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Milwaukee Is Keeping the Bucks, But Would It Have Been Better Off Without Them?

Scott Walker and others argue that Wisconsin taxpayers ultimately will make money by forking over millions for a new Milwaukee Bucks arena. But—surprise!—the numbers don't add up.
July 16, 2015, 3:05pm
Photo by Jeff Hanisch-USA TODAY Sports

Milwaukee Bucks fans can breathe easy: Their team is almost certainly staying put, now that the Wisconsin state senate has approved a revised funding bill for a new arena after weeks of negotiations between state Republicans and Democrats. There are still a few more t's to be crossed and i's to be dotted—the state assembly and city council still have to vote to approve the plan, and everyone has to figure out how the funding scheme that was hammered out yesterday will actually work. But the state senate was considered the toughest obstacle, so the Bucks' owners can feel free to start popping the champagne.

Meanwhile, Wisconsin taxpayers—who are by and large the same people as Bucks fans—can hold the bubbly, and perhaps look around for an overhead oxygen mask. The bill approved by the state senate is virtually unchanged from the one that was previously calculated to cost $277 million in government cash, plus $180 million in future tax breaks. That's enough to cover nearly the entire $500 million arena construction cost, in exchange for which the public gets precisely zero percent of any future arena revenue.

READ MORE: Your Votes Don't Count: How Sports Stadium Welfare Deals Shut Out The Public's Voice

Scott Walker, the newly-minted official Republican presidential candidate, and occasional Wisconsin governor, has explained his support of the plan—while simultaneously backing an austerity budget that goes so far as to take away workers' rights to have weekends—by saying that the public's $457 million chip-in is really a mirage. That's because, according to the governor's oft-repeated slogan, it's "cheaper to keep them." Sure, Walker argues, a Bucks arena would cost a lot of money—but losing the Bucks to another city would cost even more, so let's start those bulldozers!

"Trust me, I'm wearing a replica jersey." -- Photo by Mary Langenfeld-USA TODAY Sports

We already covered here the uncertainty over whether the Bucks' billionaire owners, Marc Lasry and Wes Edens, really would have hightailed it to Seattle without a new arena—or if they would have simply settled for a Milwaukee arena offer slightly less crazily generous than this one. Still, let's humor Walker's assertion, and ask the important question: If the Bucks had moved, would Milwaukee have been so much worse off without them?

First things first: how you answer that depends on what you mean by "worse off." If you're a Bucks fan distraught at the prospect of not getting to watch Giannis Antetokounmpo stuffing things into other things, no price is too high to pay to ensure that the National Basketball Association sticks around. Of course, that's not what Walker meant by "cheaper to keep them"; he meant that the actual economic cost to the state of Wisconsin would have been so great that it's better to hand over $457 million. Spend money to make money, in other words.

Can that possibly be true? Let's take a look at the arguments being made by Walker and other Bucks arena plan proponents, and crunch some numbers.

Walker's office has put out a slew of charts claiming to show that the Bucks arena would be a good deal for taxpayers, charts that have gotten recycled a ton in the print and web media, because charts. For example, who can argue with this?

The tower on the left is bigger than the one on the right! And in color! No one could possibly be afraid of a pleasing taupe!

So what, exactly, do those "No Arena" loss numbers mean? The top one is the simplest to understand: It's the $120 million that the governor estimates it would cost to maintain the Bucks' current home, the Bradley Center, for another ten years.

Those estimates, though, don't exactly match reality. First off, $20 million of that is existing debt on the Bradley Center, which the state would have to pay off regardless. Likewise, the state would have to pay for maintenance and upgrades on a new arena as well if the Bucks stayed—something that's yet to be negotiated, but could be substantial, given that a new building would have more expensive things that could break. And finally, the Wisconsin legislature's own independent legal advisers say the state wouldn't be on the hook for any upkeep if the Bucks left. So trim that green rectangle down to a thin slice.

The red and blue are both parts of another Walker-concocted number: The future income taxes to be paid by Bucks players and staff. The bottom slab, $130 million, is what the state would bring in from team income taxes over the next 20 years if NBA payrolls stay the same. The top slab, $169 million, is projected earnings from future increases in player salaries.

An offer the state can't refuse, right? There are two problems here. First off, as we've discussed here in the past, you can't just total up all of the taxes paid by a sports team and assume they'd disappear if the team left, for the simple reason that then people would spend their money somewhere else, a somewhere else that might well pay Wisconsin income taxes. There's a case to be made that this "substitution effect" would be less strong in the case of small-market team like the Bucks—in short, Milwaukee residents are getting the benefit of national TV spending without actually having to subject themselves to actually going to see Bucks games—but it's still going to reduce Walker's numbers still further.

And as for Walker's future revenue projections, I previously calculated that for his income tax numbers to come true, the average NBA salary would have to reach $33 million by the year 2046. And while that's plausible given current salary trends, it also envisions a future where our children are paying $1000 a month for their cable bill, which means any taxpayer windfall could easily be wiped out by the increasingly-likely downsizing of the Sports Cable Bubble, and/or the Cable Riots of 2045.

Walker-nomics 101: a) Give money to billionaire team owners; b) tax the heck out of labor; c) profit? --Photo by Jeff Hanisch-USA TODAY Sports

There's another argument that keep-the-Bucks-at-any-cost types have been making, and it's best summed up as: A new arena will lead to lots of other stuff getting built, whereas the Bucks leaving would leave Milwaukee a rubble-strewn wasteland! This is the focus of the Bucks' incredible promotional video in which a magic basketball unleashes a glowing green shock wave of redevelopment that turns all of Wisconsin to color. (Clearly somebody on the Bucks marketing team has a thing about The Wizard of Oz. Or maybe Wrath of Khan.)

It's one of the core arguments in the I'm-a-billionaire, so-buy-me-a-stadium playbook, and remains so even as economists continue to find zero evidence that it's worked anywhere ever. The classic study here was conducted way back in 1987 by Lake Forest College professor Robert Baade, who compared several cities with and without teams and found zero evidence that new sports venues do squat for increasing per-capita income in their home cities. Other economists have looked at the same question from different angles—what if we look at income in every major city? What about during strikes and lockouts? What about sales tax receipts?—and similarly found nothing, to the point that there are relatively few new studies on the subject, because most economists consider the question asked and answered.

But none of these is quite what we're looking for: a city that lost its team and how it fared afterwards. A recent paper by Brad Humphreys and his West Virginia University colleague Adam Nowak looked at one of the more notorious recent NBA relocations—the Seattle Sonics' flight to Oklahoma City in 2008—and examined yet another marker of economic health: condo sale prices. According to their findings (which involve a lot of math with Greek letters, so tread at your own risk), after the Sonics left Key Arena, nearby property values around Key Arena rose faster than those farther from the now-NBA-free arena, leading the authors to conclude that people don't actually want to live near NBA arenas thanks to the "traffic, crowds, noise, trash, and other activities associated with NBA games."

Humphreys, who is currently working on yet another paper looking for any sign of a surge in new restaurants and bars around sports venues (SPOILER: He couldn't find any), says he thinks it's time to conclude that losing a sports team has no economic costs for a city. "I keep trying to tick off all the boxes," he says: per-capita income, employment, economic activities during strikes, none have shown any measurable impact from sports teams' presence. "I don't think there's any support whatsoever to the claim that a city's economy is going to suffer when a team leaves."

So what does that mean for Wisconsin and the piles of cash it just foisted upon Edens and Lasry? Simple: if there's really demand for tons of downtown development in Milwaukee, the city could probably take advantage of it and build stuff with or without a new arena—or the team itself. In fact, when economist Geoffrey Propheter studied NBA arenas in particular, he concluded that arena builders are more often seeking out areas ripe for takeoff rather than revitalizing rundown zones—or as he put it, "professional sports are not the cause of development so much as they are the effect."

When John Oliver aired the magic basketball video as part of his takedown of stadium spending on Sunday, he remarked, "Settle down, Milwaukee Bucks! For a start, I don't think Wisconsin will transformed by one new arena." If the economic studies are right, though, it's worse than that: Wisconsin has just thrown almost half a billion dollars at an arena that won't move the economic needle at all—money that now won't be available for other projects that might actually get some bang for your buck, like transportation infrastructure.

If you're a Bucks fan, you had best hope that Giannis now turns into the next Kareem Abdul-Jabbar and brings home the team's second championship in franchise history, or else you just paid a high, high price for a lot of .500-ish basketball. And if you're John Oliver, you may need to shout "Make them pay!" a bit louder, because it doesn't look like anybody in the Wisconsin government, Republican or Democrat, is getting the message.