Audit Report on the Oversight of Private Ferry Operators by the Department of Transportation

AUDIT REPORT IN BRIEF

This auditdetermined whether the Department of Transportation (DOT) ensured that the private ferry operators complied with the requirements of their Temporary Ferry Permit (Permit) and Landing Slot License Agreement for Ferry Services (License Agreement). In addition, it determined whether DOT ensured that: private ferry operators correctly paid their permit and landing fees and security deposits and provided a safe environment at the City-owned (City) ferry-landing sites (ferry landings); and landing fees collected were used for the maintenance and repairs of the City ferry landings.

Both DOT and the New York City Economic Development Corporation (EDC) are involved with private ferry services. DOT sets the landing fees and insurance requirements for the private ferry operators, and bills and collects permit fees. EDC bills and collects landing fees and security deposits and maintains the City ferry landings, making emergency and other repairs and, when requested by DOT, structural and capital improvements.

DOT ensured that private ferry operators generallycomplied with the provisions of their Permits and License Agreements. The operators carried adequate insurance, properly named the City of New York and EDC as additional parties insured against claims, submitted required reports to DOT detailing the daily passenger totals, and paid all landing fees as billed for Fiscal Year 2002. EDCproperly deposited all landing fees collectedand, with a few exceptions, ensured that the City ferry landings were generallymaintained properly.

However, we found the following:

• Private ferry operators were not billed by DOT for all their scheduled landings, which resulted in an estimated $1.3 million in lost annual City revenue.
• Landing feeshave not been increasedin more than 20 years. If increased as we suggest, these landing fees could generate as much as $1.1 million in additional annual revenue.
• Private ferry operators are operating with expired Permits and License Agreements.
• DOT did not collect security deposits and permit fees from the private ferry operators, as required.
• There were concerns about the safety of some of the City ferry landings—the gates leading to the ramps and barges remained open after the private ferries departed from their landings. In addition, the wooden decking of the waiting area of the East 90^th Street Pier was cracked, splintered, and deteriorating.
• There were questionable EDC expenditures, totaling $83,340, that were either not related to the maintenance and repair of the City ferry landings or that were not reasonable.

To address these issues, we make 16 recommendations, the most significant of which are that DOT should:

• Coordinate with the Office of Management and Budget to consider whether the revenue associated with ferry License Agreements should be transferred into the City General Fund.
• Ensure that all private ferry operators are billed for all scheduled landings currently in effect.
• Recoup all unbilled landing fees from private ferry operators.
• Consider increasing its landing fees.
• Ensure that all Permits and License Agreements are complete, updated, and renewed immediately upon their expiration dates.
• Ensure that the gates leading to the ramps and barges of all City ferry landings are locked at all times after the private ferries depart from the landings.
• Ensure that revenue collected from landing fees is used for expenses that are reasonable and related to the maintenance and repairs of the City ferry landings.

The matters covered in this report were discussed with DOT and EDC officials during and at the conclusion of this audit. A preliminary draft report was sent to DOT and EDC officials and was discussed at an exit conference on May 9, 2003. On May 23, 2003, we submitted a draft report to DOT and to EDC officials with a request for comments. We received a written responsefrom DOT officials on behalf of both organizations on June 9, 2003. DOT generally agreed with the audit’s findings and recommendations. The response stated that bills have already been sent to the private ferry operators in an attempt to recoup all unbilled landing fees and that the landing fee structure and rates would be evaluated and adjusted during the next fiscal year.