NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6691
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:
In July 1982, the legislature authorized a real property tax exemption
for Madison Square Garden (MSG). The owners of the Garden 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 ("Madison Square Garden Offered City
Tax Cut As Part of Aid Plan," New York Times, March 6, 1982). Several of
the legislators who voted in support of the deal openly labeled the
Garden's actions as blackmail ("Madison Square Garden Given State Tax
Breaks," New York Times, July 3, 1982).
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 at the Garden.
In 2008, with support from Mayor Michael Bloomberg, the New York City
Council approved, by a vote of 40 to 3, a resolution calling on the
state to repeal the exemption ("End Tax Deal for Garden, Council Urges,"
New York Times, January 31, 2008).
The full property tax exemption enjoyed by the Garden is economically
inefficient, 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 the Garden hosts other
than basketball and hockey games. (Testimony of Theresa Devine to the
New York City Council Finance Committee, January 7, 2008).
Venues like MSG often receive benefits other than property tax breaks,
but overall, MSG is getting an unusually high level of public subsidy.
In 2008, the IBO estimated the net present value of city subsidies to
various venues. Such subsidies amounted to $140 million for Barclays
Center and $162 million for Yankee Stadium, but $218 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; "In
East Rutherford, N.J., New Football Stadium, but at Whose Cost?" The New
York Times, October 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. The
exemption is currently costing New York City $16.5 million annually
("Budget Options for New York City," IBO, April 2012). Repeal of this
unjustified giveaway to a single, highly profitable private business
enterprise is long overdue.
LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPACT ON THE STATE:
None. Repeal of this exemption would increase property tax collections
in the city of New York by approximately $16.5 million per year.
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.
