The Detroit Red Wings announced that their new arena is slated to be opened in 2017, and it will be partially paid for by taxpayers.
Well, “partially” is a rather soft term in this particular case, “mostly” would be more fitting. Taxpayers in Detroit will pay 58% of the overall $450 million new arena, making them responsible for a $261.5 million tab (as of now).
The Red Wings (and Tigers) owners, the Ilitch Family ($3.6 billion net worth), will only pay $188.4 million, or 42% of total costs.
The arena project is also part of a larger $650 million plan that would build retail stores and office buildings among others near the venue.
Mike Ilitch, Chairman of the Red Wings, claims that the new arena will generate more than one billion dollars in revenue and will bring thousands of jobs to Detroit. However, according to the arena deal, Detroit will not receive any share in revenue from money made from the arena.
Olympia Development of Michigan, which is in charge of the entire project, will get all the profits from naming rights.
In the Red Wings current venue, Joe Louis Arena, the city gets a share of $7 million in revenue that includes ticket sales and concession sales.
Were taxpayers considered at all in this deal? Especially given the sorry fiscal state Detroit is in?
To make matters worse, according to National Taxpayers Union Foundation (NTUF), new stadiums don’t actually increase employment or income. Rather, new stadiums monopolize venue competition and bring all the spending and employment to just one venue.
The Detroit Deal uses municipal bonds, a familiar tactic for stadium financing, to put that taxpayer cash to work.
This is similar to the Dallas Cowboys, who built a whopping $1.2 billion stadium in Arlington, Texas that opened in 2009. Arlington used municipal bonds, snagging about $325 million from taxpayers for that behemoth. That allowed the Cowboys’ ownership at a lower rate than normal, increasing revenues for the team.
The new Red Wings arena will also be paid in a similar fashion through 30-year bonds.
The stadium financing problem might exemplify government’s willingness to shell out taxpayer dollars to connected interests better than anything else, simply because the purpose is for a game, and those benefitting (the owners) are always going to be of enough means that there is no sob story cover.
And it adds up for taxpayers when we look at the big picture…
21 out of 32 NFL Stadiums were “partly” financed by the public. 64 other major league teams that include baseball, hockey, and basketball use municipal bonds to finance stadiums/arenas.
In a must-read blog post last year, NTUF examined how taxpayer-funded stadiums cost more than privately funded ones. According to the blog post, when taxpayers contribute more than 50% for total construction costs, stadiums will be $65 million more expensive on average.
If that statistic applies to Detroit, it will be catastrophic to taxpayers in the Motor City. Detroit filed for bankruptcy around this time last year and definitely cannot afford to have taxpayers pay for a sports arena that a private citizen is well capable of paying for on his own. The city has an unemployment rate above 14% as of April 2014 that is higher than the national average.
Furthermore, Detroit has a debt that is roughly $18 billion. With so much debt in a city, should citizens shoulder even more just to upgrade a hockey team’s arena?
Especially when history shows the promises of economic boom are likely to bust, and the cost estimates always seem to leave the ballpark?
So next time you go to a major sporting event and look around at the majestic stadium you’re in, remember: You’re probably paying a lot more than the price of your ticket!