Some raise doubts about county debt collection part of arena deal

Some government officials are raising questions about Milwaukee County’s contribution to the downtown Milwaukee arena project through a state debt collection agreement.

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.

Under the proposal released last week by state and local officials, 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.

According to materials on the arena deal provided by state officials to the media, Milwaukee County has about $120 million in delinquent debt and “the $4 million per year collection target for Milwaukee County is very achievable.”

At a Milwaukee County Board meeting Tuesday, Milwaukee County director of administrative services Teig Whaley-Smith presented a memo that laid out the debt collection process.

“There is no question that these efforts will yield at least $4 million per year,” he said in the memo.

Teig stressed to supervisors at the meeting that, in fact, the SDC program would likely collect more than $4 million, and that additional collections would be paid back to the county.

The county has had $10 million in newly generated delinquent property taxes each year since 2006, Whaley-Smith said, and another $22 million of back taxes will be sent to the state. That’s before adding in court obligations and miscellaneous debt.

The county has historically collected this debt, but over as long as 10 years. Whaley-Smith said the SDC program would accelerate collection.

But a Wisconsin courts fiscal operations official says the debt collection portion of the arena funding plan is not feasible. A large portion of the county’s receivables that would be collected by the state would come from the Milwaukee County court system, according to state courts fiscal operations administrator David Ehlinger. However, assuming that the county turns over 100 percent of receivables to the Wisconsin Department of Revenue and the DOR collects 100 percent of the receivables due, the courts total would only come to $1.8 million over the 20 year span.

In a document sent on May 29 to Milwaukee County Circuit Court clerk John Barrett, Milwaukee County comptroller Scott Manske and other interested parties detailing the shortfall in court receivables that could be collected, Ehlinger lays out the court collections process, explaining that Wisconsin statute requires that court payments are first applied to restitution for the victims of crimes, before the county receives any fines, subcharges, costs or fees.

Ehlinger said his department never received documentation requesting information from the county or state about the plan to turn collections over to the state, but he assembled and submitted his analysis after seeing news reports about the possible move.

“We’re assuming they received this at negotiations,” Ehlinger said. “It was also copied in to the budget director and the director of administration for Milwaukee County, and those two individuals report directly in to (Milwaukee County Executive Chris) Abele.”

Among the debts that the State Debt Collection Program collects are parking, government utility and overdue property taxes. It has the power to garnish wages, levy bank accounts, and intercept tax refunds and payments from other government agencies. The SDC’s rate of collection is 28 percent of the delinquent debt balance, according to state officials.

Milwaukee County Supervisor John Weishan, Jr. released a statement this week criticizing the county’s portion of the arena funding plan. According to Weishan, most of the debt is from Emergency Medical Services, property taxes and court judgments that the county has already tried aggressively to collect.

“This plan shifts the cost of the new arena from the state and the Milwaukee Bucks’ new wealthy owners to the poorest in our community,” Weishan said. “The county executive’s plan to transfer old uncollected debt to the state is unworkable. The idea that the debt has any chance of being collected is pure fantasy on the part of its supporters.”

Abele could not be reached for comment.

“To be honest, delinquent interest property taxes isn’t a good thing to look at, because if the property is worth anything, the lien holder or property owner would pay that delinquent property tax interest so they can keep the property,” Ehlinger said.

Ultimately, if the debt collection figure falls short, the state would end up cutting Milwaukee County’s portion of shared revenue, Weishan said.

“Under that scenario, Milwaukee County’s only option would be to raise property taxes or cut services to make up the difference,” he said. “I will not foreclose on someone’s home or shake down a senior for unpaid medical bills in order to build an arena for millionaires and billionaires.”

“Either we are going to have to ask for additional tax levy or we are going to cut services within our departments,” Ehlinger said.

Milwaukee County Supervisor Theodore Lipscomb Sr. also this week expressed concern about cuts to county services if the debt cannot be collected.

“The proposal says the State of Wisconsin will try to collect from people who’ve previously been unwilling or unable to pay, but if it remains uncollectable, I fear the state will then deduct millions of dollars annually from Milwaukee County’s shared revenue, which would likely lead to service cuts,” Lipscomb said.

County supervisors expressed frustration at Tuesday’s meeting that they weren’t included in the negotiations, and that they don’t have all the information about the plan.

But others are confident there won’t be a debt collection shortfall.

“I believe that (Ehlinger was) looking at just (the courts’) piece of the county’s overall debt and they were making a lot of assumptions about current processes and procedures remaining in place,” said Steven Kreklow, budget director for the Milwaukee County Office of Performance Strategy & Budget. “What the county has done is provide information to the Department of Revenue on all sources of receivables of outstanding debt that’s owed to the county.”

Neither county nor state officials would release that receivables information in total. Kreklow pointed to a 2007 audit of Milwaukee County’s debt collection efforts that recommended the county centralize its collections and use some of the state’s tools to increase the amount collected.

“The county’s collection efforts have been very fragmented, decentralized and spread out among different departments,” Kreklow said. “Basically every county department has some level of delinquent receivables that could be part of the collection process.”

If the arena funding proposal is approved, the county would on a continuing basis certify all debt that is more than 90 days old and more than $50 to be collected by the DOR, so the state could proceed with collection.

“What it would really do is just increase the level of effort,” Kreklow said. “In that 2007 audit, the county hasn’t been systematically, on a county-wide basis, working to collect the debt as effectively as we could.”

In response to questions from BizTimes Milwaukee, a Wisconsin Department of Administration spokesman said no further information will be provided by the state about the county debt collection portion of the arena funding plan at this time.

In other arena news, the nonprofit Common Ground held a press conference today at Milwaukee City Hall to voice its opposition to all of the public subsidies for the construction of the arena.

“Today we have the opportunity to launch a tidal wave of phone calls, emails, tweets and letters to our city, county and state representatives to let them know our message that they should vote no for subsidies for the Bucks billionaires,” lead organizer Keisha Krumm told a crowd of about 100.

According to Krumm, Common Ground opposes the public subsidies for three main reasons.

First, she said the Bucks owners do not need the money as many of them are “New York-based billionaires.”

Second, they do not deserve it, she said, asserting that Nationstar Mortage (of which Wes Edens, an owner of the Bucks, is chair of the board) is responsible for hundreds of foreclosed properties “deteriorating” and “blighting” the city of Milwaukee.

Third, Krumm said Milwaukee “needs and deserves” the public’s money in other ways, such as rehabilitating foreclosed homes and improving playgrounds and parks.

“This is a call to action,” she said. “The deal is not done…Our city has to take the lead in making the decision to give money to the Bucks, and that starts with you.”

Common Ground is a 501(c)3 organization of congregations, religious groups, small businesses, nonprofits, schools, unions and neighborhood associations with the mission to address social issues.

Sign up for BizTimes Daily Alerts

Stay up-to-date on the people, companies and issues that impact business in Milwaukee and Southeast Wisconsin

No posts to display