Wisconsin's Walker Pitches Arena Bond Plan

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Republican Scott Walker, governor of Wisconsin, speaks while fellow Republican Mary Fallin, governor of Oklahoma, listens during a press conference after meeting with U.S. President Barack Obama in Washington, D.C., U.S., on Tuesday, Dec. 4, 2012. Negotiations over the so-called fiscal cliff are stalled as President Obama and Republicans trade offers on ways to avoid more than $600 billion in U.S. spending cuts and tax increases for 2013 that will start to take effect in January if Congress doesn't act. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Scott Walker; Mary Fallin

CHICAGO — Wisconsin would divert future growth in income taxes paid by Milwaukee Bucks players and visiting teams to repay $220 million in appropriation-backed borrowing for a new professional basketball arena, under a plan Gov. Scott Walker pitched Tuesday.

Walker released a sketch of the financing plan, saying he planned to include the proposal in his two-year budget plan that will be released Feb. 3.

"There's absolute security for the taxpayers," Walker said in a presentation. "There's no new taxes, there's no draw on existing revenues, and there's no exposure in the future…this is all based on growth."

The state currently collects about $6.5 million in income taxes on players. The state would set that amount as its base and keep those funds in the future. Growth in tax revenue would be tapped to repay the bonds, Walker said.

While the governor called the plan fiscally conservative and budget neutral, the state could no longer rely on growth in the taxes to support its general fund. The plan was crafted with help from legislative leaders, the state's revenue department and capital finance team, the Bucks, the NBA, and Goldman Sachs, Walker said.

The governor pitched the plan as one that actually would help the state prevent a loss of revenue. If the team leaves, Walker said the state would lose $270 million in revenue over the life of the bonds. It was not clear if that comparison accounted for the interest on the borrowing.

"If we do nothing….I lose that amount of money," he said.

If the team is sold before the bonds are retired, proceeds of the sale must go to pay off the bonds before the old owners receive any funds.

"This solution allows for the state to make an investment in economic development in Milwaukee, while protecting Wisconsin taxpayers from risk," Walker said.

Under the plan, a Sports and Entertainment District would be created to manage the repayment of a $220 million grant financed with the bonding that would carry the state's appropriation backing but repaid with the future income tax revenue.

It's unclear how that growth would impact the debt service schedule and whether the state would tap into existing revenue to allow for level debt service, a structure that would lessen interest costs over a schedule with escalating payments. Projected growth was estimated with help from the NBA and is based on future contracts and estimated pay increases.

The district would be governed by a nine-member board appointed by the governor and confirmed by the state Senate with members serving staggered, 7-year terms. If Milwaukee County provides funding for the arena, the county executive will have appointment power for one board member subject to confirmation by the county board. If the city provides funding, the mayor shall appoint a board member subject to confirmation by the city council.

The district would not have taxing or bonding power but could raise revenue through the operation of the arena and will assume any outstanding debt owed on the Bucks current home, the BMO Bradley Harris Center.

Former Wisconsin Sen. Herb Kohl sold the team last year for $550 million to a group of buyers led by Wes Edens and Marc Lasry. As part of the sale, Kohl pledged to contribute $100 million toward the cost of the new arena while the new owners have pledged $150 million. A new arena is estimated at $400 million to $500 million.

While Kohl made keeping the team local a requirement of the sale, a clause allows the NBA to buy the team from the new owners if a deal on a new arena is not in place by late 2017. The league has been pushing for a new venue to replace the 26-year-old 18,600-seat arena and warned without a new one the team is likely to be relocated. The Bucks' lease runs through the 2016-2017 season.

A recent report from the nonpartisan Legislative Fiscal Bureau found annual income taxes Wisconsin receives from players and team employees would cover repayment of $150 million of 20-year state general obligation backed bonds for a new arena. Others have suggested a sales tax hike.

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