Today’s Madison Square Garden (born 1968) is now the oldest arena in both the NBA and NHL, but it almost didn’t make it to its twentieth birthday. In 1982, noting the flurry of sports teams then moving to New Jersey (the Devils had just joined the Giants and Nets in the swamplands, and the Jets would follow two years later), then-owners Gulf and Western threatened to have the Knicks and Rangers move across the Hudson if the city didn’t chip in for a renovation that included some of those vaunted luxury boxes. Mayor Ed Koch acquiesced, and soon enough the Garden had a full property tax exemption providing about $5 million a year for the next ten years, money that MSG’s owners sank into the building’s first skyboxes.
Or at least that’s what Koch said he thought he was approving. “I went to bed at night believing it was a ten-year abatement,” the mayor told the Times in 2002. In his recounting, after the bill made it through the state legislature, he abruptly discovered that no one had bothered to insert a sunset date for the tax exemption. There’s some evidence that the mayor may have been confusing a clause requiring the teams to stay put for ten years with the length of the abatement; whatever the reason, 34 years later, the Garden remains 100 percent tax-free.
The MSG tax break has become the gift that keeps on giving, having now saved Cablevision-helming, Isiah Thomas–loving, bad-blues-singing owner Dolan some $391 million in city taxes over those 34 years; it is set to provide another $48.5 million (and rising) per year forever, according to the city Independent Budget Office. In the IBO’s annual Budget Options document, which lays out dozens of ways the city could save money if it put its mind to it, the MSG tax break always has a place of honor. This year’s edition notes, “the Knicks market value is $2.5 billion, nearly five times its 2000 value (in 2015 dollars), while the Rangers value has tripled over the same period, indicating the teams are no longer economically disadvantaged.”
It’s a popular windmill at which to tilt, especially for those who think Dolan is the last person who deserves a fat subsidy. The City Council voted overwhelmingly in 2014 to ask the state legislature, which maintains jurisdiction over the city’s tax rules, to make the Garden pay up. But Albany has so far turned a deaf ear — before his conviction on federal fraud and extortion charges, state assembly leader Sheldon Silver was treated as a V.I.P. by Garden officials, who went so far as to place his daughter and one of his former top aides on the payroll. Cuomo has opposed repealing the tax break on the grounds that he hasn’t “heard any argument that’s convincing for eliminating that.”
Meanwhile, the MSG tax break only complicates any plans to relocate the Garden once its operating permit expires in 2023, since Dolan would suddenly be on the hook for an extra $50 million a year in taxes, as well as for raising funds for land and construction. That’s the kind of scenario that makes it all too likely that a future mayor and governor would be forced to cough up massive subsidies to get the Garden out of their hair — making the World’s Most Famous Arena potentially the Most Costly, too.
This article from the Village Voice Archive was posted on January 26, 2016