Will Herb Kohl Blackmail Milwaukee?
The Bucks need a new arena. Time to start threatening to move the team.
Back in mid-1990s, when Bud Selig was trying desperately to convince taxpayers to build him a new stadium, he brought the devil incarnate, Atlanta Braves owner William Bartholomay, to Milwaukee. This was the man who had bought the Milwaukee Braves in the 1960s and then moved the team to Atlanta, despite the fact that Milwaukee had for years been the National League’s top-drawing team. Bartholomay had broken the hearts of Milwaukee’s baseball fans, including Selig, who was outraged by the move.
But 30 years later, Selig brought Bartholomay to Milwaukee to warn people they could lose their team again if they didn’t pony up tax money for a new ballpark. It was an ugly moment, truly revealing how Selig had changed over the years, and a brilliant example of how the game of civic blackmail is played by major league teams.
Now Herb Kohl, Selig’s friend since they were boys, faces the same issue. Kohl has periodically made it clear the Bucks need a new arena, and has suggested government help is needed. But as a U.S. Senator, he could hardly threaten to move the team. Kohl, however, will soon be retiring, and could — though he seems a far more reserved and gentle person than Selig — try to emulate his friend in blackmailing Milwaukee.
The example of the Seattle Supersonics stands as the obvious warning. This great franchise won the 1979 NBA championship with a team that included two of the best Milwaukee-raised basketball players in history, forward John Johnson and guard “Downtown Freddie” Brown. But after Seattle refused to build a new arena with an estimated price tag of $500 million, the team moved to Oklahoma City in 2008.
Is there a city that wants an NBA franchise and is willing to spend a half billion on a new arena? If we start hearing of one, you will begin to see the squeeze put on Milwaukee taxpayers.
In addition, the old MECCA arena, then run by the city, was required to hand over 15 percent of all proceeds from its bookings to the Bradley Center for the new facility’s first 10 years of operation. This protected the Bradley Center from competition, allowing it to funnel more revenue to the Bucks while reducing revenues for MECCA arena and thereby increasing its costs for city taxpayers. All told, former Mayor John Norquist once estimated, the total subsidy for the Bradley Center might have been as high as $50 million. In short, the taxpayers may have paid more than one-third of the costs for this “free” arena.
Many of the details on this were very hush-hush, and we’re seeing the same sort of secrecy in the effort to gain more revenue to the Bucks. In May, the Metropolitan Milwaukee Association of Commerce announced it had secured a six-year commitment of $18 million from a long list of local businesses to support the Bradley Center.
The biggest contribution was presumably from BMO Harris Bank for naming rights to the arena, which is now known as the BMO Harris Bradley Center. One source told the Business Journal the company is paying $1 million a year for this, but Bradley Center President and CEO Steve Costello claims the Bradley need not reveal the details of such contracts for competitive reasons. That’s not my read of the state law incorporating the Bradley Center, which says the center must “Within a reasonable time after execution, make available to the public copies of all contracts for the purchase of goods or services, or both, if under the contract the payment for the goods or services, or both, exceeds $20,000.”
Aside from the secrecy here, the other eyebrow raiser is that the $18 million from these businesses can be claimed as a charitable donation to the Bradley Center, even though it’s intended to generate more revenue for the Bucks, a for-profit company. In a similar fashion, the non-profit Bradley Foundation donated $20 million to the stadium district when the Milwaukee Brewers couldn’t make their required contribution to the construction of Miller Park.
The Bradley Center has a long history of funneling its non-profit dollars to the Bucks. Under their most recent contract, the Bucks pay no rent for its use and get 27.5 of the concessions revenue, 19 percent of net suite revenue and 13.5 percent of suite catering revenue for all events (not just Bucks games). The team also gets 30 percent of the merchandise revenue and up to 16 percent of other catering revenue for Bucks games only. For the most recent year, 2011, the total revenue given to the Bucks was $4.7 million.
Who decided the Bucks should get all these goodies? The Bradley Center’s Board of Directors, of whom six are appointed by the governor and three by the Bradley Family Foundation. Clearly, business and civic leaders in town quietly decided the Bradley Center should become a cash cow for the Bucks and the board has made its decisions accordingly.
The Bradley Center declined to divulge any details of the new six-year lease agreement, which begins as of October 1 (it’s still under negotiation, Costello says), but it’s a safe bet the Bucks will get a far better deal, sweetened by the $18 million in charitable contributions from local businesses.
But it will all be done as covertly as possible, without telling us how much each company donated or what was paid for naming rights. The Bradley Center has gotten so used to secrecy, it doesn’t even list the board of directors on its web site. Keep in mind the Bradley Center is a tax-exempt, state-chartered and, as I’ve noted, city-subsidized operation. Don’t the taxpayers have a right to know how the naming rights deal compares to those achieved for other arenas nationally?
This kind of secrecy, of course, makes it easier to cut deals that may or may not be in the taxpayers interest. That’s why the Bradley Center-MECCA Arena deal was so hush-hush. And there is a huge incentive for the Journal Sentinel, whose revenue is greatly dependent on sports coverage, to avoid scrutinizing any such deal.
Better to keep the details from taxpayers, who don’t like subsidizing pro sports teams. That antipathy can be seen even among business people: a poll in the Business Journal asked whether the Miller Park tax should be extended to pay for a new NBA arena and 64 percent of respondents said no.
As Milwaukee Journal Sentinel reporter Don Walker once wrote, “(Herb) Kohl is keenly aware that some fans and taxpayers have suggested that he should build or put a down payment on a new arena with his personal wealth.”
Indeed. While Kohl has probably lost some money on a year-to-year basis with the team, he has seen the franchise’s value rise 14-fold, from $19 million when he bought it in 1985 to $268 million today, according to Forbes magazine. Contributing to the rise in value are the charitable dollars and city subsidies that bankrolled the Bradley Center and the tax exemption that lowers its costs of operation, thus helping subsidize the Bucks for-profit company.
Most citizens of Milwaukee, however, probably don’t know this is how the deal actually works — which is why the Bucks aren’t eager to discuss the details of their latest agreement, or any strategies to fund a new arena. The best way to force a city to pay for a new sports venue is to threaten to move the team, while finding every possible way to obscure the true cost to the taxpayers. It’s become the American way of playing pro sports.