Audit Report on the Payment of Commercial Rent Taxes by Department of Parks and Recreation Concessionaires

AUDIT REPORT IN BRIEF

This audit determined whether the Department of Parks and Recreation monitors payments by its concessionaires of the City Commercial Rent Tax and whether it coordinates its efforts with those of the Department of Finance to identify concessionaires required to pay the tax and assists Finance in collecting the tax.

The lack of coordination between the Department of Parks and Recreation (Parks) and the Department of Finance (Finance) has resulted in Parks concessionaires’ owing $971,248 in Commercial Rent Tax (CRT), interest, and penalties. We found that Parks neither monitors whether its concessionaires pay CRT nor effectively coordinates with Finance to identify those concessionaires who are required to pay the tax. As a result, nine of 15 Parks concessionaires who are required to pay CRT did not file tax returns or pay the tax for at least one of the last three tax years. Moreover, two former concessionaires have not filed or paid the amount they owe since ceasing operations in November 2000 and July 2001, respectively. Only the remaining four of the 15 concessionaires filed the required returns.

To address these issues, we recommend that Parks should:

• Assist Finance with the collection of the CRT owed by concessionaires. In that regard, Parks should issue a "Notice-to-Cure" to concessionaires requiring them to pay the outstanding amounts.
• Establish a system for tracking franchise fees of concessionaires operating below 96^th Street in Manhattan. The system should flag concessionaires as soon as their franchise fees exceed the CRT payment-threshold. Once a concessionaire’s fee exceeds the CRT threshold, Parks should alert Finance so Finance can ensure that the concessionaire complies with filing requirements and pays all taxes due.
• Consider the non-payment of CRT when making decisions on future proposals from concessionaires.

In addition, we recommend that the Department of Finance should:

• Pursue collection of the amounts owed by the 11 concessionaires cited in this report.
• Notify Parks of concessionaires who owe CRT and request that any security deposits from the concessionaires be used to satisfy the amounts due.
• Attach liens to the business property of those concessionaires that owe CRT.