Saturday, July 25, 2015

Rep. Weatherston, Bruce Murphy with updates on Bucks bill

I wanted to give you a couple of updated takes on the Bucks arena bill, which is still scheduled to be debated in the Assembly next Tuesday. The first comes from State Rep. Tom Weatherston, a Republican who represents suburban Racine. Weatherston has been at the forefront of trying to end the 0.1% Miller Park sales tax in the Milwaukee area, and wrote an intriguing press release explaining what he sees as the difference between the Miller Park bill from 20 years ago, and the current Bucks bill. The first contrast that Weatherston makes is that there is a sunset to how long most government payments will be made to the Bucks arena, as opposed to the open-ended Miller Park tax.
First, the Miller Park bill created a sales tax in Milwaukee, Racine, Waukesha, Ozaukee, and Washington Counties. And, like any tax, once it’s established it’s hard to make it go away. Just look at news accounts regarding the stadium tax over the years. On January 7, 2005, the Stadium Board reported, “the stadium tax remains on track to end in 2014.” Then on March 4, 2008, a stadium consultant reported that, “the sales tax might extend to 2017.” Two years later in 2010 financial projections suggested that the Miller Park stadium sales tax will be paid off “between 2016 and 2018.” Three years after that in March of 2013, a forecast said the Miller Park sales tax could end “as soon as 2016 or as late as 2020.” In March of this year the financial advisor to the Stadium District said in a letter that “we believe the District should be able to satisfy all of its outstanding obligations between 2017 and 2020.” The Bucks Arena bill does not create a new tax.
While some of that delay in ending the Miller Park tax is due to the two recessions that hit the area especially hard in the 2000s, Weatherston is mostly right o this point. The only direct tax money designated for the Bucks arena is through the Wisconsin Center District, and that is in the form of hotel and rental car taxes that are already in place.

Weatherston goes on to note that unlike Miller Park, the Bucks arena bill's taxpayer costs are merely for construction, are capped at a set figure, and will not include ongoing maintenance. All of those issues has resulted in a rising price tag that taxpayers have had to shell out for the Brewers stadium over the last 2 decades.
Next, the Miller Park legislation contained no taxpayer protections and set up a Stadium District with little oversight. The legislation that made Miller Park possible said that taxpayers were liable for $160 million of the estimated $250 million in construction costs with the Brewers making up the $90 million balance. But by the time the stadium construction was completed, taxpayer liability increased to $310 million when construction costs ballooned over the life of the project to nearly $400 million. Cost overruns were picked up courtesy of you, the taxpayer, because there were no protections in the bill. The Bucks Arena bill limits state taxpayer liability to $80 million, cost overruns are paid for out of the owner’s pockets.

Finally, the lease is where the insult was added to the injury to the taxpayers after the Miller Park bill was passed. Taxpayers are treated as an unwitting third party to the lease. The Stadium District as the landlord sticks taxpayers with the bill for a large portion of the costs of maintenance and upkeep. The lease requires the team to pay rent, yet the rent they pay doesn’t even cover the maintenance costs of Miller Park. What kind of landlord does that you ask? The same kind of landlord that plans to buy two more brand new scoreboards, the second one in the final year of the lease, at a cost of $6 million each. Further, did you know taxpayers paid a good chunk of the costs for the “mini-Miller Park” officially known as Helfaer Field (the Little League Park in the Miller Park parking lot) ?.... The cost of the field was $3.1 million with $2.1 million coming from the Helfaer Foundation. Taxpayers and the team were liable for a 70/30 split respectively for the remaining $1.1 million. Is this maintenance and upkeep? Under the Bucks arena legislation, after the arena is built, maintenance and upkeep and improvements are the Bucks’ responsibility, not the taxpayer’s.
I'll have a bit of a quibble with Weatherston's comment about the Bucks bill not paying for improvements, because the current Bucks bill still plans to spend $10 million to fix up the Bradley Center over the last two years that the Bucks would play in it (it's provision b on Page 3 of the 2.0 bill, and that hasn't been amended as of this time). But otherwise, I think these points are spot-on, and are improvements over the Miller Park bill that Weatherston calls "the model of what not to do" when it comes to funding sports arenas.

But that doesn't mean there still aren't a ton of goodies and other subsidies in this Bucks bill, as Bruce Murphy of Urban Milwaukee pointed out this Thursday. Here a tasting of the hundreds of millions in tax breaks and other extra perks that the Bucks and this arena will get, as opposed to the typical private business in Milwaukee.
A property tax exemption will extend to nine acres of development by the Milwaukee Bucks, which the bill says “may include offices of the professional basketball team…, parking spaces and garages, storage or loading facilities, access ways, sidewalks, skywalks, plazas, transportation facilities, and sports team stores.” We will never learn the total value of this complex because its exempt and will never be appraised by the city, but even assuming a value of just the $500 million estimate for the arena, that’s nearly $15 million in property taxes lost annually or $450 million over 30 years. (For a real business the assessed value might be lower than this but over time the tax rate would rise and I’m applying current rate for all 30 years.)...

-A sales tax exemption on building materials, equipment and supplies used solely in the construction of the arena. Assuming the cost of materials, etc. for the arena is, say, $300 million, that exemption would be worth about $17 million to the team.

-A sales tax exemption on luxury boxes which will be carried over from current law, which makes luxury boxes for an NBA arena sales tax exempt. In the NBA the average luxury box cost about $206,000 annually. Assuming 30 boxes, that’s six million in income annually, which would have generated $336,000 per year, or about $10 million over 30 years. (An regressive contrast to the $2 ticket tax that's part of the current arena bill, and the sales tax us regular folks already pay on tickets.)

-A sales tax exemptions on all retail within the arena, basically for concessions stands and other retail not normally open to the public. Any licensed bars or restaurants regularly open to the public will be subject to property and sales taxes.
And the Bucks would also be exempt from the state's corporate income tax, which is a nice bonus when you realize NBA teams will be making money hand-over-fist in the coming years with the league's new broadcasting deal. Murphy also mentions that the city of Milwaukee will have to borrow to build its portion of the infrastructure that it's contributing to the arena, and in addition to the Bucks picking up parking revenue from the garage being donated by the City, Milwaukee will lose parking revenue from the structure on 4th Street that it currently operates, but will demolish for the arena.

It is those local government costs, along with the contrast to the loss of education funding and other services in Milwaukee that make me oppose this arena (well, that and the corrupt ties between Gov Walker support of the arena and Walker 2016 finance chair Jon Hammes, whose company stands to make millions on this deal). As mentioned previously, I think a simple local Milwaukee County sales tax is the best way to go if you want to have public funding toward such an arena, and it can even be done in such a way to make Rep. Weatherston happy by killing the Miller Park tax at the same time. In addition, I think having the $4 million cut to Milwaukee County shared revenues to start in 2016, before there is a new arena, is a double-whammy, and the cut should be put off until 2017, when the County could realize the revenues from the new facility to offset some of that cut. Maybe some of the Assembly reps could throw that in as an amendment, which I'd think the Senate would have no problem concurring with.

Both Weatherston and Murphy's articles are good food for thought as this bill goes back for debate at the Capitol next week, and we'll see what the outcome is, and if any changes end up getting made to the arena bill.

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