Bruce Murphy
Murphy’s Law

How Could Walker Refuse Incredible Deal?

Kenosha casino would pay entire taxpayer bill for NBA arena and up to $275 million for any (unlikely) litigation costs. And Walker says no?

By - Feb 12th, 2015 01:44 pm
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Kenosha Casino

Kenosha Casino

No issue is tougher for elected representatives than the demand to subsidize a pro sports stadium or arena. Across the nation, voters overwhelmingly oppose such deals, which forces politicians to scramble for some ingenious end run around the taxpayers.

So the announcement by the Menominee tribe — that it would funnel $220 million of earnings from its proposed Kenosha Casino to underwrite the entire taxpayer bill for the new NBA arena in the proposal by Gov. Scott Walker — was like manna from heaven for worried state representatives. Now they wouldn’t have to consider voting for just the kind of plan that got George Petak, the Racine state senator who voter for the Miller Park subsidy, recalled from office.

So what was Walker’s reaction to the Menominee proposal? He rejected it.

This is one of the most astounding political decisions I’ve seen in more than three decades of covering state and local politics. As Assembly Minority Leader Peter Barca (D-Racine) puts it, the offer from the Menominee “is a no-brainer. It’s a double bonanza for the taxpayers, who will get two magnificent entertainment venues (a casino and an NBA arena) without having to pay a dime in taxes.”

At the press conference in Madison, the offer from the tribe managed the rare trick of uniting the four Republican and Democratic representatives in attendance from the Racine and Kenosha area, all of whom lauded the proposal.

“This proposal is a game changer,” said Rep. Samantha Kerkman (R-Powers Lake), who cited the estimated 10,000 jobs the casino project would create and the “two to four billion” in revenue it could generate, according to a study by the Illinois legislature. “I want to bring that money here to Wisconsin.”

In a statement, Assembly Speaker Robin Vos (R- Burlington) said, “This proposal is an exciting opportunity and could be a win-win for everyone involved.”

Indeed, the details of the proposal as spelled out by Menominee tribe chairman Gary Besaw and Jim Allen, president of Hard Rock International, the tribe’s partner in this project, were eye opening.

Allen noted that studies showed there were 8 million potential customers for the casino, 80 percent from Illinois. The projected revenue from the proposed, $800 million casino is enormous. Besaw noted the tribe would pay $1.2 billion in annual payments (7.5 percent of its annual revenue) to the state over 25 years — plus the $220 million to pay for a new arena for the Milwaukee Bucks.

Mike Huebsch

Mike Huebsch

So why did Walker reject the deal? His Secretary of Administration Mike Huebsch wrote a memorandum noting the Potawatomi tribe (which owns the Milwaukee casino and opposes the Kenosha casino) has threatened to sue the state and could gain $250 million. The tribe claims the state would have to repay its payment of $25 million per year because its contract with the state guarantees no casino competitor within a 50 mile radius.

But the Walker administration hired the Dykema Gossett law firm, under a contract that would pay up to $500,000, and its attorney R. Lance Boldrey concluded that if the Potowatomi won the dispute, it would then be ruled by an earlier 1998 contract, which means it would lose nearly 2,000 slot machines and could also open the door to getting its contract cancelled by 2019. “It does not appear to be in anyone’s best interest to pursue a remedy that results in a reversion to the 1998 compact,” Boldney wrote.

Yet Walker’s rejection of the Menominee offer stated that the “taxpayers still face significant and substantial risks due to potential litigation.”

Walker cited no legal opinion to back up his claim. Instead he referenced a memo he received from Huebsch, who is not a lawyer. Indeed, Huebsch, who attended Oral Roberts University, never graduated from college. I asked Walker’s spokesperson Laurel Patrick, “is there a legal expert the governor or Huebsch has consulted to determine there is a litigation risk?” and she never answered, but merely sent me Huebsch’s memo.

Back in the real world. where lawyers are considered experts on litigation, I checked with Penny Coleman, a principal with Coleman Indian Law in Washington, D.C., who offered this assessment: “I think there is little litigative risk.” She noted that the federal Department of Interior has “made it quite clear… it will not support an anticompetitive position designed to prevent other tribes from conducting gaming. Plus, the State (of Wisconsin) did what it was required to under the existing compact, enter into arbitration. The State cannot be held responsible that the Tribe proffered amendment that was not legal and thus disapproved. The State’s position is quite strong.”

A similar opinion was offered by Kathryn R. L. Rand, Dean of the University of North Dakota School of Law, and Co-Director of the Institute for the Study of Tribal Gaming Law & Policy. She has noted that “compact provisions intended to exclude other tribal gaming may violate federal law…What is certain is that the 2005 compact (signed by the Potawatomi and then Gov. Jim Doyle) does not require any refund from the state.” And “even in the unlikely event” that an arbitrator might decide a refund by the state is required, “it is questionable whether it would be approved by the BIA (Bureau of Indian Affairs).”

“Candidly, the governor’s position on this is puzzling,” Besaw said. “His own outside counsel agreed with our stance that any risks of litigation are very, very far-fetched. And we believe in this so strongly that we have put up a bond to protect the state.”

Besaw and the tribe have promised to pay for a bond to indemnify the state from up to $275 million in any possible costs due any litigation. Walker’s statement rejecting the Menominee offer claimed the bond “would do little to nothing to protect the taxpayers” — without citing any legal opinion, and again referencing the memo from non-lawyer Huebsch.

So I ran this by Matthew L.M. Fletcher, a Professor of Law at Michigan State University College of Law and Director of the Indigenous Law and Policy Center, which follows the law on Indian gaming. What impact would the bond have, I asked.

“Wow, he said. “Seems like that would cover the risk.”

Or as Kerkman put it, “there is not a nickel of taxpayer risk in this deal.”

Adding in the $275 million bond, this makes this a $1.7 billion deal for the state. But can the casino generate enough revenue to pay for this?

That’s a slam dunk, noted Allen, whose company has long experience in the gaming industry, because the percentage of revenue charged casinos by Wisconsin is much lower than in other states. He noted that Hard Rock pays 42 percent of gaming revenues in Ohio and gaming companies in other states “pay 30 percent, 40 percent, 50 percent, even 60 percent” of gaming revenues. Even with the payment for the NBA arena and $275 million bond included, he noted, “we would still be under 20 percent of revenues in what we pay to the state.”

“And obviously, that is the reason why the Bank of America and Merrill Lynch gave us a highly confident letter in order for us to get the additional financing needed for this project,” he added.

All of which raises anew the question: how could Walker possibly turn down this offer? “I think because 600 conservatives in Iowa told him he can’t win the Iowa caucuses (in the Republican presidential race) if he favors the casino,” Barca says.

Certainly Walker’s timing — he turned down the Kenosha Casino not long after he received the warning from Iowa conservatives — suggests this.

Interestingly, Besaw and Menominee representatives say they made an earlier, lower offer of $100 million for the NBA arena back in October. Walker apparently sat on this information. Why? Was he planning a big announcement approving the casino and touting the payment to the Bucks, and then changed his mind after getting the letter from Iowa conservatives? If not, why the secrecy about this earlier offer?

Nearly as remarkable as Walker’s rejection of the Menominee offer has been the response of the Milwaukee Journal Sentinel. No sooner had Besaw and Allen concluded their remarks at the Milwaukee press conference then JS reporter Don Walker asked this question: “Is this a bribe?” Was the tribe trying to bribe the governor?

Actually the $275 million bond would protect the taxpayers. And the offer was made in public at press conferences in Milwaukee and Madison. So how exactly is that a bribe?

Walker and Cary Spivak co-wrote a cursory story on the press conference that includes little of the information you’ll find in this article.  And the Journal Sentinel quickly jumped on the issue with an editorial panning the offer to pay for the NBA arena, and noting that the Walker administration “is skeptical as to whether the Kenosha casino would generate enough revenue to cover payments for the arena as well as the operation’s promise to pay 7.5% of its net win.”

Journal Sentinel readers have no way of knowing why the projected payments might seem reasonable since the news story didn’t include Allen’s explanation on this. And since when is the newspaper taking the word of a lifetime politician like Walker over a chief executive in the industry as to how much revenue the casino can earn? The paper’s reaction to this deal was nearly as puzzling as Walker’s.

More about the New Bucks Arena

35 thoughts on “Murphy’s Law: How Could Walker Refuse Incredible Deal?”

  1. PMD says:

    Pandering to Iowa conservatives seems likely, but what about pandering to Sheldon Adelson? He opposes the casino, spent at least $98 million on elections in 2012, and is going to be a big spender in 2016. $100 million or more buys a lot of influence.

  2. Rich says:

    Besaw noted the tribe would pay $1.2 billion in annual payments (7.5 percent of its annual revenue) to the state over 25 years

    Had to read that three times to realize that it is $1.2b total across 25 years or $48m per year…That’s nearly double the payment from the Pot ($25m/year)!

    Kenosha says 80% expected to come from IL — yay for some OPM — so it would be interesting to get a breakdown of the Pot’s “revenue sources”. Could it be that they too get 80% from IL?

    I’m neither an industry insider nor a potential customer of either of these places, but for the new casino to double the output of the current one, it would have to be pretty special.

  3. Phil says:

    I’m pretty sure the Potawatomi would have no problem coughing up $48 million per year, if that was a term of their deal.

  4. Tyrell Track Master says:

    Totally bizarre. I oppose the Kenosha Casino because it’s a sprawl producer in a wasteland. IF they had placed it in a legitimate neighborhood walking distance from Kenosha’s Metra then I would have been far more in favor. At any rate, the arena deal made enough sense to me to forgive the sprawl.

  5. Matt says:

    So you’re saying it wasn’t a bribe? Who bribed you? So you think the feds would have approved the casino after all this nonsense? You think the Bucks and NBA would politely wait for the Feds? or for the Potowatomi lawsuits? Or for city and county of Milwaukee with no reason to throw in on a stadium (what with one of our most important corporate citizens just getting stabbed in the back by a Republican [who always screws us] running for president).

    But we go to Peter Barca for quotes? Of course he’s pissed, he was on the verge of moving a lot of Milwaukee jobs to an abandoned dog murdering facility. Yeah he’s got some convincing tears. How about you talk to someone from Milwaukee. Like SOMEONE WHO WORKS IN YOUR DOWNTOWN MILWAUKEE STORE, What’s it called again, Urban Seattle?

  6. Tony says:

    Walker losses sight of Wisconsin’s best interest as he takes aim on Washington. Follow the money trail straight to walkers pockets. So disappointing!!

  7. Tpj says:

    Have you ever known Walker to change his mind about a decision he directly made? As Ellis said – Walker works for Walker.

  8. Michael says:

    That’s a lot of quotes from Racine and Kenosha politicians and those with direct financial stake in the casino. Of course Baca, Kerkman and Vos are all over it… they represent that region. This offer wasn’t the rare thing that brought the area pols together, they all were major supports of the casino beforehand.

    The JS has consistently been against the Casino, not just after Walker’s decision. There also hasn’t been widespread activism against the jock tax proposal like their was with an additional regional county sales tax. It may shrink from $220million, but the basic concept seems to be set for approval.

    So you have the rough outlines of an arena deal in place, and you’ve turned down the Casino (for whatever reason). The casino then offers to throw a bunch of money at you and the state (publicly!) in order to allow them to make billions of dollars. What do you gain by taking the money and changing your mind? You look like you are easily bought, not a perception that Walker wants after the John Doe/Mining incident.

    Bribes can be public, and that was clearly one. They were trying to bribe the state to let them build the Casino by offering money towards the arena. You can say it was still the right thing to do but to pretend it wasn’t a bribe because it wasn’t in secret is silly.

    Meriam Webster says….
    bribe
    noun \ˈbrīb\

    : something valuable (such as money) that is given in order to get someone to do something

  9. Bruce Murphy says:

    Michael, there are always negotiations for Indian casinos, as to what state will get. Whether its upping the percentage of revenues paid to the state, or helping fund the Bucks, that’s just each side negotiating. I think most people would think of a “bribe” as something paid personally to the governor, not a payment that lowers taxes for citizens in this state.

  10. Jerry says:

    Can anyone tell me why when the Potowatomi refused to pay their $25 million gaming fee this wasn’t extortion and why their failure to make their legally required payment on time was not in violation of the existing compact that Walker touted as the reason he could not approve the casino. I would assume that their outright refusal to pay the money they owed the state would have made the compact null and void. I thought Walker was supposed to be unintimidated, apparently not so much. The fact that they made their payment immediately upon Walker announcing his no for the casino smacks of bribery and this whole thing smells of complicity by Walker. One has to wonder how much dark money was exchanged over the past year before Walker gave his decision/

  11. Jim says:

    When Milwaukee loses the Bucks because Walker cant get votes to pay for it then the light will go on. Any one that thinks a Hard Rock wont bring in a ton of money has never stayed at one. I’ve been to the one in Vegas and the hotel only in San Diego, very classy operation, better than anything in the state now. The part I laugh about is when its not built in Kenosha it will be in Waukegan then all the idiots in WI wont have anything complain about when potawatomi loses money and theres no offset in Kenosha. Is there not a true statesman in the state?! I can tell there’s not an ounce of brains.

  12. alex says:

    Scott Walker mornig sodium in mixer

    well, that didn’t come out right. I’ll try typing it this time.

    Scott Walker, “more nixonian than Nixon”

  13. Ben says:

    Can we really be surprised that Walker refused hundreds of millions of dollars in cash and the potential to generate far more in revenue that would alleviate the burden of Wisconsin taxpayers, not to mention all of the potential jobs? I feel like we’ve been here before. Who knows what goes on in the brain behind the bleary eyes of a bonehead. He probably can’t do math, which is why he never could finish college, and therefore listened to his idiot friend, who also never finished.

  14. 2fs says:

    Wow, Scott Walker’s most impressive achievements as governor all seem to involve making sure that money stays far away from Wisconsin.

  15. tim haering says:

    It’s a matter of pride, Bruce. Walker already cast himself as the savior of the deal, and he had to swallow some principle to do it, hiking taxes on players to cover his offer. If Menominee had taken the initiative and tossed $200M in when the owners announced their contributions, the answer to their casino dream would have been different. But Walker does not see their late offer as saving taxpayers, but as stealing his thunder. There is still a chance the tribes offer could be accepted, but Walker has a lot of pride to swallow and a presidential nomination to either lose or win. I am more surprise the Potawatomi did not pitch into the arena deal as a way to endear themselves to Walker and ensure the Kenosha casino rejection. But they decided to save their cash and gamble on outside forces nudging Walker to No. The WIN for all tribes is co-marketing, not competition. But they have yet to figure that out.

    Also, Bruce, check your last paragraph. “no know of knowing” should be “no way of knowing.” Your proofreader musta been flirting at that moment.

  16. wisconsin Conservative Digest says:

    In 2010 Scott said: “No new net increase in gambling in Wisconsin”.
    I know that no one expects politicos to keep their word but this is part of it. Secondly the Pots can tie this whole mess in court for decades while withholding their money, HoChunks could do same.
    Menonomee sent out press release but what does the contract say? They could negotiate that for years.
    Same time, what guarantee is there that the Casino would be able to make that kind of money. Anyone been to Atlantic City lately? Slums and dumps around closed Casinos.
    The fairy dust of gambling is not as bright as everyone thinks.
    I happen to have apt. in Kenosha. One side of me, the pocket book, says build, the other side that believes that gambling is net loss for community says; bad idea. I opposed the lottery and these casinos, but the courts won.
    Norquist was right. Where is all the taxable income, development around the Pots place?? Arenas, Casinos, trolleys are no excuse for real management of a city to stop the crime, fix the schools, get jobs for kids.

  17. Gov Walker said he would not approve a new casino unless all Wisconsin Tribes were in agreement. He established October 2013 as the deadline.
    1. Wisconsin Tribes are not in agreement.
    2. Gov Walker did not make a decision in 2013.
    Gov Walker failed to keep his word. Some say he stalled to elicit donations from the Menonmonee Tribe & the Hard Rock corporation.

    Amazon is building an enormous distribution center in Kenosha. This will create numerous good jobs & generate significant tax revenue. Good for Kenosha!
    Milwaukee’s Potowatomi Casino would be adversely impacted by a nearby casino. Customers from Illinois would gamble in Kenosha. Good jobs will
    be lost & tax revenue will decrease. Bad for Milwaukee!

    Kensha should not get two (2) enormous projects at the expense of Milwaukee’s casino. Spread the wealth!

  18. partypanther says:

    I found the fact that JSonline was working really hard to cover up the story to be really interesting. In the afternoon it was to the right of the top story on the main page, which was that the streetcar had been approved. I went back around 5:00 to see if there was any response from Walker and it had fallen to 6th headline under the news portion and the new top story was the Walker opened an Iowa campaign office.

    The question that makes me ask is, what is there to gain for the Journal Sentinel to have Walker as a GOP candidate? Is it because they will get referenced a lot in the media or get page visits from outsiders?

  19. PMD says:

    The Journal Sentinel has already been pointing out how Walker topics they’ve covered for years are now getting coverage nationwide. They are already running a huge amount of Walker-as-presidential-candidate stories (many of them fluffy nonsense like the one about his childhood home in Iowa) before he’s even officially a candidate. Imagine how many stories they’ll get out of him when he’s an official candidate. It means more mention of them and their coverage in stories from media outlets nationwide, even worldwide, and it means more page views from non-subscribes and people who normally don’t read the paper or visit JSOnline. It’s a huge win for them.

  20. TJp says:

    Walker just wrote a letter to Obama telling him that with one stroke of the pen he could create thousands of jobs by approving the Keystone pipeline. How ridiculous does that look? Walker is not being forthright about his reasons. This is vote pandering – pure and simply sad for WI.

  21. John says:

    Hi,

    Good story. Amazing that suddenly a move from the private sector is insufficient for the public sphere. Denying this offer smacks of religious, not free-market, motives. Someone is showing their stripes.

    This professor from UW-Madison Law School asserts that Walker was within his rights to re-negotiate the contracts. Might be another expert to consult?

    http://law.wisc.edu/profiles/rmonette@wisc.edu

    Keep up the good work.

  22. Frank says:

    Walker keeps saying Jim Doyle made him do it. (It’s going to be really interesting in the presidential race how Walker justifies his policy stands without Jim Doyle to scapegoat.) Jim Doyle had less to do with this decision than the man in the moon. But if he did, thank you Jim Doyle. The revenue promises are awesome and it’s amazing Walker walked away from them. But we just don’t need another pocket-picker that takes money largely from low-income households and the elderly. The jobs are nice–but there are a very high percentage of low-wage hospitality industry positions among them. The main product of casinos is regret and sorrow. We just don’t need more of it.

  23. JimmyDean says:

    Some of you turds should do some research on how casinos effect communities. Especially those that aren’t travel destinations.

    Its not all about the money here. At the core, Walker’s decision is completely democratic.

  24. wisconsin Conservative Digest says:

    Put out newsletter to our extensive network of Conservative leaders on the casino and the Arena and even I was surprised. Almost no support for the Arena and state money. Most people do not want more casinos or do nit care at all. so vote goes to Walkers position except for a few loud mouths crying Chicken Little. Win for Walker!!

  25. wisconsin Conservative Digest says:

    People across Wis. have spoken. They do not care about Casino and are opposed to the Bucks getting money from state. They do not think that any of this is good deal.
    I can guarantee you that Walker gang polled extensively about this and found the same.

  26. Jerry says:

    Folks get a grip. Stop the constant attack mode on this governor. Get over it. This governor is doing many great things to turn around this state. We were headed in a bad direction. People forget that even the state bank account was deficient, owing about $ 1 million dollars when Scott took office. No one has raised the possibility that the Potawatomi Tribe is rumored to be doing their own investment towards this new arena. If that is the case perhaps again our state is eased of having to help make the building a reality. Where is Mayor Barrette in this matter? It is not enough for the city to pay simply for roads, sewers etc. when they especially will benefit the most in this huge investment. And where is the county in this matter? Perhaps the shakers of Walker’s policy ought to get over to those two trees,and find out what is happening indeed by the city and the county. I for one believe that this casino in Kenosha would have been a passed deal had not Gov Doyle tied our hands. How does a gaming business get a guarantee that they won’t suffer loss? And why did Doyle give back the copper mines up north to the tribes. Inquiring minds want to know !.

  27. jake says:

    If Walker wants it, he knows his brainless supporters will change their minds and positions on a dime to defend Him. Situational principles, disposable ethics for the ambition of one man.

    Walker Cultists are easily manipulated fools.

  28. jake says:

    Walker owes his Milwaukee business allies. All of wich want a new Bucks arena. He owes the GMAC, lubar, and as well as JS communications.
    If the arena is not built Walker and his legislative cronies will loose much needed monetary support and media cover.

  29. lufthase says:

    The groups from Iowa sending letters and petitions are a sideshow. Follow the people/money most involved in opposing the Kenosha casino and it leads right back to Club For Growth and the John Doe 2.

    Part 1 – Who is spending money?:
    1) Enough Already Wisconsin Inc. has been the most active anti-casino group doing major TV and Radio buys the last couple months, including a Super Bowl ad in Milwaukee. That means they have some serious money coming from somewhere.
    2) Go to their website: http://enoughalreadywi.com
    3) Try to make a donation to their cause. Guess what? You can’t! The “Contribute” button links back to the home page.
    4) So they’ve got money for a big media campaign, but can’t accept donations over their website. They must be getting a big grant from somebody, right?

    Part 2- Where is the money coming from?:
    1) A list of Enough Already’s officers can be found on pg. 4 of this advertising contract: https://stations.fcc.gov/collect/files/71427/Political%20File/2015/Non-Candidate%20Issue%20Ads/Enough%20Already%20Wisconsin/241094%20Enough%20Already%20WI%20WDJT%20w.NABform%20%2814216787099679%29_.pdf
    2) Note that Enough Already’s Treasurer is James Michel
    3) James Michel is also Executive Director of anti-casino group Citizens for a Strong Sheboygan, which declares on its website that it is “a project of Citizens for a Strong America.” http://www.stopthecasinonow.com/ See also: http://wisbusiness.com/?Article=266897
    4) Citizens for a Strong America has gotten almost all of their past funding (and more or less been a front group for) WI Club for Growth. Both groups are right in the thick of the John Doe 2 probe.

    Additionally, Enough Already WI’s Executive Director is Brian Nemoir. He ran Prosser’s 2011 campaign and Thompson’s 2012 campaign. I bet he knows a thing or two about dark money.

    Whatever the reasoning behind it (and it’s not Iowa conservatives), the same groups and donors that have supported and coordinated with Walker all along are the ones most active in trying to kill the Kenosha casino.

    Bruce, I hope you can dig into this further. I think it’s only going to get weirder from here.

  30. Kevin says:

    Mr. Murphy, One would think after “…more than three decades of covering state and local politics…” you would have realized Scott Walker only cares about his current office in so far as it can be leveraged into the next one, constituents be damned. Having said that, I thought approval was a slam dunk, given the electoral votes the Seminoles would by him in Florida.

  31. jake says:

    So true Kevin.

  32. Morgan says:

    @Rich Don’t you not know what “annually”means? It’s $1.2 billion EVERY YEAR, not $48 million a year for 25 years.

  33. Morgan says:

    @Jake No, liberals are followers. I voted for Walker, but don’t support him anymore just like most “Conservatives” I know because we have a mind of our own. I will point out good or bad from both democrat or republican. Can you say the same?

  34. Joel Polar says:

    The Potawatomi tribe and Scott Walker are in bed together they said to Walker “don’t let this Kenosha deal happen” then he said “alright but you have to stay out of the mining situation in the U.P.” They bribed gov. Doyle at least a million dollars in political contributions to get the land their casino sits on in Milwaukee now the bribery continues with the Kenosha deal because they don’t want any other tribes cutting in on their action I highly doubt they were the main reason he said no the heavy hitters backing him had the final say but they certainly did everything they could under the table to black ball the Menominee tribe.

  35. wisconsin Conservative Digest says:

    joe that is outright lie. Walker tried to get the tribes to agree, Kenosha tried to buy them off. Walker said in campaign that he would not allow any net increase in gambling and that all tribes had to agree. He kept his promise but the Walker haters lie away.

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