Red Wings arena could endanger two historic Detroit buildings, council responds by not showing up

The Detroit Red Wings arena plans have hit … not exactly a snag, but possibly a speed bump, as city residents have belatedly realized that the area Red Wings owner Mike Ilitch is asking to have rezoned for development includes two historic hotel buildings, and Ilitch hasn’t specified whether he’d preserve them or raze them. And the city council is desperately interested in this matter:

On Thursday, a crowd of residents, activists and representatives of the Ilitches’ company, Olympia Development of Michigan, packed the council chambers for a committee meeting on the issue, but only two council members — Brenda Jones and Andre Spivey — showed up. The predicament left the council without a quorum and unable to ask questions.

Okay, somewhat less than desperately, then. The council has a hearing on Tuesday at which it could vote on the rezoning, or could kick everything back to January, depending on how committed it is to this whole “asking questions before voting” thing.

Did Detroit let Lions and Red Wings stall on water bills while punishing residents? Definitely maybe

The Daily Show took a look last night at how Detroit is shutting off water to poor residents who don’t pay their bills, but has left the water on for the Red Wings and Lions despite delinquent payments. It got lots of attention, and because the Daily Show is a comedy show, much of it was of the “Ha ha, so amusing” variety:

The controversy over water shutoffs for Detroit residents unable to pay their bills was front and center Monday night on Comedy Central’s “The Daily Show with Jon Stewart.”

It was a story that took some humorous twists and turns, and it probably was deemed offensive or even inaccurate to some as well.

That article on MLive didn’t actually provide any details of anyone who thought the segment was offensive or inaccurate, but in a followup, the site provided this:

“I can say right now that the information was not accurate,” DWSD spokesperson Curtrise Garner told MLive.com…

Garner said she would send MLive more information via e-mail Tuesday afternoon to show that all the commercial accounts mentioned in the “Daily Show” report have been paying their bills and don’t have any overdue balances.

“I’m taking a look at the larger ones here in the city and they are all current,” Garner said over the phone.

So where did this report of overdue water bills come from in the first place? It looks like from a June article in the Guardian, which further linked to a blog post by Oakland University journalism professor Shea Howell that reported that “Joe Louis Arena/Red Wings Hockey owes $80,000 and Ford Field $55,000.” Howell didn’t provide a source for those numbers, but they’re pretty specific to be made up, leading to the likely conclusion that if everyone is telling the truth, the Red Wings and Lions were behind on their water bills in June, didn’t get their water shut off, and have since paid up. Which is, as the Daily Show segment makes clear, the same treatment that low-income water protestors are requesting from the city.

I’m trying to reach Howell to get more info on her numbers, but as MLive seems eager to show us, modern journalism doesn’t need to wait until we see the actual documents. Updates as needed.

[UPDATE: Okay, thanks to a couple of correspondents who wish to remain nameless, I’ve tracked the Lions/Red Wings water bill story back a bit further: This all dates back to an April WDIV-TV report that found that the two sports teams were behind on their water bills. As of July, the teams still hadn’t paid, but as the Detroit water department told Metro Times, it was because the Lions and Red Wings owners were disputing their past stormwater runoff bills, which the water department was “still in the process of trying to collect.”

So: Detroit’s sports teams aren’t being allowed to keep their running water despite not paying their bills for that; they’re allowed to keep their running water despite not having paid different water bills. Which is less black and white than the simplified version that the Daily Show presented, and they probably should have done their homework better, or at least explained the situation more fully. But the general “one system for poor folks and another for big corporations” vibe is still legit.]

Glendale’s lease deal with Coyotes is now officially most godawful of all time

Glendale’s series of lease deals to lure and keep the Arizona Coyotes in town have always been among the worst in sports history: The city built a new arena at its own expense and charged the Coyotes only $1 minimal rent [EDIT: see comments for more on the Coyotes’ past and present rent situation], gave the team $50 million in operating subsidies to keep its owners from leaving town after it filed for bankruptcy, then agreed to pay another $15 million a year for the next 15 years to ensure that the team stays put, leaving the city with a budget drowning in red ink even after laying off a quarter of municipal workers. That was all bad enough, but what may kick this over the top to Worst Sports Venue Deal Ever: Glendale gave the Coyotes owners an out clause that will let the team move even if it’s not losing money.

The short version, condensed from David Shoalts’ excellent investigation in Friday’s Globe and Mail: Under the escape clause, the Coyotes’ owners can break their lease and move the team if they’ve lost at least $50 million over the first five years of the deal, running through 2018. That would seem to be hard to do when you’re getting $15 million a year in subsidies from your landlords and paying very little rent, but the Coyotes figured a way around that:

The $15-million from Glendale is recorded as revenue on the books of the company [George] Gosbee and [Anthony] LeBlanc formed to manage the arena, not on the books of IceArizona, the company that owns the Coyotes. While that money eventually flows to IceArizona because it owns the arena manager, for perfectly legal accounting purposes the parent company can claim a larger loss on its hockey operations, which ratchets up the number for the escape clause. Just as important, it also means the $15-million is not recorded as hockey-related revenue, which has to be shared 50-50 with the players under the collective agreement.

So not only is Glendale paying the Coyotes to play in its arena, it’s agreeing to let the team owners claim unmanageable losses by not counting those payments on their books. That is some kind of crazy.

Now, it’s always possible that Gosbee and LeBlanc (and possible new majority investor Andrew Barroway) won’t exercise the escape clause, because where else are they going to find a city that’s willing to give them a free arena plus $15 million a year in cash while doing so in such a way that they’re still eligible for NHL revenue-sharing payments. But then, they don’t have to actually exercise the escape clause to make use of it — they can use the mere threat of it to try to extract even more concessions from Glendale in a revised lease. You may think Glendale is tapped out by now, but when you’re this far down the road in a long con, there’s nothing left to do but see how far you can push your mark.

No, Columbus Blue Jackets’ future isn’t actually threatened by county’s arena loan woes, yeesh

Mike Ozanian, aka the guy who’s been overseeing the Forbes sports team valuations since before Forbes was even doing them, took a look at the Columbus Blue Jackets arena loan payments mess yesterday, and declared that the team may be “economically nonviable” in its current home.

On the face of it, this doesn’t make a lot of sense: Franklin County has skipped out on paying off its debt on the Blue Jackets’ arena (which the Blue Jackets initially took on, then decided it’d be way better if somebody else were stuck with paying for) because money from taxes on new casinos is running way below expectations. That doesn’t say anything about whether people in Columbus like hockey, just about how much they like spending their money at casinos — and about how rose-colored the glasses were that Franklin County officials donned before approving this deal.

What Ozanian seems to be getting at, though, isn’t anything about the current arena payments mess, but rather what it will reveal about the Blue Jackets’ shaky underlying finances. Team execs demanded the money in the first place, after all, because they said they couldn’t possibly pay off the arena that they themselves built while also running an NHL franchise in Columbus, and Franklin County agreed to bail them out. Now that the bailout money is on hold, Nationwide (which originally built the arena with the team) will have to wait on its loan payments. The Blue Jackets owners, meanwhile, will be on the hook for arena operations and maintenance, which are … actually just barely being paid off by what casino tax money is coming in, but, you know, if that number drops, then they might have to pay something toward running their own arena!

Certainly, any cost for the Blue Jackets will be a lot, given that Ozanian’s own figures for Forbes show that the team was losing larger and larger sums of money until the arena operating costs were taken off their hands in 2013. On the other hand, the team did make an estimated $4.9 million profit last year under the new deal, and casino revenues would have to drop by an awful lot before the Blue Jackets’ share of operating costs would make a significant dent in that. And anyway, under the bailout deal the Blue Jackets are committed to playing in Columbus through 2039, so it’s not like they could do much even if they were “nonviable.”

So mostly Ozanian’s article comes down to “County’s Threat to Make Blue Jackets Pay Own Arena Costs Reminds Everyone How Broke Team Was Before Public Bailed Them Out.” Poor, sad Blue Jackets. Hey, I know what would cheer them up — a nice fun trip to a local casino! Because that always helps!

Franklin County not making payments on Blue Jackets arena, because turns out there’s no money, oops

Hey, everybody, remember when Franklin County refused to let residents vote on whether to stop payments on the Columbus Blue Jackets‘ arena because if the county voted to pay for things and then didn’t that would make them look terrible? Turns out the county has stopped making payments after all, for a simpler reason — they don’t have any money! It’s irony!

The city-county authority financed the $52 million deal through loans from Nationwide and the State of Ohio in March 2012. To make the payments, the city and county pledged to use a portion of casino tax revenue.

But casino revenue is far below projections. And Franklin County Convention Facilities Authority Executive Director Bill Jennison said no payments have been made to pay off either loan. More than $3 million remains unpaid.

County officials say that if casino taxes don’t start rolling in, they’re not going to fill in with general revenues, but rather will just make bondholders sit and wait for their cash. Wait how long?

[Activist Jonathan] Beard ran his own numbers and expects the city-county authority to be paying on the loan far beyond 2039 based on current casino-tax revenues returns.

“We showed a $1.8 billion deficit at the end of 100 years when we’d still be paying on the [arena]. So it’s this huge albatross,” Beard said.

Yep, that’s a while. I’m guessing at some point somebody is going to suggest selling a few hospitals to save the county’s bond rating in the meantime.

Sporting News went to a Florida Panthers game, and the Miami Marlins’ attendance broke out

The Sporting News has been publishing since 1886, but never let it be said they haven’t learned how to update their headlines to the way the kids today like them:

Oh boy, the Panthers’ arena is empty again (PHOTOS)

And here’s one of the promised PHOTOS:

It got a bit better once the game actually started, but still, it’s never a good thing to have the Sporting News writing: “Part of the reason for all this: the team ended its long-running practice of ‘giving away tickets for free just so the building will have people in it’ for this season.”

Panthers owner Vincent Viola still wants $80 million from Broward County to make it worth his while to keep the team in town — despite a lease that runs through 2028 and the fact that he still makes money on the arena operations despite nobody going to hockey games — but at this point you have to wonder what he’d do with it to get people interested, unless he just stands at the doors handing out twenties to anyone who agrees to watch this strange “hockey” thing.

Markham arena proposal still missing, declared dead

This happened a while back, but I didn’t want to leave you hanging: Remember how Markham’s crazy arena plan was pretty much killed last December, when the city council sent it back to the drawing board for further study? Well, apparently it’s now completely dead, thanks to the developer in charge of it disappearing off the face of the earth:

In the summer, staff confirmed that they were no longer in touch with Graeme Roustan, the arena’s chief promoter, and the project was officially over.

“We never heard from him again,” said Joe Li, who is running for a second term as regional councillor and was one of the first to oppose the financial plan for the arena.

Yeah, that would have gone well if they’d gone ahead with it. Now somebody just tell Howard Bloom that there’s not going to be a place for a second Toronto team to play.

Arizona Coyotes being sold again (of course), could demand more subsidies (of course)

The saga of the Phoenix (now Arizona) Coyotes was one of the longest in recent sports history, and ended in 2013 with the city of Glendale agreeing to pay the team $15 million a year to stay put in town for just five more years. But at least it’s finally over, and now Coyotes fans, such that there are fans, can enjoy the Coyotes season in peace, such that there’s much to enjoywait, what now?

The city of Glendale is not sure what impact — if any — a sale of the majority stake in the Arizona Coyotes will have on a $225 million arena accord reached with hockey team’s owners last summer…

City officials are not sure yet if a change in Coyotes majority ownership would necessitate a new or amended arena subsidy.

Why on earth would Glendale have to kick in more money just because of the checks being made out to a different name? Phoenix Business Journal doesn’t say, but presumably it’s connected to the out clause in the Coyotes’ lease, which allows the team’s owner (whoever it is at the time) to break the lease and move the team in 2018 if they’ve lost more than $50 million over the previous five years.

The Coyotes say they lost $24 million last year, which would certainly put them on the path to lease breakage. But it’s not entirely clear that that entire loss is really loss. As David Shoalts of the Globe and Mail explains it:

The problem for the latest owners is the same as it was for all the previous owners – despite any claims to a successful first year, the Coyotes’ cash flow is not enough to service the franchise’s enormous debt. The team’s hockey-related revenue (HRR) for the 2013-14 season was said to be just $40-million, last among the NHL’s 30 clubs.

Gosbee and LeBlanc borrowed $120-million from Fortress Investment Group and $85-million from the NHL to finance the team and have some working capital left over. While the NHL loan is at favourable terms, one source pegs the interest rate for the Fortress loan at 10 per cent.

The New York Post, which first reported the $24 million loss figure, doesn’t indicate if this counts debt service. But if it does, it’s completely ridiculous: Just because the team’s owners took out a terrible loan (which is soaking up the entire $15 million in subsidies from Glendale to pay off) because they didn’t have enough cash to buy the team shouldn’t count against the franchise’s performance. And it certainly shouldn’t allow the Coyotes owners to cry poverty in order to demand more subsidies. (They would have to repay some of the subsidies to do so, but it’s not really about whether they’d use the out clause, but whether they’d threaten to.)

Anyway, let this be a reminder to city officials everywhere: Don’t sign lease clauses based on team profits and loss, because the teams can cook the books however they want. Maybe someone could just print up some nice plaques with Paul Beeston’s quote on it and send them around to city halls everywhere? The world will appreciate it.

Detroit using adjustable-rate bonds for Red Wings arena because that’s all banks would give them

Here’s some more explanation of the Detroit Red Wings‘ new arena financing plan revealed last week, courtesy of Crain’s Detroit’s Bill Shea. In short: It’s still pretty much the same deal as announced last year, which is that the state and city give Red Wings owner Mike Ilitch about $300 million in cash and land, but it’s cash that the state says it’ll only use for economic development anyway, so why not give it to Ilitch instead of blowing it on something like working streetlights?

The main new twist appears to be that the Downtown Development Authority had to use variable-rate bonds for the project — i.e., bonds where the interest rate can go up later if the prime rate rises — because “under market conditions right now, [fixed-rate bonds were] not available,” an indicator that bond brokers weren’t real excited about this deal, and an explanation of why those interest-rate swaps were necessary as a hedge against interest rates soaring down the road. Though apparently the DDA intends to refinance in a few years once the project is underway and they can maybe get a fixed-rate loan and … man, these people really are taking every page they can find from the real estate bubble financial playbook, aren’t they?

Detroit to use (DUNH dunh dunh!) interest-rate swaps in Red Wings arena deal

The Michigan Strategic Fund approved new terms for the Detroit Red Wings arena bonds this week that involve … frankly, I don’t entirely understand them either, despite an excellent Bill Shea article in Crain’s Detroit Business attempting to explain them. Suffice to say that the Downtown Development Authority will now be able to pay off the bonds more quickly if more tax revenue comes in than expected (instead of having a $15 million a year cap), plus there will be credit-default swaps, which nobody truly understands except that they almost broke the global economy.

[CORRECTION: In fact, they’re so confusing that I confused interest-rate swaps, which is what the DDA will be using, with the related but distinct credit-default swaps. Interest rate swaps didn’t almost destroy the global economy, just some municipal and state budgets. An interest rate swap is essentially a hedge against interest rates going up, but if interest rates instead go down, you end up paying more than you would have otherwise. With interest rates still at historic lows, that’s not too likely, but there’s still a decent chance that the DDA ends up spending money on the swaps that will gain it absolutely nothing in return.]

In the grand scheme of things, it probably doesn’t matter much, or at least doesn’t matter as much as the $300 million or so that the arena will be costing the Michigan public. But just in case it blows up spectacularly when the DDA spends all its money collecting Pat Boone albums, don’t say I didn’t warn you.