Tax plan for Bucks arena considered in lieu of finance district

Fans head into the Chesapeake Energy Arena in Oklahoma City recently. The city used a sales tax to pay for the arena’s construction in 2002. Milwaukee Alderman Robert Bauman wants a similar finance plan to build a new arena for the Milwaukee Bucks. (Photo by Brent Fuchs/The Journal Record/Oklahoma City)

Milwaukee Alderman Robert Bauman’s proposal to add a penny to Milwaukee County’s sales tax in order to finance a new Bucks arena came as a result of his argument that the city will be unusually limited in using a tax increment finance district to contribute to the project.

“As far as the city is concerned, coming up with $50 million or more is simply not possible given existing financing tools at the city’s disposal,” Bauman said in a news release. “We cannot use our most effective tool — tax incremental financing — because the arena will be exempt from property taxes.”

As part of the search for alternative sources of money, the city’s Judiciary and Legislation Committee took up Bauman’s sales-tax resolution Monday, although the committee ultimately held the proposal for further consideration. Barring an approval or something similar, city officials will find that they have few other means of contributing to the project other than a tax increment finance district.

In general, the districts collect taxes generated by rising property values and new developments in a particular area and set the money aside to finance public projects in the same place. Milwaukee is handicapped, Bauman said, because the arena will probably be owned by a non-profit entity that will be exempted from paying property taxes. With no property taxes to collect, a TIF district would be next to useless.

Even so, an announcement by the Bucks in April detailed plans not only for a $500 million arena that would replace the BMO Harris Bradley Center, but also another $500 million worth of development, turning adjacent vacant lots into entertainment spots, shops, hotels, residential units, offices and parking lots. Bauman acknowledged Monday that a TIF district could apply to private developments around the arena, although he cautioned that projects of that sort are far from guaranteed to be built.

What’s more, even though the development would be private, it still might not generate property taxes that could be captured by a TIF district. Under a proposal to create a “sports and entertainment district” in the area, any ancillary developments owned by the Bucks would also be tax-exempt, and the team has already shown interest in some of the available parcels.

The Bucks’ plans include purchasing a parcel just north of the Bradley Center for their new arena and connecting it to an adjacent parcel that now is a city-owned parking ramp at the corner of North 4th Street and West Highland Avenue. The combined area would become an arena and entertainment “live block.” The team also announced plans to put up a new practice building and parking garage. However, Bucks officials also stressed that they had not yet purchased any parcels, and that the renderings they had released were not yet the final versions.

Another option, floated in previous discussions about the proposed arena, and in use in other cities, is a “super-TIF” district. A mechanism of that sort would not only capture property taxes, but also state payroll, income and sales taxes. Still, the creation of a super-TIF would require an act of the state Legislature.

Columbus, Ohio, set up a TIF district on empty parcels it had sold for developments surrounding a planned hockey arena — now the Nationwide Arena — in 2000. The 20,000-seat, $150 million arena is the home to the NHL’s Columbus Blue Jackets expansion team. (AP Photo/Terry Gilliam)

Other cities have used combinations of various sorts of taxes to pay for similar projects. Oklahoma City relied on a sales tax to pay for its NBA arena; Columbus, Ohio, set up a TIF district on empty parcels it had sold for developments surrounding a planned hockey arena; and Kansas City, Mo., established a super-TIF to finance a shopping and entertainment district downtown.

Estimates hold that between $450 million and $500 million will need to be spent on the new arena by 2017 if the team is to remain in Milwaukee. With only $250 million committed from the Bucks’ former and current owners, as much as another $250 million is still needed.

Currently, legislative leaders favor selling $150 million in bonds to the Board of Commissioners of Public Lands, a group that manages money raised from sales of land that was originally donated by the federal government. That leaves a shortfall of $100 million, presumably to be covered by the city and county of Milwaukee.

Bauman said his sales tax resolution would not be binding on the state and county representatives who are now debating the project’s financing with Milwaukee Mayor Tom Barrett, but would still be helpful in expressing the city’s position.

“It is at least generating discussion on an issue that has largely been discussed behind closed doors,” Bauman said in an email. “I have received no formal or official responses, but several (individuals) have mentioned interest and support on an informal basis.”