The reality of the Milwaukee Bucks playing in a new arena may still be years away, but a deal outlining how the Bucks, the state, the county and the city will pay for it could be sealed by the end of the week.
That was the big (and yes, exciting!) headline after Tuesday's latest summit meetings in Madison, with stakeholders sharing optimism that the broad parameters of a deal would come into focus by Friday's deadline for inclusion in the state budget. Via Tom Daykin and Patrick Marley from the Journal-Sentinel:
"We're in the baking stage of the legislation," said a second source, noting the measure had already been through several drafts. "We're getting closer."
The latest arena financing plan has a lot of moving parts, including an expanded role for the Wisconsin Center District, which operates the downtown Wisconsin Center convention facility, University of Wisconsin-Milwaukee Panther Arena and Milwaukee Theatre, one source said.
The district would sell bonds to raise $93 million to help finance the arena, said the source, who asked not to be identified. That amount, plus interest, would be paid over several years to the investors who buy the bonds.
Those payments would come from three taxes the district levies in Milwaukee County: 3% on car rentals, 2.5% on hotel rooms and 0.5% on restaurant food and beverage sales.
State legislators had been campaigning for months to push more of the cost burden to local authorities, and co-opting a chunk of the WCD's existing tourist taxes would certainly go a long way on that front. Those taxes netted around $30 million last year, though there wasn't much left after accounting for operating losses (around $16 million) and repayment of the district's $200+ million in long-term debt (around $13 million last year). You can check out the WCD's full 2014 financial here if you're interested.
Still, the annual debt service on $93 million would (according to some rudimentary Excel work) require only a fraction of the existing WCD budget: $5 to $7 million annually assuming either a 20- or 30-year debt tenor and the 3.75% interest rate that's been tossed around of late. So it's not surprising that a solution would be workable, especially given the WCD isn't exactly a paragon of efficiency in its current state.
Ironically, the WCD was also a major point of debate late last year when the Bucks were trying to buy the Journal Square site. You may recall that the Bucks' reported grand plan was to also tear down the WCD's UWM Panther Arena and Milwaukee Theater, though both facilities were granted a reprieve (for now) when the team instead opted for the path of least resistance north of the BMO Harris Bradley Center. WCD Chair Franklyn Gimbel may not be so lucky; after spending the past year suggesting a new sales tax should pay for a Bucks arena and a $200 million convention center expansion, it would appear the Bucks will instead take a chunk of the WCD's cash cow without him even having a say. And so it goes.
The Journal piece further reports that the city would add $35 million for a new parking structure (to be paid for by parking fees), with another $12 million coming from a tax incremental financing district. That would bring the total local tally to $140 million, not including the Park East land that we've been assuming Milwaukee County would provide for the arena and ancillary development. If the Bucks' contribution remained at $250 million, that would then require less than $100 million from the state to meet the $500 million total estimate we've been assuming -- a number well below both the $220 million originally proposed by Gov. Walker as part of his original budget proposal in February.
Bringing the state contribution into the $100 million range would presumably be enough to gain the necessary votes in the legislature to support the budget, which has always been the most obvious hurdle to clinching a deal in time for groundbreaking later this year. That's still a big assumption, but it's difficult to imagine Walker and the leadership in Madison claiming a grand bargain if they don't have the votes needed to push it through.
Supporting that type of number isn't without logic for lawmakers in Madison, either. Without a deal to keep the Bucks in Milwaukee, the state would lose on two accounts: the millions in annual NBA-related tax receipts that would disappear without the Bucks ($6 million now, but doubling in the near future) and the need to find something to do with the BMO Harris Bradley Center, which is expected to require a whopping $100 million in maintenance and upkeep over the next decade. Add in the loss of its biggest tenant and the BC would effectively become a financial sinkhole, though demolishing it as part of the new arena project neatly solves the problem. In other words, it shouldn't be a surprise that state lawmakers are willing to throw serious money at the new arena regardless of their appreciation of NBA basketball.
So ultimately we're getting there -- but not quite yet. Even with inclusion in the state budget, the plan will need to be approved and an infinite number of details -- political, economic and otherwise -- will be haggled over. For example, we've yet to hear any mention of naming rights ownership or how much rent the Bucks and other might pay, both of which can swing the value of a deal massively in one direction or another. So expect the "fairness" of the deal to be debated, and its financing mechanisms questioned. It's all fair game given the broad group of stakeholders involved, though ultimately the incentives were always aligned for a deal to happen one way or another. So give it another couple days -- and let's hope by Friday we'll be celebrating a major milestone in the quest for assuring the Bucks' future in Milwaukee.