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Don Walker with the Milwaukee Journal Sentinel has a new piece up where he interviews Bucks owner Wes Edens on a number of arena related topics. This is a must read for Bucks fans as Edens highlights some important points and foreshadows where he’d like to see things head in the arena debate.
Here are the important takeaways from that piece:
“Edens says he envisions an arena with a capacity of 16,500 for basketball”
This comment is the one that will get the headlines. It would appear that the Bucks goal will be quality over quantity. All pro sports teams are facing the issue of competing for physical game attendance with the 60″ HDTV located in the comfort of your home. The great thing about the NBA is that the TV rights game is so lucrative, actual game attendance is far less relevant than it was thirty-years ago. Edens understands that landscape and it would appear any new arena will need to focus on being a destination location to get people off their couches and to the game. As anyone who attended a Bucks game at Mecca years ago can attest, smaller is better for an NBA game.
Scarcity of product also matters. Look no further than Miller Park with its much reduced seating from County Stadium. Scarcity of tickets to important Brewer games (or any Brewer games when they are hot) drives demand. It is human nature to want to be part of any “in thing”. The harder it is to get Brewer tickets, the more it psychologically drives fans to want to attend Brewer games. The Bucks rode this same wave in the 1970’s and 1980’s when capacity at Mecca was 10,938 (later 11,052). Bucks tickets were the hot thing for years partly because they were hard to get. This is classic human nature that goes back to the Tulip bulb craze in the 1600’s. And creating demand for tickets also allows the team to, ahem, charge higher ticket prices per seat.
“The best arenas have upward of 300 events a year”
We take this to mean the Bucks plan would envision the existing arena, Milwaukee Theater and BMO Bradley Center will all be torn down in favor of a single new facility. Even 200 nights per year of new arena use means everyone and everything is playing there, the Admirals, MU, UWM, graduations, concerts, etc.
We agree with this type of plan. For too long Milwaukee has had too many buildings, none of which are particularly unique or attractive to their various tenants or patrons. Let’s focus on creating one amazing destination place. The schedule makers for the various teams can sort it out later. It can be done!
“Fascitelli is an investor in the team”
We hadn’t picked up on this name in the now lengthy list of Bucks owners. Michael Fascitelli is a major player in New York real estate who is also helping the Bucks with the arena development. Fascitelli’s estimated net worth is only $700 million, so he doesn’t qualify as the fourth billionaire in the ownership group.
All kidding aside, the Bucks ownership group will make a fascinating future study of pro sports ownership groups. The Bucks appear to have brought together a Wall Street dream team while also bringing in numerous influential local Milwaukee investors. We will let Don Walker and Rich Kirchen sort out who owns what percentages and what the new investors paid per share, but it is a interesting development. The important takeaway is that however this project turns out, it will be driven by some much needed outside perspective. We love our fine city, but Milwaukee has badly needed some outside ideas to spur economic growth and development.
“If you step back, look, the team generates over the term of this arena’s utilization… many tens of millions of dollars of direct tax benefits.
While people can argue about what the impact is on the team and the community long term, you can’t argue that there’s not a team playing there…. that no one is paying taxes..”
Here Wes Edens confirms what we’ve known for a long-time. The new arena will likely be funded with a “Super-TIF” that will segregate the State of Wisconsin income tax revenue generated by the Bucks to pay debt service on bonds issued to fund construction. As this site has noted since April, THE SINGLE MOST IMPORTANT TALKING POINT for Bucks fans to recite to friends and family is the fact that under the NBA financial structure, the Bucks are “takers” of revenue. There are tens of millions of dollars of national and international revenue that the Bucks derive by being one of 30 teams in the NBA. These are NOT dollars generated by the team’s activity in the State of Wisconsin, but rather by the league and from other outside markets. Yet these outside dollars enter the State of Wisconsin via the Bucks franchise and accrue to the benefit of our local economy and tax base.
If you can take away only one thing from our piece today, be sure to trumpet this fact far and wide. We still hear many politicians and talking heads parroting the line that “Well, if the Bucks leave, that tax revenue won’t go away because Bucks fans will just spend their money on other local entertainment options.” This is not true at all.
Unlike stadium debates in other markets, the Milwaukee situation is unique. The Bucks bring significant dollars into the State. These will not be replaced if they leave. So for those of you against a new arena, please leave all your Roger Noll and Andrew Zimbalist talking points at home. The economic debate doesn’t need to be fought on those grounds because Milwaukee is a unique situation where the Bucks bring more economic impact to the State than that majority of other new arena situations.
“Interest rates are low, Edens said”
This is the final important takeaway from the piece. Without going into a lengthy discussion of public bond issues and amortization schedules, let’s use the simple example of a couple looking to buy a house (or new arena). The lower interest rates are, the more home someone can afford. If the State can float a bond issue at a 30-year fixed interest rate of 4%, the first year interest cost on $200 million is $8 million dollars. If interest rates rise to 6%, that first year interest cost on the same $200 million is $12 million.
No one can predict if/when interest rates will rise, but rates have been in historic low territory here the past few years. Better to keep the project moving and lock-in those low rates if possible. It means more building for our Bucks.
And with that we look forward to the four upcoming games over the next week and the continued emergence of Giannis on the NBA scene!