In response, Cablevision called attention (right; click to enlarge) to the even larger tax breaks and other forms of support the city has handed out for construction of new sports facilities for the Yankees, Mets, and Nets.
And two City Council members—Atlantic Yards opponent Letitia James and sometime critic David Yassky—issued a statement saying the City Council should take a broader look at all subsidies, including much larger ones for Atlantic Yards.
Explaining the numbers [update]
IBO spokesman Doug Turetsky says of MSG's figures, "They have extrapolated from numbers we have presented in reports in the past and used portions of them but their totals are not the reflection of our numbers as sourcing them to us would lead one to think.
They include state and federal subsidies, which are not part of the comparison we presented yesterday. In addition, they compare the one-year cost of the MSG exemption to the lifetime subsidy costs of the other projects."
25 years later
The resolution notes that MSG was granted a property tax exemption by the state in 1982, at a time when an incentive was seen as necessary to keep the sports teams from leaving the city, a threat that clearly has passed. Moreover, it notes, “privately owned sports arenas built in recent years in other major cities, according to the IBO [Independent Budget Office], generally do pay real property taxes – as did MSG from 1968 when it opened until 1982.”
The resolution seems likely to pass City Council, given the support of Mayor Mike Bloomberg, who clashed with Cablevision over its opposition to a West Side Stadium that could compete with MSG, and Council Speaker Christine Quinn. However, it must then pass the state legislature, where cagey Assembly Speaker Sheldon Silver, long allied with Cablevision, has kept his cards close to his vest, as the New York Times reported.
Quinn was apparently in full dudgeon, according to a statement published on Gotham Gazette:
$11 million dollars may not sound like a lot of money to [company president] Jim Dolan, but to most New Yorkers it’s a fortune. If he expects the City of New York to extend what is almost a million dollar a month tax break in perpetuity, he’s sadly mistaken. New Yorkers pay the highest taxes in the country, and they need to know that their tax dollars are being spent wisely.
“When Mayor Koch requested the exemption for MSG, he believed it would be for a decade, not a quarter of a century, and certainly not forever. But for more than twenty-five years, New Yorkers have compensated Madison Square Garden’s decision to stay in New York to the tune of nearly $297 million dollars. It’s time for them to start paying their fair share.
“Madison Square Garden, the Knicks and Rangers, should be treated just like all our hometown professional sports teams. The Yankees and Mets are building publicly owned ballparks on publicly owned land, the Garden is a private facility. If and when a new arena is built for the Knicks and Rangers, Payments In Lieu of Taxes (PILOTS) should be considered as were structured around the agreements to build new homes for the Mets and Yankees.
She didn’t mention Atlantic Yards, perhaps because the term “publicly-owned land” is a dodge. As the Memorandum of Understanding shows, private property will be conveyed by Forest City Ratner to the state and leased back for nominal sums.
Among the nine initial City Council sponors are Lew Fidler and Mike Nelson of Brooklyn, both Atlantic Yards supporters. Fidler told the New York Sun, "The Garden pressured the city into a giveaway in perpetuity, and that was wrong."
Note that the Payment in Lieu of Taxes (PILOT) deal in the Atlantic Yards MOU is for 99 years.
James and Yassky
In their statement, James and Yassky, who called the MSG exemption “now entirely unnecessary,” added:
Unfortunately, Madison Square Garden is not the only potentially tax-supported, privately-owned arena on our horizon: if you think subsidizing MSG is a bad idea, know that worse is on the way in the form of Atlantic Yards, which features a new stadium for the New Jersey (soon-to-be-Brooklyn) Nets. The Atlantic Yards Project is slated to receive $500 million in City and State subsidies, including $205 million in the current City Budget, a property tax carve-out valued at up to $200 million, and $100 million from the State.
Forest City Ratner is the greatest beneficiary of public subsidies in NYC. The various tax exemptions enjoyed by this company, and others in the City, have not been reviewed or been subject to as much scrutiny as was witnessed in the Finance Committee hearing today. This legislative body should be reviewing how we grant tax exemptions to companies on a city wide basis, and not single out any one company. The policy should be consistent, broad and equitable.
I don’t know if Forest City Ratner is the greatest beneficiary of public subsidies, but they are King of the PILOTs, as Daily News columnist Juan Gonzalez recently wrote.
In 2005, Bettina Damiani of the watchdog group Good Jobs New York argued for “attention to what we believe are unnecessary taxpayer giveaways – that are not only being given to Madison Square Garden... We hope all large corporate subsidies get this type of attention." She made similar arguments yesterday.
Retention vs. construction
MSG said in a statement that it was wrong to pick on them: “With a more than $50 billion City annual operating budget, it is strange that Speaker Quinn would focus on MSG's abatement which pales in comparison to the more than a billion dollars in benefits recently granted to all other pro sports teams in New York City."
Quinn told that Times said MSG was disingenuous to compare its deal with those regarding new construction. (Then again, it was for a remodeling.)
MSG within norms?
In testimony (which I was sent) at City Council , Thomas Hazinski, Managing Director of HVS Convention, Sports & Entertainment Facilities Consulting argued that “MSG’s property tax exemption is well within the norms for sports venues in the United States.”
In fact, he said, most get far more subsidies than just abatement of property taxes. “The vast majority of sports venues do not pay property taxes,” he said, though the IBO has pointed out (see below) that new arenas have been required to pay property taxes.
He also said that MSG’s “exemption is more modest than the support New York City has offered to other professional teams, citing “the estimate of public support for the new Nets arena in Brooklyn is $340 million with $14 million in property tax savings.”
A fact sheet (top) MSG distributed stated $342 million, citing the IBO as a source. While the city and state have pledged $305 million, the IBO, as noted by Turetsky's comments, does not endorse MSG’s calculations.
Either way, clearly the amount of subsidy is even greater for the other sports facilities. Hazinzki noted, “These totals do not include other key support mechanisms, including the full value of tax exempt bonds.”
Hazinski argued that New York “has leveraged greater economic impact from Madison Square Garden with less overall public support,” given that MSG “is the home of three professional teams and hosts hundreds of other events.” That cuts both ways, however, because it suggests that MSG already has steady income.
Moreover, Cablevision’s willingness to spend $11.5 million—more than the tax-exemption over one year—to settle a sexual harassment case involving former MSG executive Anucha Browne Sanders, also suggests that the company has deep pockets.
Hazinksi, in closing, argued that the Council defer any vote until a full evaluation of “what government support is appropriate for the development of a new arena.” Quinn has said that could be taken up separately.
The IBO yesterday criticized the tax break, as the Daily News reported. Last February, in its Budget Options for New York City document, the IBO offered much stronger pros than cons regarding removal of the exemption:
Proponents might argue that tax incentives are now unnecessary because the operation of Madison Square Garden is almost certainly profitable. Because Madison Square Garden, L.P. owns the Knicks and Rangers teams, and the MSG Network and Fox Sports New York, it receives game-related revenue from tickets, concessions, and cable broadcast advertising. In addition, Madison Square Garden hosts concerts, theatrical productions, ice shows, the circus, and much more in its arena and theater, and it collects both rent and concession revenue on these events.
Proponents also might note that privately owned sports arenas built in recent years in other major cities, such as the Fleet Center in Boston and the United Center in Chicago, generally do pay real property taxes—as did MSG from 1968 when it opened until 1982—although some have received other government subsidies such as access to tax exempt financing and public investment in related infrastructure projects. In the case of MSG, the continuing subsidy, long after the construction costs have been recouped, is at odds with the philosophy that guides economic development tax expenditure policy.
Opponents might argue that the presence of the teams continues to economically benefit the city and that foregoing $13 million is reasonable compared to the risk that the teams might leave the city. Some also might contend that reneging on the tax exemption would add to the impression that the city is not business-friendly.
These days, the risk that such teams would leave a major media market seems low. And, as James and Yassky and Damiani pointed out, the city still manages to seem business-friendly.
[Updated]: IBO testimony
From the IBO's testimony yesterday:
With an open-ended benefit, the city continues to face an annual cost even if the conditions that prompted the initial deal have changed. In 1982, the owners of the Garden argued that their costs, including taxes and energy, had grown so high that they threatened their ability to keep the basketball and hockey teams playing there. Today, it is unlikely those conditions remain. With the advent of its own cable TV network, more intensive use of the facility to generate advertising revenue, and construction of new luxury boxes and club seating areas with higher ticket prices, the Garden today is by all accounts a highly profitably enterprise.
In recent years the city—ignoring the argument that sports facilities are a bad investment—has entered into agreements with the Nets, the Mets, and the Yankees to subsidize new facilities for each of those teams. IBO has estimated that the net present value (40 years with discount of 6 percent) of these city subsidies range from $140 million for the Nets arena to $162 million for Yankee Stadium. These deals also include additional state subsidies and federal tax exempt financing. Measured on a comparable basis, the Garden’s exemption represents a city subsidy of about $218 million. While the value of the Garden’s subsidy from the city is larger, with these other deals, the city has somewhat leveled the playing field in terms of public subsidies for our major league sports teams.
(Emphasis added, given that the Nets would get $205 million in direct subsidy from the city and $100 million from the state)