Jan. 14--Milwaukee would attract significantly more convention traffic if the Midwest Express Center were expanded, a draft report by a consultant projects. 

Milwaukee-area residents would pay a significant share -- if not most -- of the cost of expanding the Midwest Express Center, an analysis of the proposed tax sources for the project suggests. 

That would represent a shift from the financing of the existing building, which is being paid for largely by taxes levied on out-of-towners. 

The reason for the difference: Proposed financing for an expansion draws most of its money from a beefed-up food-and-beverage tax -- a tax borne chiefly by locals. 

One rough estimate, using actual revenue collections and figures drawn from a consultant's annual study of travelers' spending in Wisconsin, suggests that Milwaukee-area residents would pay about half the tax bill for an expansion. 

But that assumes that visitors account for nearly 30 percent of sales at restaurants and taverns across Milwaukee County -- far more than estimated by three scholars. Their best guess is that visitors account for about 10 percent of food-and-beverage sales here. 

If so, area residents might pay two-thirds or more of the new taxes that would finance a $100 million to $120 million convention center expansion, along with improvements to the nearby Bradley Center. 

"I think the end result here is this is a tax on locals," said William A. Raabe, a tax expert and former University of Wisconsin-Milwaukee professor who now is dean of the School of Management at Capital University in Columbus, Ohio. 

Heywood Sanders of the University of Texas at San Antonio and Marc Levine of UWM -- both of whom study the economics of tourism and have been skeptical about its use as an urban development tool -- agreed. 

"The folks who are going to pay are overwhelmingly locals," Sanders said. 

That's not the case with the Midwest Express Center as it stands now. The $175 million building, which opened in 1998, is being financed with money from three taxes levied across Milwaukee County -- 3 percent on car rentals, 2 percent on hotel rooms, and .025 percent on food-and-beverage sales -- as well as a 7 percent hotel tax in the city of Milwaukee. 

The revenue goes to the Wisconsin Center District, which owns and runs the Midwest Express Center, the U.S. Cellular Arena and the Auditorium. The countywide taxes expire when the Midwest Express Center debt is paid off. 

The food-and-beverage tax, the one that falls most heavily on area residents, accounted for 20 percent of the $13.4 million collected in 2000. Excluding the $4 million passed on to the convention bureau -- and focusing only on revenue that went to service the district's debt and provide a reserve for smaller capital improvements -- the food-and-beverage levy represented 28 percent of the total collected. 

But that tax would be the workhorse in a plan, discussed last week by district board chairman Franklyn Gimbel, to finance both convention center expansion and improvements to the Bradley Center. The plan would see the car rental tax doubled, to 6 percent , and the food-and-beverage tax raised to 1 percent . 

The latter move would provide the muscle: Based on tax collections for 2000 and the first 11 months of 2001, it would generate $4 of every $5 in new revenue. 

Hotel taxes wouldn't be touched. Gimbel said increasing them would hurt Milwaukee's ability to compete for convention business. The room tax already is high here, he said. 

The 14.6 percent in taxes levied on city hotel rooms ranked 13th highest among 200 nationwide locations surveyed last year by consulting firm Runzheimer International. 

Of 10 cities identified in another consultant's recent study as key competitors to Milwaukee, all but three have lower room taxes, according to representatives of the various convention bureaus. 

A higher room tax could chill interest in further hotel development, Gimbel said. Asked whether he thought existing hotel operators would oppose a higher levy, Gimbel said he hadn't talked with them. 

"My instinct would be that they would not look kindly on it, but that really is not a factor in my thinking," he said. 

While expansion is being pushed by Wisconsin Center District officials, there's no guarantee it will happen. 

The tax package envisioned by Gimbel would require approval in the state Legislature. Two area legislators -- state Sen. Alberta Darling (R-River Hills) and Rep. Scott Walker (R-Wauwatosa) offered the idea a chilly reception last week. 

Further, the fate of the project increasingly appears to be intertwined with the question of merging the Bradley Center and Wisconsin Center District boards. 

In any event, evaluating the local tax burden is fuzzy work. Restaurants and taverns, whose sales generate the great majority of the food-and-beverage tax, don't ask customers where they're from. 

But scholars such as Levine, Raabe and Sanders can offer educated guesses, at least. And Gimbel, who has been the chief public advocate for convention center expansion, said the financing plan he has proposed would indeed see locals paying a large share. 

"That's correct," he said. "Nor did I ever suggest that it wasn't." 

Gimbel said the local burden wouldn't necessarily make the project a significantly tougher sell than building the existing hall, whose tax-based financing generated little controversy. 

"It may be somewhat more difficult," he said, "but at the same time, I really do think there is a community benefit in expanding the convention center." 

Those benefits include a more vibrant downtown area and increased hospitality-sector employment, which is particularly important to less-skilled job seekers, Gimbel said. 

"I know no one wants to raise taxes, but sometimes it's good because it causes good for everybody," district president Richard Geyer said. He noted that, with the increase to the food-and-beverage tax, diners would pay $1 on a $100 restaurant tab. 

"We're not talking a lot of money to support Milwaukee and bring good things to Milwaukee," Geyer said. 

Assuming it attracted more conventioneers, an expanded Midwest Express Center would boost revenue from the hotel tax, which falls largely on non-residents. Hosting more convention-goers probably would increase car rentals too, so tax revenue from that source likely would rise more rapidly than revenue on food-and-beverage sales, district finance chief Charles Pesano said. 

Some of the car rental tax, however, comes from local pockets. About 20 percent of car rentals in a large city typically are to area residents, said Michael Towers, an officer with ACTIF, an association of independent rental agencies. 

In estimating the local contribution to the food-and-beverage tax, Levine pointed to data he has gathered on tourism in Montreal. There, he said, visitors in 2000 accounted for 11 percent of restaurant and tavern sales, according to surveys by the Canadian government and the local tourism agency. 

There is no reason to think visitors to Milwaukee would claim a greater share of food and beverage sales here, Levine said. 

Raabe said he generally estimates that 10 percent to 15 percent of any sort of purchases are made by outsiders to an area. 

"If this is a countywide tax, and Milwaukee not being a great destination city, I'd tend toward the 10 rather than the 15," he said. 

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(c) 2002, Milwaukee Journal Sentinel. Distributed by Knight Ridder/Tribune Business News.