Madison Square Garden unveiled plans for a $500 million top-to-bottom renovation, effectively killing hopes for a huge commercial West Side development linked to the arena's proposed move across the street.

"We will renovate, and we will not be moving," said Hank Ratner, vice chairman of Cablevision, which owns the arena. "We can establish anything we want by renovating."

Yesterday's announcement formalizes the Garden's threat last Friday to abandon a state-sponsored plan to make it the centerpiece of Moynihan Station. The proposed replacement for the aging Penn Station is to be built in the landmark Farley Post Office building across Eighth Ave.

The decision reflects Cablevision's apparent frustration with the state's inability to obtain sufficient funding for Moynihan Station, which is at least $1.2 billion short of its projected $3 billion cost.

It was unclear yesterday whether the state would revert to earlier plans for Moynihan Station that did not include the Garden.

The renovation of the arena, to be paid for entirely by Cablevision, is slated to begin next year, with completion in time for the 2011-2012 basketball season.

Construction will not disrupt basketball or hockey games, officials said. The renovation promises to improve sight lines.

Plans call for a new upper-level party deck plus more bars, restaurants and concession stands.

Luxury suites will be moved down to midlevel and floor locations. Seating capacity will remain at 20,000. The rest room area will be increased by about 15%.