Alderman comes up with plan to fund Milwaukee Bucks arena, and it involves sales tax

"Government should not be involved in paying for sports arenas -- period. Sales tax increases should be the last thing considered. The people of Wisconsin are taxed too much as it is, and any sales tax increase in Milwaukee will only hurt the area."

Having closely watched the debate over how to fund a new arena for the Milwaukee Bucks, it appears there is a real risk that this franchise will leave Milwaukee. It appears that the state Legislature has balked at Governor Walker’s original $220 million funding proposal. It appears they are focused on approving a funding package of $150 million. This leaves a funding gap of at least $100 million ($500 million in projected cost, less $250 million in private capital and $150 million in state financing). State legislative leaders have suggested that the city and county come up with this $100 million or what could be an even bigger share if the actual costs of construction run over $500 million.

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. We cannot use our most effective tool—tax incremental financing—because the arena will be exempt from property taxes. The city has pledged approximately $25 million in assistance, mostly in the form of improved and unimproved real estate. However, contributing real estate does not help meet actual arena construction costs.

I suspect that state legislative leaders know all of this, so their proposal of $150 million in funding is intended to create a funding gap they know the city and county cannot fill. They have set up the city and county as the “fall guys” if the Bucks choose to leave.

There is another approach, an approach extensively discussed by the Cultural and Entertainment Capital Needs Task Force created by the Metropolitan Milwaukee Association of Commerce to review funding options for a new arena, as well as other public needs such as parks, cultural institutions and transit. That approach is a one-cent dedicated sales tax in Milwaukee County to fund the arena, parks, cultural institutions and the Milwaukee County share of transit operating and capital costs.

A one-cent dedicated sales tax in Milwaukee County would completely cover the public share of arena construction costs, as well as ongoing maintenance (which no one has discussed in connection with current funding proposals), would completely fund all parks and cultural institution deferred capital projects, proposed capital projects and the Milwaukee County share of operating costs, and completely fund the Milwaukee County share of transit operating costs and proposed capital projects such as Bus Rapid Transit lines and expanded service to job centers in suburban areas.

This one-cent dedicated sales tax would represent new revenue, although there would be a significant Milwaukee County property tax offset since the Milwaukee County property tax levy is covering the local share of parks, cultural institutions and transit at present. This new revenue would enable Milwaukee County to retain one public good (the Bucks), and place three other public goods (parks, cultural institutions and transit) on a stable and sustainable financial footing for years to come. The constant debate about deteriorating parks, struggling cultural institutions and declining transit service would end.

State legislative action is required to implement this approach. This will represent a new tax. However, the legislature could require a Milwaukee County referendum. The legislature can put the question to the voters and let them decide whether the Bucks are worth keeping and whether stable and sustainable funding for parks, cultural institutions and transit are worth an extra cent in sales taxes.

This approach is not new.  Most major metropolitan areas have dedicated sales taxes for transit, and at least one city, Oklahoma City, has used a dedicated sales tax to pay the public share of an NBA arena. Such dedicated taxes have usually been implemented after successful public referenda.

Yes, the Milwaukee County sales tax would increase to 6.6%, but this would still represent one of the lowest sales tax rates among major urban counties. In addition, the Milwaukee County property tax levy would be reduced by nearly $54 million dollars. The local cost to operate and maintain parks, cultural institutions and transit would shift from property tax payers to consumers of goods and services in Milwaukee County, of whom approximately 25 percent are non-residents.

I hope common sense and reason prevail, and that this proposal gets serious consideration in the Legislature."