Milwaukee Leaders Sign Off on City Financing Plan for Bucks Arena

Milwaukee Bucks' Jared Dudley celebrates after Game 4 of an NBA basketball first-round playoff series against the Chicago Bulls Saturday, April 25, 2015, in Milwaukee.

Milwaukee Bucks' Jared Dudley celebrates after Game 4 of an NBA basketball first-round playoff series against the Chicago Bulls Saturday, April 25, 2015, in Milwaukee. Aaron Gash / AP Photo

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Tuesday’s Common Council vote was one of the final hurdles for a deal that involves a total of $250 million in state and local funding for the project.

A $47 million public financing package that will help cover the cost of a new basketball arena for the Milwaukee Bucks won approval from the Common Council in Wisconsin’s largest city on Tuesday.

The city funding is part of a broader deal that is set to provide enough public money to pay for about half of the $500 million arena project. The Common Council vote was seen as one of the last major steps toward cementing the deal, which was outlined in a bill that cleared the State Assembly in late July and was signed the following month by Gov. Scott Walker.

In the end, the Council voted 12-3 in favor of legislation that would commit the city’s share of the financing.

“We have to look at the big picture,” Alderman Jim Bohl, who chairs the Zoning, Neighborhoods and Development Committee, said during Tuesday’s meeting. “And the big picture is that this provides future tax base growth in a significant way, future employment.”

In his annual budget address, delivered to the Council before the vote, Milwaukee Mayor Tom Barrett reiterated his support for city investment in the arena plan.

“It preserves a community asset, the Milwaukee Bucks,” Barrett said.

The mayor went on to highlight the benefits he believes the project will have for the local economy, which included boosting Milwaukee’s tax base, creating jobs and revitalizing a part of town that has seen a lack of development in recent years. “Think about it this way," he said, "a $500 million public works project, employing thousands of people, paid for by $250 million in private dollars.”

The private money the mayor referred to is the amount that the owners of the Milwaukee Bucks and the team’s previous owner, Herb Kohl, agreed to pitch in for the arena. A former Democratic U.S. senator from Wisconsin, Kohl said he would pony up $100 million, while the current owners, investors Marc Lasry and Wesley Edens, committed $150 million.

“This transformative public-private partnership is now a reality,” Bucks President Peter Feigin said in a statement after Tuesday’s Council vote.

Overall the total public money invested in the project is expected to be around $400 million once interest costs are taken into consideration. That cash is set to come from a number of sources in addition to the city, including the state of Wisconsin, Milwaukee County and a special taxing district that collects taxes on hotel rooms, food and beverage sales in restaurants and car rentals.

Alderman Nik Kovac cast one of the no-votes against the city financing package.

He has voiced criticism about the deal in recent months, arguing that the Bucks should have to pay back some of the public money invested in the project, or give the city an equity stake in the team. The basketball franchise sold for about $550 million last year.

“If you’re going to go in halfsies with somebody on the grief, you should go in halfsies with somebody on the gravy, too,” Kovac said before the vote.

Despite his dissent, he acknowledged that “there is tremendous value” in the project and that “there are so many good things that are a part of this deal that we all want to see happen.” But he added: “It is very hard for me not to stare that $400 million in the face—again looking outside the city purview, but we’re the last chance for the public to weigh in on this—and not think, ‘gosh, do they really need all that money from us, and is there really no way they can pay us back.'”

Alderman Mark Borkowski also voted no on the legislation. Elected to the Council in August in a special election, after the death of Alderman Joe Dudzik, Borkowski called into question the economic benefits some supporters of the arena had touted.

“There isn’t the purchasing power in this community to support all of this,” he said. “I hope that I’m wrong, but I don’t think so.”

The city’s contribution to the deal involves issuing $47 million of bonds, which will be paid back using revenue generated through tax incremental financing.

Milwaukee has long-used tax incremental financing as a development tool. It involves creating special districts in areas where development will take place. A baseline figure is established for the value of the property within the district. As new development occurs, the value of that property rises. Taxes collected on that added value can then be used to pay off bonds the city has issued to help finance projects within the district's bounds.

Of the city funding, $35 million will pay for a new parking structure, and $12 million will go toward an outdoor public plaza.

Under the deal’s terms the Bucks and the city will split revenue from the parking facility 50-50, including payments for naming rights.

The financing arrangement also calls for 40 percent of the labor on the project to be hired under a city program that gives preference to Milwaukee residents who are unemployed or underemployed. If there are problems meeting that requirement, there are options to adjust it.

When Kohl sold the Bucks last year, the sale agreement stipulated that the team needed to have a new arena finished, or nearing completion, by 2017. Without the arena, the National Basketball Association would be able to buy out the team and relocate it to another city.

It was widely expected that if the new facility was not built, Milwaukee would lose the Bucks.

Gov. Walker, who dropped out of the race for the Republican presidential nomination this week, pushed for channeling public funds toward the project. Walker argued that doing so would be cheaper than losing the tax revenue generated by the team. Critics have questioned whether that claim holds up for local governments putting up money for the project.

Although the Bucks were initially aiming to have the arena completed in time for the 2017-2018 NBA season, one of the team’s co-owners suggested last week that the facility would not be completed by that time and that doors were more likely to open in fall of 2018.

Bill Lucia is a Reporter for Government Executive’s Route Fifty.

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