The Amazing Problem Shared by Detroit and Brazil
Business + Economy

The Amazing Problem Shared by Detroit and Brazil

REUTERS/Dave Sanford/Pool

Despite nascent bankruptcy proceedings, Detroit is moving ahead with a plan to build the Red Wings a new arena backed by hundreds of millions of dollars in public financing.

The Michigan Strategic Fund gave unanimous approval Wednesday evening to issuing hundreds of millions of dollars in bonds to help finance the $650 million project, which includes the new arena plus some associated downtown redevelopment. The goal, according to Detroit's Downtown Development Authority, is to "transform the (45-block area) from its currently largely blighted state into a vibrant year-round business, residential and entertainment district."

Before this project is a done deal, the state, city, and Olympia Development — the company owned by Red Wings owner Mike Ilitch — must finalize a long-term lease agreement to keep the Red Wings in the new facility for at least 35 years.

Of the project's total $650 million price tag, 56 percent will be paid for with private funds, with the public on the hook for the remaining 44 percent, or $284.5 million. As for the $450 million arena itself, 58 percent of that money will come from tax revenues.

Following the bond approval, Gov. Rick Snyder (R) lauded the project as a prime economic opportunity, claiming it would create 4,380 new construction jobs. He also defended the use of public funds to build a new sports complex in the bankrupt city, saying the project "should increase the tax base of the city longer term, and should increase the employment opportunities for Detroiters."


"So this should create a better environment for Detroit long term and that will be better for all of us," he said.
Snyder and the arena's defenders have cited the Red Wings' importance to the city as a motivating factor for giving them a new home.

Detroit has taken home more Stanley Cups than all but two other teams, winning six titles in the last two decades alone. Forbes named Red Wings fans the third best of any North American franchise in 2010, and last year ranked the team the sixth most valuable in the NHL, specifically noting that their propensity for selling out games was "an amazing streak considering the city's economic plight."

Yet the city is now $18.5 billion in debt — much of it from unfunded pension obligations — and headed into bankruptcy, leading critics to ask why stadium financing should trump other expenditures the city is already too broke to make.

"We're all supportive of new development in Detroit," a spokesman for Senate Democratic Leader Gretchen Whitmer told the Associated Press. "But it's difficult to tell the residents of the city that this is more important than public safety or street lights."

As has been widely noted elsewhere, new stadiums almost always oversell their potential economic impact while sticking taxpayers with a hefty bill. In the most glaring case in recent memory, the Miami Marlins and their much-loathed owner, Jeffrey Loria, convinced Miami-Dade County to issue some $500 million in bonds to build the Marlins' new digs, which opened last season. Loria then gutted the team's payroll and pocketed millions, in the process alienating fans so much that attendance has dropped by more than 11,000 people per game compared to last year. The county, meanwhile, will still pay off an estimated $2.4 billion over the 40-year life of the bonds issued to build the stadium.

This article by Job Terbush originally appeared at

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