NY Urged to Curb Madison Square Garden Tax Break That’s Cost $1 Billion Since the 1980s

New York’s subsidies for Madison Square Garden, run by billionaire James Dolan, have cost taxpayers nearly $1 billion since the mid 1980s and no longer make economic sense, according to a report from a city budget office.

(Bloomberg) — New York’s subsidies for Madison Square Garden, run by billionaire James Dolan, have cost taxpayers nearly $1 billion since the mid 1980s and no longer make economic sense, according to a report from a city budget office. 

In 1982, New York gave the property-tax exemption to Madison Square Garden, home to hockey’s Rangers and basketball’s Knicks in an effort to prevent professional sports franchises from leaving the city. But the incentive is no longer necessary because the teams probably couldn’t earn as much money if they moved elsewhere, according to the July report. 

“It is unlikely that the Knicks’ and Rangers’ continued location within the city is solely dependent on the property tax exemption,” wrote Alaina Turnquist, an economic development analyst, in the report from the New York City Independent Budget Office, which provides nonpartisan information about the city’s finances. The report doesn’t specifically mention Dolan by name. 

The city’s Department of Finance estimates the tax break was worth about $42 million this year, and cumulatively, MSG has avoided paying $947 million, measured in 2023 dollars.

The exemption doesn’t align with best practices for subsidies, because the benefit is indefinite, and the owner of MSG isn’t required to report data like wages paid that may show what benefits the city is receiving in return, Turnquist wrote. In general, economists and academic researchers agree that government subsidies for sports stadiums aren’t a good use of resources, calling into question the city’s policy of providing those subsidies, the report said.

The agency recommended that the City Council ensure that any future subsidies of Madison Square Garden is brought under the city’s control, be subject to periodic review, and include reporting requirements for data like employment. And the city and state should make clear the rationale for any future development incentives for the venue, according to the report.

A spokesman for Madison Square Garden Entertainment Corp., which owns the venue, said the report is “slanted, clearly politically motivated and unfairly singles out Madison Square Garden.” If the IBO’s analysis were applied across other stadiums and arenas, it would be clear that government subsidies cost the city billions of dollars, the spokesperson added. 

The MSG spokesperson referred to an analysis by HR&A Advisors that found the cost of public subsidy for MSG was less than peer venues over the last 40 years.

City Support

When the exemption was initially granted in the early 1980s, it was an attempt to keep the Knicks and Rangers from following the National Football League’s New York Giants, which left for New Jersey in 1976. At the time, New York City was recovering from a fiscal crisis, crime levels were high, the population was falling, and lawmakers said that the teams were key for the general and economic welfare of the states and city. 

Now the city and state are facing pressure again, albeit milder than the circumstances decades ago. Personal income tax receipts have fallen and wealthier taxpayers are showing signs of leaving the state. The city faces wider-than-projected budget gaps in future years as spending on labor contracts and education climbs while federal pandemic aid dries up, the Independent Budget Office said in May. 

A state senator has introduced a bill seeking to end Madison Square Garden’s exemption.

Because Madison Square Garden sits above Penn Station, the busiest transit hub in North America, it would be hard to generate as much revenue from a different location, the report said.  

MSG is in the midst of applying to renew its special permit from the city, that allows it to host a crowd larger than 2,500 people, for 10 years. The arena made various commitments including a civic space, more seating, and a commitment to work with rail agencies as their plan to renovate Penn Station solidifies. 

The City Planning Commission is planning to vote on MSG’s permit application Wednesday, and a City Council vote would follow. Regular permit applications are required of all venues seating more than 2,500.   

Dolan is also executive chairman of Madison Square Garden Sports Corp., which owns the Knicks and Rangers. 

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