Madison Square Garden doesn't deserve a tax break. But other sports venues, including the Barclays Center, get not just tax exemption but also tax-free financing.

There's no excuse for the tax-exempt status of Madison Square Garden, bestowed dubiously in rough 1982 and justified as preventing the departure of the New York Knicks and New York Rangers from the country's economic capital--and which Mayor Ed Koch mistakenly thought would last just ten years.

But that doesn't mean that, as state Sen. Brad Hoylman-Sigal grandstanded yesterday in a press release, that Madison Square Garden Has The Richest Stadium Deal in NYC, New IBO Report Says. Actually, that IBO report (bottom) comes with a letter to Hoylman-Sigal, who requested the analysis, stating that the bottom line is murky:

All these sports facilities benefit from public subsidies or incentives that reduce costs but because the subsidy structures for each are different, cross-comparisons are difficult to make. None of the stadium owners are currently liable for New York City property taxes but for different reasons.

Missing the point

Hoylman-Sigal stressed that MSG isn't responsible for payments in lieu of taxes, or PILOTs:

MSG is by far the oldest venue receiving subsidies, the only one that does not pay Payments in Lieu of Taxes (PILOTs) and the only venue whose property tax break is completely disconnected from the construction costs of the building. The report further asserts that MSG’s estimated annual property tax waiver of $42 million is a conservative estimate that could be far higher.

State Senator Brad Hoylman-Sigal said: “The IBO report on NYC stadium subsidies shows the exceedingly generous and exceptional financial arrangement for Madison Square Garden. Every stadium in New York City pays the equivalent of property taxes, except MSG. Yankees Stadium, Citi Field and Barclay’s [sic] Center pay a total of $167 million a year in the form of PILOTs (payments in lieu of taxes). At the same time, MSG pays nothing, zero, bupkis.

Similarly, he tweeted that MSG was the:

• ONLY stadium that doesn’t pay property taxes or PILOTs
• ONLY venue whose tax break is totally disconnected from the costs of construction

But PILOTs are a fiction, since the money goes not to the public fisc, but to pay off construction debt--and the PILOTs scheme, given ostensibly "public" land, allows for cheaper tax-exempt financing than the taxable financing that MSG used for its renovation.

In other words, the tax-free financing is another subsidy, compounding the subsidy provided by tax-exempt land. MSG doesn't get that--not that it needed it. (Similarly, MSG and Yankee Stadium didn't need to sell naming rights, while operators of the Barclays Center and CitiField got to do so.)

As I wrote in 2018, tax-exempt financing is mainly (but not exclusively) a cost to federal taxpayers. The IBO estimated the value of initial Brooklyn arena financing as about $200 million, part of what was calculated as an overall $726 million in savings on the arena. However, that was overstated by at least $50 million, given that a smaller amount of tax-exempt bonds were sold.

In 2016, researchers at the Brookings Institution estimated $161 million in revenue loss based on that financing. But that was before the bonds were refinanced in 2016: Bloomberg estimated an additional $90 million in savings over time for the arena operator.

The coverage

From The City's newsletter today:

Lastly, we took a look at one particularly knotty issue in the capital right now: the future of the tax break for Madison Square Garden. Some say it should be nixed to raise money for transit. Meanwhile, MSG officials say the tax breaks — in place since 1982 — are no different than public subsidies doled out to other local stadiums and arenas. But a new report from the Independent Budget Office shows that’s not true.

Well, the tax break is different, but it's not functionally worse. Arguably, the others are worse, though that's countered by MSG's advantageous location in Manhattan.

Not sure MSG "wins competition" for the biggest tax break.

It self-financed its renovation & pays off cost *without tax-exempt financing.*

Others got cheaper tax-exempt financing, repaid via PILOTs.

(Though, yes, MSG is hugely profitable & has no case for a tax exemption.)

— Norman Oder (@AYReport) March 29, 2023

Note that The City's coverage, originally headlined "Madison Square Garden Wins Competition for Biggest Sports Tax Break," was updated--in response to my tweet?--to Madison Square Garden a Contender for Biggest Sports Tax Break, Budget Office Finds. 

Still, The City framed it as, "While Yankees and Mets help pay back state-issued bonds, the arena home to the Knicks and Rangers gives “nothing, zero, bupkis” says lawmaker who’s pressing to end MSG’s $42-million-a year benefit."

But those "state-issued bonds," as with the bonds paying off Barclays Center construction, are another subsidy, rather than a contribution to the public fisc. It's unwise to let the grandstanding lawmaker frame the issue.

The MSG response

From The City:

MSG officials used the difference in projected tax payments and what the outer-borough venues actually paid in debt service to argue that those subsidies were actually more lucrative than theirs. 

For example, Citi Field would have a $121 million tax liability based on its $3.2 billion property assessment, but only pays $44 million toward debt service — a subsidy of $77 million, the officials said.

They also said the other statements benefit from subsidies that weren’t included in the IBO review, such as capital replacement reserves and rent credits — which MSG doesn’t get.

“The Independent Budget Office’s report clearly illustrates what we’ve said all along – all of New York City’s major sports venues benefit from public subsidies, and as the analysis clearly indicates, MSG’s is one of the smallest,” said MSG Entertainment spokesperson Mikyl Cordova.

That's not wrong--but it's still not defensible, given the context that MSG's tax break is the longest, cumulatively totaling more than $875 million; the least defensible, given the lucrative location; and is surely an undercount, as noted below.

Other coverage

From Field of Schemes, NYC is handing out $377m a year in tax breaks to its pro sports teams:

As of February 2023, the DOF assessed fair market values for Yankee Stadium, Citi Field, and Barclays Center are $2.6 billion, $3.2 billion, and $2.6 billion respectively, and the property tax amounts would be $115 million, $121 million, and $99 million, respectively.

Add the $42 million for Madison Square Garden and that totals $377 million, totaling, as Neil deMause points out, "$5 billion in present value over the next 30 years." Plus, of course, all the other subsidies.

The New York Post, in MSG gets sweeter state tax deal than previously thought, watchdog says, noted that the IBO said that the $42 million is a conservative estimate, given a fair market value of just $867 million--far less than the valuate estimates of $2.6 billion for Yankee Stadium,, $2.6 billion for Barclays, and $3.2 billion for Citi Field.

Crain's New York Business offered MSG's tax exemption stands tall in a crowded field, IBO report says.