NEW YORK – At the 1997 groundbreaking for a 40,000-seat ballpark for Major League Baseball’s Detroit Tigers, Michigan Gov. John Engler said the stadium would symbolize the city’s renewal.
Ford Motor Co. Chairman William Clay Ford Jr., whose family owns the National Football League’s Detroit 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 Michigan Gov. Rick Snyder’s turn to tout a comeback spurred by a stadium for a suburban fan base financed with help from city taxpayers. Snyder has 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, said Snyder, who controls the bankrupt 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.
Detroit, 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 slashing pension and health-care benefits for Detroit city 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 Detroit’s filing, an arm of the state’s economic development agency 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 Red Wings’ home since 1979.
“It creates jobs – and enough jobs and other economic activity to have a positive payback,” Snyder said in a July 26 interview at Bloomberg News headquarters in New York.
Construction would create 4,380 jobs and as much as $1.8 billion in new economic activity, according to Snyder and Olympia Development of Michigan, a company controlled by the Ilitch family.
Almost 60 percent of the funds to pay for the arena would come from taxpayers. Bonds would be backed by a combination of about $15 million in annual payments from Detroit’s Downtown Development Authority and $11.5 million from Olympia. Wayne County may also provide support, according to a July 24 memo.
In December, Michigan’s legislature revived the ability of the development authority to take a portion of school-tax revenue generated by property on 615 downtown acres.
The money otherwise would have reverted to public schools and the state’s school-aid fund, according to a legislative analysis. The state will reimburse the district to make up shortfalls, just as it did before 2011, an authority spokesman said.
However, the state still must take money from programs to make up for cash benefiting the Iliches, said Shikha Dalmia, a senior analyst for the Los Angeles-based Reason Foundation.
“The left should be crying bloody murder,” Dalmia said. “Why are you diverting money that’s meant for Detroit school children to this guy’s pocket? And the right should be crying about crony capitalism. They could easily have passed another state law which allowed this money to go to fighting crime, or a bazillion other things.”