Collaboration in Civic Spheres

Airport concessionaire underpays Port of Seattle by $250K

by July 20th, 2012

A major SeaTac Airport concessionaire owes the Port of Seattle $256,269 because of confusion on how to report revenues, according to a June port audit. The concessionaire’s umbrella company, American Management Services, agreed with the audit results and will pay the additional monies owed, said the audit report and a port spokesman. Airport Management Services is a joint venture of the Hudson News Group and two other local retail firms. The airport has three food-and-beverage concessionaires, plus other tenants. The June 12 audit report focused on the Hudson News Group, which operates 15 news stands, two bookstores, two bakeries and four speciality stores – Made in Washington, Discover Puget Sound, Life is Good and Kids Works – at the airport.

“While the amount $256,259 is not small, in the perspective of the roughly $46 million in sales generated last year, and the roughly $7 million paid to the Port in rent, the amount is not tremendously significant,” wrote port spokesman Perry Cooper in an email. The audit was a routine procedure that all of the airport’s concession firms undergo, he said.

The audit report concluded that American Management Services underpaid certain fees to the port in the amounts of $297,679 and $74,916, while overpaying the port by $116,336 in another category of fees. That translates to American Management owing the port $256,269.

The concessionaires pay rent based on percentages of their gross sales. The percentages are based on what is sold, with items divided into four categories with the percentages ranging from 11.5 percent to 26.5 percent. Sometimes, the port and stores categorized the sold items differently. “That is one of the reasons we have audits – to make sure we are all capturing what we’ve agreed upon. ….There’s nothing underhanded going on that was discovered by the audit, but confusion about what they were supposed to pay,” Cooper wrote.

The $297,679 and $74,916 underpayments came from American Management mistakenly using the wrong method to count gross receipts and from paying less than the 14.5 percent rate for selling magazines in prime store displays – which was caused by complicated contracts between publishers and concessionaires which can vary from airport to airport, Cooper said. The $116,336 overpayment was due to American Management categorizing some specialty goods under the 14.5 percent payment plan instead of the correct 11.5 percentage category, the report said.

The Port’s audit committee meets periodically. Its meeting dates and agendas including links to internal and external audits can be found through the full listings of all Port Commission and committee meetings.


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