SWEETHEART DEAL: WILL MSG KEEP ITS MULTIMILLION DOLLAR TAX BREAK?

Published in City & State

Madison Square Garden hasn’t paid property taxes in 32 years.

The one-of-a-kind deal was struck in 1982, in a very different New York City—one with a fiscal crisis and a high murder rate—when the prospect of the beloved Knicks and Rangers moving elsewhere was real and frightening. And yet while the city has changed, the tax break remains— and in theory will last forever, because it has no sunset clause. As a result, the Garden and its owners, the Dolan family, who also preside over the Cablevision empire, avoid having to pay $17.3 million every year—a figure that swells to roughly $54 million when the stadium’s new billion dollar renovations are taken into account.

The New York City Council recently revisited the tax break at the prodding of Queens Assemblyman David Weprin, and passed a resolution opposing the exemption. Mayor Bill de Blasio has also come out in support of taxing the sports complex. But de Blasio, Weprin and City Council members know that such a move would never get through Albany. As Councilman Vincent Ignizio put it, “This bill is dead on arrival. It’s not happening … The governor’s opposed, the Speaker’s opposed; it’s not going anywhere.”

Still, the implied leverage that the Dolan family has to keep the exemption in place—threatening to move the Knicks and the Rangers out of the city—is no longer a plausible concern. There is little to no chance that the Dolans would ever abandon the enormously lucrative New York sports market. Nonetheless, they are still winning the property tax battle.

Madison Square Garden is by no means the only stadium to benefit from major tax breaks and public subsidy. Yankee Stadium, the New York Mets’ Citi Field and the Brooklyn Nets’ Barclays Center, all of which opened in 2009 or later, have each cut deals whose upside to the city has often been called into question. The Garden, however, has the most favorable arrangement of the lot. At a recent City Council hearing, George Sweeting, the deputy director of the Independent Budget Office of the City of New York, testified that the current estimated subsidy values for Citi Field is $138 million, $350 million for Barclays and $362 million for Yankee Stadium. All three are dwarfed by Madison Square Garden’s estimated public subsidy of $541 million.

“They have a lot of lobbyists,” Weprin said, when asked about the Garden’s clout in Albany. “They would rather spend $17 million on lobbyists than what they would be paying in property taxes, to be honest. They don’t want it to be taken away from them.”

The new Yankee Stadium and Citi Field were both built on public land. Neither technically owes property taxes, but they do make PILOTs (Payments in Lieu of Taxes). Both stadiums were also built using tax-exempt bonds. Typically the city prohibits the use of tax-exempt bonds for sports arenas, except when those bonds are serviced by general municipal revenues, a major loophole that has since been closed by the IRS. The city persuaded the IRS to treat PILOTs as equivalent to tax revenue, even though the money doesn’t go directly to the city but instead to the bondholders. Yankee Stadium, Citi Field and the Barclays Center also receive additional incentives and subsidies from the city.

Madison Square Garden does not have to pay property taxes or PILOTs. Moreover, although the Yankees, Mets and Nets stadium deals were put together to subsidize the construction of new facilities, the Garden’s arena had already been built when it got its tax break.

“People mention that other stadiums get subsidies, and that’s true,” says Elizabeth Bird, project coordinator at the policy resource center Good Jobs New York. “But at least in those cases, those costs tend to be shared in federal, state and local subsidies. In Madison Square Garden, the property taxes directly affect the city’s budget,” because if the Garden were ever required to pay taxes, the revenue would go exclusively to the city.

Opponents of Madison Square Garden’s one-of-a-kind deal have not been completely unsuccessful. When the arena’s “permit to operate” expired in January 2013, it was renewed for only 10 years, meaning that the city could technically force the Dolans to move out in 2023. Most recently the Council passed another resolution against the never-ending tax break—it previously passed one in 2008—and in May the Real Property Taxation Committee of the State Assembly approved a bill to revoke the break by a vote of 7–2. That bill, which has 54 sponsors, is now in the Ways and Means Committee of the state Assembly, which will be meeting every day before the current legislative session ends.

But there is no chance the measure will pass.

Gov. Andrew Cuomo is on record as saying he is opposed to repealing the break, as is Assembly Speaker Sheldon Silver. Political contributions may play a part in their calculation. Since 2000 Charles F. Dolan and his son James, the founder of Cablevision and executive chairman of the Madison Square Garden Company, respectively, have each contributed $3,100 to Friends of Silver, as has Charles’ wife, Helen. In addition, since 2000 James Dolan has personally contributed $7,000 to Cuomo and his son, Charles P. Dolan has given $30,000 to Cuomo.

And those are just their individual contributions. Since 2000 Cablevision has donated $7,100 to Friends of Silver, and $370,000 to Andrew Cuomo.

Unions are also a factor in the future of the Garden’s tax break. James Dolan and Cablevision have come under fire for preventing some of their employees in Brooklyn and the Bronx from unionizing with the Communications Workers of America, leading to a complaint being filed against Cablevision with the National Labor Relations Board. However, at the Council hearing on the tax break, representatives from several unions testified in support of the Garden’s exemption including the Building and Construction Trades Council of Greater New York. Their support may be related to the Garden’s recent renovations, which entailed a significant amount of construction by organized labor. The president of the Building and Construction Trades Council, Gary LaBarbera, also sat on the advisory board for the Committee to Save New York, the pro-Cuomo business-backed group that raised $17 million for the governor in the early years of his term before disbanding in 2013.

CWA, on the other hand, is taking a particular interest in the tax break fight. It is currently rolling out advertisements critical of the tax break in several Albany publications.

“It’s no secret that CWA members are facing aggressive union busting tactics from Cablevision’s leadership,” said Pete Sikora, a research economist with CWA District 1. “But the issue here is clear. This tax break is an outrageous giveaway to a profitable company that costs the city $54 million a year, and it’s indefensible on public policy grounds, separate and apart from any labor issues.”

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