The Knicks Can't Play Basketball—When Will They at Least Pay Their Taxes?

In what might be dubbed the NBA's Year of the Tank, what's going on at Madison Square Garden is still pretty remarkable. In the last month and a half, the Knicks have traded Iman Shumpert and J.R. Smith for a bag of balls, heard Carmelo Anthony announce that he'd shut down for the season to rehab his injured knee (but not before playing 30 minutes in the All-Star Game), and finally straight-out cut Amar'e Stoudemire to let him play on some semblance of an NBA team.

Given that the Knicks were managing to be among the league's worst teams with those guys, what's left is beyond dismal. Derek Fisher's squad is on pace to win a franchise-record-low 15 games, a pace that they're going to have a tough time keeping up with the collection of no-names that remains, even with two games left to play against the equally beyond-dismal Sixers. And Knicks fans appear to be noticing—I mean, how could they help but notice, but they're starting to vote with their tickets, with close to 5,000 tickets per game now flooding StubHub.

All of which, you would think, would be the worst nightmare of a franchise that was hoping for a flood of fans to help pay off the $1 billion in renovations it just completed on Madison Square Garden. Yet James Dolan, the Knicks/Rangers/Cablevision chieftain who was voted the worst owner in the NBA by ESPN—and this at a time when Donald Sterling was still in the league—has one ace in the hole even if fans stop going to games or watching on TV: No matter how bad the Knicks get, New Yorkers will still be giving them more than $40 million worth of tax breaks this year. And despite years of local elected officials clamoring for this annual taxpayer gift to be brought to a halt, it could amount to hundreds of millions of dollars more before the money spigot is finally shut off.

The tale of the Madison Square Garden tax break is one of the more bizarre ones in New York political history, which is saying something in a city that's featured a borough president stabbing himself to death in a scandal over stealing money from parking meters and rival police departments doing battle on the steps of City Hall. It all started back in the early 1980s, when Gulf and Western, the wide-ranging conglomerate (its other holdings at the time included both Sega and Star Trek) that owned the Knicks, the Rangers, and the Garden, began making noise about moving the teams out of the city. Mayor Ed Koch, afraid that it would look bad to lose two sports teams just a few years after the city emerged from default, quickly shepherded a bill through the state legislature to give MSG 10 years' worth of full tax breaks in exchange for keeping the teams in Manhattan.

Or, at least, that's what Koch said he thought he was doing. "I went to bed at night believing it was a 10-year abatement," he told the New York Times 20 years later. When he awoke, though, it was to a freshly signed bill stating that the full tax exemption for the owners of the Garden "shall continue, as long as both of said teams play their home games therein."

Whoopsie.

Manhattan property, as you may have heard, has gotten a bit more valuable since the 80s, and the World's Most Famous Arena is no exception. The Garden's tax gift was worth just a few million dollars a year over that initial 10-year span, but soaring property values have raised its foregone tax bill to $356 million dollars in the years since. Dolan's $1 billion renovation, in fact, has had the bizarro effect of giving him a much higher tax bill not to pay: The New York City Independent Budget Office estimates that the MSG tax break will be worth $44 million for this year alone; by the end of the decade, that slip of the pen back in 1982 could end up costing New York City taxpayers more than half a billion dollars.

This, too, has not gone unnoticed—but so far, efforts to close the loophole have gone about as well as efforts to fix the Knicks. The Independent Budget Office has dutifully included eliminating the MSG tax break year after year in its annual budget options report, and the city council actually voted overwhelmingly to do so back in 2008. (Or as it's known in Knicks time, Year Two After Isiah.) But the tax break was originally approved on the state level, meaning state action is required to overturn it, which has proven difficult in a state with the nation's most dysfunctional legislature. Two years ago, a group of state legislators sponsored a bill to eliminate MSG's annual tax break—there's "no possible justification at this point" for continuing it, said Assemblymember David Weprin, while city Councilmember Jumaane Williams chimed in, "They can't even make good Knicks trades. It's appalling." The bill got shelved before it could come up for a vote.

Shirking on property taxes, of course, is a time-honored tradition in American sports. Both the Yankees and Mets play tax-free at their new stadiums, thanks to having the city technically own them. (In Canada, teams that use public buildings for private sports uses typically still have to pay property taxes. This is not Canada.) It's something that Cablevision execs have cited as an argument in their defense: Okay, so maybe our tax break wasn't meant to be permanent, but all the other kids are doing it too!

Brian Kavanagh, a Manhattan Assemblymember who co-sponsored the 2013 bill with Weprin, is unmoved, telling me via phone: "The notion that other sports franchises in other facilities that are also run by super-wealthy people may not be paying their fair share is not a terribly good argument in favor of allowing this super-wealthy franchise to get away with it."

There is some potential good news on this front—though given that it involves the New York legislature, of course it's the kind of good news that comes wrapped in bad. Last month, State Assembly Speaker Sheldon Silver, who first ascended to the position only a few months after Charles Smith's moment of infamy, was forced to resign after being arrested for taking $4 million in bribes. Silver had long stood in the way of repealing MSG's tax break—he was also instrumental in killing a proposed Jets stadium in Manhattan that Dolan objected to—so his departure has raised hopes a bit, even if Cablevision pal Gov. Andrew Cuomo is still in place, for the moment, anyway. With Weprin reintroducing his bill again last month, it's time for New York taxpayers to hold their breath (and Cablevision to put their lobbyists in gear) to see if things turn out any different.

There is, meanwhile, one longshot loophole by which the tax break could be ended without legislative action, though it would take some pretty clever legal wizardry to do so. As noted above, Dolan can continue to withhold property taxes on the Garden so long as the Knicks and Rangers "play their home games" there. (This is apparently why, when the Rangers play occasional outdoor games at Yankee Stadium, they have to count as road games, lest the magic spell be broken.) There's nothing in the law, though, that defines what "play" means. Can these Knicks, in a legally binding sense, be said to be "playing basketball"? Are they, in fact, a professional basketball franchise, or could it be argued that the actual Knicks have departed already, and what remains is a mere pretense in Knicks uniforms?

Nah, it probably couldn't work. Though dear lord, just look at them. No jury in the land would call that basketball.