Wisconsin assembly decides it’s too hot to change Bucks arena bill, votes it in without debate

As expected, the Wisconsin state assembly easily passed the Milwaukee Bucks arena bill yesterday, 52-34; as slightly less expected, it didn’t make even insignificant changes to the language, or debate it in the slightest, just straight-up voting on what the state senate passed last week:

“I’m ready to go home,” [Rep. Dean] Knudson said. “We’re here in the summer. It wasn’t going to change anything.”

The arena deal now heads to Gov. Scott Walker, who will certainly sign it, though there’s some calls for him to veto the part of the bill that will direct part of a ticket tax to the state instead of the state-run arena district, which has to be the least interesting amendment possible to the deal unless you work in the arena district budget office. Next up would be Milwaukee’s city council, which is headed by that opposition leader from The Thick of It, and which isn’t expected to throw up any significant roadblocks either. It won’t vote until September, though, so expect lots more public squabbles in the interim over things that don’t really matter and don’t ultimately change anything, because that’s what elected officials do when they want to seem important but don’t want to rock any boats.

Wisconsin assembly Democrats will only vote for Bucks deal if it doesn’t get more awful than it is already

The leader of Wisconsin’s state assembly Democrats says they won’t provide the votes necessary to pass a Milwaukee Bucks arena deal without “six or seven amendments” to the plan the state senate approved last week. And what does Assembly Minority Leader Peter Barca want to see?

“By and large, one thing that’s important is making sure that 30 years from now when the Bucks come around and want a new arena again that we’re in much better shape for the taxpayers,” he said. “That we’re not in the same boat (as) now where we have to put millions of dollars just to keep the Bradley Center operating because it needs significant maintenance.

“Additionally, we want to make sure that we have the best arrangement for the greater Milwaukee area for workers and for having jobs that are meaningful that I think the Bucks share in.”

Item #2 is clearly some kind of local hiring agreement, which the Bucks’ billionaire owners should be happy enough to agree to, since it’s no skin off their nose who actually builds the thing, so long as it’s mostly the public that’s paying the bills. The first one is a bit more unclear — some kind of clause ensuring that the team is on the hook for maintenance and upgrades on a new arena, maybe? — but is certainly worth trying to address, given that the Bucks’ actual lease on this new arena is still yet to be determined, which could hide an awful lot of subsidies down the road.
And speaking of hidden subsidies, Bruce Murphy of Urban Milwaukee has taken another shot at totaling up all the public subsidies involved in the Bucks deal, and come up with this list:
  • $195 million in Wisconsin Center District costs (including interest), less $45 million in accrued ticket taxes, for a total of $150 million. Murphy doesn’t convert that into present value, but it would come to about $70 million.
  • $55 million from the state (against translating Murphy’s numbers into present value) in arena bonds, plus $20 million to pay off existing Bradley Center debt.
  • $55 million from the county for arena bonds.
  • $48.5 million from the city.
  • $180 million in present value in property tax breaks on the arena.
  • $50 million in savings from federal tax exemption on arena bonds.
  • $17 million in sales tax exemption on construction materials.
  • A bunch of “miscellaneous,” including continuing to exempt the Bucks from the state’s 7.9% corporate income tax, just because.

That’s at least $505.5 million in public subsidies, or just about exactly the total cost of building the arena. (Actually slightly less if you want to be technical, since the federal tax-exempt bonds really reduce the arena cost, so without those it would be a $550 million arena.) You can quibble over the details of the math, but the public — including taxpayers in Milwaukee, in the state of Wisconsin, and even in the rest of the U.S. — would be paying for the vast majority of a new Bucks arena, to replace one that is less than 30 years old. With a deal like that, here’s hoping the state assembly Democrats do actually put a little effort into making sure that it doesn’t get even worse once the lease is decided on.

Atlanta mayor offers Hawks public money to replace 16-year-old arena, but only if it’s “reasonable”

Atlanta Mayor Kasim Reed says he’s met with the new owners of the Hawks about their stated desire for a new or renovated arena, and any hopes you may have had that he was going to tell them, “Fine, you want to replace your 16-year-old arena, do it on your own dime,” you can forget about that:

Reed said he’s met once with the team’s new owners and repeated his willingness to consider a deal involving the use public funds. The mayor first indicated that option last year in the wake of controversy involving the team’s previous leadership.

“What I’m willing to do is come to the table with a plan that makes sense and is fair to the people of Atlanta,” Reed said. “I’m not closed to participating in a reasonable plan to make sure that the Hawks remain in the city and that’s what I expressed in our meeting.”

Mayor Reed has a bit of a weird history with sports subsidies, being a prime mover behind giving hundreds of millions of public dollars to the Falcons for their new stadium, then declaring offering the Braves money to keep their from moving to Cobb County to be too rich for his blood, then offering $150 million for the Hawks to extend their lease when they weren’t even threatening to break it. There’s also the little matter that the Hawks couldn’t leave without paying off about $100 million in remaining bonds on the Philips Arena (and couldn’t leave before 2018 without paying an additional $75 million in penalties), but that’s apparently not going to stop Reed from leading with his wallet.

Possible sites for a new arena would be the Atlanta Civic Center (the current filming site for Family Feud, according to Wikipedia), a rehab of the existing Philips Arena (which the Hawks own), or a third, undisclosed site. Total cost: Who knows?

Prediction: This is not going to end well.

 

Wisconsin pol says garnish wages of poor debtors to fund Bucks arena, because hell with those people

So remember how the state of Wisconsin proposed to help fund a Milwaukee Bucks arena by having the state go after $4 million a year in uncollected Milwaukee County tax debts, then it turned out this mostly meant shaking down poor people for money, then some senate Democrats complained that this would make them look bad, so the senate decided to leave it up to the county where to come up with the money? Well, now the arena bill has moved to the assembly, where at least one member thinks that garnishing the wages of the poor isn’t such a bad idea after all:

Republican Joe Sanfelippo (R-West Allis) says the remaining options are no better.

“It ties their hands and you’re left with two options: you either cut services or you raise property taxes countywide,” said Sanfelippo.

Sanfelippo says he will ask his party’s leaders to put the debt collection plan back into the bill.

“What we’re talking about primarily are people who willfully, knowingly, and purposefully just won’t pay their bills because they know they can get away with it,” said Sanfelippo.

Sanfelippo isn’t wrong that if you demand $4 million in county money for the Bucks, then the county needs to come up with $4 million somehow — though it’s worth noting that cracking down on debt collection would still be one option. (Not necessarily an option that would work, mind you, but an option.) And putting the debt collection plan back in the bill would likely cost Democratic votes, if not in the assembly then back in the senate, which would still need to sign off on a revised bill. So it’s probably a fair bet that the final plan will remain “punt it to the county with a $4 million a year invoice, let them figure it out,” but we’ll know more once the assembly votes next Tuesday.

Bucks co-owner is now Scott Walker’s fundraising chair, what a funny coincidence!

From the “now you tell us” department, the International Business Times’ David Sirota and Andrew Perez reported on Friday, two days after the Wisconsin state senate approved a $450 million arena subsidy for the Milwaukee Bucks, that Gov. Scott Walker’s presidential fundraising chief is in line to directly profit from the deal:

Real estate mogul Jon Hammes, who has donated hundreds of thousands of dollars to Republican candidates and causes, is a prominent member of the investor group that owns Milwaukee’s NBA team. Last week CNN reported that he also will serve as the Walker campaign’s national finance co-chairman. Days after that appointment, Walker’s Republican allies in the Wisconsin state Senate backed the governor’s proposal to spend public funds on a new arena for the Bucks.

Awkward!

Walker’s office replied that Hammes wasn’t part of Walker’s team when Walker proposed the Bucks deal, though IBT notes that he was already a major Walker donor. A Walker spokesperson also defended the plan by saying it “protects taxpayers from the loss of $299 million if a new stadium is not built and the NBA moves the Milwaukee Bucks to another state,” a piece of terrible math that I debunked for Vice Sports on Thursday.

There’s still a chance that the state assembly could vote this whole mess down, but with state Republican and Democratic leaders now both on board, that doesn’t seem likely to happen. On big-money issues, red and blue typically matter a whole lot less than green.

Wisconsin senate votes to pay $450m toward Bucks’ $500m arena, claims this is a bargain, is on crack

Well, they done did it: The Wisconsin state senate voted yesterday by a surprisingly hefty 21-10 margin to approve state, county, and city funding for a new Milwaukee Bucks arena, to replace the 27-year-old Bradley Center. A flurry of last-minute negotiations resulted in Democratic lawmakers getting a handful of changes to the deal in exchange for their votes:

  • Instead of requiring Milwaukee County to let the state collect some of its citizens’ unpaid tax debts and use $4 million a year of that for the arena, the state will now just cut its funding to the county by $4 million, and let the county figure out how to pay for it. This would improve the “optics” of the county portion of the funding, as Democratic state senator Chris Larson said the day before — in other words, the state won’t have to be responsible for shaking down poor people to help pay for a pair of billionaires’ new NBA arena — but it doesn’t change the actual county subsidy amount at all. In fact, the county could still end up paying for its share by having the state collect on its debts — it’d just be the county’s decision, not the state’s.
  • Took the ticket tax on events at the Bradley Center — currently $2 on tickets over $12, $1.50 on cheaper tickets — and raised it to a flat $2 per ticket, 50 cents of which would go to the state to repay its costs. That’s actually less money going to the Wisconsin Center District than previously, though more to the state.

The previous estimate for total public cost of this deal was $457 million: $55 million in state bonds, $55 million from the county, $93 million diverted from the WCD, $20 million to pay off state debt on the Bradley Center, $54 million in city costs for garages and other infrastructure, and $180 million in city property tax breaks. The only change to that in the revised deal — aside from exactly how the money would be provided — is an additional 50 cent charge on tickets under $12, which, given that the entire ticket tax only brings in $1.5 million a year, is going to over time knock at most a million dollars off that $457 million bill. Tough negotiating, Wisconsin Democrats!

In exchange, of course, Milwaukee will get to keep the Bucks — and as Democratic senator Lena Taylor argued yesterday, “the Bucks are big bucks for the state of Wisconsin.” I’ve spelled out before why the “cheaper to keep them” line is bogus — and I have a piece going up at Vice Sports later this morning that explores this in greater detail — so there’s no possible way Wisconsin taxpayers are going to earn back $457 million in value from the presence of the Bucks, especially not when the team will get 100% of all revenues from the new arena. The economically sensible move would have been to call the Bucks owners’ bluff and see if they truly walked — or, at least, to offer them a significantly less lucrative handout and see if they’d accept it.

Instead, as is so often the case, the only true negotiations were between different levels of government about who will get stuck with the tab. It’s a disappointing ending (well, not really an ending since the state assembly and city council still have to vote, but those are considered done deals), especially coming on the heels of several mayors pushing back on sports subsidies, not to mention John Oliver’s “Make them pay!” movement (it must be a movement, it has its own hashtag!). But at least Bucks fans will be happy, if poorer. And hey, the world needs cautionary tales too, right?

BREAKING: Bucks deal agreed to, also not agreed to

This just in from the Milwaukee Journal Sentinel’s reporter on the Bucks arena deal:

So there you go, indeed. All signs are still pointing to a vote of some kind today, but who the hell knows when or on what. I’ll update this post as things progress, though given that I’m just sitting here watching Twitter like the rest of you, you may see it as soon as I do.

 

UPDATE (12:48 pm): Stein has an update:

UPDATE (1:21 pm):

That’s Central time, so everybody meet back here in 39 minutes.

UPDATE (2:01 pm): They’re still working on the bill, but Jason Stein has some hints what’s in it:

That “debt stuff coming out” doesn’t mean the county wouldn’t still have to pay for it — it would — just that it would have to look under the sofa cushions for $4 million a year instead of having the state find it by garnishing poor Wisconsinites’ paychecks. In other words, it’s Chris Larson’s “optics” change to make the subsidy look less, you know, creepy.

So the only real change here is the ticket fee, which if it’s a significant amount could be an actual shifting of costs to the Bucks owners, since ticket taxes typically cost teams, not the public. (Think of it this way: If there’s a 10% ticket tax, that’s 10% the team can’t charge you without you giving up and watching at home.) The Bucks only sold $17 million in tickets last year, so even a 10% tax (which we’re almost surely not talking about) would only generate a couple million dollars a year, which is a drop in the bucket compared to the $457 million current public cost.

I’ll be checking in on and off today — if you really want to follow all the ins and outs of this, I’d suggest following Stein on Twitter. Otherwise, check back way later for the denouement.

Wisconsin Dems reportedly back Bucks arena after winning changes that won’t actually change much

The Wisconsin state senate is reportedly set to vote on a Milwaukee Bucks arena bill today, and since they weren’t going to vote until they had the votes lined up to pass it, presumably if they vote, it will pass. And since the senate was considered a harder get than the assembly, this likely means the plan will be on track for final approval.

Now, the only question is what, exactly, they’ll be voting on. Fox6 News reports:

Senator Lena Taylor (D-Milwaukee) told FOX6 News Tuesday evening a deal appears to be in place. Lawmakers are set to vote on the plan Wednesday. Senator Taylor says to get the ‘yes’ votes needed to pass it, there are changes as to how the city of Milwaukee, Milwaukee County and the Wisconsin Center District will pay their portion of the $250 million in public funding.

Changes to the deal could involve not how much, but exactly how the city of Milwaukee, Milwaukee County and Wisconsin Center District portions would be paid.

Ooooookay, then. Another Democratic senator, Chris Larson, said he’d flipped to support the deal because it will no longer include using $80 million in unpaid county debt collections — money that may well be uncollectable anyway — but told the Milwaukee Journal Sentinel the county would still be putting up the same $4 million a year toward the arena, and County Executive Chris Abele could still hand the debt collection over to the state and fund it that way if he wanted to. So that sure sounds like a meaningless provision, but Larson said that previously the “optics of it just looked horrible,” which presumably translates as “I want Abele to be the guy garnishing the wages of poor debtors to pay for a Bucks arena, not me.”

This sure sounds like all Democratic senators got were some CYA provisions to make them look less like the bad guys, but not anything that will actually change who’s paying for what. Everything is still in flux, though — or as pro-arena senator Alberta Darling said yesterday, “nothing’s poured in concrete” — so we’ll know more after today’s vote, if it happens.

No, the NBA doesn’t need to move the Bucks so it can make $1 billion

Today in bad journalistic math, we present an article by Business Insider’s Cork Gaines, which proposes that the NBA has a vested interest in the Milwaukee Bucks arena plan failing, since it would allow the league to take over the team and profit off of rising franchise values in the wake of its new TV deal:

If the Bucks fail to get a new arena approved, the NBA will buy back the Bucks and then turn around and sell it to the highest bidder in either Seattle or Las Vegas for as much as $1.6 billion. That would be a cool $1 billion profit for the other 29 NBA owners.

Another scenario would allow Edens and Lasry to keep the team and move it to Seattle (or Las Vegas) after paying the NBA a relocation fee, likely in the hundreds of millions of dollars. Under this scenario, the other NBA owners still get a hefty pay day and Bucks owners get to keep an NBA team in a new arena that is still worth more than the total amount they paid in 2014.

Anyone see the logical flaw here? (No, not that someone would pay $1.6 billion to put an NBA team in Las Vegas — we’ll get to that in a moment.) Come on, it’ll come to you. Let’s take a look at the chart that Business Insider included in its article (based on Forbes’ franchise value estimates), maybe that will help:

01-713-1Got it yet? Here’s the key: Those soaring franchise values are for all 30 NBA teams, including the Bucks. That means that even if the Bucks sit right where they are, they’re worth a whole lot more than they were a year earlier, thanks to the league’s new $24 billion TV deal that is already driving player salaries skywards.

Yes, since the NBA’s buyback agreement for the Bucks is fixed at $575 million, that’s an opportunity for the league to make some easy cash if it can get the franchise at a bargain price and then resell it. (This is assuming that the other 29 owners would actually go ahead with scarfing up the current Bucks owners’ equity for themselves, which seems like the kind of thing billionaires don’t do in polite company, but we’d see.) But if you’re including “let Edens and Lasry keep the team for a fee and move it to Las Vegas” in your scenarios, you also have to include “let Edens and Lasry keep the team for a fee and keep it in Milwaukee,” which could potentially be even more lucrative, given the nearly half-billion dollars in subsidies on the table, even if they don’t manage to get approved this year.

Meanwhile, $1.6 billion for a Seattle team, let alone a Las Vegas team, is completely insane, new arena or no. Keep in mind that the Atlanta Hawks, a team in a market bigger than either Seattle or certainly Las Vegas, were just sold for $730 million, a figure that had Forbes itself suggesting that sports franchise values have already peaked. And then take a look at the Forbes NBA valuation estimates: Only five teams are valued at $1.6 billion or higher, and all of them play in New York, Los Angeles, Chicago, or Boston. The nearest markets in size to Seattle are Phoenix ($910 million) and Minneapolis ($625 million), and neither of those teams would be saddled with tens of millions in annual arena debt payments like a Chris Hansen-owned team would be in Seattle. So any potential sale payday here is probably closer to $100 million than $1 billion.

Anyway, all this is no doubt raising temperatures in the Wisconsin state legislature, where Senate Majority Leader Scott Fitzgerald has started suggesting that a ticket surcharge could play a role in a revised Bucks arena funding plan. That’s potentially good news for Wisconsin taxpayers — ticket surcharges mostly end up coming out of team owners’ pockets, since it means they can’t raise ticket prices as high as they would otherwise without pricing themselves out of the market — but without any details it’s hard to say by how much, and Fitzgerald didn’t provide any. The Wisconsin legislature can be called back into session at any time to deal with this, so with no deal close at hand, best prepare yourself for a long, hot summer of this stuff — “window is closing” rhetoric or not, $457 million in cash and tax breaks is too rich a potential offer for either the Bucks owners or the NBA to turn their noses up at.

Bucks exec threatens move to “Vegas or Seattle,” er, that is, NBA would move team, yeah, those guys

Ooooh, he said it!

At an informational hearing held by the state Legislature’s Joint Finance Committee, [Milwaukee Bucks president Peter] Feigin said the Bucks owners’ purchase agreement for the team includes a provision that construction of a new arena start in 2015. If that does not occur, he said the NBA will buy back the team for a $25 million profit and move them to “Las Vegas or Seattle.”…

“The window is closing,” Feigin said. “We can’t wait months, even weeks to start the public process.”

This, of course, has been the threat behind the arena demands of Feigin’s bosses, Bucks owners Marc Lasry and Wes Edens, ever since they bought the team early last year with the provision that the NBA could buy it back and move it if there was no deal in place for a new arena by 2017. (Whether this meant a new arena in place by 2017 or a deal in place by 2017 has been a topic of some debate, though Lasry himself seemed to indicate it was the latter.) But this is, I’m pretty certain, the first time that a Bucks exec has come out and said “Approve this deal now or the NBA shoots this team,” and absolutely the first time that anyone has dared name specific cities, which comes awfully close to a straight-out threat by the owners, even if the NBA is still cast in the role of the big bad.

So how real is the threat? The buyback clause is obviously there for a reason, and Seattle is both a TV market twice Milwaukee’s size and the home of a guy willing to both build a $500 million new arena and pay $625 million, plus relocation fees, for an NBA team to play in it. (Las Vegas is a tiny market, and its main association with the NBA is of an All-Star Game that everyone involved would seemingly rather forget.) That would represent a $50 million profit for the NBA if it bought the team off Lasry and Edens for $575 million (which would in turn be a $25 million profit for Lasry and Edens), and if that’s a crazy amount of money for Chris Hansen to be putting up for a team and arena — or more accurately, for an as-yet-unidentified Steve Ballmer 2.0 to be putting up — that would be Hansen’s problem, not the NBA’s.

On the other hand, this is the same decision that the NBA faced two years ago with the Sacramento Kings, and the league decided then to give Sacramento some more rope to get an arena deal finalized, even though that deal wasn’t any more approved at the time than Milwaukee’s is now. Plus, that was before Chris Hansen was revealed to have secretly funded a petition drive to keep the Kings from getting their Sacramento arena, which undoubtedly didn’t win any friends in NBA offices.

Still, that isn’t going to stop the NBA from using Seattle as a threat, because that’s what it’s there for. As to whether it would go ahead and consummate a deal if its bluff is called by the Wisconsin legislature — that’s a tougher guess, but I’d recommend putting your money on Milwaukee getting at least a couple more drop-dead deadlines if this one doesn’t work.