Real estate is a sector that has major ties to the MTA & its overall financial picture. Whether it comes from properties they use or own, the fabric of the MTA’s finances good or bad are woven deeply in it. Clearly over the last couple of years, real estate has not been kind to them especially in terms of real estate taxes.
One official who has been critical of the MTA is New York State Comptroller Thomas DiNapoli who has released many audit reports on different facets of the agency. His latest audit report focuses on you guessed it, real estate. Before getting to the report, here is a take on it from Tom Namako of the New York Post:
The cash-strapped MTA has squandered a fortune in botched real-estate transactions — failing to collect millions in outstanding rent, refusing to charge interest on that money, and hanging onto lucrative air rights over some property, a bombshell investigation found.
These revelations come on the heels of the most drastic subway and bus service cuts in decades aimed at saving $93 million — and ahead of a planned fare hike next year.
“New Yorkers can’t afford to pay more while the MTA ignores potential cost savings,” said state Comptroller Thomas DiNapoli, whose scathing report was obtained by The Post. “But that’s exactly what has happened here.”
The report’s findings are damning.
Between January 2005 and August 2009, the MTA didn’t collect a whopping $9 million in back rent from nearly 1,000 commercial tenants — and no interest or penalties were ever charged.
In New York City alone, MTA brass never attempted to sell $12 million worth of air rights over rail yards that could be used for commercial structures — even though they hired Massey Knakal Realty Services in 2006 to consult on the matter.
And the agency pays more than $6 million each year on upkeep of two nearly vacant buildings: the agency’s former headquarters on Jay Street in Brooklyn, and another in Mineola, LI.
Click here for the complete report.
Now let’s take a look at the official press release for Mr. DiNapoli’s latest audit report:
The Metropolitan Transportation Agency (MTA) is missing significant opportunities to save money and generate greater revenues through its vast real estate portfolio, according to an audit New York State Comptroller Thomas P. DiNapoli released today. DiNapoli’s audit found the MTA routinely spends more than $25 million a year on rent without assessing whether some of its vacant properties can meet its office space needs. The MTA also did not have a strategic plan for marketing its real estate holdings, and had not met the Public Authorities Law reporting requirements to publish a list of the holdings until June 2010.
“Millions of New Yorkers rely on the MTA,” DiNapoli said. “Those New Yorkers can’t afford to pay more while the MTA ignores potential cost savings. But that’s exactly what has happened here.
“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. The MTA should also publish a full list of its real estate holdings as required by law and let New Yorkers know how it’s going to capitalize on these assets.”
The audit, which covered the period between January 1, 2005 and August 31, 2009, is the latest DiNapoli effort to identify cost-saving opportunities for the MTA, which this week implemented a series of service cuts that are disruptive to the commuting public.
Auditors found that the MTA generates revenues of $199 million a year from real estate-related activity but has the potential to earn much more. The agency owned 600 vacant rental units as of March 2009, including six large retail spaces in the 42nd Street/Sixth Avenue subway station, but only three vacancies had been advertised on the MTA’s web site. One property had remained unoccupied for 14 years. In addition, current tenants in MTA-owned properties were not charged interest or late fees on overdue rent or charged increased rents when the lease expired.
The MTA had also lost $1.7 million in rental revenue, in addition to paying a $625,000 penalty to a tenant because the MTA could not meet certain provisions in the lease. There was no evidence that the MTA conducted a study assessing its ability to meet the lease provisions before accepting the request for the provision. Auditors also found that the MTA could improve the accuracy and completeness of its database for tracking real estate holdings.
Additionally, DiNapoli’s audit found:
* Non-government tenants owed the MTA a total of $9 million in rent during the audit period;
* 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/Sixth Avenue subway station at Bryant Park had been vacant since 2004;
* The MTA does not ensure its rents are competitive with market values and does not charge interest and late fees when appropriate;
* Two of the agency’s buildings—one vacant and one nearly-vacant—cost more than $6 million to maintain; and
* More than one-quarter of the MTA’s occupied rental units sampled were not rented through the required competitive rental processes.
DiNapoli recommends that the MTA:
* Create a single MTA real estate portfolio management system that comprises information from all five existing databases;
* Develop a strategic marketing plan to properly advertise its available spaces; and
* Improve rent collection by charging interest and late fees.
The MTA called DiNapoli’s audit a timely one, and agreed that the agency must explore new ways to generate revenue through its real estate holdings.
Click here to download the complete 46 page report in .pdf format. I will review it & have an analysis sometime over the weekend.
The report should prove interesting as it has been commonly known that the MTA does not exactly make the best decisions in terms of its real estate holdings.
xoxo Transit Blogger