Today, Wisconsin governor and presidential candidate Scott Walker signed a bill providing public financing for a new basketball arena in downtown Milwaukee. Walker has recently taken some heat on the campaign trail from fellow conservatives, who object to “taxpayer money” being used to finance arenas.
An ideological aversion to taxpayer money being used to finance sports arenas is fine, but the actual structure of the Milwaukee deal is far more complicated than its opponents are letting on. Just today, for instance, Michael Tanner writes that using “$250 million of Wisconsin taxpayers’ money” is “a quintessential example of crony capitalism,” citing the plan’s ties to a co-chair of Walker’s presidential campaign. I suppose six Democrats in the state senate and 17 in the state assembly who voted for the plan are concerned about rewarding Walker donors?
Rarely will one hear the actual details of the complicated plan, which have been woefully misrepresented in the national media so far. A large chunk of the arena will be paid for through a $2 per ticket user fee. Of the $2 per ticket fee, 50 cents will go to offset $80 million in bonds issued and paid for by the state. This portion of the fee is expected to provide around $500,000 per year toward paying off the bonds.
The rest of the bonds will be financed with state tax revenues, but there’s an important catch — the remaining $3.5 million per year the state will pay over the next two decades is more than offset by the annual income taxes the Milwaukee Bucks franchise pays the state. According to state records, the Bucks pay $6.5 million per year in state income taxes. Every NBA player who comes to Milwaukee to face the Bucks pays a portion of his income to Wisconsin. This isn’t expected revenue from future economic development — this is money already being paid to the state. Thus, “taxpayers” won’t be paying the state’s portion, the Bucks will be.
And with the NBA’s salary cap expected to explode next year, the Bucks’ contribution to the project will only increase. The Wisconsin Department of Revenue estimates conservatively that over the next 20 years, the Bucks franchise will add $300 million to the state’s coffers via income taxes. If the team were to leave the state — the threat that loomed over negotiations for a new arena — that money in the state budget would have to be made up somewhere. State taxpayers would likely feel the brunt of the shortfall in one way or another.
Another $80 million of the arena’s total costs will be financed by reducing the state’s annual aid to Milwaukee County. So rather than raising taxes to pay for the arena, the county’s contribution is being financed by a spending cut. And that cut will likely be offset by a plan to have the state take over the collection of funds owed by delinquent Milwaukee County taxpayers. Call it the “deadbeat tax.”
The fact is that without the new arena, Wisconsin taxpayers will be far worse off — and the NBA won’t be around to pick up any part of the tab.
More aid will go to finance bonds issued by the local entertainment district, which will be partly paid for by a combination of the per ticket user fee and existing hotel-room, rental-car, and food-and-beverage taxes levied by the district.
The remaining $47 million will come from the creation of a “tax incremental financing district.” Such TIF districts are typically funded with revenues generated by the locality itself. In this case, the city’s contribution is a new parking structure.
It’s also worth pointing out that the Bucks’ current owners and their former owner are ponying up $250 million of their own money to pay for the arena — so it isn’t as if they aren’t also personally invested in the project. Scott Walker isn’t just handing them a gift.
#related#If one is naturally inclined to oppose any kind of governmental involvement in the building of arenas, that’s fine, as long as equal scorn is heaped on less publicized building plans. Last year, the state approved an $82 million chemistry lab at the University of Wisconsin–La Crosse. That plan seems unlikely to make its way into any discussion of Scott Walker’s presidential campaign. Every politician who stays in office long enough will eventually vote for some sort of multi-million-dollar construction project. Many of those projects won’t have nearly the economic impact of a new downtown arena that keeps an NBA franchise in town.
It’s much easier to accuse Walker of spending “$250 million in taxpayer money” than it is to explain the plan’s complicated funding mechanisms. And those mechanisms are certainly fair game for people who object to any sort of governmental aid whatsoever for the construction of sports arenas. But the fact is that without the new arena, Wisconsin taxpayers would be far worse off — and the Bucks wouldn’t be around to pick up any part of the tab.
— Christian Schneider is a columnist for the Milwaukee Journal Sentinel.