The Property Tax Scam for Brewers, Bucks
Odds are, the Bucks arena will get many secret tax subsidies, as Miller Park does.
There was a time when the Milwaukee Brewers paid property taxes. They did so for the first 21 years of the their history. They are, after all, a private company, and benefited greatly from city services.
The Brewers were operating in publicly-built facility, County Stadium, which was therefore tax-exempt, but all the property owned within the ball park by the Brewers was taxed. But in 1991, the legislature passed a little-noticed law which awarded a tax exemption to all the property connected to a stadium used by a professional athletic team, “including but not limited to parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities, and other functionally related or auxiliary facilities and structures.”
The change in the law came at a time when the Milwaukee Brewers were doing poorly and then-owner Bud Selig was constantly harping about the travails of a small market-team. Once Miller Park was built, the revenue flowing to the team and its market value rose incredibly, yet that law was still on the books, so Miller Park remained completely tax exempt. As City of Milwaukee assessor Mary Reavey noted in an email responding to my question, “this means that all the businesses like TGI Fridays, the Brewer stores, etc are all now exempt from property taxes for both real estate and personal property.”
Legislators were apparently unaware this exemption was on the books, until 2003, when they asked the Legislative Audit Bureau to review the Brewers’ finances, and the LAB revealed that the team was exempt.
An earlier LAB report had concluded the stadium cost just under $414 million to build. Officials with the Southeast Wisconsin Professional Baseball Park District bitterly contested the figure, arguing the true cost was just over $393 million. Nowadays, however, the District claims it cost about $392 million.
So let’s split the difference and say it cost $403 million. Based on that value (plus the 265 acres that provide parking, etc.) the approximate 30-year bill for property taxes for any private company would be $336 million for the entire facility. If you buy the fiction that the Brewers only benefit from the portion of the stadium it owns, the exemption would be equal to about $106 million.
But as a helpful analysis of Miller Park’s finances by Milwaukee Magazine’s Matt Hrodey found, the sales tax that is still being collected to pay for Miller Park is also putting money into a maintenance and capital repairs escrow fund which is intended to last until 2044. By then the value of the property tax exemption will be $494 million for the entire park or $156 million for the Brewers’ alleged portion. Hrodey’s story also updates readers on the long list of stadium improvements that we generous taxpayers are helping finance. These improvements and the escrow fund have increased costs and will push back the ever-elusive sunset date for the stadium sales tax, which the District now estimates will arrive around 2019 — or about ten years after it was first projected to end.
Will the Milwaukee Bucks get the same tax break? Back in 1985, when the Bradley Center was created as a unique state entity, it was exempted from all taxes. That certainly made sense for the basic facility, as it was created through a charitable contribution by the late philanthropist Jane Pettit, but it also included any improvements made over time (club seats, restaurants serving club seat holders, any Milwaukee Bucks-themed retail entities, etc.) to generate revenue for a for-profit NBA franchise.
Indeed, the board of the Bradley Center, dominated by local business leaders, made it their mission over time to figure out ways to funnel money from this non-profit to the for-profit Bucks. Thus the board decreed that a generous portion of the revenue generated by the Milwaukee Admirals and the Marquette Golden Eagles should fund the Bucks. In the latter case this was a non-profit university being required by the non-profit Bradley Center to subsidize a for-profit company. These decisions were never reviewed by the state legislature that created the Bradley Center, much less by the taxpayers who were in essence subsidizing the Bucks through the broad tax exemption awarded to the Bradley Center. The whole thing was kept as quiet as possible.
Which brings us to the current effort to create a new NBA arena. Not a word has been mentioned by the Bucks ownership or the new arena’s supporters of whether the new entity will be tax exempt. But we know now that Herb Kohl has been assured this will happen, since his $100 million contribution to a for-profit company’s arena is getting treated as a charitable donation, as I’ve reported.
So how will the Bucks manage to claim this exemption? I’m guessing their lawyers have concluded that the 1991 law covering pro sports “stadiums” will cover this new arena. The law, 70.11(36)(a)(a), covers “Property consisting of or contained in a sports and entertainment home stadium, except a football stadium” which is “leased to or primarily used by a professional athletic team that is a member of a league that includes teams that have home stadiums in other states.” The exclusion of football allows the argument that the legislature intended to include all other pro sports team facilities, including a basketball “stadium.”
If so, this means that unlike all other businesses in Milwaukee, which pay property taxes to help support all the city services they receive — police, fire, garbage collection, snow-plowing — the billionaires who own the Bucks will pay nothing. Similarly, Brewers’ owner Mark Attanasio (with an estimated net worth of $700 million) pays nothing in property taxes.
We’ve yet to hear what tax exemptions the Bucks will benefit from. I’ve recently estimated the 25-year cost of a property tax exemption for the new arena will be in the neighborhood of $325 million. That’s just the opening bid. Odds are the city will provide some kind of tax incremental financing. All the materials used to build the arena will be exempt from sales taxes. There will be a state and federal tax exemption on bonds issued to build the arena. And of course the state is considering the so-called “jock tax” that may contribute as much as $150 million to the arena. Finally, we haven’t heard whether the ancillary developments (restaurants, bars, Bucks apparel shop, perhaps a hotel) the team’s owners may create as part of a grand downtown development project will pay taxes.
Guard your wallets, folks, the list of secret subsidies you will pay for is likely to be quite long.