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Detroit Red Wings deal a cautionary tale

How billionaire Ilitch clan fleeced bankrupt city

The sports publication deadspin.com this week excerpted a story on the Detroit Red Wings scam from Next City, a magazine for urban leaders. The story unearths some new, horripilating facts.

A week after Detroit declared bankruptcy, it was announced that taxpayers would pay 58 percent of the cost of a new Red Wings hockey arena for the Ilitch family, which is worth $3.2 billion.

Tax-increment financing will contribute at least $12.8 million a year to the project; If that money weren't going to the arena, it would go to Michigan's School Aid Fund. The $261.5 million taxpayer subsidy comes at a time firefighters and police could see pensions reduced by as much as one-third.

Last month, the Detroit City Council voted to sell the Ilitch company and the Downtown Development Authority (who will share ownership of the arena) 39 vacant parcels for $1. The Ilitch operation (which owns a downtown gambling casino and the also-subsidized Detroit Tigers baseball team) called the $1 payment a "once-in-a-generation" deal. Yes, for the Ilitch family.

After council approved the $1 transfer, a Detroiter shouted, "The citizens of Detroit thank you for selling them out!"

Oh, yes. In 1992, as controversy swirled over the Tigers subsidy, a ballot initiiative banned the use of public subsidies for stadiums. Three years later, the council passed an ordinance that repealed it.

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The sports publication deadspin.com this week excerpted a story on the Detroit Red Wings scam from Next City, a magazine for urban leaders. The story unearths some new, horripilating facts.

A week after Detroit declared bankruptcy, it was announced that taxpayers would pay 58 percent of the cost of a new Red Wings hockey arena for the Ilitch family, which is worth $3.2 billion.

Tax-increment financing will contribute at least $12.8 million a year to the project; If that money weren't going to the arena, it would go to Michigan's School Aid Fund. The $261.5 million taxpayer subsidy comes at a time firefighters and police could see pensions reduced by as much as one-third.

Last month, the Detroit City Council voted to sell the Ilitch company and the Downtown Development Authority (who will share ownership of the arena) 39 vacant parcels for $1. The Ilitch operation (which owns a downtown gambling casino and the also-subsidized Detroit Tigers baseball team) called the $1 payment a "once-in-a-generation" deal. Yes, for the Ilitch family.

After council approved the $1 transfer, a Detroiter shouted, "The citizens of Detroit thank you for selling them out!"

Oh, yes. In 1992, as controversy swirled over the Tigers subsidy, a ballot initiiative banned the use of public subsidies for stadiums. Three years later, the council passed an ordinance that repealed it.

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Comments
12

As a former Detroiter myself, I have to ask Don. Do you have any ties there, or work history there? Soon after I bought my first San Diego house for 90K (1985), I visited a childhood friend in Detroit. He was unhappy that he couldn't get 15K for his mother's house because of redlining. He eventually sold it for 9K. It was probably newer than my San Diego house. San Diego is NOT Detroit. But it's a great story. I wonder how much that $12.8 million a year would come to if broken down per game ticket. I'll believe that they've hit bottom when Warren Buffet invests there. Personally, I do what I can. I have 3 mortgages with Quicken Loans, which I believe is headquartered there.

March 5, 2014

mridolf: I have been to Detroit once -- took a bus to a wedding, and left right after the wedding. When I was with Business Week magazine in Cleveland, I worked occasionally with my counterpart in Detroit, because the economies were intertwined.

I have no axe to grind. I want Detroit to succeed. It won't if it, with the help of the state legislature, continues letting billionaire sports team owners to drain it dry. That's true of most cities. Best, Don Bauder

March 6, 2014

Don: San Diego is nowhere near as bad off as Detroit, so we should be able to contribute hundreds of million of $$ towards the building of a new stadium for the Chargers. Maybe even hundreds of millions more for a new arena. I can almost hear that reasoning from the stadium proponents here, and it scares the hell out of me.

March 6, 2014

aardvark: Yes, that will be one of the arguments: if even bankrupt Detroit can afford a huge subsidy for a hockey arena, surely San Diego can afford a subsidy for a football team. It is a false argument, but every argument in favor of the stadium will be fallacious.

Here is a good counter-argument: if you are pleased with the condition of San Diego's roads, streets, sewers, water system, storm drains, neighborhoods, etc., then vote for a $700 million subsidy for the billionaire family that owns the Chargers. Best, Don Bauder

March 6, 2014

Don: You are assuming it even gets on the ballot. I am sure the Chargers are hoping to find a way to bypass the voters completely. If the team really wanted this on the ballot, it could have been years ago.

March 7, 2014

aardvark: Mark Fabiani, Chargers flack, claims he wants a public vote. This probably means he does NOT want a public vote. Best, Dn Bauder

March 7, 2014

TROUBLED HOCKEY TEAM FACTOR IN GLENDALE'S POOR BOND RATING. Glendale, Arizona, has had a financial problem for several years: the cost of it giving succor to the Phoenix Coyotes, a professional hockey team that filed for bankruptcy in 2009, was operated by the National Hockey League for four years, and finally sold in the summer of last year.

Standard & Poor's has downgraded the rating of Glendale from A- to BBB+ and reported a negative outlook over the next two years. S&P noted that Glendale has spent millions of dollars since the early 2000s trying to become a professional sports hub. S&P in lowering the rating cited Glendale's lingering debt on payments to the National Hockey League. Best, Don Bauder

March 11, 2014

SHOULD FLORIDA RESIDENTS BE REQUIRED TO TAKE ECONOMICS COURSES IN THIRD GRADE? CBSSports.com had a most remarkable story March 10. The lead boasted, "Miami Dolphins owner Stephen Ross is about to prove that you can renovate an NFL stadium without using public money."

After the state legislature adjourned without acting on a fat subsidy for the renovation, Ross -- one of the nation's richest persons -- boasted that he would pay for the $400 million renovation of Sun Life Stadium himself, with no public money.

Buried in the story is the revelation that Ross would like $4 million in annual tax relief.

Huh? Huh? Fieldofschemes.com reported on Ross's attempted Florida heist with this headline: "People in Florida don't understand how money works, apparently." If Ross gets his $4 million annual tax break, either Miami-Dade County has to cut some services or raise taxes to make up the difference. Best, Don Bauder

March 12, 2014

Excluding the payments that Glendale owes the NHL, $25million or so I believe, Glendale has spent in the Neighborhood of $400million or so on the football stadium, hockey arena and MBL spring training facilities. As for Glendale being a sports hub, yeah, not so much, I think. With the Diamondbacks and the Suns playing literally less that 1000 feet from each other, I think downtown Phoenix is pretty much the sports hub, not Glendale. As for the NHL running the Coyotes, let me add this. The reason the NHL had to run the team is because the refused to sell the team the team to any interests that would have moved the team out of the Phoenix. That has to be one of the stupidest moves ever because the Coyotes are perennially bottom dwellers in attendance; last I read they were playing to about 75% capacity crowds so far this season.

March 12, 2014

danfogel: Yes, the NHL's refusal to move the team was puzzling, to say the least. One potential owner wanted to move it to Hamilton in Canada but the league wouldn't hear of it. The team has actually been good in recent seasons, but attendance remains unimpressive. Best, Don Bauder

March 12, 2014

Well, I guess good is a relative term. They have made the playoffs 3 of the last 5 yrs I believe, though to be fair, when 16 of 30 teams start the playoffs, I'd say you have to be REALLY bad to not make the playoffs. And while they did make it to the conference finals a couple of yrs ago, losing to the eventually CUP winners the LA Kings, the other times they lost in the first round, coincidentally enough, to the Red Wings. My personal opinion is that attendance remains unimpressive for two reasons. First, in not all but most cases, fans support winning team, which historically Phoenix is not. And second, coming from someone born and raised in Az., hockey in the desert southwest is one dumb-ass idea!

March 12, 2014

danfogel: Yes, I think hockey and the desert are not really compatible. Best, Don Bauder

March 12, 2014

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