Comptroller blasts city on water bill oversight

As ordinary New Yorkers cope with annual double-digit increases in their water bills, the city has lost millions in unbilled charges to the Economic Development Corporation (EDC) - a “non-profit” city agency that made over $7.3 million last year.
A recently-announced audit conducted by New York City Comptroller William C. Thompson found that the EDC hasn’t paid for water and sewers at the Brooklyn Army Terminal for 22 years.
At the announcement, on Monday, June 9, Thompson called on Mayor Michael Bloomberg to review whether all city agencies are paying their water and sewer bills.
“It is unconscionable that the Economic Development Corporation would not pay these bills or collect the costs from its sub-tenants since 1986,” Thompson said. “A single family homeowner has watched the city’s water bill skyrocket by 464 percent over the last 22 years, while the Terminal has watched its bill go up from zero to… zero!” he remarked.
The EDC has a lease agreement with the city to operate the 97-acre Terminal in the Sunset Park section of Brooklyn. It sub-leases space to commercial tenants. The terms of the lease requires that the agency pay, or to include in sub-leases to be paid by sub-tenants, charges for water, water meter and sewer rents, real property assessments, excises, levies and fines.
Moreover, Thompson found that the agency violated the terms of its agreement by not charging market-rate rents to its construction manager, Turner Construction Company, which resulted in a loss of rental fees totaling at least $211,500.
EDC did not charge certain other sub-tenants rents in accordance with market appraisals, forgoing potential rental payments amounting to almost $300,000 according to the audit.
Thompson revealed that nobody at the Department of Environmental Protection (DEP), which issues the water bills, knew that the EDC had leased the Terminal from the city.
“New York City taxpayers have lost the benefit of countless dollars as a result of the city’s lax oversight,” Thompson said. “These agencies simply must do a better job, because their failure means your tax dollars.”
It seems that over that last 22 years, nobody at EDC asked DEP why it wasn’t getting billed for water and sewer, even though their lease required them to either pay the charges or write them into sub-leases.
This is not the first time that EDC failed to make sure its tenants paid water and sewage bills, according to Thompson.
Just last year, in another audit, he discovered that Astoria Studio Limited Partnership II - which also is overseen by EDC - did not pay $335,000 in water and sewer charges for a period covering more than a decade.
It seems that the Astoria tenant failed to ask DEP why it wasn’t being billed.
Once auditors uncovered this, DEP dispatched an inspector to the property and then billed Astoria’s account $135,237 for water and sewer use from April 2002 to April 2006.
However, years worth of revenue was lost because, by law, DEP can only back-bill or collect on four years of outstanding water and sewer charges.
After the latest discovery, DEP notified Thompson last week that it recently sent a $479,124 water bill to EDC for the Terminal.
Thompson had called on EDC to work with DEP to grant it immediate access to the Terminal’s water meters, and ensure that it obtained DEP billing statements to bill sub-tenants for water and sewer charges for the appropriate periods.
The department indicated that according to a Memorandum of Understanding forged in December by the City Council and DEP, it would not seek to collect bills older than two years.
The Comptroller disagrees with that position and instead continues to hold that DEP should collect from EDC four years worth of unbilled services. “In these tough financial times, every dollar counts,” he said.
EDC’s certified financial statements for Fiscal Year 2007 show total operating revenues of $18,777,935, total operating expenses of $11,405,171, and operating income of $7,372,764 for the Terminal.
Although an amendment to the agreement allows EDC to retain its net operating income, Thompson said EDC should pay this balance (less $10,585 in interest) to the city, but has failed to do so. “This money should be used to benefit New Yorkers,” Thompson said.
Thompson has called for a review of EDC’s rental policies; called upon them to provide adequate documentation to substantiate certain travel and meal expenses and remit 100 percent of the Terminal’s net operating income to the city on a quarterly basis, in accordance with the lease agreement.
“As the city’s vehicle for promoting economic growth, EDC has failed to turn over generated income to the city,” he complained.