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

On December 7, 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 a 20-year lease. 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 actual game attendance, rent for the team store, and certain percentages of revenues generated from special event net income and from advertising revenues. In addition the lease requires the SI Yankees to: deposit $26,943 annually in a sinking fund that permits EDC to undertake capital projects at the stadium; pay for stadium electricity; pay for the stadium’s water and sewer use; maintain a $50,000 security deposit with EDC; and carry comprehensive property and liability insurance that names the City and EDC as additional insured parties. 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 required reports, maintained 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. (Staten Island Yankees), with Their Lease—#FN05-106A, dated April 21, 2006.

Audit Findings and Conclusions

The SI Yankees adhered to certain non-revenue-related requirements of the agreement including: maintaining property and liability insurance endorsing the City and EDC as additional insured parties; depositing a required $50,000 security deposit with EDC; and paying water and sewer charges. Our review also noted that the SI Yankees did not owe rent for game attendance, team store, or special events for the audit period January 1, 2005, to October 31, 2006. In addition, the SI Yankees improved their internal control over reported attendance, addressing the weakness cited in the prior report.

However, our review found that from January 1, 2005, through October 31, 2006, the SI Yankees failed to pay EDC a total of $1,581,154 for reimbursement of electricity use, signage revenue, sinking fund capital contributions, and previous audit assessments. Nevertheless, on January 4, 2007, at the conclusion of our fieldwork, the SI Yankees signed a lease amendment and agreed to pay the amount of $1,427,899 in full settlement of all outstanding balances owed. This monetary settlement was precipitated by the impending sale of the SI Yankees through a total acquisition of interest by their minority shareholder. On April 9, 2007, EDC confirmed that the total amount of $1,427,899 has been received from the SI Yankees.

Audit Recommendation

We make the following two recommendations:

We recommend that the SI Yankees:

• ensure that it remits to EDC in a timely fashion all required electricity payments, signage revenue, and sinking fund contributions.

We also recommend that EDC:

• ensure that the SI Yankees pay all lease fees on time.