Milwaukee County comptroller’s report raises questions about arena funding

Milwaukee County comptroller Scott Manske has reviewed the county’s receivables as funding for the proposed new Milwaukee Bucks arena, and presented those findings to the Milwaukee County Board this week.

A portion of the arena funding package lays out a plan for the Wisconsin Department of Revenue to recover a portion of the past due receivables of Milwaukee County, contributing an estimated $4 million per year for 20 years to help fund the project.

Milwaukee County would be part of the State Debt Collection Program, through which the DOR already collects debt for 108 municipalities, 15 state agencies and 14 University of Wisconsin campuses. The SDC charges collection fees to the debtor, so the county would receive full repayment.

Manske’s report evaluated the county’s receivables as of December 31, 2014, determined which of those would be available for the SDC program, and analyzed the collectability of those receivables. He was trying to find out whether the county could meet its funding commitment under the plan floated by Milwaukee County Executive Chris Abele and Wisconsin Gov. Scott Walker to fund the arena, which is still under debate in the state Legislature.

Manske’s report shows there are $38.7 million in courts fees, traffic fines and criminal fees; and $24.8 million in delinquent property taxes and taxes interest and penalties available for collection under the arena funding plan. Of those receivables, Manske estimated, based on the ages of the debts, that about $27.4 million is collectable.

One issue that needs to be resolved, the report says, is whether the state will continue to collect 70 percent of court fees, and leave 30 percent of those fees for Milwaukee County to collect.

Another is the speed of collections, and how accelerating that pace may impact annual interest revenue available to the county. Without that revenue, there could be a hole in the county budget.

Manske also asks the question: “Can we expect a consistent amount of new delinquent receivable activity to be available to sustain revenue levels for the arena project and the county?”

Among Manske’s recommendations to make the deal better for Milwaukee County are to allow the county to continue collecting its delinquent property taxes to retain the interest revenue; and create a new reserve for excess collections raised to be used in future years in case the receivables collection falls short.

The report concludes that while the county is able to make a $4 million annual payment out of existing cash flows from receivables, it is unlikely the county will be able to generate an additional $80 million over 20 years for payments on the arena debt based on the changes to the collection of its receivables.

Abele issued a statement following Manske’s presentation touting Manske’s findings. He said the report shows the county will have more than enough cash flow to support a $4 million annual contribution to arena funding, and will not be in danger of having its state shared revenue decrease because of a lack of funds to meet the arena obligation.

“I want to thank Comptroller Scott Manske and his staff for confirming the viability of the proposal to finance a new arena,” Abele said. “The proposal was something all parties could agree on and I truly believe that it will provide a very significant net positive for Milwaukeeans. I am committed to being actively involved in this project to ensure the responsible use of tax dollars and to demand that public investments bring a significant public benefit.”

Milwaukee County Supervisor Patricia Jursik also issued a statement following Manske’s presentation, voicing her opposition to the county portion of the arena funding plan.

 “Simply stated, ‘bad debt’ is not a revenue stream,” Jursik said. “It is an unconscionable trick, not a resource. It is a con game of ‘hide the ball.’ The ball is largely property tax, whether garnered from diverting debt collections from the county’s collection of delinquent property taxes or other court judgments to pay bond liability for the new arena. This collection would have otherwise offset property taxes in the budget. Additionally, if there is shortfall of the ‘bad debt’ collections, shared revenue from the state earmarked for Milwaukee will be diverted to pay this shortfall. This, too, translates into property tax dollars or additional loss of services, likely shorting our parks and cultural assets such as the Milwaukee County Zoo or the Milwaukee Public Museum that ultimately depend on property tax support. Any way you want to describe this shell game, funding will fall on property taxes, already the single most burdensome tax on our local residents.

“The county executive’s deal is unconscionable since this ‘bad debt’ collection will fall mostly on the poor, the elderly, those suffering medical setback or loss of a job. Does the Buck’s organization really want to be associated with such a deal?”

Today, leaders of commercial and residential Realtors organizations and of construction trades groups held a press conference to urge Legislators to approve the arena plan.

“The development of the new Bucks arena, and the surrounding property, will provide lasting economic development and many good jobs,” said Mike Fabishak, CEO of the Associated General Contractors of Greater Milwaukee. “When we look back a decade from now, I believe we will be praising the leadership of the public policy makers who had the foresight, and will, to move this project forward.”

Building Advantage executive director Ken Kraemer noted the potential for construction opportunities working on both the arena and planned ancillary development in the Park East corridor. The arena would cost $500 million (half paid for by the Bucks current and former owners and the other half by the public) and the Bucks owners play to build at least $400 million in ancillary development around the arena.

“This is a billion dollar project that will greatly benefit economic development efforts in Milwaukee,” Kraemer said. “The project is estimated to create over 14,000 jobs – 7,000 of those could be in construction.”

“We want everyone in our state to know that the funds contributed to this effort will grow to a billion dollar development project that will contribute millions annually in tax revenue,” said Betsy Head, chairwoman of the Greater Milwaukee Association of Realtors. “Realtors sell more than simply bricks and mortar, we sell the quality of life associated with a property. The Milwaukee Bucks are part of the quality of life beyond southeastern Wisconsin, throughout the whole state.”

The public share of the arena cost would be split between the state, city, county and the Wisconsin Center District. The plan is subject to approval by the state Legislature and the Milwaukee Common Council.

“While its place in the state budget is being evaluated, it is undisputable that revenue generated from the arena project will benefit the Milwaukee community as well as the state,” said Paul Galbraith, chairman for the Commercial Association of Realtors Wisconsin. Income tax from both permanent and temporary workers in the ancillary development will go to the state of Wisconsin. The public has seen the plans and has the numbers – the arena is a job creator for the state, and we hope it continues to be a funding priority for lawmakers.”

“While we recognize the need for some stakeholders to vet each portion of the funding proposal with constituents, we are committed to ensuring a level of urgency be applied to the process,” said Jeff Hoffman, vice-chairman for CARW. “If the plan comes out of the budget, we will continue to advocate for the proposal.”

Arena supporters also say the county should sell 9.8 acres of land in the Park East corridor to the Bucks ownership group for $1 to assist in the plans for $400 million in ancillary development around the arena. The land has been vacant since the Park East freeway spur was torn down 12 years ago. The Bucks have offered to acquire the site “as is” and assume underground remediation costs, which could reach $10 million according to a Milwaukee County report this week.

“The value of the Park East land is derived by supply and demand,” said Tammy Maddente, executive vice president with First Weber Group. “We have the supply, but there is no demand. Getting $1 for the land is a deal, especially considering that the Bucks will add tens of millions of dollars in taxable value.”

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