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Comptroller: NYPA leasing properties at less than 10 percent of assessed value

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ALBANY - The New York Power Authority (NYPA) is leasing properties to golf courses, a university and a private yacht club for less than 10 percent of the assessed fair market rental value without justification, in some cases waiving rent altogether, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“The unusual nature of these deals makes it critical that NYPA fully document and disclose the nature and justification for them,” DiNapoli said. “NYPA hasn’t shown that these tenants are the only ones that could provide required recreational use of these properties.”

NYPA is the nation’s largest state public power provider, operating hydroelectric and gas-powered energy plants throughout the state. As of Dec. 31, 2012, it owned 48,941 acres of property associated with 12 power generating projects, along with an administrative building in White Plains and several permanent easements.

NYPA officials said that although it is difficult to determine the fair market value for leased land, 10 percent of the total assessed value is a good rule of thumb. For some properties, this amount may be further reduced if it is only usable part of the year. If NYPA followed those guidelines for the four entities, it would collect at least $214,000 a year.

During the audit period of January 2010 through July 2013, the Massena Country Club, located in St. Lawrence County, was leasing land that was assessed at $1.8 million for an annual rent of only $2,000 from NYPA, rather than the fair market rent of $180,000.

Auditors also found the private St. Lawrence Yacht Club leased property that was assessed at $180,000 for an annual rent of only $2,700, rather than $18,000, even though the club’s facilities are not open to the public. Since 2010, the tenant was allowed to make improvements in lieu of paying rent. NYPA records show that the yacht club replaced a dock and a shed and purchased a woodstove without documenting how the cost of these projects compared with any rental offsets.

St. Lawrence University is leasing a boat house from NYPA that was assessed at $100,000 for an annual rent of only $1 (which NYPA waives), instead of $10,000.

The Twin Brooks Golf Course, in Waddington, is leasing property that was assessed at $123,000 for an annual rent of only $200, rather than $6,150 (reduced from $12,300 because the property is only usable for six months of the year). NYPA has waived the rent on this property since the 1990s.

DiNapoli’s auditors found NYPA failed to follow state law and notify the Governor and Legislature that it was renting the properties below market value and justify why it was doing so.

Auditors found that NYPA had not accurately accounted for all of its real estate holdings. It has not determined the need to either hold or dispose of those properties, nor disposed of property on terms beneficial to the state, as it is supposed to under state law.

NYPA did not update the information systems used to account for its real estate inventory in a timely manner and has not been consistent in how it reports disposals of real property. Furthermore, NYPA does not regularly review its real estate portfolio to identify properties it no longer needs, as required by law.

DiNapoli recommended NYPA:

• Notify the Governor and the Legislature when property is leased for less than the fair market value and provide the justification for such action;

• Ensure that information systems used to track real estate holdings are updated timely to reflect changes when property is acquired or disposed; and

• Evaluate the continued need for property owned and property leased from other entities.

In responding to the audit’s draft report, NYPA officials indicated that they would enhance their practices and procedures for real estate portfolio management. In addition, officials indicated they would strengthen NYPA’s automated real estate management systems and continue to improve system capabilities.

For a copy of the report, including NYPA’s response, visit: http://osc.state.ny.us/audits/allaudits/093014/13s23.pdf

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