June 20, 2007

Red Wings dilemma: Sweetheart lease, or door #2?

Get ready for another sports facility funding battle in Detroit: Red Wings owner Mike Ilitch (who also owns the Tigers, Little Caesar's Pizza, and a giant machine that can block the sun's rays from reaching Detroit) has until August 16 to decide whether to renew his lease to Joe Louis Arena and Cobo Hall for another 20 years, and all indications are he intends to use this as an opportunity to squeeze more money out of his home town.

The big question facing Ilitch is whether he'll really risk giving up what the Detroit News calls "the most lucrative [lease] in the NHL" to take his chances on a new arena deal. Under the current lease, Ilitch pays just $450,000 a year for exclusive rights to the two arenas, and gets property tax breaks as well; the city imposes a 10% ticket tax and gets a cut of concessions of luxury suites, but under the terms of the lease, must give up even those if the lease is renewed.

You might think this would give the city of Detroit leverage in refusing to cough up city dollars towards a new arena, since Ilitch is sitting on such a gold mine already. If so, you would not be a writer for the Detroit News, whose reporter David Josar speculated that a new arena "would still be too costly without government assistance - especially since the Ilitches pay bargain-basement rent for control of the Joe and Cobo." This is perhaps a first in the history of sports subsidy deals: We need public money because we need to compete with the subsidy deal we're already getting.

Of course, the Red Wings are also availing themselves of more traditional tactics like the non-threat threat, telling the media that while they'd prefer to stay in downtown Detroit (wink, wink), they're looking at "numerous locations" for a new arena. One local TV station, noting that Ilitch already owns suburban land that could be used for a site, has already suggested the "Farmington Hills option" as one the Wings might pursue. I wonder: Is getting the nightly news to issue your threats for you part of the official rules?