Scott Walker Steals from Taxpayers and the Poor to Give Billionaire Basketball Team Owners a New Arena
Wisconsin Gov. Scott Walker has just delivered a thundering slam-dunk in the face of state taxpayers by lining up $250 million in public funds for the Milwaukee Bucks’ three billionaire owners to build a new $500 million Milwaukee Bucks arena.
The contrast between the plight of Milwaukee, 4th poorest major city in the country, and the fortunes of the new Bucks’ owners could not be more stark. The three principle new owners—Marc Lasry (net worth: $1.7 billion, according to Fortune), Wes Edens ($2.5 billion) and Jamie Dinan ($2.4 billion)—are worth a combined $6.7 billion. (Edens is also the majority stockholder of Nation star, a nationwide mortgage servicer, which “manages some of the city’s worst kept foreclosed homes, properties commandeered by raccoons and drug dealers, “the NY Times reported.
But the trio’s enormous wealth and Edens’ indifference to Milwaukee’s inner city did not diminish their leverage with the state and other proponents of the deal. Walker and the local corporate leaders and public officials proved to be easily pliable in the hands of the Bucks’ owners.
However, to some progressive elected officials like State Rep. Jonathan Brostoff (D-Milwaukee), the Walker-led giveaway is a flagrant misuse of public funds to aid a big private corporation easily capable of financing the full $500 million for a new Bucks arena by itself.
“We are building an arena for [three] of the richest people in the U.S.A. and they are just asking for more,” Brostoff fumed. “If aliens came down and looked at this, they’d say, ‘What the hell are you doing?’ “
The deal marks yet another capitulation by public officials, prodded by local corporate elites, to the demands of pro sports teams to cough up huge sums for new arenas or stadiums, or face the humiliating relocation of the local team to another city. The National Basketball Association heightened the owners’ leverage in Milwaukee by insisting that all NBA teams must have an arena no older than 25 years, meaning that the current 27-year-old Bucks facility would disqualify Milwaukee from keeping the franchise.
The financing of the new facility extorted from taxpayers—which has become increasingly routine in pro sports—becomes even sweeter for the billionaire owners when examined more closely. To help kick-start an entertainment district near the new arena, neo-liberal Democratic County Executive Chris Abele sold the owners $8 million with of public land for precisely $1, and also committed the county to the multi-million cost of relocating a major sewer pipe. Several experts believe that the final cost to state and local taxpayers will thus be far larger than the initial $250 million.
Further, new arenas and stadiums have almost always failed to stimulate the economic development in entertainment districts as promised by the Bucks’ owners and proponents like Walker, Abele, Barrett, and corporate leaders represented by the Milwaukee Metropolitan Association of Commerce.
For Gov. Walker, the Bucks’ arena deal may have been a major loser for taxpayers, but it was a major political necessity for his candidacy. The taxpayer handout was clearly motivated by Walker’s need to claim some steps in the name of a “economic development” as he runs for the Republican presidential nomination, burdened by the state’s low ranking of 35th in job growth during his administration, the rank of 50th in new business start-ups, and the continuing decline in household income which has been worst in the nation since 2000.
The Bucks deal also brought in sizable campaign contributions for Walker, including $150,000 from Jon Hammes, a minor owner of the Bucks who is also the co-chairman of Walker’s campaign finance committee.
The challenge to and other progressives about Walker’s outlay of public bucks for the privately-owned Bucks comes at a particularly sensitive time, when other needs in Milwaukee and the state seem glaringly urgent:
• $250 million happens to be the amount being cut from the University of Wisconsin system by Walker in the 2015-17 state budget he signed last month. The slashed budget will translate into a loss of well-known faculty to other colleges, layoffs of staff, unavailability of classes students need to graduate and thus more expensive educations and even larger debt burdens than before.
• Milwaukee’s economic and social conditions have continued to deteriorate outside a few enclaves of affluence, and is now the nation’s 4th poorest major city. Further, it has the very highest poverty rate among its black residents, at 38%.
• The city’s playgrounds, where Milwaukee’s youth practice basketball and engage in other play to escape the nightmare of poverty afflicting Milwaukee’s young people, are in deplorable condition, as Michael Powell of the NY Times reported, based on a thorough survey by the community group Common Ground.
• While city leaders are hoping that recreational activities will divert some of the stress in Milwaukee’s impoverished central city spanning blacks, Latinos and poor whites, the city has instead witnessed a major upward spike in homicides particularly among young black males. “Milwaukee has seen a dramatic surge in murders: 84 so far this year, more than double last year's rate,” CBS reported.
But other public officials, including liberal Democratic Mayor Tom Barrett (memorably skewered on the Bucks’ deal by comedian John Oliver), County Executive Abele, and both Republican and Democratic legislators felt compelled to give in to the billionaires’ demands. Abele told the New York Times that he would support national legislation banning sports teams from blackmailing cities, but in the meantime, he was a central force pushing the deal.
Under the agreement, Milwaukee County is committed to coming up with $4 million a year for 20 years. But meeting this requirement could impose severe hardships and political turmoil, as Michael Powell of the NY Times argued: “Abele has spoken of scrounging up the county’s payment by allowing the state to crack down on the county’s many debtors.
“That sounds fine in theory. In practice, it could mean hounding working-class homeowners for property taxes or pursuing residents who have delinquent ambulance bills. No county can afford to let taxes go uncollected, but that strategy registers as a touch repellent.”
The county’s collection practices may become increasingly controversial if the entertainment district fails to produce the spin-off revenue promised by arena backers. A pioneering 1984 study—since reinforced by a number of additional surveys by both economics on the Left and Right—by “Lake Forest College economist Robert Baade examined thirty cities that had recently constructed new facilities. His finding: in twenty-seven of them, there had been no measurable economic impact; in the other three, economic activity appeared to have decreased,” as summarized by Neil deMause, co-author of Field of Schemes.
Again and again, the purported economic benefits of new sports facilities have fallen far short of what team owners, public officials, and corporate leaders have In fact, “As University of Chicago economist Allen Sanderson memorably put it, ‘If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ballpark,”” noted deMause.
But retaining a major-league sports team, at whatever cost to taxpayers and public intuitions, is regarded as an absolute must by local officials and corporate leaders. Losing a team is regarded as major blow to civic pride and a barrier to recruiting top corporate talent and new investors. “It gives the city an identity and gives us something different than Des Moines,” stated Tim Sheehy, president of the Metropolitan Association of Commerce.
Owners are keenly aware that they can play on this fear and force cities to make enormous sacrifices in their long-term economic strategy and educational investments. The late Cleveland Browns owner Art Modell, who moved his NFL football team to Baltimore, put it bluntly: ''The pride and the presence of a professional football team is far more important than 30 libraries.”
Indeed, the cost of financing the Bucks’ new arena will surely mean cutbacks in libraries, public education the from kindergarten level to the university level, the parks system, recreational playgrounds, and other public institutions.
“The billionaire owners and the NBA are blackmailing city and county leaders into bankrolling an arena in one of the nation’s poorest and most segregated cities,” fumed Michael Rosen, president of the American Federation of Teachers Local 212 at the Milwaukee Area Technical College.
“The arena and related real estate deals do not address Milwaukee’s good jobs crisis and will do nothing for the unemployed and underemployed in the areas near the north side and south side neighborhoods. The county’s contribution of $80 million which is to be generated through collecting unpaid debts and fines, mainly from our poorest citizens is unconscionable and irresponsible. This is a bad deal.”
The Bucks’ threat of relocating in order to obtain substantial public funding, as with other sports teams, is another example of Corporate America’s widespread practice of obtaining major subsidies by threatening to move to Mexico or China. The result has been an annual outlay of about $80 billion from the 50 states, according to a 2012 series by NY Times reporter Louise Story.
But even massive outlays of public dollars are no guarantee of security for the public. The Bucks’ new owners remain free to apply their hedge-fund mentality to the Bucks, long-time Milwaukee activist and writer Patrick Small pointed out. They can treat the team as just another “distressed asset” whose value can be pumped up and then sold off.
“’Putting shovels in the ground’” usually implies that a major business is establishing deep roots for generations to come.” Small wrote in Urban Milwaukee. However, in today’s NBA, a franchise simply runs down an arbitrary 20-year (or less) arena time clock. Owners then demand a new and ever-changing list of “ancillary income streams” and upgrades from fans/citizens– or they threaten to leave town.
“Let’s not delude ourselves that the current Bucks investors will treat their NBA franchise differently than any other ‘distressed asset,’” Small warned.
“Remember the formula? Buy low. Improve value. Divest. Move on.”