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

AUDIT REPORT IN BRIEF

In December 2000, the Staten Island Minor League Holdings L.L.C., (Staten Island Yankees) and the New York City Economic Development Corporation (EDC) entered into a 20-year lease agreement that commenced on May 1, 2001. The agreement grants the Staten Island Yankees exclusive rights to use the Richmond County Bank Ballpark at St. George. Under the terms of the agreement, the Staten Island Yankees are required to pay EDC an annual base rent for actual attendance, for complimentary tickets, for "no-shows," and for the team store, and percentages of revenues generated from special event net income and from advertising revenues. The Staten Island Yankees are required to deposit $25,000 per year into a sinking fund that EDC is permitted to use for capital work at the stadium. The agreement requires EDC to pay the Staten Island Yankees net parking lot income. The Staten Island Yankees are also required to carry comprehensive property and liability insurance that names the City as an additional insured party, pay all utilities, and maintain a $50,000 security deposit to EDC.

This audit determined whether Staten Island Yankees paid the appropriate fees due EDC, and whether they paid these fees on time. The audit also determined whether the Staten Island Yankees maintained adequate internal controls, received the appropriate payments from EDC, maintained the required insurance, paid all utilities, reimbursed EDC for electricity use, paid its security deposit, and paid its capital contributions.

For the 2001 and 2002 lease years, the Staten Island Yankees adhered to certain non-revenue-related requirements of the agreement. They maintained the required property and liability insurance that named the City as an additional insured, deposited the required $50,000 security deposit with EDC, contributed $25,000 into a sinking fund available for EDC to pay for any capital work at the stadium, and paid water and sewer charges. However, because of internal control weaknesses over the recording and reporting of revenue from attendance, it could not be determined whether the Staten Island Yankees paid the appropriate fees to EDC. In addition, payments that were due were consistently made late, resulting in late fees due of $35,774. Also, the Staten Island Yankees did not reimburse EDC $303,858 for electricity use and have an outstanding balance of $25,000 due for their 2002 percentage of signage revenue. We also found that EDC overpaid the Staten Island Yankees $8,885 in parking lot net income. Therefore, based on the available records, the Staten Island Yankees owe EDC at least $373,517. Finally, even though the agreement contains a provision for payments to EDC from sales at the team store, the amount to be paid has not been negotiated between the Staten Island Yankees and EDC.

The audit recommends that the Staten Island Yankees: pay EDC $373,517 for outstanding fees and late charges due; make all future fee payments on time, as required by the agreement; calculate actual attendance and fee payments based on turnstile counts, as required by the agreement; visually distinguish between paid and complimentary tickets; and ensure that the actual attendance for events can be properly supported.

The audit also recommends that EDC: ensure that the Staten Island Yankees remit $373,517 for outstanding fees and late charges due; charge the Staten Island Yankees the appropriate late fee assessments when necessary, as stipulated in the agreement; and negotiate specific fee terms for the team store as specified in the agreement, retroactive to the store’s first day of operation.