Sunday, July 5, 2015

Proposed Milwaukee Arena Musings

These are just a few more of my thoughts regarding the Milwaukee basketball arena boondoggle playing out.

A recent Milwaukee Biz Times article, Milwaukee County comptroller's report raises questions about arena funding, raises a number of issues, but fails to analyze the implications.

Part of the arena plan is for the county to contribute $4 million per year for 20 years. As Dan Bice explains in a separate article, "The county would 'certify' its uncollected debt, allowing the state to hit up Milwaukee County residents for at least $80 million over the next 20 years. The state would cut its aid to the county if it failed to gather up at least $4 million in any year under the proposal."

As the Milwaukee County comptroller, Scott Manske, reported, "While the county is able to make a $4 million annual payment out of existing cash flows from receivables, it is unlikely the county will be able to generate an additional $80 million over 20 years for payments on the arena debt based on the changes to the collection of its receivables."

The Biz Times article does give space to Patricia Jursik's view that this funding mechanism for the county is a "trick" and "a con game." Jursik stated, "The county executive's deal is unconscionable since this bad debt collection will fall mostly on the poor, the elderly, those suffering medical setback or loss of a job. Does the Buck's organization really want to be associated with such a deal?"

Sadly, this is followed by quotes from the usual cast of characters bloviating the usual arena platitudes. The arena will improve quality of life and it will create temporary and permanent jobs.

If work associated with development creates jobs and grows the property tax base, what is the excuse for not spending more on other development projects - roads, bridges, trains, greening public buildings, etc.? If public spending has such good a return on investment, why do the proponents only support such spending when the primary recipients are privately-owned developments?

The article continues, "Arena supporters also say the county should sell 9.8 acres of land in the Park East corridor to the Bucks ownership group for $1 to assist the plans for $400 million in ancillary development around the arena." The article then gives Tammy Maddente, VP at First Weber Group, space to opine how $1 for the land would be a great deal.

Should the state, county and city now have to pay for the sites of private developments. If this arena proposal is such a great deal for everyone involved, shouldn't the Bucks have to at least pay the market rate for the land. Should the public just give away its assets to private developers?

It's amazing how many professional stadiums have been built in Wisconsin, yet it seems we've learned nothing and logic is absent from the discussion.

As I've said many times, if these arena developments were such no-brainers, economic catalysts, why aren't market forces lined up to grab a piece of this low-risk, high-reward income stream? If, comparatively speaking, this arena-investment has such a great return, greater than alternative investments, why is the public footing most of the costs and taking on most of the risk? Why, suddenly, when it comes to building sporting arenas, is the market so bad at allocating resources?

Of course the answer is because these are bad investments. They money spent is basically corporate welfare and the supposed benefits are always exponentially exaggerated. And, don't forget, the costs are always much more than initial estimates.

To borrow a descriptor from Antonin Scalia, this arena-funding scheme for the county, along with the assumed and inflated ancillary outcomes, is complete jiggery-pokery.

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