Audit Report on the Compliance of Brooklyn Baseball Company, L.L.C., With Its Lease Agreement

AUDIT REPORT IN BRIEF

On June 1, 2001, Brooklyn Baseball Company, L.L.C. (BBC), owner of the Brooklyn Cyclones, and the New York City Department of Parks and Recreation (Parks) entered into a 20-year lease agreement. The lease, which is monitored by Parks, grants BBC the exclusive right to use KeySpan Park on Surf Avenue in Brooklyn. The lease requires that BBC pay rent to the City based on the following: actual game attendance, a per ticket fee for recreation area tickets issued, paid “no-shows,” team store rent, special event net income, advertising, and the Surf Avenue retail area. The lease agreement also requires that BBC deposit $27,670 each year into a sinking fund that permits Parks to perform capital projects at the stadium.

This audit determined whether BBC paid the City the rent due in accordance with the lease agreement and complied with other provisions of the agreement. It also determined whether BBC implemented the recommendations made in our prior audit (Audit Report on the Compliance of Brooklyn Baseball Company, L.L.C., ( Brooklyn Cyclones) with Their Lease Agreement, FM05-080A, issued January 27, 2006).

Audit Findings and Conclusions

For the audit period, November 1, 2004, through October 31, 2006, BBC maintained the required property and liability insurance that named the City as an additional insured party, contributed the required $55,340 ($27,670 each year) into a sinking fund, and it submitted the required reports on time. In addition, BBC paid the amount required for water and sewer charges, and reimbursed the City for electricity use.

However, during lease year 2006, BBC underreported actual attendance to Parks by 28,031, resulting in additional rent due of $83,009. Since BBC did not properly calculate actual attendance, its calculation of rent related to no-shows and use of the recreation area were likewise incorrect. As a result, BBC owes the City an additional $6,874 for underreported no-shows and $7,849 for its underreported use of the recreation area. Consequently, BBC underpaid the City $97,732.

In addition, BBC did not report $67,786 of special event net income to Parks, as required by its lease agreement. For 2005, BBC reported special event net income of $211,523. However, BBC’s books and records indicated that actual special event net income totaled $279,309 for 2005. As a result, BBC owes the City an additional $20,336 in shared special event net income, which is attributed to several carry-over transactions from the prior year and additional expenses.

Through our communications with Parks and BBC, we confirmed that only one of the prior report’s three recommendations was implemented: BBC implemented an electronic ticketing system whereby the use of the malfunctioning ballpark turnstiles as a means of counting ticket-holders was rendered obsolete.