Foundation Helps Herb Kohl Get $20 Million Windfall
His “$100 million gift” to Greater Milwaukee Foundation will gain him huge tax break for supporting new NBA arena.
“This wonderful news comes as the Greater Milwaukee Foundation embarks upon its celebration of 100 years of service to this community,” said Ellen Gilligan, President and CEO of the Greater Milwaukee Foundation. “From his years in business, philanthropy, and the U.S. Senate…. Sen. Kohl has been a shining example of service. He has always served with both distinction and a generous spirit.”
At first glance, that sounds like a fantastic windfall, increasing the assets of the $711 million foundation by more than 14 percent. But it turns out this isn’t a gift at all. The foundation will simply pass-through the $100 million Kohl had already promised for a new arena to that project. And so Kohl gets a charitable write-off for money that will essentially go to benefit a private business.
“It’s a classic tax avoidance maximization approach,” says Aaron Dorfman, executive director of the Washington, D.C.-based National Committee for Responsive Philanthropy. Dorfman notes that because Kohl sold the team this year, “he needs to get the donation on the books for this tax year.” And the foundation was happy to help Kohl. “We are honored to help a dedicated philanthropist fulfill his charitable wishes,” Gilligan told Urban Milwaukee.
Kohl sold the Bucks for $550 million, with the understanding he would commit $100 million to help pay for a new arena. It helped make the sale more attractive to new owners Marc Lasry and Wesley Edens, which in essence meant Kohl was getting $450 million for the team. That was still huge windfall for him: Kohl purchased the team in 1985 for $18 million, meaning the $450 million sales price gave him a magnificent, 25-fold return on his investment.
But it turns out his return will be even better because Kohl is converting part of that business deal into a charitable donation. Kohl will be taxed at 20 percent for capital gains in selling the team, Dorfman notes, and as high as 36 percent for his other income, meaning he will get a $20 million to $36 million tax write-off on his $100 million contribution to the new arena. “It means the taxpayers will be paying $20 million to $36 million of his $100 million gift,” Dorfman notes.
Actually, this only includes the federal tax exemption. Kohl will also get a state tax exemption for his gift, which will increase the taxpayer-paid portion of his contribution.
In short, Kohl and the new owners of the Bucks are already planning to make the entire new arena some kind of non-profit that will be tax-exempt, even though it must be built solely to create for revenue for the team. As I’ve often noted, the Bradley Center, which opened in 1988, works perfectly fine for all of its other tenants; only the Bucks need the new arena, in order to create new amenities and profit-making opportunities for the team.
To date, no one involved with the push for a new arena has divulged that it will be tax-exempt, and for good reason. This means the taxpayers of Milwaukee will be subsidizing all the city services the arena receives and which any business would have to pay for through property taxes. Assuming the arena costs the current estimate of $450 million, this means it would be paying about $13 million a year in taxes, or about $325 million over 25 years — all money Milwaukee’s taxpayers will instead be charged.
Kohl and the new Bucks owners couldn’t be counting on the arena being a non-profit unless Mayor Tom Barrett has already okayed that idea or Gov. Scott Walker has agree to create some kind of state-created entity like the Bradley Center — or to allow the state-created entity that runs the Bradley Center to run the new arena. Whichever is the case, not a word of this has been shared with taxpayers.
And no, it’s not the same scenario as the Bradley Center. In that case, philanthropist Jane Pettit gave the facility as a gift to the city and received no benefit for doing so, and it was the city’s choice to accept or reject the money. In this case the owners are demanding a subsidy, which they hope to get from the state, to pay for most of the facility, and yet will not pay any taxes on a facility built solely to increase the team’s annual revenue. Adding insult to injury, Kohl’s $100 million offer to help pay for the facility, which helped cement the deal to sell the Bucks, will now be treated as a charitable donation.
Though the foundation’s willingness to essentially launder Kohl’s money is legal, Dorfman says a foundation gift to a pro basketball team’s arena does raise questions. “It could be questionable whether an arena that benefits the Bucks has a broader community benefit,” he says.
There is a historical parallel here. When Miller Park was built, the Bradley Foundation provided a loan at a below-market interest rate to help build the facility. The loan meant the foundation lost in the neighborhood of $4 million in interest it would have gained through its typical investments. It would have been illegal had the money gone directly to the Milwaukee Brewers, but instead it went to the Southeast Wisconsin Professional Baseball Park District, the government entity which runs the stadium for the benefit of the pro-profit Milwaukee Brewers. Here too, charitable dollars were passed through a tax-exempt entity to a private business.
At the time, the decision was critiqued by Douglas Jansson, who said “the question is raised whether that’s the best use of charitable funds.” Jansson, as it happens, was the executive director of what was then known as the Milwaukee Foundation. His successor Ellen Gilligan appears to be doing something similar to the deal he once questioned.
The Milwaukee Journal Sentinel hasn’t exactly been digging into the question of why the deal to sell the Journal Sentinel building to the Bucks has fallen through. Given that the reporters work for the company, that becomes a very uncomfortable situation.
This presents the ironic scenario where a newspaper likely to editorialize in favor of the new arena is a key obstacle to a deal being done.
There is, however, one other complication: the Journal company’s new buyer, E. W. Scripps, is about to takeover the company, and that may raise sticky issues about who benefits from the sale.
All of which, it appears, is pushing the Bucks owners to consider a different site.
Update 2:30 p.m. December 18: Mayoral spokesman Jodie Tabak informs me that Barrett has not agreed to make the new NBA arena tax exempt.
More about the New Bucks Arena
- Murphy’s Law: Taxpayers Make Bucks, Brewers Rich - Bruce Murphy - Apr 16th, 2019
- Eyes on Milwaukee: Bucks Unveil Master Plan for Park East - Jeramey Jannene - Mar 15th, 2019
- Eyes on Milwaukee: Bucks Plan Massive Arena Signs - Jeramey Jannene - Feb 12th, 2019
- Eyes on Milwaukee: Bucks’ New Bar Is “The MECCA” - Jeramey Jannene - Feb 7th, 2019
- Eyes on Milwaukee: Bucks Planning Sports Bar for Live Block - Jeramey Jannene - Jan 24th, 2019
- Eyes on Milwaukee: Inside Good City Brewing’s New Taproom - Jeramey Jannene - Jan 23rd, 2019
- Good City Brewing Opens At Fiserv Forum - Jennifer Rick - Jan 22nd, 2019
- Eyes on Milwaukee: Watch the Bradley Center Demolition From the Inside - Jeramey Jannene - Jan 16th, 2019
- Eyes on Milwaukee: Watch the Bradley Center Roof Drop - Jeramey Jannene - Jan 13th, 2019
- Eyes on Milwaukee: Bradley Center To Go Boom - Jeramey Jannene - Jan 3rd, 2019
- Fiserv Forum Adds Drink Wisconsinbly - Jennifer Rick - Dec 8th, 2018
- Friday Photos: Arena Apartments Rising - Jeramey Jannene - Nov 23rd, 2018
- Eyes on Milwaukee: Bulls Put Fiserv Forum To The Test - Jeramey Jannene - Oct 4th, 2018
- Eyes on Milwaukee: Bucks Honor Herb Kohl at Arena Opening - Jeramey Jannene - Aug 26th, 2018
- Eyes on Milwaukee: Bucks Open Fiserv Forum - Jeramey Jannene - Aug 26th, 2018
- Governor Walker Celebrates Grand Opening of the Fiserv Forum - Gov. Scott Walker - Aug 26th, 2018
- Walker Reconsiders Fiserv Subsidy? - Chuck Quirmbach - Aug 3rd, 2018
- Wisconsin Center District Announces Substantial Completion of Fiserv Forum - Wisconsin Center District - Jul 31st, 2018
- Eyes on Milwaukee: Bucks Will Play in Fiserv Forum - Jeramey Jannene - Jul 26th, 2018
- Eyes on Milwaukee: Bucks Plan German-Style Holiday Market - Jeramey Jannene - Jul 16th, 2018
- Eyes on Milwaukee: Bucks Show Off Nearly Finished Arena - Jeramey Jannene - Jun 28th, 2018
- Eyes on Milwaukee: Bucks Unveil Monumental Sign - Jeramey Jannene - Jun 14th, 2018
- Eyes on Milwaukee: Bucks Arena Getting Custom-Painted Fire Hydrants - Jeramey Jannene - Jun 6th, 2018
- Wisconsin Entertainment and Sports Center to Launch Sustainability Program - Wisconsin Entertainment and Sports Center - Jun 5th, 2018
- Eyes on Milwaukee: Bucks Still Won’t Play in Fiserv Arena - Jeramey Jannene - May 31st, 2018
- Eyes on Milwaukee: Good City Brewing Tapped for Bucks’ Live Block - Jeramey Jannene - May 31st, 2018
- Eyes on Milwaukee: Bucks Beat Hiring Goals on Arena - Jeramey Jannene - May 23rd, 2018
- Eyes on Milwaukee: Is Bucks Live Block Good Urbanism? - Jeramey Jannene - May 22nd, 2018
- Eyes on Milwaukee: Bucks Arena 95% Complete; See Inside - Jeramey Jannene - May 18th, 2018
- Eyes on Milwaukee: Bucks Unveil Old World Third St. Bar - Jeramey Jannene - May 8th, 2018
- Eyes on Milwaukee: Bucks Won’t Play in Fiserv Arena - Jeramey Jannene - Apr 27th, 2018
- Eyes on Milwaukee: Bucks Live Block Eliminates Performance Space - Jeramey Jannene - Dec 12th, 2017
- Eyes on Milwaukee: City Panel Okays Live Block Shrinkage - Jeramey Jannene - Dec 4th, 2017
- Eyes on Milwaukee: Bucks’ Live Block Connector Approved - Jeramey Jannene - Nov 21st, 2017
- Eyes on Milwaukee: Bucks Arena 68% Complete - Jeramey Jannene - Nov 21st, 2017
- Bucks’ Health Clinic Will Soon Open - Graham Kilmer - Nov 9th, 2017
- Eyes on Milwaukee: Bucks Unveil Arena Parking Garage - Jeramey Jannene - Oct 31st, 2017
- Eyes on Milwaukee: Bucks Arena On Budget, On Schedule - Jeramey Jannene - Oct 5th, 2017
- Friday Photos: Live Block Work Starts in Deer District - Jeramey Jannene - Sep 22nd, 2017
- Eyes on Milwaukee: Bucks Top Off New Arena - Jeramey Jannene - Aug 24th, 2017
- Photo Gallery: Touring The New Bucks Arena - Graham Kilmer - Aug 1st, 2017
- Eyes on Milwaukee: Inside New Bucks Arena - Jeramey Jannene - Jul 6th, 2017
- Friday Photos: The Deer District Rises - Jeramey Jannene - May 12th, 2017
- Eyes on Milwaukee: Council Approves Arena, Hammes Design Changes - Jeramey Jannene - Mar 1st, 2017
- Eyes on Milwaukee: Committee Okays Two Downtown Designs - Jeramey Jannene - Feb 22nd, 2017
- Eyes on Milwaukee: Bucks Unveil New Signs for Arena - Jeramey Jannene - Feb 14th, 2017
- Friday Photos: Arena Rises from Frozen Tundra - Jeramey Jannene - Dec 16th, 2016
- Eyes on Milwaukee: Bucks Live Block is a Slam Dunk - Jeramey Jannene - Dec 5th, 2016
- Friday Photos: New Bucks Arena From Above - Jeramey Jannene - Oct 7th, 2016
- Eyes on Milwaukee: Council Okays Streetcar to Bucks Arena - Jeramey Jannene - Jul 6th, 2016
- Friday Photos: Bucks Arena Work Prep - Jeramey Jannene - May 27th, 2016
- Eyes on Milwaukee: Bucks Arena Design Approved - Jeramey Jannene - May 17th, 2016
- Eyes on Milwaukee: How Urban is Bucks New Arena? - Jeramey Jannene - Mar 18th, 2016
- Eyes on Milwaukee: New Bucks Arena Approved - Jeramey Jannene - Sep 22nd, 2015
- Murphy’s Law: Is Abele Dumping the Marcus Center? - Bruce Murphy - Jul 28th, 2015
- Eyes on Milwaukee: Bucks Arena Winners and Losers - Jeramey Jannene - Jul 17th, 2015
- Murphy’s Law: How Abele Bailed Out Walker - Bruce Murphy - Jun 11th, 2015
- Murphy’s Law: Abele Plan for Bucks Arena Won’t Work - Bruce Murphy - Jun 4th, 2015
- Back in the News: Bucks Bailout Gets Even Bigger - Bruce Murphy - Jun 1st, 2015
- Murphy’s Law: Arena Plan is Massive Tax Shift to Milwaukee - Bruce Murphy - May 29th, 2015
- Murphy’s Law: MMAC Plays Hardball on Bucks Arena - Bruce Murphy - May 5th, 2015
- Murphy’s Law: State Bucks Arena Plan Fleeces Milwaukee - Bruce Murphy - Apr 23rd, 2015
- Murphy’s Law: The Secret Tax Subsidy Society - Bruce Murphy - Apr 14th, 2015
- Murphy’s Law: Should City/County Donate More to NBA Arena? - Bruce Murphy - Mar 24th, 2015
- Murphy’s Law: Bucks Owners Must Build Without Subsidy - Bruce Murphy - Mar 10th, 2015
- Murphy’s Law: How Could Walker Refuse Incredible Deal? - Bruce Murphy - Feb 12th, 2015
- Murphy’s Law: Foundation Helps Herb Kohl Get $20 Million Windfall - Bruce Murphy - Dec 18th, 2014
- Murphy’s Law: How Will NBA Arena Benefit the City? - Bruce Murphy - Dec 2nd, 2014
- Murphy’s Law: Dispute Over Bucks Arena Goes National - Bruce Murphy - Oct 23rd, 2014
- Murphy’s Law: 10 Reasons To Build Bucks Arena on Wisconsin Ave. - Bruce Murphy - Oct 8th, 2014
- Murphy’s Law: How UWM Deal Will Affect the Bucks - Bruce Murphy - Jul 3rd, 2014
- Murphy’s Law: Four Plans to Save the Bucks - Bruce Murphy - May 15th, 2014
- Murphy’s Law: 10 Key Issues in NBA Arena Debate - Bruce Murphy - Apr 24th, 2014
- Murphy’s Law: $1 Billion Needed for Milwaukee Facilities - Bruce Murphy - Dec 12th, 2013
- Murphy’s Law: New Moves to Bail Out the Bucks - Bruce Murphy - Oct 15th, 2013