Wisconsin Center Faces 50% Revenue Cut
But CEO Marty Brooks still pushing to expand center, issue bonds during pandemic.
The Wisconsin Center District is still considering authorizing an expansion of the convention center, even as district staff brief board members on their work to avoid defaulting on existing loans.
The district, which is funded by a combination of food and beverage, rental car and hotel taxes as well as rental fees, is forecasting no tax revenue from April through June and a reduction of $22 million in tax collections, a more-than 50-percent cut, for the year.
The district had projected an income of $583,000 after depreciation in its 2020 fiscal year, but because of that $22 million loss, “We are down on our net income relative to the budget by about $21 million,” said district senior vice president and Chief Financial Officer Steve Marsh. His assessment was offered during a briefing of district board’s Finance & Personnel Committee on Monday morning.
“Our revenue projects for the rest of the year aren’t very significant,” said Marsh. But one thing they’re still budgeting for is “several million dollars” in rental income and reimbursable expenses from the Democratic National Convention.
Steps are being taken to lower operating costs in response to declining revenues. “We’re actively managing and controlling those elements of the business that we have some amount of control over,” said Marsh. Salaried staff have taken a 20 percent pay cut, an ice sheet in the UW-Panther Milwaukee Arena has been removed now that the Milwaukee Admirals season has been suspended and the heat in various buildings has been turned down. The Miller High Life Theater is completely closed. The district is looking to move capital projects from being paid for with income to using debt payments.
“I am confident we are going to get through this,” said Marsh. He said the impact of the COVID-19 pandemic would be most strongly felt by the district at the back end of the year when events start occurring again. A cash flow projection shows the district’s restricted revenue account used to repay debt would have a $6 million negative balance starting on September 1st if no action is taken.
Two resolutions will come before the 17-member board at its April 2nd meeting. Option A would authorize up to $690 million in debt, with up to $525 million in debt used to finance the $420 proposed expansion, $15 million to fund capital projects in the short term and $150,000 million in refinancing existing debt. Option B would allow only for the refinancing and short-term capital borrowing. Refinancing debt, originally envisioned before the pandemic took hold in the United States, is intended to reduce debt payments in the short term to create more free cash flow.
Under each scenario the county hotel room tax would be increased from 2.5 percent to 3 percent and a 0.5 percent food and beverage sales tax would be extended past its 2033 projected sunset. “Just so everyone’s clear about that we are raising taxes in the middle of a recession, possibly a depression,” said Bauman during the meeting, the only time the issue was broached.
Bauman was critical of District CEO Marty Brooks‘ Friday memo to the board that said a revenue-sharing deal between the Common Council and WCD had been reached that each side “could accept.” He said, “this so-called agreement has not presented to the Common Council in any shape or form.” Brooks has been negotiating by phone with Council President Ashanti Hamilton and representatives of Mayor Tom Barrett.
“No agreement has been reached. These are discussions about terms and conditions that I believe are reasonable for the district to be engaged and recommend to the board for their support,” said Brooks. He said a revised deal had been sent to the city Monday morning. “I would not take this information to a public meeting if I did not believe and didn’t know these discussions had occurred.” The district needs the city’s certification of revenue estimates in order to obtain a moral obligation from the state, and without that obligation the borrowing costs associated with the project are expected to grow by $40 million to $50 million. The council rescinded the certification last week to force Brooks to the bargaining table.
Brooks asked the finance committee if he was being “tone deaf” in proceeding with the expansion? “Yes, I am very concerned about it,” said Bauman.
“I support your actions. Keep going. We have to get this done,” said Mark Flaherty, managing partner at hotel developer Jackson Streets Holdings.
During the meeting of the district board’s Governance Committee that followed the finance committee, Brooks did not ask for verbal feedback and instead asked for it to be emailed. “This is something that could serve as a significant economic stimulus package,” said Brooks. Both meetings were held via phone and streamed on YouTube.
During the governance meeting, Hamilton asked what the worst-case scenario was for issuing debt. “The doomsday scenario was probably two weeks ago in terms of what’s going on in the bond market, what’s going on in the stock market,” said Bill Mack, a project consultant with Morgan Stanley. “There wasn’t an ability to do any deals whatsoever.” He said interest rates had rebounded since then to be closer to pre-pandemic levels. “There is a path for at least addressing parts of the finance plan.” He said his firm took five bond deals to market last week and anticipated more.
The full 17-member district board will meet via phone on Thursday, April 2nd.
Barrett’s office did not respond to a request for comment on the negotiations by the time of publication.
Army Studies Wisconsin Center, State Fair for Pandemic
Brooks said the Army Corps of Engineers would tour the Wisconsin Center campus Monday morning after visiting Wisconsin State Fair Park as part of an evaluation of the facilities’ suitability for use in responding to the pandemic. “I assure you that are we doing anything we can to make our facility available to any local, county, state or federal agencies that can help us all,” said Brooks.
Renderings
Current Building
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More about the Coronavirus Pandemic
- WI Daily: 308 New COVID-19 Cases - Urban Milwaukee - Mar 1st, 2021
- Wisconsin Anticipates First Shipment of Johnson & Johnson Vaccine - Wisconsin Department of Health Services - Mar 1st, 2021
- Marquette University announces in-person plans for fall 2021 semester - Marquette University - Mar 1st, 2021
- Dane County Drops Most Fines Against Dance Studio - Wisconsin Institute for Law & Liberty - Mar 1st, 2021
- Back in the News: Uline Workers Suffer Higher COVID-19 Rates - Bruce Murphy - Mar 1st, 2021
- Groups Now Eligible for the COVID-19 Vaccine - Wisconsin Department of Health Services - Mar 1st, 2021
- WI Daily: 464 New COVID-19 Cases - Urban Milwaukee - Feb 28th, 2021
- WI Daily: 689 New COVID-19 Cases - Urban Milwaukee - Feb 27th, 2021
- HDA Statement on FDA Authorization of Johnson & Johnson COVID-19 Vaccine - Healthcare Distribution Alliance - Feb 27th, 2021
- Gallagher Statement on Pelosi’s Payout - U.S. Rep Mike Gallagher - Feb 27th, 2021
Read more about Coronavirus Pandemic here
More about the Wisconsin Center expansion
- Eyes on Milwaukee: Who Wants To Name the Wisconsin Center? - Jeramey Jannene - Mar 1st, 2021
- Plats and Parcels: Riverwest Hostel Becoming Cooperative Housing Facility - Jeramey Jannene - Dec 13th, 2020
- Eyes on Milwaukee: Wisconsin Center Gives Final Approval for $420 Million Expansion - Jeramey Jannene - Oct 9th, 2020
- Eyes on Milwaukee: City Approves Wisconsin Center Deal - Jeramey Jannene - Apr 15th, 2020
- Eyes on Milwaukee: Convention Center District Authorizes $420 Million Expansion, Raises Hotel Tax - Jeramey Jannene - Apr 2nd, 2020
- Eyes on Milwaukee: Wisconsin Center Faces 50% Revenue Cut - Jeramey Jannene - Mar 30th, 2020
- Plats and Parcels: City Could Get Cash From Convention Center Expansion - Jeramey Jannene - Mar 29th, 2020
- Eyes on Milwaukee: Council Delays Convention Expansion? - Jeramey Jannene - Mar 24th, 2020
- Plats and Parcels: Convention Center Expansion Paused - Jeramey Jannene - Mar 22nd, 2020
- Plats and Parcels: 11 Key Details About the Convention Center Expansion - Jeramey Jannene - Mar 8th, 2020
Read more about Wisconsin Center expansion here