With a big week ahead, I decided to break down this deal as honestly as possible. All calculations were done to the best to my knowledge and sources. All feedback is encouraged, especially your opinion on the proposal and if you have any other interpretations of the proposed arena bill.

What If the Bucks Left?

If the Bucks left Milwaukee, we would not have the $500 million development project planned in addition to the stadium. Additionally, Marquette basketball could be left in the dark. And, of course, Bucks fans would lose their team. But, you already know these things.

We would lose $234.1 million from tax revenues in 20 years in real dollars alone if the Bucks left Milwaukee. Richard Chandler, Secretary of the Wisconsin Department of Revenue, projects we will lose an additional $65 million and more on top of that. Furthermore, Chief Economist of the Wisconsin Department of Revenue John Koskinen points out the key differences in the positive economic impacts NBA franchises had on the states of Louisiana and Oklahoma when they did and did not have NBA franchises. Letting the team move would not be a smart idea, so let’s understand the arena plan further and how it will benefit Wisconsin, Milwaukee, and taxpayers in the end.

Screen Shot 2015-07-11 at 10.34.44 PM
(The Wisconsin Department of Revenue)

Analyzing the State, City, County, and WCD’s Funding

As noted in my piece about State Senator Lena Taylor‘s comments on The Bill Michaels Show, her concerns about the Wisconsin Center District (WCD) make sense. The WCD has so much debt already, that they will not be able to pay the debt on the arena for 13 years, building up millions in interest. “Right now, those taxes are dedicated to paying off the debt service for the convention center and theater. Under the deal, those funds would not become available for the Bucks arena until 2028,” according to Daniel Bice and Patrick Marley of the Milwaukee Journal Sentinel. Thus, the WCD would actually have to pay the most out of any of the state’s public entities at $93 million on the surface, as you can see in the chart below. But, using the 3.87% interest rate on a 20-year repayment schedule, that number would end up amounting to $217 million total in real dollars due to $124 million in interest. That will take years for the WCD to pay off, which is why Senator Taylor wants 1% on food and beverage tax to go to the WCD. The state and county would help pay off the bonds, but it’s still relatively unfair to put that much on the WCD.

arena-funding
(Fox 6 News)

The WCD collected approximately $30,079,530 in tax revenues in 2014, according to page 12 of their 2014 Financial Statement, which stemmed from “2.5% on rooms, 3% on car rentals, and 0.5% on food and beverage sales.” Additionally, the WCD “receives a 7% hotel room tax formerly collected by the City of Milwaukee.” From just sales and use taxes from 2014, the state of Wisconsin collected $4,628,300,000 (see page 9 of the Wisconsin Department of Revenue’s 2014 Sales and Use Tax report). Yes, the state looks like it’s getting a deal at this point, but let’s dig deeper.

The City of Milwaukee would be responsible, according to the Milwaukee Journal Sentinel, paying for a $35 million parking structure and $12 million in tax incremental financing. That’s $47 million from the City of Milwaukee.

Milwaukee County would “spend” $55 million in bonds, and the state would cover $80 million in its current delinquent debt, which includes the $25 million in interest). This means Milwaukee County would theoretically not pay anything in real dollars since the state would just take charge of its delinquent debt (debt relief). But, it’s important to know what delinquent debt is (basically debt collections), and that realistically, the state is not going to collect all of this money back. Ultimately, the state will have to write off the debt as a bad debt expense or come up with the money itself, both of which are of concern to those that think the county should be participating more. The bottom line is this (unless someone has another explanation): The state is bailing out Milwaukee County from paying next to nothing in the end by taking on its delinquent debt instead of having to pay real dollars. This is without a doubt the most questionable part of the deal.

To pay for an additional $55 million in bonds from the state, Wisconsin’s state government would also be responsible for $4 million a year for 20 years ($80 million), to cover this bonding, after another $25 million in interest. Additionally, the state would absorb $16 million for the Bradley Center’s destruction and liabilities, with $10 million left and $6 million already in the state budget. Digging further, the state would agree to absorb another $80 million in debt for Milwaukee County, which would go toward the arena. That’s approximately $176 million from the state in the end and probably more with the county’s delinquent debt.

Final Breakdown of Public Money

State: $176 million (and possibly more) in real dollars
Milwaukee County: $0 in real dollars
City of Milwaukee: $47 million in real dollars
WCD: $217 million in real dollars

So, the total public amount may be $250 million on the surface, but in the end will be at least $440 million in real dollars. But, regardless of the amount in real dollars we will spend to build the arena, will it make sense to let the Bucks walk away?

Benefits for Wisconsin, The City of Milwaukee, Milwaukee County, and the WCD

There are only 22 states in the country with an NBA team. Not to mention, the Bucks are becoming very good and will be considered a championship contender for years to come, which only increases their value. The value of NBA franchises is skyrocketing, as Forbes has valued the average NBA franchise at $1.1 billion. The Bucks sold last year for $550 million.

The NBA’s media rights deal is rising 216% from 2016 to 2017, to $2.67 billion. That means 216% more tax revenues for our state. The state is being asked to pay $4 million per year essentially from its own debt. Right now, the net income from the NBA is $6.5 million on tax revenues per year for the state. Yes, that is a $2.5 million gain per year. And, by 2019, because of the new media rights deal, the net income for the state is expected to be $10.4 million, meaning a $6.4 million gain per year. By 2024, it’s expected to be $13.55 million per year! How does the math work out on that? The state would be making money on this deal right away. By the time the debt ended in 2035, the state would be up $154.1 million total just from these income tax revenues. This does not even take into account the overall economic impact from the arena and surrounding developments; it’s only tax revenues from the NBA (basically our players and coaches and visiting teams) paying our income tax.

An NBA team adds $130 million per year to the Wisconsin economy overall. In time, it will be $200 million, and in five years, it will be $300 million, according to Koskinen. The city will bring in increased tax revenues as well, and they don’t even have to pay nearly what the state or WCD has to. Not to mention the county is not responsible for paying anything in real dollars. Lastly, the building of the arena will create hundreds and hopefully thousands of jobs.

The Decision

In the end, will this deal work out? It’s hard to project exactly the number, but we can come to a conclusion that the economic benefit will definitely do well for the city, county, and WCD, and even the state. When it comes down to it, regardless of who benefits the most or the least, we have two options:

1. Not building an arena – the state LOSES $234.1 million in 20 years on only tax revenues plus all of the potential economic boom from development, ticket sales, parking, merchandise, hotels, rental cars, and other benefits of having an NBA team and multi-purpose arena. The Bucks would move to Seattle, Las Vegas, or another suitable city and Marquette basketball would be left in the dark. Not to mention, Park East would be an empty lot for the coming years. We would lose out on an opportunity of never gaining the money back that we lose, unless we build the arena and keep the Bucks in Milwaukee. 

2. Building an arena– the state (net) GAINS $154.1 million the next 20 years on only tax revenues; this does not include development, ticket sales, parking, merchandise, hotels, rental cars, and more. We spend approximately $440 million in real dollars from the public over 20 years. It is estimated that, in total, the state of Wisconsin makes $130 million per year, would then $200 million per year in a few years, and $300 million in five years by keeping the team. By that time, the Bucks could easily make back that money for the state, city, county, and WCD. The city only has to front $47 million that go to a parking structure, which will be profitable, and other tax incremental financing. Milwaukee County will gain from the get-go, not having to theoretically pay for any of the arena in the end since the state will take on $4 million per year of their $120 million delinquent debt for 20 years. The county and city will receive even more tax revenue from hotels, restaurants, and more with increased tourism, as $500 million in development is planned around the arena. Is there an easier way to create jobs right now and make so much money? Probably not. We would be spending about twice as much to build the arena, but have potential to gain it back and MUCH more. Just like the potential the Milwaukee Bucks have as a team, their potential for the community is just as exciting.

And this is why mixing sports and politics is never good. Just ask FIFA.

Special thanks to Adam Ziv-el and Bernard Rosen for their contributions to this article. 


Other sources not linked above:

Business Insider

Milwaukee Courier Weekly Newspaper

Green Bay Gazette

Wisconsin Business Journal