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Current Events & Hot Topics Current Events & Hot Topics

New $444 million hockey arena is still a go in Detroit

Posted by on Jul. 29, 2013 at 7:45 AM
  • 27 Replies


detroit joe louis arena

A Detroit Red Wings game at Joe Louis Arena, the team's current home.

NEW YORK (CNNMoney)

Detroit's financial crisis hasn't derailed the city's plans to spend more than $400 million in Michigan taxpayer funds on a new hockey arena for the Red Wings.

Advocates of the arena say it's the kind of economic development needed to attract both people and private investment dollars into downtown Detroit. It's an argument that has convinced Michigan Gov. Rick Snyder and Kevyn Orr, the emergency manager he appointed to oversee the city's finances, to stick with the plan. Orr said Detroit's bankruptcy filing won't halt the arena plans.

"I know there's a lot of emotional concern about should we be spending the money," said Orr. "But frankly that's part of the economic development. We need jobs. If it is as productive as it's supposed to be, that's going to be a boon to the city."

But critics say the project won't have enough economic impact to justify the cost, and that it's the wrong spending priority for a city facing dire economic conditions.

Detroit city services are already stretched extremely thin. On average, police take about an hour to respond to calls for help, and 40% of street lights are shut off to save money.

"If you want people to live in the city, and not just visit to go to games, you have to invest in schools, in having the police to respond to calls," said Gretchen Whitmer, the Democratic leader in the state senate. "There are so many investments that should trump a sports stadium."

Additionally, Orr wants to make deep cuts to both the pensions and health care coverage promised to city employees and retirees.

The state legislature approved the taxpayer funding for the arena in December. The controversial vote split Detroit's own legislative delegation. Whitmer argues that the matter should be reconsidered given the city's worsening finances.

"If the vote was held today, since the bankruptcy, I wouldn't put my money on it passing," she said.

The arena will be paid for with a $450 million bond issue that will be repaid over the next 30 years. Taxpayers will be paying almost two-thirds of the cost of the arena -- $283 million -- and private developers will cover the rest. Including interest, it's projected that there will be a total of $444 million in taxpayer funds spent on the project.

Additionally, the developer has committed to spending another $200 million to build retail, office, residential and hotel space as part of the project. The construction is expected to create about 8,000 construction jobs with work due to start next year.

Most of the tax money going into the project would otherwise be going into Detroit schools, which are also under state control due to their dire finances. But the lost money is slated to be made up for by the state government according to Michigan's school-funding formula.

"The schools won't lose a dollar," said Robert Rossbach, spokesman for the Detroit Economic Growth Corp., the non-profit agency overseeing the project. "It was designed to have minimal impact on city of Detroit operations."

Mark Rosentraub, a University of Michigan professor and an expert on the economic impact of sports teams, did a study for the arena developers, and estimates that it would create more than $1 billion of direct spending in Detroit during the next 30 years. He said many stadium and arena projects have minimal impact on local economies because they're already thriving or because of poor location.

But he argues that this one -- in a depressed city next to football and baseball stadiums -- will encourage a lot of private investment in restaurants, bars and other entertainment venues.

Related: Detroit entrepreneurs make case for their bankrupt city

The Joe Louis Arena where the Red Wings now play is antiquated by modern arena standards, and is relatively isolated from the downtown area where the new arena is to be built.

"The problem behind the financial issues of Detroit has been a flight of capital to the suburban areas," he said. "We have to bring foot traffic and investment back to Detroit. This is exactly what it needs."

Typically, a team threatens to move out of a city in order to get government officials to agree to a publicly financed new home, but the Red Wings have not made that threat.

Andrew Zimbalist, a Smith College economics professor and a sports business expert, said the Red Wings are one of the few profitable teams in the National Hockey League, and there is no chance they would want to leave Detroit, even for the suburbs.

-- CNN's Poppy Harlow contributed to this story

source

by on Jul. 29, 2013 at 7:45 AM
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Replies (1-10):
Mommabearbergh
by on Jul. 29, 2013 at 8:06 AM
2 moms liked this
Their priorities are all screwed
candlegal
by Judy on Jul. 29, 2013 at 8:08 AM

No kidding


Quoting Mommabearbergh:

Their priorities are all screwed


D-Town
by Silver Member on Jul. 29, 2013 at 8:21 AM
1 mom liked this

While not the top priority it's not a good financial move to let the Red Wings leave. They are the most profitable sports team that Detroit has. The following for the Tigers flip flop with how well they do. The Lions - well we'll save the jokes about them. The Red Wings have packed JLA even when they are at the bottom. They bring in a LOT of money to the city when they play. Especially sine the Ilitch family has done so much already for the city. 



While I wouldn't make it a top priority, I would also do what I could to keep them in the city. 

meriana
by Platinum Member on Jul. 29, 2013 at 9:13 AM
1 mom liked this

So the hockey team has NOT threatened to leave the city but they're going to build a new stadium anyway while at the same time city services have been greatly reduced and they're planning on deep cuts to the pension and health care plans of city employees and retirees. Sure the building of it will create jobs but jobs created for a specific building project are not permanent and will go away. Sure building retail, office, residential and hotel space is good but only if there are people to fill those spaces. Sounds to me like they do need to attract people to the city but they need to do things which will attract those who will become residents as opposed to those just going to the city for a short time to watch some event.

I don't see this as being the best use of the funds they do have but then I kind of have a problem with all the tax-payers of a city, county, paying for a stadium through tax payer dollars when an awful lot of them will never see the inside of the place due to the price of admission to events held there being unaffordable for them. The only ones who really win are those who own/run the stadiums.

candlegal
by Judy on Jul. 29, 2013 at 9:52 AM

This is the type of problem you run into when you have a democrat government running the city.  Taxpayers money, they don't care.

Quoting meriana:

So the hockey team has NOT threatened to leave the city but they're going to build a new stadium anyway while at the same time city services have been greatly reduced and they're planning on deep cuts to the pension and health care plans of city employees and retirees. Sure the building of it will create jobs but jobs created for a specific building project are not permanent and will go away. Sure building retail, office, residential and hotel space is good but only if there are people to fill those spaces. Sounds to me like they do need to attract people to the city but they need to do things which will attract those who will become residents as opposed to those just going to the city for a short time to watch some event.

I don't see this as being the best use of the funds they do have but then I kind of have a problem with all the tax-payers of a city, county, paying for a stadium through tax payer dollars when an awful lot of them will never see the inside of the place due to the price of admission to events held there being unaffordable for them. The only ones who really win are those who own/run the stadiums.


lizzielouaf
by Gold Member on Jul. 29, 2013 at 9:54 AM
2 moms liked this

I'm no economist nor do I play one on CM but this expenditure confuses me.

candlegal
by Judy on Jul. 29, 2013 at 10:20 AM

I am betting the taxpayers in Detroit are confused also.

Quoting lizzielouaf:

I'm no economist nor do I play one on CM but this expenditure confuses me.


greenie63
by Silver Member on Jul. 29, 2013 at 10:24 AM

Huh? For real? DTW has issues. 


meriana
by Platinum Member on Jul. 29, 2013 at 10:28 AM

Quoting candlegal:

This is the type of problem you run into when you have a democrat government running the city.  Taxpayers money, they don't care.

Quoting meriana:

So the hockey team has NOT threatened to leave the city but they're going to build a new stadium anyway while at the same time city services have been greatly reduced and they're planning on deep cuts to the pension and health care plans of city employees and retirees. Sure the building of it will create jobs but jobs created for a specific building project are not permanent and will go away. Sure building retail, office, residential and hotel space is good but only if there are people to fill those spaces. Sounds to me like they do need to attract people to the city but they need to do things which will attract those who will become residents as opposed to those just going to the city for a short time to watch some event.

I don't see this as being the best use of the funds they do have but then I kind of have a problem with all the tax-payers of a city, county, paying for a stadium through tax payer dollars when an awful lot of them will never see the inside of the place due to the price of admission to events held there being unaffordable for them. The only ones who really win are those who own/run the stadiums.



I don't think it's so much having a Democratic government running the city as it is a problem with those that are wealthy having the ability to sway those in power via the use of lobbyists and "incentives" to get what they want regardless of which party is in power. It, IMO, also is a problem with societies general view of sports as something more than a game and entertainment. Those who are really good at their sport are seen as role models and often looked on as heroes of some sort. They seem to garner far more respect than the average person working long, hard hours to support his/her family. It's an overall attitude that what a team/team owner wants, a team/team owner must have and they know how to use the fans to their advantage. Sports are no longer sports, they're a career. As long as people look at those who are good at a game as being special, greatly admired and an example to try and emulate and are able and willing to pay outrageous amounts for the privilege of watching someone bat a ball or a hockey puck around a court, this kind of thing will continue.
jllcali
by on Jul. 29, 2013 at 10:35 AM
You don't mess with hockey fans......
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