Most other major American cities have found ways to build NBA arenas to keep or attract teams in recent years.
The question of the moment in Milwaukee is: Can Milwaukee learn from these other cities and find a viable path forward to get a new arena built and keep the Milwaukee Bucks in town? Furthermore, will the public be willing to help finance the preservation of the region’s cultural and entertainment assets?
A group of community leaders, led by the Metropolitan Milwaukee Association of Commerce, is examining how to meet the capital needs for Milwaukee’s cultural and entertainment institutions. The initiative, the Cultural & Entertainment Capital Needs Task Force, recently brought to town civic leaders from Cleveland, Oklahoma City and Denver to share how their cities found the resources to build new or remodel their existing arenas.
The Oklahoma City story
The crash of oil prices in the 1980s devastated the Oklahoma economy. By the early 1990s, the downtown of Oklahoma City, the largest city in the state, was “horrible” and lacked vibrancy, according to Roy Williams, president and chief executive officer of the Greater Oklahoma City Chamber.
“In the late ’80s and early ’90s, Oklahoma was in a depression,” he said. “(Oklahoma City) had a dead downtown.”
In hopes of attracting much-needed jobs, the city tried to convince United Airlines to build a large maintenance facility there that would employ thousands of people. Residents of Oklahoma City, one of numerous communities trying to attract the facility, voted to increase their sales tax 1 percent to provide United with a $125 million incentive to attract the facility.
“The city was desperate in trying to reverse this economic spiral that was getting worse and worse,” Williams said.
However, the company rejected the Oklahoma City proposal and chose Indianapolis instead. Oklahoma City leaders learned a valuable lesson from the experience.
“The CEO of United explained why Oklahoma City finished second,” said Oklahoma City Mayor Mick Cornett in his State of the City Address earlier this year. “In conducting its due diligence, unbeknownst to the people of Oklahoma City, United had sent a handful of midlevel executives and their spouses into our city to spend a weekend and look around a little bit. When they reported back, United gathered the information and concluded they were not going to consider Oklahoma City because they simply couldn’t imagine their employees living there.”
That slap in the face sent community leaders back to the drawing board in search of a new economic development strategy, Williams said. They decided to stop trying to recruit a savior for the city’s economy.
Williams said community leaders thought, “Let’s try something different. Let’s try building a better city.”
Thus began a dramatic effort to invest tax dollars in numerous quality of life projects, including the Chesapeake Energy Arena, which is now home to the Oklahoma City Thunder.
The Thunder, one of the NBA’s better teams in recent years, led by MVP Kevin Durant, has become a major source of pride for Oklahoma City, Williams said.
“When I travel around the country, when people talk about Oklahoma City they don’t talk about the bombing (of the Alfred P. Murrah Federal Building in 1995) anymore or (Oklahoma University) football,” he said. “They want to talk about the Thunder.”
However, the arena for the Thunder is just one of several quality of life projects built with Oklahoma City tax dollars during the past 20 years. The Oklahoma City initiative, called MAPS (Metropolitan Area Projects), began in 1993. Funded by a 1 percent sales tax (by comparison the Miller Park sales tax in southeastern Wisconsin is 0.1 percent) approved by voters, the MAPS initiative raised $350 million to: build a new arena; build a new ballpark for a AAA baseball team; build a canal in the city’s warehouse district; build a new library; renovate the Civic Center Music Hall; renovate and expand the city’s convention center; renovate the State Fairgrounds; develop a trolley-replica bus network; and add a lock and dam system on the North Canadian River to create a series of river lakes bordered by landscaped areas, trails and recreational facilities.
To convince voters to support the plan, civic leaders sold them on the importance of investing in quality of life for the community’s future, Williams said.
“We said, ‘If you want your kids to stay here, we’ve got to do something to change the community,’” Williams said. “We’ve got to build a better community. Otherwise your children are not going to stay here. They are going to move to somewhere that is a more exciting place.”
The construction of the Bricktown Canal led to a revitalization of the city’s warehouse district. Dell Inc. built a campus with 2,000 employees on the river. The enhanced river has also attracted the headquarters of USA Canoe/Kayak and USRowing.
In 2008, the Seattle Supersonics moved to Oklahoma City. The city’s arena cost $89 million to build and needed major upgrades to host an NBA team. Again Oklahoma City voters backed another 1 percent sales tax to spend $120 million to upgrade the arena and build a practice facility to bring an NBA team to the city. The team did not contribute any funds for the arena project, Williams said.
Oklahoma City voters again backed a sales tax for a second MAPS program, called MAPS for Kids, which spent $700 million to improve existing schools or build new schools. More than 70 new schools and school renovation projects were completed. The tax was collected for seven years, and 70 percent of the funds went to the Oklahoma City School District and 30 percent went to 23 suburban school districts.
In 2009, Oklahoma City voters approved another 1 percent sales tax to spend $777 million on a new set of quality of life projects, including a new downtown convention center, a new 70-acre downtown park, a new streetcar/transit system, senior health and wellness centers, more river improvements, more State Fairgrounds improvements, expansion of the city’s trails system and expansion of neighborhood sidewalks.
Each time voters were asked to support a sales tax for these quality of life initiatives, about 54 percent of voters approved, Williams said. One of the keys to the success of the MAPS initiative was including a large number of projects that created a broad coalition of supporters.
“It forced the people that had different priorities to work together,” Cornett said. “Suddenly the people that were passionate about the arts were working side-by-side with the people that supported the sports facilities. You had all of these interest groups working together. You suddenly had a lot of people pulling on the same rope.”
The MAPS projects were significant and inspired community support, Williams said.
“We wanted to invest in things that excited people,” he said. “It has exceeded everyone’s expectations.
The economy of Oklahoma City has improved dramatically in recent years:
- Fast Company ranked Oklahoma City eighth on its Employment Satisfaction Report Card this year.
- CNNMoney ranked the metro area ninth on its “10 Fastest Growing Cities” list this year.
- Oklahoma City was ranked 12th for startup business climate this year by WalletHub, a personal finance social network.
- NerdWallet.com ranked Oklahoma City ninth of its “10 best U.S. Cities for Job Seekers” list.
- Last year, the Wall Street Journal said Oklahoma City ranked No. 1 in home value increases since the housing market crash.
The Cleveland story
Cleveland spent many years developing the Gateway Sports and Entertainment Complex, a side-by-side baseball field and multi-purpose arena in its downtown.
Discussions began in earnest in the late ’80s. Several early ideas were shot down, but pairing the venues together received more support. The Cavaliers were playing at an arena in a rural area 30 miles south of downtown, and there was a desire to move them closer to fans. Former Major League Baseball commissioner Fay Vincent also indicated the city’s aging stadium would need to be replaced to keep the Indians in town.
Gateway called for a $128 million baseball stadium and a $75 million arena with a plaza and two parking garages, though the eventual cost totaled more than $400 million. Half the project was funded through a 15-year “sin tax,” an excise tax on alcohol and tobacco, while the other half came from stadium operating revenues.
The projects were presented as a way to improve a blighted area of downtown while providing entertainment venues that would help improve the local economy.
“This and the arts are key criteria for what keep talented people here and keep attracting talented people to our region,” said Joe Roman, chief executive officer of the Greater Cleveland Partnership. “We were able to show people that these kinds of investments can be catalytic for a downtown and they’re a part of a metropolitan base.”
The project, though, had its share of detractors.
“I think there’s some natural opposition,” Roman said. “It’s no secret that some people feel that investing in teams that are owned by billionaires isn’t something that people should be doing, but the reality is that’s something we’ve been doing for generations, and I actually look at the public owning the facility as a great way to ensure longevity with your teams in your community. If teams have a lease with themselves, they’re free to go when they’d like to.”
The Gateway referendum passed by a thin margin in 1990. It was used to build a multi-purpose arena used by the Cavaliers, now known as the Quicken Loans Arena, and Progressive Field (formerly Jacobs Field), where the Cleveland Indians play.
The Cleveland Browns left for Baltimore in 1995, which created a vacuum in downtown Cleveland, Roman said. The team’s move helped spur voters to renew the excise tax for another 10 years to build a new football stadium, FirstEnergy Stadium, which eventually attracted a new NFL team, also called the Browns.
The second renewal of the excise tax this May did not require as much convincing as in the ’90s, Roman said.
“Almost 80 million people have been able to experience one or all (three) of these ballparks since … they opened,” he said. “I think they’ve experienced great outcomes from the tax, and that’s why they’ve been able to support the two extensions.”
Cleveland chose the excise tax because it had not been used to fund public projects before, so it was not already earmarked for something else, Roman said. And even as smoking has become less popular, a growing hospitality industry helped balance the tax with alcohol sales.
“The good news about the tax is that while it’s Cuyahoga County only, we have visitors that are coming to enjoy the ballparks from many counties, and when any visitor is here in Cuyahoga County taking part in any of the amenities, they’re contributing to that tax,” he said.
With the construction of Gateway, Cleveland entered a sort of downtown renaissance that snowballed into the renovation of several of its arts and cultural institutions, Roman said.
“It created a momentum that we’re benefiting from even today in an accelerated way. We have a demand for more downtown housing than we can keep up with, our restaurants are booming, our cultural institutions are booming.”
Cleveland recently secured the 2016 Republican National Convention, which will draw up to 50,000 people to the city, the Quicken Loans Arena and its newly opened 750,000-square-foot convention center, about a half mile away.
Last year, the city completed the new convention center and Global Center for Health Innovation through a $465 million joint venture between the county and Chicago developer MMPI Inc. funded in part by a 0.25 percent sales tax increase. A 600-room Hilton convention center hotel is being developed to take advantage of the economic activity being generated by the site.
The Denver story
Denver’s Pepsi Center, home to the NBA’s Denver Nuggets, the NHL’s Colorado Avalanche and the National Lacrosse League’s Colorado Mammoth, was born solely from private funding.
The sports arena, a project that cost more than $180 million, opened in October 1999 after about 21 months of construction.
The arena was originally owned by Ascent Entertainment Group Inc. but in 2000 was purchased by Enos Stanley Kroenke, an entrepreneurial giant and chairman of Denver-based Kroenke Sports & Entertainment.
Kroenke also owns the Nuggets, Avalanche, and Mammoth as well as Major League Soccer’s Colorado Rapids.
The Pepsi Center’s original financing relied on asset-backed securities and was the first sports facility in the country to use asset-back financing, according to a report by MarketWatch.com. Pepsi Cola Co. bought naming rights for the facility for $68 million, a 20-year deal established in 1999.
Kelly Brough, president and chief executive officer of the Denver Metro Chamber of Commerce, said that, to the best of her knowledge, public funding for the Pepsi Center was never part of the conversation.
However, other major sports venues erected in Denver came to life through a combination of public and private dollars.
In 1990, Colorado began rallying to bring a Major League Baseball team to the state. In August of that year, a seven-county metro region in Denver passed a 0.1 percent sales tax to finance the construction of a baseball stadium. Revenue from the sales tax was intended to finance 75 percent of the stadium, according to Brough, and the remaining 25 percent relied on private funds.
The following year, Colorado was awarded its Colorado Rockies with funding from a group of private investors. The team began playing ball in 1993 and completed its first two seasons at the former Mile High Stadium, owned by the City of Denver, before moving to Coors Field upon its opening in 1995.
Coors Field cost a total $215 million to build, and Coors paid $15 million for indefinite rights to the stadium’s name.
Revenue from the sales tax paid off the bonds purchased to build the stadium. Those bonds were paid off in 2000, 12 years ahead of original projections.
Brough recalls more energy around bringing professional baseball to Colorado than controversy around public funding of a sports venue.
“We’re a huge sporting town and…baseball was the one thing we didn’t have,” Brough said. “Generally, I think most people were just excited about the potential.”
The same 0.1 percent sales tax contributed to the development of a new football stadium for the NFL’s Denver Broncos, who also played games at the former Mile High Stadium.
Voters in the same seven-county region reapproved the sales tax to apply to the football stadium, agreeing to cover 75 percent of its construction and $266 million maximum. The Broncos footed the bill for the other 25 percent of the stadium, which today is known as Sports Authority Field at Mile High.
To make these athletic venues a reality, Denver collaborated with the region in agreement that these facilities would spur economic benefits for the region at large.
“What works here is we’re regional, and public and private sectors work really well together,” Brough said.
Colorado operates on the premise that it gets “further faster by working together,” Brough said.
“I think we have a culture in Colorado that says we work together.”
To drive economic value for any metropolitan region, sports teams and their arenas must build a base of local fans as well as attract out-of-town visitors, according to Brough.
“The real economic value is when you get people to come in and stay,” she said. “That’s new money. (Sports venues) provide an amenity that attracts the kind of workforce that companies need.”
BizTimes Milwaukee associate editor Molly Dill and reporter Erica Breunlin contributed to this report.
