Milwaukee business leaders propose “super TIF” to pour property, sales, income taxes into Bucks arena

The Milwaukee Milwaukee Association of Commerce (aka “local business leaders) set up its own task force last year to figure out how to pay for a new Milwaukee Bucks arena without having to, you know, ask the Milwaukee Bucks for the money, and the latest they’ve come up with is a “super TIF.” The Milwaukee Journal Sentinel is a bit hazy on the details, but this apparently would involve not just kicking back increased property taxes in an arena district, like in a regular TIF (aka tax increment financing, aka “the financing method most likely to completely blow up in your face if tax receipts go down and not up”), but sales taxes and state income taxes as well, over a large geographical area.

While on the face of it this may seem like a great idea — if we need a lot of money, let’s build a bigger TIF! — this goes against the logic (using that term loosely here) of TIFs, which are designed to capture the increased economic activity from specific projects. Recall that Louisville actually shrunk its TIF district last September in order to bring in money, because it had drawn its circle so broadly that it was having to figure in all the other areas of downtown that were losing spending to the arena district, whereas a smaller TIF area can pretend that any arena spending is new money, and to hell with the effect on the region as a whole.

Looking on the bright side (using that term loosely here), a supersized TIF in Milwaukee involving property, sales, and income taxes is likely to generate a bunch of money, if only because those tax revenues tend to go up over time regardless. (Yes, Milwaukee is growing. Slowly. Plus there’s inflation regardless.) On the less bright side, this would mean crediting the Bucks for economic activity they had nothing to do with, and giving them the proceeds instead of using it to, oh, I dunno, pay for the increased cost of future city services.

MMAC president Timothy Sheehy told the Journal Sentinel that “such TIFs had worked in other markets,” but reporter Don Walker (who you may remember from this fine piece of journalism) apparently didn’t think to ask him for actual examples. Walker did cite developer Hammes Co.’s involvement with a TIF-financed minor-league hockey arena project in Allentown, Pennsylvania, which doesn’t open until September, but is already massively over budget. That’s a funny definition of “worked,” but I guess that’s why Chamber of Commerce presidents get paid the big bucks.


15 comments on “Milwaukee business leaders propose “super TIF” to pour property, sales, income taxes into Bucks arena

  1. I really hope that the public financing is limited. Herb Kohl is rumored to be in position to get as much as $500 million for the Bucks. If he just sells 90% of the team, he gets $450 million. For an 80 year old with no heirs, that’s a lot of money that won’t be spent so he is justifiably saying that he’ll pour “a lot” of money into the arena.

    Secondly, the new owners will be pitching in some as well. Assuming a $400 million arena, the 2 parties can/should be able to take care of this on their own. Kohl could throw in $300 and still have $150 left over while the new owners would throw in the remaining $100. Being that it would be 100% privately funded, the new owner could own and control the revenue that comes into the building making the $100 million contribution and worthwhile investment. Meanwhile, Kohl can say that he saved the Bucks, which he says will be part of his legacy.

    Public off the hook, legacy intact and new owner controls all revenue generated at the building as opposed to paying rent to the city and making money off the Bucks alone. Sounds good to me.

  2. Wait, why would Kohl want to sell 90% of the Bucks for $450m and use $300m of that on a new arena for a team he wouldn’t own anymore?

  3. This article has more information on the sale of the team and the arena situation. http://www.brewhoop.com/2014/4/12/5596184/Bucks-investors-sale-common-ground

  4. If private corporations are going to be handed revenue streams like property, sales and income taxes, perhaps they should also accept the expenses those revenues are actually meant to cover – like roads, water and sewer infrastructure, policing etc.

    Why not just hand over all assets of the city of Milwaukee to Kohl and let him run it? I’m sure he’s a good enough businessman to just work all the city’s problems out and still have everyone operating in the black.

  5. How long until the Bucks are rumored to be moving to Seattle??? No way Kohl sells the team and gives the profits to a new arena….that would never happen.

    The Seattle Bucks….it has a ring to it.

  6. We need to stop right now with the Bucks to Seattle nonsense. We are not going down that road again. Seattle deserves a team. Milwaukee deserves their team. Done.

  7. Artificial scarcity at work…. both in sports franchises and new cars… ‘Barnum’ was right.

  8. “Trueblood – For an 80 year old with no heirs, that’s a lot of money that won’t be spent so he is justifiably saying that he’ll pour “a lot” of money into the arena. Kohl can say that he saved the Bucks, which he says will be part of his legacy. Public off the hook, legacy intact”
    Seriously? $300M for a legacy that most will forget? I’d rather see the money donated to charity or something useful for the public.
    Wouldn’t surprise me if the Bucks ended up in Seattle.

  9. I’m not sure there’s an estate planner alive that would ever recommend spending that much money on an arena as a “legacy.” Leaving tax issues aside, given the lifespan of various recent NBA arenas, Kohl could still be alive when the next Bucks owner demands a new arena. Anyone worried about “legacy’ with money could do better in many other places.

    Not sure why Kohl should be lauded for “saving” the Bucks when there isn’t anything wrong with the Bucks. Its a somewhat dull franchise in a generally sucessful league with a lot of mid-sized cities, whatever the accountants will tell you.

    The Allentown project has its own level of silliness and is accompanied by the expected chicanery, but it is probably fair to point out that while the arena project is the headliner, the purpose of the TIF is to use money that would be state tax receipts to subsidize the building of new office and residential construction. Even the arena will have a hotel built on top of it. It is unclear from the article if Milwaukee really would use all that money for a single arena, which would be astonishing, to say the least.

  10. GDub: Exactly right.

    Perhaps the greatest lie told about the Sonics situation is that the money spent to renovate Key was “wasted” as the Sonics left anyway, and that ‘if they’d just built them a new arena for $250m in 1995 instead’, they wouldn’t have lost ‘their’ team.

    Of course, many teams who were gifted new facilities in the mid 90s are now demanding (and getting, in several cases) new $500m-$1bn facilities just 20 years later.

    The idea that paying a sports franchise $1Bn to stay in your community provides any sort of guarantee is ludicrous. Some teams are signing “location” agreements that allegedly bind them to their host city for a specified number of years. It is just a matter of time until some enterprising owner attempts to drive a (moving) truck through the loopholes these agreements contain (some would say Kroenke already has tried and may well be succeeding as we speak).

    Keeping in mind who crafts the agreements and who gives them a quick look over before voting to accept them, it seems very unlikely to me that any “location agreement” would stand up in court. After all, Glendale had a lease break clause in their (allegedly ironclad) agreement with the Coyotes that required a $700m lease break fee. We remember how that worked out…

  11. $300 million on a legacy . That’s rich.

    Look into how the Bradley Center was built and how it’s now the BMO Harris Bradley Center to secure $1 M more a year. Legacy lesson learned.

    http://www.jsonline.com/news/milwaukee/naming-rights-for-bradley-center-sold-to-bmo-harris-ud5g5oi-152280455.html
    It was Jane Bradley Pettit’s $90 million donation that led to the construction of the Bradley Center in memory of her father, Harry Lynde Bradley. Four years ago, the family said selling the naming rights would degrade their mother’s gift.

  12. Milwaukee clearly doesn’t want this team. Let it go! What is the point of building a new arena there? People still aren’t going to come!

  13. All I can say is that if you read the various Buck fan sites, saveourbucks.com included, everyone pretty much says that Kohl’s main objective is to keep the team from leaving Milwaukee. I don’t know if you want to call it “legacy” or term it something else but Kohl has often said that he wants to put a “significant” amount into the new arena if that’s what’s needed to keep the team in town. This comes from fans, journalists and various others who cover the Bucks on a full time basis.

    Someone has to throw some money into this thing. The whole point of this site is to be a watch dog for saving tax payers. I agree with that. That’s why Kohl should be commended for actually putting his money where his mouth is. Ok, so it won’t be $300 million but he’ll put up or at least has said that he’ll put up enough to get this done and still have plenty left over for charity and himself.

    Lastly, the modern day arena is going to last a lot longer than the arenas built in the 80’s. Places like Chicago and Cleveland opened their arenas 20 years ago and you never hear a whisper about replacing those places or even major renovations. Same with Phoenix, Philadelphia, Boston, Toronto, Dallas, LA and so on. Arenas that are at least 13 years old and are still considered state of the art and will be in play for decades to come. Do it right and you have a long lasting structure. Do a cheap renovation project like you did in Seattle with a short 15 year lease and you open things up for the vultures.

  14. “Everyone pretty much says that Kohl’s main objective is to keep the team from leaving Milwaukee.”

    *Every* sports team owner claims that they want nothing more to stay in town, even as they’re dropping hints about how terrible it would be for the team to leave. (Something Kohl has done as well: http://www.fieldofschemes.com/2013/12/17/6450/bucks-owner-kohl-without-new-arena-somebody-will-move-bucks-you-know-some-guy/) Kohl may be more sincere about this, or he may not, but we simply don’t have the data to tell one way or another.

    “Places like Chicago and Cleveland opened their arenas 20 years ago and you never hear a whisper about replacing those places or even major renovations.”

    Um:

    http://www.fieldofschemes.com/2014/01/24/6659/cleveland-residents-could-vote-in-may-on-160m-in-new-tax-subsidies-to-indians-cavs-browns/

  15. Neil:

    Cleveland’s arena is fine. I was under the impression that those subsidies are more for the Browns than the Indians and Cavs. My point remains. Arenas aren’t being replaced every 15 years. Most NBA and NHL arenas are older than that and have plenty of years left in them.

    Yes, I realize that every owner gives lip service but if Kohl was in this for the money, he would’ve sold to the Hansen group. They were willing to go as high as $625 million for the Kings which still trumps the ridiculous price that he got yesterday. As much as he meddles in personnel decisions and has been bad for the progress of the team, Kohl has remained steadfast in keeping the team in Milwaukee.

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