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From the IBO's Budget Options for NYC: tax exemption for MSG now worth $48.5 million (and what does that say about Barclays?)

From the Independent Budget Office's Budget Options for New York City, released last week, "Eliminate the Property Tax Exemption for Madison Square Garden," with emphases added:
This option would eliminate the property tax exemption for Madison Square Garden (MSG or the Garden). Since 1982, the Garden has received a full exemption from property tax liability for its sports, entertainment, and exposition property. Under Article 4, Section 429 of New York State Real Property Tax law, the exemption is contingent upon the continued use of MSG by professional major league hockey and basketball teams for their home games. In 2013, the Garden’s owners completed a $1 billion renovation of the facility, and as a result the tax expenditure for the exemption increased from $17.3 million in 2014 to $48.5 million for 2016. 
When enacted, the exemption was intended to ensure the viability of professional major league sports teams in New York City. Legislators determined that the “operating expenses of sports arenas serving as the home of such teams have made it economically disadvantageous for the teams to continue their operations; that unless action is taken, including real property tax relief and the provision of economical power and energy, the loss of the teams is likely…” (Section 1 of L.1982, c.459). Eliminating this exemption would require the state to amend this section of the law. 
Proponents might argue that the city has many fiscal needs that are more pressing than sports and entertainment, and thus the exemption is a poor allocation of scarce public dollars. Moreover, proponents could argue that the historical motivation for the exemption likely no longer applies. According to Forbes, the Knicks market value is $2.5 billion, nearly five times its 2000 value (in 2015 dollars), while the Ranger’s value has tripled over the same period, indicating the teams are no longer economically disadvantaged. They could also argue that the threat of relocation is much less creditable today than in 1982, not only because of the arena’s recent renovation, but also because team revenue is boosted from operating in the nation’s largest media market. Thus, relocating would likely cost the Garden more in revenue than it saves through the tax exemption. 
Opponents might argue that the presence of the teams continues to benefit the city economically and that foregoing $48.5 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.
My take

Surely the proponents' arguments are strong: the arena and teams are profitable, and there's no threat to relocate. (Indeed, if a new Madison Square Garden is built because the arena is kicked out of Penn Station for a station remodeling, it surely will find a place in Manhattan.)

As for the opponents' argument, there's no risk the team will leave the city. And "reneging on the tax exemption"--well, circumstances have changed.

The only argument with weight is that agreements with other teams and sports facilities have leveled the playing field. And that goes to the question of the actual subsidy for the Barclays Center, beyond the direct payments of some $305 million for Atlantic Yards, perhaps half of which could be attributed to the arena.

Note that, in contrast with the MSG tax exemption, the Independent Budget Office does not consider the tax-exempt financing for the Brooklyn arena to be a full subsidy, in the way former Assemblyman Richard Brodsky considered tax-exempt financing for Yankee Stadium to be a full subsidy. (As does Michael D.D. White, regarding the arena.)

Rather, regarding the Brooklyn arena, the IBO only counts the difference between taxable and tax-exempt financing, as well as the lost property taxes on formerly taxable property within the arena site.

It also argues that the Metropolitan Transportation Authority took a hit by not maximizing the price it could have gotten for the railyard portion of the arena, suggesting that the price should have been higher because the buyer would be able to maintain the advantageous tax-exempt status of the site.

But some of the tax exemptions on commercial property within the arena site are in question, too.

For now, note that the the tax exemption for the Brooklyn arena is worth over $32 million this year, and rising steadily, as the "Estimated PILOTs" table below shows.

Estimated PILOTs for Barclays Center, from 12/09 Official Statement for arena bonds