Arena Plan is Massive Tax Shift to Milwaukee
County taxpayers will pay far more than predicted, as state legislators back away from the deal.
At the outset, let me agree with the Koch Brothers-funded Americans for Prosperity, surely for the first time in my life: The new plan for the Bucks arena “is based on fuzzy math, complicated accounting and taxpayer dollars,” as David Fladeboe, director of Americans for Prosperity of Wisconsin, put it. “Whether it comes from the state, the county, the city or other authority these are taxpayer dollars. This proposal needs to be rejected.”
Implicit in Fladeboe’s statement was an awareness that the deal is changing which pots of taxpayer money would fund the new arena. But somehow this major development escaped the Milwaukee Journal Sentinel. As the word “newspaper” suggests, its job is to tell us what is new. Yet the paper’s big, top-of-the-fold headline, “Taxpayer tab: $250 million,” was very old news. Since January it has been clear the Bucks owners and former owner Herb Kohl would together pay $250 million and taxpayers were expected to pay the remaining $250 to build the arena.
What had changed — and was quite newsworthy — was the proportion of taxpayer dollars to be paid by Milwaukee County. Recall that Gov. Scott Walker’s original proposal pledged the state to pay $220 million, leaving a gap of $30 million that might be paid by the owners stepping up or by the city and county closing the gap. Over time, as the owners made clear they wouldn’t budge, the pressure was on the city and county to come up with the $30 million. Then, Republican legislators began carping that Milwaukee wasn’t paying enough, and the deal gradually morphed into the state paying $150 million, with the city and county being pressured to jointly come up with $100 million.
And so its story never tallied up the total for the state versus Milwaukee, nor discussed what caused the change by Republican legislators. As Steven Walters has reported, polls show that outside Milwaukee and Madison, voters opposed the state bailout of the Bucks by a stunning 86 percent to 10 percent margin. One can certainly imagine GOP legislators are hearing negative things from constituents on this issue.
Meanwhile, Democrats have happily dumped on Walker for supporting an arena deal. A story in the Washington Post on Walker reported the carping from Democrats: “They note that Walker wants to retain a tax break on manufacturers and farms and to issue $220 million in bonds for a Milwaukee Bucks basketball arena, even as he is pushing for cuts in education and health care.” Given that the Bucks deal, to the extent that it has any economic spinoff, would have the most for Democratic Milwaukee County, this comment infuriated Republicans.
And so, about a week or so ago, in one of the ongoing meetings of representatives of the Bucks, the state, city and county, Republican Assembly Speaker Robin Vos apparently dropped a bomb: that the legislature wouldn’t approve more than $50 million in state funding. This seemed to leave the deal dead, but that’s when state Department of Revenue Secretary Rick Chandler floated the idea of letting the state grab some $3 million annually of the city and county’s uncollected debt. The state has more power to garnish wages and other tools to collect debts.
The city, it appears, resisted, but County Executive Chris Abele was okay with the idea, and the number was increased to $4 million as it became clear there was a bigger gap to fill. (The state bumped the $50 million to $55 million) Meanwhile, Walker and legislative leaders were gradually sold on the idea of letting the Wisconsin Center District raise one or both of the hotel and car rental taxes to raise some $93 million. Walker had been adamant that no taxes would be increased, but has now changed to arguing this isn’t a state tax so it’s okay.
The Bucks representatives had long assumed Abele would have trouble getting any Bucks handout approved by the county board, but Chandler’s solution of having the county certify its debts for state collection can apparently be done without board approval. And it’s expected to raise $80 million over 20 years.
Board Chairman Marina Dimitrijevic tells me the proposal hasn’t been discussed with the board and “was a complete surprise.” She says she is seeking legal counsel on this, adding “it would be especially concerning if the final proposal would allow one individual to commit millions of dollars in taxpayer resources unilaterally. Many questions are being asked about a possible diversion of taxpayer resources away from public programs that provide day-to-day services to the County’s vulnerable residents.”
The deal also appears to envision using the Wisconsin Center’s tax hike to pay for an expanded convention center and change the center’s governing authority to combine it with the Bradley Center and perhaps other downtown entertainment entities. That might make sense, but at this point appears a case of the tail wagging the dog: changing the structure not to serve Milwaukee’s Downtown, but to pave the way for an NBA arena. And the $93 million it would provide to the Bucks appears to be highly leveraged and grabbed from tax revenue gained many years into the future.
The politician who seems most exposed in this deal, and who has been unwilling to discuss it with the press, is Abele. The idea of having the state go more aggressively after the county’s creditors, many of whom could be low-income people, to gain $80 million for the Bucks’ billionaire owners, has an ugly sound to it, all more so given that Abele himself is a wealthy man. Perhaps worse, if the state can’t raise the expected $80 million, it will likely reduce its aid to Milwaukee County to make up the difference, which will directly affect local taxpayers. This might be an issue a populist opponent for county exec could exploit.
But of course all parties involved hope that none of this really sounds like a tax. The hotel and car rental taxes fall more on tourists, the debt collection is just collecting what’s owed, after all, TIF districts have never been understood by taxpayers, and the state bonds, as we’ve repeatedly been told, are coming from income taxes paid by NBA players. The reality is the total cost to taxpayers, when the final tally is made (and odds are I’ll be the only reporter to do the tally) will likely come very close to $1 billion. But don’t expect to see that in a headline.
-The state will also pay an estimated $25 million in interest on the $55 million bonds, which adds to the $500 million cost for the arena.
-I’m told the city is pressuring the Bucks to provide more details on spinoff development they envision building near the arena, and that there is bargaining as to what will be tax exempt. It’s pretty hard to do a TIF district, which gets repaid from future property taxes paid, if all the development is tax exempt. This too, is something that doesn’t seem to be getting much coverage.
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