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.

WI pols “confident” Bucks deal will be ready by Friday, just in time for no one to read it before vote

Wisconsin political leaders held what had been announced as their “final” closed-door meeting to negotiate a Milwaukee Bucks arena deal yesterday, and … they didn’t finalize anything. But they’re close! Really they are, because they say so!

“The number of issues is narrowing,” Milwaukee Mayor Tom Barrett said Tuesday.

“There’s still work to be done, so there’s no white smoke. But I feel confident we’ll be able to work out the remaining issues,” he said.

We’ve heard this before, needless to say, but now things are really coming down to the wire: The state legislature’s joint finance committee is set to issue its budget proposal by the end of this week, so if the Bucks want to have their plan considered this legislative session, they really need to get it done tout de suite.

And what do we know about what this eventual plan will look like? The four Milwaukee Journal-Sentinel reporters (Tom Daykin, Patrick Marley, Crocker Stephenson, and Daniel Bice) who are filling the shoes of the late Don Walker provide some clues:

  • A “source” indicates that the state would sell $93 million worth of bonds to help finance the arena, paying them off with existing surcharges on car rentals, hotel rooms, and restaurant food and beverage sales in Milwaukee County. Those taxes currently go to the Wisconsin Center District, which mostly uses them to pay off construction debt on its convention center, but there’s about $8 million left over for the city’s tourism and convention marketing budget — which would just barely be enough to pay off $93 million in bonds if the city is fine with promoting tourism from now on by holding up a big “COME TO MILWAUKEE WE HAVE CUSTARD” banner at nationally televised Bucks games.
  • Milwaukee would provide $35 million for a new parking garage, and get back some unspecified parking revenue in return. It would also kick in $12 million in future property taxes from new development around the arena via a TIF district.

Assuming that the state would still be putting in something on the order of $150 million to be repaid out of NBA player’s future state income taxes (which is assuming NBA salaries continue to rise at a hyperinflationistic rate), that would be $290 million total in public money, which should be enough to make Bucks owners Wes Edens and Mark Lasry happy.

Whether it will make the state legislature happy, especially in a year when Wisconsin is going to have to be cutting everything else to the bone to fill a budget gap, remains to be seen. The big worry here is that the last-minute nature of the deal could end up working in its favor — if it gets dropped into the budget on, say, Saturday morning, that won’t leave much time for either state legislators or local journalists to read and digest what’s looking to be an extremely complex plan before it has to be voted up or down. The last time we saw one of these two-minute offense sports subsidy pushes, it resulted in Minnesota’s e-pulltabs fiasco. Which isn’t to say that the Bucks plan is necessarily as bad as that one (I mean, nothing could be as bad as that one), but the way things are going, this plan may be law before anyone has figured out what it means, which is never a good way to run a railroad.

Hansen: No NHL teams are so eager to play in Seattle that they’ve gotten out their checkbooks

Chris Hansen, the would-be Seattle NBA arena builder who can’t get an NBA team, says he hasn’t been approached by any NHL teams wanting to move to Seattle and willing to pay him to do so:

“We’ve had a lot of informal discussions with people about this, but us or the city have yet to be presented with any kind of offer. I mean any kind of even basic offer that would be the opening point for negotiating something,” Hansen said in an interview with The Associated Press on Tuesday.

The AP called this “surprising,” but it really isn’t: There aren’t a ton of hockey teams looking to move right now, and while I’m sure any team owner looking to test the waters would do due diligence by putting in a phone call to Hansen (that’s your “informal discussions” right there), actually offering to put in a pile of cash to help get the arena built — something Hansen and the city say would be needed for hockey, which doesn’t bring in as much revenue as basketball — isn’t really how things get done in the arena game.

None of this means that Seattle will never get an NHL team, or Hansen will never get his arena built, though the latter is certainly looking less likely the more time passes from his original approval two years ago. But it’s a reminder that 1) paying for arenas is hard, which we knew already, and 2) “build it and they will come” isn’t a great strategy for landing a pro sports franchise, which we also knew already.

Commissioners gotta commissioner: Silver says “upgrades” needed for Cleveland to host NBA All-Star Game

Hey look, everybody, a sports league commissioner has used the promise of a major sporting event as a carrot to demand arena and/or stadium upgrades! That’s surely never happened before!

NBA Commissioner Adam Silver said the only thing that would prevent the city of Cleveland from hosting an NBA All-Star game is failing to make improvements to Quicken Loans Arena.

“They’ve expressed interest in it and we’re waiting for them to get the additional work done on the building,” Silver told Northeast Ohio Media Group during Game 2 of the Eastern Conference Finals…

“It really comes down to when are the upgrades going to made to the arena,” Silver reiterated.

Cavaliers owner Dan Gilbert has been asking for public money to upgrade the team’s 21-year-old arena, because the public money he got last year at this time wasn’t enough, or something. So Silver just did him a favor by delivering a promise, or a threat, or a promise-threat, in the hopes that Cleveland officials will get all exciting about the possibility of an NBA All-Star Game without checking to see whether other host cities have actually benefitted from them one bit. Because that’s what commissioners do.

In totally unrelated news, the NFL has said that it will maybe consider holding the 2020 Super Bowl in Los Angeles, if there’s a stadium and a team in place there by then. Must be nice to be the kid with the new car everyone wants to ride in.

Seahawks owner expresses “concerns” about not-anywhere-close Seattle arena, this is news, people

Citizen responses to environmental impact statements are usually among the most academic of exercises — you file them, they go in the back of the final report, and no one ever reads them again. Unless, that is, you’re a citizen who owns the local NFL team:

Paul Allen’s First & Goal Inc., which oversees all operations at CenturyLink Field, expressed serious concerns about the proposed sports arena that could house NBA and NHL franchises in Seattle’s Sodo neighborhood…

“It was anticipated that the EIS regarding the arena would resolve many of our questions and concerns,” the letter stated. “Unfortunately, after reviewing the FEIS and the most current version of the Arena proposal, we continue to be troubled that the arena has not yet disclosed and the city does not yet know how the proposed arena will fit within the existing stadium district or how it will mitigate many of its potential effects.”

Allen hasn’t previously complained about Chris Hansen’s proposed Sodo arena — unlike the owners of the Mariners, who’ve griped about it causing traffic problems — and the Seahawks owner insists that he’s still supportive of the plan, despite his concerns. But it still has the Puget Sound Business Journal asking what Hansen will do with his downtown land if he doesn’t build an arena on it. (Answer: sell it to somebody for commercial development, say two commercial realtors.) Not that Hansen is ready to break ground on this thing regardless — he still doesn’t have a team to play in it, for starters — but it sounds like now the media is developing an exit strategy for him, whether he wants one or not.

Milwaukee arena reporter Don Walker has passed away

I’ve poked a lot of fun at the Milwaukee Journal Sentinel’s Don Walker in recent months — most memorably for this — but he’s done a bunch of good reporting as well, all part of his assignment to cover the Bucks arena deal on a daily basis. And even if he hadn’t, it still would have been a shock to see this just now:

No word yet on the cause, though Walker was still tweeting as recently as last night, so presumably something sudden. (From his college graduate date, it looks as if Walker was in his early 60s.) Our condolences to his family and friends, and respect to someone who clearly cared a lot about reporting on the sports-business world, even if we came at it from very different places.

Bucks arena talks prove fruitful at finding new, vaguer ways of expressing optimism

Another week, another set of closed-door meetings about the Milwaukee Bucks arena funding plan, another batch of news articles filled with nothing but quotes from participants expressing vague optimism:

WISN 12 News reporter Kent Wainscott was told that some funding questions still need to be resolved, but a couple of the participants told him after the meeting that they believe a deal may be closer than it has been to this point.

And:

“I’m confident we will get to a solution,” [Bucks President Peter] Feigin said. “We are happy the Bucks are involved in that solution.”

This is barely news on the best of days — “People Trying to Negotiate Thing Express Confidence That Negotiations Will Be Successful: Film at 11″ — but even less so given that everybody at these meetings just expressed the exact same platitudes three weeks ago. A better headline might have been “Chris Abele, Bucks express same optimism on arena deal as they’ve expressed through last month of so-far fruitless meetings.” (It’s wordy, I know, but think how it’d do on social media!)

Come on, Don Walker of the Milwaukee Journal Sentinel, didn’t anybody say anything about where the money would actually come from?

Asked about the substance of the talks to date, Feigin said negotiators were trying to figure out the revenue streams a new arena would produce, what revenue would result from ancillary development and how that would be allocated.

“That is the crux of what we are trying to figure out,” he said.

So, city, state, and team negotiators trying to figure out how to pay for a Bucks arena are focused on whether it would make any money, and who would get it. Film at 11.

WI realtors buy ads claiming Bucks arena job creation, win free space in Milwaukee Business Journal

I honestly don’t get why Milwaukee’s commercial realtors are so hot for a new Bucks arena — the Commercial Association of Realtors Wisconsin previously announced plans to come up with its own arena funding proposal, though I don’t believe they followed through — but they’ve stepped it up a notch by announcing they’ll be buying billboard space to tout the project. One such ad reprinted in the Milwaukee Business Journal reads “New ARENA jobs = 10,000,” which, well, I guess they’re not the Commercial Association of Copywriters Wisconsin.

Other things I don’t honestly get: Why the Business Journal’s Rich Kirchen wrote an entire article repeating the realtor ads’ claims without, you know, doing some checking to see whether ARENA jobs really = 10,000. (SPOILER: Almost certainly not, especially when even arena proponents only say that “many” of these jobs would be permanent.) There’s a fine line between reporting on a PR campaign and giving it free publicity — as many people may end up seeing these ads from this article as will in the flesh — and I’d say this piece crosses it. Though come to think of it, maybe the way the Business Journal portrayed the billboard thumbnail was a clever commentary on the arena’s actual likely impact:

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Bucks arena to include magic basketball that will transform Milwaukee into world of color

MILWAUKEE —The Milwaukee Bucks released a video Thursday showing what good a new arena could do.

Oh, boy! I hope this involves one of those computerized flyovers that are all the rage! Preferably with the arena leaping into action to save Milwaukee citizens from the Green Goblin!

Okay, so, um, floaty basketball that will apparently reorganize molecular structure at the subatomic level into life-generating matter of equal mass. That’s pretty good, too!

I’m not sure which I like best about this, the disclaimer that the arena won’t actually look like it’s depicted in the video (the magic basketball, presumably, will look exactly like this), or the bit that shows all six of the Bucks’ one championship banner being lowered from the rafters. Promotional videos are just awesome.

Milwaukee official proposes tax hike that’s dead on arrival, stop even reading this, seriously

Another day, another Wisconsin official throwing Milwaukee Bucks arena funding ideas against the wall and watching them fall ineffectually to the ground:

Under [County Executive Chris] Abele’s plan, the current 0.5% tax on food and beverage sales would be increased, with the extra revenue diverted to debt service on a $500 million arena and, down the road, possibly an expanded convention center, the sources said…

Increasing the food and beverage tax faces at least two major hurdles. One is that it would require the approval of the Republican-dominated Legislature, making passage doubtful. The second is that Gov. Scott Walker has repeatedly said he is opposed to any kind of tax increase as a means of funding the $500 million arena.

Yeah, so that ain’t happening, especially not in a month when the state is about to start slashing spending on everything in sight to fill a giant budget hole. In fact, Don Walker’s story on Abele’s plan says it may already have been dropped from arena talks, though he still devotes an awful lot of words to it. Slow news year, I guess.