Bloomberg has a story today about the new Detroit Red Wings stadium. As the City of Detroit moves through bankruptcy, City and State leaders plan to push forward a plan that allocates public funds to subsidize hockey in the Metropolitan Detroit area.
At the 1997 groundbreaking for a 40,000-seat ballpark for Major League Baseball’s Detroit Tigers, Michigan Governor John Engler said the stadium would symbolize the city’s renewal.
Ford Motor Co. (F) Chairman William Clay Ford Jr., whose family owns the National Football League’s Lions, said in 1999 that his new 65,000-seat dome would “showcase the city’s turnaround.”
Now that Detroit has become the biggest U.S. municipality to declare bankruptcy, it’s Republican Governor Rick Snyder’s turn to tout a comeback spurred by a stadium for a suburban fan base financed with help from city taxpayers. Snyder approved a plan to put public money toward a $450 million downtown arena on behalf of the the National Hockey League’s Red Wings and their billionaire owners.
The 18,000-seat complex and a planned $200 million private development nearby would transform a blighted area into one with apartments, offices, restaurants and shops, says Snyder, who controls the city through an appointed manager. Critics call the plan a giveaway to Mike Ilitch, owner of the Red Wings, the Tigers and the Little Caesar’s pizza chain.
“It’s going to be very tough, in my opinion, to make the case that the city of Detroit should go into bankruptcy so they can simply go in and just raid pensions or give money to the Red Wings,” said the Rev. Charles Williams II, senior pastor at Historic King Solomon Baptist Church in the city.
Hockeytown AgonistesDetroit, a former auto-building powerhouse, on July 18 filed the largest U.S. municipal bankruptcy after years of decline. The city of about 700,000, which lost half its population in the past 50 years, has more than $18 billion in long-term debt and an operating deficit close to $400 million. Snyder’s emergency manager, Kevyn Orr, has proposed reducing pension and health-care benefits for employees and paying holders of $2 billion in unsecured bonds an average 18 cents on the dollar. The distress is so deep that 40 percent of the city’s streetlights have gone dark.
Yet six days after the Detroit’s filing, an arm of state’s economic development corporation gave preliminary approval to sell $450 million in tax-exempt bonds to finance a 650,000-square-foot facility to replace Joe Louis Arena, the home of the Red Wings since 1979.
This move bodes well for the Ilitch family and hockey fans, but it is not what Detroit needs as it moves forward. Studies conducted to measure the economic impact of new sports arenas have consistently shown that the arenas themselves do not cover the public costs for building and maintenance.
Rather than give Ilitch $400 million, the City should expand its property tax amnesty program to allow families that want to live in Detroit to keep their houses. Our firm has had to represent many bankruptcy filers to repay their property taxes in Chapter 13 bankruptcy. With money being tight, most clients can barely get by when paying back thousands of dollars of tax at a 12-18% interest rate in bankruptcy.
In general, the property tax assessments must be seriously altered as far too many properties have valuations that are double a real market value. This again leads to many bankruptcies as debtors put off paying credit cards or car payments to pay real estate taxes.
