Tuesday, April 22, 2014

Bucks arena pt. 2? How to pay for it? (EDIT: with more info 7:40pm)

1. $200 million for Bucks arena, but other funding will be needed. Metro Milwaukee Association of Commerce President Tim Sheehy talked about the arena issue on Mike Gousha's show this weekend. New owners Mark Lasry and Wayne Enders committed to putting up $100 million toward a new arena, and former owner and U.S. Senator Herb Kohl said he'd contribute another $100 million. But more than half of the money for a new arena will likely have to come from public sources.
The cost of a new arena is estimated at $400 million to $500 million. Sheehy said more work remains in courting private investors and said he anticipates the project will need public funding. He said a tax incremental financing [TIF] district that would include retail and restaurants could help the investment pay off for the new owners as well as downtown Milwaukee.

Sheehy said taxpayers would need to take an interest in the funding in order to maintain the basketball franchise long term, adding there are cultural assets that need to be a priority as well, such as the Milwaukee County Zoo.

Sheehy hopes the city and county work together to push for funding on the state level if it is required.
But Sheehy also told Gousha that getting an acceptable package to build a new arena would be "challenging", and a hint to the discussion that's to come was showcased in an article that the Milwaukee Business Times printed last week. In that article, Milwaukee Ald. Nik Kovac made it clear where he stood.
"The NBA has been printing free money for 20 years. I'm not asking them not to make money. I'm just asking them to cover the capital investment that allows them to make money. I'm an old-fashioned guy; I still like capitalism," said Kovac, who represents Milwaukee Third District. "I don't believe in Vladimir Putin-style corporate socialism, which is what the NBA believes in. And you can quote me on that."

Kovac added, "The talk of contribution to me should be off the table – any public contribution that does not involve a direct return on investment. I will loan them money, I will bond them money, but in my opinion, we shouldn't be giving them a dime. It's a private business."

Kovac said taxpayer funding could be better spent on other priorities.

"Will I be glad [the Bucks] didn't leave? Yes," Kovac said. "Do I want to spend $200 million on you not leaving when I could have spent $200 million on public transit, on public education, on stabilizing our housing stock? It's not even close. When you actually look at the things the public expects you to invest money in, this is not one of them. (Owners of professional sports teams) have managed to create, frankly, an extortion racket, in which the public pays them or else. And they do that through a legal monopoly, which shouldn't be legal in my opinion, especially given that they're extorting municipalities that clearly have other needs."
And it's not like Ald. Kovac is an anti-sports TeaBagger. He has a weekly podcast called "Packerverse" (click here to listen) that Michael Horne has described as "the only Socialist-themed sports talk show in the nation." (Disclaimer: I have actually been a guest on Packerverse) I disagree with the socialist part (as evidenced by Kovac's comments above where he doesn't begrudge the profitability of an NBA franchise), but his type of opposition to a straight public subsidy of a business worth $550 million to a new Bucks arena is certainly significant and will have to be addressed.

Kovac did say he was open to the idea of a city-backed loan or TIF district, which ultimately means that the Bucks owners would be paying back funds to the city. Which leads to these questions when it comes to funding a new Bucks arena.

1. Do you do it through some kind of loan or TIF, as is often done for other private-sector business developments, and have it be a city-only project? This would be an internal, Milwaukee-only measure, and would likely be linked to where the site of the new arena would be. I'd favor a spot around vacant land around the Park East Corridor (currently owned by Milwaukee County), which is within a few blocks of the current Bradley Center site, and an area that could be connected into the already-built area on the northwest side of downtown Milwaukee. But both of the site and funding issues would be a combined deal if you did a TIF or loan?

2. Do you look at new sales taxes as the method of public funding, as was done with the 0.1% Miller Park tax and 0.5% Brown County tax that helped pay for Lambeau Field renovations in the 2000s (that Packer tax may be going away next year, by the way). Another option would be a ticket tax, as is used in Nashville for the Predators' hockey arena, as well as other cities.

Which leads to what I'll discuss in the third part of this arena issue. Which government entity would be overseeing this new arena, and who will get to vote to approve this deal, or could block it and turn it down? Lotta sides to look at here, and with the spectre of the NBA taking over the Bucks from Lasry and Edens if there's no arena deal in place in 3 years, this thing's going to heat up faster than either candidate for guv or most other elected officials want to admit.

EDIT: And if your response is "Why not just keep the BC as it is?", Don Walker of the Journal-Sentinel has your answer. He interviews Bradley Center CEO Steve Costello, who says $100 million is a realistic figure that will be needed to run the BC over the next decade.
The short list of needs includes the roof; new technology demands; its heating, ventilation and air conditioning units; seat replacement; and work on the arena's parking structure adjacent to the building. All of those issues will need to be addressed over the next 10 or 12 years, he said.

Second, there is debt. "Three or four years from now when our lease with the Bucks ends, we will still be sitting on $15 million worth of debt," he said. "Over a decade or two we can manage that, but there won't be an immediate plan to pay off that debt."

Third, there is the potential loss of corporate support if the Bucks leave the building and go to a new arena, or elsewhere. The Champions of the Community program, in which major corporations committed financial support to the BMO Harris Bradley Center, provides about $3 million a year, Costello said
Costello also notes that losing the Bucks would likely mean many fewer corporations wanting to shell out funds to sponsor, and would jeopardize events such as March Madness returning to the Bradley Center. So it's certainly a cheaper option to keep the BC vs. build a new arena, but it also carries a real risk of losing a lot of revenue for the area, especially if the Bucks are taken over and/or leave.


  1. My guess would be $600 million, and we should ensure that the design is well handled.

    Otherwise, I am with Kovac on this one. Unless the City gets part ownership of the team, any funding needs to be some kind of loan arrangement.

    Personally, I think it is about time for cities and states to stop knuckling under to the extortion by sports team owners, and maybe the leagues (like the non-profit NFL) need to start making up the funding gaps for these facilities.

  2. I agree with your last statement. According to Mark Cuban, the leagie's making money hand over fist and the $550 mil the Bucks sold for is a "bargain". So we don't need to give major tax help, especially in an area that has many other needs.

    That being said, I'm keeping an open mind till I see where the site would be (it better be downtown) and how it'll be funded. I'm not as absolute as Ald. Kovac on this issue, but I'm skeptical of these deals in this day and age. And the MMAC pushing for it is NOT a positive in my book.

  3. 1. As I'm sure you agree, a "ticket tax" isn't even really a tax, it's more like a user fee. As such, it is an obvious first step, although it's hard to envision it generating much more than $1-2 million a year, if that.

    2. They really need to get the naming rights done before they even think about asking for any public funding.

    3. A loan certainly sounds a lot more reasonable than just giving them money. Despite the large price tag, it seems like this is the type of project where a "super-TIF" actually makes sense.

  4. Alex- Yes, a ticket tax is the definition of a user fee, since no one pays it unless they actually go, which would go a long way toward shooting down the "I won't go to the arena, why am I paying for it?" argument.

    But as you mention, it probably wouldn't raise much. Although even the Bucks drew over 500,000 this year, so you probably figure 750,000 or so total when you combine every BC event. A $2-a-ticket tax is $1.5 million if so, and that wouldn't even pay a year of debt.

    Obviously, naming rights will be a big part of this for the up-front money, and it's probably part of Sheehy's references to "corporate help". Again, I want to see the details on that.

    Now if you have other self-supporting entities be part of a new arena, like a parking garage or team store or some other enterprise, maybe a portion of those sales go to pay back the arena cost or something. Could be part of a Super-TIF