Friday roundup: What arena glut looks like, and other news of our impending doom

Hey, I like this Friday news roundup thing! Let’s do it again:

  • A public hearing has been set for Elmont Public Library on July 10 to discuss the possibility of a New York Islanders arena near Belmont Park racetrack. Team owners Jon Ledecky and Scott Malkin won’t have to submit their actual bid until after that, so who knows what everyone will be commenting on, but I’m going to try to go and report back, if I can figure out what time the hearing is, a detail that none of New York’s myriad news agencies seem to have reported on.
  • There’s a thing called the Canadian Premier League, apparently, though it’s more destined to be a second-tier league (think USL of the North) that can serve as development for Canadian soccer players. Anyway, assuming this gets off the ground, Halifax has approved plans for a privately funded 7,000-seat “pop-up” stadium on a public soccer pitch, which will be taken down once the season is over so regular folks can use the field — park users are a little gripey, as you’d expect them to be, but all in all it’s a far cry from the kinds of demands that minor-league soccer teams in the States are issuing, and promises to be far less of a disaster than most of the other things Halifax is known for.
  • Two out of three Hamilton County commissioners agreed to sign non-disclosure agreements before receiving details of FC Cincinnati‘s soccer stadium proposal, because it was the only way they could find out about the team’s plans. Apparently being on the deliberative body that will be deciding whether to give your team gobs of money just doesn’t hold the same kind of sway that it used to.
  • The Atlanta Hawks owners are considering building a mixed-use project around their arena similar to what the Braves did around their stadium, which Mayor Kasim Reed says is the result of the city handing over $142.5 million in renovation funds, no, I don’t understand that either. The Atlanta Journal-Constitution further reports that a new state law would allow local governments to kick back sales taxes to help pay for development in so-called “enterprise zones,” and okay, now it all starts to make sense.
  • One of the Detroit city councilmembers who voted to approve $34.5 million in subsidies for a new Pistons practice facility says she’s considering changing her vote after being deluged with complaints from constituents, but also said she believes the objections are “based on misinformation that I plan on trying to address or clarify at this public meeting on Friday,” so, we’ll see.
  • And finally, here is a photo showing three past, present, and future NBA arenas all side-by-side, because this is what 21st-century America thinks is a rational use of land, resources, and carbon footprint. Future alien visitors who find this as a relic of the civilization that once was, we can’t really explain it either.

Court rules Detroit can spend tax money on Red Wings arena, because they already pinky-swore

A federal judge has refused to impose an emergency injunction against Detroit using tax money to pay off construction debt for the new Red Wings and Pistons arena without a public vote, on the grounds of “OMG won’t anyone think of the city’s bond rating?!?”

In his opinion, federal Judge Mark Goldsmith said the plaintiffs ultimately failed to establish why an emergency injunction was needed.

“The loss of  anticipated commercial activity connected to the Detroit Piston’s downtown presence would be regrettable, but the loss of the city’s hard-won creditworthiness caused by defaulting on existing bond obligations would do catastrophic damage to the status quo,” Goldsmith said.

This is, needless to say, a dangerous precedent, since it would mean that cities could go ahead and sell bonds without being sure they’re legally allowed to pay them off, figuring that no one will stop them after the fact for fear of harming the city’s credit rating. (Which cities are already doing, of course.)

The plaintiffs can still continue with the court case, and have indicated that they will — as well as filing a state court action to stop the Detroit city council from approving funding for the Pistons’ practice facility, as it is expected to do today — but if the courts keep ruling, “Too late, the getaway car has already left and it would be too much of a mess to chase it down now,” it’s hard to see how court challenges will do any better down the road. There’s a long tradition of this kind of thing in Michigan — the Tigers‘ new stadium was funded in part by the governor funneling off state money without legislative approval and courts later ruling, “Enh, water under the bridge” — but that doesn’t make it any less disturbing when courts rule not on the basis of the law but on the basis of who will be most inconvenienced.

Stadium architects dream of holographic players, and other Friday news

Hey, know what we haven’t done in a while? A Friday news roundup. Let’s do one of those now!

Happy weekend, everybody!

Detroit council signs off on $20m in Pistons tax breaks, says worth it because it just is

The Detroit city council has approved $20 million in tax breaks for a Detroit Pistons practice facility, clearing the way for the team to move from suburban Auburn Hills to the new downtown Red Wings arena. Here’s how council president pro-tem George Cushingberry explained his reasoning:

“It seems to me that this deal is an $83 million deal and there is approximately $8 (million) to $10 million benefit to the residents of the city of Detroit, just in the first ten years of the tax abatement,” Cushingberry said. “So it’s certainly a benefit.”

(Yeah, no, I don’t get how $8-10 million in benefit would be worth $20 million in subsidies, either. Just go with it, it’s city councilmember math.)

The total cost of the Pistons share of subsidies would actually be $54.5 million, since there’s another $34.5 million in city bonding that still has to be approved by the council. The Detroit News has estimated that Detroit could earn that back via new “jock tax” revenues, which is maybe possible (jock taxes are notoriously hard to calculate because of accounting tricks players and performers can use to offset one state’s taxes against another’s), but in any case none of this would be happening without the more than $300 million that the state and city are giving to the Red Wings to build the arena. This is badly crying out for a better analysis than “the Pistons are spending $83 million on a practice facility, that’s a lot of zeroes!”, but it’s not looking like we’re going to get it.

Detroit political candidate sues city over using school taxes for Red Wings arena

A Detroit resident running for city clerk has filed suit against the funding mechanism for the new Detroit Red Wings and Pistons arena, claiming that the city’s development agency illegally siphoned off tax levies meant for another purpose without getting the public’s approval:

D. Etta Wilcoxon alleges in a federal lawsuit filed Thursday in U.S. District Court that the Detroit Downtown Development Authority and the Detroit Brownfield Redevelopment Authority have violated her right to vote by attempting to use tax revenue from an 18-mill DPS levy “for a different purpose” without first obtaining voter approval from Wilcoxon and the other registered voters.

The grab violates Michigan’s General Property Tax Act, the lawsuit alleges.

This is confusing, because the whole Detroit arena deal funding scheme is confusing, so let’s revisit it briefly: The DDA has been collecting property taxes and using them to pay down school construction debt, but is now going to siphon off a chunk of that and use it to pay down arena construction debt instead. Then the state is reimbursing the DDA for the money, so really the subsidy is coming out of state coffers.

Still, the DDA is undeniably using money that was approved for another purpose, even if the state is paying it back, so Wilcoxon’s lawsuit has maybe a leg to stand on? Why she’s only filing it now, three months before the arena opens, is less clear — though it may have to do with that whole “running for city clerk” thing — and if she’s successful it’ll be the city and state scrambling to find a way to raise $300 million, not the sports team owners, but, sure, challenging maybe illegal use of public moneys is always fun.

In other news, the Detroit city council is still considering a tax abatement for a Pistons practice facility, which would cost the city about $20 million. Oh, and the teams showed some journalists around the arena construction site recently, leading the Free Press reporter on the junket to enthuse that the place will be “at once intimate and airy,” which is not strictly impossible — you could have an intimate seating bowl and spacious concourses, say — but is also exactly the kind of PR gibberish that teams tend to spout, so it’s probably best to be skeptical, especially when the actual photos accompanying the article show the exact same “wall of suites topped with cheap seats a mile from the action” design that every arena seems to have these days:

Basically, don’t believe anybody about anything, because people are horrible and will lie to your face, and most journalists will repeat whatever those people say because that’s what they see as their job, or at least all they have time for. The end of the world really can’t come soon enough.

Most new taxes will go right back to Pistons, Detroit News calls this “big win” for public

Time for today’s episode of poorly explained tax revenue implications of new sports projects! Our contestant is the Detroit News, with its headline:

Pistons, concerts could be big tax win for Detroit

That is quite the promise! How does News reporter Louis Aguilar work that out? Detroit has a 1.2 percent “jock tax” on athletes and entertainers who play or perform in the city while living elsewhere, and that, say Pistons officials, would provide the city with about $4 million a year in new income tax revenue, assuming all the concerts that would have gone to the Palace of Auburn Hills relocate to the new Detroit arena with the team if that arena is eventually demolished. That’d be worth about $60 million in present value, so: moneyz!

Of course, the city of Detroit is paying the Pistons $34.5 million to move in with the Red Wings in their new arena, so most of that big tax win will be going straight back to the team. It still means that, if the estimates are accurate — they were done by the Pistons, remember, and a tax attorney way down in the 15th paragraph of the News article notes that many entertainers and athletes may have tax shelters set up to avoid paying full jock taxes — the deal to bring in the Pistons was worth it for the city, if your definition of “worth it” is giving up most of the tax benefits you’d normally get from a business relocating to your city in order to get the business to relocate in the first place.

Also, of course, there’s the little matter of the $50 million in land that the city sold to the Red Wings for $1 to make the arena happen in the first place, plus the $266 million that the state of Michigan is spending to move two of its sports teams and a bunch of concerts from one part of the state to the other, and … I’m not sure what headline I would have gone with, but “big win” probably isn’t it.

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.

Agency that okayed Red Wings arena deal is run by a bunch of tax cheats, this all makes sense now

Now here’s a newspaper lede you don’t see every day:

The Downtown Development Authority board spending $250 million in taxes on Little Caesars Arena is dominated by tax delinquents with financial problems and in some cases criminal records, according to public records.

The DDA, you’ll recall, is the local quasi-public development corporation that spearheaded the push to spend $300 million in public money on a new Red Wings arena, plus another $34.5 million to move the Pistons in with them. It’s long been considered about as in the pocket of the local business establishment as you can get — its longtime director took a job with the Red Wings as soon as he’d left office — and now, according to the Detroit News, its board is a clown car full of clowns:

Seven of the 12 appointed DDA members have a history of financial issues, including more than $500,000 in state and federal tax debt, according to public records. Several blamed the problems on the Great Recession, an ordeal they say made them better public stewards and taught them how to avoid making new financial mistakes.

Yes, you read that right: The tax delinquents on Detroit’s development authority board say that this makes them uniquely qualified to plan the city’s economic future. And the city council president agrees with them:

Council President Pro Tem George Cushingberry Jr. said he doesn’t see the past financial troubles of some board members as an issue.

“It doesn’t mean that they aren’t capable of doing a good job,” said Cushingberry, who filed for bankruptcy in 2011 and lost a home to foreclosure. “In fact, we probably need a few people that have some tax issues so they can anticipate the possibilities.”

Not that making bad financial decisions should necessarily rule anyone out from public service, but maybe it might be a consideration for a job that requires making financial decisions for the city? What next, hiring a guy to run an agency that he not only wants to eliminate, but he can’t even remember the name of? Wait, what?

Pistons, Red Wings still not telling anyone how they plan to split their arena boodle

You know what I could really use this morning? A good article to read. Here’s a good article, from Sunday by Bill Shea of Crain’s Detroit. What makes it good: It’s that rare article about an important lack of information, which nonetheless informs readers about what the issues are, and why it’s important to know what certain parties are refusing to divulge:

The long-speculated on deal to relocate the Detroit Pistons from Oakland County to the Red Wings’ new downtown arena that will open in September was formally announced Nov. 22. What hasn’t been disclosed are any details about the upcoming financial relationship between the clubs.

Neither team is willing to discuss terms of the deal — which apparently still is being finalized — and a spokesman for Detroit’s Downtown Development Authority that owns the new arena said the Pistons-Red Wings contract has not yet been shared with the city. Terms of the deal between the teams do not have to be provided to the city or DDA.

There are plenty of ways to structure the deal, reports Shea, including Red Wings owner Mike Ilitch paying the Pistons to play in his arena but then keeping basketball club seat and suite revenue in exchange (as the Boston Bruins do with the Celtics). And what form it takes could have as much with trying to play revenue-sharing arbitrage with the NBA and NHL rules as with plain old sports bookkeeping.

And if you’re wondering why you should care how the Pistons and Red Wings owners divvy up their private revenue — the $334.5 million in public cash in the deal will remain the same regardless — this is not only likely to help determine the future fate of the Pistons’ old arena in Auburn Hills and how the two teams approach monopoly control of a region’s arena market, but should tell us a lot about what teams can get out of new arenas and why they want them. Other than the $334.5 million, obviously — it’s pretty clear why they want that.

Yep, Pistons owner is getting even more public money to move team to downtown Detroit

And we have the terms under which the Detroit Pistons will move from their 28-year-old arena in Auburn Hills to a zero-year-old arena in their namesake city, courtesy of MLive. With no further ado:

The Pistons will play all home games at the 20,000-seat Little Ceasars Arena starting with the 2017-18 season.

Right, we figured.

The team and Palace Sports & Entertainment will move its business operations, corporate headquarters, team practice and training facilities into a new practice facility, to be built north of the arena at a cost between $32 and $55 million.

That’s pricey. Who’s going to pay for that?

Detroit’s DDA has agreed to contribute $34.5 million in additional bond proceeds through refinancing to be used for redesign and construction to modify Little Caesars Arena from a hockey facility to jointly house an NHL and NBA team.

Apparently Steve Neavling was right to be suspicious when Detroit’s Downtown Development Authority scheduled a meeting for a half-hour before the Pistons announcement and wouldn’t tell anybody what it was. But is this real Detroit city money, or passthrough money that’s really coming out of state education funds, like most of the rest of the arena costs? Reply cloudy, ask again later.

No city of Detroit general fund dollars will be spent on the arena project, and any additional costs or cost overruns will be paid entirely by the Pistons, the Red Wings and associated companies.

Teams pay overruns, all the public money comes out of special segregated funds, not the precious “general fund,” blah blah. It’s still city (or state) dollars that could be used for something else otherwise.

The Pistons are responsible for all costs relating to the development, construction, operation and maintenance of the practice facility.

That’s good!

The location of the team’s practice facility may be owned by the DDA, subjection to a concession agreement with the Pistons.

That’s possibly bad, since it means the practice facility wouldn’t pay any property taxes! Unless the concession agreement involved making payments in lieu of taxes. Reply cloudy, etc.

The Pistons have agreed to a 10-point community benefits plan, including investing $2.5 million over six years for the construction, renovation and refurbishment of more than 60 basketball courts in Detroit, the employment of at least 51 percent of Detroit residents on the construction of the practice facility and provide 20,000 free tickets a year to Detroit youth and area residents.

Better than nothing, but for what the DDA is putting into this, they could have built 1,000 basketball courts.

So, wait, who’s paying for that practice arena again?

Wait, what?

Okay, phew. You know, this “rough draft of history” stuff was a lot easier before Twitter got people publishing their actual rough drafts.

Anyway, total public subsidies for the arena are now at $334.5 million at minimum, and possibly even higher than that. You can argue that it’s worth it to Detroit to throw this money at the arena in order to lure the Pistons across the border from Auburn Hills — the tax impact may not be as huge as team owners like to pretend, but it doesn’t have to be to repay just $34.5 million — or you could argue that the Red Wings are eliminating a competitor (the Palace at Auburn Hills will almost certainly be razed now) and the Pistons are getting a newer home, and they’re both owned by billionaires who clearly want to do this deal regardless, so why the hell can’t they pay for adding a basketball court instead of Detroit be giving up scarce tax revenue?

More news tomorrow morning, if the magic eight ball clears up.