Milwaukee Bucks 2014 - 2015 (part 2)

[BrewBalls]

Wow, can't believe this concept is so hard to grasp. Bucks players income is roughly what 70mil (yes I know they pay their road taxes in road states but it's balanced by the road team paying when here). 35 mil of that is paid into taxes, I don't what % is stave vs federal but that tax is now 100% gone. Moreover, the cap is about to skyrocket to around 100mil, so it's only going up because the league is exploding worldwide. Now throw in corporate taxes on a billion dollar company. This is all gone if they leave, it literally pays for itself. Getting 50% paid by the owners is a much better deal than any other city gets. This is a no brainer.

Currently the state collects around $7M per year from the Bucks and visiting NBA teams. This is projected to increase to roughly $10M per year when the cap goes up after the 2016/17 season. In twenty years the state will have recovered all of the money they invested and then some.

[RobertR]

I think my explanation that increased salaries for million dollar athletes on the Brewers and Packers will help offset the loss of Bucks payroll is simple to grasp.

 

The $7 to $10 million is the line being used to sell the deal. The reality will be something different. Because, again, people aren't just going to sit around in the dark if there are no Bucks, they'll find something to do with their disposable entertainment spending. The substitution effect isn't exactly advanced economics.

 

There are plenty of people that are balking at the deal, simply because it isn't a no brainer. People are asking "What if the real cost is only $3 to $4 million per year? Is that worth shelling out over $400 million for including interest?" Even if we say that the net effect is $10 million per year, and it's going to cost taxpayers $400 million including interest, the net payback period of that is 40 years (and I'm being overly simplistic with that). Anything over 20 years is a dicey proposition, IMO.

 

This project doesn't work at all unless the ancillary development actually materializes. If it does, then yeah it makes sense. At least, if it doesn't simply move economic activity from one part of Milwaukee, say the Third Ward, to another.

[BrewBalls]

I think my explanation that increased salaries for million dollar athletes on the Brewers and Packers will help offset the loss of Bucks payroll is simple to grasp.

 

The $7 to $10 million is the line being used to sell the deal. The reality will be something different. Because, again, people aren't just going to sit around in the dark if there are no Bucks, they'll find something to do with their disposable entertainment spending. The substitution effect isn't exactly advanced economics.

 

There are plenty of people that are balking at the deal, simply because it isn't a no brainer. People are asking "What if the real cost is only $3 to $4 million per year? Is that worth shelling out over $400 million for including interest?" Even if we say that the net effect is $10 million per year, and it's going to cost taxpayers $400 million including interest, the net payback period of that is 40 years (and I'm being overly simplistic with that). Anything over 20 years is a dicey proposition, IMO.

 

This project doesn't work at all unless the ancillary development actually materializes. If it does, then yeah it makes sense. At least, if it doesn't simply move economic activity from one part of Milwaukee, say the Third Ward, to another.

Your explaination doesn't make sense for the following reasons.

1.The Packers cannot simply choose to increase salaries because their is a salary cap in the NFL and cannot refer to its steady increase becasue this increase is likely in line with inflation.

2. The Brewers payroll is already maxed out due to being in the smallest market and having the worst TV contract in baseball. They also have been operating in the red the past few seasons and will likely need to ticket increase just to get back in the black.

3. There is no way increased ticket prices alone will suddenly cause the Packers and Brewers to increase their payrolls $70M to make up the difference.

 

As for the $7-$10M numbers I threw out. $7M in the current amount of income tax the state receives from NBA players per year. It is estimated to increase to $10M once the salary cap increases after next season. I don't see this number going down if the players salaries are all scheduled to increase in the next few years. Besides this number will be $0 if the Bucks relocate.

 

"Under the proposal, the state would issue $55 million in bonds, which paid back over 20 years would cost $80 million. The city would contribute $47 million, including building a new parking structure. The county also would issue $55 million in bonds and the Wisconsin Center District would issue $93 million in bonds."

http://www.greenbaypressgazette.com/story/news/2015/06/04/milwaukee-bucks-arena-deal-to-be-announced/28467421/

 

The majority of the money being put up is by the WCD which will own and operate the new arena. So the majority of the money will be paid back by the revenue earned by operating the new arena over the next 20 years.

 

Governor Walker also gave the number $419M will be lost over the next 20 years if nothing is done. Meaning the negative economic impact will be $419M in lost revenue if the Bucks leave.

[RobertR]

 

This so-called Jock Tax is an income tax. If the Packers and Brewers raise ticket prices and revenues, invariably player salaries increase. Player salaries increasing results in increased income tax/jock tax, from Brewers and Packers players.

 

This doesn't work for either team. The Packers are resticted by a salary cap and the Brewers are already operating in the red with a $100M payroll. I can't see you making up $70M in lost wages by simply raising ticket prices.

 

The Packer's salary cap is a % of league revenue. If league revenue goes up, the salary cap goes up, player salaries go up, and state income tax revenue goes up.

 

And, the Brewers won't raise their payroll if their revenue goes up and they again find themselves in the black and looking to compete? C'mon, Mark A is perhaps too competitive for his own good.

 

There's no reason to doubt that less competition for entertainment dollars will lead to more revenue for the Packers and Brewers and that inevitably leads to higher payrolls and more income tax.

 

There's a case to be made for the Bucks arena, but the case isn't made stronger by willfully ignoring the fact that there are other competing interests for the entertainment dollars of SE Wisconsin residents, some of which will benefit from the Bucks leaving and mitigate their absence. The history of arena deals is replete with examples of the benefits being greatly exaggerated.

 

This is a risky deal. It could go south in many ways that are out of control of the State of Wisconsin. A Wall Street collapse or a significant rise in interest rates, for example could kill the spin off developments. Ignoring things like interest, substitution effects, and the need for the spinoffs to materialize is simply ignoring the risks of this project.

 

Also, yeah the new uniforms of the Bucks look pretty great.

[RobertR]

http://www.jsonline.com/news/milwaukee/interest-could-push-public-cost-of-new-bucks-arena-over-400-million-b99510427z1-305636241.html

 

It's a mistake to only count the State's portion of the project against it. There are plenty of taxpayers of the State, County, and City that are being asked to contribute.

[BrewBalls]

 

This so-called Jock Tax is an income tax. If the Packers and Brewers raise ticket prices and revenues, invariably player salaries increase. Player salaries increasing results in increased income tax/jock tax, from Brewers and Packers players.

 

This doesn't work for either team. The Packers are resticted by a salary cap and the Brewers are already operating in the red with a $100M payroll. I can't see you making up $70M in lost wages by simply raising ticket prices.

 

The Packer's salary cap is a % of league revenue. If league revenue goes up, the salary cap goes up, player salaries go up, and state income tax revenue goes up.

 

And, the Brewers won't raise their payroll if their revenue goes up and they again find themselves in the black and looking to compete? C'mon, Mark A is perhaps too competitive for his own good.

 

There's no reason to doubt that less competition for entertainment dollars will lead to more revenue for the Packers and Brewers and that inevitably leads to higher payrolls and more income tax.

 

There's a case to be made for the Bucks arena, but the case isn't made stronger by willfully ignoring the fact that there are other competing interests for the entertainment dollars of SE Wisconsin residents, some of which will benefit from the Bucks leaving and mitigate their absence. The history of arena deals is replete with examples of the benefits being greatly exaggerated.

 

This is a risky deal. It could go south in many ways that are out of control of the State of Wisconsin. A Wall Street collapse or a significant rise in interest rates, for example could kill the spin off developments. Ignoring things like interest, substitution effects, and the need for the spinoffs to materialize is simply ignoring the risks of this project.

 

Also, yeah the new uniforms of the Bucks look pretty great.

I'm not saying some of the entertainment dollars will not be redirected just that you are not going to make up more than 20% of the difference doing so. Inflation plays a role in payroll increases just as much as revenues. And professional sports franchises get the majority of their revenue from TV contracts which are signed for extended periods. The Brewers were able to start the season with a $104M payroll because their new TV contract kicked in, not because Mark A raises ticket prices.

[superfly]

I can think of multitudes of ideas that are 100 times worse than building a portion of a stadium for a professional sports franchise. This entire subject is one of the biggest yawners in the country and I wish it would just get done and over with. I'm worn out in Minnesota having lived through the baloney that went into building the new Vikings and Twins stadiums.

[BrewBalls]

If you do the math the Packers and Brewers would need to increase prices $8.75 per ticket to just make up the revenue lost from Bucks tickets. I'll breakdown the math below.

 

Bucks:

Attendance = 611,226

Avg Ticket = $50.30

Total Ticket Sales = $30,744,667

 

Brewers Attendance + Packers Attendance = 2,797,384 + 625,114 = 3,422,498.

 

So for simplicity we will use $30.75M in ;lost ticket sales and 3.5M tickets sold. This means you would need to increase tickets on average $8.75 per ticket. Although this doesn't seem like much, The Packers have already increased tickets each of the past five seasons and prefer to stay close to the average NFL ticket price to keep tickets affordable for all Packer fans. This increase would put them in the top 25% in terms of ticket prices. As for the Brewers who attract the majority of the fans, you are expecting Mark A to approve a 33% increase ($26.32 to $35.07) and still expect them to attact fans at a similar clip with a product which is clearly regressing. Not sure your plan will work out the way you think it will.

[RobertR]

I'm not saying some of the entertainment dollars will not be redirected just that you are not going to make up more than 20% of the difference doing so. Inflation plays a role in payroll increases just as much as revenues. And professional sports franchises get the majority of their revenue from TV contracts which are signed for extended periods. The Brewers were able to start the season with a $104M payroll because their new TV contract kicked in, not because Mark A raises ticket prices.

 

Right, because a) his revenues increased and b) he knew that the public would balk after last year's collapse. But, I think Rick Schlesinger and his crew are savvy enough to take advantage if an opportunity presents itself. I don't think it's beyond the realm of possibility that the Brewers could increase attendance by 100k without the Bucks as competition, that's only a bit over 1,200 a game, and increase the price of their luxury box leases. That could mitigate a good chunk of the loss right there. And, obviously, the Packers can justify a ticket and luxury box lease increase however they would like. Clearly with the secondary market like it is, they're not meeting demand as it is.

 

Since none of us are economists here, I think we'd be well advised not to say how much or how little would be redirected towards other substitute options. But, we should realize that there's a risk out there. How many stadium deals have actually lived up to the hype?

 

On the whole, stadium deals come with big promises. Frankly, I'm more inclined to believe that a couple of sharp billionaires are going to win any deal.

 

I do hope that there's a way for the Bucks to stick around, and hey I don't have a vote so it's only my opinion, but I don't think downtown Milwaukee and the State of Wisconsin will fall apart without them.

[jjkoestler]

Please continue this conversation in the BF.Net Political Forum.

 

viewtopic.php?f=67&t=10628

 

Thanks.

[BrewBalls]

I'm not saying some of the entertainment dollars will not be redirected just that you are not going to make up more than 20% of the difference doing so. Inflation plays a role in payroll increases just as much as revenues. And professional sports franchises get the majority of their revenue from TV contracts which are signed for extended periods. The Brewers were able to start the season with a $104M payroll because their new TV contract kicked in, not because Mark A raises ticket prices.

 

Right, because a) his revenues increased and b) he knew that the public would balk after last year's collapse. But, I think Rick Schlesinger and his crew are savvy enough to take advantage if an opportunity presents itself. I don't think it's beyond the realm of possibility that the Brewers could increase attendance by 100k without the Bucks as competition, that's only a bit over 1,200 a game, and increase the price of their luxury box leases. That could mitigate a good chunk of the loss right there. And, obviously, the Packers can justify a ticket and luxury box lease increase however they would like. Clearly with the secondary market like it is, they're not meeting demand as it is.

 

Since none of us are economists here, I think we'd be well advised not to say how much or how little would be redirected towards other substitute options. But, we should realize that there's a risk out there. How many stadium deals have actually lived up to the hype?

 

On the whole, stadium deals come with big promises. Frankly, I'm more inclined to believe that a couple of sharp billionaires are going to win any deal.

Of course the Billionairs are going to win. Otherwise why invest $150M of your own money? Also, its business which markets Wisconsin and Milwaukee on a global scale. How much money does the state invest in marketing to attract visitors for out of state to increase revenue? This is much bigger than allowing a couple of billionaires to profit on their inverstment while asking the state, county and city to chip in if they want their piece of the pie.

I do hope that there's a way for the Bucks to stick around, and hey I don't have a vote so it's only my opinion, but I don't think downtown Milwaukee and the State of Wisconsin will fall apart without them.

[RobertR]

If you do the math the Packers and Brewers would need to increase prices $8.75 per ticket to just make up the revenue lost from Bucks tickets. I'll breakdown the math below.

 

Bucks:

Attendance = 611,226

Avg Ticket = $50.30

Total Ticket Sales = $30,744,667

 

Brewers Attendance + Packers Attendance = 2,797,384 + 625,114 = 3,422,498.

 

So for simplicity we will use $30.75M in ;lost ticket sales and 3.5M tickets sold. This means you would need to increase tickets on average $8.75 per ticket. Although this doesn't seem like much, The Packers have already increased tickets each of the past five seasons and prefer to stay close to the average NFL ticket price to keep tickets affordable for all Packer fans. This increase would put them in the top 25% in terms of ticket prices. As for the Brewers who attract the majority of the fans, you are expecting Mark A to approve a 33% increase ($26.32 to $35.07) and still expect them to attact fans at a similar clip with a product which is clearly regressing. Not sure your plan will work out the way you think it will.

 

 

I think you're being too simple with the Brewers example. They can also increase revenue by increasing attendance.

 

I'll note that the Potawatomi have been dead quiet on the arena. It definitely seems like there was a missed opportunity to play the Potawatomi off against the Menomonee while the Kenosha casino was still undecided.

[RobertR]

Please continue this conversation in the BF.Net Political Forum.

 

viewtopic.php?f=67&t=10628

 

Thanks.

 

Fair enough.

[tmwiese55]

Love the new uniforms. When I first saw the new M logo I was concerned they were going too modern/futuristic but everything else has retro feel too it. Perfect. Championship in 2019

[patrickgpe]

Love the new uniforms. When I first saw the new M logo I was concerned they were going too modern/futuristic but everything else has retro feel too it. Perfect. Championship in 2019

 

i agree, home run. i just hope they don't introduce a black alternate with sleeves later. I wish the brewers would take a page out of the bucks new uniforms.

[JJHardy7]

Not trying to get political on the arena...when will this go to vote/be decided?

[adamb100]

If it goes in the state budget, by the end of this month.

[patrickgpe]

looks like Ersan is on his way to Detroit. I am fine with shipping him out, but the return doesn't look that great

 

http://www.hoopsrumors.com/2015/06/pistons-acquire-ilyasova.html

[superfly]

Salary dumpage. See ya Ersan

 

Bucks get :

 

Caron Butler

Shawne Williams

 

Pistons get :

 

Ersan Ilyasova

[brwrsfan]

This is purely a move to create cap space and/or playing time.

 

Both Butler (4.5 million) and Williams (1.3 million) have unguaranteed contracts - so the Bucks could cut them both and not have to pay them a penny. Even if they keep them both, they'd still save money as Ersan was set to make 7.9 this year and 8.4 the following year.

 

Also takes his minutes and lets the younger guys play more (especially if we draft Looney or another PF as I seem to be seeing mocked everywhere).

[patrickgpe]

i saw that they can save 22 million in cap space by cutting both. Gives the bucks the ability to sign Middleton and someone else if they choose.

[FVBrewerFan]

The Bucks will save $7.9MM on next year's cap by trading Sova, assuming they cut both Butler and Williams. Sova only had one guaranteed year left.

[patrickgpe]

The Bucks will save $7.9MM on next year's cap by trading Sova, assuming they cut both Butler and Williams. Sova only had one guaranteed year left.

i think one of my facebook friends mistyped his post, the bucks will be 22 million under the cap, not save 22 million.

[FVBrewerFan]

Yea, that's getting close. The numbers I have show they will be $26.6 under the cap next year after the Sova salary dump. They would still need to sign their 1st round draft choice, of course, but I think that will be less than $2MM where the Bucks pick. Since I like round numbers, that gives them $25MM under the cap to sign Middleton and/or other free agent.

[GAME05]

So if the Bucks sign Middleton for $9M, that gives them roughly $16M under the cap. Right now a $16M salary would be the 16th highest in the NBA.

 

But don't the Bucks have big jumps in salary in two years with Giannis and Parker? So maybe what we'd be talking about is a good role player FA? Ugh, that's Lopez, isn't it. Or do you think the Bucks would dangle their later draft pick this year to trade for a higher-priced center from a team looking to shed some salary? Like a guy with a two-year contract or something?

 

Edit: I said later draft pick this year thinking that this was the year we had the Clippers pick, but I guess that's not until 2017.