NYC Missing Out on Millions in Revenue From Tax-Exempt Stadiums: IBO
By Rebecca Baird-Remba March 30, 2023 11:56 am
reprints
As the New York state legislature considers repealing Madison Square Garden’s permanent tax exemption, the city’s Independent Budget Office found that all four of the city’s tax-exempt sport stadiums are likely costing taxpayers hundreds of millions in forgone revenue.
The Garden’s tax break costs the city about $42 million a year in missed revenue, since the New York City Department of Finance pegged the arena’s value at $867 million. Meanwhile, the fair market values for Yankee Stadium, Citi Field and Barclays Center are $2.6 billion, $3.2 billion and $2.6 billion, respectively, and their 2023 property tax bills would be $115 million, $121 million and $99 million, respectively.
Madison Square Garden has always stood out from the pack because it does not pay property taxes or payments in lieu of taxes (PILOTs) like the others, thanks to an accidentally permanent deal negotiated in 1982. At the time, Mayor Ed Koch thought he was authorizing a decade-long abatement, as the New York Times reported in 2002.
“I went to bed at night believing it was a 10-year abatement. There’s no question,” Koch told the paper.
City and state officials OK’d a $5 million annual tax break for 10 years in 1982, along with an exemption on electricity designed to save the arena “at least $360,000 a year,” according to the Times. Legislators believed they needed the deal to prevent the New York Rangers and the New York Knicks from leaving the city.
The situation with the city’s three other stadiums is a bit more complex, because their owners financed construction with tax-exempt bonds issued by the city and state. Yankee Stadium, Citi Field and the Barclays Center do not pay traditional property taxes, but instead pay PILOTs aimed at paying down the debt service on their bonds. The Garden, meanwhile, financed its construction through private loans in the late 1960s.
“For the other stadiums, the use of tax‐exempt bonds creates an incentive for the stadiums to have their properties assessed at a higher value, providing more security for the debt,” IBO noted.
Instead of taxes, Yankee Stadium paid $84 million in PILOTs, Citi Field paid $44 million, and Barclays Center paid $39 million this year. These payments don’t go directly to the city, because they go to bondholders to pay down the stadiums’ debt service, according to IBO.
MSG has been on the radar recently as its current city permit is set to expire July 24. There have been talks to move the Garden to a different location as part of Gov. Kathy Hochul’s efforts to renovate Pennsylvania Station, which MSG sits on top of. Meanwhile, Democrats in the New York State Senate have pushed a proposal to end MSG’s tax exemption in their budget resolution.
Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.
