Bruce Murphy
Murphy’s Law

The Property Tax Scam for Brewers, Bucks

Odds are, the Bucks arena will get many secret tax subsidies, as Miller Park does.

By - Jan 13th, 2015 10:57 am
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Miller Park

Miller Park

There was a time when the Milwaukee Brewers paid property taxes. They did so for the first 21 years of the their history. They are, after all, a private company, and benefited greatly from city services.

The Brewers were operating in publicly-built facility, County Stadium, which was therefore tax-exempt, but all the property owned within the ball park by the Brewers was taxed. But in 1991, the legislature passed a little-noticed law which awarded a tax exemption to all the property connected to a stadium used by a professional athletic team, “including but not limited to parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities, and other functionally related or auxiliary facilities and structures.”

The change in the law came at a time when the Milwaukee Brewers were doing poorly and then-owner Bud Selig was constantly harping about the travails of a small market-team. Once Miller Park was built, the revenue flowing to the team and its market value rose incredibly, yet that law was still on the books, so Miller Park remained completely tax exempt. As City of Milwaukee assessor Mary Reavey noted in an email responding to my question, “this means that all the businesses like TGI Fridays, the Brewer stores, etc are all now exempt from property taxes for both real estate and personal property.”

Legislators were apparently unaware this exemption was on the books, until 2003, when they asked the Legislative Audit Bureau to review the Brewers’ finances, and the LAB revealed that the team was exempt.

Indeed, the assumption was that the Brewers, who own 31.5 percent of Miller Park, based on their contribution to construction of the stadium (a contribution which was itself controversial since almost none of it came from the team), would be paying property taxes on at least their share of the stadium. Nope.

An earlier LAB report had concluded the stadium cost just under $414 million to build. Officials with the Southeast Wisconsin Professional Baseball Park District bitterly contested the figure, arguing the true cost was just over $393 million. Nowadays, however, the District claims it cost about $392 million.

So let’s split the difference and say it cost $403 million. Based on that value (plus the 265 acres that provide parking, etc.) the approximate 30-year bill for property taxes for any private company would be $336 million for the entire facility. If you buy the fiction that the Brewers only benefit from the portion of the stadium it owns, the exemption would be equal to about $106 million.

But as a helpful analysis of Miller Park’s finances by Milwaukee Magazine’s Matt Hrodey found, the sales tax that is still being collected to pay for Miller Park is also putting money into a maintenance and capital repairs escrow fund which is intended to last until 2044. By then the value of the property tax exemption will be $494 million for the entire park or $156 million for the Brewers’ alleged portion. Hrodey’s story also updates readers on the long list of stadium improvements that we generous taxpayers are helping finance. These improvements and the escrow fund have increased costs and will push back the ever-elusive sunset date for the stadium sales tax, which the District now estimates will arrive around 2019 — or about ten years after it was first projected to end.

Will the Milwaukee Bucks get the same tax break? Back in 1985, when the Bradley Center was created as a unique state entity, it was exempted from all taxes. That certainly made sense for the basic facility, as it was created through a charitable contribution by the late philanthropist Jane Pettit, but it also included any improvements made over time (club seats, restaurants serving club seat holders, any Milwaukee Bucks-themed retail entities, etc.) to generate revenue for a for-profit NBA franchise.

Indeed, the board of the Bradley Center, dominated by local business leaders, made it their mission over time to figure out ways to funnel money from this non-profit to the for-profit Bucks. Thus the board decreed that a generous portion of the revenue generated by the Milwaukee Admirals and the Marquette Golden Eagles should fund the Bucks. In the latter case this was a non-profit university being required by the non-profit Bradley Center to subsidize a for-profit company. These decisions were never reviewed by the state legislature that created the Bradley Center, much less by the taxpayers who were in essence subsidizing the Bucks through the broad tax exemption awarded to the Bradley Center. The whole thing was kept as quiet as possible.

Which brings us to the current effort to create a new NBA arena. Not a word has been mentioned by the Bucks ownership or the new arena’s supporters of whether the new entity will be tax exempt. But we know now that Herb Kohl has been assured this will happen, since his $100 million contribution to a for-profit company’s arena is getting treated as a charitable donation, as I’ve reported.

So how will the Bucks manage to claim this exemption? I’m guessing their lawyers have concluded that the 1991 law covering pro sports “stadiums” will cover this new arena. The law, 70.11(36)(a)(a), covers “Property consisting of or contained in a sports and entertainment home stadium, except a football stadium” which is “leased to or primarily used by a professional athletic team that is a member of a league that includes teams that have home stadiums in other states.” The exclusion of football allows the argument that the legislature intended to include all other pro sports team facilities, including a basketball “stadium.”

If so, this means that unlike all other businesses in Milwaukee, which pay property taxes to help support all the city services they receive — police, fire, garbage collection, snow-plowing — the billionaires who own the Bucks will pay nothing. Similarly, Brewers’ owner Mark Attanasio (with an estimated net worth of $700 million) pays nothing in property taxes.

There is a tendency to dismiss the significance of such exemptions. In fact, they are a key way that politicians work around the fact that citizens across the country are adamantly opposed to subsidizing the millionaire athletes and billionaire owners of sports teams. In the case of the Brewers, I estimated the total cost of Miller Park at more than $1 billion when all costs were accounted for. That included seven different tax exemptions costing taxpayers more than $400 million.

We’ve yet to hear what tax exemptions the Bucks will benefit from. I’ve recently estimated the 25-year cost of a property tax exemption for the new arena will be in the neighborhood of $325 million. That’s just the opening bid. Odds are the city will provide some kind of tax incremental financing. All the materials used to build the arena will be exempt from sales taxes. There will be a state and federal tax exemption on bonds issued to build the arena.  And of course the state is considering the so-called “jock tax” that may contribute as much as $150 million to the arena. Finally, we haven’t heard whether the ancillary developments (restaurants, bars, Bucks apparel shop, perhaps a hotel) the team’s owners may create as part of a grand downtown development project will pay taxes.

Guard your wallets, folks, the list of secret subsidies you will pay for is likely to be quite long.

16 thoughts on “Murphy’s Law: The Property Tax Scam for Brewers, Bucks”

  1. Rich says:

    >>>> “…’leased to or primarily used by a professional athletic team…'” <<<>>> “Guard your wallets, folks, the list of secret subsidies you will pay for is likely to be quite long.”<<<<
    And then, gee, you get to pay to go to the game too!

  2. Rich says:

    Seems WordPress got confused with some of the angle brackets in the previous post. The second line (in response to the first quote) should’ve said: “There must be a lease, since the Bucks’ 42 games played there is hardly a primary use — only 11% of the calendar” Though I suppose it would be argued that since the facility is designed for Basketball, then they must be the “primary” user. Of course, that argument falls apart when one consider’s the Bradley Center’s original purpose of NHL hockey.

  3. Mike Bark says:

    Ask most small business owners which tax they really hate and quite a few of them will cite the personal property tax which is assessed on the equipment a business owns. It hits start-up companies particularly hard because the newer the equipment is the higher it is assessed for. It’s also one of those taxes where people say “Really, you’re taxing me on the equipment I own?”. While most people don’t like taxes they at least understand the premise of real estate taxes and income taxes and why they are a necessary evil so to speak.

    Having said that there have been other exemptions carved out for this law. One pertains to manufacturing equipment and one applies to computer equipment. In other words, of you’re a tech start-up you’ll pay little to no tax, yet if you are a dentist starting out you may be looking at a bill between $5,000 and $10,000 per year depending on what municipality you are in.

    The Bucks and Brewers aren’t the only people being subsidized while the vast majority of other businesses have to pay.

  4. Wisconsin Conservative Digest says:

    Great reporting Bruce. This is nuts. Marquette subsidizing the Bucks?? Marquette is worth far more to this area than the Bucks will ever be.

  5. Marie says:

    Wow, it’s far worse than we thought! Thanks, Bruce, for laying this all out. But the deck is solidly stacked against taxpayers.

    First, the team announces that players will be going out in the community to “do PR” to pitch a new arena. The goal is to make mere mortals fall at the feet of these gods and offer whatever “sacrifices” (taxes) are necessary to keep them in our midst.

    Then we hear of all the new “owners,” the lords and ladies of MKE industry who will also be “selling” us all on the wondrous economic value of having taxpayers funding their privately owned, and likely tax-exempt, palace. How can the servant class put up an meaningful resistance, especially when dissenters are treated like misguided malcontents?

    A J-S op-ed (1/4) by acclaimed economists saying that the Bucks have had/will have little more impact on the economy than other forms of entertainment will likewise be dismissed. Why listen to economists when fairy tales make us feel so jazzed about our deep-seated wishes for salvation from on high.

    Keep researching and writing, Bruce. Maybe it will help bands of local “Davids” come up with a powerful slingshot…and perhaps find the will and a way to fund all those neglected sports fields and rec centers Common Ground is campaigning for.

  6. Wisconsin Conservative Digest says:

    Great reporting. what do taxpayers get, the 70% that do not care about the bucks? The chance to subsidize billionaires and their toys. The elite make out while the proletariat get to eat cake.

  7. PMD says:

    We dish out a lot of corporate welfare WCD. Is this selective outrage, or does all of it get you hot and bothered?

  8. tim haering says:

    Bucks should register as a 501(c)4, get tax breaks and be able to run issue ads. Bingo! I still think the POtawatomi should build an Arenasino.

  9. Marie says:

    How can we demand that the sweetheart tax exemption for the Brewers (and all their lucrative spinoff businesses) be repealed? All that corporate welfare is contributing to this metro area’s lack of public money for basic public infrastructure.

    And how can we stop this from happening again with the Bucks?

    Yes, people are outraged by this, but what can we do about it? The democracy game is not over quite yet.

  10. Gee says:

    Marie, I agree. And I think that the demand to amend this sweetheart deal can target the politicians — because we can do something about them, anyway, at the polls — who legislated it, in the first place, As I recall, a key one was Alberta Darling, who should face pressure to fix what she broke, when she brokered it in the legislature.

  11. wisconsin Conservative Digest says:

    I strongly disagree with him on this, agree with that briliant journalist: Bruce Murphy.

  12. PMD says:

    Why do you think Walker is doing this WCD?

  13. Wisconsin Conservative Digest says:

    He believes that it would be black eye fro Milwaukee to lost franchise, this has happened to lots of cities that they get branded. I am opposed but it is not big deal in 70 billion dollars budget.
    Contrary to popular belief Conservatives do not hate Milwaukee, we love it but are abhorred at the lousy management and civic leaders that refuse to recognize the need for solving the big issues.

  14. PMD says:

    So how do you decide when $150 million or so is or is not a big deal?

  15. Terry says:

    Houston told Bud Adams to take a hike when his Oilers wanted to replace the Astrodome, still alive and functioning very well. And, still paying tax dollars to Harris County.

    When the Supersonics wanted a new playpen, Seattle told them goodbye. Oklahoma City is hardly a better place than Seattle.

    And, when Georgia Rosenbloom wanted a new playpen for the Rams, Los Angeles told her not to let the door hit her in the butt as she headed east.

    Houston, Seattle, Los Angeles. Three cities wealthier than Milwaukee. Three cities that just said “No” to blackmail.

    But, Milwaukee is subsidizing the team with the worst composite record in the history of MLB. And, the Bucks haven’t won anything since Kareem got on a plane and headed to L. A. without leaving a forwarding address.

    Is that what Milwaukee thinks is so important? To be known as the Home Of The Losers?”

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