, but also failed to be vigilant of capital improvement costs at the golf course. The Parks Department paid for work for which the City was not liable, and lost out on millions of dollars in revenue. More than seven years after the concession agreement was signed, the golf course is not nearly complete, and as a result New York City does not have a world-class golf course.”

Under the terms of a May 31, 2000 agreement with the Department of Parks and Recreation, Ferry Point Partners LLC was granted a concession that required it to develop, operate and manage Ferry Point Golf Course in the Bronx. The agreement required Ferry Point Partners to complete at least $22.47 million in capital improvements consisting of an 18-hole golf course and related facilities such as a driving range, restaurant and clubhouse.

Additionally, residents of the Bronx were supposed to benefit from a waterfront community park and a renovated community playground, which were to be completed by January 1, 2003. The agreement also required Ferry Point Partners to pay the City the greater of a $1.25 million annual fee or a percentage of gross receipts.

Ferry Point Partners began capital improvement work in August 2000 by importing fill material to shape and contour the premises, formerly the site of a New York City municipal landfill. When excessive levels of methane gas, a hazardous substance, were detected in 1999, Ferry Point Partners undertook its remediation.

The City’s Franchise and Concession Review Committee authorized Parks to expend up to $8.6 million for remediation. As of September 2006, Parks had reimbursed Ferry Point Partners $7.24 million, ostensibly for remediation. In addition, Parks modified the original agreement’s end date from January 1, 2003 to April 15, 2004. 

Thompson’s audit - at www.comptroller.nyc.gov – covered September 1999 to September 2006. The audit examined whether Parks effectively monitored Ferry Point Partners to ensure that remediation costs were substantiated, reasonable and necessary in accordance with the concession agreement and amendment, and whether scheduled capital improvement work was performed in accordance with the concession agreement and modification. Auditors found:

• Parks allowed Ferry Point Partners to reach an agreement with its subcontractor, Laws Construction, in which Laws Construction would be paid to import and shape the fill required to construct the golf course by retaining “tipping” fees paid by waste haulers seeking to dispose of construction and demolition debris from other sites. According to Laws Construction, the “tipping” fees collected totaled $15.13 million. If Parks had collected the “tipping” fees while Ferry Point Partners was still carrying out the work, the City could have paid Ferry Point Partners the estimated $1.26 million for remediating the methane gas and $3.58 million for permits and environmental inspectors, which still would have yielded $10.29 million in earnings for the City.

“The Parks Department created a disincentive to complete the project timely by allowing Ferry Point Partners to agree to allow Laws Construction to pocket millions of dollars that could have gone to the City,” Thompson said.

• From June 2002 to September 2006, Parks reimbursed Ferry Point Partners $7,242,754 for remediation work performed at the premises - an overpayment of $5,978,416. In an independent cost analysis, auditors estimated that the cost of the remediation, including landfill gas trench, installing monitoring wells, performing maintenance, engineering design and a required monitoring program, should have cost only $1,264,338. Moreover, auditors found that the improper reimbursements included work items associated with Ferry Point Partners’ obligation to carry out the required capital improvements, such as the costs of importing fill to construct the golf course, and other costs which were not eligible for reimbursement.

• Since Ferry Point Partners had not completed the required capital improvements by the stated date of April 15, 2004, the City lost out on $3,020,833 in license fees through September 30, 2006. Furthermore, as of September 2006, the only improvement underway was the 18-hole golf course. Given the rate of progress, auditors estimated that all 14 improvements would not have been completed until 2011, by which time the City would have forgone $9,712,500 in fees.

• Auditors found that part of the delays resulted from Ferry Point Partners’ decision to revise the design of the golf course, requiring additional fill, which also allowed for the reaping of additional “tipping” fees by Laws Construction. Delays also included the failure to obtain required permits on a timely basis.

• The agreement stipulates that if Ferry Point Partners failed to complete a particular improvement by the date specified, it could be required to pay the City liquidated damages of $500 a day. As of September 2006, Parks could have assessed Ferry Point Partners $6,286,000 in liquidated damages, but did not.

• The agreement and file documentation reviewed by auditors lacked work scopes and estimates prepared by Parks that could have been used to assess whether the remediation work was being carried out effectively and in a timely manner.

• Only 55 of the total 807 invoices comprising the 12 payment requisitions contained evidence that Parks officials had actually reviewed the invoices to verify that the work was performed and was for remediation. Parks employs a single revenue architect to monitor payments to Ferry Point Partners and 50 other concessions. Further, although Parks has a full time staff of engineering-audit officers, they did not review the reimbursements because according to those officers, they were not able to assess whether the work was actually done. Additionally, Parks’ capital project division of architects and engineers did not oversee any of the work.

Thompson recommended that Parks: review all Ferry Point Partners’ invoices to identify which specific work items are included in the $7.24 million reimbursements (For those items for which Ferry Point Partners is not entitled to reimbursement, Parks should revoke the improperly granted reimbursements and recoup the excess payments); ensure that City funding is used solely for the purposes for which it was authorized; track the progress of capital improvements against start and completion dates prescribed in the agreement; assess Ferry Point Partners all appropriate liquidated damages; prepare a written scope of work and an itemized breakdown of costs for all required activities; prepare and adhere to written policies and procedures that govern the review of invoices, canceled checks, and other related documentation; and, prohibit concessionaires that have concession agreements with the City from collecting and retaining any type of fees before the commencement of concession operations.

In its response, Parks wrote: “The City firmly disagrees with most of the findings and recommendations in the Audit.” Parks agreed with four and disagreed with two of 11 recommendations. Parks also maintained that it had already implemented four recommendations and will consider implementing one recommendation.

Thompson countered: “Clearly, the Department has failed to understand the salient conclusion of this audit report –that the Department has not properly overseen and managed the administration of the Ferry Point concession. We recognize that administering a concession for constructing a golf course over a former municipal landfill is complex, but doing so without adhering to adequate procedures is unacceptable for the management of any government program.”