City Could Get Cash From Convention Center Expansion

The Wisconsin Center District (WCD) has a proposal to provide the city with annual cash payments in exchange for restoring a certification that would save the district up to $50 million on the proposed convention center expansion. But will the Common Council accept it?

On Tuesday, the Common Council revoked a certification required to enable the state’s backing of $300 million in debt related to the $420 million expansion of the Wisconsin Center. Without the state’s backing, known formally as a “moral obligation,” a WCD report estimates that borrowing costs on the project would rise by $40 million to $50 million.

Alderman Robert Bauman led the charge to revoke the previously approved certification as part of a move to force the Wisconsin Center District’s leadership to negotiate with the city over projected surplus revenue. According to financial models by project consultants, the district is expected to have hundreds of millions in excess tax revenue, including from a 7.5 percent hotel room tax that formerly went to the city, over the life of the project’s proposed 40-year bonds.

Prior to the pandemic drastically altering the United States economy, district CEO Marty Brooks had sought an April 2nd vote to approve the financing package without any city support. He indicated support for still doing so in a memo Monday and another sent Friday. “I think the change in circumstances is so dramatic, so dire, that if the Wisconsin Center District is not going to hold up this vote, then we have to,” said Bauman on Tuesday in successfully encouraging his colleagues to revoke the certification.

His strategy appears to have worked, at least insofar as bringing Brooks to the bargaining table. “Over the past several days very productive discussions with multiple City officials and have yielded a Payment in Lieu of Taxes (PILOT) program that both the Common Council and WCD Board could accept,” wrote Brooks in his Friday memo.

Council President Ashanti Hamilton had met previously with Brooks about the city’s concerns with the proposal. “I don’t want to lose the leverage with the conversations we’ve had around revenue sharing and solidifying a community benefits package,” said Hamilton during a council debate that lasted nearly two hours.

The district would provide the city with $750,000 annually for its first $750,000 to $30 million in annual income starting in its 2025 fiscal year. For each additional $10 million in income, not including depreciation, the district would provide the city another $750,000. If the terms of the deal were applied to the district’s past three fiscal years, the city would have received $750,000 in each year.

As part of the deal the city would have to forego revenue from building permits on the expansion and any future WCD projects as well as not levy any new fees or expenses not otherwise required by state or federal government. The district would apply the standard workforce and contracting requirements to the expansion that the city does to all projects receiving more than $1 million in city funds, including that 40 percent of the work hours be performed by unemployed or underemployed city residents.

But the Common Council has not voted on the deal. Multiple council members told Urban Milwaukee they haven’t been briefed on the deal. “As far as the reference to ‘acceptable to the Common Council’ assertion, apparently there was a council meeting over the last two days that I missed,” wrote Bauman. He said his starting position was a third of the hotel tax, which generated approximately $15 million in 2019. He said avoiding a fixed amount would allow the amount to go down during a recession and go up in boom times. He also wants the distributions to start earlier.

Alderwoman Milele A. Coggs, Hamilton and Bauman serve on the district board as the council’s appointees.

Two WCD committees are scheduled to meet virtually on Monday morning to decide whether to proceed with an April 2nd vote. The board would also need to authorize the PILOT agreement with the city.

Renderings

Current Building