Wisconsin Governor Announces Plan for New Milwaukee Bucks Arena: Will It Work?

By Zack
January 29, 2015 3:30 pm Last Updated: January 30, 2015 4:42 pm

The Milwaukee Bucks need to have a new arena under construction or built by 2017–when the current lease expires–or the NBA will likely force the team to relocate.

To that end, Wisconsin Governor Scott Walker announced a new “Pay Their Way” plan for the team to raise money for a new arena, which will cost an estimated $520 million.

New Bucks owners Marc Lasry and Wesley Edens have pledged at least $150 million, while former owner and former Sen. Herb Kohl has pledged another $100 million.

Walker says his new plan is the first-of-its-kind, and will protect taxpayers by not issuing new taxes.

Instead, the proposal has the state issuing a $220 million grant, which would be paid back by projected growth in income taxes from the Bucks and visiting NBA teams. The grant money–in the form of bonds–would not be released until all other funding for the arena has been secured. With the contributions from the new owners and Kohl, that appears to be $50 million. Some public officials say at least that much should come from the city and county.

“This solution allows for the state to make an investment in economic development in Milwaukee, while protecting Wisconsin taxpayers from risk,” Governor Walker said in a statement. “This ‘Pay Their Way’ plan will help to turn a great potential loss in revenue into the potential for great gain.” 

Sports economists and some others aren’t sure about the proposal though.

“In general, most sports economists think that public subsidies for sports stadiums in general are a bad idea,” Victor Matheson, professor of economics at the College of the Holy Cross in Massachusetts, told Epoch Times. “That being said, in Milwaukee’s case, when you’ve got a small market team like the Bucks, it’s difficult to attract funding. Milwaukee probably thinks that they need the Bucks a lot more than the NBA needs Milwaukee.”

There’s also the interesting issue of Walker pushing for public money. 

“Here’s a governor whose entire four years in office all he’s been about is cutting government spending, deciding that he’s OK with putting a bunch of public money into a stadium owned by billionaires, while he’s been pretty actively trying to go after public spending elsewhere,” said Matheson. “The governor will argue that he is designating income taxes generated by NBA players to pay off that stadium. That being said, I don’t get to use my state income that I pay to pay off my mortgage, why should NBA players be able to do that to pay off their mortgage?”

Rep. Chris Kapenga (R-Delafield) noted in a statement that the salaries of pro athletes have increased dramatically. While the salaries rise, the income tax does, too. If that growth is used for the new arena, it would divert it from the state’s general operations “which includes everything from education to roads,” Kapenga said. “The governor’s proposal would divert these increased tax dollars, which are included in future revenue projections, away from taxpayers to the owners of the Bucks to help fund the Milwaukee arena.”

Besides the increase in player salaries, the plan would use money from the NBA’s current television agreement, which garners almost $1 billion for the league and its teams each year. John Koskinen, chief economist for the state Department of Revenue, told the Milwaukee Journal Sentinel that the projections are “conservative, but reasonable.”

“A significantly larger new TV contract set to take effect in 2016-’17 and future new media rights contracts will lead to salary increases for players which, in turn, will lead to Wisconsin collecting more withholding tax if the Bucks stay and play in Milwaukee,” he said. If the plan goes through, after the bonds are repaid, the tax growth would go back to the state.

So what’s an alternative to Walker’s plan?

“One thing is you can simply take a hard line and say ‘Look, in Wisconsin we’re saying that limiting public spending is our top priority, and therefore, why put money into this private business when we’ve been attempting to reduce public spending all across the state?” Matheson said. 

David Fladeboe, director of Americans for Prosperity’s Wisconsin chapter, would support that stance. “While it appears that some protections are being put into place, the Governor’s plan would put the state and taxpayers on the hook for future obligations. Funding for sports arenas should not be the responsibility of the state and the hard-working taxpayers of Wisconsin,” he said in a statement.

The current Bucks arena, the BMO Harris Bradley Center, is one of the oldest active NBA arenas, opening in 1988 along with The Palace of Auburn Hills in Detroit and Sleep Train Arena in Sacramento. The only two older arenas in the league–New York’s Madison Square Garden and Oakland’s Oracle Arena–were renovated or remodeled to meet current requirements. 

Added motivation to build a new arena has come in recent years, with NBA Commissioner Adam Silver deeming the current arena, which has a capacity of 18,633 for basketball games, too small and outdated. The league imposed a 2017 deadline for a new arena to either be under construction or already completed.

The Bucks are 23-22, and in sixth place in the Eastern Conference this season after being one of the worst teams in the league last season. The team has an average attendance of 14,883 (about 80 percent of capacity), which is 27th in the 30-team league.