Wisconsin Center expansion would probably need legislative action

Real Estate

Wisconsin Center
The Wisconsin Center

In order for the Wisconsin Center District to expand the downtown Milwaukee convention center, it will likely need the state Legislature to take action, approved by Gov. Scott Walker, to allow the district to increase its taxing authority, according to district officials.

Outgoing district president and chief executive officer, Russ Staerkel said financing the $225 million to $240 million convention center expansion could be done if the Legislature allows the board to increase the tax the district collects on food and beverage sales in Milwaukee County from 0.5 percent to 1 percent. This would generate between $10 million and $12 million per year, enough to bond for an expansion of the convention center, Staerkel said.

The Wisconsin Center
The Wisconsin Center

But getting support from a Republican-controlled Legislature for any tax increase initiative could be difficult, even for a Milwaukee-specific tax for a Milwaukee-specific project.

“Whether or not it would be easy (politically), that is all left to debate at the Legislature,” Staerkel said. “It would be up to the (Wisconsin Center District) board to ask for it.”

The current convention center, which was built in 1998, is 266,000 square feet, with about 189,000 square feet of exhibit space. By comparison, Cincinnati has 196,800 square feet of exhibit space at its convention center; Columbus has 373,000 square feet; Minneapolis has 475,000 square feet; and Indianapolis has two convention venues totaling 749,000 square feet of exhibit space.

A second phase of the Milwaukee convention center opened in 2000, and a third phase was planned to the north but was never completed. The long-desired completion has been brought back to the forefront now that the City of Milwaukee has been presented with two plans to develop a vacant two-acre parcel, owned by the city, across the street from the Wisconsin Center at Fourth Street and Wisconsin Avenue.

Milwaukee-based hotel development firm Jackson Street Holdings LLC is proposing a $279.6 million plan for the Fourth and Wisconsin site that would include three hotels totaling 506 rooms, 103,000 square feet of meeting space and 22,000 square feet of street-level restaurants, bars and cafés. Under the plan, called Nexus, Jackson Street Holdings is asking the Wisconsin Center District to fund and own the 103,000 square feet of convention and meeting space.

Marcus Hotels & Resorts also submitted a proposal for the Fourth and Wisconsin site, a $125 million plan called eMbarKE, which calls for a 276-room expansion of the existing Hilton Milwaukee City Center hotel and a tower with up to 200 apartments. Marcus also is asking for the convention center be expanded, at taxpayer expense.

The City of Milwaukee has not yet made a decision on the Fourth and Wisconsin proposals, waiting to see what the Wisconsin Center District does, since each plan relies on a convention center expansion.

Alderman Robert Bauman, who represents the downtown area and is a Wisconsin Center District board member, said he doesn’t believe either proposal for Fourth and Wisconsin will go anywhere.

“Marcus can probably do the hotel piece, but they don’t claim to be a residential developer; it’s almost like promising nothing,” Bauman said. “And the other (project) can’t be completed without substantial assistance from the Wisconsin Center District.”

“I blame the city,” Bauman said. “Before we were running around issuing an RFP, we should have had a pretty specific vision for what this should look like. Should the focus be hotels? Should it be residential? How about a public plaza with a streetcar running through it?”

In July, the City of Milwaukee issued a request for proposal for the long-vacant site south of Wisconsin Avenue between Fourth and Fifth streets. The city’s asking price for the site (at 401-441 W. Wisconsin Ave.) is $4.6 million. The city has agreed to fund all streetcar-related infrastructure, but has stated tax increment financing or other city assistance is not available for development of the site.

Bauman said the door should not have been closed on TIF financing.

“We’re requiring real money in the purchase price,” he said. “Would I subsidize a four-story hotel? No. But I might subsidize a 1,000-room, 40-story hotel. If I were the commissioner (of the Department of City Development) I would say thanks for the pretty renderings, but I think they are both non-responsive to the RFP.”

The Wisconsin Center District owns and operates the Wisconsin Center convention center, the UW-Milwaukee Panther Arena and the Milwaukee Theatre.

A state law passed in summer 2015 gave ownership of the new Bucks arena to the Wisconsin Center District and required the district to provide $93 million for the arena. That financial obligation for the arena project left some people believing expansion of the convention center would be put on hold for years, if not indefinitely.

The district is funded by three Milwaukee County taxes: a 2.5 percent tax on hotel rooms, a 3 percent tax on rental cars, and a 0.5 percent tax on food and beverage; plus an additional 7 percent tax on hotel rooms in the city of Milwaukee.

The only tax the district board has the authority to raise is the Milwaukee County room tax, to 3 percent. Staerkel said doing so would generate an additional $1 million per year.

The Wisconsin Center District would need the authorization of the state Legislature and Walker for it to make any other tax increases.

Department of Administration Secretary Scott Neitzel, a Walker appointee who chairs the Wisconsin Center District board, said he is not ready to consider a tax increase.

The board has engaged Manhattan Beach, Calif.-based Barrett Sports Group to provide it with a strategic plan on the district’s facilities. That plan is scheduled to be complete in February. At that time, Neitzel said a discussion will be had regarding the expansion of the convention center.

“The board is going to have to look at what the district’s goals and objectives are for its facilities and what we want to do, and figure out how that relates to each proposal and work with the city to understand how our mutual objectives overlap,” Neitzel said.

Regarding a possible tax increase, Neitzel said that is looking too far ahead.

“I want to look at the strategic analysis and see where the finances are,” Neitzel said. “Only then would I be willing to say how it’s going to work. I’m still hopeful the district will find a way to meet its objective without raising any tax.”

Joel Brennan, president and CEO of Discovery World and a district board member, said there is a consensus on the board that the convention center should be expanded to the size it was planned for when it was built 20 years ago.

The board has never gone into great detail about how to expand and the discussion has changed a bit since Jackson Street came forward with its proposal that would add meeting space at Fourth and Wisconsin, Brennan said.

The original plan was to expand the convention center to the north, which is still a parking lot along Kilbourn Avenue.

Brennan said it is likely a tax increase will be needed to pay for the expansion of the convention center, especially now that the district is paying for a portion of the Bucks arena.

“At the end of the day, we have only a certain number of vehicles to raise revenue for certain capital projects,” Brennan said. “I’m still hopeful there are going to be some things that come out of (the Barrett Sports Group study) that will be beneficial to the community. Will it be enough to generate enough revenue necessary for (an expansion) of the convention center? That remains to be seen.”

If the board were to go to the state and request the authority for a tax increase, it could be difficult to achieve with the Republican-controlled legislature and would likely require lobbying efforts from Milwaukee elected officials.

Milwaukee Mayor Tom Barrett said it is too soon to discuss financing for an expanded convention center.

“A vibrant convention center is important to Milwaukee,” said spokesman Jeff Fleming, speaking on behalf of Barrett. “It creates jobs and adds value to our economy. At this stage, it is premature to discuss publicly how an expanded convention center might be funded.”

Milwaukee County Executive Chris Abele also said he believes it is too early to discuss financing for an expanded convention center. He said the district board’s first responsibility is financial sustainability and right now, it is in the process of paying down the debt they already have and re-evaluating the need for convention space.

“There are interesting proposals out there, but not an insignificant dollar amount requested from the district and the district deserves to get to its own comfort level,” Abele said.

Abele stopped short of saying the city’s RFP process was flawed, but believes the district board should have been included from the beginning.

“Anybody who you want to be part of the project with you on the landing, I like to think you should include on the takeoff,” Abele said. “But the city has designees on the (district) board. The groups who put out the proposals are good groups. I like to explore public private partnerships, but the ones that work best do their homework first.”

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