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DiNapoli MTA audit finds millions lost and wasted

In an audit, state Comptroller Thomas DiNapoli accuses the MTA of losing money by mismanaging its real estate holdings, including six large rental units near popular Bryant Park (shown). AP Photo/Mary Altaffer
By Philip Newman

State Comptroller Thomas DiNapoli has accused the MTA of losing mega-millions of dollars because of what an audit indicated was inefficient management of its vast real estate holdings.

The comptroller said about 1,000 Metropolitan Transportation Authority tenants had fallen behind in rent payments, totaling $52 million, and that the MTA had paid taxes from which the agency was exempt.

“Before making drastic service cuts and talking about fare hikes, the MTA has to maximize the value of its real estate holdings by advertising their availability and ensuring that it’s receiving market rate rents for prime properties,” DiNapoli said.

“Millions of New Yorkers rely on the MTA,” DiNapoli said. “Those New Yorkers cannot afford to pay more while the MTA ignores potential cost savings. But that’s exactly what has happened here.”

The comptroller said one case in point was a 20-year lease with Metrazur, a restaurant in Grand Central Terminal. The lease specified that the MTA maintain a temperature range from 70 to 75 degrees in the restaurant. The MTA could not do so and thus had to reduce the rent by $1.7 million as well as pay a $675,000 penalty to the restaurant.

“There was no evidence that the MTA conducted a study assessing its ability to meet the lease provisions [specified temperature range] before accepting the request for the provision,” DiNapoli said.

The audit said at one point about 1,000 tenants were in arrears by a total of $52 million — as of various dates between March and May 2009.

“Of this amount, $43 million is owed by another government entity and the MTA is in the midst of a settlement for this amount,” the audit said.

“The MTA does not provide for assessment of interest or late payments fees, even in cases where the terms of the lease so provide,” the audit said.

“We also found that the MTA is paying real estate taxes on some of the properties it leases, even though it is, by law, exempt from paying such taxes,” the audit said.

DiNapoli also found that:

• the MTA did not effectively market the space above certain properties, known as “air rights,” despite estimates that the rights could generate more than $12 million in revenue

• six large rental units in the 42nd Street-6th Avenue subway station at Bryant Park had been vacant since 2004

• the MTA does not make sure its rents are competitive with market values and does not charge interest and late fees when appropriate

• two MTA-owned buildings, one vacant and one nearly vacant, cost more than $6 million annually to maintain

• more than a quarter of the MTA’s occupied rental units sampled were not rented through the required competitive rental processes

Three state senators reacted with criticism to the report.

“Sadly, despite the widespread cry for change, the MTA continues their never-ending trail of fiscal mismanagement that only adds to the burdens placed on transit riders and commuters,” said Sen. Frank Padavan (R-Bellerose).

Sen. Martin Golden (R-Brooklyn) said, “Yet, once again, the MTA has shown mismanagement at its best.”

“The MTA creates mess after mess, then passes the buck onto taxpayers by hiking fares and cutting services,” said Sen. Andrew Lanza (R-Staten Island).

Reach contributing writer Philip Newman by e-mail at timesledgernews@cnglocal.com or phone at 718-260-4536.

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