If the devil is in the details, then the Milwaukee County supervisors are digging into the hellish parts of the county’s role in the financing of the proposed Bucks arena and development of the Park East land nearby.
Milwaukee County Executive Chris Abele has negotiated in private to provide $80 million for the new arena over 20 years, along with selling nine acres of Park East land for $1 to a development group led by the major Bucks owners.
Although Abele pitched his deal in a press conference with Gov. Scott Walker, Milwaukee Mayor Tom Barrett and Republican leaders, he hasn’t spoken to Milwaukee County supervisors about the deal, which could blow a hole in the county budget.
Instead, Abele’s sent two top aides to defend the plan in public hearings.
Those hearings have become increasingly heated as supervisors expressed their frustration with Abele’s lack of transparency and the rampant rumors that he is asking Republican legislators to include a provision in the state budget that would eliminate the board’s role in approving any land deals—including the $1 deal for the Park East land.
It’s not the first time that Abele has worked with non-Milwaukee Republican legislators to cut supervisors’ power and increase his own. Act 14, passed in 2013, vastly diminished the board’s oversight power and pay and will essentially reduce the board to part-time status. Act 203, passed last year, took the oversight of the county’s mental health services away from the board and placed it in the hands of an unelected board.
This year, Abele and Republican legislators are working on a scheme to allow Abele to take over low-performing Milwaukee public schools and privatize them.
That takeover plan will likely be included in the two-year state budget, currently being held up by Republican infighting.
As of this writing, legislators haven’t determined if the Bucks arena plan will be included in the budget or whether it will be proposed in stand-alone legislation. Out-state Republicans question why the state should underwrite bonds for the arena. And, increasingly, questions are being raised about Abele’s proposal to finance the plan with $80 million in uncollected debt on the county’s books.
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Suburbanites on the Hook
If Abele’s plan to finance the new Bucks arena passes the state Legislature, suburbanites who are behind on their property taxes will be a big source of the $80 million earmarked for the Downtown Milwaukee facility.
To cover $55 million in bonding for the arena, which balloons to $80 million when interest is figured in, Abele plans to turn over the county’s bad debt to the state, which will be responsible for collecting at least $4 million a year for the next 20 years. If the state cannot collect $4 million annually, it will likely deduct the shortfall from the county’s share of state aid, decreasing the county’s revenue.
One of the sources of the county’s bad debt is $16.9 million in unpaid property taxes.
But those delinquent taxes on the county’s books are only from the suburbs—not from the city of Milwaukee, which is responsible for collecting its own unpaid property taxes.
The city’s delinquent property taxes are not part of the Bucks deal at all. Mayor Barrett specifically rejected that source of funding, saying he didn’t want to finance the new arena on the backs of the city’s hardest-hit residents.
That means that suburbanites who are behind on their property taxes will be forced to pay for the new Bucks arena, to be located in Downtown Milwaukee.
In addition, under Abele’s plan the county will lose a lucrative source of income, the 18% of interest and penalties imposed on delinquent property taxpayers. According to a report prepared by County Comptroller Scott Manske, $7.8 million of unpaid interest and penalties is available for collection.
The county expects to collect $3.5 million of interest and penalties this year, which goes directly to the county’s bottom line and offsets the property tax levy.
Manske’s report shows that the county ultimately collects 95% of its delinquent suburban property taxes and 92% of the interest and penalties on those taxes.
If the state takes over the collection of this debt, it could force delinquent taxpayers to pay more quickly. The state can also use collection tools unavailable to the county, including garnishing wages and bank accounts. The state also imposes a 15% fee on collections.
Milwaukee County Treasurer David Cullen told the Shepherd that the county encourages delinquent taxpayers to pay down their debt so that they can stay in their homes and not go into foreclosure. Sometimes, delinquent taxpayers work out payment plans with the county to whittle down their debt.
“Our office could probably do more foreclosures, but then the county owns the property,” Cullen said. “But the overriding question is, should our policy be to foreclose and kick people out of their homes or should we work with them to keep them on the tax rolls?”
Cullen added that his office recommends that delinquent taxpayers who have equity in their home get a loan to pay off their property taxes, since the interest on the loan will likely be less than the 18% interest charged on the unpaid taxes. But Cullen said he’s been advised that if the state certifies a property taxpayer’s debt, that property owner will not be able to obtain a loan.
“That, to me, is a large detail that’s going unnoticed,” Cullen said. “That tool will not be available to those people.”
County supervisors pushed back on Abele’s plan in last week’s meeting of the Economic and Community Development Committee.
Supervisor Patricia Jursik, chair of the committee, said that her district has the most delinquent property taxpayers. Jursik represents the South Shore communities of St. Francis, Cudahy, South Milwaukee and parts of Oak Creek.
“I have significant elderly populations and poverty in my district,” Jursik told the Shepherd. “There is a long list of delinquent taxpayers because they fell on hard times in 2009. Some of them are trying to pay off this debt service. It is really a bad deal for my district.”
She called Abele’s plan a “shell game” that ultimately uses property taxes to pay for the Bucks arena, “the worst way to do this.”
Supervisor Steve Taylor, who represents Hales Corners and parts of Franklin and Oak Creek, said he has a significant number of delinquent property taxpayers in his district. He said he recognized a number of names on the list of delinquent taxpayers.
“These people are real,” he told the committee.
Comptroller Not Consulted on Deal
Comptroller Manske, an independently elected official, told the committee County Executive Abele did not consult him when Abele was negotiating with the state to develop the arena financing deal.
Manske prepared a report for the board showing the sources of bad debt that can be used to finance the deal as proposed by Abele.
According to Manske’s report, the county has $137 million of receivables or “bad debt” on the books. But just about half—$67 million—cannot be collected and used by the county. These funds include restitution made to crime victims, court fees, airport receivables and reimbursement from other government entities for the county programs.
Just over half of the county’s receivables—$69 million—could be used to finance the arena.
The biggest chunk—$38.7 million—comes from court fees, traffic fines and criminal fees, while the remaining $24.7 million is delinquent suburban property taxes, interest and penalties.
The $38.7 million may seem like a robust source of funds for financing the arena, but Manske told the committee that the county currently has to split the receipt of the fees collected with the state, with the state receiving 70% of the fees and the county receiving 30% of the fees.
Manske said he wasn’t sure if that state-county split would continue if the state takes over the collection of the fees under Abele’s plan. If the state still takes 70% of the county’s court fines for its own coffers, it’ll be even more difficult for the county’s $4 million annual arena obligation to be met.
Manske told the committee that there’s enough bad debt coming in each year to cover the $4 million obligation annually, but whether it’s a sustainable source of funding in the long run is an open question.
He told the committee it’s “probably unlikely” that the county will be able to generate an additional $80 million over 20 years for the arena based on changing the way it collects its bad debt. If the county doesn’t generate the $80 million from the bad debt, it will end up on the county property taxpayers.
