Skip to main content

As the IBO again suggests NYC could cut Madison Square Garden's tax exemption, City Planning Commission leans toward 15 years for permit renewal

The annual Budget Options for NYC, from the Independent Budget Office, again suggests the possibility of having the state eliminate the property tax exemption for Madison Square Garden, which would bring the city $17.3 million in FY 2014.

From the document:
For three decades, the Garden has enjoyed a full exemption from its tax liability for the property it uses for sports, entertainment, expositions, conventions, and trade shows... When enacted, the exemption was intended to ensure the viability of professional major league sports teams in New York City.
The argument for removal:
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 Madison Square Garden Network and Fox Sports New York, it receives game-related revenue from tickets, concessions, and cable broadcast advertising. Additionally, the Garden hosts many events, including concerts and circus shows in its arena and theater from which it collects both rent and concession revenue. Proponents also might note that privately owned sports arenas built in recent years in other major cities such as Boston and 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.
The argument against;
Opponents might argue that the presence of the teams continues to benefit the city economically and that foregoing $17.3 million is reasonable compared with 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. In recent years the city has entered into agreements with the Nets, Mets, and Yankees to subsidize new facilities for each of these teams. These agreements have leveled the playing field in terms of public subsidies for our major league teams. Eliminating the property tax exemption now for Madison Square Garden would be unfair.
Um, the teams are not going to leave the media capital of the world. The more interesting question is whether the tax break is justified because other sports facilities, including the Barclays Center, recently got a lot of help.

That deserves a lot more analysis--yes, the financing scheme for those new facilities provides hundreds of millions of dollars in tax breaks. Then again, MSG is in Manhattan, over a transit hub, a tremendous advantage for booking events and accommodating visitors... at least for now.

Giving the Garden 15 years

After a public hearing in which some prominent advocacy groups called for the Garden's operating permit to be renewed for only 10 years rather than in perpetuity, the mayoral-controlled City Planning Commission is leaning toward supporting 15 years--surely antagonizing MSG operators.

That's hardly a done deal, because the change requires support not only of the City Council--Speaker Christine Quinn hasn't weighed in--but also of the state legislature, and Assembly Speaker Sheldon Silver, an ally of MSG, does not support it.

Crain's New York Business reported 5/7/13,  City proposes limiting Garden to 15 more years: Limit falls hugely short of owner's insistence that the special permit for "the World's Most Famous Arena" be renewed in "perpetuity." Backers of limit seek way to redevelop site and give Penn Station room to grow.

Crain's reported:
"While Madison Square Garden maintains that the arena special permit should continue in perpetuity, we believe the term is warranted due to the uniqueness of the site and the importance of Penn Station to the city," said Amanda Burden, the head of City Planning Department who also chairs the City Planning Commission.
..."We are recommending today that the commission call for a renewed, multiagency initiative to improve Penn Station," Ms. Burden said. Her notion of a 15-year permit drew vocal support from fellow commissioners, who will officially vote on the plan later in May.
"I think 15 years, in my view, was a good decision and the minimum of what we could do because 10 years is too short and does not give the Garden enough to relocate," said Commissioner Angela Battaglia, who had been skeptical of a limited term during past commission hearings.
"...The Garden is especially sensitive to the imposition of the limited permit because it just spent nearly $1 billion renovating the arena. Some commissioners suggested 15 years would be enough time for the Garden to make back its investment, but even so, there has been talk of the arena operators suing should their permit be limited. The Garden's spokeswoman declined to comment on the prospect of a lawsuit.
An editorial

Crain's followed up with Editorial: Plan for Penn Station's future: As long as Madison Square Garden sits above Penn Station, the transportation hub won't get the major overhaul it desperately needs:
The Garden is an economic engine in its own right and an important part of the city's culture. But its benefits to the local economy are marginal compared with those of Penn Station, which handles more than twice as much traffic as Grand Central Terminal. If one West Side venue had to be sacrificed for the other, the Garden would have to give way.
Fortunately, there need be no sacrifice. Both Penn Station and the Garden could end up winners. And should. Thus, we urge the City Council to affirm the Bloomberg administration's proposal to extend by only 15 years the special permit that allows the Garden to be where it is. That's enough time to come up with a project that expands and modernizes Penn Station, relocates the Garden without interruption and creates a vibrant business district.
Development around the site today doesn't take full advantage of the station's 600,000 daily commuters. Adding office, retail and other space around a renovated Penn Station would be lucrative enough to subsidize a new Garden nearby. The arena's owners, who would see their air rights soar in value, would be effectively compensated for leaving their current building, despite their having spent, by their count, $980 million on its recent upgrade.
Maybe so, but like the tax exemption, it deserves some thorough analysis.


Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.