MSG now earning more than $50m a year in property tax breaks

The New York city council is gearing up for another run at Madison Square Garden’s 32-year-old full property tax exemption, and the city’s Independent Budget Office has a new estimate of how much MSG’s owners will get from it: $54 million in 2015, based on the projected increased value of a renovated Garden. The total value of MSG’s exemption now stands at a whopping $541 million*.

While the IBO doesn’t make policy recommendations, it just presents policy options, economist George Sweeting makes it pretty clear what the agency thinks of the MSG tax break, noting that “there is broad consensus within the economics field that government subsidies for sports facilities are not an effective use of scarce public resources,” that the Garden’s is the only property-tax exemption that applies only to a single property and is open-ended (most other property tax breaks end after a number of years, but the state legislature neglected to include a sunset provision in this case), and any threat that may have existed in 1982 of the Knicks and Rangers leaving town has long since gone by the wayside.

Of course, the council already voted once before to axe the MSG tax break, in 2008, but it didn’t accomplish anything because the tax exemption is enshrined in state law, it’s impossible to get the New York state legislature to do anything, really. Unless you’re a rich guy looking for a tax break, in which case the three men in a room would be happy to serve you.

*[UPDATE: IBO confirms that $541 million is the present value of the tax exemption over the next 30 years, net of tax breaks that would be available to any company, not just MSG. So allowing the tax break to remain in place for another 30 years would cost New York City $541 million in present-value 2014 dollars.]

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7 comments on “MSG now earning more than $50m a year in property tax breaks

  1. Their operating permit expires in 2023, but the council can still renew it. Keeping the lease to ten years was just a statement that the council would like to see MSG move elsewhere if possible, but nobody seriously has any idea where else they’d go.

  2. Neil this vote is symbolic and essentially meaningless. The City has three options going forward. 1: do nothing. 2: Kick Cablevision out and build another Penn Station and help them find another spot in NYC. 3: Tell them to leave town and we do not care where you go . Option three would take guts, but no one thinks it would happen.

  3. The operating permit and the property tax break are two separate issues. The state legislature has the power to repeal the tax break in an eyeblink, but don’t hold your breath.

  4. I doubt they wind up vacating in 9 years. Sounds to me like leverage on the part of the city. We’ll allow you to stay beyond the 9 years but we’ll take away or minimize the tax breaks in return.

  5. True blood, I do not think that is going to be the scenario at all. The WORST and I mean WORST scenario for any business (Cablevision/MSG included), is uncertainty. They would sooner have their taxes raised then have an uncertain future held over their head. Whatever happens will be Bill De Blasio’s call ( assuming he is Reelected Mayor ( and I would be shocked if he is not)). I suspect all of their tax breaks will be eliminated. Why? Because I believe he will be Governor( and a GREAT one) after Cuomo leaves office. Why? Despite being a Strong Social and Political Conservative ( very much on the other side of the political spectrum) I like him because of his willingness to stand for what he believes in. Even if it is unpopular ( like the Horse Carriages and St Patricks Day ( both I disagree with by the way)).

  6. Trueblood and David: The city has control over the operating permit, the state has control over the tax breaks. So unless whoever’s mayor in nine years (which won’t be de Blasio — term limits) tries to pull some “Go to the state and demand that they eliminate your tax break or we’ll evict you” gamesmanship, there’s no leverage game to be played here.

    It’s been very well covered how the operating permit issue came to the forefront: The Municipal Art Society and the Times architecture critic decided to make it a crusade, and the city council went along with it, at least as a possibly toothless threat:

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