Bruce Murphy
Murphy’s Law

Will Republicans Support a Bucks Bailout?

It can’t get done without GOP legislators, but they have deeply felt reasons for opposing any deal.

By - Aug 28th, 2014 10:18 am
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Rep. Dale Kooyenga

Rep. Dale Kooyenga

Rep. Dale Kooyenga (R-Brookfield) is six-foot-seven and played basketball in high school and on Lakeland College’s NCAA Division III basketball team. He was often a bench warmer in both high school and college, but those pushing for public funding of a new NBA arena are hoping he becomes a leading player on the pro-Milwaukee Bucks team.

The reality is that public funding won’t happen without the support of Republican legislators. Sure, Milwaukee Mayor Tom Barrett wants a new NBA arena built Downtown, but the city is financially constrained and unlikely to make much of a contribution. Sure, the retention of an NBA team carrying Milwaukee’s name has more benefit for the city than outstate Wisconsin, but Milwaukee’s delegation of Democratic lawmakers has little clout in the GOP-controlled legislature. Indeed, Democrats complain they haven’t even been contacted by the likes of Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce and spear carrier for the effort to build a new arena.

Even if Republican Gov. Scott Walker were to lose to Democratic challenger Mary Burke, and even if Burke got aboard the Bucks bailout bandwagon, it wouldn’t go anywhere without the support of Republicans, who will definitely control the state Assembly and probably the state Senate after the election.

And Republicans have not been excited about publicly funding an arena. In June 2013, the Business Journal invited some Republicans to an editorial board meeting on the subject, and boy, did lawmakers unload.

“I am very leery with this entire idea of saying we are going to tax a large group of people to benefit a small group of people,” said Assembly Speaker Robin Vos (R-Burlington).

“I don’t think we have hundreds of millions of dollars to throw at sports teams where people are making tens of millions of dollars,” said then-state representative  Jeff Stone (R-Greenfield, now an administrator with the Public Service Commission).

“There’s no way in heck that I want to see the Miller Park tax automatically transferred over” to support a new NBA arena, said Rep. Joe Sanfelippo (R-West Allis).

“There’s zero chance I think that’s a good use of public money,” said the basketball loving Kooyenga, a key member of the Joint Committee on Finance.

No, you’ve never seen a story in the Milwaukee Journal Sentinel with so many negative quotes. The newspaper’s sports coverage drives its readership and subscriptions so it typically covers the issue of sports bailouts with a far gentler touch.

For Republicans, the legendary 1996 recall of George Petak looms painfully over this issue. Petak was a Republican state senator from Racine, who switched his vote to get the state legislation passed that paid for Miller Park. Racine voters heatedly opposed the five-county sales tax that was levied, so Petak was recalled from office and Republicans lost control of the state senate.

As Republicans see it, Democrats resisted voting for the package and then exploited the issue to push the recall of Petak. Of course the bill was championed by a Republican governor, Tommy Thompson, yet Republican Senate Majority Leader Mike Ellis wouldn’t vote for it, forcing Petak’s act of courage. So you might also blame Petak’s downfall on the Republican leadership.

But the details hardly matter. For Republicans, the recall was all about Democratic treachery, and they are not about to put themselves in a similar situation again.

Tim Sheehy

Tim Sheehy

So Sheehy and Bucks supporters are searching for the magic formula that might make a public subsidy palatable and they hope to get something done between next January, when the legislature is next in session, and mid-2015, Sheehy told JS reporter Don Walker.

Sheehy and an MMAC working group composed of the region’s top business leaders have come up with a new and inventive source of public funding: using the state income taxes paid by visiting NBA players, as well as Bucks players, to help pay for a new arena. Sheehy estimated this so-called “jock tax” could raise $6 million to $8 million a year.

Of course that is already money collected by the state that would be diverted to building the new arena. But as Sheehy noted, that revenue would be forfeited if Milwaukee lost its pro basketball franchise because a new arena wasn’t built.

By contrast, the argument that pro sports has a significant economic multiplier that drives new taxes has been discounted by most economists. Money that isn’t spent by locals and tourists on pro sports may simply get spent on other attractions. But the revenue from players’ income tax payments “would disappear if the team wasn’t here,” Sheehy noted.

The idea has intrigued Kooyenga and some other Republican legislators, who have asked the Legislative Fiscal Bureau to study how much revenue is generated by the NBA in Milwaukee, including visiting players and Bucks players and the team’s front office personnel.

The question, Kooyenga noted, is “If we don’t have the NBA, what kind of budget hole would that create? If they aren’t here, we don’t get that money.”

It’s about the best rationale for a public subsidy of a sports team I’ve seen. Whether it will fly with the public remains to be seen.

Meanwhile Sheehy is doing his best to hype the private sector investment in the project. Bucks owners Marc Lasry and Wes Edens have pledged $100 million and former Bucks owner Herb Kohl has pledged $100 million to a project that could cost as much as $500 million. Sheehy has also said another $50 million in private investment may be added.

But where is that $50 million coming from? If it’s from new minority owners that Lasry and Edens recruit, that’s legitimate. But if it’s from naming rights to the arena, that’s not an “investment.” Take, for example, the naming rights to Miller Park, which generated $50 million. Since the taxpayers paid for nearly the entire stadium, that $50 million was money largely generated from a public subsidy.

In the case of the proposed NBA arena, it looks like at least 50 percent of the investment will come from taxpayers. Meaning, at best, 50 percent of any naming rights sold is a private sector investment. And no, you’re not likely to have it explained that way by the Journal Sentinel.

Categories: Murphy's Law, Politics

37 thoughts on “Murphy’s Law: Will Republicans Support a Bucks Bailout?”

  1. smh says:

    Kooyenga is an awful lawmaker who continues his war on Milwaukee and will never support a single thing if it benefits even one person who lives within its borders.

    It’s too bad his district is nothing but right wing loons like him otherwise we could toss this carpet bagger back to North Carolina where he can go back to damaging his home state.

  2. David says:

    It is of the highest priority in the Republican playbook to marginalize Milwaukee, and you can’t compare Republicans 15 years ago to the brand that is around today. They keep moving to the right. OF COURSE, the Buck’s are good for the city and region. We all know this, but Republicans need to follow the playbook. How old is Koonyega 27? He knows what’s good for us? From the frat house to the Statehouse. We’re in trouble.

  3. Don’t the new owners from New York stand to benefit if they are “forced” to leave because we failed to come up with an adequate subsidy? I doubt the benefit of leaving to a larger market escaped these Hedge Fund guys.

    This had to be part of the calculation of buying the team.

  4. James B says:

    Thomas, actually the new owners would be forced to sell the team back to the NBA. So it is definitely to their benefit to make sure a new arena is built in Milwaukee.

  5. David says:

    A winning team with a new stadium would significantly increase the value of the Bucks. Besides, other than Seattle, where would they go? KC?, Louisville? A second team in Chi? Furthermore, the future of the NBA lies in its international appeal. Whether you believe it or not, of our three sports, it the NBA that has the brightest future. Europe and China love basketball. With all due respect to Latin America, baseball does not have the same potential.

  6. Allison says:

    Why don’t the people that profit from the Bucks pay for it? You know, sort of like a business. Just a crazy thought.

    I love how the Journal Sentinel/Bruce Murphy/Shepherd Express spend day after day after day hammering Governor Walker and the Republicans about being for tax cuts for the rich, out of state money, Koch Brothers money and yet then also then want Republicans to raise taxes on the middle class to pay for a new arena that benefits a couple billionaire hedge fund managers. Hypocrites.

  7. David says:

    Why is it hypocritical? We would be leveraging close to $300M dollars in private investment. That seems like a great deal. And remember, the Bucks will use the facility only 20% of the time. There will be an additional 150 events annually that have nothing to do with the Bucks. If we use a tif, we would capture player income taxes and taxes from those that would benefit directly from a new arena.

    Even if we keep the Bradley Center, studies report that $100-200M is needed to update the existing facility. And the State would have to kick in since they own the Bradley Center. We’d be throwing good money afetr bad. We use tifs to finace projects all over the state.

  8. Dave Reid says:

    @Allison Since when has Bruce Murphy supported raising taxes to pay for a new arena?

  9. Observer says:

    @Allison, the Journal/Sentinel doesn’t hammer the Gov, they endorsed him twice and will prolly go for the trifecta.
    Since the “San Francisco” 49ers play their home games in Santa Clara 45+ miles away, couldn’t the Bucks impasse be solved by building the Bucks new arena in downtown Ozaukee County? Milwaukee politico’s could make “hay” by vowing no Milwaukee taxpayers dollars be used for the new arena.

  10. David says:

    @Allison, you should reread Bruce’s article.

  11. Tim says:

    Moving the Bucks to “downtown Ozaukee County” (might as well be the land of Oz because it doesn’t exist), will be the 2nd* quickest way to get the Bucks to leave WI. I’m sure all their fans in Racine, Waukesha & Milwaukee county will be tripping over themselves to go out of their way to see them play there.

    *The first being obviously, to not built a new arena.

  12. Observer says:

    There is no downtown Ozaukee? Are you kidding me?

  13. Mike Bark says:

    Wouldn’t the jock tax open up a big can of worms? What I mean is couldn’t someone like me say that our business generates income taxes and as such we’d like some money from the State to keep us in Wisconsin? I get that we don’t generate as much income tax as the Bucks, but shouldn’t I get some type of handout? After all, if we left, the State would be out the income we generate.

    There’s not much appetite for public financing because people just saw Herb Kohl turn an $18,000,000 investment into $550,000,000. They just saw the Clippers sell for $2,000,000,000.

    There’s also that small problem that most economic studies have shown that the investment in projects like these has had little to no economic benefit. If an arena is such a growth engine, why doesn’t the bar directly across the street from the BC stay in business?

    Even the sales tax for Lambeau Field did not pass by a slam dunk margin.

  14. bruce Murphy says:

    Allison, I’ve probably been the most implacable opponent of sports subsidies among journalists in the state, and have written in opposition to them for the Brewers, Packers and Bucks since the early 1990s, when a subsidy for Brewers first began to get discussed. The story you linked to is an argument for a regional tax for cultural institutions and notes why they are more deserving than a private business like the Bucks to get help from taxes. Yes, toward the end I said if I was ever to support a subsidy I might do so if all the cultural institutions were part of the package. Finally, this current column was simply meant to update readers as what is going on and the importance of Republican lawmakers. Finally, whatever my feelings on this issue, I feel Urban Milwaukee as a publication should be a forum for a variety of views on this issue, which is certainly of great importance to the community.

  15. David says:

    Are you referring to that bar located in the parking structure owned by the city? That’s the only example people ever bring up. It closed because the place was terrible. Walk up and down Third Street and see how many bars ans restaurants want the Bucks to leave. The street is packed on game days. And who cares how much Herb Kohl made. He didn’t have to give up $100M toward a new stadium. I could understand your point if tax had to foot the entire bill, but private investors are putting up $250-$300M. And again, we utilize tifs all the time. NML received $75M. The city and state provide assistance for companies like yours all the time.

  16. Tyrell Track Master says:

    So sad what goons the republicans have become… the investment in a new arena is peanuts and pays hige dividends for the entire state yet these goats stand to score a few points by acting like goons about it…

  17. Mike Bark says:

    David,

    That bar has been several different entities over the years and nothing has stuck.

    Once a new arena is built it’s likely that Bucks would sell for a much higher price tag, so why should the taxpayer subsidize it?

    And no, businesses like mine do not get any State and Federal aid. Instead, we get additional taxes like unemployment taxes and personal property taxes.

    Tyrell,

    A new arena pays huge dividends for the entire State? How so? Also, since when did the Democrats become the champions of corporate welfare?

  18. David Ciepluch says:

    I would contribute $25 annually in the form of a tax for a new arena even though I will likely never attend another Bucks game. I realize the benefits it brings to Milwaukee and Wisconsin. I also know the challenges facing Milwaukee and obstacles Republicans continue to through in the way for anything progressive happening for our communities and state with their form of narrow and dim-witted governance.

    This is proven by our downward spiral of a last in the Midwest performance in all major categories of meaningful measurement. Our governor and legislature are the least educated and ill-informed in modern history of Wisconsin.

  19. David says:

    Mike,
    That site in the parking gargage has been troubled for a long time. People avoided it and went elsewhere like Buck Bradleys or a number of other places. Like I said, the Bucks are investing close to $300M towards a new facility. I think thats significant. I’m not sure about your company but the city, state and feds support small businesses with SBA loans and grants, site remediation grants, facade grants, etc.

    Like Bruce, if we could piggy back with cultural amenities like Art Museum, that would be ideal.

  20. Observer says:

    How do this become a Democrat vs Republican battle? I could understand a city of Milwaukee versus nearby counties but this isn’t a red blue fight. I know Republicans that want a new Bucks arena and I know plenty of liberals that say no public funding. Me, I like the Bucks but I don’t want anyone to use my taxes to pay for a new arena. I’m willing to settle for watching Giannis do his magic in Seattle on TV. If the millionaires dig into their own pocket and build an arena, I’ll go to some games every year.

  21. David says:

    They are….. to the tune of $300M!

  22. Observer says:

    Well David, the arena better come in at a total cost of $300 million then.

  23. Chris Kyle says:

    Excellent article in terms of laying out the most likely scenarios in regards to how this premeditated conundrum will conclude. As reflected in the article, the events are unfolding in predictable fashion. Ways in which the new owners realized and banked on in the first place.

    The new owners are filthy rich for a reason and it’s not because they take random risks with huge amounts of money in cities they have no emotional attachment to.

    Those fellas have crunched every number, potential investment option/combo/scenario as well as the likelihood of any and all subsequent ‘if-then ‘proposals/outcome(s) or remedies imaginable. This was done well BEFORE they pulled the trigger on purchasing the team.

    They know that it will be a long, arduous and taxing process to rejuvenate public interest overnight, and to secure hundreds of millions more in arena funding…to say nothing of building an NBA caliber team that’s capable of increasing investment revenue long term.

    They are certainly playing percentages after digesting extensive research that tells them the majority of taxpayers here are NOT in favor of helping foot the bill.

    There will be plenty of local turmoil as that process unfolds with passion from taxpayers…but Lasry and Edens won’t have to be engulfed in it from their penthouse offices out east or their vacation homes on the west coast.

    It may take a few years, but in the end, I think (and so do they) – it’s likely that attempts to finance a Bucks area will implode. The result = default on the team’s initial promise to the NBA to finance/open a new arena and will ensure the NBA gives a big green light for the billionaire bros. to take THEIR team to a city projected to be more promising regarding growing the product / generating profit.

    The owners get what they want, the taxpayers get what they want and a city that REALLY craves pro basketball will eventually get what THEY want as well. Yes, the imminent departure of the team (or any team anywhere) is hard to swallow for the sliver demo component of dedicated fans, like Herb, but …it’s not a tragedy in the making…it’s just business. Ask Cleveland or Baltimore or countless other cities, since pro sports became big biz juggernauts.

  24. David says:

    Boooooooo!

  25. D says:

    The Bucks leaving is hard to swallow for any person that has a heart, foresight, and a history book. Yes, go ask Cleveland and Baltimore about professional sports. The folks in Cleveland are currently on Cloud 9 after LeBron’s Decision II and Baltimore just recently won a Super Bowl. Sports raise the spirits of the community and improves our quality of life. Only a fool or cantankerous old man would claim otherwise.

    Oh, speaking of old men—-thanks for destroying things for the future generations. You baby boomers already bankrupted the nation, sent thousands of Americans to die in fruitless wars, created failed policies/welfare state, killed major cities, helped send our jobs overseas, and are now pulling the rug from beneath our feet in regards to local entertainment. You had your moment in the sun but now are content with turning Wisconsin into a joyless place to live for the rest of us. All because of your greed, pride, and petulant political rivalries. I can remember being a child, saddened that you tightfisted creeps were going to send the Brewers to Charlotte. Now you are back to send the Bucks out of town, despite likely having over half the project already paid for! This isn’t conservatism or ‘sticking it to the rich’—it’s stupidity and the entire country is going to laugh at us for it. Not that you care. You will have your precious $10 extra a year to take with you down to your retirement home in Arizona in 5 years. I truly hope you spend your pennies wisely on the McDonalds dollar menu.

  26. David says:

    Yes D! I agree 100% I don’t understand either. Very nice post.

  27. D says:

    Thank you! Tired of these Republicans and Democrats making us pay for their crap but throwing a fit over $150 million dollars. It’s a community building that hosts events for most of the year. Go ahead and saddle us with some outdated dump without professional sports and more than likely without Marquette. Who is going to pay for the BMO Harris Bradley Center years down the line? I’m not paying for that **** without the Bucks. You guys can take your $10-20 in savings and put it towards the gas/parking bill down at the United Center to see concerts. Enjoy minor league hockey, monster trucks, and Disney On Ice.

  28. Mike Bark says:

    I don’t see this as a Democrat or Republican issue (but I can imagine the outcry from some of these posters if the Koch brothers were the owners of the Bucks and asking for money).

    It really comes down to what your position on corporate welfare is. I’m not totally opposed to it if economically it makes sense and if it helps businesses that actually need the help to grow. I look at our client list and even my own business and feel we could all keep growing if we had more access to capital.

    The trouble with giving money to the Bucks is that just about evert study has shown these subsidies to be at best a break-even proposition. The other problem is sports entertainment is a massive business that quite frankly could pay for it themselves.

  29. David says:

    @Mike,
    There are studies that show spin off economic gains with professional sports. I guess it depends on which studies fit your point of view. You call it corporate welfare, I call it public / private partnerchips. Partnerships such as the Corner’s $55M TIF in the Town of Brookfield or NML’s $73M TIF on the Lakefront. Let’s be honest, NML has more than enough cash to build their new building. They don’t don’t know what to do with their money. Let’s see…. the Marriott downtown, The Brewery project, various projects in Shorewood, tax deferrments from various suburbs in our area that poach from Milwaukee, Federally backed small business loans, city of Milwaukee facade grants, disadvaged business loans, minority owned grants / loans….. and on and on.

    D is right. You say its not a Dem or Republican thing but it is. Its the far left and the far right. The ideological fringes of both parties that seem to be driving all debate these days. We get it…. spoiled athletes and fat cat owners. However, this speaks directly to quality of life. At least we’re getting something for it! Your point is moot. It’s kind of like the privacy debates, that ship has sailed.

  30. wisconsin Conservative Digest says:

    First do they need a new arena to field a good team and make money and answer is no. They can make more money by getting a new arena, they will not starve.
    The big money in the next decades is going to come from TV. As TV has changed so have the ads. Too many people are not watching prime time, but in their time, whenever and they forward over the commercials. People watch sports games live. No fun to watch after game over.
    This means the prices of TV ads on games will go up. There are other ways that they will make lots of money that will keep them happy.
    They might like basketball, Milwaukee is not big basketball area, but they care little about Milwaukee area. First let us see them field good teams, then fill up the arena, then see what they will give us to build a new arena. I do not think that they will leave if they do not get a new playpen.

  31. Mike Bark says:

    @David: I get that government has decided to enter in all sorts of “public-private” partnerships. It’s hard to open up a mere coffee shop in this community without the business getting some sort of subsidy from the taxpayers.

    I’m simply questioning the wisdom of all of these subsidies. Some do make sense, but Sports teams are making money hand over fist. I’m not convinced they need the handout and I’m not convinced that Milwaukee is somehow not a “cool” spot anymore if the Bucks leave. Is Seattle no longer cool? Is Portland lacking cool because they only have one major sports team?

    I do the accounting for all sorts of businesses that would be expanding even more and creating real middle class jobs with benefits, but the access to capital is hard to come by. Banks are still tight with lending, investors are over occupied with tech and the cities seem to be chasing pro sports teams and coffee shops.

  32. D says:

    This isn’t a handout to the Bucks, it’s an investment in the city of Milwaukee. Why should Lasry and Edens pay 100% of the costs for a community facility that will be used mainly for non-Bucks events? Why do we have to stick with a poorly designed, outdated, bare bones, falling apart facility in the middle of downtown? Why can’t we have a superior facility that will further rejuvenate an improving downtown Milwaukee? The rich have been very generous with the Bucks and the response of the community is that of a spoiled, greedy, petulant child. Milwaukee hasn’t put up the money for a new indoor arena since the 1940’s yet it acts as if its some victim of the rich. The rich gave us the Bradley Center, the Art Museum, the Pabst buildings from being lost, most of the Zoo exhibits, Discovery World, Marcus Center, etc. Why won’t the rest of you ever kick in and help make this a better place to live?

    And yeah…Milwaukee won’t be cool if the Bucks leave. We aren’t Seattle with all our tech wealth and outdoors activities. Everyone knows they are getting NBA/NHL too. I don’t know if you have noticed but the weather here sucks in the winter. Take the Bucks away and you take away a major seasonal attraction. Instead of having the worlds greatest athletes come to our town on a Tuesday night, all we will have left is Marquette’s mediocre new conference and NHL minor leaguers. That’s the kind of city I want to live in if I am a person with a disposable income!

  33. D says:

    “D is right. You say its not a Dem or Republican thing but it is. Its the far left and the far right. The ideological fringes of both parties that seem to be driving all debate these days. We get it…. spoiled athletes and fat cat owners. However, this speaks directly to quality of life. At least we’re getting something for it! Your point is moot. It’s kind of like the privacy debates, that ship has sailed”

    I’m done with both fringes of these political parties. They are ruining Milwaukee with their spitefulness and hardheadedness. Unrealistic wage demands, killing any form of mass transit, hard line environmentalists blocking important developments, inner city kooks cheerleading for the criminals, politicians in the pockets of utility companies, race baiters, suburbanites voting based off of talk radio entertainers, cult-like union members, and so on. Despite all this, we have a nice thing going here in Milwaukee but some want to throw a bucket of water on it.

  34. Mike Bark says:

    D,

    The Bucks get most, if not all, of the rent and concession revenue that is derived by those extra events. So it’s not like they don’t get a benefit from the extra events.

    How many Bucks games have you been to in the last few years? Unless fans are now starting to dress as empty seats it’s not exactly a huge attraction. This is with the Bucks practically giving away seats to game. I can relate to that as when our firm had tickets we had a hard time giving the things away. We finally decided we were wasting money and got Marquette tickets instead.

    I like the professional basketball and I’ve been a Bucks fan my entire life. I go to 10+ games a year. I would miss them if they leave.

    The BC is not my favorite facility and I’d rather watch a game at Mecca to be honest. But the real reason the BC needs to be replaced is that we can have more areas for rich people to congregate and more ways to get them to spend money on site. People talk about the bar scene on Old World Third Street as a reason to build an arena, but I think with all the amenities on site in a new arena it just might kill off that scene.

  35. Observer says:

    Gee an NBA team is for sale. http://www.usatoday.com/story/sports/nba/hawks/2014/09/07/bruce-levenson-racist-email-atlanta-owner-sell-team/15241591/

    It’s interesting to note how the 1999 Phillips Arena was financed.
    Cost of Construction~ $213.5 million
    Arena Financing~ $130.75 million in revenue bonds to be paid from arena revenues; $20 million from Turner Broadcasting; and $62.5 million from 3% car rental tax.

    D says ” The rich have been very generous with the Bucks..” I think the poor have been very generous to the rich. The Bucks get all the cash generated at the Bradley Center while the poor get all the bills. And now they are being asked to give more and in return…… I’m not sure what they get in return. That we are not Cedar Rapids?

  36. wisconsin Conservative Digest says:

    Observer, good observations:
    Why should granny or people who care little about basketball pay millions to the NewYork hustlers?
    Who does their PR? Must be tone deaf. there re people in line to make millions, hotels, food, cabs etc. Let them pay for it. First do we need a new arena? Shouldn’t the team prove that it can draw first by putting together a good operation? Kohl did not do that. We built a new stadium for Selig and he was last for years, should have sold years earlier. When the Bucks prove themselves and ill the place up then we can talk about a new arena. Compare how much revenue, extra, they will get to the capital costs and how much it will cost the average person and what return they will see? How much is their rent?? I am from Missouri, show me.

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