Brewers Cost Taxpayers $1.56 Billion

The Milwaukee Brewers new stadium opened in 2001 and by all accounts is expected to last at least until 2040. What has the total cost been for taxpayers? The standard figure used by the media is the $605 million total in sales taxes paid by the five-county, greater metro area. But that figure is incomplete, leaving out many costs and tax exemptions. Under a state law passed to benefit the Brewers, pro sports franchises benefit from a long list of exemptions, including a sales tax exemption on the materials used to build a stadium or arena and a property tax exemption on the facility and land. Thus the Milwaukee Bucks are also beneficiaries while the Green Bay Packers, like all nonprofits in the state, automatically get such exemptions.

Back in April 2001, I did an estimate of the full costs for Milwaukee Magazine, coming up with a figure of $1.116 billion. But this is by now out of date: it did not include later spending on improvements to the stadium, overestimated potential interest costs (the bonds for the stadium were refinanced many times, yielding considerable savings), underestimated the value of the federal tax exemption and overestimated the value of the property tax exemption, all based on the best information at the time. Moreover, it assumed a 30-year life for the stadium. A lifespan of 40 years (or more) adds another decade of exempted property taxes.

The only other attempt to do a fully-loaded estimate of costs was the Legislative Audit Bureau, which did a report in May 2002 that found (on page 60) the total cost was $1.004 billion. Yet despite the bureau’s vaunted reputation, that figure was never used by the media in reporting on the stadium’s total costs. By now that estimate is also out-of-date: it also overestimated the interest payments while not including the tax exemptions.

The federal tax exemption on bonds used to pay for the stadium is not a small deal. A study by the Brookings Institution estimated that the federal government had lost $4.3 billion in revenue as a result of tax-exempt municipal bonds used for stadium construction since 2000, as the Washington Post reported. In February three members of the House of Representatives proposed a bill to ban this subsidy. The Brookings researchers had earlier estimated the value of this exemption for many teams, finding it totaled $117 million for the Brewers stadium.

Another issue is how to determine the property tax exemption. The assessed value of the Brewers’ land can be fairly estimated based on the that of nearby parcels, but what about the stadium? The audit bureau estimated the cost of construction of the stadium complex at just under $425 million as of December 2001. Since then the public stadium authority has spent another $45 million on capital repairs and improvements to the stadium and has reserved another $87 million to spend between now and 2040. And the Brewers have said they have spent $112.7 million on capital improvements to the ballpark.

That certainly sounds like the stadium should be worth, say, at least $350 million but it’s never been assessed by the city. And the fact that nearly every pro stadium and arena in the country is subsidized makes it tougher to determine market values. Perhaps the only such computation is made by Forbes in its annual analysis of the value of each Major League Baseball franchise, which estimated the Milwaukee stadium’s value at $207 million. So we used that figure to estimate the property tax exemption for the building.

Besides the sales tax, all three levels of government – state, county and city – were required to chip in money for the stadium and/or infrastructure. Both the city and county used bonding to pay for costs over time, adding interest expenses. The state also had to pay for infrastructure demanded by the CMC company, as part of an “imbalanced” land swap that secured needed land for the stadium project.

Finally, it should be noted that the Brewers have already warned that they will want more public funding over the next two decades, which is likely to increase the total public subsidy. But for now, dear taxpayers, here is the total bill for the stadium:

40-Year Tax Subsidy For Miller Park: $1,561,150,000.

• $605 million: total five-county sales tax paid
• $25.2 million: Milwaukee County payment for infrastructure (includes $7.2 million in interest).
• $29 million: city payment for infrastructure (includes $8 million in interest).
• $36 million: State of Wisconsin payment for infrastructure.
• $216.6 million: property tax exemption over 40 years on stadium
• $483 million: property tax exemption over 40 years on 265 acres of land
• $117 million: federal tax exemption on interest earned from stadium bonds.
• $13.3 million: state tax exemption on $221 million in interest paid on stadium bonds.
• $8.7 million: state administration expenses for new sales taxes.
• $14 million: sales tax exemption on materials (estimated at $255 million) to build stadium.
• $8.35 million: sales tax exemption on estimated $139.5 million in additional materials for repairs and improvements to stadium
• $2.3 million: new infrastructure demanded by CMC corporation from state for “imbalanced” swap of land for stadium.
• $2.7 million: federal income tax exemption on city’s $15 million loan to stadium.

Additional notes on how computations made: The city assessor estimated the value of land near the stadium at $1.742 million per acre and the 2020 city property tax levy (which is at midpoint of the 40-year period) is $26.16 per $1,000 of assessed value. The state exemption on $221 million in interest paid to bondholders assumes they were in the highest income tax bracket in this state (7.65%) or others (where top rate ranges from 3.23% to 13.3%) and not from the handful of states with no income tax, which would make the bonds an unattractive investment. (We went with average rate of 6%). The exemption of the normal 5.5% sales tax on materials assumes that 60% of the cost of construction and capital improvements was for materials. The estimate of state administrative costs for new five-county sale tax was made back when it was first created, when the tax was expected to end by 2014, so it is likely an underestimate. The federal tax exemption on city’s loan to the stadium was for bonds created to help fill a gap in funding created when the Brewers, then owned by Bud Selig and others, were unable to pay their promised contribution for the stadium.