Scott Walker’s $400 Million Arena Subsidy Belies His Tightfisted Image

Scott Walker, governor of Wisconsin and 2016 Republican presidential candidate, speaks during a campaign stop in Davenport, Iowa, U.S., on Friday, July 17, 2015.

Photographer: Daniel Acker/Bloomberg

Governor Scott Walker’s fiscal conservatism will collide with the reality of sports-team subsidies when he commits Wisconsin taxpayers to pay $400 million for a new basketball arena.

At Wednesday’s signing, the Republican presidential candidate’s message of being a tightfisted taxpayer champion will be weighed against public costs spread over 20 years. The ceremony also may draw attention to the $200,000 that the co-owners of the National Basketball Association’s Milwaukee Bucks donated to a group backing his campaign.

Walker is reaching this intersection of principle and pragmatism as he travels early-primary states to prove his low-tax, small-government mettle in a crowded field of Republicans. He runs the risk of rankling conservatives in those places who believe government shouldn’t choose economic winners.

“I don’t think taxpayer money should be used for things like that,” said Tom Thomson of New Hampshire, who is son of a governor and organizer of an effort to get candidates to take a no-tax-increase pledge.

“Why should you burden all the rest of the taxpayers?” said Thomson, whose state holds the first primary Feb. 9. “Let the private sector in Milwaukee work on that.”

The state would put $250 million toward the arena, with interest adding up over decades. The subsidy, approved last month with bipartisan support in Wisconsin’s Republican-controlled legislature, wasn’t addressed in the first presidential debate Thursday. That might change in future forums -- or attack ads.

“I don’t think it’s a killer of his presidential ambitions, but it does raise some concerns about what is an appropriate government expenditure,” said Oran Smith, executive director of the conservative Palmetto Family Council, in South Carolina’s capital, Columbia. That state is tentatively set to hold its Republican primary Feb. 20.

Old Friends

Walker, 47, argues that the subsidy is a "good deal," partly because Wisconsin would lose revenue if the Bucks leave, as they had threatened. The owners of the Bucks, a team whose value Forbes pegged at $600 million, will pick up half the cost of the $500 million arena.

The governor has friendships among the team’s owners, including some who contributed to his presidential effort. Through a limited-liability corporation registered under his son’s name, Bucks co-owner Jon Hammes on May 27 donated $150,000 to the super political action committee backing Walker, according to state and federal records.

Hammes didn’t return a phone call to his office seeking comment on the donation.

The super-PAC also received $50,000 on May 15 from Ted Kellner, another Bucks owner, Federal Election Commission records show. Kellner didn’t return a phone message seeking comment on the deal.

In Iowa last month, Walker sought to deflect questions about Hammes’s involvement in both his campaign and the arena deal. Instead, he pointed out that another team co-owner, Marc Lasry, raises money for Democratic frontrunner Hillary Clinton. Lasry, co-founder of $13 billion New York investment firm Avenue Capital Group, said in an April interview that he hoped to raise $270,000 during the first week of her campaign.

“I didn’t care whether it’s the owners or not,” Walker told reporters. “What we are trying to do is make sure we’re protected from having a major hole in our budget.”

Since being elected governor in 2010, Walker has used Republican legislative majorities to cut taxes by $2 billion. Three months after winning a second term in November, the governor supported a plan to build the Bucks arena, replacing the 27-year-old BMO Harris Bradley Center in downtown Milwaukee.

Irked Friends

His backing angered some allies. Among the critics are Americans for Prosperity, a group underwritten by Charles and David Koch, who have financially supported Walker’s campaigns. The MacIver Institute, a free-market think tank that’s endorsed most of Walker’s agenda, also opposed it.

“This doesn’t look like a good deal for taxpayers,” said Nick Novak, communications director for the Madison-based group. “You’ve got billionaires who clearly can afford to build their own arena.”

Laurel Patrick, a spokeswoman for the governor’s office, said the deal keeps the state from losing money if the team follows through on its threat.

“This plan protects taxpayers from the loss of $299 million if the NBA were to relocate the Bucks, while capping the state’s contribution at $80 million,” she said in an e-mail. “The $299 million is based on actual and projected income tax revenues from the Bucks and the NBA.”

“Furthermore, for every dollar the state invests, state taxpayers will get a $3 return through income tax revenue.”

Walker’s support is part of a bipartisan tradition of backing taxpayer-funded arenas and stadiums. Since the 1980s, states and cities have sold more than $9 billion of debt to finance professional sports facilities, according to data compiled by Bloomberg.

“These things are almost never a good deal from a macro-economic standpoint,” said Kenneth Mayer, a political-science professor at the University of Wisconsin at Madison.

“How does he explain it to undecided or Republican primary voters?” Mayer said.

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