New York City Accuses U.S. Open Organizers of Underpaying Rent – The New York Times

With the start of the United States Open tennis tournament just days away, New York City’s comptroller accused the tournament’s organizers of underreporting at least $31 million in revenue over the past four years and said the city was owed $311,000 in back rent for use of the Open site in Queens.

The comptroller, Scott M. Stringer, said the United States Tennis Association, which operates the lucrative tournament and leases the grounds of the U.S.T.A. Billie Jean King National Tennis Center from the city, had obstructed an audit by his office, and he and other elected officials called for a renegotiation of the lease agreement that has been in place since 1993.

“Whenever the city enters into an agreement with a multimillion private entity, we have to protect New Yorkers first,” Stringer said at a news conference outside the tournament grounds on Thursday. “We can’t allow the city to have a raw deal.”

The U.S.T.A. disagreed with many of the findings of the audit, and Danny Zausner, the chief operating officer of the National Tennis Center, said that about 40 percent of the disputed amount had already been paid to the city. Zausner added that he saw no need to renegotiate the terms of the lease.

“Not unless they want to make it more favorable for us,” he said.

Zausner denied that the U.S.T.A. had obstructed the audit by the comptroller’s office and said that the current lease agreement favored the city more than any of its other deals involving sports facilities.

“The comptroller is entitled to make a statement,” Zausner said, “but we strongly disagree with it. We are a tenant of the city and we’ve been a good tenant for 40 years. Things come down to interpretations sometimes, and we make our rent payments according to interpretation of the lease as we see it.”

Stringer said his primary goal in a renegotiation would be to gain better access to the U.S.T.A.’s records. He conceded that there was no mechanism to reopen the lease, but said that he hoped the tournament organizers would do so as an act of good faith.

“It’s not lawyering up,” he said. “It’s about having a frank conversation with the community.”

The city’s parks department leases the grounds of the National Tennis Center to the U.S.T.A for $400,000 per year, plus 1 percent of any gross revenue beyond the first $20 million. According to records made available by the comptroller’s office, the U.S.T.A. reported gross revenues of $308 million in 2016 and $349 million in 2017.

Stringer and Catalina Cruz, the state assemblywoman whose district includes the tennis center, said that the U.S.T.A., in its response to the audit, had failed to be a good neighbor.

“It’s no longer enough to do just the bare minimum that the agreement has required,” Cruz said. “Now we have to go to the table, sit with the board and come up with something that will actually make you good neighbors, because right now you are not acting like them.”

Stringer said the National Tennis Center had failed to report, or had understated, more than $11.5 million in revenue earned from sponsorship deals and broadcasting rights. If so, that would result in $115,000 in additional rent.

He said that the U.S.T.A. had also inappropriately deducted over $10 million in operating expenses, which kept another $100,000 from the city, and that $4 million in sponsorship went underreported. The audit, Stringer said, also showed an “inappropriately omitted” $5 million from ticket fees, an inaccurate accounting of online sales and a discrepancy between the U.S.T.A.’s certified financial statements and the revenue the organization reported to the city.

“The U.S.T.A.’s misreporting and underpayments cannot be shrugged off or swept under the rug,” he said, adding: “The U.S.T.A. lease agreement allows the U.S.T.A. to refuse to give us records in electronic forms. So we couldn’t even look at the financial records electronically. It’s 2019, and they would not give us anything electronically.”

Zausner said the U.S.T.A. would refuse to allow documents to leave the premises to protect private information.

Cruz said she recognized that the tournament provides temporary employment for many local residents and also hosts a day of free special events for Queens residents during the week before the main tournament starts. But she also said that in the weeks leading up to the annual event, access to Flushing Meadows Corona Park, which contains the tennis center, is restricted by the large crowds, by security restrictions and by cars parked on the grass.

“This is our lawn, because for many of us who don’t have a yard, this is our lawn,” Cruz said. “This is our community, this is our backyard. This is where our children come to play because they don’t have anywhere else.”