The New York Islanders and the hockey team's lease partner, SMG, owe Nassau County more than $3.6 million in unpaid rent, utilities and revenue payments for the Nassau Coliseum.
Nassau County Comptroller George Maragos is recommending "collection action and legal action" to get the debts paid.
As recently as Dec. 24, the Islanders and SMG owed Nassau a total of $4.9 million, according to the county's last available documentation, obtained by Newsday through a Freedom of Information Law request.
On Dec. 23, the team and SMG made a $1.25 million payment that wasn't reflected in the Dec. 24 documents. The $1.25 million was more than the total the Islanders and SMG had paid the county since February 2012, records show.
That payment came weeks after Newsday filed a request with Nassau County seeking an update on what the Islanders and SMG owed the county, along with additional financial and maintenance records. The financial data Newsday reviewed did not include fourth-quarter rent, utilities and revenue figures from last year. The county said those figures are not yet available.
Nassau's finances remain under the control of a state panel, the Nassau Interim Finance Authority. The county ended 2014 with a $70 million sales tax shortfall and recently scrapped its school-zone speed camera program, which officials had expected to bring in $30 million in new annual revenue.
To make up for the deficit from the camera program, the county is considering revenue-generating ideas such as electronic highway billboards.
Islanders owner Charles Wang had said for years that he was personally keeping the team afloat. In September, Wang sold a minority share of the team to businessmen Jonathan Ledecky and Scott Malkin, who will assume majority control in two years. Wang, who will retain a minority share in the team, has confirmed reports that the deal was worth about $485 million.
Nassau County leases the Veterans Memorial Coliseum to SMG, a West Conshohocken, Pennsylvania-based venue management company, and the Islanders hold a sublease with SMG. County officials, who deal primarily with the Islanders regarding the debt, say they are confident Nassau will be paid in full by the time the SMG/Islanders lease expires July 31.
At issue, county officials say, is the upkeep of the 43-year-old arena. According to the lease, SMG and the Islanders are responsible to pay for repairs and the county reimburses them. County officials said they are negotiating with SMG and the Islanders to determine what maintenance still needs to be done. The costs could partially offset what the parties owe.
"The county has a good working relationship with the Islanders and will continue to work to resolve this issue as the term of the lease draws to a conclusion," county attorney Carnell Foskey said in a statement. "The county fully expects to recover any amounts owed to it by the Islanders prior to the expiration of the lease."
Foskey said Maragos' remarks regarding going to collection or taking legal action are "premature and would have a negative impact on the ongoing discussions with the Islanders."
County Executive Edward Mangano, a Republican, declined to comment beyond Foskey's statement.
But Maragos, who in a letter this month urged county officials to make more of an effort to get the debts repaid, believes the county isn't being assertive enough trying to recoup a debt that's been outstanding since 2011.
"We have needs and we have a lot of money out there in receivables that we're not moving aggressively to collect," Maragos, also a Republican, said in an interview. "I cannot justify it."
The Islanders will play their home games at Barclays Center in Brooklyn starting this fall. The team decided to move after several failed attempts to either renovate or build a new arena at the Coliseum site. They have played their home games at the Coliseum since their inception in 1972.
Islanders senior vice president Michael Picker, the county's primary contact regarding the debt, did not return calls for comment. A message left at SMG's corporate office was not returned.
Records show that Nassau has been attempting to collect the debt since February 2012, when then-Nassau County real estate accounting executive Kempton Hicks wrote to Picker saying Nassau was owed $1.75 million for 2011 expenses. In February 2013, the county sent another letter to Picker, saying the amount owed had increased to $3.8 million.
According to emails obtained by Newsday, county officials attempted to schedule a meeting to discuss the outstanding debt in March 2013, after a Newsday story that made the debt issue public.
According to the new records, SMG and the Islanders did not make another payment on that debt until 2014. Records show a $500,000 payment was made, but give no date for it. Municipal infrastructure attorneys Josh Meyer and Zachary Klein of Pannone Lopes Devereaux & West LLC, who have been retained by the county to work with SMG and the Islanders for Coliseum matters, said the payment was made in April 2014. Then, SMG and the Islanders sent the $1.25 million check on Dec. 23.
According to the county, the Islanders and SMG's remaining debt of more than $3.6 million is for outstanding rent, water and electric bills and the county's share of past years' concession and parking revenue.
Separately, the lease calls for the Islanders and SMG to pay the county a portion of Coliseum advertising revenue. Documents show that the team and its lease partner have been behind on that as well -- paying the bills, but often months late. The county's share for the fiscal year that ended June 30, 2014, was due last October. The Islanders paid that bill -- for $168,389 -- at the end of January, according to Meyer. These payments have no effect on the other debt.
No rush to pay?
Robert Boland, a sports business professor at New York University, said municipalities in disputes such as these typically get paid. But because the Islanders are about to leave and the SMG lease is about to end, Boland said the Islanders and SMG likely don't feel in any rush to make the payments.
"There's some perception here that the Islanders sort of have the advantage here because they would owe the debt while playing in a new building," Boland said. "Soon they won't need the Coliseum."
The Islanders' sublease with SMG, agreed upon during the final days of Democrat Thomas Suozzi's tenure as Nassau County executive in December 2009, also stipulates that the hockey team owes SMG a $7 million lump sum at the end of the lease as part of a deferred rent payment plan.
County officials said they were satisfied with allowing the Islanders and SMG to delay paying the debt so they'll have money for repairs, because they are occupying a 43-year-old arena, in which potential problems needing immediate fixes are more likely to crop up without any notice.
"Once it is apparent that certain repairs are not required to be made as the expiration of the lease draws closer, the amounts owed by the Islanders to the county will be reduced, with any and all outstanding amounts to be paid to the county prior to or upon expiration of the lease," said Foskey, the county attorney.
Maragos disagrees with the approach. "The common business practice is that people pay their contractual obligations and then if there are maintenance expenses that need to be incurred, that can certainly be compensated for by the county," Maragos said.
In a Feb. 11 letter to county public works Commissioner Shila Shah-Gavnoudias in which he raised the possibility of using a collection agency, Maragos also cited Nassau's fiscal problems as a reason to collect the money owed by the Islanders and SMG.
"With the current financial pressures on both the county and our residents, it is essential that all outstanding receivables be collected," Maragos wrote.
Jon Kaiman, chairman of the Nassau Interim Finance Authority, said his agency, which oversees the county's finances, "is not involved in the enforcement of contracts, but rather requires the county to meet its budget estimates by alternative means if a revenue source is lost or delayed. The question NIFA would have is whether or not the county will be made whole at the end of the year."
With Laura Figueroa
What they paid, what they owe
The New York Islanders and their lease partner, SMG, owe Nassau County more than $3.6 million in unpaid rent, utilities, water and revenue sharing, documents show. Here is a breakdown of what they have paid and what they still owe:
Outstanding Balance as of 2/21/12 - $1,745,186.69
Owed from 2011-2014:
Total Owed: $10,117,223.79
April 2014 Payment
December 2014 Payment
Total Deductions: ($6,491,980.93)
*Rent, Water and Parking Revenue are as of the third quarter of 2014.
**Electric is as of the second quarter of 2014 .
***Concessions are as of the end of 2013.
Sources: Nassau County; Newsday analysis