Deadlines, $50M-$100M funding gap, relocation threat create tension in Bucks arena deal
From lease extensions through league pronouncements, we’ve been talking about the Milwaukee Bucks’ plans to build a new arena to replace the BMO Harris Bradley Center for years. As the recently rebranded Bucks prepare to host the Chicago Bulls at their nearly-27-year-old building in Game 3 of their first-round playoff series on Thursday, negotiations surrounding the club’s $1 billion proposal for a “public-private partnership” that would fund a new arena and surrounding development project in downtown Milwaukee seem to be coming to a head, and the franchise’s future in Wisconsin could hang in the balance.
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State, city and county legislators will meet with representatives from the Bucks and the office of Wisconsin Gov. Scott Walker at the state capitol in Madison on Wednesday to discuss the project, according to Rich Kirchen of the Milwaukee Business Journal. The goal of the talks: to “sit down and solve for the publicly funded money,” as Bucks president Peter Feigin told Kirchen Tuesday.
Hedge-fund billionaires Wesley Edens and Marc Lasry bought the Bucks from longtime owner and former U.S. Sen. Herb Kohl for a reported $550 million last year. As part of their purchase, they committed $150 million toward the construction of a new arena. Outgoing owner Kohl also committed $100 million to the project.
The problem: the Bucks’ proposed new gym — complete with “Atomic Age-swoop,” “soft, fluid form” and “dramatically curved roof” — is expected to carry a price tag of $500 million, meaning Edens, Lasry and company only get halfway to the finish line with their commitments. This, of course, has led ownership to look to state and local government, and the citizens of Wisconsin, for a helping hand.
Gov. Walker has proposed the state issue $220 million in bonds to help cover the costs, with debts incurred from the bond sales later repaid “with increased income taxes from NBA players in the coming years,” according to Kirchen. Under Walker’s plan, the city of Milwaukee and Milwaukee County would combine to cover the remaining $30 million. Thus far, according to Don Walker of the Milwaukee Journal Sentinel, Milwaukee Mayor Tom Barrett has offered more than $18 million in infrastructure and land toward the project, but no money, while while Milwaukee County Executive Chris Abele “has not offered anything concrete yet.”
In a political climate in which public funding of arenas and the long-term effect of such funding on local economies have come under increased scrutiny — President Barack Obama’s 2016 federal budget proposal calls for barring the use of tax-exempt bonds to finance professional sports facilities, a move that would close one major loophole but might not actually curtail the practice of owners seeking public subsidies — the Wisconsin legislature has pushed back against Walker’s proposal.
State Senate Majority Leader Scott Fitzgerald and state Assembly Speaker Robin Vos have promoted a plan that would raise $150 million in state funds via financing through Wisconsin’s Board of Commissioners of Public Lands. They argue that $220 million is a bridge too far.
The joint $150 million plan isn’t a slam dunk, though. For one thing, the land commissioners earlier this month “remained cautious since they have yet to receive key specifics about the possible deal from lawmakers and the Walker administration,” according to Walker of the Journal Sentinel, and the board “would need to sell some of its existing holdings of municipal loans to get the cash needed for a Bucks deal,” which could have concerning ripple effects.
Walker mentions “the State of Wisconsin Investment Board, which manages the pension funds for state employees,” as a potential buyer for “about $100 million in bonds from Wisconsin municipalities.” Matt Hrodey of Milwaukee Magazine identifies increased property taxes as the most likely source of revenue to handle the debt service on any loan from the BCPL.
Beyond that, a substantial majority of Wisconsin residents are against the idea of kicking in even the lower $150 million figure, according to a Marquette Law School poll published April 16:
Seventy-nine percent oppose borrowing about $150 million to support a new arena for the Milwaukee Bucks, with 17 percent supporting the proposal. In the Milwaukee media market, 67 percent oppose funding for an arena and 29 percent support it. Those views vary by less than 2 percentage points among the City of Milwaukee, the surrounding suburban counties of Waukesha, Ozaukee and Washington counties, and the seven other southeastern Wisconsin counties included in the media market.
In the rest of the state only 9 percent support borrowing for an arena, with 88 percent opposed.
So we’ve got a lack of public support for kicking in up to half the cost of a new arena, a yawning potential funding gap and, above all else, a ticking clock.
The Edens-Lasry group’s April 2014 purchase agreement included a provision allowing the NBA to buy back the franchise for $575 million, $25 million above the sale price, if construction on a new arena hasn’t begun by November 2017. If a lack of progress results in the NBA invoking that clause, “league insiders suggest a sale and relocation is the next logical step,” according to ESPN.com’s Brian Windhorst, meaning that the longer the wrangling over financing lasts, the harder it’ll get for the Bucks to meet the NBA’s timeframe.
More from Windhorst:
[…] according to league sources, the NBA office — having learned through the years that pledges and promises have little value until ground is broken — has made it clear to all parties it will enforce the out clause if shovels are not digging quickly. The NBA has communicated it could give on the schedule a bit, but only in the case of true progress. The league isn’t threatening consequences; it’s guaranteeing them. […]
“When do we need to get started? Yesterday,” said Michael Fascitelli, a member of the Bucks’ ownership group who is leading the arena development. “The arena is a two-year process. Every day is critical. Our goal is the 2017 season.” […]
[The lack of an agreement on state, city or county funding] leaves a major shortfall — between $50 million to $100 million — and no one is offering to fill it, including the Bucks’ ownership, who lawmakers have more than hinted should fund the solution. It is in this hole where the Bucks’ future probably is going to be decided.
“If the state comes in at $150 million, the deal is dead, and the Bucks will move,” city alderman Bob Bauman told Milwaukee Magazine this week. The arena would be in his district. “The gap is too big.”
The combination of the funding shortfall and the impending shovel-in-ground deadline seemed to bear down on Bucks president Feigin on Tuesday, according to Walker and Jason Stein of the Journal Sentinel:
Over the noon hour Tuesday, Peter Feigin, addressing a conference of commercial Realtors and shopping center executives, said, “The clock is ticking. This has to be wrapped up in the next 10 days.”
However, late in the afternoon — and three hours after his comments were posted online — Feigin released a statement from the Bucks that attempted to backtrack.
“There is no immediate deadline for a financing plan and we’re not creating one,” it said. “We’re simply hopeful that progress continues with our partners and throughout the legislative and political process.”
Bucks’ spokesman Jake Suski said Feigin misspoke. He said Feigin didn’t want to leave the impression that the Bucks were imposing their own deadline. “That wasn’t his intent,” Suski said.
Earlier, however, the Bucks president had been quite clear, saying if an arena financing deal doesn’t get completed, “the Bucks will be gone from the state of Wisconsin.”
Feigin struck a more optimistic note later, according to Kirchen of the Business Journal: “I think we’ve got two weeks of being locked in a room and figuring out how this actually gets done.” It’s possible that more conversation and compromise could result in an agreement that satisfies all parties … or, at least, that equitably spreads whatever misery is associated with keeping the Bucks in the city they’ve called home since 1968.
If it doesn’t, though, and if Eden, Lasry and company hold the line on upping their contribution to the new stadium project — which, as ProBasketballTalk’s Dan Feldman notes, would seem sort of like cutting off your nose to spite your face, given the relatively small profit they’d realize if the league was to take the reins — then we could find ourselves talking an awful lot more about relocation in the months and years to come.
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Dan Devine is an editor for Ball Don’t Lie on Yahoo Sports. Have a tip? Email him at [email protected] or follow him on Twitter!
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