Bucks arena deal a $270m mashup of public cash, tax breaks, and mystery debt

Courtesy of the Milwaukee Journal-Sentinel’s new tag-team coverage, we now have more details of the latest Bucks arena funding plan:

  • $55 million in state bonds (paid off $4 million a year over 20 years), presumably to be justified as coming from future state income taxes on NBA players, though it seems like everyone is just calling it “state money” now, which it is.
  • $20 million from the state to pay off the remaining bond debt on the Bradley Center.
  • $93 million from the Wisconsin Center District, to be drawn from various county taxes that currently go to fund the district’s other expenses.
  • Another $55 million “certified” by the county but to be paid by the state out of (unspecified) debts that currently aren’t being collected but will be in the future, maybe.
  • $35 million from the city for a new parking garage, plus $12 million in property tax kickbacks on new development around the arena.

That comes to $270 million, if I’m counting correctly, split between the state, county, and city in a way that’s pretty much impossible to determine the shares right now, since who knows whether that $55 million in future uncollected debts will ever materialize, or who’ll pay for the shortfall if it doesn’t. Oh, and still no decision on who’ll pay for cost overruns (or operating losses, though the J-S doesn’t get into that), but the article does provide this priceless quote:

“Everybody involved — except the owners — says it’s got to be the team,” said a source familiar with the talks.

All in all, this is looking a classic of the “pick all the low-hanging fruit and add in a bunch of stuff you’re just guessing at” school of arena finance: You have a pile of things that could be vaguely justified as “basketball-related” if you squint (tourism spending, NBA player taxes), but which however you slice it would end up blowing a $270 million hole in government budgets that would have to either be filled somehow or end up leading to cuts in other areas.

Whether this tactic will work, we won’t know until after this whole mess lands on legislators’ desks, likely sometime tomorrow. It definitely seems like the most likely successful strategy from a political standpoint; whether it makes any sense in terms of economics is another question, and one that hopefully will be discussed fully in the next couple of weeks in legislative debate, but I’m not exactly holding my breath.

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5 comments on “Bucks arena deal a $270m mashup of public cash, tax breaks, and mystery debt

  1. Re: the fuzzy math, it could just be sloppiness, or it could include the $20M in debt the Bradley Center currently owes that will be “absorbed” by the state (i.e. taxpayers). (That’s $20M owed on maintaining an arena that was built for $90M, completely donated.) At that rate, taxpayers could one day owe another $100M in 30 years, beyond what it will have to pay for bonding debt with interest.

    Part of the deal is to start paying some of the arena debt only after 2028. Balloon mortgage, anyone? Well, the Bucks owners are hedge fund honchos. They probably suggested all these risky schemes, like trying to get the state to collect the county’s uncollectible debt ($80M).

    Right-wing radio host Charlie Sykes is skewering the shell-game maneuvers of all this. Who will be the apologists for this convoluted deal?

  2. Neil,

    If the state can’t collect the county’s debts, then the county’s yearly aid from the state would be reduced by that amount. so it’d probably be the usual suspects (K-12, police & Fire, parks) that get dinged.

    This looks like a great deal. Outside of the cuts in county aid that are likely and the $4M/yr from the state, it looks like all parties are protected. My only remaining complaint is that they’re planning to build an arena that’s unfriendly to hockey. Not saying they’d get NHL, but USA games, Frozen Four and holiday NCAA tournaments would all be out the window.

  3. Mr. DeMause,

    Which of the 5 provisions are worst?

    Based on what is reported now, how would you rate the overall proposal? (e.g. from terrible to fantastic)

    I think they are getting to 1/2 public financing ($250 million) by counting only 4 million paid a year on the 55million state bonds,
    8 + 20 + 93 + 80 + 35 + 12= 248million (the certified debt is reported as 80, not 55) here: http://www.jsonline.com/news/statepolitics/arena-negotiations-continue-no-deal-imminent-b99508223z1-305192861.html
    We’ll see when final details are announced soon.

    Thank you.

  4. Based on initial media reports, and without all the details, these parts seem problematic:

    The 80 million uncollected county debt- the amount seems too high, too speculative and insecure for the taxpayer.

    The 12 million “TIF” contribution by the City of Milwaukee is too little of a contribution by the City for its part.

    There needs to be clear taxpayer protections against cost overruns, and incentives to finish ahead of schedule and under budget.

    We will know more details soon.

  5. Here’s what else is apparently not counted in that $250-million/$270-million tally:

    The value of state-owned land to be ceded for the arena site (north of the Bradley Center).

    The value of a block-long parking/commercial structure built by the city for $25 million (it would be demolished to make way for an arena-adjacent “entertainment destination” to be publicly funded as part of the arena project).

    The cost to tear down that parking facility. Lost income from that facility (currently nearly a million a year)

    The value of a city street that would be vacated and given over for the arena complex.

    The value of the land on which the city intends to build a $35-million replacement parking facility.

    A one-acre lot owned by the city and valued at $1.1 million (pledged by the mayor).

    Park East acreage owned by Milwaukee County, reportedly to be used for “ancillary development.” It’s rumored the Bucks owners want to be given up to 13 acres of additional vacant land to develop.

    The Bucks announced in April that they envisioned masterminding the development of a total of 30 acres, over the next decade or so.

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