Lawmakers Push Back on Governor’s Plan for Financing Bucks Arena

Wednesday, April 8, 2015 at 5:00 AM by

Both Governor Walker and state lawmakers have indicated they want to use public money to help build a new arena for the Milwaukee Bucks, but they have different ideas on how to go about it. At this point, the plan put forth by lawmakers is the “least worst” of the options, but we should also be asking whether the state should be subsidizing a new arena when it is reducing resources for schools and higher education.

In his budget proposal, Governor Walker recommended that the state borrow $220 million and dedicate that money to building a new arena. Governor Walker’s proposal didn’t set a specific timetable for repaying the bonds, so the total cost to repay the borrowing was unclear. The total cost for the proposal could have could have been as much as $488 million over 20 years or as little as $324 million, under three different repayment scenarios modeled by the Legislative Fiscal Bureau.

The interest costs for repaying the bonds would increase if a change proposed by President Obama becomes law. Obama has proposed prohibiting governments from using tax-exempt bonds to finance professional sports facilities. If Obama’s proposal passed, and if the bonds for the proposed arena were issued after 2015, the bonds would have to be issued as federally taxable bonds, increasing the amount the state would pay in interest.

But the total price tag of Governor Walker’s proposal may be a moot point. Recent news articles indicate that lawmakers have rejected his proposal and are leaning towards an alternative that would provide a loan of about $150 million to the district that manages the arena. The loan would come from a state fund that provides loans to local governments in Wisconsin and grants to school libraries.

Changing the package from bonding to a loan and shrinking the amount of assistance provided for the new arena will help limit taxpayer liability. But there are still several unanswered questions about the revised proposal, including how it would affect municipalities and school libraries that depend on assistance from that fund. Lawmakers haven’t actually voted on this proposal yet, so the details of the proposal could continue to evolve.

A bigger question – and one that neither Governor Walker nor state lawmakers appear to have asked – is whether Wisconsin residents should foot the bill for professional sports facilities at all. In general, using public dollars for an arena does not do much to create jobs or boost the local economy. And the public subsidies teams receive often wind up in the owner’s pocket later in the form of a higher resale price when the team is sold. In this article, the Federal Reserve Bank of St. Louis includes additional reasons why spending public money on arenas is a bad deal for taxpayers, and sums up by saying:

“Cities go to great lengths to lure a new team to town or to keep the home team home. They feel compelled to compete with other cities that offer new or updated facilities; otherwise, the home team might make good on its threat to leave. The weight of economic evidence, however, shows that taxpayers spend a lot of money and ultimately don’t get much back. And when this paltry return is compared with other potential uses of the funds, the investment, almost always, seems unwise.”

Lawmakers have moved in the right direction by distancing themselves from Governor Walker’s proposal to borrow money to bankroll the new Milwaukee Bucks arena. Lawmakers should consider eliminating public subsidies for the arena altogether, but a smaller package in the form of a loan, like the one some lawmakers favor, will at least reduce costs to the public.

Tamarine Cornelius

Categories: 2015-17 biennial budget, Blog, STATE BUDGET | Comments Off on Lawmakers Push Back on Governor’s Plan for Financing Bucks Arena

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