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.

NYC considering granting MSG endless permit in exchange for new escalators

The New York City Planning Commission is set to vote tomorrow on a proposal to extend the permit that allows Madison Square Garden to sit on top of Penn Station. (It’s not technically a lease, but rather an operating permit — trust me, neither you nor I wants to spend the time this morning to understand it.) And while the previous plan to extend the permit indefinitely seems to have been warded off by opposition from several major city planning groups, those same groups are now claiming that the new plan would represent a “a gift to Madison Square Garden”:

The city will in fact propose a 15-year renewal, rather than a 50-year one, which is in theory a victory for the planners. But the proposal also contains a major loophole: if the Garden meets certain conditions during those 15 years, it can get a permit to remain on top of Penn Station in perpetuity.

Namely, the Garden would have to come to some sort of an agreement with the three railroads that run beneath it to make improvements to the station, like adding new escalators and elevators. If such an agreement were to reached, and the City Planning Commission’s chair (who is appointed by the mayor) were to approve it, then the Garden could remain where it is, on top of the ever-more-crowded Penn Station. Its special permit, in other words, would have no expiration date.

Whether you think this is a good idea or a terrible one probably depends on your ultimate goals: If, like the Regional Plan Association and Municipal Art Society, you want to get the home of the Knicks and Rangers out of the way (to some undisclosed new location) so you can build a new, grander Penn Station (with some undisclosed source of money), then this is terrible, since it means the Garden can stay put just by buying some improvements for the underground train station. If, on the other hand, you just want MSG to have to pay for its right to use city land instead of getting to remain there for free, then this is potentially an okay deal — depending on what “improvements to the station” mean, obviously, and how this multipartite deal between MSG, Amtrak, and the commuter rail lines would actually be negotiated.

(Or, if you’re the head of the city’s business lobbying group, you think it’s a terrible idea because MSG just spent $1 billion on renovations, and if they don’t get an endless permit to remain in place they’ll … unspend the money or something?)

Meanwhile, a far more constructive bit of government action would be if the state legislature would actually revoke the Garden’s endless property tax break, which is now a public gift of $15 million a year and climbing. Or, hell, even demand that MSG build some escalators if it wants to keep it. Don’t hold your breath, though, given that 1) the New York state legislature never actually does anything if it can help it, and 2) MSG has hired Gov. Cuomo’s former director of cabinet affairs, just in case.

Campaign mounts to move MSG (somewhere), build new Penn Station (somehow, with some money)

The notion of tearing down Madison Square Garden right after it got $1 billion in renovations and building a new one in an unknown location just so Penn Station can have some skylights if anyone comes up with money for it may be, on the surface, a little nuts, but it’s sure getting lots of high-profile supporters. Manhattan Borough President Scott Stringer and the local community board have both endorsed terminating MSG’s use permit to the city property where it stands. The New York Times editorial page, as noted earlier, has also jumped on the bandwagon. And yesterday, the heads of the Municipal Art Society and the Regional Plan Association, the two civic groups behind the proposal, took to the Daily News op-ed pageto tout the idea, saying that limiting MSG’s permit renewal to ten years “would provide the time, attention and focus required to find a new and strategic site for the Garden, allowing the city to have both a splendid modern arena and a great train station.”

On the one hand, there’s nothing actually wrong with keeping the permit renewal to ten years: If MSG’s owners can be talked into building elsewhere by then, fine, and if not, the city can always just give them another renewal in 2023. But while the MAS and RPA no doubt see themselves as righting a historic wrong — the demolition of this to make way for the current MSG — and more space for a nicer train station is no doubt a good idea, has anybody actually stopped to think about how much it would cost to clear space for an arena (which would need to be near a transit hub as the current MSG is, and so on expensive land), build it, and then build a new Penn Station on the current site? There’s something to be said for already existing infrastructure: It may be imperfect, but at least it’s already paid for.

The hope here is that the ten-year permit renewal is being pursued mostly as a negotiating ploy: We don’t know what the city may want to do in the future, or what MSG may want to do, but let’s at least limit the length of the permit so the city can keep its options open. The fear is that this will end up a self-justifying project, where the city ends up having to spend millions (or billions) of dollars to “help MSG relocate” just so that commuters can have a nicer place to get off their trains in the morning. We already narrowly dodged that bullet once, but bad projects never seem to die.

NY legislators propose axing MSG’s eternal property-tax break

Fans of boneheaded legislative actions will recall that way back in 1982, New York Mayor Ed Koch agreed to give the owners of Madison Square Garden (and also the Knicks and Rangers) a 10-year property tax break to help pay for some renovations to the building, in exchange for the teams promising not to leave town. Except that somewhere in the course of writing the bill, the state legislature forgot to put in an end date for the tax break, meaning the Garden is continuing to rack up property-tax subsidies, to the tune of $15 million a year at last count.

Now, finally, somebody in Albany is actually trying to do something to reverse this 31-year-old action. Assemblymembers David Weprin and James Sanders have introduced a bill to strip MSG of its tax break, with Weprin arguing that “that money could be very well used by the city in tough economic times on things like education, police.”

MSG is also engaged in a bitter battle with one of its unions, which could have something to do with why Weprin and Sanders chose this moment to suggest repeal of the tax break (though they insist otherwise, but then, they would). Regardless, it’s nice to see state legislators actually realizing that it’s possible to undo tax breaks that they handed out decades ago — though not in all cases, obviously, because that’d be crazy talk.

NYT to MSG: Get lost, we wanna rebuild our underground train station

This is really weird: The New York Times has an editorial today calling for New York City to refuse to renew Madison Square Garden’s lease zoning permit on the land atop Penn Station, which apparently expired in January. The argument: MSG is “bulky” and “drumlike” and is in the way of a grand renovation of Penn Station that nobody really wants to spend the money on anymore, but anyway, “The Garden has moved twice since its original location in Madison Square. It can move again.”

The Times does note in passing that MSG’s owners just spent about $1 billion on renovating the arena, and that “of course makes them less eager to move” — and then suggests that they instead be given a new 10-year lease, “and use the time to find a new home for the Garden.” Because it totally makes sense to tear down a building that just got $1 billion in upgrades so you can tear down something else and spend another $1 billion on a new one.

This smells like the Times is carrying water for someone, but I’ll be damned if I can figure out who. Old-time rail terminal fans who are holding out hope for the Moynihan Station plan? Developers hoping to revive some plan to do a giant development project on the site? And in any case, if you want the city to lean on MSG over something, why no mention of that perpetual property tax exemption they’re still getting? Very, very weird…

MSG renovations on for 2011, sending Liberty into three-year exile

The on-again, off-again renovations to Madison Square Garden are back on again, slated to begin next summer and be completed by Fall 2013, a full year later than at last report. By limiting work to the summer, MSG will be able to avoid disruptions to the New York Knicks and Rangers schedules, but as I wrote on the Village Voice website yesterday, the New York Liberty WNBA franchise won’t be so lucky:

This won’t be the first time that the Liberty will be forced to relocate: The orange-teal-and-black were displaced to Radio City Music Hall for part of their 2004 season so that George W. Bush could be re-coronated on their home court. But there’s a big difference between shifting a few home games 20 blocks north and completely pulling up shop for three seasons…

As for future summers, it’s as yet unclear where Maddie will be parking her doghouse. Newark’s Prudential Center, as the Times suggested, is the most accessible big arena to city Liberty fans, and would if nothing else lead to a rise in the average Kinsey number among PATH ridership. (It could also make for a nice low-cost option for hoops fans in one of the tristate area’s most impoverished cities; Liberty games at the Garden are already distinct from Knicks games for drawing a large number of African-American teens of all genders.) And with MSG renovations slated to last through 2013, there’s even the possibility of a one-season stay in Brooklyn, given that Bruce Ratner’s Atlantic Yards is still — officially, at least supposed to be complete by late 2012. Liberty officials didn’t immediately return calls seeking more info on the team’s plans.

The renovation itself, which will essentially end up gutting the Garden and building a new seating bowl inside the existing shell, are now estimated to cost between $775 million and $850 million, all of which will be paid for by MSG’s corporate owners. MSG’s corporate owners who already get an $11 million a year tax break from the city of New York, mind you, but it’s still a pleasant change to see a sports team not asking for new subsidies on top of the ones they’ve already received.