Detroit’s “renaissance” has enriched its billionaire sports owners while rest of city suffers

If you want a depressing read about the impact of Dan Gilbert, the billionaire Quicken Loans baron, Cleveland Cavaliers owner, and would-be Detroit MLS owner, on his hometown of Detroit, there’s a great one by Shikha Dalmia in The Week. Among the highlights:

  • Gilbert is pushing for the state legislature to approve a super-TIF bill that would kick back property, sales, and income taxes from environmentally contaminated “brownfields” sites to help pay for the project. It would only apply to projects costing over $500 million in cities of more than 600,000, so the only eligible developer is Gilbert, who is proposing a giant project on the former site of the Hudson’s department store in downtown Detroit.
  • Gilbert got $50 million in tax breaks to move his Quicken headquarters from the suburbs to Detroit.
  • He and his partner, Pistons owner Tom Gores, are seeking $300 million in cash and land in exchange for building a new soccer complex on a half-finished jail site (and a new jail elsewhere).
  • Detroit is about to open a new $187.3 million light rail system that will link “Detroit’s downtown, dubbed Gilbertville because it houses the Quicken office and other buildings where Gilbert’s employees live, with the midtown area, where the entertainment district [built by Gilbert’s fellow sports billionaire, the late Tigers and Red Wings owner Mike Ilitch] is. Never mind that Detroit’s jobless and carless residents would have much more use for bus lines transporting them to jobs outside the city.”

Okay, maybe it’s a high price to pay, but at least Detroit is finally undergoing a long-awaited renaissance as a result, right? Well, actually:

The whole argument for pouring taxpayer dollars into this area is that its growth will spill over to the rest of the city, opening up jobs and business opportunities for all Detroiters. But research by Michigan State University’s Laura Reese and Wayne State University’s Gary Sands published earlier this year suggests that on virtually every metric, life outside the targeted zone is worse than it was even in 2010, when the alleged renaissance began.

Detroit’s overall population actually declined by 2.6 percent between 2010 and 2014. The unemployment rate among Detroiters increased by 2.4 percentage points between 2010 and 2013. This may have been because of the bankruptcy-induced layoffs of city employees, but Sands maintains that the trends don’t seem to have changed much in 2015. “About half of the neighborhoods in the periphery saw employment and payroll declines,” he notes. What’s more, although the overall number of Detroit businesses remained unchanged between 2014 and 2015, 13 of the more peripheral city zipcodes saw a decline.

In other words, far from the city core leading a comeback, it is at best siphoning — and at worst destroying — business and employment in the rest of Detroit, perhaps because smaller enterprises are having trouble competing with powerful billionaires who can dip into taxpayer pockets and divert other public resources toward their grand designs.

The whole thing is a terrific read, if you like to be depressed about how our cities are increasingly being run as engines for boosting the profits of their richest citizens. But you almost certainly do, since you read this website, so by all means go check it out.

Timbers plan $50m privately funded stadium expansion, not outraging anyone at all

The Portland Timbers owners are planning to spend $50 million of their own money on a 4,000-seat expansion of their 21,000-seat stadium:

…and that’s it, really. In a normal world, this would be an everyday occurrence: Team decides it can make more money with a bigger stadium, team spends the money to build it as an investment, team (hopefully) comes out ahead. It’s how sports worked in the pre-subsidy days of the 19th and early 20th centuries, it’s largely how sports works in Europe, and it’s only worthy of note here because the North American sports business model has become so based on getting public money for these things. It’s like a little taste of a happier world where I could retire this website and write about something else. (Not that I don’t write about other things too, but you know.)

As for the expansion itself, it’ll be a little freaky looking, with a vertically stacked stand that is supposed to recall the Globe Theater somehow filling in the gap in a more traditional sweeping, curved grandstand. Which is also fine: Piecemeal, jury-rigged stadium designs are also common in international soccer (in part because of that practice of expanding them only when the money is there), and the result should end up resembling Buenos Aires’ Boca JuniorsLa Bombanera. There’s really nothing at all to complain about here, so happy Friday!

 

Dan Gilbert says Detroit MLS stadium will create umpty-bajillion dollars in economic impact

In “economic impact reports are ridiculous, but some are more ridiculous than others” news, Cleveland Cavaliers owner Dan Gilbert says that if Detroit gives him $300 million in city funding plus free land so he can build a soccer-stadium-plus-other-stuff complex on the proposed site of a new jail, it will create $2.4 billion in economic impact, because sure, why the hell not?

I can’t find the actual study anywhere — it’s not anywhere on the website of Rock Ventures, Gilbert’s real estate umbrella firm, or on the site of Mark Rosentraub’s University of Michigan Center for Sport & Policy, which conducted it — but I’m sure I can guess where it came up with that crazy-high impact figure: Gilbert says he’ll spend $1 billion on construction of the soccer stadium and surrounding development, so add in a smidge more for money spent at actual soccer games and apply a standard multiplier effect, and you can certainly get to $2.4 billion. (I’ve asked Rosentraub and Rock Ventures for a copy of the study, and will report back here if I get a look at it.)

Wayne County executive Warren Evans immediately called the study “irrelevant” and said it “does nothing to sway my thinking,” but not because of anything about the numbers — rather, Evans is just concerned that building a soccer stadium will delay getting a jail built. (Gilbert says he’ll build a jail complex elsewhere if he gets the stadium land and money.) It doesn’t sound like this plan is going anywhere fast, but if so, it’s less because of the actual economics underlying it than because Major League Soccer is still less popular than jails, which seems to be the trending message these days.

St. Louis voters approve sales-tax hike, reject giving it to an MLS stadium

St. Louis voters went to the polls yesterday and narrowly defeated a proposal to spend $60 million in city tax money on a new soccer stadium for a proposed MLS expansion team. The stadium proposal failed by a 53-47% margin, while an accompanying ballot measure to raise city sales and use taxes by 0.5% and use some of the proceeds to expand the city’s light rail system passed by a 60-40% vote.

Local news coverage hasn’t provided much in the way of exit interviews with voters about why they cast their ballots the way they did, though the St. Louis Post-Dispatch did include this outstanding photo caption on an image of a woman in a soccer jersey peering out from between her fingers:

Lauren Rapp of The Hill watches vote returns creep in at Union Station during a watch party for the Major League Soccer stadium funding on Tuesday, April 4, 2017. “It’s been a rough night,” said Rapp. “And then (Stephen) Piscotty gets hit in the head.”

The failure of the stadium-subsidy vote puts MLS commissioner Don Garber in an interesting position: He’s previously raved about soccer fandom in St. Louis — and did so again last night after the vote, in a statement saying that the city would be “a tremendous market” for MLS but that the vote outcome was “clearly a significant setback” for the city’s expansion bid. Does the league now turn up its nose at St. Louis and say, “Fine, if you don’t want to throw $60 million at us, we’ll go find some other city that will”? Or does it try to find another way to make a go of it there, either by team owners digging deeper and funding the $60 million on their own, much as Orlando S.C.‘s owners did with their stadium, or by the league lowering its $150 million expansion fee request — either of which would risk the league’s standing in future “the subsidy way or the highway” demands?

If I had to guess, I’d predict Garber will take door #1 for this round of expansion, and figuring he can always circle back to St. Louis next time and see if the appetite for stadium funding has improved any, since it’s clear that MLS is going to keep expanding until such time as it runs out of rich guys willing to blow $150 million on expansion fees. In the meantime, the vote makes one thing clear: MLS fandom may be on the rise, but not enough for fan frenzy about obtaining a team to tip the balance against taxpayer distaste for giving public dollars to the rich dudes who’d own it. There isn’t a whole lot of extortion leverage in being an 80-pound gorilla.

As St. Louis votes on MLS, reasonable people disagree if “no economic benefits” is a bad thing

Tomorrow is the public vote in St. Louis on whether to spend $60 million in city money on a soccer stadium for a new MLS team, and everybody has a hot take:

  • A sports economist and Forbes “contributor” (aka guy who lets Forbes publish his writing for free in exchange for the publicity) says this is a good deal because $60 million isn’t that much, and it’d just be stadium taxes getting kicked back to the team (plus other taxes, but those are on out-of-state purchases so just pretend St. Louis was never getting them, okay?), plus “unprecedented” community benefits! And who can put a price on the “community/psychic/civic value” of civic pride? (Bruce Johnson, actually, and it wasn’t all that much.) Also, soccer is hot.
  • The St. Louis Business Journal notes that there’s no evidence that any of the above benefits actually exist. #micdrop

Team owner Paul Edgerley predicts that the balloting will be close, so vote early and vote often!

Only thing standing between Indianapolis and MLS is meeting league’s stadium extortion demands

It’s a hectic Monday morning, and time for a quick game of “What have been newspapers been spinning inappropriately this weekend?” First up, the Indianapolis Star:

Unless the General Assembly finds surprise funding for a new stadium in the coming days, Indy Eleven has no discernible path to join America’s premier professional soccer league.

VERDICT: Yes, but… There’s no reason MLS can’t approve Indy Eleven as an expansion franchise without a new stadium — as recently as two years ago there was talk about the team owners settling for upgrades on their current stadium — except that the league is dedicated to a business model based on “bring us a $150 million check and some new stadium blueprints, and you’re cool.” A more accurate report would have been something along the lines of “Indy Eleven is ready to make the leap, but MLS is holding out for stadium subsidies” — but that would have made the sports league the bad guys instead of the politicians, and this is a business column and team owner Ersal Ozdemir is a major local businessman, so.

Miami officials to Beckham: Build stadium or get off the pot already

No, David Beckham still hasn’t figured out who’s going to finance his proposed new MLS arena in Miami yet. And yes, Miami officials have noticed, and are starting to wonder how long they should be expected to wait on this stadium plan:

“How long are we going to negotiate for the use of that [county-owned land] before we decide that maybe that ought to be made available for some affordable housing?” Commissioner Xavier Suarez asked Monday during a meeting of the county’s Housing and Social Services committee. “Are we going to wait for these folks forever before we use that property for something more?”

He’s got a point! As does commissioner Audrey Edmonson, whose district includes the proposed stadium site, and who griped that the commission has gone months since last hearing from Beckham’s ownership group: “Are they bringing a stadium there? I haven’t heard anything.” Team Becks, meanwhile, has resorted to having their PR firm defensively tweet that they hope to have a team in place someday, maybe:

It’s not entirely clear what the holdup is, but “no banks think that investing in a soccer stadium in Miami just because a famous guy would run the team is a hot idea” is a likely candidate. There’s no reason this standoff can’t continue forever — or at least until Beckham loses interest or MLS runs out of expansion franchises to dole out, and the latter seems likely to happen never — so gird yourself for more of these headlines for the foreseeable future.

 

San Diego pulls large number out of butt, calls it SoccerCity economic impact

So last week this happened:

SoccerCity could deliver an annual $2.8 billion economic boost to the region at full buildout of the Qualcomm Stadium site, according to projections released Thursday by the San Diego Regional Economic Development Corp.

I’m not going to go to the trouble of showing you all the EDC’s calculations, because it’s easy enough for you all to join me in hollering, “NO IT WON’T!” Adding up all the future wages paid at a complex and calling that an “economic boost to the region” only makes sense if all of those jobs would only exist in the region with the complex, and nobody believes that.

This proposal started out really promising, with a soccer stadium and housing and light industry all for no public money, but between the possible $240 million infrastructure and land cleanup cost and this overblown economic impact study, it’s starting to look less like the exception than the rule. Not that it would necessarily be a disaster for San Diego, but it requires a hard, hard look before it goes before voters for approval.

Orlando SC stadium neighbors hope for economic boost, prepare to be sadly disappointed

Good article with misleading headline alert! From the Orlando Sentinel:

Parramore residents hope stadium will help kick-start community

They do? Will it?

Soccer faithfuls won’t change Parramore’s fortunes by themselves, [Florida State University professor Tim Chapin] said.

“That sounds like a lot of economic activity, but it’s a tiny drop in a very large pond in terms of the economy,” he said. “There will be a few winners in this, but it’s not a rising tide that lifts all boats.”

A quote from Charles Frizzell, owner of a new sports bar across the street, in instructive: “I don’t know if we would have chosen this location, if it wasn’t for the soccer stadium.” Which, if the biggest impact you’re going to have is that people choosing to open sports bars will move over a few blocks to be closer to the stadium, that’s exceedingly meh impact. Plus, opening a sports bar and keeping a sports bar open are two different things: Reporter Jeff Weiner notes that similar hopes were raised by the opening of the Magic‘s Amway Center in 2010, but then mostly dashed:

Draft Global Beer Lounge, despite taxpayer subsidies, fell into debt before closing at the Church Street Parking Garage, which has since been torn down, while Parramore mainstay Johnson’s Diner also failed after moving into the CityView building.

Commissioner Regina Hill, a Parramore native who represents the neighborhood on the City Council, credits a job at the old Amway Arena, which opened in 1989 and was demolished in 2011, with offering her hope as a young woman.

“It was $7-an-hour, part-time, but it gave me the ability to get off that couch and start to feel valuable,” she said.

Now there’s a headline: “Sports facilities bring hope to low-income communities with minimum-wage part-time jobs to get them off the sofa.” Accuracy is so seldom clickbaity.

San Diego MLS stadium with “no public money” pledge could demand $240m in infrastructure cash

One of the key attributes of the plan to build an MLS stadium on the site of the San Diego Chargers‘ old stadium was that it would not only require no public money, but also the developers would pay “fair market value” for the 80 acres of land involved. So how much would that be? How about maybe … $10,000?

The sale price would be linked to the fair market value, yet to be determined, but it would have to take into account the cost of demolishing Qualcomm, estimated at perhaps $15 million, and other environmental issues and other problems, such as flooding and habitat preservation. Also taken into consideration would be the potential of setting aside room for an NFL stadium, and other “extraordinary costs.”

If these conditions reduce “the fair market value…(to) a negative number,” the initiative says, then FS would be required to pay the city $10,000 as a one-time lease payment.

In effect, then, the soccer developers are asking the city to pay for the cost of prepping the land for new development, which could eat up the entire $240 million market value of the parcel. If that sounds crazy to you, that’s exactly the word one real estate expert uses to describe the proposal:

“If I was the city, I’d say this is crazy,” [real estate development consultant Gary] London said this week. “The city is selling the property as if it was distressed property (under the FS initiative).

“This is not distressed property,” he said. “This is almost an empty piece of land, with the exception of one stadium, that is practically flat. This is in the center of San Diego and is probably the most valuable land asset, public or private, in the city of San Diego right now.”

And then there’s this:

Greg Shannon, chairman of Sedona Development and current chairman of the local chapter of the Urban Land Institute, said a private landowner would “never sell” land the way the FS initiative proposes.

“From what I can tell, it’s a huge giveaway from the city to the developers,” Shannon said. “They’re saying there’s no taxpayer subsidy. That’s a huge taxpayer subsidy.”

One hopes that this is just a butt-covering clause to indicate what happens on the off chance that infrastructure costs get out of control, and not something the team actually anticipates. Even so, though, this is a potentially whopping hidden public cost that the developers really should have mentioned when they first announced their plan, though I guess then people might not have been quite as excited about it. We’ll see how excited voters are if and when this thing goes up as a ballot initiative later this year.