Former Exec VP Joe Lhota Has Deep Ties to Madison Square Garden's 30-Year Tax Break
In between his roles as Giuliani's "Rat Czar" and the MTA's chairman, mayoral candidate and Republican frontrunner Joe Lhota spent his days at 4 Pennsylvania Plaza. For five years, he was an executive vice president of Cablevision; then, in 2010, he was named the chief administrative officer at Madison Square Garden Co., the "mega-corporation" that runs the world's most famous sports arena, as well as Radio City, the Beacon Theater, the Knicks and the Rangers. There, he was responsible for securing the best gift of all from Albany: a free tax ride for the corporation worth millions.
In 1982, at the end of Ed Koch's first mayoral term, the Knicks and the Rangers, two teams who call MSG home, threatened to leave the city. The city's fiscal insolvency of the '70s was only just dissipating and the economic boom of the late '80s had yet to take hold; as a result, the sports organizations, which bring millions of dollars in revenue to the city every year, felt threatened by the uncertain times and wanted an escape plan.
To retain them, Koch and the New York State Legislature granted the Corporation a tax abatement; by doing so, it would not have to pay any property taxes whatsoever. Thirty years later, this break has cost the city nearly $300 million; in the coming fiscal year, MSG Corp. will get away with not paying $16 million to the taxman.
But this is common procedure in New York. The Yankees, Mets and, now, the Brooklyn Nets have always been given profit incentives, courtesy of the taxpayer. As the New York Times reported, "Among them, the three teams are receiving more than $1.4 billion in subsidies over the next 40 years, including $230 million in property tax abatement."
The only difference with MSG Corp.'s break is that it's 20 years past due. Even Koch, in a 2008 interview, was confused as to why it's lasted 31 years: "My original intent was for the abatement to last 10 years. It should have never stretched for an eternity." By then, it was assumed the Knicks and Rangers would've stayed.
"The MSG tax break is really a distinct case," Maria Doulis of the Citizens Budget Commission told me. "It was codified in state law in 1982 without any sunset or renewal provisions.The tax break is perpetual so long as the Rangers and Knicks play there, but it is conditional on the arena having a permit from the city." Madison Square Garden's permit was extended for another 15 years a few months ago.
Because of this, almost everyone in the New York City political sphere is against this weird intersection of archaic management and corporate welfare. Mayor Bloomberg has demanded that "they should pay taxes just like everyone else," with City Council Speaker Christine Quinn arguing that MSG's "time is out." Both the mayor and the council have called for a 10-year sunset period so the Dolan family can eventually move out of 4 Pennsylvania Plaza, making way for an extremely and absolutely needed renovation of Penn Station--a terminal built for 200,000 commuters and now used by 650,000 every day.
In 2008, the City Council, in a 40-3 vote, passed a resolution calling for an end to the abatement. And, this month, Council Members Margaret Chin and Brad Lander have rallied in support of a bill upstate sponsored by David Weprin, the former Council Finance Committee chair who initiated the vote in 2008. But attempts in the past have failed due to one thing: they have to get Assembly Speaker Sheldon Silver's approval.
Now, this is where Joe Lhota comes in.
This little piece of property hasn't paid any property taxes since 1982.
"I am enthusiastic about joining the exceptional management team at MSG, and look forward to successfully executing the company's strategic plan. MSG is one of the world's leading sports, entertainment and media companies, and I look forward to helping ensure the company's continued growth and success," Lhota said on the day of his new job announcement.
In 2010, Lhota was put in charge of, among other things, government relations for the Corporation. That makes sense, given his public past: as deputy mayor under Giuliani, he was the city government's liaison to Albany and Washington. With his refurbished role in the private sector, he would be taking his contacts from his time in the Giuliani administration and using them for MSG Corp.'s benefit; the most important of whom, in this case, was Silver.
"The position puts him in frequent contact with elected officials such as Assembly Speaker Sheldon Silver, a Rangers fan who is often spotted at games," Andrew Grossman of the WSJ reported back in 2010. And the Dolan family, the powerful clan who bought the Corporation in 1992, doesn't have a more supportive friend in Albany than Silver.
His campaigns for the Assembly have received enormous donations from midtown corporate leaders and the money-politics connection is evident. Silver was an integral part of shutting down Bloomberg's West Side stadium proposal--a plan that Cablevision and the Dolans both opposed. Silver's former chief of staff, Patricia Lynch, played the role of lobbyist for Cablevision, advocating (and eventually succeeding in) a continuation of the exemption.
The ties continue to this day. When asked about Weprin's pending legislation, Silver told the NYDN last month, "This was a commitment that was made to encourage development, and it would be troubling to remove it." Translation: bye-bye, bill.
In contact with Silver, Lhota was the middleman between MSG Corp. and Albany; a future mayoral candidate responsible for ensuring his employer millions of dollars that could've been spent on anything from elementary schools to mental health clinics all over the city. It's an example of a revolving door ripped right out of a political textbook: leave public life, ensure private profit.
And, now that he's making an attempt to return to the former, he's well-endowed. According to campaign finance papers, the Dolan family has donated upward of $10,000 to the Lhota campaign already, guaranteeing their interests will be met should Lhota go on to win in November.
If that's the case, Koch's "eternity" for the $300 million exemption will most certainly become a reality.
UPDATE: The Madison Square Corp. has issued the following statement to the Voice:
The Madison Square Garden Arena acts as a vital driver of the city's economy, supporting thousands of jobs, and hosting 400 annual events that attract 4 million people to the heart of New York City each year. In addition, MSG is the only venue in the city that has used its own money, nearly $1 billion, to transform The Garden into a state-of-the-art facility for the 21st century to help ensure it attracts even more premiere events to New York. All other teams, including the Yankees, Nets and Mets, have received, and continue to receive, significant public subsidies, including property tax exemptions, that are estimated to total more than $2.3 billion.
The Voice has reached out to the Lhota campaign. We're waiting to hear back.
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