The City’s Real Costs for Bucks Arena
The exact total is unknown, but will be much higher than media has reported.
Tracking down what a new Milwaukee Bucks arena deal will cost city taxpayers is an elusive task. Much was revealed at a recent informational hearing before the Steering and Rules Committee of Milwaukee’s Common Council, which suggests the cost will be higher than so far reported. But there is still no public document with specific details, and the numbers keep changing.
Mayor Tom Barrett was joined by city lobbyist Jennifer Gonda and Commissioner of City Development Rocky Marcoux at the meeting. The mayor stressed that his overall goal was to avoid directly raising property taxes, which he says he achieved. But while no levy increase may be required there’s little doubt taxpayer dollars will be spent on the project.
Barrett noted that Milwaukee Bucks representatives have resisted spending a dollar more than the $150 million the owners initially offered to help build the $500 million arena. For example, when Ald. Nik Kovac asked why the mayor agreed to give the Bucks half the income from a parking facility the city would build for the team, Barrett revealed that the Bucks first demanded all the parking revenue, and also wanted to control the facility and have it be tax exempt.
The Bucks will nominally contribute $8 million for the parking facility and land it sits on, but under the deal that amount will later be returned to the Bucks from property taxes collected in a tax incremental financing (TIF) district the city will create for the Bucks project. In short, the Bucks will have no out-of-pocket costs the for parking facility while the city would take on $35 million in bonding to build it, yet would only get half the income, with the other half going to the Bucks. The city’s estimated take of $350,000 a year means it would take 100 years (and that would be with zero percent interest) to pay off the bonds. By that time there may be at least two more new arena projects, given the current average life span of NBA arenas.
No mention was made of demolition costs or who would pay them, but Barrett’s chief of staff Patrick Curley told Urban Milwaukee that this, too, will be a city cost, probably totaling $1.2 to $1.5 million.
Committee members also learned that city, county and state deal makers have jointly decided to give about 25 total acres in land to the Bucks for the arena and ancillary development that may take up to 15 years to develop. City and county representatives will vote on land transfers, but state-owned land will be handed over through the Bradley Center board. The land’s appraised value is about $1 million an acre, but to date this cost hasn’t been mentioned in media reports on negotiations. Marcoux acknowledged that the Bucks land demand is a deal contingency. (The Bucks owners named the new company running this project Head of the Herd, LLC, perhaps a hint as to who’s in charge in these ongoing negotiations.)
The city has also agreed to fund $12 million in infrastructure (through a TIF district) that will reportedly cover creating public areas and sidewalks.(Plus, $8 million for the parking structure will be added to the TIF, increasing its total cost to $20 million.) However, it will not cover the costs of vacating 4th Street and rerouting traffic. Marcoux said these costs and other infrastructure costs are also not included in the deal since “they’re already budgeted for.” Those costs have yet to be tallied and have not counted as part of the city’s contribution.
“Why is there any public subsidy at all?” asked Ald. Robert Bauman. He noted that the owners are billionaires and can easily afford to build their own arena with private money, as the private owners of the United Center in Chicago, and others venues, have done. Bauman also questioned whether the proposed entertainment mall, with many new bars and restaurants, might “cannibalize” existing downtown businesses on Third Street and Water Street. Mayor Barrett said he knew of no opposition from any businesses. “I’ve always believed the more activity you can have within a walkable distance the better.” But in the last few days, some businesses in the area have begun to raise concerns about the potential competition from team-owned establishments, as the Milwaukee Journal Sentinel has reported.
Some information was revealed about what the Bucks envision for their “entertainment destination” — it would be several floors of bars and restaurants facing the arena. Owner Wes Edens has said it would include the “biggest outdoor sports bar in the country” and he imagines Packer fans watching games on giant screens in cold weather. Marcoux told the committee the Bucks “don’t want this to be Anywhere USA,” yet the Bucks are promising only “25 percent local vendors” in the bar mall. In other words, three-fourths of the annex will be chain-franchised bars, restaurants and other retail common to other cities, competing with the mostly locally-owned businesses.
Kovac also asked Barrett if he had pushed the Bucks for specific concessions, such as giving the city an equity interest in the team. The mayor said he requested other options, such as ticket surcharges and local taxing of players, which were rejected by the Bucks. But the mayor did note that businesses in the entertainment mall will not be exempt from property taxes, which is a change from the governor’s original draft legislation. Only the arena itself and the Live Plaza or public gathering area would be tax exempt.
Wisconsin Center District leaders also presented information to the committee. Jeff Sinkovec, its director of finance, expressed concerned about potential impacts of a possible state mandate requiring the state-chartered District to borrow $93 million to fund arena construction. (With interest the cost would be at least $180 million.) Sincovec calculated that repayment of new arena debt, using the district’s taxes on hotels, rental cars and food and beverages, would not begin in large amounts until at least 2028—after all costs for prior construction are largely paid off, pushing any sunset far into the future, probably well past the likely life of the new arena.
WCD’s interim president Russell Staerkel said its representatives had been rebuffed when they asked to be included in arena talks. Kovac responded to this by referencing the adage: “If you’re not at the table, you’re on the menu.” Staerkel expressed the concern that the arena’s cost would indefinitely delay expanding the convention center. Without a bigger convention center, he warned, Milwaukee is on the verge of going from a Tier 2 city to Tier 3 city, like Omaha, his hometown.
Bauman charged that the state and county roles in this deal “stink to the high heavens.” The council’s spirited discussion and skepticism indicates they may demand a thorough review of all city subsidies, including hidden ones, and not just rubber-stamp any deal. We’ll see.
Known City Costs At This Time:
- 25 acres of public land would be given to the Bucks by the city, county and state. Value: At least $25 million.
- City gives up a fully-functional parking structure built for $30 million. City will lose at least $500,000 in annual income plus up to $100,000 per year from an 8,500 square-foot retail space in the complex.
- City will pay for demolition of parking complex.
- City will pay issue $35 million in bonds for a new parking structure and will get only half the revenue (estimated $350,000 annually) from new structure.
- City will pay $20 million for infrastructure through a TIF district.
- Some additional city infrastructure costs are not tallied or credited in the deal.
- The costs of foregone property taxes for arena and Live Plaza have yet to be determined.