By AMANDA SEITZ
The Associated Press
When Milwaukee’s new sports arena opened last month, Gov. Scott Walker promised that state taxpayers would see a rich return on their investment in the Fiserv Forum, where NBA games will be played.
When some were criticizing Walker for committing $203 million to the $524 million arena while trimming other parts of the state’s budget, the governor was out championing the deal. In a statement issued the day of Fiserv Forum’s grand opening, Walker said the state will earn a nearly 3-to-1 return on the money spent on the arena.
A look at his claim:
WALKER: “The state is estimated to receive $2.99 for each dollar invested into building the new arena.”
THE FACTS: In making his estimate, Walker omits some of the state money spent on the 20-year arena deal and relies on income tax estimates that experts call unreliable.
Over the course of the deal, when interest is included on the bonds used to finance the Milwaukee Bucks arena project, it could cost state and local taxpayers as much as $377 million, according to a state legislative analysis. The state’s share alone is estimated to add up to $160 million, when interest is included, according to the same study.
For Wisconsin taxpayers to get $2.99 for every dollar spent on the arena — nearly triple the state’s investment — the Bucks arena would have to generate $460 million worth of state tax revenues over the next two decades.
But the governor sets the bar lower in his calculation. He counts only half of the state’s investment — $80 million of it — and predicts the state will get $299 million worth of income taxes from events held at the arena. His math predicts taxpayers would actually get as much as $3.70 for every dollar spent. To predict the lower 3-to-1 return, the governor used a more conservative estimate, according to his office.
But what Walker leaves out of his accounting is a second $80 million contribution from the state. His office says he did that because that money comes from a fund that distributes cash annually to Wisconsin counties. The state will deduct $4 million every year from its regular payment to Milwaukee County and set that money aside for the arena instead. That will add up to $80 million over 20 years.
But that money should be considered in Walker’s calculation, said Allen Sanderson, a sports economist at the University of Chicago.
“The money is money; it doesn’t matter how you carve it out,” Sanderson said.
Economists also questioned the tax revenue estimates Walker says the state will earn from the arena.
Walker bases his claim on tax-collection projections released in 2015 by Wisconsin Department of Revenue Secretary Richard Chandler, his office said.
Chandler estimated the state would collect $299 million worth of income taxes over 20 years because of the arena.
Using estimates from previous years, Chandler predicted that if the Bucks stayed in Milwaukee for the next two decades, the state would collect at least $130 million worth of income taxes from the Bucks and other NBA teams. (Athletes must pay income tax in any state where they play that collects such taxes.)
He also predicted that NBA salaries would increase significantly over the next 20 years and the state would get an additional $169 million worth of NBA income tax collections during that same time. That adds up to $299 million.
So far, Chandler’s estimates are on track. But more than one economist and sports-salary expert who reviewed those estimates for The Associated Press warned that it’s risky to predict salaries 20 years into the future.
The league’s salary cap may stay stagnant or increase for a variety of reasons from year to year, said Larry Coon, an expert on NBA salary caps. An NBA lockout in 2011, for instance, shortened the league’s season and kept the salary cap flat the following year. But in 2016, the cap increased significantly because of the league’s new TV deal.
The NBA itself, Coon pointed out, provides salary-cap projections only for a few years in advance.
“There’s enough variance over time that you can’t project what will happen from one year to the next — there are too many confounding factors,” Coon wrote in an email.