So there was a community board meeting in Manhattan last Wednesday about Madison Square Garden’s expiring operating permit, and someone asked whether the Garden couldn’t move across the street to the current site of the Hotel Pennsylvania, and an MSG official didn’t say no exactly:
[Executive Vice President Joel] Fisher, trying to reframe the discussion, said renewing the permit would not preclude an eventual move. A suggestion raised earlier in the meeting—that the Garden could move right across Seventh Avenue—“probably would satisfy us,” he said.
“That would satisfy being right on top of a transportation hub,” he said, though he added that such a proposal would need to account for the costs of construction.
All the people who are excited about getting Madison Square Garden off of its current site so the city can either rebuild the great lost Penn Station or build something new and ugly were very excited about this, since it’s the first time anyone with the New York Knicks and Rangers parent company has hinted at being willing to move. But that is a huge friggin’ caveat there at the end: “the costs of construction” could be mammoth. (If you watch the linked video, Fisher actually says, “Ultimately, who’s going to pay for that? Where is the money?”) This is especially true considering owner James Dolan would want a state-of-the-art building, plus land in midtown Manhattan is super-expensive even if nobody wants to eat lunch there.
How much exactly is impossible to say. The state Empire State Development agency estimated in June 2021 that building a new Garden would cost $8.6 billion, but the math was, shall we say, not the most robust:
And the footnotes:
So we have: the cost of a new arena based on the price tag for the weird concert theater thing with an invisibility cloak that MSG is building in Las Vegas; the cost of acquiring two full blocks of land (not all of which would be needed for an arena; MSG coexists on its current two-block plot with a large office building); the cost of buying the existing Garden (which is double-counting, since there’s no reason for the public to buy the teams’ current home and pay for a new one); and the cost of building a new Penn Station, which is not part of the price tag for an arena no matter how you slice it. It does, however, create an impressively high figure, which is what ESD was looking for in a document arguing for keeping the arena where it is.
But even if we reduce the projected cost to something more reasonable — say, the $1.15 billion current MSG valuation for an arena, plus $2 billion for the land that would be need to build it on — that’s still an impressively high figure given that Fisher clearly indicated he’d want the public to pay for it. While many people who either use Penn Station or just wish they could travel back to the glory days of New York City architecture would love to see the old station rebuilt, $3 billion and change just to clear away the arena (which, it’s worth noting, has now been around longer than the original Penn Station was) would be an awfully high price to pay.
What we’re seeing here is a couple of simultaneous games of chicken: New York City, which has that expiring operating permit hanging over Dolan’s head, is hoping to use it as leverage to get him to move MSG; and Dolan, who knows the city wants him to move, is hoping to use that as leverage to get a brand-new arena — or, if that fails, to get the city to balk at the price tag and grant him a perpetual permit on his existing one. (There’s also the separate question of Dolan’s perpetual property tax exemption, but that’s in the hands of the state legislature to deal with, no chicken necessary.) Historically, this has ended with the city council kicking the can down the road by extending the permit for another decade or so, and we’re likely to see at least one more extension by the time the permit expires this July. But there’s a significantly non-zero chance that Dolan will be able to use frustrations over the suckiness of Penn Station to wheedle his way into some kind of massive taxpayer concessions, and that’s worth keeping an eye on.
Regardless of who pays for it, moving MSG is a ridiculous idea. Yes, they destroyed some amazing architecture to build it, but you couldn’t ask for a more central/easy access for a 20,000 seat arena.
That leaves what to do with Penn Station…
On a visit a few weeks ago, I took a walk around many sections of Penn Station. While a major portion of it does suck, improvements are seen in many sections.
Moving Amtrak and some LIRR over to Moynihan has made those waiting for those trains a much better experience. The amount of work being done to improve access and lighting enhancements to the LIRR concourse makes that portion much less miserable.
The NJTransit side is still quite unpleasant and the subway corridors still dreary. Yes, there are plans for improvements there, but even moving MSG would not address capacity issues for NJT and the eventual addition of MetroNorth.
Would it be nice to have wide open natural lit corridors throughout the station, sure, but paying Dolan to move to a new areana is not worth the cost.
For perspective the Grand Central station expansion cost like $11 billion. Now sure how much bigger or smaller the Penn Station expansion will be
The Grand Central Madison project involved adding new LIRR service and building trackage/infrastructure 15 stories below ground. The numbers presented for the MSG move do not address adding capacity for NJT or MetroNorth.
What I found funny was when I looked at the preliminary time tables, my old commute from Huntington the one year I lived out there would be all of 3 minutes shorter.
So…. just because somebody has to be that guy…
What is to stop the appropriate authority (and I don’t know enough about Manhattan to know which that would be) from just terminating the operating permit? It expires and there is no guarantee of a renewal expressed or implied as I understand it… so on expiry, why not just let it die a natural death?
MSG doesn’t have to be torn down and the company that owns it is therefore not encumbered by demolition (or other) costs related to the existing building (at least no NEW costs).
On the flip side, they no longer can allow more than 2500 (trying to remember if that is exemption the present OP gives them?) people into the building for events.
The garden has become entirely uneconomic to run, but that is not the borough’s problem… it is the Dolans.
They might sue (and if there’s one thing we know it’s that rich people love to file actions – baseless or otherwise – that claim they have been unfairly treated/disadvantaged/just not advantaged enough). But so what?
It seems to me that the authority is well within it’s right to not extend the operating permit and to force MSG to operate – if it chooses to at all – without any or the preferred conditions or exemptions that the permit provided.
If nothing else, this puts the leverage where it belongs… squarely on the sports team owner who will have to increase ticket prices by 90% on average in order to keep his gate revenues at their current level.
Other than a handful of irate sports fans (who aren’t going to see the Knicks or Rangers win a championship anytime soon anyway), who would be rioting in the streets over this?
The only answer I’ve seen suggested for this question is “Some lawyers think the city would be responsible for paying damages for lost income.” Why allowing a time-limited to expire is doing damage to someone’s business — if the Garden reasonably expected a perpetual permit, wouldn’t that just be like having a perpetual permit? — I dunno, but I Am Not A Lawyer.
The more likely answer is “Even if everybody hates James Dolan, you can’t be meen to rich businesspeople, then their friends will all get on your ass.” But hard to say for sure unless you’re inside those council discussions.
But considering subway infrastructure is crap and the current mayor is more concerned about putting cops on the street to lock up the homeless, it’s not exactly a thought that the council is going to be having.
Sure, and anyone can sue anyone for anything it seems.
But I would be very much interested to hear how lawyers for MSG and the Dolans explain how an operating permit with a fixed expiry date creates an expectation of perpetual renewal.
If I lease a piece of property for 30 days and set about building a pop up version of the Taj Mahal on it, it is not the lessor’s problem that I have to tear it down (or abandon it with ‘leaseholder improvements left in place’) at the end of 30 days.
Depending on the language in the permit (and MSG’s lease on the land/air space above Penn Station), they might find that they are responsible for returning the property to the city in substantially the same condition it was at signing…. so I would hope the authority in charge of all this and their lawyers are actually reading the fine print in the original agreement and any subsequent agreed modifications etc.
MSG doesn’t lease the land — it owns the surface lot outright. Amtrak only owns the subsurface space.
The special permit is needed by any venue over 2,500 seats, and is basically a zoning variance. Most of the cities’ sports venues are exempt, because they sit on city or state land that isn’t subject to zoning, but the Garden needs one in order to sell more than 2,500 tickets. (How exactly this whole operating permit thing came about, I’ve never been able to determine.)
Here’s what one guy told The City (the news site, not the municipal government):
“Michael Rikon, an attorney whose law firm focuses on eminent domain — cases in which government takes or restricts private property — says said he agreed with MSG’s claim that it’s being singled out, given that MSG owns the property and has successfully operated it.
“If the city denied the MSG permit, Rikon said, ‘Just compensation would be required. Because if they do not grant the special permit, the property becomes worthless. It can’t be used for its highest and best use.\'”
Legit legal precedent or lawyerly BS? That’s above my pay grade.
Thanks. It’s above mine too.
If the city did sell the land to MSG specifically for the construction of a 20,000 (or whatever) seat entertainment venue, then I would think that they may have some reasonable claim if the use it was sold and intended for is no longer possible…
So we have these competing POVs in which the land was sold for a specific use, but with a time limited operating permit that would seem to preclude that use (or at least to provide the option to do so at some point in future).
Hmmm.
I would say that – unless there is some language in the sale contract or Op permit itself that specifies conditions under which the permit renewal will or cannot be refused – the winning argument would be that MSG knowingly signed a permit with a fixed expiry date and thus built a non-complying facility absent that renewal.
I don’t buy the argument that the property becomes useless… it does not. It just has to conform to the non-special permit regulations.
While MSG is certainly being ‘singled out’, selective enforcement arguments are hard to prove (the other special permit holders, for example, have not built a non-complying structure over a major transit hub).
But I agree that this sort of argument will eat up thousands of billable hours for lawyers for both sides.
Very interesting and highly entertaining*, thank you.
*just the thought of Mr. Dolan having to rely on income from JD & The Straight Shot gigs makes me happy….
The city never owned the land — MSG initially leased it from Penn Central Railroad, then bought it outright (down to 15.5 feet below ground level) in 1984. (Penn Central was eventually absorbed by Amtrak.) And the permit isn’t a contract of any kind, it’s just a zoning document:
https://zap.planning.nyc.gov/projects/2022M0440
The “highest and best use” argument seems weird — if that were a legal case, then couldn’t any property owner subject to zoning sue on the grounds that they’re not allowed to build the Empire State Building 2.0 on their land? But then, zoning variances with expiration dates are weird to begin with, so it’s entirely possible this is unsettled law.
15.5 feet… I’d ask but the answer would probably just annoy me…
“Highest and Best” usage is typically a phrase deployed during taxation arguments. I believe we have discussed this before, but land within a given municipality is generally taxed at highest and best use rates… so if you have an organic farm covering 100 acres in the centre of Manhattan, it isn’t going to be taxed as farmland… it will be taxed based on what it “could” be used for (this isn’t just a pie in the sky calculation of the theoretical tax assessment of the world’s most expensive luxury condo development, it is what the property would generate if it were developed ‘consistent with’ it’s neighbourhood).
So I agree, the highest and best use that the lawyer deployed is really just a misdirection intended to make the city fearful of any can of worms they might (deliberately or accidentally) open.
There is no requirement or guarantee that any parcel of land can legally be used for it’s “highest and best” use. That’s all zoning, as you have indicated. And since the lawyer has brought this up, the city and Dolan might wish to revisit the issue of property taxes on the air + 15.5ft of ground rights Dolan is using. In that regard, highest and best usage for tax purposes is clearly not a tax exempt(ish) sporting venue. It’s much much more… look down the block.
Did the city originally sell the land to Penn RR then? Or was this some sort of exemption granted during the age of the railroad barons etc?
The operating permit and the tax exemption are two unrelated things:
The city has never owned the land. It’s tax-exempt because Ed Koch, in his infinite wisdom, asked the state legislature to let the city make the Garden exempt in property taxes in the 1980s to keep the teams from moving to (waves hands in general direction of Greensboro). And then in his transfinite wisdom he didn’t bother to check if the tax break had a sunset date. Whoopsie!
The operating permit is something that all 2500+ capacity venues need, for unknown reasons lost to the mists of time. MSG got its initial one in 1963 for a 50-year term, then had it renewed in 2013 for ten more years. And now here we are.
Hey Neil,
Off topic but this article caught my attention and is pretty clear about the (poor) economics around thr Olympics.
https://www.theguardian.com/sport/2023/feb/24/los-angeles-2028-olympics-karen-bass-ioc
The practical answer is that Dolan employs countless lobbyists that make it much easier for politicians (city or state) to be his friend than his foe.
I’m sure he does. And I’m sure he makes all the right campaign contributions come reelection time. However, it is literally the politicians’ job to not be his friend and to treat every citizen the same.
Yes, I know. I’m laughing too…