NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3081
SPONSOR: Kavanagh TITLE OF BILL: An act to repeal section 429 of the real property tax
law relating to real property used for professional major league sports
PURPOSE:
This bill would repeal a property tax exemption that benefits only one
property: Madison Square Garden in Manhattan.
SUMMARY OF PROVISIONS:
Section 1 of the bill repeals Section 429 of the real property tax law.
Section 2 sets forth the effective date.
JUSTIFICATION:
Madison Square Garden (MSG), the enormously successful for-profit busi-
ness that occupies the land from 33rd to 31st Street between Seventh and
Eighth Avenues in Manhattan has not paid New York City's property tax in
32 years, due to a state law enacted in 1982 that granted MSG a tax
exemption with no expiration date, a corporate welfare benefit given to
no other property in the State (Jim Dwyer, "32-Year Streak at MSG: No
Taxes Paid," NY Times, May 20, 2014, www.ny time s.com/2014 /05/21/nyre
gionJ32-year- streak-at-the-g arden-no -taxes-paid.html).
As a result, according to the New York City Independent Budget Office,
MSG avoided an estimated $48.5 million in property taxes in 2016. The
history of how this came to pass is as follows.
In July 1982, the legislature authorized a real property tax exemption
for MSG. The owners of MSG had contended that the arena was operating at
a loss and had threatened to relocate the Rangers hockey franchise and
Knicks basketball franchises to East Rutherford, New Jersey. Earlier in
the year, the owners had rejected a proposal from the city of New York
of a 75% property tax abatement, insisting on an all-or-nothing deal
(Gerald Eskenazi, "Madison Square Garden Offered City Tax Cut As Part of
Aid Plan," NY Times, Mar. 6, 1982, http://www.nytime s.co
m/1982/03/06/sp orts/madison- sq-garden-offered- city-tax-cut-as- part-
ofaid-p lan.html). Several of the legislators who voted in support of
the deal openly labeled MSG's actions as blackmail (E. J. Dionne, Jr.,
"Madison Square Garden Given State Tax Breaks," NY Time s, July 3, 1982,
http://www.n ytimes.co m/1982/07/0 3/n y region/madiso n-square-garden-
given-st ate-tax- breaks.html).
Under the terms of the 1982 legislation, the franchises were required to
agree to continue to play their home games at MSG for ten years in order
to benefit from the tax break. The late Mayor Ed Koch stated years later
that he had believed at the time the exemption was enacted that it would
also expire after ten years. This perception that the law provided for
the tax exemption to be temporary was shared by other observers in 1982.
(See, for example, "Madison Square Garden Given State Tax Breaks," New
York Times, July 3, 1982) However, as written, the law permits the
owners of MSG to benefit from the exemption in perpetuity so long as the
Rangers and Knicks continue to play their home games there.
In 2014, the New York City Council passed a resolution by a wide margin
urging the state legislature to end the exemption (Neil Demause, "Never
Forget-Madison Square Garden Hasn't Paid Property Taxes in Over 30
Years," Village Voice, January 26, 2016, h ttp://www. villa
gevoice.corninews /never-forget-ma dison square-ga rde n-hasnt-paid-pro-
pertyta xes-in -over-30 -years-8194924).
The full property tax exemption enjoyed by MSG is economically ineffi-
cient, unfair, and not in line with tax benefits granted to other
professional sports franchises in the New York metropolitan area. The
New York City Independent Budget Office (IBO) has noted that no other
state law provides a significant property tax exemption that benefits a
single private for-profit firm in New York. Furthermore, the IBO has
pointed out that the exemption enjoyed by MSG has an anti-competitive
effect well beyond professional sports. By reducing MSG's operating
costs, the exemption makes it more difficult for other tax-paying venues
to compete with MSG for the many types of events it hosts other than
basketball and hockey games.
Venues like MSG often receive benefits other than property tax breaks,
but overall, MSG is getting an unusually high level of public subsidy.
In 2024, the IBO estimated the net value of city subsidies to various
venues. Such subsidies amounted to $350 million for Barclays Center and
$362 million for Yankee Stadium, but $541 million for MSG.
It is also noteworthy that, among other regional professional sports
teams that enjoy tax benefits, the Yankees, Mets, and Nets all make
payments in lieu of taxes to the city, while the Giants and Jets make
payments in lieu of taxes to the localities they train and play in; the
Rangers and Knicks pay nothing at all to the city ("NY Giants' Hometown
Penalized by Stadium Tax Standoff," Bloomberg, October 25, 2012; Ken
Belson, "In East Rutherford, N.J., New Football Stadium, but at Whose
Cost?" NY Times, Oct. 10, 2009).
Whatever the sense of granting this exemption was in 1982, it has lasted
far longer than necessary to reward MSG, the Rangers, and the Knicks for
their decision not to leave New York City more than 30 years ago. Repeal
of this unjustified giveaway to a single, highly profitable private
business enterprise is long overdue.
FISCAL IMPACT ON THE STATE:
None.
FISCAL IMPACT ON LOCALITIES:
Repeal of this exemption would increase property tax revenue in the city
of New York by an estimated $48.5 million in FY 2016.
IMPACT OF REGULATION ON BUSINESSES AND INDIVIDUALS:
Would end the property tax exemption for Madison Square Garden.
IMPACT ON FINES, IMPRISONMENT, FORFEITURE OF RIGHTS, OR OTHER PENAL
SANCTIONS:
None.
LEGISLATIVE HISTORY:
2016: A6117 (Kavanagh) - Real Property Taxation
2015: A6117 (Kavanagh) - Real Property Taxation
2014: A06691 (Kavanagh) - Real Property Taxation
2013: A06691 (Kavanagh) - Real Property Taxation
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.
