Sen. Olsen believes Legislature has a better plan than governor
By State Sen. Luther Olsen
Over the last several months, there has been a great deal of discussion over the Milwaukee Bucks Arena. In today’s column, I wanted to explain several details of Senate Bill 209 (SB 209) for those interested in this legislative proposal.
As most people know, the Milwaukee Bucks NBA basketball team wants to build a new arena in the City of Milwaukee. The owners of the Bucks say that without a new arena, the NBA could force the team to leave Milwaukee.
In response to the possibility of losing the team, Gov. Scott Walker proposed $220 million in state-supported borrowing to pay for part of the arena’s construction costs. I believed that the state should not borrow so much money for the arena and that local governments in Milwaukee should be contributing more to this project. Senate and Assembly leaders worked with the city of Milwaukee and Milwaukee County to develop a new plan.
The new Bucks arena is expected to cost $500 million. Past and present owners of the Bucks are paying for half of the project’s costs. They will also be responsible for cost overruns, operations and maintenance for the building. In addition, private investors are expected to invest an additional half-billion dollars in development around the site of the new arena.
The new financing plan relies on the Wisconsin Center District, which is a taxing authority in Milwaukee County that operates the Wisconsin Center, the Milwaukee Theater and the UW-Milwaukee Panther Arena to issue bonds for the new arena. The Wisconsin Center District currently levies a tax on hotel rooms, meals in restaurants and rental cars. This money is used to repay bonds for the construction, maintenance and operations of the three venues it operates.
The new financing plan would require the Wisconsin Center District to issue bonds, but state funding for the project would not occur until the city of Milwaukee provides at least $47 million for the project. Additionally, state contributions will not begin until the Wisconsin Center District has begun issuing debt in order to fund the development and construction of the arena.
It is important to note that SB 209 built in protections for cost overruns and no new taxes are created in this proposal. In fact, this legislation says the state’s obligation cannot be more than $80 million over the next twenty years.
When the Wisconsin Center District issues bonds, these bonds will be repaid through a number of sources. Over the next twenty years, the state will allocate two appropriations of $4 million each year, in order to cover the principal costs and interest payments.
As a result, starting in 2016-17, the state will directly allocate $4 million for the arena, but the other $4 million will be supported and offset by a reduction in state aid to Milwaukee County by this amount.
The bill also included provisions that create an event ticket surcharge with 25 percent of surcharge revenues being deposited into the state’s general fund, and the rest of the revenues will be allocated to the Wisconsin Center District. As a result, it is estimated that $500,000 would be annually deposited into the general fund due to this event ticket surcharge for the Milwaukee Sports Arena, making the annual net cost to the state $3.5 million for twenty years.
According to the Department of Revenue (DOR), the state received $6.5 million in income taxes from Bucks players and their opponents in 2013. The DOR expects to bring in $299 million in income taxes over the next 20 years between a minimum income tax revenue of $130 million and an estimated income tax revenue growth of $169 million. With this legislation, Wisconsin will finally be out of the business of owning arenas after owning the Bradley Center for more than twenty years.
This means that Wisconsin’s taxpayers will not be on the hook for the deferred maintenance costs and additional responsibilities of this arena in the future.
If the Bucks moved to another city, local Milwaukee business owners and government officials believe this could also have a substantial effect on the redevelopment efforts in Milwaukee. The economic growth generated from the Bucks arena will not only deposit more money into the general fund for the use in future biennia, but it is also estimated that for every dollar of investment from the state, we will gain $2 from this economic growth and development of the City of Milwaukee.
I think this plan is a better deal for the state than the plan proposed by the governor in his budget. During the informational hearing on the plan, I raised questions about the state’s long-term liability for the project. The Legislative Fiscal Bureau explained that the legislation is written in such a way that the state’s liability is limited to the financial contribution for the arena.
I supported SB 209 because the state’s portion of the overall funding for the new arena is limited in scope and this allocation will also be offset by the income taxes generated by the players at the arena and other provisions included in this legislation. I was pleased that this proposal was pulled out of the state budget and that it received the bipartisan support that it did. On July 15th, 2015, SB 209 passed the Wisconsin State Senate on a vote of 21-10.