Bruce Murphy
Murphy’s Law

State Bucks Arena Plan Fleeces Milwaukee

Proposed sports district gives all legal protection to the state and sticks it to Milwaukee, both financially and politically.

By - Apr 23rd, 2015 12:42 pm
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Arena Rendering.

Arena Rendering.

Wow. If you read the actual language of the state’s proposal to create a new arena for the Milwaukee Bucks, you quickly realize the deal is fabulous for the Bucks, while giving the state total authority and legal protection and treating the city and county like vassals who provide a massive subsidy in return for no political power whatsoever.

Though the deal as revised by legislators calls for the state to provide $150 million in funding and the city and county to cough up as much as $100 million, in addition to providing a huge tax exemption to the Bucks, the “sports and entertainment district” spelled out by Gov. Scott Walker’s administration gives all control of the district to the state. It calls for 11 board members, with nine appointed by the governor, one by Milwaukee’s mayor and one by the Milwaukee County Executive. The language calls the sports district a “local government unit,” but the overwhelming majority of state appointed board members leaves no real power to local governments in Milwaukee. When asked, Walker’s spokesperson Laurel Patrick offered no answer as to why the board membership was structured this way.

The proposal also fully protects the state’s investment, noting that “if the team breaks or otherwise fails to fulfill its obligations under the lease, the professional basketball team would have to pay the state an amount sufficient to retire the state appropriation obligation issued for the sports and entertainment facility.” But there is no such protection for any investment provided by the city or county. Patrick offered no explanation for why the proposal offers protection only to the state.

The proposal also fully protects the state’s ownership of the proposed facility, noting that if it “is not used principally for professional basketball, the state would retain an ownership interest in the facility equal to the amount of the state’s grant.” No such language protects the city or county. Once again Patrick offered no explanation for this.

Then there is the matter of the proposal’s lavish tax exemptions for the Bucks. The language of the proposal is quite sweeping, calling it not an NBA arena, but a “Sports and Entertainment District,” and specifying that a property tax exemption will be extended to “parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities and other functionally related or auxiliary facilities or structures.” It would appear that nearly anything the Bucks owners develop in the area is going to be exempt from property taxes.

It was hardly coincidental that when the Bucks owners made their recent announcement of a $500 million, downtown development plan they called it a new “sports and entertainment district” and a “dynamic entertainment district (that) will serve as a destination that draws the people of the region together.” It suggests that the owners and Walker made sure each was using the same language. Indeed, the Bucks’ proposal for an entertainment district calls for building a separate “state of the art” practice facility, a 60,000 square foot public plaza and a new parking facility. By a neat coincidence, the state proposal for the district specifically awards an exemption for a practice facility and “parks” like the public plaza the Buck plan to build. Additionally, any “restaurants” or other “auxiliary facilities or structures” would be tax exempt.

What then is being developed by the Bucks that won’t be tax exempt? The team also suggested the plan “could” include both a hotel and office development of some kind, but it’s worth noting that the renderings provided by the team only showed the arena and “live entertainment” public plaza and a “beer garden” next to the arena that’s clearly an auxiliary facility that would be tax exempt.

In my email to Patrick I noted that the proposed sports district “would appear to exempt most of the $500 million in ancillary development the Bucks have promised to build downtown. Is that the intent, and if not, will the language be changed to make it clear that only the arena itself and anything contained within it is exempt?” Patrick offered no answer, saying only that “the bottom line is Governor Walker’s focus is on protecting taxpayers by maintaining the current revenue stream. Without progress on a new arena, the Bucks will leave Wisconsin in 2017, costing the state nearly $10 million a year in lost revenue collections.”

In short, Walker will assure the estimated $10 million in state income taxes on ballplayers isn’t lost, but has created legal language that allows the Bucks a massive property tax exemption. Not only will the $500 million arena be tax exempt, but so will the beer garden, practice facility, public plaza, probably any Bucks apparel and merchandise shops and who knows what else? Assuming everything within the entertainment district will cost at least $700 million (a very conservative estimate) and figuring that value times the current property tax rate of $29.97 per $1,000 of value, that would equal a property tax payment of nearly $21 million per year, meaning local taxpayers would lose far more in tax revenue than state taxpayers would gain. Over the likely 30-year life of the arena that’s a total property tax exemption of $629 million. (That might be a high estimate as property tax assessments for new buildings are often set below construction costs. On the other hand, I’m applying the current tax level for all 30 years of use, while the buildings’ value and taxes are likely to rise over time.)

But that’s not all the exemptions coming to the Bucks. The state proposal also awards a sales tax exemption on “building materials, equipment and supplies used solely in the construction, renovation, or development of a sports stadium.” Note that when it comes to the state sales tax, only the arena is exempt, but when it comes to the local property tax, nearly anything in the sports district is exempt. Assuming the cost of materials for the arena is, say, $300 million, that exemption would be worth about $17 million to the team.

The proposal’s language also specifies that the “income of a sport and entertainment district would be exempt from the state corporate income and franchise tax.” This language is very broad and would seem to include anything the Bucks develop under the banner of an entertainment district. Given the state corporate income tax of 7.9 percent, this exemption could be huge and wipe out most of the $10 million in annual income taxes Walker says he wants to protect.

It’s almost comic to hear state legislators repeat the mantra that the city and county must contribute to the Bucks because they will benefit from this huge development coming downtown. In fact, they are getting nothing but a massive non-profit eating up acres of developable land that will now be stricken from the tax base, and at a time when Downtown has become a magnet to new businesses.  For the city, county, Milwaukee Public Schools, Milwaukee Area Technical College and Milwaukee sewerage district, this will represent a huge loss of property taxes that could have been paid by business, residential and retail development. This tax exemption is so far-reaching it leaves no way for the city to create a Tax Incremental District to finance a contribution to the proposed arena because no taxes will be collected in the district.

Will any development in the district not be exempt? I emailed Jake Suski, the Bucks Senior Vice President of Communications, noting that the state proposal appears to exempt most of the $500 million in ancillary development the Bucks have promised to build, and if not, would the team support a change in the enabling language to make it clear that only the arena itself and anything contained within it is exempt? He did not answer.

Perhaps the richest part of this ongoing black comedy is that the politicians are all squeezing each other to pony up more money while the Bucks are not even being asked to donate the naming rights to the arena. Even in the case of Miller Park, which at that time was the most lucrative subsidy every given to a Major League Baseball team, the $50 million in naming rights for the park helped pay for its construction.

The deal for naming rights was struck nearly 20 years ago. Today, recent naming rights deals for NBA arenas range from $20 million per year for the Brooklyn Nets (signed in 2012) to $2 million annually for the Indiana Pacers (2011) and $3.7 million per year for the Oklahoma City Thunder (2010).  At a minimum, you’d expect the Bucks might get $2 million a year or $60 million over 30 years. It’s almost unheard for an NBA arena not to sell naming rights and the Bucks have been coy about this, merely saying “we haven’t talked about that.”  And why would they want to? Better to wait until after the deal with the state and all its endless subsidies is secured.

So why aren’t Walker or legislators demanding the naming rights be used to help pay for the arena? Because they are doing everything they can to increase the team’s profits, at the expense of taxpayers statewide, but especially in Milwaukee.

Arena Renderings

63 thoughts on “Murphy’s Law: State Bucks Arena Plan Fleeces Milwaukee”

  1. Sam says:

    This is exactly what I feared. I’m assuming this is just the opening negotiation position of the Bucks/State. There is no way the city/county should accept this as is. It’s completely ridiculous.

  2. AG says:

    No time to respond to all my concerns… but want to again point out that you can’t lose 21 million dollars in property taxes when you don’t have them to begin with. Since neither the BC or the barren wasteland of the park east generate any property taxes, we’re losing nothing. We could however, gain from ancillary development not listed above. Sounds like a win… or are we going to somehow see an onslaught of proposals for new development in the park east that will generate this “lost” tax revenue in the next… say… oh, 10-20 years that we haven’t been seeing already?

  3. PMD says:

    Do you disagree with all of Bruce’s points AG? Is it fair for the state to control this? Have 9 of 11 board seats appointed by the governor? Is even a bad deal for the city much better than building nothing?

  4. AG says:

    Well, is it the state that is the entity doing the borrowing for the largest portion of the public financing? If the city and county are mainly putting in infrastructure and land grants then it seems the state has the most to lose and needs the most protection.

    Who said I thought this was a bad deal for the city?

  5. PMD says:

    I didn’t mean to imply that you think this is a bad deal. I just mean do you think the city basically just needs to say yes to any deal.

  6. Will says:

    “The language calls the sports district a “local government unit,” but the overwhelming majority of state appointed board members leaves no real power to local governments in Milwaukee. ”

    And this matters because?

    ” “if the team breaks or otherwise fails to fulfill its obligations under the lease, the professional basketball team would have to pay the state an amount sufficient to retire the state appropriation obligation issued for the sports and entertainment facility.” But there is no such protection for any investment provided by the city or county. ”

    And this matters because?

    “The proposal also fully protects the state’s ownership of the proposed facility, noting that if it “is not used principally for professional basketball, the state would retain an ownership interest in the facility equal to the amount of the state’s grant.” No such language protects the city or county. ”

    And this matters because?

    “It would appear that nearly anything the Bucks owners develop in the area is going to be exempt from property taxes.”

    Or we could just leave it as an empty parking lot, that brings in the big bucks(psyche)

    “It was hardly coincidental that when the Bucks owners made their recent announcement of a $500 million, downtown development plan they called it a new “sports and entertainment district” ”

    That’s because it is a “sports and entertainment district”. It is more than just the stadium

  7. Dave says:

    If accurate, this is absurd. I can deal with the arena being tax exempt…seems to be the pretty normal relative to other arenas….but exempting additional development from taxes is unacceptable. I was hoping the City could potentially use that development for a TIF district that would up the City’s financial commitment placating all those who demand we contribute more. Guess that’s out the window with this proposal.

  8. Kenneth says:

    It’s surprising that so few are calling for the NBA to contribute. In light of the fact that they recently signed a TV deal worth over $20 billion.

    Effective with the 2016-2017 season the NBA begins a new 9 year TV contract worth $2.6 billion per year which equals $87 million per team. The current contract pays $31 million per year. So every NBA team will be getting $56 million more per year starting in 2016-2017. The annual cost to fully finance a $500 million arena at 5% for 30 years is $32 million. So every NBA owner, including the Bucks owner, can easily afford to pay 100% of the cost for a new arena, if that new arena is indeed needed. When are the politicians and citizens of Milwaukee and Wisconsin going to smell the coffee?

  9. Sam says:

    My main concern is the ancillary development being exempt from property taxes. AG and Will sound like they work for the Bucks. I don’t really understand their positions otherwise.

    We’ve seen plenty of development in this city and in the Park East corridor and they all pay taxes. Why would the city agree to exempt this development from that? Your reasoning is there is currently no taxable development in the land adjacent to the proposed arena and that this would bring development and therefore the city has nothing to lose. Are you seriously arguing that? Development for development’s sake is stupid. It’s especially stupid when tax-exempt development/businesses are directly competing against the tax paying development/businesses around it.

    Why would the city and surrounding tax paying businesses/development be on board with this? It would kill the existing developments along 3rd/4th street, the Brewery, and likely Water St.

    I’ve already made my comments about what I’ve characterized as a Bayshore Mall 2 clear in a previous post. Notwithstanding the types of businesses likely to come in with this proposed development (ehem national chains), having the development not pay taxes is ridiculous, insulting, and bad city planning.

  10. BrewCity says:

    “The reality is that there is fierce competition among cities for assets like NML and the Bucks. These companies seek and receive public financing to supplement their private investment in major capital projects not because they are robber barons, but because if they don’t get that money here, there are cities lining up across the country to give it to them somewhere else; it’s a function of the market. From my perspective, allowing assets like NML and the Bucks to leave town over $200-300 million in public financing over some misguided moral stance on corporate welfare is the epitome of the type of small-minded thinking that could turn Milwaukee into Dayton. I mean, consider this: there are currently over $4 BILLION dollars in highway construction projects, either under way or nearing final approval, in Milwaukee County. All of those projects are ostensibly designed to get people into the city and out of it more efficiently. But if we fail to retain vital commercial and cultural assets in the heart of downtown, those roads will lead to nowhere.”

  11. AG says:

    A couple clarifications.

    1. I don’t support other ancillary development being tax exempt. The arena, or to stretch it, “the district” directly associated with the arena is one thing… but any new development beyond that would not be ok… at most I can see it supporting a TIF.

    2. Kenneth, they don’t have mortgages for sports complexes and arenas… you won’t find a 30 year debt vehicle with a 5 percent interest rate.

    3. Sam, I’m sorry you don’t understand my position, I’m not sure how to make it any clearer. We have had no development in the western part of the Park east except the aloft (I believe the only city parcel on that side?). I don’t promote development just for development sake… but also remember we have NO development on that moonscape and have had no action since 2002. Should we just wait another 13 years before we decide to do something? Plus I’ve seen little in the initial proposal that would greatly compete with anything nearby. An outdoor plaza with a couple vendors will hardly draw all the business from old world 3rd…

  12. Kenneth says:

    @AG
    But the owners could still use less than two years worth of money from the new TV contract and pay the $100 million funding gap. After all, they will be getting a sweetheart deal from the new arena and will be making extra profits from the new luxury seating sections. If the ancillary development is tax exempt, that would be the ultimate jackpot for them.

  13. Gee says:

    Sam, I’m betting that Will, at least, does not work for the Bucks — because, if he did, he would know the difference between a stadium and an arena.

    But reference to the post-midnight politicking of legislators that resulted in the tax burden put upon some of us by the stadium, it may be useful to remind legislators of one result: recalls, with loss of his seat by one legislator. As a resident of the city of Milwaukee (and thus, obviously, also of the county of Milwaukee), I place all legislators on notice that they go there again, and with this even more egregious proposal, at their peril.

  14. rednet says:

    the arena will wind up costing $600 million plus and we all know that. so where’s the extra money coming from?
    the very transparent ‘play’ area across the plaza will wind up being a much more modest building.
    and let’s get some renderings of the 2 sides of the building that are not shown, lots of truck bays and service areas.

    as the building will come in substantially over bid the glass areas will be cut down etc….or the arena will be bare bones and the façade will be kept. like the railroad station….great façade but the old grim station.

    Populous did a really great job on the rendering. fun, fun, fun.

  15. Marie says:

    JS recently listed wrote about all the lobbyists in Madison officially lobbying for an arena. These bills are tailored to whoever’s got influence and campaign donations. I know of no citizens groups (except Common Ground) who are even speaking out about arena funding plans. No politician cares what taxpayers think of this deal unless they worry it might hurt them in the next election. Scooter the Looter is presumably running in late 2016 for the WH. Mayor Barrett and County Exec Abele have elections next April. So they all might worry a bit about some heat, or just hope distracted voters have forgotten by then. But, if they can do it all with smoke and mirrors, they might skate by…

    The Bucks prez told an audience in Jan. the Bucks & NBA want the new arena project (including this hot-spot annex) to have as big an overall “footprint” as possible, so they cab be “as opportunistic” as it can be. There’s no mystery–they want everything under the tax-exempt arena umbrella because
    1) they want the public to pay to build 30-40 acres of real estate from which they will capture obscene percentages of gross revenue and
    2) because they will not have to pay tax on any of it and
    3) if a nightclub mall becomes a white-elephant, Bucks are not out any real money and taxpayers are left holding the bag.
    It’s incredible that the state’s budget has zeroed out any support for its “state parks” (only income must come from fees)–and they all want the state to build/run several floors of sports bars and god knows what else?!

    Yes AG & Will, the city does lose when vacant land is developed and then the city must forever support that tax-exempt development with city services (and it’s not MATC providing public services). We may hear soon how many acres the County wants to give the Bucks for free. Even if Bucks pay for a practice facility and then it becomes part of the tax-exempt “district” the state entity must maintain it, pay for any upgrades, etc. (Venues always lose $, after team gets its take…) Plus get no taxes. Insane fiscal policy.

    But if Scooter doesn’t make it to WH, he could still become a DC lobbyist and not care if his “arena district” is called “Walker’s Folly.”

  16. tomw says:

    My first question is why is the arena tax exempt? When Manpower moved downtown did they get a tax exemption for their property? Tax exemptions are for non-profits and religious organizations. If the Bucks or the Brewers were losing money maybe such an exemption would be understandable but these are MULTI-Million dollar enterprises whose employees make good wages and almost no economist believes that they somehow contribute to the economic development of the surrounding neighborhoods. And I say all that as a rabid Brewer fan. I know my degree is in the esoterica of theology but could someone explain to me why an enterprise which is receiving billions in revenue isn’t asked to assume the same responsibilities I have as a homeowner to pay for police and fire as well as streets and other municipal services. Manpower or a law firm or bank could better argue for this exemption as they create “ancillary” development and wealth in the community which is more widespread than the Bucks. !

  17. Marie says:

    Bruce, perhaps you can answer Tom’s question. You once chronicled that whole story–how the Brewers (Braves, back when) used to pay property taxes. Car salesmen can be very persuasive, and I believe it was Bud Selig who sold the state the tax-exemption bill of goods. Now, it would take some powerful citizen action (or a miracle!) to ever get Legislature to change that. But it certainly adds to why property taxes are so high, when service-gobbling, for-profit major-league teams take massive acreage off the tax rolls (75 acres for Brewers & TBD for new arena…)

    But, tomw, theologian (and sports fan) that you are, you may have noticed that major-league sports have become our national religion, according to some like Robert Lipsyte (who covered sports for NYT and elsewhere for years, but not reverentially). Arenas and stadium are our new cathedrals–but planned obsolescence means we must rebuild them every 30 years…so it goes…

  18. Steve Blackwood says:

    i wonder if the project could be stopped by referendum I’m Milwaukee county or city. Plus, don’t most of the attendees at Bucks games come from the suburbs outside the county? How come they get off so easy? The 1% strikes again.

  19. DTY says:

    Great information, Bruce.

    For all you who claim that “ancillary development” will somehow bring the city and county extra revenue, keep dreaming. The new sports and entertainment district will provide more than enough restaurant, retail and entertainment venues to support the 800,000 people that MIGHT attend Bucks’ games every year. The shiny new places will also attract much of the existing audience heading to UWM Arena and Milwaukee Theater events. Establishments on North 3rd Street and North Water Street that DO pay property taxes are going to have a hard time competing against these brand new places that will not pay any property tax.

    Just how much additional ancillary development do you anticipate this place generating? Where is the hospitality and restaurant development around Miller Park where the Brewers attract more than 2 million a year? There’s not even much high-end ancillary development around Lambeau Field because the Packers’ atrium keeps the fans inside the stadium before and after games and during the week as well.

    I’ve talked to servers and service personnel in Indianapolis. Even with the massive amounts of national (not local) traffic that Lucas Oil Stadium and the convention center (2-3 times the size of Milwaukee) brings in, what it basically has meant for the downtown is a whole lot of venues and restaurants where the locals work but can’t actually afford to patronize.

    Broad-based, diversified long-term development – even at a slow pace – will be far more beneficial to Milwaukee and Wisconsin than giving up huge swaths of downtown land to a glitzy enterprise that will be back again in 30 years with an open palm.

  20. AG says:

    So we have a $500 million dollar development that is half paid for by the Bucks current and former owners and the other half would be financed by the state, paid for by Bucks player salaries, and benefiting schools and libraries with the proceeds.

    In addition, we have another estimated $500 million dollars of ancillary development that will presumably pay property taxes and will not be paid for with public funding.

    All of this in a barren part of the city that has been left fallow for 13 years with no prospect on the horizon to earn any property taxes AND will help revitalize a part of the city that hasn’t been successful for roughly 75 years.

    And we’re upset that there’s some tax exemptions for this project? Even though, if the Bucks leave, we’d lose that money anyway? Or which we don’t collect right now regardless?

    I’m not saying we do this project at any cost… but lets not falsely inflate the costs or ignore the benefits. Not to mention create a false dilemma. You people need to realize that the Bucks owners will never pay for the full project in this day in age and if they go, you’re giving up a lot for this city.

  21. Matt says:

    Basketball is many peoples religion. Religions don’t pay taxes.

  22. M says:

    It would help if the Bucks, city, county, state or anyone else actually provided any real numbers, any facts rather than vague promises and spin. What exactly are we tax-paying rubes supposed to be buying. (Forget the dreamy pix. What’s the fine print?)

    Are we taxpayers really going to build, own and be responsible (thru state government) for a nightclub district, not just a monolithic arena? MKE has the fifth-highest ratio of bars per capita of any U.S. city. Wisconsin has the third-highest rate of any state. Where’s the feasibility study that we need more bars, even with giant TV screens. No one builds a biz without a plan.

    Milwaukee Mag’s blog reported that the Bucks want the three bars (or the land) on 3rd St. next to the Moderne to also come under its vast tax-exempt arena umbrella. Thus, property now on tax rolls would stop paying taxes. What a city development plan!

    Why not get someone (Marcus?) to build a movie-theater complex (as a private, not public venture). There’s not a one downtown. The Bucks have had years to pitch their plans for corporate welfare. Let’s hear ideas from other developers, downtown businesses, residents. Did I miss the public hearings on all this?

  23. Kenneth says:

    @AG

    You didn’t answer my question about the NBA TV deal. How come Lasry and Edens are not willing to fund the $100 million gap when they are about to make $87 million per year from that TV contract starting in 2016-17. You’re telling me these billionaires can’t afford an extra $100 mil when they will make that back in less than a year and a half just from the TV money. And let’s not forget the extra profits they will make from the higher ticket prices and new luxury seating.

  24. DTY says:

    Uh, AG, don’t you get it? NONE of the ancillary development in the land controlled by the Bucks will generate property taxes according to this proposed agreement. Otherwise the city could create a TIF district. The arena and the immediate development will require all sorts of local services – fire, police, EMT – and generate virtually no local revenue other than the pittance that is the local sales tax.

    Worse, that ancillary development will have a huge competitive advantage. If you put up a brand new hotel and steak house that have a great profit margin because they are property tax free, how will that impact the competitive balance for the Hyatt or Maders? Those establishments pay property tax and would in essence be financing the local services for their competitors.

  25. AG says:

    DTY, I get it. You’re making some pretty far reaching assumptions regarding what falls under the sports and entertainment district. I’ve seen nothing that would lead me to believe that the district would extend beyond the arena, the plaza w/ it’s entertainment venues, the parking garage, and the practice facilities. There will be a lot of additional investments made in the area that, using the limited information in budget change item presented by Walker I see no indication that anything else (let alone the rest of Kilbourn Town) will be included. In fact, when you read the definition of “sports and entertainment facilities” it basically spells out that only assets built by the district (and thus presumably with publicly financed money) are part of the district. (Think auxillary vs ancillary… auxillary is the plaza, garage etc that is built with arena. Ancillary is all the general city development that happens around the arena)

    To visit some of my other concerns that I didn’t get a chance to talk about earlier. First, the corporate tax exemption is NOT a corporate tax exemption for the Bucks, it is solely for the district. This makes sense since much of it’s funding is financed by the state you wouldn’t want them to use state funds to pay.. well, the state!

    And for those who don’t know, municipal bonds (the vehicle upon which this will likely be financed) are essentially ALWAYS tax exempt. That’s the whole point of the bonds! It’s not some outrageous thing for a public asset to be financed this way. Anything from stadiums, to museums, to parks, to anything that has public benefits are often financed with these. It is not some conspiracy to use these to find a new arena in Milwaukee.

    Finally, all the tax exemptions and other benefits are for the DISTRICT not the Bucks. Two different entities… please remember that when trying to parse the facts of the deal.

  26. AG says:

    @Kenneth, I don’t know… because they don’t want to? It’s a stretch to say they’d make that money back in a year and a half… but I could come up with many other reasons. Last I checked they’re already putting up almost a 150 million dollars of their own on top of Kohl’s 100 million. Pretty generous… of course I’d always accept more from them!

  27. DTY says:

    @AG

    The article, quoting from the draft agreement, says that “…parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities and other functionally related or auxiliary facilities or structures…” within the district will all be property-tax exempt. The renderings look like the “district” encompasses anywhere from 3-5 blocks.

    How much more ancillary development do you think will take place beyond these entities? Why would anyone invest in a restaurant, bar, parking facility or retail store when the Bucks can place the exact same type of business in the area surrounding the arena and have much lower business expenses with no property taxes?

    And again, what does this do to the competitive balance in the area? If the Bucks can place restaurants, beer garden, etc, adjacent to the arena, how many fans are ever going to make it across the river to Water Street the way they do now? If the Bucks can build a hotel within the borders of the district, you can bet the Hyatt will never get another NBA team or network television crew to stay again.

    I want the Bucks. I like the Bucks. I’m watching them now. But this is simply a bad deal and hands far too advantageous of a situation to billionaire developers who don’t need the help.

  28. Nick says:

    My boycott begins now.

  29. NealB says:

    No one cares about the Bucks, least of all the most vocal supporters of Walker’s ‘sports and entertainment’ district, to be controlled by the State though located in downtown Milwaukee. Whether connected directly to Walker or the Bucks, AG, Will, and others are here because they see profits in the development going forward. And as Will says, ‘so what?’

    So, what if a big chunk of your city is about to be taken over by outsiders at your personal expense? The land in question has been a dead zone in the city not just since the freeway was built there back in the 70s, but over ten years since it was torn down in 2003 as well.No one would develop there. So, what’s the loss? Fire sale. Let it go.

    Klibourntown isn’t what it used to be, though everything east of the river seems to have done well, even through the recession. Stand on top of the reservoir west of Humboldt on North Avenue. East you can see the new NML tower going up, MSOE’s new sports field parking lot thing, and the new riverfront suburb of condos and apartments that have gone up just over the past fifteen years. Look south across the river there and you can see where this new, privately owned, State controlled sports and entertainment district will be. It’s not hard to imagine a new arena there, ’cause there already is one that’s still pretty new, built just twenty-eight years ago.

    Anyway, what the carpetbaggers are building, looks like, is basically just a big television studio for broadcasting live basketball games. Will they hire extras to populate the plaza for background shots during the shows? Whatever it takes, maybe. New owners are in it to win, on and off the court. The more they can suck out of the city and county, the more profits they generate, the better for them. The more it comes out of the local’s pockets, the sweeter it is.

    Do either Edens or Lasry even live in Milwaukee?

  30. AG says:

    How much more ancillary development do you think will take place beyond these entities? -If we believe the estimates, at least $500 million.

    Why would anyone invest in a restaurant, bar, parking facility or retail store when the Bucks can place the exact same type of business in the area surrounding the arena and have much lower business expenses with no property taxes? -The district won’t have the property tax, that won’t stop them from creating leases at market rate. No savings to the business owner. Why do you think there would be?

    And again, what does this do to the competitive balance in the area? -See above answer.

    If the Bucks can place restaurants, beer garden, etc, adjacent to the arena, how many fans are ever going to make it across the river to Water Street the way they do now? -You think water street is supported by the Bucks? Regardless, if this truly is a catalyst project for the area it could see many additional visitors, residents, etc to patronize new businesses. Which… is kind of the point of revitalization.

    If the Bucks can build a hotel within the borders of the district, you can bet the Hyatt will never get another NBA team or network television crew to stay again. -If billionaire real estate moguls want to invest in building new hotels and other developments in Milwaukee, who am I to stop them? They won’t be included, from what I see, in the district that is tax free.

    The district tax exemptions are in place because it’s the government is financing a large chunk of the project and only, from what I see, include things are actually built with this financing. Thus, any taxes paid by building the district will be a tax on the state to the state. The idea is to keep it as inexpensive as possible and get paid back as soon as possible. Remember, this isn’t the Bucks getting the exemptions, it’s the “sports and entertainment district” which serves a larger purpose.

  31. AG – You said “Finally, all the tax exemptions and other benefits are for the DISTRICT not the Bucks. Two different entities… please remember that when trying to parse the facts of the deal.”

    That’s not accurate. The exemption, which the Brewers benefit from today, exempts personal property taxes as well. All the assets the Bucks own in the arena and other exempted areas would be exempt as well. Fixtures, equipment, etc.

    If the bars and restaurants are exempt from personal property taxes as well (I assume they would be, and that Friday’s is today), that would save them money as well.

    The Bucks $500 million in ancillary development includes a practice facility, that would for sure be tax exempt by today’s law. The “Live” district is also included in the ancillary figure and could easily be fully property tax exempt. That either means the entertainment tenants have a competitive advantage or as you propose, they pay market rates and the district (and ultimately the Bucks profit the difference).

  32. For those looking for more information on how the property tax exemption works, it’s actually current state law. Not something new or unique to the Bucks (the Brewers and Bud Selig, as a commenter mentioned, were the originally beneficiary).

    “Current law [s. 70.11(36) of the statutes] provides a property tax exemption for property consisting of or contained in a sports and entertainment home stadium of a professional athletic team that is a member of a league that contains teams with home stadiums in other states. The exemption includes parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities, and other functionally related or auxiliary facilities or structures.”

    http://legis.wisconsin.gov/lfb/publications/budget/2015-17%20Budget/Documents/Governor/sports.pdf

    Bruce did a great job explaining how this works in a past column -> http://urbanmilwaukee.com/2015/01/13/murphys-law-the-property-tax-scam-for-brewers-bucks/

  33. PJ says:

    How does this proposal compare to Barrett’s proposal? Abele’s?……..Oh, that’s right.

  34. JS says:

    I agree that the park east corridor is an unused blight. I also feel that we lack a multi-use venue of quality. Not getting into the economics, but simply out of curiosity, would the new facility be appropriate for something like the upcoming Rolling Stones concert? The Bradley Center is horrible and the Summerfest Amphitheater is not only seasonal, but horrible as well. I’ve seen glowing renditions of the exterior, but would the new facility be suitable for larger, bigger name concerts and provide a quality experience to the ticket holders? Bucks aside, Milwaukee is sorely lacking this type of facility.

  35. Hereiam says:

    @ Bruce Murphy I don’t think your able to be very objective on this topic.

  36. Dave Boz says:

    A couple of things to note –

    1. The Bucks are not an asset, contrary to what some commenters and pols have stated. They are a massive liability, and about to get bigger. (If subsidized sports teams were assets, Glendale AZ, near where I live, would be the richest place on earth, as it is chock- full of subsidized arenas, stadiums and ballparks. Glendale is in very bad financial trouble.)

    2. This is already a done deal. The scenario described by Murphy is probably the best case. Note that every politician involved is debating only one thing: how to extract the cash from the taxpayer and give it to the Bucks. There is literally nobody involved in these discussions who is on the side of the taxpayer. Not one politician is even remotely entertaining the possibility of not giving a huge amount of money to the Bucks.

  37. Milwaukeean says:

    Most folks outside of Wisconsin do not even know the Bucks are an NBA team located in Milwaukee. A pal of mine in Nashville thought they were some minor league basketball team – and rightfully so…Milwaukee does absolutely nothing (in the shadows of it’s larger neighbors like Chicago, Minneapolis, etc…) to get beyond its imagine of a tiny Midwestern town. The Bucks have not been popular on a national level since the 1970’s – ironically just when Milwaukee was a thriving, bustling, active City. Good luck folks. I’d say let the team leave. It appears Milwaukee is headed back to those thriving days, even without the NBA team that no one else knows…

    Regarding development…Many said that the Pabst complex would be a forever barren land – that wasn’t true. The development will happen in the BC part of downtown even without the Bucks, and the City will benefit even more because of it. I hope Barrett sends the Governor a strong message when he rejects this plan that the City is no longer the States dumping grounds for free taxes.

  38. AG says:

    @Jeramey Jannene, I was referencing the proposal for new tax exemptions to which Bruce was referring to when I was saying they were directed at the district not the bucks. But remember too, the Bucks will still be paying corp. income tax.

    Also, regarding the practice facility and what you called the “live” area, I tried to parse those out by calling them auxiliary development. So when I say ancillary development will be fully taxed, I’m referring to things that don’t fall under this district, which is everything else besides that which you and I mentioned.

  39. Jeramey Jannene says:

    @AG – My reading of the situation is that there are no new exemptions. They all exist in state law today. The proposal that Bruce analyzed just calls them out. It’s logical that the state wouldn’t tax itself (as you pointed out), but the Bucks will be building things with their own funds that are tax exempt. By my reading, it’s not the District ownership that matters for tax exemption, it’s the use. If the Bucks use it for one of the listed things, it’s completely property tax exempt.

    The Bucks have already shown that the $500 million in ancillary development includes the “Live” area (their name) and the practice facility. So that $500 million is already substantially less (in terms of what they might build that might be property taxed).

    The corporate income tax is great, but that’s primarily a state benefit. Given the city’s limited tools to contribute (TIF, tax-free bonding, or just a general fund grant), the property tax laws put in place for the Brewers really make the deal rough for the city.

  40. 2fs says:

    AG – re your claim that w/o the facility, that $21m in taxes wouldn’t exist: As Murphy points out, development in the area is doing well, with active projects being built within blocks in every direction. If not this facility, something would be built on the site – and that something would generate tax revenue.

  41. Michael Zahn says:

    Great reporting, Bruce, and Jeramey’s clarifications also help to put the deal in context. Intelligent commentary by others, with no name-calling! Grateful for all of this.

  42. M says:

    Someone mentioned above there’s a difference between the Bucks franchise and the state-owned entity that governs the Bradley Center (and its clone that will govern a new arena, with the BC folded under the new “”district” umbrella.) True, but the lines blur. The newly appointed Bradley Center authority chair (already a board member) is a Bucks co-owner, as is Jeff Joeres (sp?). The board approves all BC leases, including the no-rent one with the Bucks that gives them a huge cut of every dollar collected at all arena events (on top of their own ticket sales).

    The Government Accountability Board ruled this week that there’s “no conflict of interest,” as long as the Bucks owners leave the room when these final deals are inked. Well, that’s reassuring. No foxes guarding the arena henhouse…

    Oligarchy is alive and well in Milwaukee…

  43. Sam J says:

    Has anyone explored the idea of the city just building the facility and renting it to the Bucks for games? Would the city be able to make money off it, and if not, would we be any worse off than with this plan? And if the Bucks completely refuse to consider the idea doesn’t that say something about their “commitment” to the city vs. their commitment to making money?

  44. M says:

    Sam J: Good suggestion…some potential problems. Bucks have never invested a dime in Bradley Center, yet BUCKS PAY NOT RENT to BC. They also get a huge skim, a reported 41 percent of all concession etc. revenue in FY 2014. (Marquette U. pays $20,000 a game and Bucks get a cut of all their concession, luxury suite income, etc.)

    How about exploring having private developers build any nearby entertainment annex (after studying what’s really needed in MKE, like a movie theater, or whatever)? Taxpayers do not need to own bars, esp. if those venues are intended to out-compete their property-tax-paying neighbors. This way new development will pay property tax.

    One problem with the Bucks grand plan for a “live block” entertainment complex is that “trendy” hot spots often become un-trendy when fickle bar-hoppers move on (perhaps to where drink prices don’t reflect Bucks’ “revenue share”). These “live blocks” can work when they’re designed and managed by experts. Current plan is designed by the Bucks, to benefit the Bucks, and to be managed by whoever a mostly-state-appointed board hires. Taxpayers will ultimately own all the problems, like keeping the place leased, by getting fleeced for more subsidies (as with BC)…Lots of moving parts, with no one directly accountable to the taxpayers who will be on the hook…

  45. Matt S. says:

    Or, what’s the feasibility of the the City-County forming a quasi-public corporation that could acquire an ownership stake in the Bucks team in return for its public financing contributions?

  46. AG says:

    Jeremy, I haven’t seen anything that says the practice facility and plaza are part of that additional $500 million to be developed over the next 10 years.

    Otherwise, the rest of what we’re discussing is left up to guess, inferring, and interpretations. I’d like to see something concrete to judge. Hopefully we’ll have that soon. Right now we’re working off of an old document that’s no longer in play anyway… will be nice to have clarity. If indeed the ancillary (not auxillary) development is proposed to be property tax exempt then I too will side against the proposal.

    @2fs -There’s been little activity in the park east in this area. Nearby, the Pabst Brewery project is doing decent and we have the moderne and aloft that were built, but there’s been absolutely no traction on the large plots in this portion of the park east and little indication that we will. The only success we’ve seen has all been on the east side of the river. Literally the only plot of the park east west of the river that has been filled since the freeway was torn down is the aloft.

  47. M says:

    Matt, economists have suggested just that, but no pol says a peep about it. And would “public’s stake” yield more than phantom dividends?

    One possible way to make this work & keep Bucks in MKE:
    1. Remove the “live block” from the arena project and have all ancillary entertainment etc. be developed privately (as done elsewhere).
    2. That will lower the project cost considerably, perhaps by $150-200M or more (other arenas are not currently costing $500M).
    3. Have city build in some TIF $ for this new private development, to be repaid by future property taxes.
    4. Urge Bucks major owners, minority owners & former owner Kohl to chip in to cover whatever the shortfall is ($50-100M, total).
    5. Amend the state-authority law so that the public does not own Bucks practice facilities etc., (so they are not tax exempt).

    Bucks will still get huge public subsidies thru free land, multiple tax exemptions, & free city infrastructure etc. The city/county will actually get some property tax revenue. All state taxpayers will not by buying an arena that 88% of out-staters oppose. A real win-win for all, not just the Bucks…We can all celebrate at the new arena!

    Majority Leader Scott Fitzgerald would just need to talk his brother, a former state legislator, now Bucks lobbyist, into backing this or some other solution that does not fleece taxpayers. The Senator says MKE’s success is crucial to the state. He’s right.

    Who wants to pitch alternate plans to city/county officials? How about state leaders in charge?

  48. kevin says:

    The billionaires can build the millionares their own basketball court. Have a garage or bake sale to raise funds! No public money!

  49. Jeramey Jannene says:

    @AG – Dan Shafer’s Milwaukee Magazine piece on the issue has it broken out as such.

    http://www.milwaukeemag.com/2015/04/08/bucks-unveil-arena-plans/

    Agreed on wanting an actual proposal to judge.

  50. judith ann moriarty says:

    this will be the kiss of death for businesses outside of the “tax free district.” our downtown is dying. isn’t there any other way to save it? besides screwing the populace? Bruce, only you have the balls to write this. where are the “other” writers?

  51. jon says:

    Sooooo…Walker’s plan hits up the workers (players) wallets for taxes, but lets the owner’s wallets intact? How…unremarkable and typical.

    Great journalism Bruce. Some of the best in the state!

  52. Virginia Small says:

    Judith, I agree, w/o Bruce’s journalism on these sports-venue deals and subsidies, we’d be in the dark on this (tho Milwaukee mag has dug into some recently, both stadium and arena deals…)

    And Wisconsin Gazette just published this on arena funding plans…

    http://wisconsingazette.com/milwaukee/moneyballbreakpublic-financing-for-the-bucks-arena-entails-hidden-costs.html

    But politicians also need to hear from citizens directly, however people feel about this complex issue. And we must demand facts, feasibility studies, solid business plans, not just renderings and ballpark numbers. We’re not playing Monopoly here…

  53. Bill Sweeney says:

    We do well to remember the different approach of the Golden State Warriors: http://www.jsonline.com/news/milwaukee/in-san-francisco-an-arena-emerges-with-no-public-subsidy-b99440899z1-291176061.html

    And would it not be swell if Bud Selig, as a form of reparation for the sweet deal he got with Miller Park, said, “I got this,” telling the Wisconsin taxpayers that he will cover the rest of the costs so there is no need for any public subsidy.

  54. Virginia Small says:

    Bill, I second all that…Even sweller, both Selig & his lifelong buddy Herb Kohl could jointly reward MKE for all they reaped as team owners. They were college roommates and UW honored them jointly in 2014:

    http://www.uwalumni.com/news_release/kohl-and-selig-honored-with-2014-distinguished-alumni-award/

    This really is the only viable plan that’s been offered (since current owners are playing hardball). Both Selig and Kohl are very philanthropic, and this could be their most enduring legacy!

  55. Matt S. says:

    Actually, the Bucks owners may be pretending like they are playing hard ball, but they clearly want this deal more than all other parties. Hence, their 3-hour walk-back of the 10-day ultimatum. It seems that they have more money to put in and will do so when push comes to shove.

  56. Lisa says:

    More money out of the taxpayers pocket and into his property developer buddies pocket. Nice that he wants state appointed cronies for new sports management, at the same time he cuts education, child protection, services to elderly and disabled……at what point to people wake up and realize you are still paying taxes…they are just no longer converting into public services. By the way…..love the 14 million dollar leased child protective service building on the land given to the property developer for a dollar. Probably the same developer that will benefit from this new handout of the taxpayer’s money by Scott Walker.

  57. Bill Sell says:

    The gap is so huge, particularly in understanding. The $100-500 million a billionaire holds onto is a pittance to what we know we are giving up: the chance to build a sustainable city with schools and transportation. That has far more consequences to our lives that a percentage of the wealth of wealthy person who has not walked in our shoes. If they cannot see that we will need to teach them.

  58. js says:

    @AG: …and I quote:

    “AG says:
    April 23, 2015 at 7:43 pm
    @Kenneth, I don’t know… because they don’t want to? It’s a stretch to say they’d make that money back in a year and a half… but I could come up with many other reasons. Last I checked they’re already putting up almost a 150 million dollars of their own on top of Kohl’s 100 million. Pretty generous… of course I’d always accept more from them!”

    When it’s stated that Edens/Lasry and Kohl are ‘financing’, or, as you say, “putting up”, $150mil and $100mil each, it does not mean they are donating this money. What they are doing is offering to LEND to the yet-to-be-created “District” at (very) high interest rates. These are effectively like leveraged loans used in an LBO, only instead of spinning out a company, they are creating a “district”. And while I do not know, I would guess the language in case of a default in loan payments by the district to Edens/Lasry/Kohl are quite attractive to the lenders. They always are.

    “Pretty generous” indeed. Pay attention, AG.

  59. M says:

    Walker has been granted permission by Legislature to sell virtually any public asset (to “unburden the state.” He has said he wants to sell off public utilities, property belonging to UW system, etc. His current budget also zeroes out all funds for “state parks,” and freezes any funding for land conservation for 13 years.

    And now Walker wants the state to own and manage (through his crony appointees) not just a money-pit arena, but also nearly a square block of bars etc., plus a new practice facility for the Bucks.

    Wisconsin has the third-most bars per capita of any state. With the state owning a new nightclub district, is he trying to get us to #1 in something?

  60. rednet says:

    the arena will come in at $600 million plus.

    who will pay the difference? will it be like miller park where ” the scoreboard was not in the estimate”.
    “oh, the seats were not in the estimate”.

    so what will give. not the luxury boxes for sure.

    the interior will be bare bones or the exterior glass will be reduced considerably…..or….

  61. M says:

    Rednet: …Or the Bucks can fund/own/manage a new arena outright…

    The Bucks are the only party demanding an upgraded facility for either sports events or concerts. There are other MKE large-venue options, even for mega acts. Paul McCartney played at Miller Park. Rolling Stones will be at Marcus Amphitheater before Summerfest officially opens. Aretha Franklin etc. played State Fair. Leonard Cohen sold out Milwaukee Theater. Plus countless must-see shows at Marcus Center for PA, Pabst/Riverside Theaters etc. (Kevin Hart, Jerry Seinfeld…MKE’s on the circuit…)

    A new Bucks-owned arena can still lure mega-shows, and rent to Marquette, Admirals, etc. While MU will gladly play in whatever facility is available, they only want to be a tenant, not an investor. UWM is happy in its new home. City/county/state could take the same approach. Taxpayers can help out with free land, infrastructure. The Bucks can manage the operation and get all the profits. A state entity is an unneeded middle-man.

  62. Wisconsin Conservative Digest says:

    We are going to spend a billion of the taxpayer dollars for a bunch of dribblers than play about 40 days here or so. Is this completely nutty or what, especially when Milwaukee is in middle of major crime wave, making our top ten most violent pace in country even worse. We are hundreds of office
    rs short.

  63. Fed up In Milwaukee says:

    Welfare for Billionaires…..Let the concession folks, beer barons, politicians and the players pay for the arena. We pay every time we buy at ticket. This deal is welfare for the Billionaires.

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