An agreement to keep the New York Knicks and Rangers playing at Madison Square Garden that includes a 10-year, $50.1 million "total city tax abatement" was officially announced in the center ring of the circus that is currently playing at the Garden.

Madison Square Garden Corp. President David (Sonny) Werblin said the Garden had not been bluffing when it threatened to take the two teams it owns out of the city because of a $9 million annual loss at the arena.

The agreement calls for a $5.01 million "total city tax abatement" each year for 10 years. During that period, the Knicks and Rangers will continue to play at the Garden. If one of the teams is moved to an arena outside the control of the Garden, the abatement would be eliminated. Other components of the pact include a $400,000 reduction in electrical costs through the availability of low-cost power from the Power Authority of the State of New York.

The tax package must be formally passed by the state legislature.

The Garden's parent company, Gulf & Western, agreed to accept a $3 million annual operating loss at the arena and unions representing 1,200 workers affilliated with the hall agreed to $1 million in concessions.