Something’s Rotten In The State of Michigan

Joe Louis has been gone for 32 years, but somehow he has a new fight on his hands.

On Wednesday, The Michigan Strategic Fund unanimously approved the issuance of up to $450M in bonds to build a new arena for the Detroit Red Wings. It would replace the aging Joe Louis Arena. Exciting right? Another new arena in the NHL! As of now, the only new arena on the NHL docket is the Barclays Center, for the Islanders.

New arenas! What’s not to love? A lot actually.

Well, in case you hadn’t heard, the city of Detroit is broke! They have no money to pay their bills. They even filed for bankruptcy protection last week. How in the world can they actually ask the citizens of one of the poorest cities in the US? Well let’s back up for a second.

A little background on the Joe Louis Arena:

• The arena opened in December of 1979
• It replaced the Olympia Arena where the Red Wings had played since 1927
• The Red Wings hosted the 32nd All-Star Game in 1980
• In 1987, the first NHL Entry Draft to take place in the US took place at Joe Louis Arena
• The Wings have won 4 Cups since moving to Joe Louis, clinching 2 of them on home ice
• The Pistons played 15 games there during the 1984-85 season
• The arena seats 20.066 people for hockey
• It’s the only other arena besides Madison Square Garden and the Nassau Coliseum without corporate sponsorship

So, back to the issue at hand. How, in a city that as of May 2013 had an unemployment rate of 9.3%, could you ask people to contribute money towards an arena for the Red Wings? Now, don’t get me wrong. I am not against public funding of stadiums. But, this is not the time, nor is it the place to ask people to contribute 58% of the funding towards a new arena for the Wings or for any other team in a struggling city.

Why The Urgency?

Few teams have been as successful as the Red Wings have since 1995, and by all means they should be in a first class facility. There is no indication from anyone involved that Joe Louis is not that facility. However, in 2009, the team announced they would not renew their lease with the city of Detroit. Had they not informed the city that they were not renewing, it would have automatically renewed for 20 years. At the time, the parent company of the Red Wings, Olympia Entertainment was hoping to negotiate a new lease. They decided that repairs needed to be made to a 30 year arena, and a lease crafted 3 decades ago just wouldn’t fly. Understandable. They had to come up with an answer relatively soon, as the current lease expired in June 2010. But, the fact remains that the public is now on the hook for 58% of an arena that will tentatively open in 2017. It will have 18,000 seats, which includes 1,200 premium seats. Clearly, all will be extremely affordable for the struggling residents of the Motor City. They are paying for it right?

The Rebuttal

Governor Rick Snyder believes this is vital to Detroit’s future. The Governor seems to think this is part of an investment in changing the prevailing opinion about the city of Detroit. He knows that when you think of Detroit as a whole, you don’t quite think of Motown and Berry Gordy anymore., you think of a city that is going through hard times.He states that it “should increase the tax base of the city longer term, and should increase the employment opportunities for Detroiters.”

The new complex would be close to the Lions’ Ford Field and Tigers’ Comerica Park near Interstate 75. It would actually be moving the team to a different part of the city. The team and city have also declared their intention to build up the area around the arena, adding several shops and restaurants.

Does This Situation Ring A Bell?

This whole arena thing sounds eerily familiar right? But you know what’s missing? A public voice. As much as we may not have liked the outcome, and as much as we thought politics played a ridiculous part in it, the public did have its say in regards to the Islanders arena situation. Even though Nassau County is highly dysfunctional, Kate Murray will always be public enemy #1,  and the vote was so poorly planned out and so poorly executed it made the 2000 Presidential election look well thought out, it was still a vote.

Nassau County has its own share of financial issues. It had its finances taken over by a state watchdog group. The credit rating of the county was even downgraded. However, if you remember, before Kate Murray stepped in, Charles Wang was willing to privately finance the whole arena. Unfortunately the whole thing didn’t work out and the Isles are off to Brooklyn soon.

Conclusion

Mike Ilitch, the owner of the Detroit Red Wings and Detroit Tigers, is worth upwards of $2B. Privately financing this project would be like you or I putting some of our weekly salary into a 401k. Will we see it now? No. Will we see some money from it eventually? Probably.

Studies have shown that new sports arenas are usually not a good tool for economic development. Victor Matheson, an economist at Holy Cross stated

"Researchers who have gone back and looked at economic data for localities that have hosted mega-events, attracted new franchises, or built new sports facilities have almost invariably found little or no economic benefits from spectator sports."

The citizens of Detroit had no choice in this matter. They just had some pucks shoved down their throats, and it’s awfully hard for them to swallow.