Bucks stadium: Will arena be 50-50 public-private deal?

As with other stadium projects, the key will be in the details

From the very beginning, the plan for a $500 million downtown Milwaukee arena has been sold as a 50-50 public-private partnership.

But with any deal of this magnitude, the key is how that breakdown is measured.

Subsidies, tax exemptions and what degree of control a proposed sports and entertainment district might have over an arena — these issues and others all affect the financing calculus.

They also affect whether Gov. Scott Walker, Republican legislative leaders who control both houses of the Legislature, Mayor Tom Barrett, County Executive Chris Abele and the Milwaukee Bucks can reach a deal.

Broadly speaking, there are three focal points: the arena itself, businesses in the arena and development around the arena.

Nationwide, it is the rule rather than the exception that newly built arenas and stadiums are tax-exempt.

Victor Matheson, a sports economics professor at Holy Cross College, said it is common for stadiums and arenas, even if they are partly or largely privately financed, to officially be the property of a governmental “sports authority.”

“For example, Metlife Stadium in the National Football League was nearly 100% privately financed but is owned by the Jersey Sports Authority,” he said. “Similarly, the 49ers’ Levis Stadium in Santa Clara was roughly 90% privately funded but is owned by a semiautonomous agency of the city. Public agencies do not pay property taxes.”

Matheson added that stadiums or arenas don’t justify such an exemption, but they are granted one anyway.

“Not charging the Bucks property tax would make them just like most other pro sports teams but would make them totally different from most other businesses. And there is little reason not to treat them like most other businesses,” he added.

Even with the tax exemption, the proposed arena will likely have joint ownership, just like Miller Park.

The Miller Park property consists of 287 acres, all of it owned by the state and exempt from property taxes. It is leased to the Miller Park stadium district, which in turn subleases the stadium, Helfaer Field and other pieces of property, to the Brewers. In all, the team controls 186 acres and pays an annual rent of $1.2 million. The Brewers have an actual ownership stake in just the stadium; the district owns 68.5% of the building and the team owns 31.5%.

In Green Bay, the City of Green Bay owns Lambeau Field outright, and the Green Bay Packers pay rent. There is no property tax,

though the Packers pay a personal property tax, which is a tax on equipment, whether leased or owned.

Other businesses

While the new arena is expected to be exempt from property taxes, the city is expected to try to tax any business that operates within the new arena, such as a franchise restaurant or club.

The current law on property tax exemption governing stadiums is broad. The exemption includes parking lots, garages, restaurants, parks, concession facilities, transportation facilities and related structures. Negotiators on behalf of the city and county hope to narrow those exemptions specifically for the new arena.

Patrick Curley, Barrett’s chief of staff, said any arena financing plan must include tax fairness.

“Because the new arena will be financed with public funds and under the oversight of a public board, we expect the building will not be taxed,” he said. “That does not exempt what’s in the building, and what will be developed around the building, from paying taxes. For example, restaurants and taverns either in the new arena building and, or on the plaza and open to the public, will have to be subject to the same taxes being paid by businesses on Old World 3rd Street, Water Street and throughout the city.”

In Curley’s view, it would be unfair to existing businesses if that were not the case. Abele agreed. “It is our expectation that assets owned by the public are property tax exempt, and assets that are owned by the private sector are on the tax rolls. Current statutes support this proposition, and we haven’t heard of any proposal to change that,” Abele said.

As for the proposed development around the arena over the next decade, the Bucks say any ancillary development, much of it on county-owned land in the Park East corridor, will be privately owned and subject to property taxes.

What about the Bucks proposed training facility, a project the franchise is anxious to start? The team official said that, too, would go on the public tax rolls.

There’s also the issue of naming rights for the proposed new arena. The expectation is naming rights will be able to generate additional revenue, but for whom is not yet known. Bucks President Peter Feigin said it was his hope that the naming rights would go toward operations and maintenance of the facility, regardless of who owns the arena.

Bradley Center’s fate

Walker’s original proposal on arena financing called for a sports and entertainment board or authority of at least nine members or up to 11. The bill said nine members would be appointed by the governor, one by the mayor of Milwaukee and one by the Milwaukee County executive. However, two sources say that provision is not expected to be in the final version of the bill to be considered by the Joint Finance Committee.

Regardless of the new makeup, negotiators working on an arena financing plan will have to decide what to do with the existing Bradley Center Sports & Entertainment Corp. board, and the Wisconsin Center District board, which owns and operates the Uw-milwaukee Panther Arena, the Milwaukee Theatre and the Wisconsin Center convention center.

Under the proposed legislation, the Bradley Center board would divest itself of the BMO Harris Bradley Center, either through a sale or an exchange, to the new sports and entertainment authority. Sources say negotiators may be looking at changes for the Wisconsin Center District board as well.

Don Walker is on a fellowship established through Marquette University Law School’s Sheldon B. Lubar Fund for Public Policy Research. The fellowship is aimed at providing support for journalism projects on issues of civic importance. All the work is done under the direction of Journal Sentinel editors.