The City’s Real Costs for Bucks Arena

The exact total is unknown, but will be much higher than media has reported.

By - Jun 17th, 2015 04:22 pm
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Tracking down what a new Milwaukee Bucks arena deal will cost city taxpayers is an elusive task. Much was revealed at a recent informational hearing before the Steering and Rules Committee of Milwaukee’s Common Council, which suggests the cost will be higher than so far reported. But there is still no public document with specific details, and the numbers keep changing.

Mayor Tom Barrett was joined by city lobbyist Jennifer Gonda and Commissioner of City Development Rocky Marcoux at the meeting. The mayor stressed that his overall goal was to avoid directly raising property taxes, which he says he achieved. But while no levy increase may be required there’s little doubt taxpayer dollars will be spent on the project.

Barrett noted that Milwaukee Bucks representatives have resisted spending a dollar more than the $150 million the owners initially offered to help build the $500 million arena. For example, when Ald. Nik Kovac asked why the mayor agreed to give the Bucks half the income from a parking facility the city would build for the team, Barrett revealed that the Bucks first demanded all the parking revenue, and also wanted to control the facility and have it be tax exempt.

The Bucks will nominally contribute $8 million for the parking facility and land it sits on, but under the deal that amount will later be returned to the Bucks from property taxes collected in a tax incremental financing (TIF) district the city will create for the Bucks project. In short, the Bucks will have no out-of-pocket costs the for parking facility while the city would take on $35 million in bonding to build it, yet would only get half the income, with the other half going to the Bucks. The city’s estimated take of $350,000 a year means it would take 100 years (and that would be with zero percent interest) to pay off the bonds. By that time there may be at least two more new arena projects, given the current average life span of NBA arenas.

Adding more costs for the city, it has agreed to tear down a city-owned parking structure just a block away from where the new facility would be built. The city paid $30 million in 1988 to build this 980-space garage on N. 4th St., to serve Bradley Center patrons and garner revenue. Committee member, Kovac, was incredulous that the city would agree to tear it down, and then borrow $35 million to build a new one a block away. The mayor defended the scheme by saying that building a parking garage is what’s expected each time Milwaukee builds a new arena. Kovac pointed out that the current parking garage is a perfectly adequate parking facility, one that is paid for. Marcoux affirmed its life span was “not insignificant.” Kovac concluded that “we don’t really need to tear it down; we just have a new development plan that wants it torn down.”

No mention was made of demolition costs or who would pay them, but Barrett’s chief of staff Patrick Curley told Urban Milwaukee that this, too, will be a city cost, probably totaling $1.2 to $1.5 million.

Committee members also learned that city, county and state deal makers have jointly decided to give about 25 total acres in land to the Bucks for the arena and ancillary development that may take up to 15 years to develop. City and county representatives will vote on land transfers, but state-owned land will be handed over through the Bradley Center board. The land’s appraised value is about $1 million an acre, but to date this cost hasn’t been mentioned in media reports on negotiations. Marcoux acknowledged that the Bucks land demand is a deal contingency. (The Bucks owners named the new company running this project Head of the Herd, LLC, perhaps a hint as to who’s in charge in these ongoing negotiations.)

The city has also agreed to fund $12 million in infrastructure (through a TIF district) that will reportedly cover creating public areas and sidewalks.(Plus, $8 million for the parking structure will be added to the TIF, increasing its total cost to $20 million.) However, it will not cover the costs of vacating 4th Street and rerouting traffic. Marcoux said these costs and other infrastructure costs are also not included in the deal since “they’re already budgeted for.” Those costs have yet to be tallied and have not counted as part of the city’s contribution.

“Why is there any public subsidy at all?” asked Ald. Robert Bauman. He noted that the owners are billionaires and can easily afford to build their own arena with private money, as the private owners of the United Center in Chicago, and others venues, have done. Bauman also questioned whether the proposed entertainment mall, with many new bars and restaurants, might “cannibalize” existing downtown businesses on Third Street and Water Street. Mayor Barrett said he knew of no opposition from any businesses. “I’ve always believed the more activity you can have within a walkable distance the better.” But in the last few days, some businesses in the area have begun to raise concerns about the potential competition from team-owned establishments, as the Milwaukee Journal Sentinel has reported.

Some information was revealed about what the Bucks envision for their “entertainment destination” — it would be several floors of bars and restaurants facing the arena. Owner Wes Edens has said it would include the “biggest outdoor sports bar in the country” and he imagines Packer fans watching games on giant screens in cold weather. Marcoux told the committee the Bucks “don’t want this to be Anywhere USA,” yet the Bucks are promising only “25 percent local vendors” in the bar mall. In other words, three-fourths of the annex will be chain-franchised bars, restaurants and other retail common to other cities, competing with the mostly locally-owned businesses.

Kovac also asked Barrett if he had pushed the Bucks for specific concessions, such as giving the city an equity interest in the team.  The mayor said he requested other options, such as ticket surcharges and local taxing of players, which were rejected by the Bucks. But the mayor did note that businesses in the entertainment mall will not be exempt from property taxes, which is a change from the governor’s original draft legislation. Only the arena itself and the Live Plaza or public gathering area would be tax exempt.

Wisconsin Center District leaders also presented information to the committee. Jeff Sinkovec, its director of finance, expressed concerned about potential impacts of a possible state mandate requiring the state-chartered District to borrow $93 million to fund arena construction. (With interest the cost would be at least $180 million.) Sincovec calculated that repayment of new arena debt, using the district’s taxes on hotels, rental cars and food and beverages, would not begin in large amounts until at least 2028—after all costs for prior construction are largely paid off, pushing any sunset far into the future, probably well past the likely life of the new arena.

WCD’s interim president Russell Staerkel said its representatives had been rebuffed when they asked to be included in arena talks. Kovac responded to this by referencing the adage: “If you’re not at the table, you’re on the menu.” Staerkel expressed the concern that the arena’s cost would indefinitely delay expanding the convention center. Without a bigger convention center, he warned, Milwaukee is on the verge of going from a Tier 2 city to Tier 3 city, like Omaha, his hometown.

Bauman charged that the state and county roles in this deal “stink to the high heavens.” The council’s spirited discussion and skepticism indicates they may demand a thorough review of all city subsidies, including hidden ones, and not just rubber-stamp any deal. We’ll see.

Known City Costs At This Time:

  • 25 acres of public land would be given to the Bucks by the city, county and state. Value: At least $25 million.
  • City gives up a fully-functional parking structure built for $30 million. City will lose at least $500,000 in annual income plus up to $100,000 per year from an 8,500 square-foot retail space in the complex.
  • City will pay for demolition of parking complex.
  • City will pay issue $35 million in bonds for a new parking structure and will get only half the revenue (estimated $350,000 annually) from new structure.
  • City will pay $20 million for infrastructure through a TIF district.
  • Some additional city infrastructure costs are not tallied or credited in the deal.
  • The costs of foregone property taxes for arena and Live Plaza have yet to be determined.

Arena Renderings

Categories: Politics, Real Estate

39 thoughts on “The City’s Real Costs for Bucks Arena”

  1. CJ says:

    Your last bullets seem unclear at best and potentially dishonest to make no further comment on the rest of the article.

    -$25 million is a very high value for the land, the County appraisal valued their land at $8.8 million and I’ve seen different costs that its unclear are included or not in that appraisal related to environmental and removal of remaining freeway.

    -The retail space with an “annual income of up to $100,000 a year” has been vacant for years and when last filled the tenant was behind in rent.

    -TIF is a common practice used to create infrastructure to create development, if there is $500 million in private investment the TIF will be money well spent. Cities across the country would love that kind of return.

    -Rocky’s quote above said those infrastructure costs are already budgeted. Presumeably these are costs the city has planned to take on 10+ years ago when they tore down the Park East freeway in the hopes of spurring development just like what the Head of the Herd LLC has proposed.

    -Bradley Center is Tax Exempt so the newly exempt arena/live plaza is basically replacing the Bradley Center and current plans call for a fully taxed hotel development on that parcel.

    Is this an opinion piece or news reporting? If your intent was to uncover/make clear the cities hidden costs I think you missed the mark. This reads to me as a anti-arena opinion piece, which is fine but should be passed off as so.

  2. David says:

    I can’t recall a positive or at least neutral article about the arena on this website. Urban Milwaukee has led the way in anti-Bucks / arena rhetoric. It’s exhausting. Looks like they’ll get their way. We keep going backwards. The future looks bleak with out-state Tea Party pinheads at the helm.

  3. Patrick Small says:

    I believe it will be better for the community and for fans like myself if the Bucks stay. I have enjoyed attending games since 1968. However, many of us would simply like to have all pertinent facts revealed up front so that informed decisions can be made about the actual costs to taxpayers.

    Most facts referenced in my article were from an informational hearing at the Common Council on June 5th. As noted, some items are estimated since detailed figures of the deal have not been released. For example, the Bucks April 8, 2015 press release said the arena and ancillary development would include “about 30 acres.” Recent media reports list the acreage at 25 acres. I conservatively used the lower number. The city should be able to verify the total acreage.

    Regardless of how much land is at stake, it appears that the overall deal would involve giving all that land for free to the Bucks owners or the arena project. Thus far, no value for any land is being included in the “$250-million public share” of the project. Regardless of how it is transferred, land has value.

    The appraisal of the county’s 10-acre Park East parcel was for nearly $9 million and this figure reportedly considered environmental issues on the site. It has since come out that issues regarding freeway pilings may not have been considered, perhaps reducing the appraised value. The city has assigned a value of $1.1 million for the 1.1-acre Sydney Hih site. The county sold a 2.5-acre site to MSOE in 2012 for $3.8 million. Of that, the county placed $1.1 million in a fund for environmental cleanup, for an effective sale price of $2.7 million. Those comparable figures indicate a $1 million-per-acre value for the additional 15-20 acres. Thus, the estimated total value would $24 to $29 million (minus a possible adjusted appraisal for the removal of pilings).

    Although the commercial space in the city’s 4th Street complex is vacant, it can be assumed that a new arena would sustain a bar or dining establishment directly across the street. The $500,000 net parking income was stated at the Common Council meeting. The estimated city parking share is based on current parking income and expenses as well as the increased number of spaces. That total was then split in half per the current proposal. As for forgone property taxes, the article noted that the mayor confirmed that much less property would be exempt than the governor had wanted.

    When relevant facts are not disclosed, or only reluctantly revealed at public hearings, it raises questions about the transparency of the deal-making process. I hope we can all commit to full disclosure in the pursuit of keeping the Bucks in Milwaukee.

  4. Rich says:

    Man, UM can’t make everyone happy. This has been some of the best reporting on the whole deal in any area publication. Sure, it’s not completely neutral, but what news is? Read the article for the facts and comments from skeptics who’ve barely begun to be engaged, like Kovac, who “…was incredulous that the city would agree to tear it down, and then borrow $35 million to build a new one a block away. The mayor defended the scheme by saying that building a parking garage is what’s expected each time Milwaukee builds a new arena. Kovac pointed out that the current parking garage is a perfectly adequate parking facility, one that is paid for.” I sure as hell want to know that someone is looking at this critically and has taxpayers’ interests in mind. I also sure as hell want to know that Abele has been a push-over in all of this. This kind of commentary doesn’t come from their happy press releases either, and that’s if there have even been any. UM has been the place to get that information.

    If one can’t read through the opinion in a piece, then insufficient critical thinking is being applied…I can recommend a Fox “News” station as an alternative

  5. Bill Kissinger says:

    It should be noted that the Buck’s owners have a significant negotiating advantage in this bargain, and not just the threat to move the team. The Buck’s owners have succeeded in making what should have been a two-way bargain into a 4-way deal. Instead of the state, county and city speaking with one voice, they have been pitted against one another. That is why each of these governmental units notes that the Buck’s owners haven’t budged on their original offer (except of course to greatly increase the land grab involved for the “Live” entertainment zone). That is because the other 3 parties have been negotiating with each other instead of the Bucks.

    Since all three government units represent a more or less common payer, they should have negotiated with one voice. The poor taxpayers from the city have 3 different representatives scrambling to commit their tax dollars. Considering that this kind of sports-venue extortion has been going on for decades, you’d think someone on the government side would have figured this out.

  6. Rich says:

    I want UM to do a “Friday Photos” feature on the Bucks Live Block every day of the year after the facility opens so I can compare the real results to the happy picture headlining this article.

    Packer’s games on a big screen in the winter…Nice vote/support-getter, what are the odds the Bucks owners have obtained rebroadcast rights from the NFL to actually do that?

    Quite troubling is the information regarding payback periods, especially for the WCD. If it takes longer to pay off this building that the building itself lasts (either physically or emotionally), that should be a red flag. With that kind of structure, the arena negotiations in 2045 ought to be fun!

    Local to the city, I still can’t wrap my head around the parking garage thing. Does anyone attending the game really care how new the parking garage is? How about some spot improvements to ensure reasonable ingress and egress to the highway via McKinley? Ought to cost less than $35mil.

  7. JohnnieMKE says:

    Say NO to public funding! I love the Bucks and want them to stay but public funding should be reserved for the public good, not the profit of billionaires.

    Sign the petition:
    http://commongroundwi.nationbuilder.com/no_to_bucks_arena_public_funding

  8. Kyle says:

    Seattle has a publicly funded arena deal in place right now, just waiting for a team. Maybe, if the politicians could work together, you could negotiate against that existing deal. If you want to demand no public funding, then you might as well demand that they leave. If you want them to stay for free, then you might as well start planning for a unicorn farm in the Park East corridor.

    http://www.sonicsrising.com/2015/5/26/8661191/arenaco-recap-mou-seattle-arena

  9. Patrick Small says:

    Rich, you make many great points. As for the garage, no one has said replacing it has anything to do with the garage, its location, or the need for any upgrades. City officials have confirmed that it has no deferred maintenance and a long life span is expected. Also, its $920,000 in gross revenue is likely to increase as development continues in this area.

    It would be torn down solely to allow the Bucks to take over the entire block to build an “entertainment” mall with several floors of bars, dining and retail. The Bucks have said they would like this mall to be close to Old World Third Street, possibly with frontage there. Other potential locations that would not involve razing the city’s garage include county Park East land, the former Sydney Hih lot on the Third and Juneau (across from the Moderne), and the current Bradley Center site, after a new arena is built.

    “Entertainment” malls have sprung up around the country, often next to sports venues, and they reportedly have a high rate of failure or cycling into bankruptcy and then reopening with new owners. For example, that’s been the case with Westgate Entertainment District in Glendale, AZ, which first opened in 2006, and American Dream Meadowlands in East Rutherford, NJ (opened in 2007). In Minneapolis, the former Block E mall went belly up and the space will be repurposed for an NBA Timberwolves practice facility.

    While Milwaukee is considering subsidizing an entertainment mall, it may be helpful to try to learn what has contributed to the success or failure of other such projects.

  10. Mike Serpe says:

    Well, anyone thinking on asking you very good friends at the Potawatomi Hotel & Casino if they could help, you know in grateful appreciation for all your community did to kill the casino in Kenosha?

  11. Sam Anderson says:

    Let’s not forget this arena isn’t being built for the sole purpose of making money. Sports teams unite our state. We already began selling out last year (one year after being the worst team in the NBA.) Team support and the quality of our team are both increasing. Don’t let our Bucks go. We can’t make the same mistake Seattle did.

  12. Ty says:

    I think the problem is that sports fan arguments are based on a theory that nearly all people really do care about pro sports, so nearly all people should have to pay for them.

    In reality, the tax expenditures go towards paying for and/or subsidizing luxury seating that benefit only a few. Everyone admits that there is nothing really structurally wrong with the Bradley Center or nearly any of these other arenas (seat orientation? really?). And I’d say the overall numbers would suggest the Bucks aren’t nearly as big of a deal to people in Wisconsin as fans want to believe (and if the argument is, “they come when they win,” that only reinforces it.).

    It is easy to get all nihilistic and say that this is the same as orchestras or fire trucks or street festivals–but its hard to imagine the owner of an orchestra selling the group at a huge profit and moving on after a large public expenditure made the orchestra more valuable. It is justified and right to question any private owner’s plans for public expenditures, to include hedge fund managers.

  13. mp34 says:

    @Mike Serpe

    Scott Quisling Walker had the money for the arena on the table had he approved the Kenosha casino project. Instead, he chose to suck up to Senator Joni Ernst and her Iowa Christian Taliban and killed the project.

    Walker didn’t consult with teachers or administrations over Act 10, he didn’t consult with U.W. personnel about cutting its funding or trying to find ways to solve the budget problem, he didn’t consult with aging and disability experts before he wrote his budget cutting so many services, he won’t meet with his own constituents unless they have a huge check in their hand for him. Even Republicans are beginning to see that he has an enormous ego that is not accompanied with integrity, character, or any sort of competence.

  14. Marie says:

    Bill K.: Your insight about the Bucks’ negotiating advantage is interesting. It seems like it was circumstantial, but they have used it to “divide and conquer.”

    Not every public subsidy of a sports venues is a bad deal for taxpayers. However, according to many economic experts, including Judith Grant Long of Harvard, Miller Park is one of the worst three in history. So we can’t afford to make another awful deal. Here’s her book about what works with these public-private projects and what does not:

    http://www.amazon.com/Public-Private-Partnerships-Facilities-Routledge-Management/dp/0415806933

    It may be too late to enlist a common negotiator, but if the deal falls apart at the state level everyone could go back to the drawing board, perhaps with a united front and an expert negotiator experienced in such deals.

    I found it interesting the other night that the two owners of the NBA-champion Golden State Warriors are paying for their own new arena. Also, the Cavs’ owner has invested heavily in helping transform both Cleveland and his hometown Detroit. Quicken Loans owner Dan Gilbert invested well over $1 billion in downtown Detroit and is also working on creating incubator projects, public-space improvements and other civic ventures. He probably has detractors, but seems to have a vision beyond just making money and is putting his money where his mouth is.

  15. David says:

    I have a better idea Rich. Let’s do a “Friday Photos” of the empty, polluted wasteland after our visionless leaders kill the arena proposal. It may never develop.

  16. AG says:

    Marie, Long’s assessment that Miller Park was one of the three “worst deals” for taxpayers was solely based on percent of costs paid for by the public. It does not take into account net dollars returned to the public. As I’ve pointed out numerous times on this site, Miller Park is one of the best performing stadiums or arena’s in the country for bringing in positive net dollars to the metro area from outside the home area. And that is WITHOUT using the controversial multiplier effect.

    Once again we see an example of people using data to see what they want to see.

    Best/Worst deals based on percent of cost paid by public: Miller Park one of the Worst.
    Best/Worst deals based on bringing positive net dollars to metro area: Miller Park one of the best

  17. David says:

    Marie…I believe the new owners of the Bucks promised to invest at similar levels in Milwaukee. I don’t believe they’ll do it unless an arena plan is in place. This $250M in public investment will turn into a lot more.

  18. PMD says:

    Miller Park is indeed remarkably popular. All “bad deals” should be this popular and perform this well.

    http://espn.go.com/mlb/story/_/id/8084525/battle-ballparks-miller-park-defeats-att-park

    http://www.businessinsider.com/chart-mlb-per-capita-attendance-2013-8

  19. Milwaukeean says:

    David (and anyone else): Please stop calling this spending “public investment”. It is “public entertainment spending” at it’s best. Period. And, I’d say it may reach the investment status you describe if the Bucks were a successful team/franchise. And even that is a stretch.

    Again, Milwaukee is not at the status to where it can sustain this type of spending on entertainment. Milwaukee wishes to be a large City with large City venues and entertainment (much because of it’s own inferiority complex of still being a small mid-sized city), but the reality is, Milwaukee will never reach that status without jobs, jobs, and more jobs. Specifically, more jobs in its Central Business District.

    Jobs bring people. And jobs keep people. Entertainment venues and sports franchises are a result of people. Not the other way around. Milwaukee just does not have the population to sustain the Bucks.

  20. PMD says:

    Northwestern Mutual is building a huge headquarters downtown. Johnson Controls might build a new building downtown. Isn’t downtown doing OK, and couldn’t this improve things even more? And if Milwaukee can support the Brewers, why can’t it do the same for the Bucks?

  21. Rich says:

    AG, I’m curious, yet, I suppose, lazy too…could you refresh us on the data behind “Best/Worst deals based on bringing positive net dollars to metro area: Miller Park one of the best”?

    Jobs is certainly one item, though MP food stands are half staffed with volunteers and the others paid probably no or only slightly better than minimum wage. A Bucks arena and a fancy entertainment district would likely be on par with that

  22. Will says:

    I can’t seem to understand how so many people can be so blind to the benefits and potential from the new arena. Already businesses (i.e.comedy cafe) have moved/are moving closer to park east specifically because of the arena being built. None of this gets factored into the “400 million”.

    Its amazing how so many people could reject a deal that costs you two dollars today but yields 40 dollars over time. I should add, this naivety spreads to much smaller scale business in the private industry, as well. So many people don’t have the intelligence, to be able to recognize when something that costs 2 dollars today yields forty over time. They are either too dumb, cynical or lack the courage. Its sad really, because if we lose this stadium the collateral damage could be fatal to this city. So many people are just so cynical in this city.

  23. Will says:

    I would also like to add that I just got off the phone after speaking with 2 staffers for state senators. These staffers spent the entirety of the conversations telling me how much no one likes the Bucks, how much the Bucks don’t contribute to anything, and how STATE senators across Wisconsin “they hate Milwaukee.” These are our elected officials. What does this say about Wisconsin?

  24. Teddy Horn says:

    Some of this pro arena stuff is incredible! ! A number of us have investigated over 150 articles, papers, and reports and almost 90, yes 90 % have found that using public money is a waste of taxpayer dollars. Almost every time it’s over budget, the return is not EVER what was anticipated.

    Read the report by the St.Louis Federal Reserve. Just look at sports arena financing and READ and if you can read it go thank a Republican. Go look at the Kansas City sports/ entertainment complex that was suppose to generate 20 million in tax revenue, it brought In 4 millon year one and a little over 5 million year two. The city is responsible for the losses, they had to refinance and now the 20 year plan is through 2048!!!

    The billionaires will get richer and the kids will become dumber, the murder rate will rise but no one will talk about that, the poor will only be allowed on the outside because they can’t afford to go inside. And Barrett’s train will chug along empty.

    I am a HUGE sports fan ,played , coached, and have always supported. I can assure you if I have to pay for it, my but will not be in a seat, EVER!!!
    Call Barrett’s recall money guys, ask them to pay, or the Realtors Association, or MMAC, or the teachers union,how bout Marquette, all mouth no money, or any other bystanders who think they help to create the new Milwaukee.

    Look I am more than happy to support the Bucks, let the owners pony up and I will sit in their seat. NO STATE TAXPAYER MONEY!!! Milwaukee and Milwaukee county have the most to gain , then they should foot the bill. If your that confident that this is a tremendous ” DEAL” pay for it. We’ll support you by attending.

    And to the shills that wrote those absurd pro arena comments, We See You.

  25. Marie says:

    For research about Miller Park, BC, etc., in 2013 the City of Milwaukee’s Legislative Reference Bureau did a review of sports venue economic impacts locally and nationally:

    http://city.milwaukee.gov/ImageLibrary/Groups/ccCouncil/2013-PDF-2/Review_SportsVenues_DowntownRe.pdf

    It compiles data on major sports venues in Wisconsin & elsewhere, including Miller Park & Bradley Center. The LRB is an independent research team funded by taxpayers.

  26. Neil deMause says:

    “Long’s assessment that Miller Park was one of the three ‘worst deals’ for taxpayers was solely based on percent of costs paid for by the public. It does not take into account net dollars returned to the public.”

    Actually, the whole point of Long’s research (which took ten years) was to identify the total public cost of stadium deals, including lease revenues on the plus side, and hidden costs like tax breaks on the minus side. Deciding which stadium deals are “worst” is impossibly subjective, but Miller Park was incredibly costly for the public as these things go, regardless of whether fans now vote for it in stadium polls.

  27. Kyle says:

    Wow, you guys are going off the deep end in both directions. I think the city is better off with the Bucks, but it won’t be fatal if they leave. I’m also excited for Teddy to volunteer to replace the $6.5 million in income taxes the state generates from the Bucks currently (without any presumption of that going up, which it will). “We See You”? What is that even supposed to mean? If I had to guess, you’re sitting in River Falls, watching Minnesota play, and wouldn’t drive down to Milwaukee unless you had to. You don’t “See” anyone here.

  28. AG says:

    Neil deMause, that was my point. The cost benefit analysis looked solely at the stadium operations and costs and did not take into account economic impacts of the visitors.

    Marie, the LRB report’s look at Miller Park and the economic impact was cursory at best. They quoted Marc Levine’s comments about the substitution effect but the study focuses on visitors from outside the 5 county area. Those people are not likely to say “Hm, should we drive 2 hours to see a Brewers game or should we go out to dinner?” The substitution effect would be fairly weak in this case.

    They have other oddities like this as well. For example, they don’t believe that 45% of ticket purchasers are from outside the 5 county area because there are only a few regional rivalries that play at miller park. If they had read the study, they would have noted the breakdown of out of area visitors vs out of state visitors. Further, they attempt to say the RIMS II model is an overly aggressive multiplier model which is quite opposite of facts. There are studies that use very controversial models, this is not. The great thing is, even if you eliminate the multiplier all together, there’s still a HUGE economic impact in the metro area just from visitors from outside the 5 county area.

  29. Marie says:

    AG, it’s true that Miller Park stats are much different than Bradley Center’s. Is there peer-reviewed research on the BC?

    The Bucks get far lower attendance than the Brewers, both in totals and ratios of seats. How will a new arena, with pricier tickets, draw more fans? I hope it does, but what will be the magic lure? A winning team could help, but the only games that often sell out are with the Bulls. What will it take to sell more Bucks tickets? The Bucks have already decided to include 1,600 fewer seats, facing the music, I suppose.

    The Bucks are banking on supplementing their revenue streams with an entertainment mall, filled with national chains probably found in the suburbs.

  30. PMD says:

    I’m certainly not crazy about the possibility of a lot more bars and chains downtown, but what happens to downtown economic development if the deal doesn’t happen?

  31. AG says:

    Marie, in concept I don’t disagree that in general stadiums and arena’s do not provide a measurable economic impact. I just take issue when Miller Park is held up as an example of that, when it’s not.

    That being said, despite acknowledging that a new arena will not raise metro incomes or provide a statistically significant number of new jobs, I still believe it’s reasonable for the public to finance half of a new arena if it means we’ll see at least $750 million in direct investment because of it. In addition, I think it’s a good investment considering this is an area of downtown that will most likely see little investment any time soon without the new arena. On top of all that, I put a strong value on the “externalities” that a sports franchise brings to a city. Even though they are not quantifiable does not mean they are any less important.

    I may not like the whole package, especially that they’re tearing down a perfectly good parking structure, but I do not see this as black/white case where it’s all or nothing. I think it’s in the better side of the grey area though, and thus I support it.

  32. Rich says:

    From #29 “Further, they attempt to say the RIMS II model is an overly aggressive multiplier model which is quite opposite of facts”

    AG, how so? Which facts?

    The LRB report reads “The study’s use of a 2.1 multiplier for indirect economic impact may be aggressive. This multiplier suggests the $1 spent by an out-of-town fan for a hotel room will translate into $2.10 of extra spending by the night clerk and the maid, even though it is unlikely hotel staff will have any addition earnings to spend as a result of the overnight stay.”

    I think that’s pretty true. Unless a new hotel gets built because of the arena and it is consistently filled with visitors for the arena (assuming nothing else in Milwaukee changed to attract visitors), there’s no new maids or desk clerks hired, meaning all the new visitors are staying at existing hotels and they’re presumably already sufficiently staffed to clean each room and answer each question at the desk. In reality, the maid and desk clerk are probably just slightly overworked for one game night.

    The multiplier doesn’t scale either. Assume a $99 hotel room paid for by a visitor…that doesn’t equal $207 more for hotel workers to spend, because that would be ~26 hours of work at minimum wage. That one new hotel room probably generated only 15-30 minutes of actual work for existing employees, resulting in nearly no new spending from them in the local economy and certainly no new jobs. So where’s the positive economic impact from the fancy new arena that brought all these new visitors from somewhere else?

  33. AG says:

    From #33: “This multiplier suggests the $1 spent by an out-of-town fan for a hotel room will translate into $2.10 of extra spending by the night clerk and the maid”

    That’s not how it works.

    Here’s a very basic introduction to the multiplier effect, and this intro really only uses examples of income, but remember it applies to business spending as well:
    http://www.economicshelp.org/blog/1948/economics/the-multiplier-effect/

    Here’s how someone using the RIMS II model derives their multiplier:
    http://www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf

  34. Kyle says:

    Rich, your interpretation and use of the multiplier effect is so painfully bad that I don’t even know where to start. Do you genuinely understand nothing about economics, or are you willfully twisting it to make your point?

    Local spending benefits the area. A portion will pay employee wages, not as a bonus, but in the number of employees the business can support. They’ll also hire a local carpet cleaner periodically, and someone local to tune up their HVAC system. Odds are that the spending will incur local taxes and fees, thereby funding other local attractions. True, spending one dollar at a hotel does not mean the maid personally gained two, but that isn’t even remotely what the multiplier effect describes.

  35. Marie says:

    AG, I’m all about the gray on the arena (and I like that UM is a safe haven for thoughtful dialogue). Unfortunately, many framing the arena discussion have ensured it’s all black-or-white.

    I’d like to see a much better deal, one that includes all free land, parking garages and infrastructure as part of the “public’s share.” That’s only fair and customary in other business deals. These hiding-the-money schemes (and pretending a just-fine parking garage is as worthless as an old arena) deservedly creates taxpayer distrust. Deal makers from both political parties are playing the same games. It’s disrespectful to citizens, even cynical–as if we can’t see through shell games. Pols need to be honest, and to build a real viable case, beyond “Cheaper to Keep ‘Er”

    Many boosters simply say: “Give the Bucks whatever they demand–or they’ll leave.”

    First, I don’t believe that’s true, or that the city/county/state has no bargaining leverage. Pols can put plenty on the table without giving away the farm. (Charlies Sykes has proposed many specifics on his site on how to do a better arena deal. I appreciate good ideas from any source.)

    Second, it appears that politicians and arena boosters don’t believe we have any leverage. Our pols have already conceded the game, and it’s not even half time. Where’s the can-do attitude?

  36. AG says:

    Marie, I appreciate the dialog.

    If I could have it my way, I’d have them go back and push the Jock tax again. Not for the entire public portion, but larger than the current set up.

    Also, as I said before, I’m disappointed in the decision with the parking garage. I do see how using that space for the public plaza helps connect this entertainment district to the existing entertainment area on Old World 3rd… but is it worth $35 million? Ehhhh…..

  37. Matt says:

    #36 Well said Marie. This is my thought as well, where is the negotiating from the viewpoint of the tax payers? The bucks came out and said we have $250 million you come up with the other half. Not that other half has turned into a lot more “behind the scenes” bring it out into the open.

    Also learn the ability to negotiate. As in we are willing to provide $X (I would be comfortable from about $100 million from the state with the jock tax) and no we are not tearing down the parking garage or giving you extra land to develop for free etc. This then makes them find other sources of revenue / funding. If you walked into a car dealership and they said the price of a car is $X do you just accept it. Our elected officials certainly have, I guess it is not there money though.

  38. Marie says:

    AG, I agree about the garage. But as Kovac pointed out, it’s not just $35M for a new one. We’re also throwing away a paid-for, functional facility built for $30M, plus about $1.5M to raze it (on taxpayers’ dime–why not by the Bucks who are demanding the site?). Plus, there’s the lost $500K in annual net revenue for maybe another 30 years. It all adds up. I wish the mayor did not pretend those public costs don’t count because the Bucks stopped “counting” them (like the free land for the arena proper), once those assets were pledged.

    My preference would be a “mixed-use commercial center” (not a trendy “entertainment mall”) on the site of the Bradley Center (and put it out for RFPs, not just let the Bucks decide what to put there). There are even numerous designs for this by UWM SARUP students, and a concept proposed by HZS (I believe) relating to an convention center expansion. This could really serve all of Westown, day and night, rather than just competing for nightlife patrons within an expanded (over-saturated?) zone. It could be designed to really unify and open up this whole area. They’re talking about maybe putting a hotel and more “entertainment” on the Bradley site, but without more convention space do we even need a new hotel? Why not plan for this as a welcoming hub that serves many uses and needs, not just “entertainment.” The successful “Arena District” in Columbus does not include an “entertainment mall” but rather interspersed dining options.

    The fact that no alternative to raiding the city’s complex is even being considered reflects a “my-way-or-the-highway” stance by the Bucks. And the current arena deal already would already put off any convention center expansion for another decade or two. Who’s got downtown’s big picture in mind? Who’s running the show?

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