NYC lost nearly $1B in Madison Square Garden tax revenue, according to IBO report

A new report from the Independent Budget Office finds that the city lost nearly $1 billion in property tax revenue over the last 41 years because of state subsidies to Madison Square Garden.

The arena paid property taxes until the state Legislature exempted MSG indefinitely in 1982, the IBO report said. The 38-page report called the estimate “conservative” because the city has little motivation to calculate revenue it can’t collect.

“There's also a real disconnect in that the property taxes that Madison Square Garden is exempt from are a revenue loss to the city of New York, but this tax exemption remains in perpetuity unless it's repealed by the state,” said Sarah Stefanski, who helped author the report for the IBO.

Stefanski said it was nearly impossible to calculate the economic benefit gained from the tax deal because MSG is not required to report the number of jobs created or wages paid.

The report also analyzed the threat of the Knicks basketball team and Rangers hockey team leaving New York and found it unlikely, given the costs associated with rebranding the teams.

“The Madison Square Garden property tax break benefits an arena located in Midtown Manhattan,” Stefanski said. “That's in contrast to city policy, which largely uses economic development tax incentives to promote businesses in upper Manhattan or boroughs outside of Manhattan.”

An MSG spokesperson declined to comment on the record. However, in an interview with Fox 5 in January, MSG’s CEO James Dolan said he would never move the Garden.

“It's in a good place right now. It's easy for everybody to get to,” he said. “And honestly, we've invested billions of dollars into the building.”

State lawmakers in Albany have tried for years to pass a bill that would end MSG’s tax exemption. This year, Democrats in the state Senate included provisions in their version of this year’s budget to eliminate the exemption. But Gov. Kathy Hochul has so far not taken a clear position.

“What’s been proposed by a senator is certainly something we look at, a lot of ideas are proposed,” she said during an interview. “I just want to make sure that we’re doing the right thing with respect to MSG.”

Dolan, in his January interview, said he was not worried about losing his special tax exemption.

“We get tax abatements. Every team in New York gets tax abatements,” he said. “If you don't think we should have tax abatements, you should take them away from all the teams.”

Last year, Hochul, from Buffalo, committed more than $600 million in state funds to construct a new venue for the Buffalo Bills.

“It's just a crazy boondoggle,” Elizabeth Marcello, a subsidy analyst for the watchdog group Reinvent Albany, said.

“With economic development deals, you justify them by saying, would this have happened but for the subsidy? That's a way to justify giving the subsidy and they can't really answer this because of this lack of information,” she said.

Layla Law-Gisko, chair of the land use committee on Manhattan’s Community Board 5, said the city’s hands are tied without a vote by state lawmakers.

“A billion dollars of taxes that could have gone into the city coffers and didn't. It is shameful. It is absolutely shameful. Fiscally irresponsible,” she said.