Audit Report on the Compliance of Staten Island Minor League Holdings, L.L.C. (Staten Island Yankees) With Their Lease

AUDIT REPORT IN BRIEF

In December 2000, the Staten Island Minor League Holdings, LLC (doing business as the Staten Island Yankees) and the New York City Economic Development Corporation (EDC) entered into a 20-year lease that commenced on May 1, 2001. The lease, which is monitored by EDC, grants the Staten Island Yankees (SI Yankees) the exclusive right for the use and operation of the Richmond County Bank Ballpark in Staten Island, and requires that the SI Yankees pay EDC an annual base rent for game attendance, rent for the team store, and certain percentages of revenues generated from special event net income and from advertising revenues. The lease also requires that the SI Yankees deposit $25,000 each year into a sinking fund that permits EDC to perform capital projects at the stadium; pay for stadium electricity; carry comprehensive property and liability insurance that names the City and EDC as additional insured parties; pay for the stadium’s water and sewer use; and maintain a $50,000 security deposit with EDC. 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 revenue.

This audit determined whether the SI Yankees paid EDC the rent due in accordance with lease provisions and whether the payments were made on time. The audit also determined whether the SI Yankees submitted the required reports, maintained the required insurance, reimbursed EDC for electricity use, paid for water and sewer use, provided the proper security deposit, made the required capital sinking fund contributions) and, implemented the recommendations made in our prior audit (Audit Report on the Compliance of Staten Island Minor League Holdings, L.L.C., with Their Lease—FN03-116A, issued June 27, 2003).

Audit Findings and Conclusions

The SI Yankees maintained the required property and liability insurance that named the City and EDC as additional insured parties, maintained the required $50,000 security deposit with EDC, and contributed the required $51,943 into a sinking fund, which was available for EDC to perform capital projects at the stadium. In addition, the SI Yankees paid $340,442 of the $373,517 assessed in the prior audit—the SI Yankees still owe $33,075 in late fees.

However, we could not determine whether the SI Yankees owed EDC for base rent due in accordance with the lease because of various weaknesses noted in the counting and reporting of attendance. The audit also disclosed that the SI Yankees owe the City and EDC $570,202 for not reimbursing EDC for electricity use, not paying the City for water and sewer charges, and for not making certain payments on time that resulted in late charges being due. Finally, the SI Yankees did not implement the recommendations made in the prior report—they continue not to make payments on time, not to report actual attendance based on turnstile counts, and not to adequately support actual attendance reported.

1 At the commencement of the fourth year of the lease (2004), this sinking fund contribution was subject to a CPI adjustment using the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor.

Audit Recommendations

The audit recommends the SI Yankees: maintain accurate and complete documentation that would support the attendance reported on their Season Ticket Summary Reports to EDC, and ensure that the Season Ticket Summary Reports are reconciled with their ticket reports, ticket stubs, and turnstile counts; maintain accurate and sufficient documentation for all home game dates, rainout dates, and rescheduled game dates; maintain accurate records for all turnstile activity used for home games and ensure that the turnstile records are reconciled with the attendance records for each home game, in accordance with the lease; pay EDC $377,052 for outstanding electricity use charges and ensure that all future electricity use charges are reimbursed on a timely basis; pay the City $24,887 for outstanding water and sewer charges through December 31, 2004, and ensure that all water and sewer charges are paid when billed; pay EDC $135,188 in late charges due for the sinking fund installments, advertising and signage fees, and the non-payment of base rent, determined by this audit, and $33,075 in remaining late charges due, determined by the prior audit; and make all future fee payments on time, as required by the lease.

The audit also recommends that EDC: ensure that the SI Yankees pay all fees due, including late charges, in accordance with the lease; ensure that the SI Yankees address the report’s findings and implement the report’s recommendations; and ensure that all amendments to the lease are submitted to the Franchise and Concession Review Committee (FCRC) for review and are registered with the Comptroller’s Office.