Red Wings promise to build “deconstructed” arena with public’s $300 million

The Detroit Red Wings issued renderings of their planned $450 million arena yesterday, and it’s … kind of interesting-looking, I guess?

Those buildings surrounding the arena are actually part of the arena, with the space between that and the arena structure proper being the concessions concourses. (Another rendering shows what appear to be glass roofs over the concourses, maybe?) The Red Wings are calling this a “deconstructed” design, and it’s something interesting to try, anyway, if only because it would make the arena a bit less monolithic from the outside. (Setting the arena floor 32 feet below ground level would help, too.)

It’s still not necessarily worth spending $300 million in public money and free land on, of course. But since that’s now water under the bridge, at least it’ll be nice if they can avoid a major public eyesore.


8 comments on “Red Wings promise to build “deconstructed” arena with public’s $300 million

  1. Free land? Ilitch has spent over $50 million on acquiring that land going back to the 90′s. He was only given some of the land between Cass and Temple which was valued at $3 million. Currently the space where the arena is set to be built is a dangerous blighted area that looks like this: http://www.mlive.com/business/detroit/index.ssf/2014/04/olympia_picks_general_contract.html

    There’s big time incentive for the Ilitches and the city for this plan to work. He’s not spending $200 million of his own money on something that will fail. This will also enhance development connecting midtown to downtown(hello larger tax base for the city). With the M-1 rail project plus everything Dan Gilbert is doing, the city has not seen this type of development since the 70′s. They already have the financing in place to build what they have envisioned. This isn’t a “proposal” in the sense that someone is dreaming something big and is hoping to gather financial interest in the project. This is something that is already financed, and will be shovel-ready in just two months. The best part is how the arena and entertainment district will be built at the same time. To me the element of including Detroit high school kids in a training program, the conditions for local employment and his willingness to pay for the infrastructure improvements is something that proves this is not your typical arena project.

    As for the public financing. The tax money for the new arena is property tax collected by the Detroit Development Authority on the value of the new development in the new arena district. And the property tax collected by the DDA in that zone is not a new tax. It already is on the books. Homeowners are unaffected. The DDA tax is not a city general fund tax, and by law cannot be used for pensions, or other debt liabilities. Improvements only. Basically the DDA is sepatate from the regular Detroit government and is not bankrupt. In fact, the city owes the DDA $40M in bankruptcy filing docs. Sure in a perfect world, it would be 100% privately funded but pro sports is business.

  2. Here’s the city’s contribution to the current project:
    The essentially free transfer of public land — with an assessed value of about $2.9 million — is the city’s chief contribution to the development. As proposed, construction of the arena itself would be 58% publicly funded and 42% privately funded. No Detroit general fund dollars would be spent; the state is contributing the bulk of the public investment. Olympia has agreed to pay $11.5 million annually for about 30 years to help pay off the construction bonds. Olympia will own the arena’s naming rights and will keep all revenues from arena operations, including parking fees and concessions sales. The city will not collect property taxes on the arena.

    I feel for the city of Detroit, but it’s really not in any position to actually fund an arena, had it come to that, which is really the only way it could hope to get rent or additional revenue. That just wasn’t going to happen under any plausible scenario. Were the Ilitches smart to tap into a state fund specifically created to fund business development in Detroit? Sure, they were, but one should ask why that fund is there especially if, as claimed, the money could go to education funds. (Again, I’m not supporting public money for arenas and stadiums, at all.)

    We can ask why the Ilitches aren’t footing the entire bill, which I would prefer they did, but let’s at least give them some credit for having bought the majority of the land that will be used for the project, and for actually throwing in $200 MM. Given how many cities and states just build these things for billionaire owners (NFL included!), it’s a wee bit refreshing that there IS a private component.

  3. “Sure in a perfect world, it would be 100% privately funded but pro sports is business.”

    And in which other businesses do the people running said business get one of their biggest costs built at the expense of the taxpayer?

  4. Of course their incentive is to do things which benefit their business and create income – that’s the whole point of running a successful business. In turn, their success creates job opportunities and entertainment for the community. This project does not take one penny away from city services. All this money is targeted from day one for economic development. If it didn’t go to this effort it would likely disappear down some rabbit hole of typical Detroit back door corruption with nothing permanent to show for it.

  5. The city and DDA land gifted to Ilitch was assessed at only $2.9m, yes, but it’s roughly the same size as adjacent parcels that Ilitch paid $50m for, so there’s likely some undervaluing going on there. I included a link to an earlier post about that in this item, but for those who don’t like to click hotlinks:

    http://www.fieldofschemes.com/2014/02/04/6750/free-city-land-raises-public-cost-of-red-wings-arena-to-more-than-300m/

    In any event, the tax subsidies being given to the Red Wings already amount to $261m (see http://www.fieldofschemes.com/2013/07/25/5560/michigan-approves-detroit-bonds-for-red-wings-arena-still-wont-let-detroit-spend-on-anything-else/), so when you add in even a low value for the free land, plus $5m for the cost of tearing down Joe Louis Arena, you’re going to be up around $300m total. That’s money that would have been spent on *something* else otherwise, so there is a public cost, even if only an opportunity cost, to handing it over to Ilitch.

  6. If it didn’t go to subsidizing a billionaire it would otherwise be wasted?

    By that logic I could just as easily claim that I can come up with 1,000 uses for that money that would qualify as development and all of them are better than this plan. So giving money to Olympia/Illitch is the worst possible use of the money.

    Also, what jobs are being created here? Are there going to be more/new beer vendors than at the current arena? Any increase there is probably negligible (and those are low skill low wage jobs to begin with). If you’re referring to jobs created by construction, those are temporary jobs sometimes/often taken by workers that are not permanent residents (and oh by the way, those are actually a cost in the project, if you want people to have disposable income to spur growth you might be better off cutting $30K checks to 10,000 people). Finally, pro sports as entertainment is actually relatively expensive entertainment. The people who can afford it can afford it without the need for a subsidy to the owner. So even if you’re going to claim that entertainment is a good that Detroit is suffering from a lack of, this would probably grade out poorly both in terms of job and entertainment creation.

  7. Couple gems from this glowing editorial:

    “The Ilitches also have financing in place for the $650 million project. And although some of the money will come from taxpayers, and that should always be a concern, the preponderance will be privately raised.”

    “SOME” of the money??!!! C’mon!!

    “The Ilitches have set an admirable goal for hiring Detroiters and purchasing from Michigan suppliers. These goals should not become mandates that drive up costs and necessitate shrinking the project’s scope.”

    “… admirable goal .. “? Awww, isn’t that sweet!

  8. Also, “the preponderance will be privately raised” isn’t true, even on the overall $650m project. The arena itself will cost roughly $300m in public money, as discussed above, plus the development district is getting about $30 million (present value) in tax breaks:

    http://www.freep.com/article/20140721/BUSINESS/307210149/Q-and-A-Detroit-arena-district

    So it’s majority-public-funded. Not by a lot, but >50%.

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