CHICAGO - Wisconsin took the first steps Wednesday toward putting together a team for about $200 million of borrowing planned for a new Milwaukee Bucks arena as Gov. Scott Walker signed into law the project's public financing package.
The $500 million arena for the National Basketball Association team relies on $250 million in public support from the city, Milwaukee County, and the state. The city will borrow on its own to cover some portion of its $47 million contribution that will primarily come from tax-increment financing, which still must win Common Council approval.
The Wisconsin Center District board will leverage future collections of its existing tax revenues to borrow $93 million. The district would leverage a county and state annual contribution of $8 million over the next 20 years to cover the remainder of the public contribution, bringing the borrowing up to about $200 million.
The team's owners and former owner, former Sen. Herb Kohl, will contribute the other $250 million needed.
"This is an important day for the state of Wisconsin. It's not just important for Milwaukee, but the state as a whole," Walker said at a bill signing ceremony held at the state fair Wednesday. "We think this is a good solid move as a good steward of the taxpayers' money here in Wisconsin."
The team hopes to break ground this fall. "We will continue to work with the city and county to move this public-private partnership forward as swiftly as possible and make this world-class sports and entertainment district a reality," team president Peter Feigin said in a statement. The new arena would replace the BMO Bradley Center.
Supporters led by Walker, who is seeking the Republican nod in the 2016 presidential race, have argued the public support is worth the investment as the state faced losing the team and $419 million of expected income tax revenue over the next 20 years.
Detractors argue the public funding could be put to better use and the actual cost is about $175 million more when interest costs are added.
The state, on behalf of the district board, launched a request for qualifications process for financial advisory services and bond counsel for the proposed borrowing. The deadline for both is Aug. 21.
The advisor would assist the district and other parties to complete the lease and other related agreements between the district and team and development of the financing plan that provides up to $203 million of proceeds.
Legal services are needed for bond counsel work and tax counsel feedback as elements of the project and financings are finalized, including lease and other related agreements.
In signing the legislation approved by lawmakers earlier this summer, Walker rejected the pleas of city leaders to use his line item veto powers to cancel the diversion of 25 % from a $2 ticket surcharge the district board is empowered to levy.
Milwaukee Mayor Tom Barrett, council leaders, and Comptroller Martin Matson sent letters to Walker urging him to send all the money to the district. The surcharge was added to the bill as a means to help win passage during legislative negotiations.
"The district is the entity that needs this money," officials wrote. "Additionally, splitting the revenue between the District and the State unnecessarily increases finance expenses and complicates borrowing for the project."
Under the legislation, the WCD's powers are being expanded from managing the city's convention center to include the new arena. The district was created in 1994 and collects taxes on hotel rooms, food and beverage sales at restaurants, and car rentals, which go to repay a $185 million bond issue for the convention center.
Matson's letter to Walker laid out the city's case for the veto, arguing that the district should pocket all the funds to help retire its debts earlier which would allow the district to undertake a needed convention center expansion sooner and would simply the borrowing structure and costs.
If the district receives the full $1.8 million from the ticket surcharge, it could potentially avert the need to use a more costly capital appreciation bond structure needed as the district's tax revenues will go to pay off existing debt for the next 13 years. If the district can identify an additional source of funding to reach the expected $4.5 million in annual interest payment, it could use a current interest bond structure.
Any borrowing that leverages the surcharge would need to be done on a taxable basis as its use would run afoul of the federal tax code. With a portion going to the district and another to the state under the legislation as signed, the district will need to issue two separate series of taxable bonds.
The use of current interest bonds would also assist the district in its efforts to use a state trust fund loan on the any taxable series, according to the letter.
Bloomberg News reported this week that members of the team ownership had contributed to his presidential effort. Through a limited-liability corporation registered under his son's name, Bucks co-owner Jon Hammes on May 27 donated $150,000 to the super political action committee backing Walker. The PAC also received $50,000 on May 15 from Ted Kellner, another Bucks owner, Bloomberg reported citing state and federal records.
