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.

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.

 

WI gov Walker: State’s dead broke, giving $150m to Bucks may have to wait a few weeks

Hey, check it out, Urban Milwaukee called it!

Gov. Scott Walker said Wednesday that legislative consideration of a financing plan for a new arena in downtown Milwaukee will have to wait until other big-ticket issues such as K-12 school funding and cuts to the University of Wisconsin System are dealt with first.

Walker’s comments came after a new Legislative Fiscal Bureau report showed there won’t be any additional money from tax collections to ease anticipated budget cuts during the next two years.

“It will take us some time. Right now, as you might imagine, until we resolve some of these other issues, dealing with the schools and any other big adjustments in the budget, I think the Legislature will be reluctant to sign off on any final plan until we know where we’re at in terms of covering public education,” he said.

This isn’t necessarily throwing in the towel on getting a Milwaukee Bucks arena plan through the legislature this year — Walker said he’s still hopeful of getting something done this session, once the rest of the budget is slashed to ribbons — but the state having no money for anything will complicate finding money to hand over to the Bucks owners, “no doubt about that.”

In other words, it’s highly likely that everyone will agree to meet back here next year, or rather to keep negotiating behind closed doors for the next year, and then hopefully emerge with a full-blown plan that everyone can live with. (“Everyone” here defined as the Bucks owners and all the elected officials who are needed to approve it; whether the taxpayers who would be kicking back income tax and property tax and a bunch of other stuff to the Bucks can live with it isn’t really their concern.) Which was always the most likely scenario — finding hundreds of millions of public dollars to spend on private basketball arenas is hard! — but it just got even more likely.

Arena-hating Milwaukee alderman’s bill to hike sales tax for Bucks arena gets mercifully shot down

Milwaukee alderman Bob Bauman is pushing ahead with his plan for a 1% sales tax hike to help fund a Bucks arena, which he says is a terrible waste of money, and parks and transit, which he likes.

“This is not some radical scheme that is being dreamed up here,” Milwaukee Alderman Bob Bauman said.

Bauman said a 1 percent sales tax increase in Milwaukee County would pay for improvements to parks and transportation and help fund a Milwaukee Bucks arena.

This still seems like a crazy idea, if not a Bucks-themed Trojan horse for parks and other funding, but if the Milwaukee city council is taking it seriously—

A committee voted Monday afternoon to put that idea on hold.

Never mind.

KC’s successful arena district shows even successful arena districts can be huge taxpayer money sucks

With the Milwaukee Bucks owners proposing a $1 billion arena-plus-entertainment-district that could be partly funded by kicked-back property taxes on the entertainment district part — a TIF, in other words, with the arena only excluded because it wouldn’t pay property taxes at all — the Milwaukee Journal Sentinel’s Don Walker took a look on Saturday at Kansas City’s Power & Light District, which has a somewhat similar funding scheme. And he found good news and bad news:

Today, the eight-block Power & Light District is a destination for Kansas City residents with themed bars, fine-food restaurants, shopping, a live outdoor entertainment area and a huge high-definition television that broadcasts sports to passers-by. The half-million-square-foot district is anchored by the world headquarters of H&R Block and the Sprint Center, the city’s multipurpose arena that opened in October 2007.

That’s good!

City manager Troy Schulte said that, in the first few years, the district was generating about $5 million in tax revenue, leaving a $15 million gap that had to be filled from the city’s general fund.

That’s way less good!

Now, you can make a case that even if it’s costing the city some money, it could be worth it in order to revitalize Kansas City’s downtown, give locals some more entertainment options, and the like. (In fact, K.C. councilmember Ed Ford makes exactly this case, telling Walker that “if I could go back and someone had told me at the time this would transform downtown but it will cost $15 million more a year on top of the super tax-incremental financing district we had, I would support it.”) But $15 million a year is a lot of money: That’s enough to finance maybe $225 million in improvements, meaning the city is forgoing that much in other spending in order to pay off the Power & Light District — and that other spending could be on things that were even more beneficial to city residents and their economy. Plus, even a good chunk of that $5 million a year that the district is providing in TIF taxes is likely being redirected from spending elsewhere in town, so some of that is a loss for the city as well. And if the entertainment district is this successful, it’s possible that a developer would have been willing to do it for a lesser subsidy — meaning K.C. could potentially have had its downtown destination and eaten its tax revenue, too.

Finally, all this leaves out the Sprint Center itself, which is losing about another $12 million a year for the city, and which never lured a pro NBA or NHL team as it was promised it would do. All in all, that’s a pretty expensive way to turn your downtown into a nightlife district — I’d love to see the cost-per-job numbers, but Walker doesn’t provide those — and a cautionary tale about how expensive subsidized developments can be, if anything. Hopefully Milwaukee residents and newspaper editors understand that

If the $500 million arena came as a part of an overall downtown development deal – one which benefited the city and Milwaukee County as a whole, not just the Bucks — we’d be much more amenable to state taxpayer money going toward this initiative.

*Sigh*.