Let Hockey Fans, Rather Than Over-Extended Taxpayers, Build The Red Wings Arena

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As a hockey fan, I’m excited for the Red Wings' new arena. As a taxpayer, I’m wondering why I’m required to pay for a barn where millionaire athletes compete for billionaire owners.

Don’t we have better uses for the public treasury, especially when you consider the reams of research that conclude there is virtually no economic value for cities that subsidize arenas and stadiums? Maybe we should use tax dollars to make good on public pensions or make college more affordable. It’s just a thought.

Now, subsidy proponents say we shouldn’t worry about that because the arena’s public money won’t come from the "general fund." This is one of those half-truth/whole-lie propositions offered by politicians and self-interested businessmen. This money won’t come from a general fund because it will be diverted to the arena before it has a chance to land in anyone’s general fund.

This is akin to a highway robber arguing that hijacking a shipment of Little Caesar's pizza sauce is ok because he took no sauce from Little Caesar's warehouses or stores.

What if hockey fans paid for the arena themselves? Perhaps with a special ticket surcharge to pay down what is currently anticipated as the taxpayers’ portion of the arena cost.

Let’s consider the basic numbers that we know about the project.

According to Bill Shea’s report in Crain’s Detroit Business, 30-year bonds issued by the state will finance the project. Downtown tax revenue will be diverted from normal uses to pay for $284,500,000 of the total project cost.

Presumably, that’s the portion of the project that poor old Mr. I just can’t fund through normal business revenue. We must assume that much because a sincere Detroit booster like Mike Ilitch would never take advantage of taxpayers for his own profit. He’s only asking for this help because he knows how much this arena will really help Detroit and, you know, he’s already doing all he can without raising the price on Hot’N’Readys.

So, divide $284.5M by 30 and you get an annual public cost of $9,483,333.34.

The Wings pay 41 regular season home games and four home preseason games. Joe Louis Arena also hosts about ten other major events every year from obvious sell-outs like the upcoming Justin Beiber concert to the GLI college hockey tournament. Playoff games seem like a given, but in the interest of prudence, let’s not consider those in our formula.

That leaves us with roughly 55 annual events. The new arena is expected to have a capacity of 18,000 (down from the 20,000-seat at the JLA) and the Wings sell-out the larger building. However, to be prudent, let’s assume 90% average capacity at all 55 events. That works out to a total annual attendance of 891,000.

Divide $9,483,333.34 by 891,000 and you get a per ticket surcharge of $10.60 to pay for the public cost of the new arena.

If that sounds steep, consider the a $4.75/ticket fee the Ilitch-owned Tigers charge for the “convenience” of purchasing seats from their website. An extra $10.60 surcharge to watch the Red Wings play in a state-of-the-art venue doesn’t seem so bad by comparison.

There are probably ways to lower per ticket surcharge by spreading this cost over concessions and the 500-space parking garage that’s part of the project as well as tickets. Presumably, the garage will operate year-round to accommodate other downtown activity.

I also have to assume that, with their customers now footing the bill, the Wings may be motivated to find ways to lower the arena’s cost at the margin. Do they make 720p Jumbotrons?

Now look, I freely admit this is very general back-of-the-envelope arithmetic. I lack the financial acumen to, for instance, take Philadelphia’s $25 million, 30-year bond issue used to finance Veteran’s Stadium in 1964 and turn it into a $183,000 debt 49 years later.  I'll leave that sort of fiscal gymnastics to the green eyeshade-set over at the Detroit Economic Growth Corporation. The Vet, incidentally, was demolished in March, 2004.

Truth be told, the numbers are less important than establishing a framework in which the people who benefit most from a new hockey arena—hockey fans and other arena users—pay for it, while leaving already over-extended public treasury to focus on the cops and schools and roads.
 

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