EDC failed to charge $511,500 in allowable rent and used City water and sewer services without paying. On June 6, 2008, City Comptroller William C. Thompson issued an audit report on the New York City Economic Development Corporation’s lease of the Brooklyn Army Terminal, concluding that it failed to charge Turner Construction Company $211,500 in allowable rent and lost $300,000 by charging some sub-tenants less than market rate rent. Also, EDC has not paid the City for water and sewer use at the Army Terminal since it took over in 1986 and has neglected to pass on those costs to its sub-tenants. The audit concluded, however, that EDC had complied with the major terms of its lease, paying its rent on time, submitting correct security deposits, and maintaining proper insurance coverage.
The City leased the 4-million-square- foot Army Terminal to EDC in 1986, making it responsible for its conversion into an industrial park and requiring payment to the City of 100 percent of the net operating income once EDC subleased it. EDC has renovated 3.1 million sq.ft. and has subleased space to 70 companies.
In FY 2007, the Turner Construction Company occupied 7,200 sq.ft. of the Terminal free of charge. EDC explained that Turner occupied the space under its contract as the Terminal’s facilities manager. Noting that the contract with Turner failed to mention the issue, the audit recommended against providing space rent free to non-City agencies. Seven companies paid rents below EDC’s market appraisals with no justifying documentation.
charges, when asked by the Comptroller’s Office, DEP stated that it was unaware the City had leased the space. DEP remains unable to rectify the issue because the Terminal’s water meters are inaccessible due to the presence of hazardous materials on the site. EDC stated that it was working with DEP to remedy the situation.
Audit Report on EDC’s Lease Agreement for Brooklyn Army Terminal, June 6, 2008.