Ethical Issues Lawyers May Face in Delivering Services in the Development of Sports Venues by Martin J
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Ethical Issues Lawyers May Face in Delivering Services in the Development of Sports Venues by Martin J. Greenberg June 27, 2017 Ethical Issues in Sports & Entertainment Brought to you by the National Sports Law Institute and Summerfest Table of Contents 1. Title Page 19. Non-Relocation Agreement 2. Table of Contents 20. The Public-Private Partnership at Work 3. Competent Representation 21. SCR 20:4.1 Truthfulness in Statements to Others – Stadium Debate 4. Competence 22. Taxpayers participate in the cost of sports facilities 5. Milwaukee Bucks 23. Atlanta Falcons’ Mercedes Benz Stadium – What $1.4 Billion Buys 6. Why NBA teams are increasing in Value 24. Sports Pork 7. BMO Harris Bradley Center 25. Taxpayer’s Bill of Rights 8. The NBA’s Ultimatum 26. Stadiums are a part of our community and deserve funding 9. Financing Techniques discussed to create a new Bradley Center 27. Sports.comm 10. Bucks Financing Private Contributions 28. Titletown 11. Bucks Financing, Cont. – Public Contributions 29. Referendums may not necessarily work. 12. Breakdown of Public Contribution – City of Milwaukee 30. Don’t fund it and they will go. 13. Breakdown of Public Contribution – County of Milwaukee 31. Stadium Debate – True Economic Cost of Stadium Financing 14. Breakdown of Public Contribution – State of Wisconsin 32. Stadium Debate – Municipal Entitlement Fee 15. Breakdown of Public Contribution – Wisconsin Center District 33. Conclusion 16. Arena Lease, Management and Operations Agreement 17. Management Control – Miller Park 18. Cost Overruns pursuant to Arena Financial, Funding and Construction Funds Escrow Agreement. Competent Representation • Competent Representation is defined by the Wisconsin Supreme Court rules Ch. 20:1.1 as requiring the legal knowledge, skill, thoroughness and preparation reasonably necessary for representation. • “In many instances, the required proficiency is that of a general practitioner… The required attention and preparation are determined in part by what is at stake… Complex transactions ordinarily require more elaborate treatment.” Comment on Wisconsin SCR 20:1.1. Competence • The sports facility development lawyer is the ultimate general practitioner. • The stakes are high. • Team – League acquisition procedure • Ownership vehicle of sports facility – district or authority • Siting – Acquisitions – Condemnation • Real Estate and Environmental Law • Sports.comm • Financing Structures • Public-Private Partnerships • Contracts – Overruns • Leasehold Agreements – Terms • Contractually Obligated Income Agreements • Non-relocation Agreements Milwaukee Bucks • Herb Kohl purchased the NBA’s Milwaukee Bucks (Bucks) in 1985 for approximately $19 million. • In May of 2014, Kohl sold the Bucks to Marc Lasry (Avenue Capital) and Wes Edens (Fortress) for $550 million • The Bucks sale approximated the recent sale of the Sacramento Kings to TIBCO founder, Vivek Ranadive for $534 million in May of 2013. • When the Bucks first sold they were valued by Forbes Magazine at $405 million. Milwaukee is the 5th smallest market in the NBA. In 2017, Forbes valued the Bucks at $785 million. Why NBA Teams are Increasing in Value • World’s most exclusive club • A new blockbuster TV deal • Local media deals • New and friendly Collective Bargaining Agreement • Globalization of the game • Tax shelter BMO Harris Bradley Center • An Arena Gift by a gracious and charitable Pettit Family. • Owned by the Bradley Center Sports and Entertainment Corporation established by state statute. • The facility opened in October of 1988. Cost in 1988 – approximately $91 million. • Originally constructed to draw an NHL hockey team. • One of the oldest arenas in the NBA, the facility is not large enough and is probably economically obsolete. The NBA’s Ultimatum • NBA had given an ultimatum that either Milwaukee creates a new Bradley Center or the franchise must move to another city. • "When do we need to get started? Yesterday," said Michael Fascitelli, a member of the Bucks' ownership group who is leading the arena development. "The arena is a two-year process. Every day is critical. Our goal is the 2017 season." (Brian Windhorst, Bucks need to break ground soon, ESPN.com, April 17, 2015.) • "Our owners have committed $150 million on top of Senator Kohl's generous donation of $100 million, not just to build a world-class arena for a championship-caliber team," said Jake Suski, the Bucks' senior vice president of communications, "but because they want to help revitalize downtown Milwaukee and create an economic ripple effect for the region." (Brian Windhorst, Bucks need to break ground soon, ESPN.com, April 17, 2015.) Financing Techniques Discussed to Create a New Bradley Center • Bundling • Jock Tax • Extension of Miller Park Sales Tax • Super TIF District • Naming Rights Bucks Financing Private Contributions Contribution Agreement dated April 13, 2016 by and between the Wisconsin Center District, Greater Milwaukee Foundation, Inc., KPG Charitable Foundation, Inc. and Herbert H. Kohl. • $100 million from Senator Herb Kohl • $150 million from Bucks’ Owners Marc Lasry and Wesley Edens • Any cost overruns to be covered by the Bucks, not the public Bucks Financing Public Contributions • The City of Milwaukee: $47 Million; • State of Wisconsin: $55 Million or $4 Million/year; • Milwaukee County: $55 Million or $4 Million/year; and • Wisconsin Center District: $93 Million. Fox6 News, Lawmakers, Community Leaders React to Milwaukee Bucks Arena Funding Deal, FOX6NOW.COM (July 28, 2015) Breakdown of Public Contribution – City of Milwaukee • The $47 Million will be repaid through the creation of two tax incremental financing (TIF) districts. • ThemoneythattheCitywillspendonthepublicplazaandgaragewillberepaidthroughtwotax incremental financing (TIF) districts, TID 84 and TID 22. “TID 84, which covers about 45 acres including the Bradley Center and most of the Old World 3rd St. commercial district, would be created. It would provide $12 million for the plaza. TID 22, the Beerline, would be modified and would provide $27 million for the parking structure.” The Bucks would contribute $8 million toward construction of the parking structure. The city would repay the Bucks with interest from TID 84 once the city has recovered its $12 million plaza investment. The TIF districts will collect “property taxes from new nearby commercial developments, including the entertainment center and a Bucks practice facility,” which are located within a half-mile radius of the parking structure. Under Act 60, “any expenditures or monetary obligations made or incurred by a first class city to fund a parking facility next to or within one-mile of public entertainment facilities, including new arena, would be considered a benefit to the TIF district and therefore be included as project costs.” The TIFs will also collect “property taxes from a [TIF] that includes several newer condos, apartments and other developments on N. Commerce St., north of downtown.” • Tom Daykin, Milwaukee Common Council Votes 12-3 to Approve Bucks Arena Financing Package, MILWAUKEE JOURNAL SENTINEL (Sept. 22, 2015), http://www.jsonline.com/news/milwaukee/aldermen-approve-borrowing-for-the-new-arena-b99581782z1-328671581.html?ipad=y; Bayatpour, supra note 20. • Crocker Stephenson, Another City Committee Backs Bucks Arena Financing, MILWAUKEE JOURNAL SENTINEL (Sept. 16, 2015), http://www.jsonline.com/news/milwaukee/another-city- committee-backs-bucks-arena-financing-b99577658z1-327902021.html?ipad=y. • New Bucks Arena Parking Garage, URBAN MILWAUKEE, http://urbanmilwaukee.com/building/new-bucks-arena-parking-garage/ (last visited Oct. 4, 2015); Crocker Stephenson, Another City Committee Backs Bucks Arena Financing, MILWAUKEE JOURNAL SENTINEL (Sept. 16, 2015), http://www.jsonline.com/news/milwaukee/another-city-committee-backs-bucks-arena-financing- b99577658z1-327902021.html. • Bucks arena Legislation Stays Out of Budget, THE HAMILTON CONSULTING GROUP (July 8, 2015), http://www.hamilton-consulting.com/blog/2015/07/08/bucks-arena-legislation-stays-out- budget. Breakdown of Public Contribution – County of Milwaukee • Milwaukee County will contribute $4 Million per year or $55 Million dollars. The County’s contribution approximates $80 Million with interest. • According to Section 79.035(6) of Act 60, “beginning with the distributions in 2016 and ending with the distributions in 2035, the annual payment under this section to a county in which a sports and entertainment arena . is located shall be the amount otherwise determined for the county under this section, minus $4,000,000.” Thus, Milwaukee County’s state aid payments will be reduced by $4 million dollars until their portion of the arena contribution has been satisfied. The uncollected debt provision, which was removed from the original Senate bill and replaced by the $2 ticket surcharge, may be implemented by the County if approval is received from County treasurer and clerk of circuit courts. This plan would transfer from the County to the State the ability to collect unpaid debts and taxes owed to the County to be used for the County’s portion of the funding. • Wisconsin Senate Bill 209, § 79.035(6) (2015) • Lee Bergquist & Jason Stein, Scott Walker to Sign Arena Funding Bill Thursday, JOURNAL SENTINEL (Aug. 5, 2015), http://www.jsonline.com/news/statepolitics/scott-walker-to-sign-arena-funding-bill-thursday-b99549454z1- 320795001.html. • Mary Spicuzza et. al., Scott Walker Signs Bill Clearing Public Funds for New Bucks Arena, MILWAUKEE JOURNAL SENTINEL (Aug.