Using a surcharge on the cigarette tax to help pay for a new downtown sports arena "is not feasible under state law."
Tom Barrett on Monday, March 3rd, 2014 in an interview
Mayor Tom Barrett says using cigarette tax for new arena ‘not feasible under state law’
The wheels are turning among Milwaukee’s civic leaders as they try to address the future of the aging BMO Harris Bradley Center. The 25-year-old facility has been described as a "senior citizen" among NBA arenas.
There’s a growing sense of urgency. The lease for the Milwaukee Bucks expires in 2017, the NBA is applying pressure, and the team’s owner, former U.S. Sen. Herb Kohl, is seeking additional investors in the team. Two panels of civic leaders are exploring options for the arena.
So we took notice when Milwaukee Mayor Tom Barrett seemed to rule out one funding option -- an expansion of the cigarette tax -- that has been used in other cities to help pay for new facilities.
"I don’t think that’s feasible under state law," the mayor said in a March 3, 2014 interview with Wisconsin Eye.
He added: "No one has talked about that at all. I’ve never heard anybody mention that."
The two panels -- a large group led by the Metropolitan Milwaukee Association of Commerce that's studying the region's cultural funding needs and a smaller one focused on the Bradley Center -- have just begun their work. In theory, at least, all funding options are still on the table, although some surrounding counties are on record opposing any public funding for a downtown Milwaukee arena.
So is Barrett right? Does state law block an expansion of the cigarette tax?
When we asked Barrett’s office for backup for his statement, spokeswoman Jodie Tabak said:
"Mayor Barrett’s answer was referring to the fact that we can’t have a local cigarette tax because of state law."
How it works now
The state now levies a tax of $2.52 per pack of cigarettes. The tax has been around since 1939, and has been increased by the Legislature 17 times, most recently in 2009.
The tax raised about $587 million in fiscal year 2011-’12, and raised as much as $644 million in fiscal year 2009-’10. (Increasing the tax, as was the case in 2009, often convinces some smokers to smoke less.) Money raised from the tax goes into general state coffers.
As it stands now, Wisconsin’s cigarette tax is levied uniformly statewide. There are no local surcharges, and no means for the money to be directed to local projects.
That could change, but it would take the approval of the Legislature and governor, said Sean Moran, of the nonpartisan Legislative Fiscal Bureau. Moran wrote an issue paper about the state’s alcohol and tobacco taxes last year.
"There’s really no reason it couldn’t be done," he said.
What has been discussed
The Public Policy Forum was commissioned to study a variety of funding tools, including the cigarette tax, as part of a report that will be issued March 14, 2014.
Forum president Rob Henken said in an interview that the tool was being considered because of the experience in Cuyahoga County, which includes Cleveland. Voters there approved a 30-cent county tax on cigarettes that started in 2006 and gave it a 10-year lifespan. The tax generated about $15.6 million for local arts and culture groups. (Another 4.5 cent tax on cigarettes, part of a "sin tax" enacted in 1990 that also includes taxes on alcohol, is dedicated to funding sports facilities. Voters will decide in May whether or not to extend that tax for 20 years.)
A local cigarette tax is also in place in other areas, including Cook County, Ill. Smokers there pay $2 a pack in a county tax; the city of Chicago tacks on another 68 cents. In New York state, the tax is a whopping $4.35, tops in the country.
Henken said there were pluses and minuses behind using a cigarette tax for a Bradley Center replacement.
On the plus side, of course, are the dollars. The report will say that if a 30-cent cigarette tax -- the same size as Cuyahoga County -- were levied in Milwaukee County, it would generate about $11.7 million a year. Obviously, that’s not enough to pay for a new stadium on its own, but it could factor into a package of revenue tools.
The downside includes the argument that such a tax would penalize lower income people, because studies show they tend to smoke in greater numbers than higher income people.
Also, the state’s cigarette tax is already high -- we’re No. 8 -- compared with the other 49 states, according to the Fiscal Bureau. The list is topped by New York at $4.35 a pack.
Then there’s the "island" issue. Some Milwaukee County smokers would simply go elsewhere to buy their cigarettes and avoid the higher tax.
In a meeting in February 2014, members of the task force looking at cultural funding needs -- not just the arena issue -- discussed the various tax options.
A Journal Sentinel report on the meeting noted that panel members meeting in small groups "seemed to agree that a property-tax model or a sin tax to generate revenue would not be workable in Milwaukee County."
Barrett said that using a surcharge on the cigarette tax to help pay for a new downtown sports arena "is not feasible under state law." A spokeswoman said meant that the tax wasn’t allowed under state law as it presently exists.
But that doesn’t mean that state law can’t be changed.
Indeed, state approval is likely going to be needed for any mix of higher taxes that could be used to fund an arena expansion or renovation. In that respect, there is nothing different about the approval required for a cigarette tax increase, a funding option that’s used in other parts of the country.
Our definition for Half True is a statement that's partially accurate but leaves out important details. That fits here.
Note: An earlier version of this item incorrectly stated that the Public Policy Forum was leading a task force studying the area's cultural needs. The organization is only conducting research into the matter.