The public agency that owns and operates Milwaukee’s convention center laid out
The Wisconsin Center District also released renderings of the revised plan for a larger project — previously estimated at $300 million. The completed facility would double the square footage of the existing center in downtown Milwaukee.
“Revealing our vision for the Wisconsin Center expansion with the board and to our community represents a major step forward,” WCD chief executive officer Marty Brooks said in a statement.
The discussion at the board’s Friday meeting lays the groundwork for a board vote as soon as April 2. Several moving pieces remain before the vote. The tentative timeline calls for a bond sale as soon as late April but market turmoil over the COVID-19 outbreak adds uncertainty to the timing of a sale backed by tourism-related taxes, even if a big piece carries the state moral obligation pledge, market participants said.
The project’s price tag must be finalized and that is expected later this month. The district is also awaiting a final review by the Wisconsin Department of Administration on the use of the moral obligation pledge. It was included in the state’s two-year budget approved last year.
While no city dollars are on the line, the city’s Common Council must sign off on the moral obligation use by certifying it as the sponsoring municipality. The council did that last month but a resolution that seeks to rescind the approval was submitted last week after word spread of the increased cost. A hearing is set on the motion Friday.
The district’s financial team — with Baird as financial advisor and Morgan Stanley as underwriter — laid out two structures that rely on the sale of bonds with an up to 40-year final maturity with a new-money and taxable refunding component.
A large portion of the new money — between $260 million and $280 million — would sell with junior-lien status and a state moral obligation pledge. The remainder of new money — about $130 million — would sell under a senior lien. Another $70 million to $80 million of existing debt would be refunded using a taxable structure.
The first model assumes the district’s basic room tax in the county is left at its current rate and the so-called “candy bar” tax sunsets in 2033. The second model assumes the board raises the room tax to 3% from 2.5% as it’s permitted to do and the “candy bar” tax that applies to a portion of the district’s food and beverage tax continues. The latter scenario leaves more revenue capacity for future borrowing needs.
The language of the authorizing resolution would allow for the issuance of up $425 million to fund the expansion and up to $100 million of refinancing. The district has $376 million of outstanding debt.
Rates of about 2.89% are projected on the first model based on current market conditions plus 25 basis points and 2.81% on the second to achieve the needed proceeds. Both would likely rely on a blended debt structure of capital appreciation bonds, current interest rate bonds, and restructuring existing debt.
Without the moral obligation, total debt service would increase by about $40 million to $50 million, district documents noted.
“For months, we’ve been laying the groundwork for this expansion, investing in pre-planning and gathering the necessary information so the board can make an informed decision on behalf of our city, region and state,” WCD board chairman Jim Kanter said in a statement.
The proposals from “Baird and Morgan Stanley clearly” identify “financial paths forward,” he said.
The district currently collects $36.9 million annually from its 2.5% basic hotel room tax in Milwaukee County, a 0.5% food and beverage tax in the county, a 3% car rental tax in the county, and an additional room tax charge in the city of 7%. The county room, food and beverage and car rental taxes are “restricted” and collections can only be used for debt service, while the additional city hotel tax is unrestricted and can be used for debt service or other costs. The taxes currently go to repay the original convention center debt and additional basketball arena debt added in 2016.
The tentative timeline anticipates, if all pieces are in place and the district board votes on April 2 to move forward, a bond pricing as soon as April 21 and closing in May.
Market participants following the deal say that timing will depend on the status of the outbreak, market conditions, and initial investor feedback. The timing is good given the low tax-exempt and taxable rates, but big hits to tourism-related tax revenues at a national level could dampen the appeal and result in a yield penalty even with the moral obligation pledge.
“It’s March 9. You just have to be ready to move forward and then see where the market is when you get closer to the targeted pricing date,” one market participant said.
The district has not yet been hit with trade and convention cancellations like its neighbor to the south, Chicago. The Milwaukee center is slated to host the Democratic National Convention in July.
District officials said the financing models under consideration meet a series of goals beyond just financing the expansion project.
The models utilize only the district’s restricted revenues to pay existing and new debt service. It also preserves unrestricted revenues to fund tourism and other operating and capital needs of the district, double the district’s rainy day reserve for debt service and preserve future flexibility and future bonding capacity with the ability to refinance/retire debt and structure level debt as soon as possible, according to district documents.
The expansion is needed to compete with peer cities and would benefit the state by generating $12.6 billion in spending over a 30-year period by attracting bigger shows, according to a consultants’ study released last year.
The district has eyed an expansion for years, releasing studies that support the need for and benefits of expansion, but financing has been elusive. Backers of the expansion argue that both renovations of the current facilities, which were built in 1998 and 2000, and additional space are needed to remain competitive with other cities and keep current shows and conventions as well as draw new events.
Various consultants’ reports point to expansion and renovation projects recently completed, underway, or being contemplated by competing venues in Columbus, Indianapolis, Louisville, Kansas City, Cincinnati, Grand Rapids, and St. Louis, and expansions that are done or underway to Wisconsin facilities in Green Bay, La Crosse, and Madison.
The current plan calls for increasing the exposition hall square footage by 112,000 square feet, integrating six loading docks to support the added square footage; a ballroom with a minimum of 30,000 sq. ft. and a minimum seating capacity of 2,000; at least 24 new meeting rooms; and at least 400 new parking spaces.
The project would also modernize the existing facility’s interior and include new employee locker rooms, break, training, and briefing room adding gender-neutral bathrooms, quiet rooms and nursing mothers' rooms and create outdoor patio spaces.
The convention center currently offers 188,695 square feet of contiguous exposition space and 37,500 square feet of ballroom space, accommodating up to 1,000 vendors and 10,000 guests.
The district was first established by state legislation in 1994 to build and operate the convention center, now known as the Wisconsin Center, in downtown Milwaukee, and continue operating existing venues which are now known as the University of Wisconsin-Milwaukee Panther Arena and Miller High Life Theatre.
In 2015, the state expanded the district’s authority to issue debt and serve as owner of a new basketball arena for the Milwaukee Bucks. The district in 2016 sold $200 million of debt to help finance the $500 million Fiserv Forum, which opened in 2018.
The district is run by a 17-member board appointed by the governor, Milwaukee County executive, Milwaukee mayor and Milwaukee Common Council president. It can issue bonds and collect taxes within strict limits established by statute.
