detroit plans $650 million hockey arena

[alocispepraluger102]

http://www.huffingtonpost.com/2013/06/19/red-wings-arena-new-mike-illitch_n_3467092.html

"Looks like the Detroit Red Wings are really going to leave their riverfront digs for a new downtown Detroit arena. The city's Downtown Development Authority announced a plan and approved a memorandum of understanding to build a new home for the Original Six hockey club, owned by Olympia Entertainment founder, pizza magnate and Detroit Tigers owner Mike Ilitch.

The 18,000-seat arena will pack 650,000 square feet of total event center space north of Comerica Park and Ford Field, in the area long rumored to be eyed for a new hockey stadium."

[Hardbopjazz]

For a city that is in bankruptcy, that's a lot of money to spend. As long as it's not tax payer's money, good for Detroit.

[Blue Train]

The state/city is paying for two thirds of the cost. When you add in the interest on the bond for it....that will come to $444 million. Of that Detroit will be paying $284 million. If you add in the usual amount of subsidies given....it will probably be another $200 million on top of the cost of the stadium.

On top of their share of the stadium....the Red Wings will be spending $177 million on development around the area.

Whatever few permanent jobs are created will most likely be filled by people who don't live in the city itself. Only around 700,000 people still live in Detroit. Pretty hard to raise funds through taxes with no one living in the city.

Stadiums Cost Taxpayers Extra $10 Billion,

http://www.bloomberg.com/news/2012-11-06/stadiums-cost-taxpayers-extra-10-billion-harvard-s-long-finds.html

Edited July 28, 2013 by Blue Train

[alocispepraluger102]

The state/city is paying for two thirds of the cost. When you add in the interest on the bond for it....that will come to $444 million. Of that Detroit will be paying $284 million. If you add in the usual amount of subsidies given....it will probably be another $200 million on top of the cost of the stadium.

On top of their share of the stadium....the Red Wings will be spending $177 million on development around the area.

Whatever few permanent jobs are created will most likely be filled by people who don't live in the city itself. Only around 700,000 people still live in Detroit. Pretty hard to raise funds through taxes with no one living in the city.

Stadiums Cost Taxpayers Extra $10 Billion,

http://www.bloomberg.com/news/2012-11-06/stadiums-cost-taxpayers-extra-10-billion-harvard-s-long-finds.html

that's a fine, but sickening read. .................anything but better schools or hospitals.

[Blue Train]

Even though it has so few people remaining....Detroit still has a murder rate 11 times higher than that of NYC for example. It takes cops on the average of an hour to respond to calls 40% of the street lights are turned off to cut down costs.

Building schools? They're selling/leasing all the vacant ones they can. They already sold/leased 85 or so and have around another 80 available. You don't need that many schools with that small of a population.

http://detroitk12.org/admin/operations/real_estate/

There are so many vacant buildings/homes they set up a demolishing program. It's all straight out of Robocop.


http://www.detroitmi.gov/DepartmentsandAgencies/MayorsOffice/Initiatives/ResidentialDemolitionProgram.aspx

Edited July 28, 2013 by Blue Train

[alocispepraluger102]

Even though it has so few people remaining....Detroit still has a murder rate 11 times higher than that of NYC for example. It takes cops on the average of an hour to respond to calls 40% of the street lights are turned off to cut down costs.

Building schools? They're selling/leasing all the vacant ones they can. They already sold/leased 85 or so and have around another 80 available. You don't need that many schools with that small of a population.

http://detroitk12.org/admin/operations/real_estate/

There are so many vacant buildings/homes they set up a demolishing program. It's all straight out of Robocop.

http://www.detroitmi.gov/DepartmentsandAgencies/MayorsOffice/Initiatives/ResidentialDemolitionProgram.aspx

we may be looking at detroit in chicago in 60 years if things don't change.

http://weburbanist.com/2012/06/20/grandeur-lost-the-modern-ruins-of-abandoned-detroit/

Edited July 29, 2013 by alocispepraluger102

[ejp626]

I have really mixed feelings about this -- I read about it a few days ago. My gut is pretty sickened. On the other hand, local merchants (whoever are left) will benefit by spending during construction season. And depending on how the new stadium is configured, it might bring in new suburbanites to spend money in Detroit. Quite frankly, that is about the only way Detroit is going to get any new revenues, since it can't count on anything from its own residents.

Newark followed a fairly similar strategy (or rather N.J. pushed for this) with NJPAC and a minor league stadium and then the Devils stadium. It seems to be a strategy that is starting to pay off, though you could argue that 1) Newark never fell quite as badly as Detroit (arguable -- I was there during some very dark years and its murder/crime rate is still sky-high) and 2) Newark simply has a better location and won't ever be left to wither the same way that Detroit (or Camden!) was.

But if Detroit never comes back in any way, shape or form (and I think this is probably the case), then it is a poor use of tax-payer money.

I certainly worry about Chicago as well. It has a much better base and still has a more diverse (particularly economically diverse) population. However, my understanding is that if you combine Chicago (and its various subsystems) and then the Cook County share of Illinois' pension obligations, it is $50 billion short! See here: http://www.chicagobusiness.com/article/20130521/BLOGS02/130529975/city-halls-pension-spiral-worsens

The pension liability that caused Detroit's mess was less than $5 billion, though there were plenty of other things that had been borrowed for. Just looking at the pensions alone, Chicago seems in a worse position than Detroit. So we'll see...

[T.D.]

I've never (ever) seen a genuine economic study (aside from shills funded by developers) that found any benefit resulting from municipal/taxpayer subsidies for athletic stadia. The results are uniformly negative.

Good luck with that, Detroit...

[alocispepraluger102]

I've never (ever) seen a genuine economic study (aside from shills funded by developers) that found any benefit resulting from municipal/taxpayer subsidies for athletic stadia. The results are uniformly negative.

Good luck with that, Detroit...

these teams are private enterprises with, for the most part, publicly funded, playpens. they do provide some jobs and help some bars and restaurants.

Edited July 29, 2013 by alocispepraluger102

[ejp626]

I've never (ever) seen a genuine economic study (aside from shills funded by developers) that found any benefit resulting from municipal/taxpayer subsidies for athletic stadia. The results are uniformly negative.

Good luck with that, Detroit...

Mostly agree with you there, but from a Keynesian perspective, it really doesn't matter all that much what you spend funds on if you keep people employed. For whatever reason, politicians (including GOP politicians) will open up and give funds for sports stadia and conference centers and pretty much nothing else. (Nowadays you can't even get the GOP to reliably fund the Interstate Highway System!) So I figure they ought to take what crumbs they can get.

[GA Russell]

There is a college professor (an economist) named Andrew Zimbalist who specializes in the business of pro sports, and is frequently quoted in the paper.

He says that a city obtaining its first team receives economic benefits from it, but additional teams provide nothing to the city's economy.

[Blue Train]

I've never (ever) seen a genuine economic study (aside from shills funded by developers) that found any benefit resulting from municipal/taxpayer subsidies for athletic stadia. The results are uniformly negative.

Good luck with that, Detroit...

Mostly agree with you there, but from a Keynesian perspective, it really doesn't matter all that much what you spend funds on if you keep people employed. For whatever reason, politicians (including GOP politicians) will open up and give funds for sports stadia and conference centers and pretty much nothing else. (Nowadays you can't even get the GOP to reliably fund the Interstate Highway System!) So I figure they ought to take what crumbs they can get.

In Detroit's case they really won't even the get normal tax revenue that other cities building arenas/stadiums get. Most the employees (be they the 8,000 temporary ones involved in the construction, or the "expected" 400 permanent jobs.) won't be from and/or living in Detroit. Unless they buy something while in Detroit....the city won't see any of it's money directly coming back in taxes. The state on the other hand will at least make some money and the city will probably get some of it indirectly as part of funds the state normally gives cities.

That leaves only the taxes from those that come to the game, concerts/events or restaurants, bars, etc....even in normal situations these stadiums are always money pits in terms of return in investment for cities/states....especially since owners are now demanding new stadiums every 15-20 years, or renovations that cost as much a building a new stadium.

Look at the Rams they basically want to rebuild Edward Jones Dome @ $700 million and it's only 18-years old. The city still has another 12-years on the original bond to build it.

When it's all said and done the new arena for the Red Wings will probably end up costing the state/city between $700-900 million.

They need something that will get people to live in Detroit itself. The Red Wings already have a hard core fan base...the same people that were going to Joe Louis will be going to this...the prices will probably be higher which would bring in whatever difference more percentage wise. They will still book the same amount of other events. Once again whatever percentage in higher prices being the only difference in income.

They're going to include a hotel/restaurants and other buildings in the area.

People need a reason to come to Detroit to stay in that hotel. How many people fly in from out state to see a Red Wings game? Even if people do stay in the hotel it's just going to be money they would have spent @ another Detroit Hotel, or other similar places as those that will be built around the new arena.

I really don't see much of major enough difference in extra revenue to warrant the money being spent....especially with Detroit being $18 billion in debit.

Edited July 29, 2013 by Blue Train

[Blue Train]

There is a college professor (an economist) named Andrew Zimbalist who specializes in the business of pro sports, and is frequently quoted in the paper.

He says that a city obtaining its first team receives economic benefits from it, but additional teams provide nothing to the city's economy.

His 2000 paper.

http://www.csus.edu/indiv/h/howellj/econ145_s2009/Assignments/SportsStadiumFunding.pdf

or a short interview.

http://www.stayfreemagazine.org/archives/24/city-sports-stadiums.html

These days he will say whatever whomever is paying wants.

http://www.fieldofschemes.com/2013/01/29/4452/zimbalists-rays-need-stadium-statement-made-while-under-contract-with-mlb/

Edited July 29, 2013 by Blue Train

[Blue Train]

Speaking of Chicago....Wrigley Field's renovations are closer to going forward. The Ricketts family is paying the $500 million.


http://articles.chicagotribune.com/2013-07-26/news/ct-met-wrigley-field-0728-20130727_1_rooftop-owners-rooftop-clubs-rooftop-views

[ejp626]

People need a reason to come to Detroit to stay in that hotel. How many people fly in from out state to see a Red Wings game? Even if people do stay in the hotel it's just going to be money they would have spent @ another Detroit Hotel, or other similar places as those that will be built around the new arena.

I really don't see much of major enough difference in extra revenue to warrant the money being spent....especially with Detroit being $18 billion in debit.

While it is very unclear what will happen with the DIA (and I am not at all sanguine that it will be untouched -- all bets are truly off if Detroit is judged to be insolvent in the federal bankruptcy proceedings), I actually tried to schedule a trip in Sept. to visit Detroit and specifically the DIA. That won't happen, but perhaps I can make it in Oct. However, I am not planning on spending like a drunken tourist, so I don't think my visit would help all that much...

[Blue Train]

The Judge will allow the bankruptcy. There really is no way to get around it. The real issues is the pensions and health insurance.

"Detroit is claiming $18.5 billion in debts and liabilities, including $11.5 billion in unsecured claims, mostly from underfunded pensions and unfunded retiree health insurance promises."

According to the census figures.....1950 was the peak with regards to the population @ 1,849,568. Its now has 1,142,983 less people. It was once the 5th largest city in the country. 706,585 can't pay to keep a city as large Detroit going. Being a one industry city & race relations/white flight (83% of the population is African-American.) killed the city.

Unlike Detroit....Pittsburgh started to do something once the steel industry started going south.

At one time there was 125 automakers in Detroit....now only GM and Chrysler (though their HQ is Auburn Hills) are left of the majors with factories...even Ford is out in the suburbs.


P.S. Speaking of DIA.

http://www.freep.com/article/20130718/NEWS/307180160/Are-DIA-works-more-risk-bankruptcy-

Edited July 29, 2013 by Blue Train

[GA Russell]

Blue Train, thanks for that short interview you link to!

[Blue Train]

Blue Train, thanks for that short interview you link to!

You're welcome. If you, or anyone wants to really know what's going on with stadiums/arenas....

http://fieldofschemes.com./

Edited July 29, 2013 by Blue Train

[ejp626]

The Judge will allow the bankruptcy. There really is no way to get around it. The real issues is the pensions and health insurance.

"Detroit is claiming $18.5 billion in debts and liabilities, including $11.5 billion in unsecured claims, mostly from underfunded pensions and unfunded retiree health insurance promises."

Yes, I should have written when. I was reading that it took about a year for Stockton to be judged insolvent and allowed to enter bankruptcy, and I imagine it will take at least as long here, given the additional twists and turns of MI state law.

To me the really worrying thing, is that I still don't see what Detroit is going to emerge into. Even say that they completely shed these pension obligations (a replay of Umberto D, I guess), what is the city going to diversify into? The retirees will probably just up and move completely abandoning more neighborhoods now that they have no hope. There really are only a handful of hipster art enclaves. I still don't see any employment opportunities for the remaining population, and the bankruptcy isn't going to encourage more firms to come to Detroit. How much can they really shrink the city? And what if Wayne County refuses to take back the newly disincorporated land?

[Blue Train]

It took Stockton 9 months to be considered insolvent.

Which brings up another thing. The legal fees. Even with the "discount" by Jones Day....I think they're being conservative with around $100 million. This is the kind of case that could end up @ the Supreme Court. Another thing....you have to think those on the police force are looking for jobs elsewhere. Future pension/health insurance alone is reason enough....which means the crime rate is going to get worse.

http://www.freep.com/article/20130710/NEWS01/307100023/Detroit-legal-financial-restructuring-municipal-bankruptcy

Being a one industry city makes everything much more complicated for whenever they finally get out of bankruptcy. They're basically going to have to recreate the city. They can get companies to come....but they're going to have to give a lot of subsidies/incentives.

Edited July 29, 2013 by Blue Train

[The Magnificent Goldberg]

The state/city is paying for two thirds of the cost. When you add in the interest on the bond for it....that will come to $444 million. Of that Detroit will be paying $284 million. If you add in the usual amount of subsidies given....it will probably be another $200 million on top of the cost of the stadium.

On top of their share of the stadium....the Red Wings will be spending $177 million on development around the area.

Whatever few permanent jobs are created will most likely be filled by people who don't live in the city itself. Only around 700,000 people still live in Detroit. Pretty hard to raise funds through taxes with no one living in the city.

Stadiums Cost Taxpayers Extra $10 Billion,

http://www.bloomberg.com/news/2012-11-06/stadiums-cost-taxpayers-extra-10-billion-harvard-s-long-finds.html

that's a fine, but sickening read. .................anything but better schools or hospitals.

Good article. Ms Long has the right approach to identifying subsidies, by the looks of it; ANYTHING you give to a business is a subsidy, even (or especially) an easy ride through the regulations. And businesses are very good at getting subsidies that don't seem to be subsidies. That's evident in sport, as the leagues have the ability to write rules for themselves that maximise their take.

MG