Audit Report on the Payments of Commercial Rent Taxes by Economic Development Corporation Concessionaires

AUDIT REPORT IN BRIEF

This audit determined whether the Economic Development Corporation (EDC) monitors City Commercial Rent Tax (CRT) payments by its concessionaires and whether it coordinates its efforts with those of the Department of Finance to identify those concessionaires who are required to pay the tax and assists the Department of Finance in collecting the tax.

After reviewing the payment histories of 16 concessionaires and their subtenants, we found that four concessionaires and three subtenants of two other concessionaires owe the City $268,392 in CRT, interest, and penalties. ¹ Three of the concessionaires (Express Industries Group, Inc., Wall Street Racquet Club, Inc., and Maggio Beef Corp.) who owe CRT are no longer EDC concessionaires. Had EDC effectively coordinated with the Department of Finance (Finance) in identifying concessionaires who are required to pay CRT, it is likely that the CRT due from these entities would have been collected. In addition, the four concessionaires who failed to pay CRT as well as nine other concessionaires who were required to file CRT returns, did not file the returns for at least the last three tax years. In fact, only three concessionaires filed and paid CRT on a timely basis.

During our review of the subtenants of EDC concessionaire Seaport Marketplace, Inc., we found that The Glazier Group, Inc., the owner of Bridgewaters, operates four other restaurants below 96^th Street in Manhattan, including Michael Jordan’s Steak House, The Monkey Bar, Twenty Four Fifth, and The Strip House. Although these restaurants are not EDC concessions, we noted that The Glazier Group, Inc., did not file CRT returns and pay the taxes for these establishments for at least the last three tax years. For Michael Jordan’s Steak House alone, The Glazier Group Inc., owes $114,482 in CRT, interest, and penalties for the audit period. (We were able to calculate the amount due from Michael Jordan’s Steak House based on rent information provided by the Metropolitan Transportation Authority, the owner of the restaurant site property).

To address these issues, we recommend that EDC:

• Alert Finance when a concessionaire’s rent exceeds the CRT threshold, to ensure that the concessionaire complies with filing requirements and pays all taxes due.
• Provide the necessary documentation to enable Finance to collect the CRT owed by concessionaires.
• Consider the non-payment of CRT when making decisions on whether to renew or enter into a new lease with concessionaires.

In addition, we recommend that the Department of Finance:

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

In their responses, both EDC and the Department of Finance officials described steps that have been taken or will be taken to address the report’s findings and recommendations.