The city agency turned down requests from MSG for a special operating permit with no time limit and a proposed 10-year permit proposed by Community Board No. 5.
The ruling now goes to the City Council, which has 50 days to approve, disapprove or modify the commission's decision, according to city officials.
Commission chairwoman Amanda Burden said Wednesday that the panel hoped issuing a 15-year permit for the Garden, where the Knicks and Rangers play, would give elected officials, transportation agencies and MSG time to reach a deal on renovating Pennsylvania Station.
"What a 15-year period can do is create an opportunity for city, state and federal government agencies to reach an agreement with Madison Square Garden and the railroads for a comprehensive plan to relocate the arena and rebuild Penn Station," Burden said.
MSG spokesman Kimberly Kerns said the company was "effectively being held hostage by a decision by public officials 50 years ago to demolish the original Penn Station." She said the Garden "meets all the requirements for a permit" in perpetuity, and that the commission "issues virtually all special permits without term limits."
MSG expects later this year to complete a nearly $1-billion modernization of the Garden. The commission Wednesday rejected MSG's request to install large video signs on the building's facade. The company owns the Garden building and the land under it.