Hockey arena: Watch the costs

City of Detroit

The vision of a new $650 million Detroit sports and entertainment complex took on a brighter glow after Gov. Rick Snyder signed a bill paving the way for the Downtown Development Authority to continue capturing more than $12 million a year and commit it to the project.

But if the Ilitch Olympia Development Company’s plan to erect a new, downtown hockey arena or multipurpose events center requires an additional taxpayer subsidy, it’s probably a bad idea. The last thing Detroit needs is another big-expenditure, low-benefit project that primarily serves to subsidize private enterprise.

The $12.8 million revenue stream comes from school taxes collected by the DDA. The funds, previously used for another purpose, would help fund and retire bonds for the project that is likely to be located north of I-75 in the vicinity of the Ilitch-owned Fox Theater, Hockeytown Café and Comerica Park.

Excitement is in the air.

However, Olympia Entertainment is not guaranteed the money. George W. Jackson Jr., president and CEO of the Detroit Economic Growth Corp., says obstacles, financial and otherwise, may still lie ahead. Signoffs will be necessary at every level.

You certainly can’t blame Ilitch for cashing in on any “free” dollars the city wants to generously dish out. The incentives given Ilitch for the Fox Theater (part of a deal to move his Little Caesars headquarters downtown) was just about as sweet as it gets.

But the pot got even sweeter when Ilitch received major inducements to keep the Red Wings in the city. Olympia Entertainment has leased the Joe Louis arena, Cobo Arena — and an adjacent parking structure –for a pittance, and may be delinquent on taxes.

Still, the flaunted promises sound inviting.

The widely popular assertion is that the development would generate enough additional tax revenue through short-term construction jobs, increased sales for nearby businesses and increased property values to justify public support. But when the Fox Theater deal was on the table, it was estimated that the venue would draw as many as one million patrons annually, a number that likely fell woefully short of those lofty projections. So much for wild assertions.

What if the high-flying Red Wings skidded from the top of the division to the basement and ticket sales dropped off? What if the NHL continues its lockout, or goes out of business? Will Detroit have to reach into its depleted coffers and subsidize a failing arena the way it does the People Mover? And is a complex concept necessary?

Ford Field is not just dedicated to playing a handful of home and preseason football games – it hosts mega events. And the metro-area already has Palace Sports and Entertainment. What about the DTE Energy Music Theater at Pine Knob, Meadowbrook Music Theater at Oakland University and Freedom Hill Amphitheater in Sterling Heights? Should government be in the business of giving Ilitch a public subsidy and a competitive advantage over these venues?

Tempting as it may be, Detroit should exercise caution before rejoining the arena-building craze. The tri-county area, has already kicked in mega-bucks to help finance Comerica Park, Ford Field and the Cobo Convention Center expansion. With the city facing near bankruptcy, the Ilitches’ dream arena would preferably be built with their own money.

At the very least city and DEGC officials should get assurances that if, for any reason Mike Ilitch can’t meet his construction timetable, absorb cost overruns and keep the arena filled, the city isn’t stuck with the tab. The Pontiac Silverdome experience should not be lost on any of the  planners or taxpayers.

Prudence, practicality and skepticism are recommended for yet another test of whether public subsidies to professional sports stadiums are good policy beyond an ego-boost and exaggerated sense of pride.

Careful monitoring of the process may help prevent what may be a good deal from becoming a costly mistake.

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