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The Wings' future arena will bring gains and losses for its host city -- a slippery balancing act that Free Press reporters Joe Guillen and JC Reindl explore Sunday.
They start with a rollback of benefits dating back to Coleman Young's era, but we try to keep a glass-half-full perspective and share this sixth paragraph first:
The new arena, which also will host non-hockey events, is expected to revitalize a commercial dead zone between downtown and Midtown and later anchor a proposed spin-off development of residential, entertainment, retail and office buildings worth $200 million.
Guillen and Reindl also look on the bright side near the end of their in-depth financial analysis:
A University of Michigan professor projects that the new arena will employ 1,100 people, or 440 more than the Joe as a result of a larger concourse and extra amenities and restaurants. Those new jobs — and their payroll taxes — would benefit Detroit.
When the new hockey arena opens, as soon as 2016, Detroit no longer will get 5% of souvenir sales there -- or revenue from tickets, refreshments, suites and parking.
Here's the downside, though
With a new hockey arena on track to open as early as the 2016-17 season, the [late 1970s] agreement between the City of Detroit and the Red Wings will disappear, and with it about $7 million in revenue the city received annually from the team’s home games.
Under a new deal hashed out between representatives of the team’s owners, Mike and Marian Ilitch, and state and local development authorities, the Red Wings will no longer have to share 10% of ticket proceeds, 7% of suite sales, 10% of food and beverage concessions, 5% of souvenir sales and other revenue from parking. All of that money — estimated to be about $7 million annually — would belong to the Ilitches’ Olympia Development of Michigan when the team moves north of downtown into a proposed $450-million arena.
In addition, any future proceeds from the selling of naming rights to the new 18,000-seat arena would also go to Olympia Development. Other NHL teams have snagged corporate naming rights deals worth millions a year or more.:
The Freep's headline sharpens the point with context: "Ilitches to get all revenues from new publicly financed Red Wings arena."
Brian Holdwick, an executive vice president at the Detroit Economic Growth Corp., is quoted in defense of the arrangement:
“Given the amount of money that the city’s put into this — which is zero — it’s a great deal for the city and its residents.”
Holdwick and Mark Morante of Lansing, a senior vice president of the Michigan Economic Development Corp., "told the Free Press that the proposed 58% public investment was too small for them to negotiate a share of future revenues like Young did for the Joe," the article says.
Here's who's paying for the new project:
Olympia Development will pick up 42% of the arena’s construction cost. The other 58% — the public’s share — will come from a complex financing arrangement that uses school and local property tax revenue collected by Detroit’s Downtown Development Authority to pay off state-issued bonds. The authority will own the arena and lease it — rent-free — to the Red Wings for up to 95 years.
The 30-year bonds would be partially paid off . . . from money the development authority captures from school property taxes. The state would then reimburse any shortfall to Detroit’s per-pupil funding as a result of the redirected property taxes — an obligation that will put state taxpayers on the hook for the majority of the arena project’s public investment. . . .
The Ilitches’ Olympia would contribute $11.5 million a year to paying off the bonds. It is also responsible for any cost overruns during construction, as well as maintenance, repairs and security at the new arena.
The city would not spend any money on the arena itself. Its only direct contribution to the project: the sale for $1 of three dozen blighted parcels of Cass Corridor land.
