Last updated on March 31st, 2020 at 02:24 pm
If the Wisconsin Center District continued on its current financial trajectory without restructuring debt and taking other actions, it would not have enough money on hand by the end of 2020 to make interest payments on existing debt.
This means that Wisconsin lawmakers could have to, for the first time, make debt-service payments for the WCD due to a moral obligation pledge that backs the district’s borrowing. WCD officials say they have a plan in place to avoid this scenario, though it would require approval from the district’s Board of Directors.
WCD owns and operates the Wisconsin Center convention center along with other downtown Milwaukee event venues. Its facilities are feeling the effects of the COVID-19 pandemic, which has led to the cancellation of virtually every event through at least the end of May.
District managers said they have taken cost-cutting measures that have mostly accounted for the loss in operating revenues. But, there is no way for WCD to make up for its revenue losses from taxes on hotel-room reservations and food-and-beverage sales.
The district initially expected to bring in $21 million in income this year, but has now revised that figure to only $50,000, Steve Marsh, WCD senior vice president and chief financial officer, said Monday during the district’s Finance & Personnel Committee meeting.
WCD can make its first interest payment on its debts, which comes up in June. But it would possibly miss its next interest payment due in December, making it likely it would have to fall back on the state’s moral-obligation backing.
Marty Brooks, president and chief executive officer of WCD, said the district is trying to avoid having the state make any payments.
“We recognize there is a cashflow issue and we have developed and presented a number of options to pursue,” he said at the finance committee meeting.
Plans could include restructuring some debt, increasing local hotel room taxes and eliminating the scheduled expiration of the food-and-beverage tax, falling back on money in other accounts such as an emergency fund, establishing a line of credit with financial institutions and taking advantage of state or federal relief programs.
WCD is currently counting on things to pick back up in a few months. However, if events tied to the July Democratic National Convention are cancelled, the convention center likely won’t see any activity until August, Brooks noted.
The district is expected to make “several million dollars” from DNC, said Brooks.
There’s also the matter of the proposed $420 million expansion of the Wisconsin Center. Board members on Thursday could vote to allow Brooks to issue bonding on that project along with the debt restructuring measure.
Under current plans the convention center would be doubled in size. The project will likely face delays since WCD wouldn’t issue bonding until the market recovers a bit following the COVID-19 outbreak.
The possibility of the project moving forward during a time of economic uncertainty drew criticism from some members of the Milwaukee Common Council. The council last week reversed their endorsement of the project.
Brooks said he is working with Common Council President Ashanti Hamilton and representatives of Mayor Tom Barrett’s office to address some of the concerns the city has on the project. Issues raised by officials include revenue sharing and community-benefits agreements.
The most recent form of the agreement released to reporters on Friday suggests that beginning in 2025, after one full year of operation of the expanded convention center, WCD would pay the City of Milwaukee $750,000 for its first $30 million in net income plus an additional $750,000 for every $10 million in subsequent net income for the life of the bonds.
But that agreement is already out of date. Brooks told committee members that he sent to the city a revised plan early Monday morning, reflecting comments he received over the weekend.
Alderman Robert Bauman, who sits on the WCD Board and represents the downtown area, was critical of the agreement. He said no version of the agreement has been presented to the full council in any shape or form.
Bauman also questioned the wisdom of raising taxes and borrowing even more money in the middle of an economic downturn.
“I am very concerned about (the proposal),” he said. “I think the district is being very tone deaf.”
But Mark Flaherty, managing partner of Jackson Street Holdings and WCD Board member, expressed support of the project moving forward.
“We have to get this thing done,” Flaherty said.
In the wake of the outbreak, the WCD-owned Miller High Life Theatre and Panther Arena have “virtually shut down,” with the convention center near that level as well, Brooks said.
But the facilities could potentially be used by local and federal agencies that are responding to the outbreak. Brooks told committee members that the U.S. Army Corps of Engineers were visiting both the district’s facilities and the Wisconsin State Fair Park grounds in West Allis on Monday.
“They’re coming to look at our campus to see what, if any, spaces we have to support their efforts and the country’s battling of the virus,” Brooks said. “I assure you we are doing everything we can to make our space available to any local, county, state or federal agencies that need our support to help us all.”