Detroit arena could cost $500m, require public money

As expected, the news that Mike Ilitch has the lead in buying the Detroit Pistons has led to a full-on media frenzy. Among the highlights:

  • A new downtown arena to host both the Pistons and Ilitch’s Red Wings would cost $500 million or more, sports consultant Marc Ganis tells the Detroit News. Ganis added, “It’s next to impossible to do that without some taxpayer help.”
  • Detroit Free Press sports columnist Michael Rosenberg writes that the whole reason Ilitch wants the Pistons and their Auburn Hills arena is to have a threat to move the Pistons to the suburbs, in order to be able to squeeze Detroit for money for a new arena. Detroit Mayor Dave Bing nonetheless declared himself “elated” at the prospect of Ilitch owning the Pistons, which either means he doesn’t think he’s really going to be blackmailed for a new arena, or he’s looking forward to it.
  • Getting a third pro sports team to play downtown could bolster Detroit’s image as an “urban adult entertainment destination,” says University of Michigan professor Christopher Leinberger, who notes that the city already “boasts the third largest walkable concentration of casinos in the country, behind only Las Vegas and Atlantic City,” and “has the nation’s third largest number of live theater seats, trailing only New York City and Houston.” (Houston?) Not to mention the other “adult entertainment” options available across the bridge in Windsor.

The virtues of making Detroit into the next Las Vegas aside, the arena battle looks like it has the potential to get really ugly really fast if Ilitch wins his bid. I’ll make sure I don’t have any other plans for November…

Ilitch opens 30-day window to buy Pistons, arena

And away we go: Crain’s Detroit is reporting that Detroit Pistons owner Karen Davidson has opened negotiations to sell the team to Detroit Red Wings and Tigers owner Mike Ilitch. The Detroit Free Press says the two sides have agreed to an exclusive 30-day bargaining period, after which the sale could be reopened to other bidders.

Assuming the two sides work out a deal — and that’s not at all certain, as Crain’s previously estimated there’s about a $100 million gap between what Davidson wants and what she’s likely to be offered — then it will almost certainly launch a long battle over whether to build a new downtown arena for the Red Wings and Pistons, and who’d pay for it. Already, Detroit city council president Charles Pugh declared his town open for subsidy business:

Asked whether a tax incentive would be included in a pitch to bring the Pistons downtown, Council President Charles Pugh said, “I am open to whatever we have to do in the scope of the law.

“This could be the tipping point for our city. We need hope.”

On the other hand, council president pro tem Gary Brown said, “It’s going to be difficult to do this stadium with public dollars. There is no appetite for tax relief, even for this.” Still, it’s probably best not to put anything past Ilitch, given that this is the kind of fight he’s won before.

Today in Pistons-to-Ilitch rumors

There’s very little solid information, but today’s Crain’s Detroit Business is just jam-packed with speculation on the potential sale of the Detroit Pistons to Tigers and Red Wings owner Mike Ilitch:

  • Crain’s Bill Shea reports that Pistons owner Karen Davidson is seeking $500 million for the team and the Palace of Auburn Hills arena, but cites industry experts as saying she likely won’t get more than $400 million, especially if she wants to conclude a sale fast.
  • Shea also has a list of the rumored bidders, including Magic Johnson and an unnamed group from Dubai.

Finally, and most noteworthy for our purposes here, University of Michigan sports economist Rod Fort tells Shea that he expects Ilitch has a financing plan for both the purchase and construction of a new downtown arena. He also expects it will include public subsidies:

“It would behoove the Ilitches, if they obtain the Palace, to already be talking to Detroit city government on the subsidy that’s going to be (sought),” he said.

A facility for both the Red Wings and Pistons is believed to be what the Ilitches want, a venue that is expected to cost about $300 million or more.

“If that’s the ultimate goal, we should expect the Ilitches to behave as others have in the past in that situation, which is to suggest to city and possibly state government that a subsidy is needed to make this happen,” Fort said.

Fort believes Detroit can be creative enough to help finance a new arena, through a special assessment like the tourist tax, or something else.

“It’s not a place without resources,” he said.

Of course, all Fort is really saying is “Ilitch will probably ask for a subsidy, because they all do.” But on a slow news day, speculation is all we’ve got.

Ilitch throws hat in ring to buy Pistons

Other shoe: dropped.

Sports and pizza boss Michael Ilitch said today he wants to buy the Detroit Pistons and move the team to a new arena in downtown Detroit.

The Ilitch family already owns the Detroit Tigers and the Detroit Red Wings.

The Ilitch bid is for the entire Palace Sports & Entertainment organization, not just for the basketball team itself. If successful, that means that the Ilitches would also own the Palace of Auburn Hills arena, the DTE Energy Music Theatre and other aspects of the Palace network.

You’ll recall that the big question about this plan, which was originally floated about a month ago, was whether giving monopoly control over sports and concerts in the Detroit area would really generate enough money to pay for a new Detroit arena. Still nothing on that in today’s coverage, though enough column-inches were spilled on it that there was room for worries that Bud Selig might thing Ilitch doesn’t love him anymore.

Vegas developers: Build it, and NBA team will come

In one of the weirdest arena campaign moves ever, the CEO of a development group hoping to build an NBA arena in Las Vegas said this week that “we have an NBA team under contract” to move to Vegas — but only if the city approves a tax-increment financing district to kick back property taxes in the surrounding area to help pay off arena construction costs.

The arena plan is scheduled to be discussed at an August 4 county commission hearing, but meanwhile, everyone wants to know: Really? An NBA team? Which one? The Las Vegas Sun briefly mentioned that the Detroit Pistons are for sale, leading to an immediate denunciation of any such thing by the team’s current owners. And Sacramento Kings owner Joe Maloof says it’s not him, either.

NBC Sports asked around among team execs at the Summer League currently underway in Las Vegas, and came to the conclusion that the development group “got a ‘we agree to have a serious conversation with you if you get your arena built’ rather than any kind of agreement to sell.” Which would explain NBA officials’ statement yesterday that they “categorically deny” that any such contract is in place.

In any case, though, expect Las Vegas to show up in lots of stories about NBA teams seeking subsidies for the next few months, whether it’s in Detroit, Sacramento, Indianapolis, or wherever. Maybe if they play their cards right, Las Vegas can even be the new Kansas City!

Red Wings owner pondering Pistons purchase?

While we’re on the rumor front, there’s one out of Detroit that Red Wings owner Mike Ilitch is considering buying the Pistons and the Palace of Auburn Hills as part of a scheme to get a new arena for the Wings. The upshot, as George Malik writes at MLive.com, is that Ilitches’ events company would add revenues, while “essentially freeing up the Palace to hold concerts on an almost exclusive basis while encouraging investors to fund a follow-on arena which would both succeed Joe Louis Arena and see most of its use as the home facility for both the Detroit Pistons and Detroit Red Wings.”

The basic notion should be familiar — it’s the same one that Newark and the state of New Jersey agreed to earlier this year, in sending the Nets to room (temporarily) with the Devils while the Meadowlands focuses on concerts. The idea is that by giving one venue monopoly control over concerts, they get to charge more, while sports teams cut costs by sharing a single home.

Whether the savings would be enough to make the math pencil out is dubious: Bill Shea of Crain’s Detroit Business notes that buying the Pistons and arena then building a new home for the sports teams would have “a cost approaching $1 billion,” which is an awful lot to spend just to gain some leverage over Bruce Springsteen. Shea also notes that the plan would “likely will include co-investors and some level of public financing,” which may be the whole point of the exercise: Would Detroit be more likely to fund a new arena if it meant not just keeping the Red Wings in town, but getting the Pistons back from the suburbs? Hard to say at this early stage, but as seen previously, it’s just the sort of maneuver that Ilitch excels at.