How The Ilitch Organization Scammed Hockeytown On The New Arena

With the passage of time, more and more informed critics are examining the new arena deal between the bankrupt city of Detroit and the Red Wings and concluding that the city failed its residents badly, especially considering Mike Ilitch is a billionaire and the city is $18 billion in debt.

The Free Press, in a story Sunday, concluded the Ilitch family scored better than taxpayers in the deal.

Now comes Bill Bradley, writing an article in Next City, which was excerpted in Deadspin. His conclusion:

"The Ilitch family—with its estimated $3.2 billion net worth—will get a new stadium, slated to open for the 2016-2017 season, built off the backs of taxpayers."

Bradley writes:

Now the storied franchise is headed due north, where it will set up shop between the downtown core and rapidly developing Midtown neighborhood in a roughly 45-block footprint unimaginatively billed as the "arena and entertainment district." The total price tag, including additional private investments in retail and housing, is an estimated $650 million, $284.5 million of which will come in the form of public investment.

No money will come directly from the city's general fund—something advocates of the deal are quick to point out—but instead the bulk of public funding will come by way of tax increment financing (TIF). Taxes captured in the 615-acre Downtown Development Authority (DDA) district will be poured into the project. The Michigan Strategic Fund, a state economic development agency, will issue 30-year tax-exempt bonds backed by three revenue streams: The aforementioned TIF capture, various other tax revenues from the DDA and Olympia Development, the Ilitch's $2 billion enterprise.

The TIF capture will contribute at least $12.8 million annually, though it can't exceed $15 million. The DDA will contribute about $2.15 million in separate tax collections. Olympia will toss in $11.5 million. And, as Crain's Detroit detailed in July, public money will pay for $261.5 million (58 percent) of the construction costs, while Olympia only has to pay $188.4 million (42 percent).

If you're searching for something particularly craven in the complicated financing structure—that is, something other than the careless use of public money itself—look to where, exactly, the tax capture comes from. In December 2012, the Michigan legislature restored Detroit's ability to levy school-tax funds from the downtown district for economic development purposes. If that $12.8 million annual gift weren't going to the Illitch empire, it would go to the state's School Aid Fund.

This is not to say that the arena will take money out of Detroit Public Schools (DPS) general fund. "The state is making up the shortfalls," said Bob Rossbach, spokesperson for the DDA. "So there is no difference to a student in Detroit Public Schools whether this money is refunding bonds or goes directly into the DPS budget." But it is diminishing the state's School Aid Fund by diverting the taxes for "economic development" purposes. Something, somewhere, is taking a hit.

Previously on Deadline Detroit: