MILWAUKEE (WKOW) — Milwaukee leaders plan to announce that a chunk of downtown land has been sold to the city’s NBA team for $1 as part of the drive to build the Bucks a new arena complex
County Executive Chris Abele said in a statement Wednesday that the sale will transform a vacant space into a development that will create thousands of jobs and generate millions in revenue.
The land was appraised at $8.8 million, but Abele’s office says that doesn’t factor in $8.3 million worth of needed demolition and infrastructure work.
Legislation to provide public financing for a new Milwaukee Bucks arena cleared the Assembly this afternoon on a bipartisan vote, and the bill now heads to the guv’s desk.
The chamber did not make any changes to the bill before the 52-34 vote. Those who voted note included 20 Republicans and 14 Dems.
No one spoke against the bill during today’s debate.
I wanted a few more questions answered, but as it was, I would have voted for it too. It is disappointing that 13 members of the Assembly didn’t show up for work today. Was it just a day of exceptional absenteeism or were some of them hiding from this vote?
My column for the West Bend Daily News is online. Here it is:
Almost two months ago it appeared that a bad deal for taxpayer support for an arena for the Milwaukee Bucks was going to be slammed into the budget with little input and less transparency. At the time, I wrote that it was a bad deal that needed to be taken out of the budget and reworked. Since then, exactly that has happened.
The budget passed without a deal for a Bucks arena. The Republican state leadership and the Democratic leaders of Milwaukee went back to the drawing board, included state Democratic leaders and the Senate passed a new version of a Bucks arena deal with a surprising bipartisan majority. Today the State Assembly is taking up for consideration the deal that the Senate passed.
Overall, the deal got better. The state Senate made three significant changes to the original deal being discussed in June. First, the deal imposes a taxpayer-funding cap. One of the problems with the earlier deals was that it left open the question of who would pay for the inevitable cost overruns for construction of a arena. The current deal caps taxpayer funding at what is stated and places the responsibility of an overrun into the hands of the Bucks’ owners.
The second major change was that the contribution from Milwaukee County was modified. In the previous version, the state would have paid $8 million per year for debt service with $4 million of that being offset by a convoluted plan whereby the state would collect debt owed to Milwaukee County. It was a dubious plan because it assumed that the debt could be collected (if it could be collected, why wasn’t the county already collecting it?) and left the state taxpayers on the hook if the debt could not be collected.
The new deal simplifies Milwaukee County’s contribution by fulfilling its $4 million obligation by reducing the county’s shared revenue funding by that amount. This means that Milwaukee County will have to find a way to either replace that $4 million in its budget or reduce spending by that amount, but it is a much more sensible and honest than the previous plan.
The third significant change in the deal imposes a perticket fee of $2 to help fund the arena. Of that $2, $1.50 of it will go to the arena’s governing district and 50 cents will go to the state. This fee is estimated to offset the state’s obligation by about $15 million. Financially, this provision helps reduce the taxpayers’ financial commitment to an arena, but politically, it is an essential concession that the people who will receive the benefits from a new arena will be contributing to its construction.
The deal got better, but is it good enough? Maybe, but the Assembly should insist on more information before supporting this deal. We learned a few weeks ago that the taxpayers’ obligation for the Bradley Center if a deal is not made is not necessarily $120 million as supporters previously asserted. Instead, the taxpayers’ obligation is likely somewhere between zero and $20 million. Assemblymen should know what the actual cost of saying “no” is.
Also, the economic impact for new sports arenas has varied wildly across the country. Any such projections offered by proponents of a deal should be evaluated with some skepticism. Instead, the lawmakers should focus on the more definitive economic projections related to the Bucks’ staff and players’ salaries and the Bucks’ direct financial impact. Any subsequent economic development from a new sports arena that might develop should be viewed as unpredictable, but welcome, gravy.
While the senate made the deal better for the taxpayers, there are still too many unanswered questions for the Assembly to pass it. While there is a deadline for a deal to be reached before the NBA pulls the team out of Milwaukee, the deadline is not so imminent that a deal must be passed by the Assembly today or even this week. There is time to get some more questions answered before casting a vote obligating the taxpayers of Wisconsin to an arena for the next 30 years.
The Senate has approved the Bucks arena funding package on a 21 to 10 bipartisan vote.
Of the votes in favor, 15 came from majority Republicans, while six came from Democrats.
It looks like they made two changes to get some support from Senate Dems. They removed strange provision where the state would assume Milwaukee County’s debt and use those collections as a funding mechanism. Removing that is good. They also added a $2/ticket fee for all events at the new facility to pay for some of it. That’s good too.
So it appears that the deal that the Senate passed is better than the one we saw a few weeks ago, but the way in which the Senate slammed this through has robbed all of us of the opportunity to analyze it and run the numbers. Fortunately, now the Assembly has to take it up. They have not said when they will take it up, but hopefully we have a few days to digest what the Senate passed and allow the Legislative Fiscal Bureau to do their job.
I have no idea what’s in it, so I can’t comment on the content. But the Democrats and Republicans in the Senate appear to be nearing a deal on the arena where they have added a surcharge and deleted the county debt part, but who knows… I don’t like this rushing the deal. There’s no reason that they can’t wait a few days to allow the public to get a look at it before they vote on it.
This is interesting. One of the arguments for public support for a new arena for the Milwaukee Bucks is that the state taxpayers will owe a lot of money if the Bucks leave. The numbers being told to us were that the state would have to pay about $20 million for outstanding debt and about $100 million for repairs on the old arena. So, it was said, state taxpayers were in the hole about $120 million if the Bucks left, so, it was reasoned, any state taxpayer support for a new arena that was less than $120 million should be acceptable.
Without a court reviewing the question, no one can know for certain if the state would have to assume the costs of maintaining the BMO Harris Bradley Center if the professional basketball team ended up leaving the city. But this latest finding by the independent Wisconsin Legislative Council counterbalances a contrary finding by a top lawyer and appointee of Gov. Scott Walker, a supporter of public financing for a new arena.
The state has a kind of ownership interest in the Bradley Center, but it is narrow and limited to the future, not the present, allowing state officials to refuse it if they choose, Legislative Council attorneys wrote in a memo this month to Rep. Dean Knudson (R-Hudson), an opponent of public funding for the arena.
“For the reasons discussed above, it appears unlikely that a court would hold the state financially responsible for all debts and obligations of the Bradley Center Sports and Entertainment Corporation solely on the basis of (this) ownership interest,” the attorneys wrote to Knudson, who also sits on the Legislature’s powerful budget committee.
[…]
“Documents reveal $16 million in needed repairs to the current arena, however Wisconsin law is very clear that state taxpayers have no liability whatsoever for the Bradley Center, for its maintenance or its debts,” he said.
So the number is not $120 million… it’s more like… zero. That is a very different calculation.
But it turns out, that $120 million figure is rather suspect. Most of it — some $76 million — is owed to the county courts but the vast majority of that is restitution money that must be repaid over time to victims of crimes, explains Dave Ehlinger, Fiscal Operations Administrator for the courts. In short, the state can’t get its hands on this debt to fund a new NBA arena.
Another big chunk of the $76 million is money the state already collects. (The county largely operates not as an independent government, but as the local administrator of state programs.) And by the way, when the state does collect debt, it finds that about 11 percent of debt is uncollectible, Ehlinger notes, because the party may not pay Wisconsin taxes, has moved out of state, can’t be traced because the Social Security number isn’t correct or for other reasons.
In response to a request from Milwaukee County Comptroller Scott Manske, Ehlinger prepared a huge, 13-page analysis of the courts’ out standing debts (going back 20 years) with colored charts by which he concludes that the amount of uncollected debt the state could likely collect is about $100,000 per year, or less than $2 million over 20 years.
The deal for the Bucks arena was finally announced. The only significant new detail that was revealed that hadn’t already leaked is that the owners – not the taxpayers – will be on the hook for any cost overruns for the project. That’s very good. Other than that, nothing has really changed since this weekend.
As a side note, this was a masterful bit of politics by Governor Walker. He managed to hold a press conference announcing a significant deal for economic development with his only two real Democratic rivals – Milwaukee Mayor Barrett, who ran against Walker for governor, and Milwaukee County Executive Chris Abele, who is widely believed to be sowing the seeds to succeed Walker – at his side praising it. And the press conference was in Madison – Walker’s home turf. Furthermore, Americans for Prosperity, a group funded by the Koch brothers, opposes the deal, thus giving Walker some political separation on the national stage. Irrespective of what happens to the deal, today was a win for Governor Walker.
My column for the West Bend Daily News is online. Of course, as happens when writing about a very fluid situation, some of the details have changed since I wrote this. When I wrote this, there was a deal that was to be announced any minute and the details were leaked. By Monday, they were still working on a deal and it still hasn’t been released. I suspect the feedback they got regarding the leaked details sent them back to the drawing board. Good.
After months of wrangling, the owners of the Milwaukee Bucks and political leaders from the city, county and state have come to an agreement on how to fund a new arena for the Bucks. They need to return to the smoke-filled room, because this is a bad deal both structurally and economically.
Let us start with the premise that we all want the Milwaukee Bucks to remain in Wisconsin. Putting aside the emotional attachment to a sports franchise, the Bucks are a profitable business that is good for Wisconsin. The reason this is a debate is because the new owners of the Bucks signed an agreement with the NBA that they will be playing in a new arena by 2017 or the NBA will buy back the Bucks and possibly move the team to another city.
The new and former owners have pledged $250 million for an arena estimated to cost $500 million. That leaves a $250 million gap that the owners expect the taxpayers to fill. The argument for taxpayer support is two-fold. First, if the Bucks leave, the BMO Harris Bradley Center will still cost the state taxpayers $120 million to pay off and for repairs. That number is likely exaggerated by supporters of a new arena because it assumes that the old arena should be repaired. Why repair an arena with no tenants? But there is no question that the taxpayers are on the hook for tens of millions of dollars should the Bucks leave.
Second, it is in the taxpayers’ interest to support economic development. The problem is making good projections that justify the expense. Will a new Bucks arena return an investment of $250 million to the taxpayers? The Bucks’ owners say yes. They say that the new arena will spur a billion dollars in economic activity. Will it? Maybe, but the history of these deals is dubious. According to a 2012 study from Colgate University, only 8 of 55 stadiums in use at that time that were constructed with at least 25 percent public funding actually resulted in spurring economic development in the surrounding area. That is a pretty dismal record that should cause taxpayers to pause and take a hard look at the economic development numbers being tossed about by the Bucks’ owners.
Given these factors, the political leaders making a deal began with the dubious assumption that $250 million in taxpayer support is the right amount just because the owners of the Bucks said so. There has not been any public justification for that $250 million to show that it is a good deal for the taxpayers. I suspect that is because it is not a good deal. It is far too much.
The deal itself is convoluted and full of holes. Let us examine a few of the more glaring ones.
The city of Milwaukee is offering $12 million in TIF bonding and a $35 million parking garage that they can use whether or not the Bucks stay. That is a paltry amount considering it is the city that benefits the most from the Bucks than all of the other communities being asked to subsidize the new arena. $12 million is less than a quarter of what Mayor Tom Barrett managed to put together for a useless trolley. It is apparent that, once again, the city of Milwaukee is expecting the rest of the state to pay for its luxuries.
Milwaukee County is offering $80 million — sort of. The $80 million is being “funded” by the state issuing bonds to be repaid with uncollected debt in Milwaukee County. Essentially, the county is giving up on collecting a lot of questionable debt for things like back taxes, fines, etc. and giving it to the state to collect to pay for the arena. It is likely that much of that debt will remain uncollected, thus leaving the state taxpayers on the hook to pay off the bonds anyway.
The Wisconsin Center District has the most honest approach to providing $93 million. They are going to raise taxes to do it. They will issue bonds and repay them with taxes levied on hotels, rental cars, food and beverages. They would extend taxes that were supposed to expire and raise the existing taxes to make it work. Yes, that is a tax increase.
The deal commits state taxpayers to $80 million plus assumption of the $20 million that is still owed for the BMO Harris Bradley Center. The plan is to fund that with the additional taxes collected from the net increase taxes collected from the Bucks and projected economic development. But make no mistake — the state taxpayers will have to pay whether or not the promised economic development ever materializes.
Finally, with no mention of who is responsible for any cost overruns for the project, we have to assume that the taxpayers would be on the hook for that too.
This is a bad deal. It is too much taxpayer money with too much risk for dubious value. They need to go back to the drawing board.
One more thing: the Republican legislative leaders are trying to put a deal for the Bucks arena in the state budget. This makes it easier for them to pass because legislators can hide behind their votes. The citizens of Wisconsin deserve better than that. Whatever the deal eventually entails, it should be voted on as a standalone bill so that the citizens can see precisely where every legislator — Republican or Democrat — stands.
Multiple sources indicated late last week that the new downtown facility would cost the public at least $400 million — including interest — under the draft plan the team, state and local officials are putting together.
That’s up from the original estimate of about $250 million, which would represent a mix of bonding, taxes, debt collections and other forms of public financing.
But that figure did not factor in interest on those items.
I largely agree with Charlie Sykes’ points about the arena deal. It’s bad. Really bad. Structurally and for the taxpayers. Yes, there are tax increases and a $250 million price tag for the taxpayers – at a minimum – but it also has some glaring holes. These are the worst:
That revenue — $93 million — would not be available for 13 years.
[…]
The deal also relies on collecting $80 million in uncollected Milwaukee County debt.
[…]
There are apparently no plans for cost overruns.
And, of course, there is the fact that this project would be an estimated $50 million cheaper if the same people negotiating this deal would push through the repeal of the prevailing wage laws.
Multiple sources have told WisPolitics.com over the past two weeks the talks have been focused on an option that includes the Wisconsin Center District, which now operates the Wisconsin Center, the UW-Milwaukee Panther Arena and the Milwaukee Theatre. The option includes combining those operations with the new arena into one entity and eventually using resources that now go to the Wisconsin Center District to help pay off a loan through the Board of Commissioners of Public Lands. The sources have indicated there could be other revenue streams included in helping pay off the loan.
Vos said members of the BCPL attended today’s meeting to explain how a loan could work.
“In general, it sounds like we have a broad framework,” Vos said, though he later added, “We’re not quite there yet.”
Myranda Tanck, a spokeswoman for Senate Majority Leader Scott Fitzgerald, said the parties were working on drafting specifics over the next couple of days, but it wasn’t clear when anything final could be announced.
“We’re still ironing out a couple of details and getting something drafted hopefully in the next few days,” she said.
Of course, whatever deal they strike behind closed doors that sounds good to them doesn’t mean it will sound good to the public, Milwaukee Common Council, Milwaukee County Board, State Assembly, and State Senate. It’s always about the details…
Marquette University leaders, who have said the university will not contribute construction funds to a new arena in downtown Milwaukee, are urging the university’s basketball fans to write state legislators, Milwaukee Mayor Tom Barrettand Milwaukee County Executive Chris Abele about “public financing assistance” for the project.
Marquette President Mike Lovell and athletic director Bill Scholl sent the letter dated Friday.
“When it comes to building a new arena in downtown Milwaukee, the position of our university is clear: The new arena is critical to the growth of Milwaukee as a first-class city that will attract and retain the bright young minds who will lead us into the future,” the letter states. “Marquette University has a valued strategic partnership with the Milwaukee Bucks and we remain committed to being their top tenant in the new arena.”
Of course it’s easy to advocate for other people to spend their money on stuff you want.
Milwaukee Bucks president Peter Feiginsaid he is confident the team and public officials will reach an agreement on up to $250 million in public funding for a new arena in downtown Milwaukee.
Feigin, speaking to a group of commercial real estate executives in Milwaukee, said he is hopeful about making progress on public funding Wednesday when the Bucks meet with state and local government leaders in Madison. Included in the meeting will be Milwaukee Mayor Tom Barrett and Milwaukee County ExecutiveChris Abele, both of whom some Republican legislative leaders have singled out for not committing more money to the project.
Note that while the Bucks arena is being planned for Milwaukee, the Democratic leaders of the city and the county don’t appear very interested in crafting a deal. It is a senator from Juneau doing the heavy lifting to try to get a deal done.
MILWAUKEE —Wisconsin voters do not want the state to borrow money to pay for a new Bucks arena. That’s what the Marquette Poll released Thursday shows.
The governor said just give it time.
When voters across Wisconsin were asked about a legislative proposal for the state to borrow $150 million to help fund an arena, 79 percent opposed the idea, and 17 supported it.
[…]
Only 29 percent support that idea in the Milwaukee area, and across the rest of the state, it’s just 9 percent.
This isn’t surprising. The comments in the story are interesting.
In a conference call from his trade mission in Spain, Walker said he believes people will support the arena when they realize the state could lose a lot without it.
“Well, when I sit down with people and say, ‘If we don’t do anything there’ll be approximately a $10 million hole per year in the budget going forward, and the state will have this $100 million white elephant to deal with in terms of the BMO Harris Bradley Center into the future,’ people feel very different than just saying, ‘Do you think there should be public support?’” Walker said.
That may be, but if Walker wants this, he’s going to have to come back to Wisconsin and sell it. Less than 10% of the people from outside of Milwaukee support this and, in case you didn’t notice, most of the members of the legislature are not from Milwaukee. It’s a tough sell for them to their constituents.
And Bauman is a trip.
“A 1 percent sales tax in Milwaukee County that would be used to fund the capital costs for a new arena,” Bob Bauman said.
In a plan he laid out Thursday, increasing the county’s sales rate to 6.6 percent would bring in $125 million in annual revenue.
He said it would cover the local portion of a new arena, plus maintenance costs for county parks, buses and other cultural amenities.
The lefties have been pining for a standalone tax to fund parks and cultural things for a long time. Some of them see the push for public Arena funding as a means to get this wishlist item done. But with less than a third of Milwaukeeans supporting public debt for the Arena, how many of them are going to support paying higher taxes for it? I don’t see the desire for a new Bucks arena working as a driver for a new tax.
The likelihood of state funding for an arena just got a lot slimmer. How can a legislator from Mellen support a plan that the folks in Milwaukee, who would benefit most, don’t support?
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.
“We believe the initial proposal we put on the table would not cost the taxpayer one cent,” Walker said. “Our goal is to have any plan be the one that doesn’t take anything away from the base that’s already in the budget and not to add any new taxes.”
Fitzgerald has said he’s working on an alternative to Walker’s plan that would lower or even eliminate state bonding, and speculation has ramped up recently that Fitzgerald is looking at an option that would involve the Board of Commissioners of Public Lands. More than a decade ago, the agency agreed to buy bonds for the renovation of Lambeau Field with the idea that doing so would make it cheaper for the state than selling them on the open market.
Those are good goals. It will be interesting to see if there’s a way to pull it off.
And I love this…
A spokeswoman for Milwaukee Mayor Tom Barrett did not immediately respond to a Monday request for comment on Walker’s remarks, while County Executive Chris Abele said in a statement he is actively working on a solution.
Of all of the politicians who should be the most interested in a new arena, Mayor Barrett should be at the top of the list. But throughout the last few months, he has been MIA. Instead, he is letting legislators from Racine and Juneau and a governor from Wauwatosa take the lead. He truly is a worthless mayor.
As reported on Mark Belling’s show this afternoon, the Menominee and Seminole tribes are sweetening the pot for the Kenosha casino. They are offering to give $200 million in cash – no string attached – to finance a new Bucks arena in downtown Milwaukee if Governor Walker reverses his decision and approves the Kenosha casino. They make this offer while keeping in tact all of their previous commitments including a larger cut of the profits than other casinos and a promise to indemnify the taxpayers of Wisconsin against any ill effects as a result of the compact with the Potowatomi.
This is a very clever move by the Menominee. First, the deal is getting overwhelming for Wisconsin and extremely difficult for Walker to continue to obstruct the Kenosha casino. We are talking about hundreds of millions in cash to the state – not to mention the projected $1 billion+ economic development from the casino – for the risk that the state might… might… have to reimburse the Potowatomi, the money for which the Menominee are willing to refund the taxpayers.
Second, Walker and the Milwaukee political leaders really want a new Bucks arena and really want the taxpayers to pay a couple hundred million dollars to support it. None of them want to be the governor or mayor who saw the NBA leave Wisconsin because they couldn’t get a deal done. By offering to give $200 million for the project, the Menominee are replacing the need for the taxpayers to pay anything for it. It would be completely privately financed and the taxpayers would get to keep the tax revenue that Walker wants to spend on funding the new arena. It will be exceedingly difficult for Republicans in the legislature to support public financing of an arena in Milwaukee if Walker turned down an opportunity to get the arena built without any taxpayer dollars. By making this offer, state taxpayer support for a Milwaukee arena is virtually dead whether or not Walker reverses his decision. Now the only question is if Walker is going to get something for it.
Walker now has a chance to enable two massive economic development projects in Wisconsin with a single decision. Approving the Kenosha casino will get both the casino and the Bucks arena done… and he can take credit for both deals done – without needing taxpayer money – as he heads into a presidential campaign.
Make the deal, Governor Walker. Approve the casino.
