Dispute Over Bucks Arena Goes National
New York Times dumps on Milwaukee business leaders, and city becoming divided on issue.
Veteran reporters at the Milwaukee Journal Sentinel would grumble about the New York Times “parachuting in” to cover a story in Wisconsin. The phrase called to mind fancy pants reporters popping down to a flyover state for a quick story on a place they don’t fully understand. That certainly happens. But a journalist from the outside may also see things we’ve missed, and — with no ties to the community — can be far more frank.
Which brings us to last week’s story by the New York Times, “An Arena Fairy Tale With Blurred Morals,” a droll story that describes Milwaukee as a “grand old dame of a city by Lake Michigan,” casts new Bucks owners Marc Lasry and Wesley Edens as two uber-wealthy Prince Charmings, and then proceeds to mock the notion they need a public subsidy of their business, even as a long list of children’s playgrounds and athletic fields are falling apart in Milwaukee.
Common Ground representative Earl Ingram was among those who took Times reporter Michael Powell on a tour of dilapidated city athletic facilities, including Washington High School, “where the running ‘track’ was cracked and potholed concrete… ‘Our children are twisting their ankles, hurting their knees playing here?’ Ingram said. “And they want us to build an arena for the N.B.A. athletes even as they say they can’t afford this?’”
Yes, the good guys in this fairy tale are the folks from Common Ground, and the bad guys are the businessmen. We learn that Ted Kellner, chairman of Fiduciary Management, Inc., made “heated phone calls” to Common Ground members wondering why they were complaining. We learn that Lasry and Edens have refused to meet with Common Ground and that Lasry’s son Alex, “a newly minted Bucks vice president,” wrote approvingly of a tweet suggesting locals should “Stop whining and pay the arena freight.”
“The Bucks,” he went on, “insist that the arena, if built with private dollars alone, will ‘not pencil out.’ I requested dollar figures.”
A short while later, Tim Sheehy, President of the Metro Milwaukee Chamber of Commerce, and the other villain in this tale, replied with an email, Powell reports. “It does not pencil out,” Sheehy wrote to Powell. “If the estimates are accurate, there is not enough cash flow to support the cost. That’s how real estate works.”
The “pencil out” quote is hilarious: in an age when no one actually uses a pencil to do a budget and when no sports team has ever provided evidence it can’t afford to build an arena or stadium, the idea of this shortfall in money penciling out is indeed a fairy tale. Longtime Bucks owner Herb Kohl, it’s widely assumed, had some losing seasons in the nearly three decades he owned the team, but he also got a huge windfall when he sold the team, purchasing it in 1985 for $18 million and selling this year for $550 million. It’s fair to discount that to $450 million since Kohl has promised to pay $100 million for a new arena, but that’s still a 25-fold return on his investment. By comparison, the S&P 500 grew 11-fold during that period, and was arguably a more risky investment. Pro sports owners never lose money.
Of course, Kohl didn’t have to pay for a new arena; philanthropist Jane Pettit built the Bradley Center. But Lasry and Edens won’t have to pay for the entire thing either, as Kohl has put up $100 million.
Moreover, the Bucks of today are far wealthier franchise, because of the huge increase in revenue sharing the NBA instituted in 2012. It represented “a staggering shift in league policy,” as Street and Smith noted, redistributing $140 million in revenue to the neediest teams.
That number will only grow, because “the N.B.A. itself leaks money out its pores,” as Powell writes, and “just signed an extension to its television contract worth $24 billion, which by the roughest reckoning gives the new Bucks owners a revenue stream of $89 million a year.”
Meanwhile the price Lasry and Edens paid for the Bucks now seems low, given the recent sale of the Los Angeles Clippers for $2 billion. With the growth of basketball as an international game, second only to soccer, the sport’s future is golden, and the Bucks owners will have one of just 30 NBA teams in the world, whose likely long-term value is immense.
Common Ground has threatened to oppose any arena subsidy plan that doesn’t also include at least $150 million to upgrade public recreational and playground spaces. Observers might write off its members as a do-gooders with no clout. But they are very effective; they previously pressured and embarrassed five multinational banks with foreclosed properties in Milwaukee, and these banks ultimately agreed to jointly contribute $33 million to remediate the problem in Milwaukee.
Common Ground proceeds systematically. Back in June, it released a report showing two-thirds of the outdoor athletic and recreational facilities at 268 public schools were in poor condition. Their demand was so logical — how can a city fund a new arena for millionaire athletes if it can’t afford to repair its playgrounds for low-income children? — that it’s not easy to dismiss.
The Times story was quite likely the result of being contacted by Common Ground. Since then the group has released information showing that Bucks owner Wes Edens’ Fortress Investment Group owns Nationstar Mortgage, which Common Ground charges is responsible for at least 14 abandoned and deteriorating properties in Milwaukee. “We want those neighborhoods fixed,” Bob Connolly, Common Ground’s staff director, told Don Walker and the Journal Sentinel. “They are responsible for those abandoned properties.”
And on Sunday the group held a well-attended community meeting to step up the pressure on the Bucks owners. Sheehy attended and accused Common Ground members of “demagoguery,” though the story offered no examples of this. To win the PR battle, Sheehy and the Bucks must somehow find a way to demonize people championing playgrounds for poor children. Good luck with that.
But the most important of these new partners are five prominent African-American business leaders: Michael Barber, chief operating officer for GE Healthcare; Valerie Daniels-Carter, president and CEO of V&J Holdings Cos.; Virgis Colbert, a retired executive vice president for Miller Brewing Co.; Charles Harvey, a Johnson Controls vice president; and Cory Nettles, founder and managing director of Generation Growth Capital.
All five are also members of Partners for Community Impact LLC, which sounds sort of like a social service group, but is actually a private company that state records shows was created in July, presumably to facilitate the new agreement with the Bucks. Daniels-Carter said the group is committed to making sure “the benefits of this economic activity [presumably meaning the new arena] reach the full community.”
Does that mean they will push for a strong minority hiring agreement when the new arena is built? Nothing has been spelled out. But for the Bucks, the addition of these new owners could help sell an arena subsidy to the black community. Already, Ald. Willie Wade, whose aldermanic district has big problems with home foreclosures and unemployment, criticized Common Ground, saying the group is acting like a bully. “They’re out of order,” he told the Journal Sentinel.
Yes, this could be quite a battle.
–Perhaps the most ingenious proposal for a subsidy has come from legislator and former basketball player Dale Kooyenga (R-Brookfield), who has argued the state should look at the taxes (paid by Bucks players, etc.) that would be lost if the state lost the Bucks franchise, and use that as a basis for a subsidy. Gov. Scott Walker, in the second debate, offered some support for this approach. Mary Burke was more guarded.
Of course, the same argument could be made for any business in the state that threatens to move. Indeed, it often is.
-Word has it that Ald. Wade is a Bucks season ticket holder. Could that be a factor in his condemnation of Common Ground?