City Agency Audit Reports

Audit Report On The Compliance Of Staten Island Minor League Holdings, LLC (Si Yankees) With Their Lease Agreement

Audit Number: FM10-121A
Release Date: November 09, 2010

AUDIT REPORT IN BRIEF

This audit determined whether Staten Island Minor League Holdings, LLC (doing business as the Staten Island Yankees) paid the New York City Economic Development Corporation (EDC) the rent due in accordance with lease provisions, submitted required reports, maintained required insurance, reimbursed EDC for electricity use, paid for water and sewer use, maintained the proper security deposit, and made the required capital sinking fund contributions.
               
On December 7, 2000, the City of New York, through EDC, signed a 20-year lease with the Staten Island Yankees (SI Yankees) for the use and operation of the Richmond County Bank Ballpark in Staten Island.  The lease requires that the SI Yankees pay the City annually, subject to certain attendance criteria, a base rent for actual game attendance and a ticket fee for each complimentary ticket issued and for each paid “no-show.”  In addition, the lease requires that the SI Yankees pay a monthly rent for the team store and certain percentages of revenues generated from special event net income and advertising revenues.  Finally, the lease requires that the SI Yankees submit to EDC each lease year an attendance report, a statement of special event net income, and a statement of signage (advertising) revenue. 

Audit Findings and Conclusions

The SI Yankees maintained the required property and liability insurance endorsing the City and EDC as additional insured parties; maintained the required $50,000 security deposit with EDC; made the required sinking fund payments; and paid their electricity and water and sewer charges. Our review also noted that the SI Yankees did not owe rent for team store or special events for the audit period November 1, 2007, to October 31, 2009.

However, our review found that from November 1, 2008, to October 31, 2009, the SI Yankees underreported actual attendance for the 2009 baseball season and owes the City $157,506—$118,366 in base rent, $39,140 for no-show and complimentary ticket holders. In addition, the SI Yankees took certain unallowable deductions in calculating net-signage revenues during 2007 through 2009 and owe the City $151,058.

Also, there is a lack of controls over the use of complimentary certificates, complimentary ticket forms, and the accountability for complimentary tickets. Lastly, the signage revenue reported to EDC was judgmentally based on a point allocation system that does not present a fair and equitable distribution to the City

Audit Recommendations

We make seven recommendations—five to the SI Yankees concerning the operation of the SI Yankees and two to EDC concerning the oversight of this concession.  The following are some of the recommendations.

The SI Yankees should:

  • Pay EDC the $308,564—$118,366 in base rent, $39,140 for no-show and complimentary ticket holders, and $151,058 for unallowable deductions to net-signage revenues.
  • Enhance their controls over the distribution of complimentary tickets by:
    • developing and implementing a better system for issuing and tracking of all complimentary certificates and complimentary tickets by including a pre-printed number and a space on the certificate to log the date the certificate is redeemed, who redeemed the certificate, and the seat number issued for that certificate;
    • modifying the complimentary ticket forms to include pre-printed numbers and a space for the seat numbers issued; and
    • issuing complimentary tickets in accordance with the terms of the lease.
  • Collaborate with EDC to establish a more fair and equitable method for reporting net-signage revenue to the City. The new method should include within its calculation a more realistic evaluation of the value of product placement in sponsorship agreements.

EDC Should:

  • Ensure that the SI Yankees pay the City $308,564—$118,366 in base rent, $39,140 for no-show and complimentary ticket holders, and $151,058 for unallowable deductions to net-signage revenues—and that they comply with the report’s other recommendations.

SI Yankees disagreed that they owe funds to the City.  EDC officials agreed that the SI Yankees owe $118,366 in base rent, $39,140 for no-show and complimentary ticket holders, but disagreed that the SI Yankees owe $151,058 for unallowable deductions to net-signage revenues.