I forgot to post my column from the West Bend Daily News yesterday. Here you go:
It seems that all of the politicians in Wisconsin are trying to find a way to help fund a new arena for the Milwaukee Bucks. The various plans and machinations are revealing.
When Herb Kohl sold the Milwaukee Bucks last year to an ownership group headed up by Wesley Edens and Marc Lasry for $550 million, they committed to keeping the Bucks in Milwaukee. Shortly after the sale, however, they revealed that there was a provision in the deal that would force them to move the Bucks out of Milwaukee in a couple of years unless they got a new arena.
The Bucks owners pledged $150 million for an arena and Herb Kohl committed another $100 million. They estimate that an arena will cost $500 million. So the situation is that the Bucks owners are challenging the rest of Wisconsin to pay the $250 million gap or else the team will leave the state.
While it is easy to oppose any taxpayer funding of an arena under the argument that the taxpayers should not be paying for an arena for billionaires so that millionaires can play a game, the Bucks are a Wisconsin business that has a positive impact on the state. It would be a true loss if they left.
Into the $250 million gap step the politicians. In Gov. Scott Walker’s budget proposal, he included a plan for the state of Wisconsin to cover $220 million of it with a bonding plan that would be paid back with the increase in tax collections from the Bucks players. The plan was quickly kiboshed in the Legislature for a variety of reasons.
The most recent proposal from state legislators being floated is more modest. It offers $150 million using funds from another state agency, instead of bonds, that would be paid back by the increased taxes from the team. This plan avoids using any state tax money, which is the only way that most legislators from outside of Milwaukee would vote for it. State legislators from Rice Lake, for example, would have a hard time supporting a plan that spends their constituents’ tax dollars for an arena in Milwaukee.
The city of Milwaukee and Milwaukee County are offering $50 million for the stadium, but mostly in the form of infrastructure improvements around the arena.
For those keeping count, the current proposals still come up $50 million short from the estimated needed for an arena. Nobody is stepping forward to fill that gap.
What does all of this tell us? First, it is clear that there is not any appetite in the state legislature to use tax dollars for an arena. The Bucks’ economic impact diminishes rapidly as one travels further from the city of Milwaukee and legislators rightfully have a hard time justifying using state tax dollars for an arena.
Second, Milwaukee Mayor Tom Barrett and Milwaukee County Executive Chris Abele have been noticeably slow to offer support for a new arena despite the fact that the city and the county benefit the most from a new arena. Specifically, Barrett is planning to spend more city tax dollars on a trolley with negligible perceivable economic impact than he is willing to spend on a new arena. As usual, a Milwaukee mayor is expecting those of us who do not live in the city to pay for Milwaukee’s projects. That stance is only making state legislators dig in their heels on their arena plans.
Third, the behavior of the Bucks’ owners divulges their true motivations. They have conspicuously failed to put forth an actual plan for a new arena. We have an estimate of $500 million, but they have not revealed what the arena would look like, how big it would be, what other attractions would be attached to it or even where it would be located. We know nothing about it other than they think it will cost about $500 million, but we do not even know if that number is valid without an actual proposal to evaluate.
Also, it is worth noting that the owners have unequivocally stated that they will not spend any more than $150 million on the arena. The combined net worth of the owners is several billion dollars, yet they will not spend a penny more than $150 million for their own building.
Why? Follow the money.
The value of NBA teams has increased in recent years. The most recent example is when the L.A. Clippers were bought for $2 billion. It is undisputed that the Bucks would be worth more, possibly a lot more, if they moved to another city with a larger media market. The San Diego, Seattle or Jacksonville Bucks are more valuable than the Milwaukee Bucks.
While the Bucks’ owners had to commit to Kohl that they would keep the Bucks in Milwaukee in order to get him to sell the team to them, everything they are doing now suggests that they are trying to keep that from happening. We must remember that the Edens and Lasry are investment guys and it appears that they are seeking to reap a substantial return on their investment in the Bucks by pushing them to a larger market where the teams’ value will dramatically increase.