Home Business Governance Detroit Bankruptcy? No Obstacle For Red Wings New Arena

Detroit Bankruptcy? No Obstacle For Red Wings New Arena


As of now, it appears that Detroit Red Wings owner Mike Ilitch will be getting about $284 million in state aid to build his franchise a new privately/publicly funded arena in a city that has declared municipal bankruptcy – Detroit. You can’t blame Ilitch for asking for state money in a place like Michigan where the governor, Rick Snyder, has decided to put a number of cities under the aegis of a state Emergency Financial Manager.

The Detroit Red Wings expected to have an 18,000-seat replacement for Joe Louis Arena completed by 2017.

Michigan, under Snyder, has now taken away local government power in six cities, including Allen Park, Benton Harbor, Detroit, Ecorse, Flint and Pontiac. The discussion of why and where Snyder has decided to wield the ultimate state power should be left to political and demographic experts. For the purpose of this essay, there is a narrow scope—-municipal sports funding of facilities for private enterprises, such as a National Hockey League (NHL) franchise.

Michigan is a state that, where the governor feels conditions are so bad financially that he has to step in, should not be funding a private enterprise’s new facility. The old lines that were debunked in the 1990s about spending municipal dollars on stadiums and arenas have been trotted out to help bolster Ilitch. The construction of the new facility will create work for unemployed construction workers. It will enhance property values and show Detroit is open for business.

People will flock to Detroit to see the Red Wings and other arena events. But, what isn’t said is that Ilitch needs a new arena because new and shiny arenas are like performing enhancement drugs. New facilities bring more cash into the owners’ bottom line. The luxury boxes and club seats prices go sky high, the opportunities to make additional concession monies stand to put more money into the owners’ pocket.

Detroit may be bankrupt, but Ilitch’s territory extends far beyond Detroit city limits. His well-heeled customers can more or less avoid going into Detroit and just attend a hockey game or an event at the arena and leave their money in a special entertainment area.

Detroit should not be pegging any economic recovery to the construction of a new arena. Public spending on a baseball stadium, football stadium and an arena is a proven public policy failure. There are all sorts of examples of this that have been seen both in the United States and globally.

Detroit and Michigan have sunk hundreds of millions of dollars into new facilities for Ilitch’s Tigers (allegedly 38 percent of the funding for the baseball park–the cost pegged in 2000 at $300 million came from public coffers from hikes in hotel and car rental sales tax along with some revenues from Indian casinos. Ilitch’s family is in the casino business) and William Clay Ford’s Lions (allegedly 36 percent of the $430 million for his franchise’s new facility came from Detroit, a Wayne County tourist tax, the state of Michigan and from a “quasi”-government agency, the Detroit Development Authority).

The new football facility netted Detroit a Super Bowl and a NCAA Final Four Men’s Basketball Tournament. Ilitch’s new baseball stadium earned him congrats from his fellow owners and a Major League Baseball (MLB) All-Star Game as a thank you to the people of Detroit for spending tax money on Ilitch’s’s product. Ilitich has had a great run with his Tigers and Red Wing, as the teams have been either winning championships or getting to championship finals. There has also been a major PGA tournament in suburban Detroit. That all should have brought money into the city and area, but apparently that spending hasn’t helped. The sports promoters are always eager to point out the financial benefits from sports mega-events. It appears the promoters got their money and left Detroit to clean up after the big event. In retrospect, the events did nothing to help keep the city growing economically.

Once the economic benefits issue is exposed to be not valid, Plan B is to talk about the “intangibles” a sports team brings to an area that cannot be quantified by mere economic figures. Teams bring enjoyment (or angst) to a certain segment of the population and a certain amount of civic pride, which might culminate in a parade should a team win a championship. A major league team signals that a city is a big-time destination area and puts smaller cities on the same scale in the U.S. as New York or Los Angeles and globally perhaps London, Paris, Tokyo or Rome.

If that fails, there is always the Pat McCrory theory. McCrory, who is the governor of North Carolina, was the mayor of Charlotte, N.C., during the time when Charlotte Hornets owner George Shinn moved his National Basketball Association (NBA) franchise to New Orleans. McCrory pushed to build a new arena in Charlotte to replace the (at the time) 14-year-old Charlotte Coliseum in 2002 so the city could get an expansion team. McCoury listed a main reason for wanting an NBA franchise–Charlotte would get exposure on ESPN’s SportsCenter.

Detroit still hasn’t figured out what to do with the old Tigers Stadium site. In Pontiac, the Lions old facility is wasting away.

The municipally-funded Pontiac Silverdome opened in 1975 with the Lions football team as the main tenant. The new facility cost $55.7 million. William Clay Ford’s Lions played football there from 1975-2001. The dome also played host to Detroit Pistons games from 1978-88. After Ford moved his Lions back to downtown Detroit, the then 27-year old football facility has virtually useless. The Jehovah’s Witnesses left the facility in 2004 after using it for years for an annual convention.

Between 2003 and 2006, the Pontiac Silverdome parking lot was the home for a Drive-In movie theater.

Two leagues that never got off the ground took a look at the facility was the World Hockey Association (WHA) and the United States Football League (USFL). The reincarnation of the WHA was an ill-fated idea, but there were plans to put a rink in the building in 2003. The reincarnated USFL was looking to purchase the building and playing games there in 2010 along with hosting concerts.

The new USFL never got financial backing. On November 16, 2009, a Toronto-based company bought the old stadium for $583,000 at auction with the hope of placing a Major League Soccer (MLS) team in the building.

At least the building is still standing, although it is in bad shape. That’s more than what can be said for old stadiums in Seattle and Pittsburgh, which were blown up after new facilities for major league sports teams were built with taxpayers’ money. Seattle (King County) taxpayers are still paying off the debt on the long-departed Seattle Kingdome.

The present-day Silverdome owners seemingly have given up on the old place and are pushing to build a soccer stadium as part of a major complex that would include residential and retail space near the football and baseball stadiums in Detroit. That tactic was tried in two MLS cities—Chester, Penn., and Harrison, N.J. Both municipalities have failed to come through on the stadium/residential/retail complexes. The Silverdome owners claim no public funding is needed for their Detroit proposal.

Ilitch’s money has been appropriated. He needs that new building because everyone else in the NHL has a new building, including Charles Wang’s New York Islanders who will head to Brooklyn and an arena that knows how to attract paying customers. Ilitch more than likely makes money on the Red Wings, but why say no to a new place when a state is willing to fork over a significant chunk of change to help him. After all, Glendale, Ariz., just handed over millions of dollars to the new owners of the Phoenix Coyotes in the NHL, and in another city in bad financial shape, former NBA point guard and now Mayor Kevin Johnson of Sacramento is going to spend about a half-billion dollars on an arena for the new owners of the Sacramento Kings.

No one really knows how Johnson will pay for the building, but it is the price of being in the big leagues. Ilitch knows how to play that game even in bankrupt Detroit.

Evan Weiner can be reached at evanjweiner@gmail.com. His e-book, “The Business and Politics of Sports, Second Edition” is available at www.bickley.com and Amazon.com. His e-books, America’s Passion: How a Coal Miner’s Game Became the NFL in the 20th Century, From Peach Baskets to Dance Halls and the Not-so-Stern NBA and the reissue of the 2005 book, The Business and Politics of Sports are available at www.smashwords.com, iTunes, nook, versent books, kobo, Sony reader and Diesel.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.