Dec 16, 2013, 3:59 PM EDT
Bucks fans will spend the next 2-3 years looking over their shoulders at Seattle, and that’s because they’re in jeopardy of losing their basketball team should owner Herb Kohl fail at securing a new NBA-approved arena.
For small and mid-markets, having a state-of-the-art arena to maximize revenues is a requirement and any city that isn’t willing to make that type of commitment to the NBA will be threatened by 5-10 other cities that are dying to get into the game. It’s simple supply and demand.
Kohl, the former Democratic senator who is 78, is reportedly looking for other investors to join him in his attempt to keep the team in Milwaukee.
With a net worth that’s better described with an ‘M’ for millions rather than a ‘B’ for the billionaire owners that the NBA is attracting these days, it’s understandable why Kohl needs to deepen the pockets and broaden the influence of his group.
First and foremost he needs to deliver on an arena, and having more investors will help that along in many ways. But just as important to Milwaukee will be the overall value proposition this ownership group will have to the NBA, whether Kohl wants to continue as owner of the Bucks or not. That’s because if there ever comes a time when their arena plans are in doubt, it will be this group that gets measured against Seattle and any other city that wants to get into the game.
The NBA, whether being led by Adam Silver or David Stern, does not like to relocate franchises. In this day and age of information, the damage that relocation can do their brand is much greater than it was when Seattle’s elected officials told the NBA to go kick rocks and thus Sonicsgate was born.
At the same time, the NBA has found a sweet spot in its public subsidy pitch, which has been the target of many economists’ ire over the last 30 years when suburban arenas were all the rage. Economists have maintained that arenas don’t increase local spending because of things like the substitution effect, which simply stated means that people spend money at the game but stop spending their limited funds everywhere else. In essence, they contend, there is no overall gain.
However, economists have recently found themselves at an impasse on the issue with even the most ardent oppositionists still researching newer findings, in an area of study that isn’t exactly brimming with ongoing research.
The new revelations highlight the difference between suburban arenas and what city planners call ‘high density civic attractions,’ which are more likely to be sought after in the small-to-mid market cities that are most susceptible to relocation. Instead of driving to a suburban arena, watching the game, and then leaving – a downtown arena can attract people for longer visits, attract all-important out-of-town dollars, and encourage use of mass transit.
In terms of increasing land value, a properly developed downtown arena district can increase surrounding land value by “hundreds of millions of dollars” according to a recent study by lead opposition subsidy voice Brad Humphreys. Arguments move into the both the micro- and mundane-levels from there, but an increase in land value around these downtown arenas stands on its face – it’s valuable for a reason.
The NBA has the cachet as an anchor tenant to bring in the private investment needed to make these downtown revitalization projects pencil out, particularly as public redevelopment dollars have dried up around the country.
With the NBA being the winner of over $3 billion in public funds since 1990, they have a massive financial stake in making sure they both polish that pitch and protect their reputation on that front.
For starters they have to maintain that they can be a loyal partner to any city engaging in good faith efforts to maintain a state-of-the-art arena. Long-term, by building a portfolio of downtown success stories like L.A. Live, downtown Indianapolis and the soon-to-be built arena in downtown Sacramento — the league can keep the public funding narrative from collapsing under a wave of antipathy toward millionaires and billionaires bouncing a leather ball for amusement.
So look for the NBA to work with Kohl and Milwaukee to find the political will (i.e. public dollars) to get an arena deal done. As expected, the league released a statement from David Stern moments ago expressing support for that process. “Senator Kohl bought the Bucks in 1985 in order to ensure the team would remain in Milwaukee. During his extraordinary stewardship his goal remained the same — to bring the fans of Wisconsin high-quality basketball from a team they would be proud to call their ‘home’ team. With this announcement, Senator Kohl continues his mission: to assure continuity of ownership by broadening its ownership base, and assuring that the fans of Wisconsin will enjoy NBA basketball and other events in a new state-of-the-art facility,” said Stern.
And while everything is going to sound fine for Bucks fans until it doesn’t, they’re not going to know that they are indeed keeping their team until much more has been revealed in this slow-moving story.
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