November 25. 2013 9:00AM

Loss of Bucks would devastate BMO Harris Bradley Center

By Andrew Weiland

  
The BMO Harris Bradley Center faces serious financial challenges and an uncertain future, no matter what happens to the Milwaukee Bucks.

If a new arena is built in Milwaukee for the Bucks, the BMO Harris Bradley Center will need to be repurposed or demolished, said Marc Marotta, chairman of the BMO Harris Bradley Center board and a partner with Foley & Lardner LLP.

"This city could not support two facilities," he said.

However, if a new arena is not built and the Bucks leave Milwaukee, the Bradley Center would lose its anchor tenant and a major source of operating revenue.

At the same time, the 25-year-old facility needs $25 million to $40 million in repair and maintenance, with no existing plan to pay for it, said Steve Costello, president and chief executive officer of the BMO Harris Bradley Center.

As the facility ages, its improvement, repair and maintenance needs will only grow. The BMO Harris Bradley Center has invested approximately $67 million in improvements, capital repair and routine replacement since opening, Costello said.

If the Bucks leave Milwaukee, the combination of revenue losses and needed repair and maintenance would cost the BMO Harris Bradley Center $100 million over 10 years, Marotta said.

Costs of doing nothing

"Doing nothing (to keep the Bucks in Milwaukee) is an option," he said. "But it's not a cost-neutral option."

The Bradley Center Sports & Entertainment Corp. was created by the State of Wisconsin to own and operate the facility, built in 1988 and primarily financed by a $93 million donation from Jane Bradley Pettit.

The BMO Harris Bradley Center is a major economic engine for the metro Milwaukee area. According to a 2012 economic analysis by the Metropolitan Milwaukee Association of Commerce, the facility has an annual gross economic impact of $204 million and an annual net economic impact of $86 million. In fiscal 2012, about 1.2 million people attended events at the BMO Harris Bradley Center, and the facility had revenues of $12.6 million. The NBA lockout resulted in a loss of 8 Bucks home games, which hurt the arena's 2012 fiscal year performance.

However, the Bradley Center is not sufficient to maintain an NBA team for the long term and likely could not be renovated to meet the long-term needs of an NBA team, Marotta said. The 500,000-square-foot BMO Harris Bradley Center is about two-thirds the size of a modern NBA arena. The additional space is needed for additional revenue producing amenities such as restaurants, shops and clubs and additional sponsorship opportunities, Marotta said.

"In 1988, it was good enough to have a great place with a seating bowl," Costello said. "Now it's about providing a complete social experience for fans, not just sitting and watching an event."

'Upside down'

Another major problem with the Bradley Center is that it was built primarily for hockey, in hopes of attracting an NHL team, which never happened. The facility has about 7,500 lower bowl seats and about 10,000 upper bowl seats, Marotta said. Modern NBA arenas have seating positioned closer to the court.

"Our building is upside down," Marotta said.

As a result of those structural limitations, the Bradley Center likely could not be renovated to be adequate for an NBA team, so without a new arena, the Bucks will eventually leave Milwaukee, possibly after their lease expires in 2017.

"A do nothing scenario will almost certainly result in the Bucks leaving," Marotta said. "I don't think it will happen while the senator (Bucks owner Herb Kohl) is here, but when the senator is gone, the Bucks will leave."

The Bucks share revenue with the Bradley Center. Luxury suite holders at the Bradley Center lease the suites for all of the events at the facility. Sponsors that display advertising signage in the building have those signs on display for all of the events at the facility. The Bucks attendance last season was 616,469 for 41 regular season home games. The team also played a pair of home playoff games. Without the Bucks games, the BMO Harris Bradley Center would not be able to sell advertising signage and luxury suites for the same rates, which would significantly hurt the facility's operating revenue.

"Without the Bucks, the building is less healthy, less financially secure," Costello said.

The loss of the Bucks would also make it harder for the BMO Harris Bradley Center to attract top concerts. The concert industry has become much more competitive than in the Bradley Center's early years, Marotta and Costello said. Previously, artists paid a fee to lease the facility and then kept whatever revenue the concert made. Today, top artists typically demand a revenue guarantee to perform at a venue. Thus the venue takes the risk that the event will generate enough revenue to meet the artists' guarantee and to cover the facility's cost of operations.

The same amenities that the Bucks need to generate more revenue are also needed to generate more revenue for concerts or other events that the Bradley Center competes for with other Midwest venues, Marotta said. And the Bradley Center needs the operating revenue generated by Bucks games to give it the financial security to take risks on providing revenue guarantees to book big name concerts.

Without the Bucks, "it becomes extremely difficult to attract concerts," Marotta said.

If the Bucks leave Milwaukee the BMO Harris Bradley Center will struggle to remain viable, unless a new funding source is provided for the facility. The facility would have difficulty paying for needed repairs and maintenance and would likely host fewer events and lower quality events, Costello said.

"Without the Bucks, it's not a very bright picture," he said. "We would not have the resources to maintain and invest in the building. There would be much fewer nights with the lights on attracting people to downtown Milwaukee. The Bradley Center would be a very difficult business and would not be able to serve the community the way it has."

A severely diminished BMO Harris Bradley Center would hurt the entire metro area, said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.

"If you remove the NBA events, the prospects for an economically viable (BMO Harris Bradley Center) are tenuous at best," he said. "So you begin then to lose the ability to upgrade the facility, probably lose the ability to attract as many concerts and so you end up with a less viable and vibrant downtown entertainment district. What does that mean to the fabric of downtown and the interest of people putting business there and housing and other types of things that make this a more attractive place to live? I think we're fooling ourselves if we think we are going to have a healthy metropolitan area without a healthy city of Milwaukee."

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