Monday, June 29, 2015

Hoops news pt. 2- new Bucks arena bill is out

Late this afternoon, we finally got a look at the new Bucks arena bill, and the Legislative Fiscal Bureau's rundown of it. Here are a few quick reactions.

It looks like much of the responsibility of the bonds to build the new arena have been transferred from the state (who was going to borrow $220 million and pay it back in the original Bucks bill) to a newly-expanded Wisconsin Center District (WCD). The WCD would sell $203 million in bonds, with the breakdown being as follows:

$55 million from the state
$55 million from Milw County via the state (I’ll explain below)
$93 million from the WCD

The state and county part will be paid off over 20 years, at a total price tag of $80 million for each part. Interestingly, the state will be paying more in 2016-17 than the $2.8 million they were projected to in the original version of the budget bill, as a trade-off for a flat amount of payments over those 20 years to significantly lower payments in future budgets. Also worth noting is that there are now funds to fix up the Bradley Center in its last few years of hosting NBA basketball. I didn’t see a reference in the old bill to paying $10 million for maintenance and repairs to the Bradley Center, so that’s an extra $10 million that’s being paid in this budget.
a. Two separate, GPR sum certain appropriations and provide $4,000,000 GPR in each appropriation in 2016-17 to make payments to a local exposition district to assist in the development and construction of the district's sports and entertainment home arena facilities. One of the appropriations is related to the Milwaukee County debt collection provisions in the bill, although it would not be statutorily tied to those provisions. Specify that both appropriations would be repealed on June 30, 2036. Require that the appropriation that is not related to the Milwaukee County debt collection provisions under the bill be limited to a cumulative total of $80,000,000.

b. A biennial appropriation funded at $10,000,000 GPR in 2016-17 for the payment of grants to the Bradley Center Sports and Entertainment Corporation. Specify that the appropriation would be repealed on June 30, 2017.

c. An all moneys received appropriation from debts collected pursuant to a state debt collection agreement with Milwaukee County to be distributed to the County that certified the debts. Specify that the first $4,000,000 annually in monies received would be transferred to the general fund, and the remaining balance would be distributed to the County, except those amounts agreed upon by the County and DOR to be held in reserve in this appropriation account for future payment to the County or to transfer to the
state general fund. Estimate $4,000,000 in 2016-17 in general fund revenue associated with this provision. Specify that on June 30, 2036, this appropriation would be repealed and recreated to distribute all funds to the County certifying the debts.
The county’s piece of the puzzle is where a big risk comes in, because some have questioned whether there is $4 million a year in County debts that can be recovered, and if not, then another provision mentions that the County’s shared revenues gets cut by however much the state falls short in getting the $4 million back. Also worth noting is that Milwaukee County gives up its ownership of the Marcus Center for the Performing Arts, as it gets taken over by the new Sports and Entertainment District.

The possibility of the PAC changing hands generated a lot of anger from County Board officials in a Parks Committee meeting a couple of weeks ago. Looks like they had a reason to be suspicious, as the County Board is cut out of the decisions involving the Bucks arena, as the power to give away the Marcus Center and sign the debt collection agreement goes solely to County Executive Chris Abele. This bill is clearly another excuse for an Abele power-grab/selloff, and should be yet another reason he needs to go next Spring.

The WCD's side is a bit iffy as well. Not only are they the entity that is issuing the debt, and have to get payments from the state (and the payments the state gets from collecting the County's debt), but the WCD also is likely to take on higher debt costs.
....It is anticipated that WCD would have to issue more than $203 million in bonds, as allowed under the bill, for the following amounts: (a) amounts to pay issuance or administrative expenses; (b) to make deposits to reserve funds; (c) to pay accrued or funded interest; and (d) to pay the costs of credit enhancement. The accrued or funded interest would include any potential capitalization of interest associated with zero coupon bonds that are expected to be issued by WCD. It is likely that WCD would have to issue zero coupon bonds because its current tax revenues are needed to retire the district's existing bonds [which is projected to go through 2032], and thus, would not be fully available to pay debt service on any new bonds until that current debt is retired.
As a result, the LFB estimates that the expanded WCD will have to pay a total of $217.25 million to fully pay everything off, and it means that Milwaukee County's extra 0.5% food and beverage tax along with the WCD's share of room and car rental taxes will stay longer than originally planned. Theoretically, a new Bucks arena would drive more people to be in a place to pay that tax, but there's no guarantee of that, as the new arena may displace other entertainment, tourism and restaurant spending.

One improvement in the new Bucks arena bill is that it seems the amount of property tax write-offs has gone way down from the original bill, which would have made numerous blocks of development exempt from property taxes, which Bruce Murphy at Urban Milwaukee estimated would cost local governments as much as $629 million over the 30-year life of the arena. Now it only seems to involve the arena and related buildings, and any bars or eating places would have to pay the same taxes as the existing places on 3rd Street, Water Street and other parts of downtown Milwaukee.
Expand the current law property tax exemption for a local exposition district to include sports and entertainment arena facilities, except that any portion of the sports and entertainment arena facilities that is used, leased, or subleased for use as a restaurant or for any use requiring a license for the retail sale of alcoholic beverages and is regularly open to the general public at times when the sports and entertainment arena is closed to the public would not be exempt.
There is also TIF language that seems to make it more likely to have currently-existing TIFs near the arena be more likely to go fully onto the tax rolls, which would take some pressure off of the City and County of Milwaukee.

If the bill was in isolation, I'd probably be ok with it (the County's part is my main concern). But with all of the other damage being done to Milwaukee in the budget bill, particular with the proposed takeover of MPS, reductions in funding to UWM, and the state's refusal to raise aids for local roads and local transit, I can't get behind this thing until the city that the Bucks play in is taken care of first. And I hope the Dems in Milwaukee that are being leaned on to get this bill through as a standalone would demand the same.

1 comment:

  1. You're way more optimistic about this bill than I am. I imagine Bruce M. will try to verify what could be tax exempt but there seem to be MASSIVE loopholes. In the Big Bucks Bar Mall, ONLY bars and restaurants selling liquor will pay taxes. For real! That leaves out all other restaurants/cafes and all retail, including Bucks merch stores, NBA Hall of Fame, game arcades--you name it. It's Mayor Barrett's slight nod to all the bars/restaurants the mall will cannibalize--to "level the playing field." Ha!

    As for what's tax-exempt, they just revised it and made the language vague enough for loopholes the size of 3 arenas. As before, Bucks offices, which will be in same bldg as practice facility will be part of the arena district. Also all parking. Since that's all that may be on 10 free Park East acres for next 10 years, that will all be exempt. Read my lips...NO NEW TAXES PAID,

    The state, county, city would sanction a 30-acre land grab by the Visiting Venture Capitalist who will hold all this land till all nearby land is built, thus raising value of their free land sky high. Either the pols are totally complicit or just stupid (or some of both).

    Even the so-called "public plazas" will be created solely for the Bucks to profit form. Orwellian New-Speak. NBA Company Town Plaza. Just try to occupy it. Even entry to mall will be restricted, if anything like Kansas City Live! and other enclosed "entertainment malls." Admission is only by strict dress code, meant to keep out those in "urban" garb (wink, wink).

    Prepare to be royally screwed by the wannabe monarch Abele and his Court of Oligarchs. Will the MKE Dem state reps fight any of this? Or the City CC?

    Of course the biggest fiasco will be city sanctioned attempt of the mall to out-compete Water & Third St. and food/drink venues within 2 miles of arena. They know they all compete for the same patrons and a new arena will do little to bring more bodies--plus arena will be teeming with more bars and dining inside. A model for How to Kill Off Local the guys who specialize in "creative destruction."