The Detroit Pistons will soon move back to the city after nearly 40 years of playing out in the suburbs. The public will provide at least $305 million of the $945 million that it cost to build the new pizza-themed, arena as well as a new practice facility for the team. The actual cost will almost certainly end up higher than projected; for example, the Downtown Detroit Development Authority (DDDA) is also slated to receive $726 million in money diverted from school property tax revenue by 2051. Detroit, of course, filed for bankruptcy just four short years ago and the school’s are chronically underfunded, yet they are already rolling over and paying big money to the billionaire owners of the Red Wings and Pistons.
On June 1, the city council, the DDDA, and a series of individuals involved in the project were sued by Robert Davis, a government transparency advocate, and D. Etta Wilcoxon, who is running for city clerk of Detroit. The suit attempted to block the use of any public funds until the public, not just the stadium-friendly city council, has a chance to vote on the project. As the Detroit Free Press first reported this morning, the defendants filed a motion to dismiss the lawsuit yesterday, wherein they play up the sentimental angle shared by much of the marketing push around the stadium, and wholly committed to the narrative of rebuilding and growing from the ashes of bankruptcy.
This is some lofty rhetoric to attack the idea that the public should have a voice in negotiating millions of dollars of their money being funneled to billionaires (emphasis ours):
After emerging from bankruptcy, the City of Detroit is writing a remarkable comeback story. One of the most exciting chapters in the City’s rebirth is the imminent completion of a new state of the art arena for the Red Wings, with accompanying retail, office and residential development and the anticipation of the Pistons returning to Detroit after a 40 year hiatus. This miracle has been made possible by hard work, determination and the use of every available development and financing tool. The DDA and the BRA have played a key role, by providing financing through bonds backed by tax increment financing. But, while this major development effort unfolded in public meetings, and the local press reported every detail, Plaintiffs sat back, waiting until the last possible moment to attack.
The way they spin it, the lawsuit is an existential threat to the economic prospects of the city. The city argues that if Detroit can’t fork over oodles of cash to Tom Gores and the Ilitch family (who are worth a combined $9.8 billion), then they might never recover:
Plaintiffs’ delay threatens to cause massive harm to Defendants and to the City of Detroit. The loss of tax increment financing at this critical moment could upend the complex financial package supporting the Pistons’ move to Detroit, and the resulting changes could cause the Pistons to reverse their plans. The loss of the Pistons would cost Detroit millions of dollars in tax revenue and would threaten the burgeoning growth of the City’s entertainment district. Unrelated to the 2016 amendments to the project, an adverse ruling could cause a default on $250 million in outstanding DDA bonds. Because the DDA is a component unit of the City, the consequences of default would be devastating, threatening the ability of the City to issue debt or, if debt can be issued, to obtain favorable pricing in the capital markets. Post-bankruptcy, the City cannot expect lenders to extend unsecured credit at reasonable rates, so its debt has been limited to secured transactions, tied to specific revenue streams. The default on any of that debt would significantly affect the ability of the City to attract investors.
Arn Tellem, the former agent now taking the lead on negotiations told the Free Press that he was still confident that the project would proceed on schedule, despite the lawsuit:
When asked if there was a chance an unforeseen snag could force a return to the Palace, Tellem said: “There’s no chance of that happening. Zero.”
You can read the complaint and motion to dismiss below.
- The Complaint
- Motion to Dismiss