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Detroit’s bankruptcy filing raises questions about Wings’ arena plans

Jul 22, 2013, 11:22 AM EDT

Joe Louis Arena Getty Images

The city of Detroit’s bankruptcy filing should not affect the Red Wings’ plans to build a new downtown arena, according to Brian Holdwick, executive vice president of business development of the Detroit Economic Growth Corp.

From The Associated Press:

Plans for an 18,000-seat arena were announced by the team’s owners and local economic development officials last month, although the new proposal still needed to be approved by the City Council and a handful of state and local agencies. The Red Wings said there will be $367 million in private investment and $283 million in public funds in the complex, which would also include residential, retail and office space.

Spending that kind of money on an arena — in a city where bankruptcy could mean laying off employees and scaling back basic services — could draw some public resistance. Holdwick said funding for the project would come from tax increment dollars that can’t be used by the city’s general fund anyway, so it’s not necessarily a zero-sum game between building an arena and easing Detroit’s financial pain.

But despite Holdwick’s opinion, the Red Wings have yet to comment on the city’s bankruptcy filing, which may suggest the club isn’t entirely confident that nothing has changed.

After all, in a place where so many people are facing economic hardship, spending millions of taxpayer dollars on a new arena for a pro sports team was already politically sensitive. After last week’s news, it may be even more so.

  1. wingsdjy - Jul 22, 2013 at 11:50 AM

    “Holdwick said funding for the project would come from tax increment dollars that can’t be used by the city’s general fund anyway”

    Sounds like accounting B.S. to me.

    • polegojim - Jul 22, 2013 at 4:36 PM

      It’s not BS… keep your day job wingsdjy… ; )

      • wingsdjy - Jul 22, 2013 at 4:54 PM

        Care to elaborate?

      • polegojim - Jul 22, 2013 at 5:02 PM

        Sure – It’s not BS accounting… it’s based on overall immediate/compounded financial impact and residual benefits for years to come, not just a ‘hand out’ of public funds.

        You have to figure in – taxes on new construction materials, taxes from construction worker earnings and housing… fuel purchased and burned… equipment maintained and parts purchased… related human and business services… the employment impact… money/taxes spent on spending of construction workers in the area… future income from the residential purchases, retail build outs.. retail rents… utilities to all retail and residential units… wholesale purchases then rehashed into retail sales… taxes turned at each step.

        The related net effect is compounded and $ recycled many times over and over, and Muni’s consider this when they they agree to this type of funding. It’s not a gesture of good will… the City intends to benefit in a very healthy way from the dollars spent.

        Consider the compounded financial impact of 600 mil spent in the City of Detroit… the overall effect of creating and/or relocating 8,000+ jobs in an area that DESPERATELY needs it.

        CVBs work similarly – they may fund a portion..or all… of a groups rental costs at a venue… in order to help their City gain much MORE benefit from related dollars spent. Perhaps $20,000-$50,000 as an incentive for a group to bring 10-20 million in attendee spending.

      • wingsdjy - Jul 23, 2013 at 9:25 AM

        Thanks for the explanation.

        I’m not disagreeing that spending/investing money in Detroit will create jobs. I just don’t understand why, in general, the $283M can’t be used in the cities general fund. Would’ve been nice if the article explained the tax laws for the layman.

      • polegojim - Jul 23, 2013 at 4:00 PM

        @wings – No Prob – you were right that it’s complicated. I’ve worked with a number of these situations.

        My intent was just to highlight why the funding may still happen, even with bankruptcy – and that if it does… it’s not a Red Wings hand out or Ilitch taking advantage of Detroit.

        The City of Detroit ‘should’ stand to gain more than the payout.

        BTW… I’m not related to the immediate Ilitch Fam… but I am a second gen Polego From Detroit… so there could be ties… and I love Pizza Pizza! ; )

  2. 1337ryan - Jul 22, 2013 at 12:22 PM

    Using any public money is a ridiculous idea. And how much longer are there going to be people around to fill that arena? Doesn’t look like anything is getting better around Detroit.

    • tmarchione - Jul 22, 2013 at 12:32 PM

      No one that lives in the city of Detroit is actually going to the games anyway. There are 3.5 million people in the Detroit Metro area, and only 800k of them within the city limits. The hockey fans are all in the suburbs anyway.

      The taxes that will pay for this are the same type that paid for Ford Field and Comerica Park (also owned by Mike Illitch). They are taxes on restaurants, hotels, tickets, and probably some type of casino tax. I doubt that the city of Detroit is going to piss off their biggest land owner/tax base over money they couldn’t use anywhere else anyway.

    • polegojim - Jul 22, 2013 at 4:35 PM

      @1337 – you do understand that the Red Wings, Tigers, and Lions all create HUGE Tax revenues for the City of Detroit, right???

      These types of negotiations are predicated on that fact… all over the country… for all stadiums and arenas of this nature

      You act like the Wings are asking for a handout… when their revenue has helped keep Detroit afloat.

      • ripaslapper - Jul 22, 2013 at 9:38 PM

        I would add that Mr. Illitch has remained one of the city’s biggest supporters and has made a point to KEEP his businesses within the city limits, not run to the suburbs. Do we need a reminder that this is the man who sold General Motors their billboard space for $1.00 when the company was in bankruptcy preserve their space within Detroit’s ballpark? Why? Because it was the right thing to do. There is a reason why he built Comerica Park downtown and the Motor City Casino is right across the street. He placed a bid on the Pistons likely with the hope of bringing them down to Detroit in time. There is no question he wants to keep the Detroit Red Wings the DETROIT Red Wings. Mr. Illitch has kept people coming to the city and has driven business revenue and tax revenues into Detroit. Sure he asked for an investment from the local government to assist with building a new rink. Would that investment not return millions in tax revenues over the years? As opposed to other government subsidies that produce continued expenses over time and continually drain the system. Lets remember the man is 84 years old and wants to see the city succeed. He couldn’t care less about making a buck at this point in his life. To him, it’s about preserving the city’s sports teams and making them viable enterprises for generations to come, and in turn, seeing the city make a comeback.

  3. quizguy66 - Jul 22, 2013 at 12:25 PM

    I can only guess Ticket taxes and perhaps hotel taxes would be the means of public funding is what they mean by “incremental dollars” – that is people going to the arena will be the ones taxed. Just a guess.

    -QG

  4. kometfan1709 - Jul 22, 2013 at 12:33 PM

    Not a dime of public money, whether from a “tax increment” or not, should be used at all, ever. Not just in Detroit, but anywhere. Mike Ilitch has enough money to use “Franklins” to wipe his backside. Use your own $$ for the new barn, Mike!

  5. detroitcityy - Jul 22, 2013 at 12:56 PM

    Detroit sells out every game and definitely needs a new arena, but it should not come from tax dollars

  6. shoobiedoobin - Jul 22, 2013 at 1:01 PM

    I love how suddenly everyone’s a financial analyst. The idea is that this arena will produce money, not spend it. The Illitch family has given back to MI much more than anyone here will realize so I wouldn’t worry about this. The city’s financial troubles are bigger than the Red Wings.

  7. giantssb42champs - Jul 22, 2013 at 1:07 PM

    Field of schemes

    • shoobiedoobin - Jul 22, 2013 at 1:15 PM

      Hockey isn’t played on fields

      • micklethepickle - Jul 22, 2013 at 1:46 PM

        Eh, it wasn’t terrible, so you have to give him SOME credit..

        Maybe “Something stinks about this rink” would’ve been better?
        Or “Team takes city to the cleaners over the Red Wings’ new arena?”
        I know, I know, kind of a stretch. Would you believe I’m a writer by trade?

  8. comeonnowguys - Jul 22, 2013 at 1:51 PM

    First Coyote fan who says the team should move to Seattle gets BANNED.

  9. LampyB - Jul 22, 2013 at 3:24 PM

    I’m from the area and 99% of the seats filled from the burbs, not downtown detroiters. And no, theres no justification for using taxpayers to fund an arena. Shouldn’t EVER happen, I don’t care what city we’re talking about. The Blue Jackets are a prime example…

    • dueman - Jul 22, 2013 at 4:24 PM

      So you are from the area, does that mean that you know where the 17,000 people in the stands live? What a stupid thing to say! You couldn’t possibly know where they live. I did give you a thumbs up for the tax payer funding opinion though. I agree that a guy as rich as Illitch should not be taking tax payer monies to build an arena to make himself richer, specially from a bankrupt city! Also, from what I have read the money that was promised in the deal was to be coming from some sort of education fund, which in my eyes makes it worse!

      This is a quote from the story as written on the NHL site – “Michigan lawmakers in December approved a measure allowing tax dollars collected by the Downtown Development Authority to be used for the development. The DDA has been allowed for nearly two decades to pay down Detroit’s general obligation bonds with about $12.8 million a year that otherwise would have gone to education statewide.” – Like I said, they are using monies that are supposed to be used on education to build an arena for a rich guy to get richer. How wrong is that?

    • polegojim - Jul 22, 2013 at 4:42 PM

      Oh Lampy and Dueman… understand the economics of teams that are called by a ‘City’ name… DETROIT Red Wings… the city receives HUGE tax/revs benefits and in return, they may fund part of an arena or stadium.

      There are huge PRIVATE dollars spent… and the City is asked to kick back some of it’s earnings.

      • polegojim - Jul 22, 2013 at 4:54 PM

        PS Folks… also figure in – taxes on new construction materials, taxes from construction worker earnings and housing… fuel purchased and burned… equipment maintained and parts purchased… related human and business services… the employment impact… money/taxes spent on spending of construction workers in the area… future income from the residential purchases, retail build outs.. retail rents… utilities to all retail and residential units… wholesale purchases then rehashed into retail sales… taxes turned at each step.

        It is NOT a simple formula of ‘GIVING the Red Wings some Money. The related net effect is compounded and $ recycled many times over and over.

        Stop thinking small… it’s not a handout. Do you realize the compound financial impact of 600 mil spent, and the creation and relocation 8,000+ jobs will create in an area that DESPERATELY needs it?

  10. gerryf19 - Jul 22, 2013 at 3:54 PM

    When Holdwick said the money comes from increment dollars that cannot be used for the city general fund anyway, he referring to a special kind of public funding. In any municipality, all property is taxed at a given rate and those funds generally go to the community coffers/ Municipalities, however, can said up special districts known as TIFA districts (Tax Increment Financing Act Districts) that “capture the dollars that were already going to be collected for the general fund, but instead diverts them into a special fund that can only be used for improvements in the existing district (the district is a well defined geographic area). Downtowns use TIFA districts for road, sewer, water and other infrastructure improvement so that the money raised in the geographic area stays in the geographic area (as opposed to raising revenue and allowing politicians to spend it however they wish. It does not increase taxes or lower them–it dedicates them to a specific purpose.

    • polegojim - Jul 22, 2013 at 4:43 PM

      Thank you!!!

  11. dhalb34 - Jul 22, 2013 at 3:55 PM

    I’m not a bankruptcy guru, so maybe someone can answer this for me. Can’t the bankruptcy judge prevent any public money from being spent until the bankruptcy hearings are complete? And if Detroit does spend public money on a new stadium, stuff is going to hit the fan, if you know what I mean.

  12. pastabelly - Jul 22, 2013 at 4:27 PM

    They have looked at the Palace at Auburn Hills before and should consider it again. I don’t understand why any city needs separate hockey and basketball arenas. That truly is a waste of public money.

    • wingsdjy - Jul 23, 2013 at 9:29 AM

      Here’s an idea…maybe they should move the Detroit Pistons into Detroit.

  13. richardgibbard - Jul 22, 2013 at 4:39 PM

    So what would happen with the Joe and its People Mover station?

  14. alboraison - Jul 22, 2013 at 5:41 PM

    Detroit is great for the Red Wings. The hockey fan base can live just fine with a 55-min response time from the Detroit police. It’ll give everyone a chance to exercise their right of self-defense before the officers arrive.

  15. alboraison - Jul 22, 2013 at 5:42 PM

    I wish they’d put the Wings on Bob-Lo island.

  16. blackhawks2010 - Jul 22, 2013 at 11:02 PM

    Hockeytown? Repossessed.

    • polegojim - Jul 23, 2013 at 4:05 PM

      Naw…. just restructuring and resharpening for a Blackhawk scalping!

  17. slysipops - Jul 23, 2013 at 9:50 PM

    i watched quite a few WINGS games last year where a LOT of seats were empty . maybe they show home games on local tv ? it would be horrible for an original 6 team to have to up and move !

  18. michflaguy - Jul 24, 2013 at 3:37 PM

    Time to move to Oakland County!!!!!!!!!

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