Sunday, May 31, 2015

The Bucks arena bill still has lots up in the air

We keep waiting for a final bill for the Milwaukee Bucks arena, and while we have an idea of the changes from the proposal that was in Governor Walker's budget, there are still some key details that need to be put on paper to see how they will work. And it's those details that I think will ultimately sink or swim the bill, and decide if it'll be folded into the state budget, or have to be a standalone bill that is debated at a later point.

First, let's go to the most recent summary of what the Bucks bill might look like, which came out Friday from the Milwaukee Business Journal, and includes comments from Assembly Speaker Robbin' Vos.
Vos confirmed a Milwaukee Business Journal story Thursday that the so-called jock tax will pay for the state's planned $55 million in bonding toward the arena. He said $4 million of the annual jock-tax collection from NBA players would be earmarked toward payments on the state's new arena debt, which is a much lower amount than Walker's original $220 million proposed state bond issue.

Details of the arena funding plan have leaked in recent days. Aspects of the proposal include the state issuing $55 million in bonds, the Wisconsin Center District issuing $93 million in debt and the city contributing a $35 million parking structure and $12 million tax incremental financing (TIF) district.

Vos said the Wisconsin Center District-funding provision will not require the district to increase any of the sales taxes it collects. However, the Wisconsin Center board could hike taxes if the board so chooses, Vos said.
If there is money directly earmarked from player salaries to this arena, then it truly is a "jock tax", and that's a notable change to what the bill had earlier You may remember that Walker tried to claim it was a jock tax, but when you looked inside the bill, it showed it was a straight-up subsidy of General Fund taxes.

The $55 million in bonds is a huge drop from the $220 million that was in Walker's original budget, and the idea is that the "jock tax" would pay that off at $4 million a year over 20 years. This obviously takes away $4 million in income tax revenues that can be used for other means, but $80 million is a whole lot less than the $488 million that the LFB estimated the state would be on the hook for with the original bill.

The City of Milwaukee's part seems relatively straightforward- they build and gift a parking structure and set aside a TIF for certain areas at or near the arena. But the obvious question is where that TIF would be, and what has changed in terms of which part of the "ancillary development" is free from property taxes. This was the biggest screw job in the original Bucks arena plan, and Bruce Murphy of Urban Milwaukee had estimated that this giveaway could have cost the City and County of Milwaukee nearly $630 million in revenues, leaving residents to make up the difference. Let's see the language in the bill that deals with property taxes and the "Entertainment district", and see if Milwaukee taxpayers are better protected in this updated deal.

The Wisconsin Center district part of the plan is intriguing, as it not only includes a back-loaded payoff time frame for their portion of the arena, but it also would change the parameters of what the district covers. Here's how the Milwaukee Business Journal described it last week.
In Milwaukee County, the Wisconsin Center District collects 2.5 percent on hotel rooms, 3 percent on car rentals and 0.5 percent on food and beverage sales. The district also receives a 7 percent hotel room tax in the city of Milwaukee.

The draft proposal for arena funding does not include an increase in those sales taxes, sources said, but it hasn't been ruled out.

The current arena-funding proposal also includes the possibility of greatly expanding the Wisconsin Center District’s turf.

Currently the district consists of the convention hall, the UW-Milwaukee Panther Arena and the Milwaukee Theatre. The draft proposal would add the new NBA arena as well as possibly the BMO Harris Bradley Center (which would be demolished after the new arena opens) and possibly other downtown Milwaukee County-owned cultural attractions.
Of course, the Wisconsin Center can raise these taxes with a vote of their elite group. Who makes up the new Wisconsin Center District Board might be a hidden factor in this bill, and we'll see if the power shifts toward Milwaukee oligarchs, the Governor's office in Madison, or with local elected officials. We don't get to vote on who's on that board, so the real way it gets changed may be through this bill.

And the biggest mystery involves Milwaukee's County's role in financing for the arena. Here's what the Milwaukee Journal-Sentinel had to say about that part with Dan Bice's and Patrick Marley's article from last week that revealed many of the aspects of this arena plan.
In the most unusual feature of the deal, Milwaukee County would "certify" tens of millions of dollars in uncollected county debt. The county, in effect, would then count on the state to recover at least $4 million of that debt a year for 20 years, a total of another $80 million that would then be funneled to the arena project.

One source said that plan could put the state at risk of having to put more toward the project. But another source said if there's a shortfall the sum could be deducted from aid the state provides the county.

A source said the Milwaukee County Board would not have a vote on the deal, including the financing piece affecting county taxpayers.

"There may be other County Board reforms that will be part of this package," said one official close to the negotiations.
These are the biggest red flags in this deal, at least in what's been revealed publically. How does this whole uncollected debt scheme work, and who is liable for the remainder of the $80 million in case the debt falls short (state or county)? In addition, I'd imagine there's an amount of debt that is planned on being collected over the course of a year, so is this $4 million over and above that amount? Or is it replacing the amount of debt that's normally collected, which takes those funds away from other County needs? That doesn't add up to me, and I want to see these provisions as written in the bill so I can have a better grip on these matters.

And the fact that the Milwaukee County Board or the voters don't get any say in how this financing will work is a major concern, and instead seems like another back-room deal with County Executive Chris Abele and the GOP leadership in the Legislature (much like how Abele got the County Board turned into a part-time organization with less power 2 years ago with WisGOP help). The County provisions seem like the two parts that would sink this deal, and are the ones that should be watched most carefully.

In all, if the Milwaukee taxpayers are protected from major property tax write-offs from the proposed development near the Bucks arena, this is certainly an improvement to the boondoggle that the original Bucks arena bill was. But those "ifs" still remain, and with the hijacking of Milwaukee Public Schools in the K-12 omnibus that cleared the Joint Finance Committee last week, shelling out state funds to help a team in a league where both owners and players are already set to get huge increases in available money in the coming years has really bad optics.


  1. Is it true? the Wisconsin Center board could hike taxes if the board so chooses, Vos said. An unelected board has taxing authority?

  2. They sure can. Here's a posting from late 2009 on their last increase in food and beverage tax in Milwaukee.

    Oh, but our Guv insists it won't be a tax increase because it's locally-based. Riiiight