Cuomo’s Penn Station expansion plan could cement MSG’s $550m-and-counting tax break in place for eternity

With New York Gov. Andrew Cuomo again proposing an expansion of Manhattan’s Penn Station — this one with an estimated $8 billion price tag, to be funded mostly by ¯_(ツ)_/¯ — Gothamist asked me to look into the state of the eternal tax exemption for Madison Square Garden, the arena that sits atop the train station, which the state accidentally put into place in 1982. The answer: The tax break has now cost New York City a total of $550 million and could hit $1 billion by 2030, legislation to repeal it keeps going nowhere, and Cuomo’s Penn funding plan could write it into tax law forever.

Cuomo’s Penn Station expansion plan (which is at least the sixth iteration of an expansion plan since one was first floated by then-Senator Pat Moynihan in the early ’90s) proposes another massive tax kickback, siphoning off untold billions of future property-tax dollars — technically payments in lieu of property taxes, or PILOTs—from an undisclosed area around the train station to pay for expansion of the transit complex. It’s the same mechanism that was used to partially subsidize Hudson Yards, accounting for just over $1 billion of the city’s $5.6 billion total tab.

The governor’s Powerpoint presentation on his plans includes a diagram on page 51 showing a “development district” that would include Penn Station and several blocks around it. Cuomo’s office referred questions to the state Empire State Development corporation, which indicated that this would be both the size of the new project and the size of the PILOT diversion district, though “the exact boundaries and parcels have yet to be finalized.”

If Madison Square Garden does end up within the area carved out to pay PILOTs, notes Kaehny, that could have the effect of cementing MSG’s tax break in place — or at least limiting the amount of future taxes Dolan and his successors pay, and ensuring that the proceeds go to the governor’s redevelopment project, not to city coffers.

There are a lot of question marks here, to be sure — it’s not even certain whether Cuomo’s PILOT district will be approved by the city council, or if the expansion will ever get off the ground at all — but Kaehny isn’t wrong to worry. Though the way things are going in Albany, even getting a thin sliver of tax payments that immediately get dumped into building a new auxiliary-station-plus-upscale-mall might be preferable to just letting the tax break ride forever.

And speaking of letting the tax break ride forever, here’s what an MSG spokesperson said when asked why that was really necessary:

“We appreciate that people have their opinions about our location, but the truth is that Madison Square Garden’s tax abatement pales in comparison to the billions in public benefits received by the other New York sports venues.”

All the other kids’ parents let them get away with even more! Someday I really want to see the industrial-strength vats of chutzpah that PR professionals bulk-order to keep under their desks.

New York City probably won’t evict MSG in 2023, but it sure would be fun if they tried

Madison Square Garden’s 10-year extension of its operating permit — designed ostensibly to give the arena time to find a new home that’s not atop Penn Station — is halfway over with no sign of the Garden departing, leaving the possibility that New York City might have to evict the New York Knicks and Rangers come 2023. What would that actually look like? I did a deepish dive for Gothamist, and came up with this:

“We cannot think of other examples of special permits for building use with expiration dates,” Department of Buildings spokesperson Andrew Rudansky tells Gothamist. “Hypothetically, if a building’s special permit expired, causing the use of that building to be contrary to zoning, the Department may take enforcement actions to compel the owners to return the building to a previous Code and zoning-complaint use.”

The typical enforcement actions available to the DOB, Rudansky explains, include imposing civil penalties or fines. In cases of more routine violations, the department maintains a Padlock Unit that, true to its name, is authorized to padlock a premises and issue criminal charges against anyone who enters. (Cue visions of the Rangers being hauled off to The Tombs in full uniform and pads.)

To be clear, everyone I spoke to was pretty firm that they don’t expect this to happen: Lots of people may want the Garden gone to make way for a new above-ground Penn Station (either modern or retro), but that doesn’t mean anyone on the city council wants to be the target of headlines about forcing the Knicks and Rangers to leave town. (Not that they would leave town, since they’re the centerpieces of a New York–based cable network; the levels of gamesmanship here go all the way down.) But the threat of being able to shutter the garden if they wanted to has to be a part of negotiations for MSG to relocate, if those ever get started. (Neither council officials nor MSG officials would so much as tell me whether talks have even taken place.)

The concern here, obviously, is that MSG will come back with, “It’s going to cost us around $2 billion to acquire land and build a new arena, and we’re going to need city help with that, plus we need to be able to take our $50 million a year tax exemption to any new site,” and that the council will feel obligated to listen to make the Garden leave quietly. Not that they would be obligated to listen — they do have the hammer here of applying padlocks — but the fear of nasty tabloid headlines could end up putting New Yorkers on the hook for billions of dollars in new arena costs, which would be an extremely bittersweet way of undoing the city’s original sin.

New York Rangers to play home game as road team to protect $50m-a-year tax dodge

In what I suppose is a tax dodge but is actually kind of hilarious, the New York Rangers are going to be playing a game in New York City as the road team against the Buffalo Sabres, all because they don’t want to spoil the eternal property tax break they were accidentally gifted 35 years ago:

When the Buffalo Sabres and New York Rangers square off in the 2018 NHL Winter Classic in Queens, the Sabres will be the home team despite being headquartered 385 miles away…

Madison Square Garden, the privately owned Manhattan home of the Rangers and the NBA’s New York Knicks, would risk a lucrative property-tax exemption worth more than $40 million a year if either team plays home games in New York City outside the iconic arena…

“If one or both of said teams shall cease to play their home games in said property at any time, the tax exemption provided herein shall cease immediately and such property shall immediately be restored to the tax rolls,” New York’s Real Property Tax Law states.

You can see why the state legislature wrote the language that way back in 1982: They didn’t want to give the Knicks and Rangers a massive tax break and then have the teams leave town anyway, as they were at the time threatening to do without the subsidy. (Though the bill’s crafters also either neglected to notice or intentionally snuck in language that made the tax break extend indefinitely, something that’s now cost the city government more than $400 million.) But apparently they didn’t notice the loophole of the teams playing home games and calling them road games — it’s not like the NBA or NHL would really abet the teams’ tax dodge by designated all of their games as road games, I don’t think, but…

Anyway, all of this subterfuge, and the now $50 million annual cost of the tax break, could be avoided if the state legislature would just pass a bill to rescind it after 35 years. (Mayor Ed Koch claimed he thought he was approving just a 10-year tax break at the time.) Such a bill is annually introduced to the state assembly by Manhattan assemblymember Brian Kavanagh, and for the fifth year in a row is sitting in committee with no action. With government watchdogs like these, NHL-abetted loopholes are all MSG’s owners need to keep raking in the dough.

MSG investing in new Islanders arena on Long Island is so crazy it might just be crazy

There are rumors, and then there are rumors that lead to eyebrow-raising headlines:

A supergroup of New York sports executives, including owners of the New York Rangers and the New York Mets, is lining up to invest in a new arena just outside of Queens for the National Hockey League’s Islanders, according to people familiar with the discussions…

The new arena proposal is a joint venture between the Islanders, Oak View Group and Sterling Project Development, said the people, who asked to be anonymous because the talks are private. James Dolan’s Madison Square Garden Co., which controls the Rangers, long the Islanders hated rivals, is an investor in Oak View Group, the private equity group run by Tim Leiweke and Irving Azoff. The Wilpon family, which owns the Mets, controls Sterling Project Development.

Much of this isn’t new: Bloomberg News reported last summer that the Islanders owners were looking at the Belmont Park racetrack site as a potential backup to building an arena next to the Mets‘ stadium in Willets Point, and apparently (according to those “people familiar with the discussions”) it’s now moved up to being Plan A. The new bit is the involvement of Oak View, the company run by former AEG exec Leiweke that has also expressed interest in renovating Seattle’s KeyArena, and which includes Dolan’s Madison Square Garden Co. as an investor.

Let’s start with the ways this makes some sense: Belmont Park is close to the Islanders’ old fan base, it has decent transit and highway access, and the state has been looking for a way to redevelop the site for years to no avail. And if you’re going to look to build a whole new arena in an already-glutted market, who better to turn to than Leiweke, who is desperate enough to make a splash in the arena game that he could well be willing to take on plans that more established arena operators might consider too risky.

On the other hand … this makes no damn sense. The New York City area already has arenas in Manhattan, Brooklyn, Newark, and Nassau County — it just had to close one in New Jersey because there weren’t enough concert acts to go around, and it’s now apparently being used as rehearsal space. Adding another arena would just put one of the existing ones on the brink. And it really makes no sense for MSG to want to spend hundreds of millions of dollars to compete with itself — unless Dolan thinks he’s better off owning two arenas to try to drive Mikhail Prokhorov’s two arenas (Brooklyn and Nassau) out of business, which would be a strange kind of loss leadering, but then, Dolan is after all an idiot.

There’s also always the possibility that the Islanders owners, Mets owners, and Oak View could try to demand public money to sweeten the pot: Bloomberg reports vaguely that “New York Governor Andrew Cuomo has taken part in the proposed arena talks and is seeking to attach infrastructure improvement projects to it,” and we know that Cuomo is big on building things that he can call “infrastructure,” especially when he can do so via a combination of tax breaks for private developers and Ida Know. There’s also always the possibility of going back to Nassau County voters to see if they’d be more amenable to funding a new arena now, or maybe seeing if Islanders fans on Long Island would buy commemorative bricks or something to stop having to trek to Brooklyn to see games.

All of which is to say that there are way too many unknowns here to say whether this story could have legs, or is mostly just the Islanders owners trying to leverage Prokhorov into giving them a lease extension in Brooklyn that lets them keep their guaranteed-income deal and/or renovates the Barclays Center to be a less sucky place to watch hockey. I’m in an optimistic mood today, so I’ll say I hope that this is another indicator of a burgeoning arms race within Big Arena that sees billionaires throwing money at new venues without demanding big public subsidies, just because they’re trying to drive each other out of business. It couldn’t end well — anybody remember the Borders-Barnes & Noble war? — but at least the only casualties would be some private corporation’s bottom line.

NYU study: Relocating MSG would cost $5B, give it a rest already

Certain sectors of the New York City policy world (the Municipal Art Society, the New York Times editorial board) have been calling for a while for the relocation of Madison Square Garden, so that a new, grand Penn Station could be built in its place. (The old, grand Penn Station was demolished in the 1960s to make way for the current Madison Square Garden, the fourth building to bear that name.) NYU’s Rudin Center for Transportation Policy and Management released a study last week of how much it would cost to do this, and came up with … do I hear $5 billion?

Screen Shot 2016-05-06 at 8.23.17 AMThis isn’t really all that surprising: A billion and a half for a new MSG sounds about right given that just renovating the old one cost a billion, and acquiring new land could easily cost half that in this market. (The Rudin report looks at the price of buying up the annex to the Farley post office building across the street Morgan post office annex a couple of blocks to the southwest, but other sites would be priced similarly, if you could even find any.) And almost $3 billion for building a new Penn Station is already the price tag established by Gov. Andrew Cuomo for his plans (which would leave MSG intact but build lots of new stuff under it).

It’s also important to consider the political context, with Cuomo’s plan to expand Penn Station with MSG in place (to be paid for by some as-yet-unidentified private developer — applications were due two weeks ago, but if any have been revealed it’s news to me) going up against the MAS and Regional Plan Association’s insistence that MSG really needs to be kicked out. Given that Rudin director Mitchell Moss has already endorsed Cuomo’s plan, and his report’s conclusion is “It’s time to move on,” it’s easy to see some political gamesmanship going on here.

Still, this whole mess is a reminder that as easy as it is to envision redesigning your city to undo past mistakes (tearing down one of the greatest public spaces ever, building a kind-of-ugly sports arena in its place), there’s something to be said for actually existing architecture, both in that it’s already paid for, and in that the city has grown up around it to accommodate it. Not to say that nothing should ever get built or torn down, but it’s important to look at the true costs of doing so, and whether the money could be better spent mitigating the effects of your last mistakes.

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.]

MSG unveils $1B in new renovations, but will they soon face the wrecking ball?

I’m pleased to announce that today I make my debut writing about sports economics for Sports on Earth, the spiffy newish website that is a joint project of USA Today and MLB Advanced Media. (I’m trying not to think about whether this means that Bud Selig will be signing my checks. Or touching them, even.) And while my portfolio will range a lot wider than just stadiums and arenas, today’s item is right in the wheelhouse of this site: a look at Madison Square Garden’s new $1 billion renovation, why the Garden’s owners were willing to throw this much money at a 45-year-old building, and the looming threat that the city could evict the Knicks and Rangers in another ten years.

Here’s a highlight:

The permit may expire in 2023, but there’s nothing magic about that number; as we’ve seen in numerous other manufactured crises around stadium deadlines, leases are made to be extended. The city could technically order the Knicks and Rangers to vacate the premises after 10 years, says Independent Budget Office chief of staff Doug Turetsky — “theoretically, they could ask them to tear it down” — but far more likely is that the city will use this as leverage to get the Garden’s owners to start thinking about moving elsewhere whenever the shine wears off the new scoreboards.

Go read the rest! Poppa needs a new set of hit counts! Also, you might learn yourself something.

MSG’s new “drop beers on other fans” seats, and other stadium news

After a long weekend thanks to the celebrations for the father of the transatlantic slave trade, I’m facing a busy work day and a pile of small stadium news items that I don’t want you guys to miss. So: bullet points it is!

  • The “sky bridges” in the renovated Madison Square Garden turn out just to be a new deck of seats suspended from the ceiling. Also, pretty obtrusive to fans sitting in the back rows of what used to be the blue seats. And there’s still the low railings that will allow fans to drop beers on the heads of those in the pricey seats below them. A win-win-win!
  • Some Minnesota Vikings fans say that personal seat licenses at the new stadium will make them give up their season tickets; others say they’ll just put off buying a new boat.
  • San Francisco Mayor Ed Lee compared a new San Francisco Warriors arena to the Statue of Liberty, and the San Francisco Chronicle’s Scott Ostler has brought out the sarcasm stick.
  • Qatar’s plan for hosting the 2022 World Cup will cost an estimated $200 billion, including building a stadium for the final in a city that doesn’t exist yet. Also, an estimated 4,000 migrant workers will likely die building all this stuff. Maybe that Columbus guy isn’t sounding so bad by comparison.

NYC council approves USTA expansion, tells MSG to move within ten years

The New York city council had a busy day yesterday, both approving the expansion of the U.S. Tennis Association’s plan to expand its site in Flushing Meadows-Corona Park, and then voting to limit Madison Square Garden’s operating permit atop Penn Station to ten more years.

Tennis first: The USTA had already moved to placate parkgoers angry about private buildings constantly getting built in their park by offering up 1.56 acres of its own land (okay, really parkland that it was previously occupying) in exchange for taking up 0.68 new acres. What sealed the deal, though, was apparently the association’s agreement to provide $10 million toward creating a parks conservancy group, thus assuaging complaints that the U.S. Open was raking in tons of money for the tennis center without the surrounding park getting any benefit.

That done, the council moved on to the MSG operating permit, which is a sort-of-not-quite lease that allows the home of the Knicks and Rangers to sit atop the underground Penn Station, which is owned by the city. The City Planning Commission had previously recommended a 15-year extension for the Garden, but the council, under current mayoral frontrunner thanks to the guy with the sexting problem still having a sexting problem Christine Quinn, downgraded that to a mere decade:

The Garden has argued time and again that there is no money and no plan for the station trapped beneath it and that previous attempts to move the arena failed because of the intransigence of the various parties involved. Ms. Quinn insisted this was no excuse and maintained that a deal would be reached.

“This is enough time to create and implement a plan for the future of the site and the area,” Ms. Quinn said a press conference prior to the council’s vote. When asked by a reporter what would happen if a deal was not reached in the next decade, the speaker responded, “I don’t think that’s going to happen.”

Of course, just because the council voted on something doesn’t mean it can’t revote to reverse itself and grant another extension if it looks like a new arena isn’t forthcoming. (Nobody genuinely thinks New York City is going to just evict the Knicks and Rangers and force them to play in the street. Though that’d actually be kinda cool.) But if nothing else, this certainly seems to be Quinn laying down the gauntlet that she wants to make building a new arena to make way for a new above-ground Penn Station a centerpiece of mayoralty, if she gets there. Which seems like kind of a waste given that the old Garden just got $1 billion worth of renovations, not to mention that the designs submitted for a new Penn Station aren’t exactly, you know, Penn Station.

But there’s still plenty of time to work all that out — after all, ten years is a lifetime in arena years these days. In the meantime, if nothing else, Quinn probably just won herself the mayoral endorsement of the Regional Plan Association.

MSG gets 15-year permit extension, nobody happy

The New York City Planning Commission approved a 15-year operating permit extension for Madison Square Garden yesterday, rejecting MSG’s request for a permit to remain atop Penn Station in perpetuity. And to hear planning commission director Amanda Burden talk, she wants the Garden gone once its 15 years are up:

“The best possible outcome would be a relocated Madison Square Garden,” said city Planning Commission chairwoman Amanda Burden…

“What a 15-year period can do is create an opportunity for city, state, and federal government agencies to reach an agreement with Penn Station and the railroads for a comprehensive plan to relocate the arena,” she said.

“There is no more important initiative for the region.”

Since Burden is appointed by the mayor, this is presumably an endorsement by Mayor Bloomberg of the plan to move The World’s Most Famous Arena (Except For The Ones With The Same Name That Went Before It Somewhere Else) and make way for a new above-ground Penn Station. And so the city planning groups that came up with that plan are … hopping mad?

“This would essentially allow four people in a room to decide for themselves what is best for commuters, the future of the area and the vitality of the city— requiring only a rubber-stamp approval from planners without further public review or City Council oversight,” said Robert Yaro, the president of the Regional Plan Association and co-founder of the Alliance for a New Penn Station, in a statement.

That would be a reference to this loophole, which would allow MSG to remain in perpetuity if it works out a deal with the railroads to upgrade the underground Penn Station. Or as Mayor Bloomberg explained to Capital New York (if you’re lenient about the definition of “explained”): “Because you’re right above this mass transit location and if you needed to do something for the greater good of the city, leaving the city in the position of being able to do something down the road. Doesn’t mean they’re gonna do it. But we would be derelict in our duty, I think, to take that away.”

Clearly something weird is going on here, since Bloomberg’s office has now created an out for the Garden to stay put as long as it wants at the same time as its city planning chief is saying that the Garden needs to get out of the way, because progress. The city council still needs to vote on this, so hopefully by the time of those hearings we’ll be able to figure out who’s on what side here — perhaps most importantly, the person who’s likely to be mayor when plans for 15 years from now actually get decided.