Should City Approve Subsidy for Bucks Arena?
The costs keep rising. And the benefits seem iffy.
Next week the first of three different committees of the Milwaukee Common Council will hold a hearing on the city’s contribution to the Milwaukee Bucks new arena development. A vote by the full council is expected to occur on September 22.
Milwaukee Comptroller Martin Matson has issued a report to the Common Council that concludes the city’s plan to subsidize the Bucks is financially “achievable.” That opinion was based on a review of various funding streams including bond borrowing, tax-incremental (TIF) financing, an $8 million loan from the Bucks, and other sources of funds.
But while it may be achievable, the question remains, is it desirable, does it have any benefits for taxpayers? Matson offers the hedged conclusion that the project “may reflect the beginning of an even larger economic development opportunity,” but a broad consensus of economists agrees that new sports arenas and stadiums have little or no economic impact and the money spent by consumers would be spent on other local entertainment in the absence of the facility, achieving a comparable impact. And the Bucks’ development of new bars and restaurants may actually cannibalize current taverns and dining places in the area.
The known costs for the city include:
$35 million to build a new, 1,243-space parking garage;
$12 million to build a “public plaza” between the Bucks entertainment mall and the new arena;
$8 million to build a canopied courtyard within a U-shaped entertainment mall;
$4.1 to $4.6 million for additional street work;
$17 million in interest on TIF-related borrowing;
$1.2 to $1.5 million from city to cover demolition of parking garage with 980 spaces;
$1 million (appraised value) for the one-acre Sydney Hih parcel (W. Juneau Ave.and N. 3rd St.) the city will give the Bucks;
That brings the total cost for the city to more than $78 million.
Other undisclosed or yet-to-be estimated costs:
City has agreed to pay to replace sewers and remove freeway pillars on the Park East land the county has agreed to give the Bucks for $1. Cost for city is unknown.
Lost parking revenue: the city will get 50 percent of revenue from new parking garage, which equates to 621 spaces, versus current lot’s 980 spaces. No analysis of lost revenue to city over likely 30-year life of new arena has been done.
The city gets an $8 million “loan” from the Bucks which it must repay at 4.5 percent interest over 25 years to help build the new parking garage which spins off half of the revenue to the team. It would take a very smart economist to estimate the net value of this to the team.
Additional, un-estimated interest on non-TIF borrowing by city.
According to the comptroller’s analysis, the costs of sewer work on Highland, as well as costs for Park East sewer work and other site preparation to remove freeway debris have not been determined. (The city, state and county will share these still-to-be-determined costs.)
Add these costs, plus the property tax exemption on the new arena and the total 30-year bill is likely hundreds of millions of dollars for city taxpayers.
Economic impact of the arena:
Downtown has no shortage of entertainment located close to the proposed arena. Bars and restaurants on Old World Third Street connect to those on Water Street by way of Juneau Avenue’s block of taverns.
Water Street has been cited as a national success story and favorably compared to New Orleans’ Bourbon Street and Memphis’ Beale Street by urban design professor Brent D. Ryan.
Milwaukee arguably already has a downtown entertainment zone:
-There are 60 “walkable” bars and restaurants within a half-mile of the Bradley Center. (This does not include coffee shops, George Webb, or a dozen eateries inside the Shops at Grand Avenue, the latter of which are not open at night.)
-There are 15 official “Bucks bars” on Third Street and Water Street alone, plus 30 more throughout Greater Milwaukee, that are all part of a cross-promotional network.
-This compares to Columbus, Ohio’s Arena District, considered a successful model of planned mixed-use development, which has just 19 bars and restaurants interspersed within its 75 acres.
-Even the entertainment districts cited as models for the Bucks’ development have far fewer restaurants and bars than Milwaukee’s downtown entertainment zone: Kansas City Power & Light District has 35 (including 15 within KC Live!) total restaurants and bars while Louisville’s 4th Street Live! has 21, L.A. Live has 20 and in Baltimore’s Power Point Live! has 15.
-Milwaukee’s Water and Third streets already have more sports bars, Irish pubs, cowboy joints, dueling pianos, breweries, beer gardens, steakhouses, and music halls than those other packaged districts.
In short, there is no great need for city or county government to subsidize the Buck’s plan to build more bars and restaurants.
Moreover, the kind of “urban entertainment destination” run by sports teams and on which the Bucks’ plans are modeled is controlled by a single developer or corporate umbrella. The result is less variety and originality in bars and restaurants, and more of the national chains that you can find in any city in America. And while the Buck’s bars and restaurant outside the arena will pay property taxes, the team’s entire operation is heavily subsidized, which arguably gives the Bucks’ entertainment district a distinct economic advantage over other local businesses. Moreover, the goal of these entertainment destinations is to create a captive audience within an entertainment monopoly, along the lines of casinos and theme parks, to prevent any loss of dollars that might be spent on other businesses in the city.
The Council does have options—and leverage for how it offers any funding. Council members could vote “No” to the proposed mall/garage package, or they could delay a vote and take time for due diligence and public input. Economic impacts and other implications of the proposed mall and garage teardown are still to be determined.
Mayor Tom Barrett has several times expressed concern about jeopardizing future convention and tourism business if the Wisconsin Center District is forced to borrow $93 million for the arena. The council could actually do something about that by designating that the $35 million from the city be used to defray the onerous “burden” placed on the WCD rather than spending it on the proposed mall and garage scheme.
Those details could all be worked out in a two-way negotiation process, which is much cleaner now that the state and county have already settled on their contributions. The mayor wisely arranged for the city to vote on a free-standing deal and the council can take advantage of that. Finally, it’s worth noting that sports bailouts are hot-button issues for taxpayers. They will be watching what council members do.
PUBLIC HEARINGS: Room 301-B of City Hall, 200 E. Wells St.
Mon., Aug. 31 at 4 PM Steering Committee. Comptroller’s report on subsidy costs.
Tues., Sept. 15, 9 AM Zoning, Neighborhoods and Development Committee
Wed., Sept 16, 9 AM Finance and Personnel Committee
Tues., Sept. 22, 9 AM Vote by Common Council in its chambers, Third Floor, City Hall
Dining & Bars Near Downtown Milwaukee Arenas
Old World Third Street/Westown
Agave Southwest Bar & Grill
Ale Asylum Riverhouse
Applebee’s Grill & Bar
BB’s (Build-A-Breakfast, Build-A-Burger)
Benihana Japanese Steakhouse
Brick 3 Pizza
Buck Bradley’s Eatery & Saloon
Carson’s Ribs & Steaks
Kiku Japanese Restaurant
Lucille’s Piano Bar & Grill
Mader’s German Restaurant & Knight’s Bar
Miller Time Pub & Grill
Milwaukee Brat House
Mo’s…A Place for Steaks
Old German Beer Hall
Port of Call Bistro & Beer Garden
Rock Bottom Restaurant & Brewery
The Brown Bottle Restaurant
The King & I
The Loaded Slate
The Pub Club
Turner Hall Restaurant
Tutto Restaurant & Bar
Uber Tap Room & Wisconsin Cheese Mart
Upper 90 Sports Pub
Who’s on Third
Water Street District/East Town
Brothers Bar & Grill
Buffalo Wild Wings Grill & Bar
Duke’s on Water
McGillicuddy’s Bar & Grill
Qdoba Mexican Grill
Red Rock Saloon
Rosie’s on Water
The Harp Irish Pub
The Safe House
Trinity Three Irish Pubs
Vagabond Mexican Restaurant
Water Street Brewery
Zenden Bar & Lounge
Coming Soon: Novo on Water Street, a Brew Pub on Old World Third Street, and a Tavern at 4th Street’s Hardware Headquarters