Bruce Murphy
Murphy’s Law

MMAC Plays Hardball on Bucks Arena

A misleading poll, pressure on legislators and more misinformation are all used to sell the NBA arena.

By - May 5th, 2015 10:20 am
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Tim Sheehy speaking to the media regarding the new arena. Photo by Michael Horne.

Tim Sheehy speaking to the media regarding the new arena. Photo by Michael Horne.

It’s no secret the Metropolitan Milwaukee Association of Commerce favors the proposed subsidy to create a new NBA arena. The group’s president Tim Sheehy estimates that “80 to 90 percent” of the MMAC’s 75 board members favor the subsidy.

But it’s no easy task convincing legislators to support a project that’s opposed by 79 percent of state voters, as a recent Marquette Law School poll found. So the MMAC commissioned its own poll, in which the pollster, before asking the respondents their opinion, helpfully explained that if the arena wasn’t built, the state would lose more than $700 million in tax revenue from players in the next 30 years and would be forced to pay $100 million to repair the BMO Harris Bradley Center. Showing some restraint, the pollster did not predict a plague of locusts if we lost the Bucks.

Rich Kirchen of the Business Journal did a story in which polling experts with UW-Milwaukee and St. Norbert’s condemned this sort of polling.  But it’s worth noting that the MMAC was echoing a line also being used by Republican legislators, that the state will be on the hook for $100 million in repairs to the Bradley Center, as Urban Milwaukee contributor Steven Walters has reported.

The claim is laughable. The information, Sheehy told me, came from Steve Costello, head of the Bradley Center, but just last fall he told the press the the bill for needed maintenance and repair was $25 to $35 million. Suddenly it’s risen by as much as $75 million.

And if the Bradley Center does need any repairs, that is because of a deliberate policy by its board members to neglect maintenance while funneling every dollar possible to the team. (The Bucks, after all, have been pushing to replace the Bradley Center since 1999.) The board managed to convince Gov. Jim Doyle to approve a $5 million state payment for the Bradley Center in 2009 but spent most of it on a new scoreboard for the arena the Bucks wanted. As the Bradley Center board minutes of January 28, 2010 note, the board allocated $4.2 million for a new scoreboard “to put the Center into the mainstream when compared to other NBA arenas.”

The year before that, minutes show the board borrowed $1.1 million from the Bradley Center’s plant fund for maintenance to be used to meet a revenue payment due to the Bucks. And back in 2008, the Bradley Center added a ticket fee, which raises $1.45 million annually and in theory is for maintenance, but also helps the Bradley Center afford the exorbitant payments going to the Milwaukee Bucks.

The Bucks pay not a dollar in rent for using the Bradley Center, while getting 27.5 percent of all concession sales and 13.75 percent of food and beverage sales in the arena suites, as well as 30 percent of merchandise sale, 19 percent of net suite revenue and a suite revenue share of $2.1 million annually.

Other tenants, like the Marquette Golden Eagles and Milwaukee Admirals, have had their rent payments adjusted upward over the years to help finance all this revenue getting funneled to the Bucks. Meanwhile the board was also spending money that could have gone for maintenance to buy up land around the Bradley Center to pave the way for the Bucks to expand its operations.

So if the Bucks left town and the Bradley Center was left to survive without them, it would no longer be funneling millions every year to the team. The center would have 41 more dates open to sell to concerts and other events. It would have the annual ticket surcharge money, the extra rent payments from MU and the Admirals, and money it could raise by selling the prime downtown land it owns — all of which could be spent on maintenance. And if all that fell short, there’s not a chance in hell the state would offer any subsidies; that would be a problem for Milwaukee and Marquette.

Besides the poll it commissioned, the MMAC has pushed its members to lobby legislators. State Rep. Jonathan Brostoff, whose Milwaukee district includes a chunk of Downtown, says he got deluged with emails, from 130 or more business people associated with the MMAC, urging him to support a state bailout of the Bucks. “Obviously, they (the MMAC) have a lot of influence in this town,” he notes. But there is zero chance he will vote for it, Brostoff notes, because it’s contained in the state budget that he considers a “horror show.” Odds are, few if any Democrats will vote for the budget.

Republican state Sen. Steve Nass of Whitewater has called on the party’s legislative leaders to make the Bucks subsidy a separate bill. That would gain some Democratic supporters from Milwaukee or Madison (Mayor Tom Barrett is reportedly lobbying Democrats), but would also lose many Republicans who will only support it if its buried in the budget bill. So it’s quite likely to remain in the budget and supported only by the GOP, meaning any blame goes to that party alone.

That doesn’t mean there isn’t a potential risk for Democrats. A Sunday story by Milwaukee Journal Sentinel reporter Don Walker showed what happened in Kansas City when the city guaranteed bonds used to finance an arena and entertainment district, but the projected tax revenue to repay the bonds fell way short.

What’s interesting about the situation is that Kansas City’s downtown entertainment district is centered around an arena and has a plaza connected to restaurants and bars that looks something like what the Bucks have proposed. Walker reports that the debt service on the bonds is $20 million annually but the district is generating less than $5 million in tax revenue, leaving taxpayers a $15 million annual subsidy. The problem occurred, Walker suggests, because a “consultant’s report” overstated the potential revenue to be gained.

But there is much more to the story than Walker reported. The district’s developer, Cordish Companies, got public subsidies, including tax abatements, for two major apartment complexes it built in the district. The second development received a 25-year, 100 percent tax abatement.  This was even better than “the standard tax abatement for residential projects” for blighted property, which the Kansas City Star reports is “100 percent for 10 years and 50 percent for the next 15 years.” All those tax abatements (this part of downtown was considered blighted before this development occurred) might help explain why the district isn’t collecting enough revenue to retire those bonds.

No, the city won’t be issuing bonds for the Bucks arena. But as I’ve previously written, everything the Bucks owners have proposed to build in its much ballyhooed downtown sports and entertainment district is eligible for a property tax exemption. This means a huge loss of tax dollars for the city and county, and leaves bars and restaurants outside the district that are taxed competing with district businesses that don’t pay taxes. Indeed, all other businesses and residents in the city will have to pay more in taxes to provide the city services (police, fire, sanitation, roads, snow plowing, etc.) for the district.  Tax exemptions, as Kansas City has learned to its rue, are not free.

Update 5:50 p.m. May 6: Sheehy takes issue with this column here:

Arena Renderings

More about the New Bucks Arena

28 thoughts on “Murphy’s Law: MMAC Plays Hardball on Bucks Arena”

  1. PMD says:

    I know, there have been press conferences and arena renderings and all that, but are we really any closer today to breaking ground on it than we were a year ago?

  2. Jerad says:

    You may want to mention how misleading the Marquette poll was as well.

  3. Gary says:

    OK, here’s another plan: instead of having the team play on a temporary floor in Miller Park (with the top up), sell Miller Park skyboxes to the 1% jags and give’m a screen, while the Bucks shoot hoops at Bradley Center with real buckets fans.

  4. TC says:

    @Jerad

    It is a bit amusing to see him rail against the MMAC poll that he doesn’t like the results of yet support the Marquette poll that fits his narrative even though the accusations against the MMAC poll also fit the Marquette poll.

    It’s all pretty indicative of this entire debate. When voters see the issue as “Rich people from New York want to use state (i.e your) money for a sports arena” (as most of the detractors have framed it), they get mad. However, when they are correctly informed of how much tax revenue the state would lose out on if that arena isn’t built, they magically support the arena plans. How about that?

  5. Patrick Flanagan says:

    I can’t wait for the new arena. I don’t care how they pay for it. Just get it done.

  6. Marie says:

    When will finally find out what the $500M “arena project” will get us? Just the arena itself? Or with an “Entertainment District” featuring a megatron screen and three floors of bars (as shown in the drawings)?

    Does it also include a new parking garage to replace the city-owned garage to be torn down to make way for Wes Edens’ Eden: the “largest outdoor sports bar around” where Packer fans can huddle together and watch games in winter and while slugging arena-priced beer? Soon, someone will probably release a study saying that adding 5X more bars next to the arena will only make things ginormously better for all existing watering holes. (Quick, hire that Kansas City consultant!) Hey, it’s MKE–we can’t have too many bars!!!

    Before being sold a bill of goods, inquiring minds want to know what’s being pitched. Of course, it will be bait-and-switch, but what exactly does the bait include?

  7. wisconsin Conservative Digest says:

    Both polls are misleading. i have surveyed outside the metro area, polled ands it is almost 100% opposed at all levels. Damn near the high around the suburbs. Why would any community that has major crime problems, kids in third grade that cannot read, plus all the other problems want to put a billion dollars into a turkey like this.
    Go to the journal blog on this today and read comments?? Is the GOP stupid enough to pass this cause of MMAC and the Realtors, cause they give big bucks to them and take 127 million from school kids?? I would not want to sit in a forum and be asked that question, if I was running. The GOP will lose ten sets, and the senate, if they pull of this toad. None of the BS being pushed by the MMAC, Realtors is true.
    Finally no one, the Journal, Murphy, the legislature etc. knows what the NBA/Bucks contract sez!!! They are taking guys from NYork at their word. My Dad said never trust anyone from Chicago east and he was right!!!
    Talk about buying the Brooklyn bridge and not getting the title.

  8. Wisconsin Conservative Digest says:

    Bruce, I often criticize your automatic backings and reportings of dopey Left wing ideas but here you get a pulitzer prize from us. Will you come to the CAC 2016 to get it next year??

  9. Mike Kristof says:

    “the Bradley Center added a ticket fee, which raises $1.45 million annually and in theory is for maintenance, but also helps the Bradley Center afford the exorbitant payments going to the Milwaukee Bucks.”

    There wouldn’t be a Bradley Center if not for the Milwaukee Bucks. If we don’t want a replacement arena, that’s fine, but Milwaukee wouldn’t even have the facility it has now if not for NBA basketball.

  10. wisconsin Conservative Digest says:

    So What! Does that mean that we now must put out a billion dollars for this turkey? Look around the country, these things are mirage for development, fan base and putting billions into owners pockets. NUTS to them.
    I disagree with Walker and other very strongly. Even though Scott has saved us billions for the exchanges that are going broke around country, the Medicaid bulls that are burying school money and the billion he saved us from the Halfast train, we need not blow it on this turkey.

  11. DTY says:

    @Jerad –

    Here is the exact wording from the Marquette survey “Do you support or oppose this idea for the upcoming state budget? … Borrowing about $150 million to support a new arena for the Milwaukee Bucks”

    This is almost exactly what legislative leaders have been proposing. This question was also only one of several dozen questions in a wide-ranging survey on political issues, so no one would feel strong-armed into answering in any particular way about this question.

    Any qualified survey professional will tell you that the MMAC survey had “leading” language. It identified possible impacts and perceived benefits that were highly slanted to a given viewpoint. The Marquette survey had no such leading language – it simply laid out the proposal without any mention of anyone’s perceptions of benefits, concerns, alternatives or impact. It assumed the respondent would answer based on how much (or how little) he or she already knew of the proposal.

    But if you prefer surveys that say “Would you vote to fund this arena that will solve world hunger, save puppies and prevent zombies from rising from the ashes of the Bradley Center?” then so be it.

  12. Bruce Murphy says:

    To Michael Kristof: Actually the Bradley Center was built for both the Bucks and the Milwaukee Admirals and its configuration arguably makes it better suited for hockey. Philanthropist Jane Pettit was then married to Lloyd Pettit, who was a huge hockey fan.

  13. Will says:

    @Bruce True, but without the Bucks the Bradley Center would have never been built, but without the Admirals it would have still been built.

  14. Virginia Small says:

    Even with an arena 100% donated, and $10M in state subsidies since 2009, taxpayers still are on the hook for $20M in current debt. That’s because, as Bruce reported, Bradley Center’s unsustainable business model hands over huge chunks of revenue to the Bucks. The Bucks have not invested in the facility, do not pay rent/maintenace, or help manage it. They simply have finagled an unbelievably sweet deal (not unusual in major-league sports). After investing in a new arena, the Bucks could conceivably demand even greater revenue shares, thus forcing even greater upkeep subsidies from taxpayers.

    Some cities have reportedly built sports venues that do not gouge taxpayers. Not sure which ones, but someone could look to those successful models–not Kansas City, which was on Desperation Row (and is now doing only slightly better).

    Many attractions contributed to MKE Co. bringing in $1.8 billion from tourism in 2014. Most of those attractions (including Summerfest, Pabst Theatre Group, Harley Museum, MAM etc.) succeed with little or no public help. The Bucks could do the same, even owning/managing their own venue and getting all the revenue.

    MKE benefits from having many entertainment options, but excessive public subsidies to a couple sports venues throws the overall tax base & economy out of whack. We need objective plans for how to make an arena a sustainable business model, as any business must be to survive.

  15. Jake formerly of the LP says:

    DTY is correct- there was nothing leading about the MU Poll question. If anything, it soft-sold what was in Gov Walker’s budget, which was $220 million in borrowing and ultimately $488 million to pay the whole thing off over 30 years, and didn’t mention the property tax exemptions that make this a massive giveaway.

    The MMAC is all about funneling profits to their members, and they don’t care what else that screws. That includes public schools, Milwaukee infrastructure, fiscal stability through responsible taxation, or protecting the Lakefront. You know, things that actually would make talent want to locate to Milwaukee and help businesses thrive.

  16. M says:

    Kansas City Business Journal reported that KC’s decline started 40 years ago when one developer was given development rights to 12 prime blocks–and then “killed downtown” by doing nothing…

    http://www.bizjournals.com/kansascity/print-edition/2013/07/12/power-light-district-kc-forks-over.html?page=all

    Any proposed deal for an arena itself sounds very generous to Bucks (& bad enough for taxpayers): free land from state, bonding for half of building costs, no property taxes, past & future infrastructure from city). But to comply with the Bucks’ demands for more freebies, the mayor seems eager to give away the store (and urban planning for Westown/Park East) by handing over the city-owned 4th St. parking structure & former Sydney Hih sites–for a KC Live-style complex of bars, etc. The Bucks are selling ice to Eskimos, apparently with MMAC’s blessing, cuz just a new arena won’t satisfy these speculators.

    Chris Abele is more coy, but he reportedly wants to give county-owned Park East land for a new Bucks practice facility, a new parking structure to replace the city’s one being demolished, and perhaps other land for carte-blanche development. Abele also wants to raid Wisconsin Center District funding. We can only hope it ends up being less worse than all this. But the Bucks/NBA have issued an ultimatum: Do what we demand or we’ll leave town!! How much will taxpayers pay for the bar campus et al?

  17. 2fs says:

    The bar/restaurant site DIRECTLY ACROSS THE STREET from the Bradley Center on 4th Street can’t even manage to attract enough customers to stay open for long. So much for the alleged benefits to other businesses of proximity to a sports facility.

  18. S says:

    1. Kansas City is a terrible comparison. Kansas City has no NBA or NHL team playing in the Sprint Center; the Milwaukee Bucks are a 41+ times per year show that Kansas City cannot replicate (not to mention TV influence in the area, which is a whole other issue not talked about enough), and they will continue to provide 41+ annual events and draw thousands to the surrounding area each event if, and only if, a new arena is built and they stay.

    2. The Bradley Center was constructed and designed as such largely to attract an NHL team. The Admirals weren’t part of the equation for constructing an 18,000+ seat arena and its disingenuous for this author to suggest otherwise (in his comment).

    3. This is as much about the loss of a franchise that only 27 other markets in the world share than about a sports facility. Whether you like the Bucks or not, you have to appreciate the blow the City, surrounding area, and State would take (economically and otherwise) in just giving that up. Further, the proposed area as it is doesn’t attract property tax dollars right now, so it’s not as if the City is forgoing copious levels of property tax income if the district (parts or in toto) were to be property tax exempt.

  19. Bruce Murphy says:

    S, you’re right that the Bradley Center was built with hopes of getting an NHL team. I was certain the arena was built with hockey in mind but forgot that part of it. Good correction.

  20. Wisconsin Conservative Digest says:

    S, what effect was there when the Hawks left? the Brave?s. Lots of bitching but no apparent economic effect. people just spend there money elsewhere. There is a black eye though.

  21. Todd says:

    Bruce, don’t see how any of the other development could be “exempted” from property taxes. Milwaukee does not have the power to do that even if it wanted to. The Legislature could create a statutory exemption but that is unlikely and it would not probably pass legal muster.

  22. M says:

    Instead of using scare tactics about what might happen if the Bucks leave, perhaps MMAC and other Bucks boosters can work on a deal that gets the Bucks to stay (without gouging taxpayers). If The Bucks won’t kick in any more dough, why not fund-raise among business owners and hard-core fans to chip in? Milwaukee Art Museum has done to get two museum additions built in recent years (raising hundreds of millions!), There are surely as many in metro area who love sports as love fine art.

    The other thing that could make a deal work is to nix the silly scheme for a state-owned nightlife district. Someone needs to tell the Bucks owners that downtown Milwaukee does not need more bars (until the residential population there rises accordingly). I know the Bucks want to “capture” more of the current nightlife spending, but some call that cannibalization, or at least unfair competition…

  23. Bruce Murphy says:

    Todd, as I’ver previously written, everything the Bucks owners have so far detailed that will be part of the $500 million in ancillary development (in addition to the arena) appears to fit the state definition of what would be exempt from both property and corporate income taxes in this “sports and entertainment district.”

  24. M says:

    From an official NBA press release on 4/8/15:

    “While the arena and entertainment plaza on 1 million square feet is expected to take 2 years to build, the additional $500 million in a mixed entertainment, residential and commercial development could take more than 10 years to materialize, Bucks officials said. They hope the arena will be an incubator for the additional development, but there are no guarantees, Feigin said.”

    The NBA & Bucks are unequivocal: The “entertainment plaza” with the massive sports bar and three floors of other bars etc. WILL BE PART OF THE BASIC $500M TAX-FUNDED ARENA PROJECT. Other mixed-use “ancillary development”(up to $500M more) is all just pipe dreams for now, per Feigin.

    The Bucks intend for taxpayers to fund, and for the state to own through a tax-exempt entity, both the arena proper and the “entertainment plaza.” It’s hard to believe that taxpayers building bars is part of the grand plan, which is why many of us can’t believe it.

    The actual cost will surely be more than $500M, but that’s Phase 2 of Bait & Switch…

  25. wisconsin Conservative Digest says:

    The governor just put the kabosh on this with his statement of it being behind K12 and U system funding.
    “Beware of NewYawkers bearing gifts”, get it in writing. Who has ever seen the contract between NBA and the Bucks as to when they have to give up team if no new Arena. More BS from New Yawk!!

  26. S says:

    http://espn.go.com/nba/story/_/id/10818521/nba-buy-milwaukee-bucks-no-arena-construction-2017

    Not hard to find information on the contract. The NBA is a franchisor, just like Hampton Hotels, Culver’s, etc., and it seeks to protect its brand.

  27. wisconsin Conservative Digest says:

    That isn’t the contract it is a guess what the contract sez, I ma from Wisconsin, show me the contract. Under what that sez they only have the right so there fore the guys can keep it. Loom for signed contract dummies.

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