A business group in the Diamond District has potentially mismanaged hundreds of thousands of dollars and should have its funding withheld by the city until it replaces its leaders, according to an audit released Tuesday by city Comptroller Brad Lander.
The 47th Street Business Improvement District, also known as the Diamond District Partnership, has been under watchdogs’ microscope ever since a previous audit in 2019 found that the nonprofit’s then-leader had enriched himself by spending BID dollars on personal expenses and hiring his relatives to paid posts.
Now, in a follow-up audit, the comptroller’s office says the BID has made limited progress addressing those past issues — but uncovered new problems so severe that the city’s Small Business Services Department should stop sending the BID the more than $1 million in annual property tax assessments it receives from local businesses until it changes its leadership and policies, the comptroller says.
The BID disputed many of the findings, saying that the report contains errors and omissions that “raise questions about the fairness” of the auditors.
For years, the BID has paid NYPD officers to stand guard 24/7 in the lobby of a Fifth Avenue building that is actually outside the district’s boundaries, an arrangement that cost nearly $400,000 in fiscal year 2022. The comptroller’s office said the BID’s board chair and other board members have a financial stake in that building since they own businesses there, while BID officials counter that the tower is full of valuable jewelry that needs to be closely guarded.
BID officials, in their response to Lander’s audit, said that the security setup is allowed despite the building being outside the BID’s bounds, since city law allows BIDs to pay for services that are “proximate” to the district — but the comptroller says the patrols fail to benefit the BID enough to be justified. The BID also failed to show that the building’s landlord reimbursed it for the costs of hiring the officers, the comptroller said.
Meanwhile, the BID is in hot water for a deal with Netflix, in which the group allowed a production to be filmed for three days on West 47th Street in exchange for a $105,000 “donation” to the BID. The comptroller’s office said the BID has given contradictory answers about whether it got required approvals from the mayor’s office for the private use of city streets.
The BID has also done too little to engage local businesses, with only 3% of the 3,000 businesses in the area actually registered as members. That’s despite a prior pledge by the BID to conduct an annual registration drive to up membership, the comptroller said.
Other allegations focus on the BID’s new executive director, Avi Fertig, who is not identified by name in the report. In 2022, Fertig was paid $4,000 more than his contract had stipulated, for a total of $152,000, and received $33,000 for time not worked when he took 62 days of leave — more than he was entitled to, the comptroller says. (The BID counters that he had undergone a “complicated, medically necessary surgery” that required a long recovery period, which was approved by the organization’s board.)
The BID has also relied too heavily on non-competitive procurement for goods and services — totaling upwards of $400,000 in fiscal 2022, the comptroller argues. Finally, the group has failed to implement more than half of the nearly two dozen recommendations that the comptroller’s office made after the previous audit with the goal of improving its governance and record-keeping, according to the report.
All told, the comptroller called the alleged mismanagement so dire that the Small Business Services department should have the BID’s tax assessments put in escrow until the group signs a new contract, makes unspecified changes to its “by-laws and leadership,” and agrees to implement the audit’s recommendations by April 2025. SBS, in its own response, said it would consider Lander’s recommendation.
“The leadership of the 47th Street BID is misusing city property tax assessment for its own benefit, and repeatedly violating laws and policies to improperly maintain its control,” Lander said in a statement. “Given the board’s repeated refusal to address ongoing fiscal mismanagement of city funds, the Department of Small Business Services must take the serious step of withholding the BID’s assessments until there are changes in leadership, by-laws, and practices.”
The BID, founded in 1997, reported an assessment revenue of $1.4 million in fiscal 2022. Its territory covers most of West 47th Street between Fifth and Sixth avenues.
Bob Liff, a spokesman for the BID, said the organization has “cooperated fully in response to the comptroller’s auditors’ findings and have revised procedures in response,” but added that the comptroller had omitted and misinterpreted its responses “to fit what appears to be a preconceived conclusion.”
The auditors, Liff added, failed to “understand the security needs of the Diamond District including the building on the corner of Fifth Avenue and West 47th Street which is fully integrated into the business of the Diamond District.”
“We look forward to continuing to work with the Comptroller’s office on any outstanding procedural issues they address as we serve the 2600+ businesses within the boundaries of the Diamond District BID with efficiency, transparency and effectiveness,” he said.
Nick Garber , 2024-04-02 19:29:53
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