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-Thompson audit identifies nearly $423,000 owed to the City-

New York City Comptroller William C. Thompson, Jr. today released an audit that found that Circle Line-Statue of Liberty Ferry, Inc. failed to accurately report all of its receipts and fees and did not file commercial rent tax returns with the city for two years.

As a result, Thompson said, the New York City Department of Parks and Recreation is moving to collect $186,408 in additional fees and late charges, and working with the Department of Finance to determine whether Circle Line owes another $236,308 in commercial rent tax.

“We believe that Circle Line should have included the amount of license fees paid to the City in its calculation of commercial rent tax in 2005, and that Circle Line is responsible for the payment of commercial rent tax for 2006 and 2007,” Thompson said. “I credit the Parks and Finance departments for moving swiftly to address this matter, because it is important that New York City gets every dollar it is due.”

Thompson’s auditors examined whether Circle Line accurately reported gross receipts, properly calculated the license fees due, paid its license fees on time, and complied with certain other major non-revenue terms of its license agreement.

You can view the audit at www.comptroller.nyc.gov.

The Comptroller noted that the audit covered operating year 2007, when Circle Line, the former concessionaire, operated ferry service between Liberty Island, Ellis Island and Battery Park. A new concessionaire took over in January of this year.

Under the terms of Circle Line’s agreement and permits, Circle Line is required to pay the City the greater of 7¼ percent of gross receipts or a minimum annual fee of $500,000 for operating years 2005 to 2007 (April 1, 2004 to March 31, 2007). The minimum annual fee is payable on or before the 20th day of each month. A monthly 2 percent penalty is charged for amounts 15 days overdue.

Additionally, Circle Line must maintain a $50,000 security deposit with the City, carry proper insurance coverage, submit monthly and annual gross receipts statements to the Parks Department and pay all required taxes.

The audit noted that during operating year 2007 Circle Line reported $28,479,886 in gross receipts and paid $2,064,792 in license fees.

While Thompson noted that Circle Line generally adhered to provisions of its agreement – including maintaining the required insurance and the $50,000 deposit – he pointed out that it did not pay all required fees to the City. For instance, Thompson found that Circle Line owes:

• $14,517 in percentage fees for underreported gross receipts of $200,233;
  
  
• $102,124 in percentage fees for unreported handling fees of $1,408,601 associated with advance purchases made through the Internet or by phone for operating years 2005 to 2007;
  
  
• $432 in percentage fees for minor reporting errors;
  
  
• $1,098 in percentage fees for a $15,147 deduction to gross receipts without supporting documentation; and
  
• $68,237 in late charges based on $118,171 in additional fees due.

Additionally, the Comptroller noted that Circle Line did not submit its 2005, 2006 and 2007 certified annual gross receipts statements to the Parks Department in a timely manner and failed to file commercial rent tax returns for tax years 2006 and 2007 and excluded the license fees paid to the City when calculating the tax due since tax year 2005.

Auditors therefore estimated that Circle Line may owe the City $236,308 in commercial rent tax, not including interest and penalties. Commercial rent tax is imposed on tenants who occupy or use premises for the purpose of carrying on any trade, business, profession, or commercial activity south of the centerline of 96th Street in Manhattan.

The Comptroller recommended that Circle Line pay an additional $186,408 in additional license fees and late charges to the City, calculate and pay additional fees that result from unreported handling fees from April 1, 2007 to December 31, 2007, and contact the Department of Finance and seek a final determination with regards to the commercial rent tax (and any interest and penalties due).

He further recommended that the Parks Department not only ensure that money is paid, and if not the Parks Department should use Circle Line’s $50,000 security deposit and seek legal action to recoup the difference.

While Circle Line officials disagreed with most of Thompson’s findings and recommendations, the Parks Department agreed with them, including the auditors’ interpretation of the license agreement that resulted in the major part of the underreported gross receipts.

Parks has since issued a Notice to Cure requiring Circle Line to remit $186,408 in additional license fees and late charges and submit a statement of gross receipts covering unreported handling fees from April 1, 2007 to December 31, 2007.

Further, the Parks Department plans to follow up with the Department of Finance to ensure that Circle Line resolves the issue of commercial rent tax liability, and the Department of Finance already has initiated an audit of Circle Line’s compliance with tax regulations.

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