-DCAS Division of Real Estate Services found to adequately pursue rent owed to City-

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New York City Comptroller William C. Thompson, Jr. issued an audit today that found the New York City Department of Citywide Administrative Services has maintained adequate efforts to collect rent arrears from former and current tenants of City-owned property.

“DCAS has consistently applied collection procedures and actively pursued all avenues to encourage tenants to pay any debt owed to the City,” Thompson said.  “In addition, its Division of Real Estate Services (DRES) has referred all accounts to the New York City Law Department for further collection proceedings when it has exhausted all of its efforts.”

The audit – which is available at www.comptroller.nyc.gov – noted that DCAS brought in $53 million in rental revenue in Fiscal Year 2007 and, as of July 1, 2007, had $31.1 million in arrears consisting of 314 accounts. Of this, $28.7 million reflected special cases such as long-standing disputes and contingencies and remote collectibility of cases transferred to the Law Department. The adjusted arrears balance stands at $2.4 million.

“These amounts,” Thompson noted, “clearly show that the agency’s collection procedures are effective.”

Of the 314 past due accounts consisting of $31.1 million in arrears, four accounts (two accounts for one tenant) amount to $18.9 million, or 61% of the money owed. Thompson identified the accounts as follows:

Walker Street Chung Pak LDC (WSCP)

As of July 1, 2007, WSCP owed DCAS $15.3 million on two leases held for residential and commercial property at 125 Walker Street, Manhattan. In 2000, a dispute arose over retroactive billing and DCAS’s reassessment of the property. Since that time, the accounts have accumulated late charges and interest fees in addition to monthly rents.  In 2004, DCAS referred this case to the Law Department.

Metropolitan Transit Authority (MTA) – Long Island Railroad (LIRR)

DCAS has an unresolved issue with the MTA for an expired long-term lease for a railroad right-of-way for the Atlantic Branch, a 9.1 mile-long rail line in the bed of Atlantic Avenue between Jamaica, Queens and Flatbush, Brooklyn.  The LIRR leased the right-of-way in 1877 and the City became landlord in 1940.  Since then, the LIRR made quarterly payments of $48,750 until the lease expired on May 31, 2000. A new agreement has not been negotiated and as such, DRES has continued to bill the MTA the same quarterly rate.  As of July 1, 2007 the MTA owes $1.4 million in arrears. DRES officials stated that the situation has been resolved at higher levels within DCAS, external agencies and the Mayor’s Office but until a negotiation is settled, billing continues.

Public Health Research Institute (PHRI)

In December 1985, PHRI entered into a 10-year lease (7/1/86 – 6/30/96) with the City for a space at 455 First Avenue, Manhattan. In 1991, PHRI defaulted on rent payment and agreed to a stipulation in 1994 that transferred common stock, valued at more than $1 million, to the City and assigned portions of future licensing income from patents as payment for past and future rent. PHRI owes $2.2 million to the City, and the payment is heavily dependant on uncertain earnings that may or may not materialize from future licensing revenues.

In addition, the audit noted that 162 terminated accounts totaling $9.9 million have been transferred to the Law Department for further proceedings.

The Comptroller made seven recommendations, asking DCAS to: transfer cases to the Law Department in a timely fashion once all collections options have been exhausted and, establish a benchmark for transmitting cases to the Law Department to increase the likelihood of collection and to establish ongoing follow-up of the cases.

“DCAS has shown the ability to exhaust their options in aggressively pursuing payment.  However, by recommending that DCAS establish a protocol for the timely transfer of cases to the Law Department, and consistently follow-up on the accounts, we hope to ensure that the City more efficiently receives money it is owed,” Thompson said.  “Overall, DCAS is completing the task at hand.”

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