Audit Report on the Compliance of The New York Mets With Their Lease Agreement

AUDIT REPORT IN BRIEF

In 1985, Doubleday Sports, Inc., and the New York City Department of Parks and Recreation (Parks) entered into a 20-year lease for the use of Shea Stadium.

In August 2002, a change in ownership assigned the lease to Sterling Mets, L.P. (doing business as the New York Mets). The lease has been amended 13 times since its inception through August 22, 2006, granting the Mets additional privileges.

Under the lease, the Mets are required to pay the City the greater of either an annual minimum rent of $300,000 or a percentage of revenues from gross admissions, concessions, wait service, parking, stadium advertising (less $8,000 for scoreboard maintenance), and a portion of cable television receipts. The Mets are permitted to deduct portions of the actual payments they make to Major League Baseball related to their tickets sales and local cable revenues, planning costs up to $5 million per year for a new stadium, and all sales taxes before calculating their rent payments to the City.

The objectives of this audit were to determine whether the Mets accurately reported all gross receipts in accordance with the lease, calculated and paid the appropriate fees due the City on time, deducted only allowable and documented credits, and complied with certain non-revenue-related requirements of their lease (i.e., maintained required insurance and reimbursed the City for its utility use).

Audit Findings and Conclusions

The Mets owe the City a total of $2,676,764 in additional rent consisting of $2,495,044 in new-stadium-planning costs inappropriately deducted from the rent submitted to the City, $139,821 resulting from a $2,839,456 overstatement of revenue-sharing deductions, and $41,899 from $2,627,077 in unreported concession revenue. The Mets, however, submitted their rent statements and related payments to the City on time, and generally adhered to the other non-revenue requirements of their lease agreement with the City, such as maintaining the required property and liability insurance that named the City as an additional insured party and reimbursing the City for their annual electricity, water, and sewer use, and paid the prior audit assessment of $11,873.

Audit Recommendations

Based on our findings, we make three recommendations:

We recommend that the Mets:

• Pay the City $2,676,764 in additional fees due.

• Ensure that planning cost expenses are appropriate and well documented, as required by the agreement.

We recommend that Parks:

• Ensure that the Mets pay $2,676,764 in additional fees as recommended in this report and comply with the other recommendations.