Ground leases could help replace, renovate Milwaukee stadiums

The ground beneath some Milwaukee schools could be about to go on the market.

A new initiative would lease the land underneath about 30 Milwaukee Public Schools to pay back $72 million that would be issued in bonds. The money would then be used to replace South Stadium and renovate Custer Stadium. But several Milwaukee aldermen, despite allowing the proposal to be considered by the full Common Council, are skeptical of the plan.

Under the agreement, the city would implement ground leases through the redevelopment authority, an independent public corporation closely tied to the city, for about 30 schools. The schools that would be subject to such a ground lease have not yet been named, but would be chosen from a list of 81 schools designated as “blighted” by the redevelopment authority. The authority would issue bonds and lease the improved schools to MPS, though MPS would actually manage the construction work and improvements to the properties. Lease payments made to the authority during the term of the bonds would allow them to eventually be paid off.

“There’s no financial responsibility for either the city or the redevelopment authority,” said Thomas Gartner, a city attorney. “This will accommodate MPS’ improvement of a number of schools, as well as two new athletic fields.”

An initial $38 million in bonds issued would provide $20 million to replace South Stadium and renovate Custer Stadium. The remaining money would be applied to MPS buildings, which have $85 million in deferred maintenance projects.

South Stadium, 971 W. Windlake Ave. in the Historic Mitchell Street District, was demolished in 2014 at a reported cost of $559,163. Its replacement will reportedly cost $9 million. Hunzinger Construction Co. was recently awarded a $5 million contract by Milwaukee Public Schools to renovate Custer Stadium, 4300 W. Fairmount Ave. on Milwaukee’s west side. But these figures combined were still more than $5 million less than the $20 million reserved for both projects.

Officials from MPS were not immediately available for comment.

The bonds proposed in the agreement are a new debt instrument known as qualified school construction bonds. Created by the American Recovery and Reinvestment Act of 2009, they allow schools across the country to borrow money at zero percent interest for the rehabilitation, repair and equipping of schools. Tax credits provided in lieu of interest payments reduce the cost of borrowing.

The federal government has allocated $72 million in such bonds to the Milwaukee Public School system. But because MPS does not have the independent authority to incur debt, its officials have proposed an agreement between the Milwaukee Board of School Directors, the city of Milwaukee, and the Redevelopment Authority of the City of Milwaukee to utilize the bonds.

Jeff Fleming, spokesman for the Milwaukee Economic Development Corp., said that Milwaukee had a longstanding relationship with MPS where it would issue bonds to help improve school facilities. The city could simply issue general obligation bonds, but it would run up against the city’s bonding cap. In contrast, the redevelopment authority is an independent corporation but also a public body that can purchase and sell land, declare property blighted, and issue bonds. As a result, it presents a favorable alternative, he said.

But at Tuesday’s Zoning, Neighborhoods & Development Committee hearing, where the proposal was introduced, several city council members were critical of the plan. Alderman Robert Bauman was skeptical of the broad definition of “deferred maintenance” while also questioning an arrangement that would call for the City Council’s blessing. Alderman Willie Wade said that constructing new stadiums could be an outdated idea. Committee Chair James Bohl said the proposal needed more discussion, especially once the list of schools that would be subjected to ground leases was revealed. Nonetheless, the committee recommended the proposal for consideration by the full Common Council. Follow @MatthewTaub1