The Wisconsin Center District may move forward with a vote April 2 on a borrowing plan for the $420 million expansion of Milwaukee’s convention center in order to be ready to jump into the market should market and city hurdles clear up.
“Removing the expansion vote from the agenda in light of the issues we are all facing was contemplated,” district president Marty Brooks told board members in a memorandum this week that also laid over convention center business cancellation in fallout due to the COVID-19 pandemic. “In response to my own imbalance on the right approach, we will be soliciting guidance from both the Finance/Personnel and Governance committees” meeting Monday.
“A yes vote on April 2 will be authorization to act when market conditions rebound and with majority approval by the Governance Committee. While the go-to-market date is unlikely to be in April as we had expected a few short weeks ago, the situation is far too fluid to assume that groundbreaking will or won’t be delayed,” Brooks said.
Board members will receive the full expansion order in order to “be prepared to move forward with a vote, should we choose do so” paving the way to allow the “district to issue bonds to fund the expansion at such time as market conditions have rebounded,” Brooks said. The meeting will be held via teleconference.
While liquidity-driven market turmoil began to ease in recent days, the expansion bonds would still face a tough buyside audience given the deep stress convention centers are facing from nationwide bans on large gatherings and voluntary conference cancellations due to efforts to combat the transmission of COVID-19.
It’s unclear how long the business losses will last and whether further fallout will be felt from a recession. The center is hosting the Democratic National Convention July 13-16.
The district’s deal will benefit from a state moral obligation pledge on up to $300 million of the issue. With savings of up to $50 million in interest, the pledge is needed however the Milwaukee Common Council recently voted to withdraw its support which is required under the state legislation.
Brooks said in the memorandum to board members he was working on an agreement that would address a financial concern of the city by creating an annual Payment in Lieu of Taxes so that also stands to influence the approval process and timing of a sale.
Brooks is seeking a vote on a portion of the borrowing plan that restructures existing debt to lessen short-term debt payments through 2027 even if the decision is made not to vote on the new money. “This article needs your approval regardless of your position on the expansion,” Brooks wrote.
Brooks said the COVID-19 toll enhances the argument for the expansion because of the more than expansion will generate thousand of construction and off-site jobs and is projected to attract 100,000 new out-of-state visitors to Milwaukee annually. The not-to-exceed amount was set at $420 million. “The expansion of the convention center is ready and poised to bring economic stimulus to downtown,” he wrote.
In a memorandum, the district shared a series of cost saving measures that include a 20% pay reduction for all salaried and hourly full-time staff and deferral of non-essential approved 2020 capital projects to 2021 that with other cuts that should save $2.25 million for the fiscal year.
About 17 shows scheduled between March and May have been cancelled with more than 20 postponed or rebooked. The 2020 DNC is still scheduled. The DNC reports on its website “as we continue counting down to the event, our nation is faced with the unprecedented challenge of responding to the coronavirus. In this climate of uncertainty, we wanted to share an update with you about our approach to planning.”
The board must select from two borrowing schemes laid out by the financial team — with Baird as financial advisor and Morgan Stanley as underwriter — that rely on the sale of bonds with an up to 40-year final maturity with a new-money and taxable refunding component. A large portion of the new money would sell with junior-lien status and a state moral obligation pledge. The remainder of new money would sell under a senior lien.
The district currently collects taxes on hotel rooms in Milwaukee County, food and beverage tax in the county, a car rental tax in the county, an additional room tax charge in the city.
The district operates the convention center, now known as the Wisconsin Center, in downtown Milwaukee, and the University of Wisconsin-Milwaukee Panther Arena, Miller High Life Theatre, and owns the Fiserv Forum, home of the Milwaukee Bucks, but the team operates it.
