Nassau says Islanders/SMG owe millions in unpaid rent, utilities, fees
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The New York Islanders and Nassau Coliseum's management company, SMG, owe Nassau County as much as $3.8 million in unpaid rent, utilities and other expenses for the Coliseum dating back to at least 2011, records show.
The county has written to Islanders senior vice president Michael Picker seeking payment of the monies twice in the past 12 months -- in February 2012 and on Feb. 22 of this year, according to documents. The most recent letter, written by the county's real estate office after Newsday asked about the bills, detailed two years of expenses that had not been paid. The unpaid bills include $607,502 in rent and more than $2.4 million in electric bills. In addition, the hockey team and SMG have not yet paid the county its share of concessions and parking revenue.
The letter states that Nassau may owe the Islanders and SMG for repairs the team has made to the county-owned Nassau Coliseum, the Islanders' arena in Uniondale. But the letter to Picker, written by the county's acting director of the Division of Real Estate Services, Michael J. Kelly, says the debts outpace anything the county might owe by at least $2 million.
In his letter, Kelly -- who says the final amount owed to the county may go even higher -- requests that this amount be paid to the county "by the Islanders/SMG immediately." There are no separate letters to SMG directing them to pay the county.
The issue of the repair payments -- which is under negotiation -- needs to be resolved, making the situation "complicated," Kelly wrote in an emailed response to questions from Newsday.
"The county has asked the Islanders to pay the balance and provide us with further information about the claims they have made [for repairs]," Kelly wrote. "We expect that the Islanders will be responsive to our request. If the Islanders do not respond or do not pay, the county will review its options and take action as it deems necessary."
Kelly did not specify what such action would include.
County Executive Edward Mangano did not comment for this story. Picker did not return several phone calls. Officials with SMG's corporate office in Pennsylvania, and Jerry Goldman, who works for SMG as the Coliseum's general manager, did not return calls for comment, either.
Letter: $1.75M tab for 2011
Newsday examined hundreds of pages of records detailing the finances that the Islanders and SMG must report to Nassau County, according to the lease between the team, the county and SMG, formerly known as Spectacor Management Group. The records included county-issued invoices for 2011 and 2012 expenses, without any corresponding checks or records that they had been paid. The February 2012 letter, also sent to Picker, said the county was then owed $1.75 million, entirely for 2011 expenses.
There was no follow-up correspondence among the county, SMG and the Islanders regarding the money owed until the Feb. 22 letter this year, according to the records Newsday studied. County spokesman Brian Nevin said there have been email exchanges and conversations in the interim regarding the finances and repair issues.
"There has never been a lapse in oversight of funds owed to the county," Nevin said. "You must remember, this is a more fluid, cooperative relationship than you would have with a tenant."
Islanders owner Charles Wang announced last year that the team will move to the new Barclays Center in Brooklyn when the lease with Nassau County expires in 2015. The decision came after years of failed attempts to build a new or renovated arena on the Coliseum site. In the summer of 2011, voters rejected a $400 million referendum that would have allowed the county to build an arena with public funds. Attempts by the county to find a way for the Islanders to stay also all failed, as did the Lighthouse Project, a $3.8 billion mixed-use development proposed for the site by Wang.
But even as the county tried to find ways to keep the team, officials were dealing with critical financial issues. The county remains under the auspices of the Nassau Interim Finance Authority, a state control board overseeing the county's finances that has said the county's budget remains in deficit. The county has had to cut jobs and freeze wages since NIFA took over.
County says it will collect
The county owns Nassau Coliseum and leases it to SMG, which in turn holds a sublease with the Islanders. While the county's correspondence regarding the unpaid bills has been entirely with Picker, who works for the Islanders, county Comptroller George Maragos noted that "the prime agreement" is with SMG, which manages the day-to-day operations of the arena.
"Now that it's been brought to our attention, I will make sure we collect" the owed funds, Maragos said. "We will now have it as a receivable so it can be tracked."
The February 2013 letter to the Islanders noted that over the past year, the Islanders and SMG paid the county $203,795, while incurring additional bills. In addition to the $1.75 million owed as of the end of 2011, the Islanders and SMG did not pay the fourth quarter 2011 electric bill; the 2011 concessions annual payment due last March; or any rent, water, parking or electric payments for 2012, according to Kelly's letter.
"Unfortunately, it sounds like the Islanders are really shortchanging the county at this point and that it's going to take a great deal more diligence on the part of the county to keep the Islanders current," Legis. Wayne Wink (D-Roslyn) said. "It's clearly one of the major facilities the county owns and operates and consequently it's something we need to be incredibly diligent about -- at least making sure that we're getting our fair share."
Additional study planned
Wink said he planned to ask the Office of Legislative Budget Review to analyze the situation.
But Legis. David Denenberg (D-Merrick) said that even beyond the repairs requiring reimbursement, the county may not have met its obligations under the lease, either, because some maintenance and repairs the county is responsible for have not been done at all.
The disclosure of the unpaid bills came a month after the Long Island Marriott, the Uniondale hotel owned by Wang, was said to be facing "imminent default" on a $103.5 million loan, according to Fitch Ratings.
Since the Islanders and SMG pay a portion of advertising, concession and parking revenue to the county each year, the details of that revenue are released to the county. The records show, for instance, that the team reported a 13 percent decline in advertising revenue, of which the county gets 5 percent, from the 2010 season to the 2011 season.
But the records Newsday examined were incomplete, as more recent concessions and parking details were missing. County officials said they did not have some of the information, and in his Feb. 22 letter, Kelly requested additional 2010 and 2011 records.
"Once that information is received, the amount due to the County may increase," Kelly wrote in the letter.
BY THE NUMBERS
According to letters from Nassau County to New York Islanders senior vice president Michael Picker dated Feb. 21, 2012, and Feb. 22, 2013, these are the unpaid expenses owed by SMG and the team, which hold the lease and sublease for the Coliseum:
Unpaid invoices, totaled for 2011-2012
But with money already paid to the county and approved offsets for repairs, the county says the Islanders/SMG could owe up to $3,829,289. And with additional possible future reimbursements owed to the Islanders/SMG, those two entities could end up owing $2,045,609.