-UNDC Immediately Agrees to Pay Half But Thompson Demands All-

New York City Comptroller William C. Thompson, Jr. releases an audit finding that the United Nations Development Corporation failed to pay 12 million dollars to the City at a news conference on May 29, 2008.

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New York City Comptroller William C. Thompson, Jr. today disclosed that the United Nations Development Corporation (UNDC) failed to pay the City more than $12 million in back rent in connection with the suspended project to develop additional office space for use by the United Nations.

Comptroller Thompson took aim at both the UNDC and the New York City Economic Development Corporation (EDC) for not ensuring that the City receives the entire unpaid amount.

“Part of UNDC’s lease agreements requires that a large percentage of its surplus at the end of the year be paid to EDC,” Thompson said. “For three of the past four years, UNDC has not released these annual payments, resulting in a loss of revenue for the City.”
UNDC – a public benefit corporation created in 1968 by the New York State Legislature – was established to provide office and residential space, and other facilities for United Nations personnel and foreign missions, as well as for other members of the international community.

Thompson’s audit covered the period January 2005 through December 2006, and also conducted additional testing of certain 2003 and 2004 expense transactions and consolidated surplus balances. The audit found that over this timeframe UNDC retained annual surpluses totaling $12,012,050, money that should have been paid to the City.
You can view the audit at www.comptroller.nyc.gov.

“As a result of our audit, UNDC has already paid EDC more than $6 million in back rental payments,” Thompson said. “However, UNDC has refused to pay the remaining balance. In this tight fiscal environment we cannot afford to let any revenue slip through our fingers. EDC should take every action to ensure that UNDC pays its balance in full.”

UNDC operates under two lease agreements with the City of New York. The lease agreements are administered by EDC and will remain in effect either until the year 2080 or until all UNDC bonds are paid in full, whichever is earlier.

Under the terms of the 1972 and 1981 lease agreements, UNDC was required to develop and operate a three-phase project designated as One UN Plaza, Two UN Plaza, and Three UN Plaza. In addition, the lease agreements require UNDC to maintain comprehensive general liability insurance that names the City and EDC as insured parties, and require UNDC to pay all water, sewer, and electricity charges imposed on properties in their portfolio.

The main objective of Thompson’s audit was to determine whether UNDC paid EDC all rent due to the City in accordance with the lease agreements. The audit also examined whether UNDC complied with other major requirements of the lease, such as maintaining liability insurance and paying appropriate utility charges.

On January 1, 2004, the City and UNDC signed an amendment to the lease permitting UNDC to use its consolidated surplus to establish a reserve for the completion and opening of the UN Consolidation Building Project. This project would have provided extra office space, including “swing space” for the United Nations and its staff. However, after several years of planning, the project did not take place because New York State never passed legislation to allow for construction of the site at Robert Moses Playground.

Consequently, work on the project was suspended in 2005, and most of the planning costs incurred were written off by UNDC.  Therefore, the audit concluded that UNDC should release the reserve associated with the suspended project and pay the City the $12 million it owes in additional rent.

These matters were discussed with UNDC and EDC officials during and at the conclusion of the audit process. On April 2, 2008, UNDC paid EDC $6,006,063, representing a portion of the additional rent due to the City. However, UNDC officials did not agree that any additional moneys were owed.
Thompson made two recommendations to UNDC, asking it to:

• Pay the City the remaining balance of $6,005,987 in back rental payments; and
  
  
• Maintain an updated status of the progress of the UN Consolidation Building Project.

Thompson made three recommendations to EDC, asking it to:

• Ensure that UNDC pay the remaining balance of $6,005,987 in additional rent due to the City;
  
  
• Ensure that UNDC pays the consolidated surplus reserve balance if the UN Consolidation Building Project is not built; and,
  
  
• Monitor the progress related to the UN Consolidation Building Project.

In their response to the audit, EDC officials agreed with all recommendations.

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