Sunday, May 4, 2014

Look East, Stadium Advocates

In September of 2017, the Southwest Airlines Center will open just north of the Fortress on Fourth.  It will be a modern structure of steel and glass.  Inside will sit a 16,500 seat basketball arena (12,000 unobstructed hockey seats, for you Admirals fans).  There will be fewer luxury suites than any arena in the NBA.  There will be fewer Sideline Club seats than for any basketball or hockey arena built in the decade prior.  It will have an inside/outside sports bar that is open year-round.  It will have a towering entrance atrium designed as a meeting and shopping area before events.

The vision of a replacement for the BMO Harris Bradley Center is not yet assured.  Suburban areas appear to be against offering the new Bucks owners, Wes Edens and Marc Lasry, any tax money.  Milwaukee politicians have stated that local taxes are off limits unless the suburban counties contribute.  State politicians could bridge much of the funding gap by extending the Miller Park sales tax.  There has been no movement towards a Miller Park sales tax extension in Madison.

So, what now?  Reports are that Bucks arena proponents (and please, let's admit that it is an arena for the Bucks; Marquette and the Admirals would rather stay where they are) are looking west.  Oklahoma City has a tax-funded arena built as part of a larger city development project.  Sacramento has a similarly priced arena about to be built with a similar contribution split ($222 million from the city; $225 million from the team, in that case).  

Oklahoma City and Sacramento got arenas built, but those projects are much different from Milwaukee's.  In both cases, there was no NBA-sized downtown arena already there.  The city of Sacramento can justify giving over $200 million in tax money to the Kings' owner because they are tearing down something worthless (a dead downtown shopping mall) to build something worthwhile. Sacramento's NBA team can say to Sacramento that the arena activity will be new.  New evening parking, new patronage of bars & restaurants and possibly new development of residential real estate.  Milwaukee's NBA team cannot plausibly say those things.  The Bucks' owners want a new arena in the same spot as the current arena.  Will there be more people parking?  Or more restaurant goers?  Or more apartments and condos?  Doubtful.  If Milwaukeeans wanted to live near an NBA arena, they could do that now.  They could've done it for the past ten years.  

Promoters of the Sacramento model might argue that Sacramento's new economic activity downtown is analogous to the amount of downtown economic activity that will be lost if the Bucks move.  Balderdash.  Downtown Sacramento is getting UFC shows, concerts, Disney on Ice and everything else that used to be out near the airport where Sleep Train Arena sits.  Downtown Milwaukee isn't losing any of those ancillary events if the Bucks move.  WWE still needs to run Monday Night Raw in new cities every week.  The NCAA still needs 19,000 seats in a mid-major market for its basketball and hockey tournaments.  Downtown Milwaukee would lose forty-three NBA dates.  That's it.  Is that worth $14.2 million per year (which is what it would cost to pay off a $220 million public contribution) in debt service on a new arena?  

There is a sports stadium project analogous to what the Bucks are trying to do, but it is east, not west.  It is in Cobb County, Georgia.  The Atlanta Braves are moving to Cobb County in 2017.  They will play in a stadium that is receiving $302 million in local tax money.  Games played by the sports team are the only new events expected to be generated by the new facility and there is no money coming from surrounding counties.  There are differences between what the Braves did and what the Bucks are trying to do.  The Braves play at home 82 times per year, while the Bucks play 43 times per year.  Most NBA arenas draw more per-capita ancillary spending in the area surrounding the arena than MLB stadiums do.  Still, it's one team and one local area.  That's similar to the Bucks.

The Braves' funding mechanism is a public/private partnership.  The Braves are paying 55% and Cobb County is paying 45%.  (The Bucks want something closer to 55% in tax money.)  Cobb County's contribution comes in part from hotel taxes and a rental car tax.  (Both may be politically viable because local residents often see those taxes as "not coming from us".)  Another portion is paid by an extension of a local property tax for parks that was set to expire in 2018.  (This may be where a Miller Park tax extension fits in.)  The final public contribution is local businesses and apartment building owners agreeing to have their own property taxed at a higher rate.  (If Milwaukee business leaders are actually as excited about a new arena as they say they are, an increase in Downtown property and sales taxes should be no problem.)  All of that seems reasonable and replicable in Milwaukee.

The Miller Park tax should be the hot topic for a new Bucks arena.  If the tax captures what it did in 2012 ($25.8 million), a public contribution of $220 million towards a new Bucks arena could be paid off within twelve years (assuming interest rates for government construction bonds are still around 4.9% at the time construction begins).  Even if the Miller Park tax could be extended for five years, half of the estimated public contribution ($110 million) towards construction bonds could be paid for.  $7 million per year would still have to come from some kind of other local tax.

If Milwaukee business leaders are as excited as they claim to be about a new Bucks arena, then they should show it.  Make a firm commitment.  Tell state politicians that if the Miller Park sales tax can just be extended for another five years, businesses will support increased commercial property and sales taxes in the downtown area.  If property values and retail sales in downtown Milwaukee rise significantly once the arena is built, then great.  Rates could be brought down to current levels.  But a promise should be made.  Otherwise it will continue to look like Milwaukee business leaders are only getting excited because they're anticipating a new arena to be built with other people's money.

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