Friday, April 24, 2015

Bucks arena- an epic boondoggle?

Been an interested few days on the Bucks arena front, and not just because of the summit held at the Capitol with leaders from the state as well as Milwaukee Mayor Tom Barrett and Milwaukee County Exec Chris Abele. -

The BS from WisGOP Legislators about how the City has to "get serious" about chipping in towards the arena, but refusing to give the City the tools to do that. Milwaukee Alderman Bob Bauman's prediction from last week is looking spot-on right now, as the deal is blowing up, and the GOP Legislators are trying to pay the blame on a Barrett and other city officials to make them the scapegoat if the Bucks leave.

But Barrett has a right to not want to give away the farm for this project, as the city is at a much higher risk of of sinking a large amount of money into the arena project, without getting much in return. Bruce Murphy at Urban Milwaukee wrote a long in-depth article off of a point I made last week, where the language in Gov Walker's budget says that not only the Bucks arena property itself, but the entire Sports and Entertainment District could be considered tax-exempt. If true, that would make this a huge giveaway for Bucks owners at the expense of Milwaukee taxpayers.
In short, Walker will assure the estimated $10 million in state income taxes on ballplayers isn’t lost, but has created legal language that allows the Bucks a massive property tax exemption. Not only will the $500 million arena be tax exempt, but so will the beer garden, practice facility, public plaza, probably any Bucks apparel and merchandise shops and who knows what else? Assuming everything within the entertainment district will cost at least $700 million (a very conservative estimate) and figuring that value times the current property tax rate of $29.97 per $1,000 of value, that would equal a property tax payment of nearly $21 million per year, meaning local taxpayers would lose far more in tax revenue than state taxpayers would gain. Over the likely 30-year life of the arena that’s a total property tax exemption of $629 million. (That might be a high estimate as property tax assessments for new buildings are often set below construction costs. On the other hand, I’m applying the current tax level for all 30 years of use, while the buildings’ value and taxes are likely to rise over time.)

But that’s not all the exemptions coming to the Bucks. The state proposal also awards a sales tax exemption on “building materials, equipment and supplies used solely in the construction, renovation, or development of a sports stadium.” Note that when it comes to the state sales tax, only the arena is exempt, but when it comes to the local property tax, nearly anything in the sports district is exempt. Assuming the cost of materials for the arena is, say, $300 million, that exemption would be worth about $17 million to the team.

The proposal’s language also specifies that the “income of a sport and entertainment district would be exempt from the state corporate income and franchise tax.” This language is very broad and would seem to include anything the Bucks develop under the banner of an entertainment district. Given the state corporate income tax of 7.9 percent, this exemption could be huge and wipe out most of the $10 million in annual income taxes Walker says he wants to protect.

It’s almost comic to hear state legislators repeat the mantra that the city and county must contribute to the Bucks because they will benefit from this huge development coming downtown. In fact, they are getting nothing but a massive non-profit eating up acres of developable land that will now be stricken from the tax base, and at a time when Downtown has become a magnet to new businesses. For the city, county, Milwaukee Public Schools, Milwaukee Area Technical College and Milwaukee sewerage district, this will represent a huge loss of property taxes that could have been paid by business, residential and retail development. This tax exemption is so far-reaching it leaves no way for the city to create a Tax Incremental District to finance a contribution to the proposed arena because no taxes will be collected in the district.
$629 million in foregone property taxes in 30 years? After giving away City and County-owned land and infrastructure? That's a whole lot more of a contribution that the rest of the state is willing to put in. And unlike the state, the City and County of Milwaukee isn't allowed to raise sales taxes or impose an income tax, barring an act from the Legislature, (and good luck getting that from this anti-Milwaukee, anti-tax crew). It makes Tommy Thompson's "stick it to em" of the 0.1% Miller Park tax seem like a charitable donation, and can you blame Mayor Barrett for not wanting to screw over the city's taxpayers, who would have to make up the difference in this tax exemption with higher property taxes and less services?

I want the Bucks to stay and I like the idea of a huge development associated with it, but not at the expense of permanently deforming the services and finances of the largest city in Wisconsin. Heck, if more Milwaukeeans catch on to how much the City might be on the hook for in this deal, they may hate this deal as much as the 88% of the non-Milwaukee area of the state did in the latest Marquette Law School Poll. Unless this Bucks plan gets rid of a lot of these property tax exemptions and allows Milwaukee more power to generate and keep its own revenues, I say NO WAY. If the Bucks leave, so be it, as I'll trade a city has a high quality of life with good services over giving it all up just to keep an NBA basketball team - no matter how much the Bradley Center was rocking during last night's double OT playoff game.

1 comment:

  1. Wow. Barrett needs to get out in front of this. The words "$25 Million" should never cross his lips again. If he's describing the City's contribution, lead with the $629 Million property tax exemption, plus the land and infrastructure, and hammer on it every single day.
    I'm a Bucks fan too, but if the city is going to get soaked like this, they can take a walk.