The state of Wisconsin would borrow $220 million to help pay for a new arena in downtown Milwaukee, which would be paid for with future growth of the income taxes paid by NBA players to the state, under a plan unveiled today by Gov. Scott Walker.
The arena funding plan will be part of Walker’s state budget proposal.
“We’re going to help the Milwaukee Bucks pay their own way to a new arena,” Walker said, as he presented the plan at the Metropolitan Milwaukee Association of Commerce’s board meeting.
The NBA says a new arena is needed for the Bucks to stay in Milwaukee beyond 2017. The new owners of the Bucks and former owner Herb Kohl have pledged about $250 million toward the project.
Walker said his proposal is intended to keep the Bucks in Milwaukee, allow the state to continue to collect income taxes from NBA players and make sure that state taxpayers are not saddled with about $100 million in deferred maintenance and debt service costs for the BMO Harris Bradley Center.
The state currently collects about $6.5 million in income taxes from NBA players including the Bucks and visiting players that pay a prorated portion of their salary for the number of games they play in Wisconsin each year. The current $6.5 million in income tax revenue collected by the state from the NBA players, the so-called “jock tax,” would remain set aside for the general state budget, Walker said.
“We’re not taking a penny of money (to use for a new arena) that is paid by NBA players today (in income taxes to the state),” Walker said.
But as NBA salaries grow in future years the additional income tax revenue beyond the current $6.5 million would be used to pay off the bonds for the $220 million that Walker wants to allocate for the arena project.
Lucrative new NBA TV contracts are expected to result in significant increases in players’ salaries in future years. Walker said his projections for future tax revenue increases from NBA players were determined in consultation with the state Department of Revenue, Goldman Sachs, the Bucks and the NBA. The projected tax revenue growth for the state is “conservative,” Walker said.
“The numbers you see (in the proposal) are the most conservative we could get to,” Walker said. “To me it is all about the numbers. I have a fiduciary responsibility to the people of this state.”
Walker displayed a chart showing NBA player tax revenue increases that would pay off the $220 million in bonds by 2046.
After the bonds are paid off the increased NBA player income tax revenue would be available for the general state budget.
The new owners of the Bucks support the plan, Walker said. In addition, he said the Bucks ownership has pledged that if they sell the team the proceeds from the sale would first be used to pay off any remaining debt obligation for the state’s bonds for the arena.
“That is a huge deal,” Walker said. “There is absolute security for the taxpayer.”
“We thank Gov. Walker for his leadership and commitment to building a transformative, multi-purpose arena that will help revitalize Milwaukee,” said Bucks president Peter Feigin in a statement. “The governor’s support brings Wisconsin closer to creating a new state-of-the-art venue and entertainment destination that will become an economic catalyst for the entire state. We look forward to working closely with Gov. Walker, the state legislature, local officials and the entire community to make this vision a reality.”
If a new arena is not built and the NBA moves the team to another city the state will lose about $10 million in annual tax revenue or about $270 million over the life of the proposed bond issue, Walker said. In addition, the BMO Harris Bradley Center will lose its anchor tenant and revenue source and state taxpayers could be obligated to pay for $100 million in deferred maintenance and debt service costs for the facility, which was built in 1988.
“Those are just the facts and they are undeniable,” Walker said. “If we do nothing it is not a cost neutral proposition.”
It remains to be seen if members of the state Legislature will agree with Walker’s financing plan for the arena and include it in their version of the state budget.
“This is a good starting point for the discussion on how to keep an important economic driver in Wisconsin,” said state Assembly Speaker Robin Vos (R-Rochester). “By asking the Milwaukee Bucks to pay their own way, we are protecting state taxpayers. However, it’s important to note that in order for the state to be a partner in this endeavor, we would expect the city and county to be part of the equation as well. I look forward to discussing the proposal with the Assembly Republican caucus.”
Walker said he thought it made sense to include the arena plan in his budget proposal because, “it really is about money.”
Walker also said he hopes his proposal motivates City of Milwaukee and Milwaukee County officials to contribute to the arena project.
“We hope our leadership will motivate the city and the county to play an active role,” he said. “The best way to motivate is to lead.”
Walker touted his plan as a “conservative” and “free market” solution to funding sports facilities.
“I think this is one of the most creative ways of doing this in the country,” he said. “This is all based on growth, a free market, fiscally conservative solution.”
Under Walker’s plan, a sports and entertainment district would be created to provide bonding authority to pay back the $220 million state grant for the new arena. The district would be governed by a nine-member board appointed by the governor and confirmed by the state Senate. Members would serve staggered, seven-year terms. If Milwaukee County provides funding for the arena, the county executive would appoint a board member subject to confirmation by the County Board. If the city provides funding for the arena, the mayor of Milwaukee would appoint a board member subject to confirmation by the Common Council.
The Bucks still have not announced their plans for the arena, including their preferred site.
