The entertainment management company that operated the former Smirnoff Music Centre in Dallas' Fair Park owes City Hall nearly $850,000 in back lease payments, according to a city audit released Monday.

The audit, which covers lease payments by House of Blues Entertainment Inc. from 2001 to 2006, accuses the company of not properly reporting and calculating lease payments in accordance with a lease agreement with City Hall, which owns the entertainment facility.

Live-music company Live Nation acquired House of Blues Entertainment in 2006 and continues to lease and operate the venue, which has been known as Superpages .com Center since early this year.

In the audit, City Auditor Craig Kinton concludes that House of Blues/Live Nation failed to properly account for ticket sales and for income derived from ticket sales, sponsorships, parking, concessions and income assessments.

"We recommend the city attorney continue with the negotiation process with Live Nation for a settlement" and "take the necessary steps to collect the money due to the city," Mr. Kinton wrote in the audit.

John Vlautin, Live Nation's senior vice president for communications, noted that the audit period expired the same month Live Nation acquired House of Blues Entertainment.

"Since soon after the acquisition, Live Nation has been in negotiations with the city of Dallas for a resolution of the interpretation of their audit, and we are hopeful that this will finally be resolved in the near future," Mr. Vlautin said in a written statement.

District 13 Dallas City Council member Mitchell Rasansky said Monday that "there's absolutely no excuse" for the underpayment. As chairman of the council's finance, audit and accountability committee, Mr. Rasansky said he plans to conduct a hearing on the matter May 27.

"I don't want this to happen again. We need to put better accounting systems in place," he said.

In a related matter, the audit also states that House of Blues/Live Nation failed to properly report complimentary tickets it gave to "city officials and certain city employees for events held at the Smirnoff Music Centre."

The audit did not list names. Dallas City Hall public information director Frank Librio said he wasn't able to provide a list of those who received the tickets, and he referred questions to Mr. Kinton, who wasn't immediately available.

Mr. Kinton's audit, however, suggested that such a practice may be illegal.

State law prohibits public servants from accepting gifts of $50 or more from those subject to the public servant's jurisdiction. Dallas' Code of Ethics prohibits officials from accepting a gift that, as the audit notes, "reasonably tends to influence or reward official conduct or that the official or employee knows is intended to influence or reward the discharge of official duties."

Dallas' lease with Live Nation states that City Hall is entitled to share various revenues.

Since 2004, the city is guaranteed a $350,000 minimum payment. Additionally, the city received a flat fee of 15 cents per ticket sold, among other revenue streams.