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.