The following is excerpted from a feature running in Next City's weekly Forefront series on urban issues.
Two days before Christmas, the Detroit Red Wings got booed out of their own arena. The lowly New York Islanders scored three goals in the first period and sucked all the excitement out of the building. Between periods, I strolled from the nosebleeds down to the bathrooms, where I encountered hundreds of half-drunk fans waiting in lines that snaked down the concourse. A man in front of me, dressed in a Steve Yzerman jersey and no doubt angry with the score and daunting line, remarked that the team's new arena "couldn't open soon enough."
Mike Ilitch and his wife Marian bought the Red Wings for $8 million in 1982. Last November, Forbes ranked the team as the ninth-most valuable NHL franchise, at $470 million. The previous July, just a week after the Motor City declared for bankruptcy, it was announced the public would cover nearly 60 percent of the cost for the team's new $450 million, 18,000-seat arena.
The Wings have played at Joe Louis Arena, on the Detroit River, since 1979. What it lacks in modern amenities—a comically large jumbotron, cup holders, abundant restrooms, hand railings—it makes up for in charm. The Joe is a dump, diehard fans will tell you, but it's our dump.
Now the storied franchise is headed due north, where it will set up shop between the downtown core and rapidly developing Midtown neighborhood in a roughly 45-block footprint unimaginatively billed as the "arena and entertainment district." The total price tag, including additional private investments in retail and housing, is an estimated $650 million, $284.5 million of which will come in the form of public investment.
No money will come directly from the city's general fund—something advocates of the deal are quick to point out—but instead the bulk of public funding will come by way of tax increment financing (TIF). Taxes captured in the 615-acre Downtown Development Authority (DDA) district will be poured into the project. The Michigan Strategic Fund, a state economic development agency, will issue 30-year tax-exempt bonds backed by three revenue streams: The aforementioned TIF capture, various other tax revenues from the DDA and Olympia Development, the Ilitch's $2 billion enterprise.
The TIF capture will contribute at least $12.8 million annually, though it can't exceed $15 million. The DDA will contribute about $2.15 million in separate tax collections. Olympia will toss in $11.5 million. And, as Crain's Detroit detailed in July, public money will pay for $261.5 million (58 percent) of the construction costs, while Olympia only has to pay $188.4 million (42 percent).
If you're searching for something particularly craven in the complicated financing structure—that is, something other than the careless use of public money itself—look to where, exactly, the tax capture comes from. In December 2012, the Michigan legislature restored Detroit's ability to levy school-tax funds from the downtown district for economic development purposes. If that $12.8 million annual gift weren't going to the Illitch empire, it would go to the state's School Aid Fund.
This is not to say that the arena will take money out of Detroit Public Schools (DPS) general fund. "The state is making up the shortfalls," said Bob Rossbach, spokesperson for the DDA. "So there is no difference to a student in Detroit Public Schools whether this money is refunding bonds or goes directly into the DPS budget." But it is diminishing the state's School Aid Fund by diverting the taxes for "economic development" purposes. Something, somewhere, is taking a hit.
Nonetheless, the Ilitch family—with its estimated $3.2 billion net worth—will get a new stadium, slated to open for the 2016-2017 season, built off the backs of taxpayers.
Not that this is a particularly new tactic. Mr. I, as supporters fondly call him, also owns the Detroit Tigers. When the Tigers, most recently valued at $643 million, wanted a new stadium, Ilitch—who made his fortune off the Little Caesar's pizza chain—went to City Hall, as would any sports owner in the country. And, as lawmakers are wont to do, they obliged, covering $115 million of the $300 million ballpark's costs.
He Can't Win Without Public Money
Detroit is mired in the country's largest-ever municipal bankruptcy, staring down $18 billion in long-term debt. Many retirees will lose health care on March 1, only to receive a small stipend. Firefighters and police could see their pensions reduced—some have speculated at 16 cents on the dollar. Local bus drivers are being shot at in the middle of the day. Kevyn Orr was appointed the city's emergency manager in March of last year, but he wasn't the first in town: Since 2009 DPS has been under the watch of an emergency financial manager. As part of the district's 2013-2014 budget, 665 jobs were set to be slashed. The DPS deficit ballooned from $76 million to $82 million. And roughly 600 non-union water and sewer department workers are set to lose their jobs.
Somehow, amid all that financial and institutional debris—which neglected to mention the oft-cited bits about the lack of very basic services and 58-minute average police response time in a city where less than half of the 88,000 streetlights work—there's still $284.5 million for a new hockey arena.
"This plan is deeply flawed," one resident said during a community hearing last month at City Hall. "That's arrogant to do that to a city that's bankrupt."
And that doesn't even include the land. On February 4, City Council voted 6-3 to sell Olympia and the DDA, who will own the arena, 39 vacant parcels for $1. An analysis of city records by the Detroit Free Press found that "several private landowners succeeded in netting millions for themselves by selling similarly situated land in the arena's footprint to Ilitch-controlled corporations." Rather than sell the land at market rate, the city is giving them the rest the same way you sell your younger sibling your old car—$1, but just for the title transfer.
Olympia Development's CEO Tom Wilson, without a hint of irony, called it a "once-in-a-generation" deal.
Jerry Belanger, who owns the Park Bar near the proposed new arena, voiced his displeasure with the once-in-a-generation deal. "I'm going to be taxed to buy [Ilitch] bars and restaurants that will be my competitor," he said. "He can't go toe-to-toe with me on a fair playing field. He can't win without public money."
After City Council approved the land transfer a man, in a scene that wouldn't have been out of place in the rafters at a hockey game, yelled, "The citizens of Detroit thank you for selling them out!"
They Kicked Our Asses
Comerica Park opened in 2000, but it never would have happened if Frank Rashid, a lifelong Detroiter and English professor at Marygrove College, had his way. In 1987, Rashid co-founded the Tiger Stadium Fan Club in an attempt to preserve Tiger Stadium, where the team had played since 1912, and stop local sports teams from fleecing taxpayer dollars.
The Tiger Stadium Fan Club may sound like a group of middle-aged men who show up to ballgames early and cut in front of kids for autographs during batting practice, but Rashid and his fellow preservationists were actually hardcore community activists. And, in March 1992, the Fan Club scored a huge victory: A ballot initiative to prohibit the use of public subsidies for stadiums passed and became Ordinance 7-92. If you were, say, a certain local billionaire sports owner looking to build a new ballpark, you'd have to do it on your own dime.
But that was short lived. City Council passed an ordinance in December 1995 that repealed 7-92. In January 1996, the Tiger Stadium Fan Club collected enough signatures to force a referendum that March. It was doomed from the start.
"They kicked our asses," Rashid told me. "We always knew we wouldn't have much of a chance. They had TV ads and mailers. I heard they had between $600,000 and $1 million. We had about $20,000 or $30,000."
It's no coincidence that in October 1995, shortly before 7-92 was repealed, the city and state had agreed to cooperate on a new ballpark in downtown Detroit. Two years later, they broke ground on Comerica Park in the central business district. The old Tiger Stadium languished in various preservation efforts before it was eventually demolished in 2009. All that's left is a massive corner lot in Corktown. A group of volunteers maintain the open field. Nemo's, a revered bar near the old ballpark, shuttles fans to and from Comerica on game days.
"It Passes Off the Cost to Everyone Else"
Between 1909 and 2012, roughly $53 billion—in 2012 dollars—was spent building 186 stadiums across the country, according to research from Judith Grant Long at Rutgers University and Deadspin. Of that, $32.2 billion came from public coffers for a grand total of 61 percent. The public has been footing the bill for stadiums masquerading as economic development for more than a hundred years.