Summerfest Flush With Cash

The latest federal tax form of Milwaukee World Festival, Inc. (MWF) the parent organization of Summerfest, shows the festival is flush with cash, including $16 million in investments, part of a $47 million net cash balance. 

That was the total at the end of 2018, on its most recent federal 990 tax form. That’s up from just $1.3 million in investments and a net cash balance of $17.4 million at the end of 2016. 

“Summerfest is obviously doing very well,” says Milwaukee alderman Bob Bauman. “They have a lot of cash on hand, they pay their employees very well and they don’t need a subsidy from the city in the form of uncompensated police services.” 

Under Summerfest’s lease with the city it pays a fee for police services provided by the Milwaukee Police Department, which was just $134,392 in 2019. The full cost of those services, however, was $813,297, leaving taxpayers footing the bill for $678,905 in uncompensated services. 

Back in 2011, the cost of policing Summerfest was just $313,000, but the wave of mass shootings in America has made it progressively more expensive to police huge events like the festival. Since 2011, the Milwaukee Police Department has provided $5.75 million worth of policing for Summerfest and the festival has paid just $1.1 million, leaving city taxpayers to the foot the rest of the bill, as Urban Milwaukee’s Jeramey Jannene has reported.

The investments and cash reserves of Milwaukee World Festival have grown since December, 2018, when the Boards of MWF and its separate Summerfest Foundation voted to dissolve the latter and merge it into MWF. The Summerfest Foundation had net assets of $20.8 million, including $6.25 in investments, when it was disbanded. The Summerfest Foundation raised gifts, grants and contributions totaling nearly $19 million from 2011 through 2016, of which less than 10 percent went for small grants to schools and non-profits, with the rest used to underwrite Summerfest.

Officials with Milwaukee World Festival did not respond to requests for comment on its finances, which Urban Milwaukee first made back in early December, until just after publication of this story. The organization offered this statement: “We disagree with the presumption that these numbers indicate the ability to pay more in rent. One would have to understand the complete, long-term financial picture of MWF, including the funds associated with capital developments, an analysis which cannot be completed by reviewing a 990.  Additionally, our current lease does not expire until December 31, 2030, so any discussion of rent is exceedingly premature.”

Festival officials have repeatedly said they are complying with the lease as written. But Bauman has come up with another way to force the festival to pay these costs, as Urban Milwaukee was the first to report last week: by withholding the street closure permit needed by the festival. Normally that permit is “rubber stamped,” Bauman notes, but not this year. He points to groups like the Milwaukee Marathon, which also need street closures and pay the full cost of police services. Council members have also pointed to the Milwaukee Brewers and Milwaukee Bucks who pay the full cost of police services for their games and other events.  

City officials were outraged to learn that Summerfest’s CEO Don Smiley received a $2.33 million pay package in 2017, as Urban Milwaukee was the first to report, which included some $971,000 in base salary and “deferred compensation” for his work that year, and an additional $1.37 million deferred from prior years. The news came in early November, just days after Summerfest officials blew off a scheduled meeting they had with city officials on the Harbor Commission, the festival’s landlord, as Urban Milwaukee first reported. Adding more outrage was the statement of Howard Sosoff, chairman of the World Festival board, who told Urban Milwaukee that Milwaukee World Festival, Inc., is not a partnership with the city or “a public-private entity,” but “a private corporation.”  

Actually, the organization is a tax exempt non-profit, meaning it is exempt from federal and state taxes and thus subsidized by the taxpayers. Summerfest was founded by the city and has benefited from many city subsidies. The full amount has never been calculated, but in the 1980s the city spent $42 million for improvements to the Summerfest area. The vast majority of its current infrastructure was paid for by either the city or charitable donations from businesses, foundations and individuals in the community. 

“Milwaukee taxpayers view themselves as partners with Milwaukee World Festival, Inc.,” alderman and Harbor Commission member Mark Borkowski has noted, “and the staff and board of MWF should be thankful for their support and commitment.”

Bauman says he expects he will have the support of every council member — all 15 including him — for his proposal to withhold the street closing permit. “My colleagues are incensed,” he says. “We are cutting sworn strength in the police department and facing rising police pension costs because of budget problems. And we’ve got Smiley making all this money and Summerfest sitting on all this cash while we subsidize their police costs.” 

City officials have noted that this subsidy falls on all city taxpayers, including many who can’t afford to attend Summerfest. “Milwaukee is one of the poorest cities in the country,” Ald. Michael Murphy has noted. “For the city to provide a high subsidy to a very profitable ‘private entity’, which is their words, is simply unacceptable.”