In bankrupt Detroit, four leading professional sports teams will be housed within walking distance of one another. However, the cost of having Detroit’s Pistons, Lions, Red Wings, and Tigers on top of one another comes at a cost to taxpayers. This week, the Detroit Pistons -- which is owned by billionaire developer Tom Gores -- announced that they will abandon their area in the Detroit suburbs and return to the Motor City. The Pistons will be located in the same facility as the Detroit Red Wings -- the famed hockey team that was home to the equally famous Gordie Howe.
Mike Illitch owns the Detroit Tigers, Red Wings, and Little Caesar’s Pizza -- the third largest pizza chain in the U.S. A former Detroit Tigers player, he has been instrumental in getting the project going and bringing Gores into downtown Detroit.
The Tigers baseball team and the Lions football team play at Comerica Park and Ford Field, respectively, which are located within blocks of the Little Caesars Arena that houses the Red Wings and Pistons.
The arena for the Red Wings was already under construction. The decision to add accommodations for the Pistons will cost an additional $34.5 million to the bill taxpayers are paying to bring the project to completion. That comes on top of the $250 million that taxpayers have paid towards construction in the form of bonds that must now be refinanced and extended.
In an interview with the Associated Press, Michael LaFaive of the Mackinac Center for Public Policy said taxpayers should not be compelled to fund private business efforts nor be exposed to the inevitable risks. He told the Detroit Free Press, LaFaive said that subsidizing the stadium means tax dollars cannot be spent on necessities. “If it's reasonable, then they should have no trouble raising the money through private means,” he said. "What is the opportunity cost to building these stadiums? Is it a library not funded? Is it a school underfunded?”
The Detroit Metro Times
noted that John Mozena of the Mackinac Center
indicated that a study has found that sports stadiums fail to stimulate new businesses in the area. “Instead of creating new demand and new customers for bars and restaurants, subsidized stadiums unfairly compete for a consumer’s entertainment dollar with those businesses,” Mozena said. A report by a University of Michigan economist, commissioned by Palace Sports and Entertainment, estimates the economic impact of the Piston’s relocation will approach 600 million dollars.
Beginning in late 2017, the new Little Caesars Arena will host both the Red Wings and the Pistons. Mayor Mike Duggan (D) boasted that this means that Detroit will be the only city with four major sports teams in a downtown district. “This is the right call,” Pistons owner Tom Gores said. “Four our players, how we can impact the community, it is the right call. It is time.”
To accommodate the Pistons, changes in the Little Caesar’s Arena had to be made to the blueprints while the project was underway. “If you start out designing an arena for both basketball and hockey, it’s been done a number of times,” Duggan said. “But when your stadium’s already half-done, simple things like building locker rooms require the moving of elevators, and so it was going to be very expensive.”
The added construction cost will be paid for with public money that comes from the Detroit Downtown Development Authority, which will use money generated by refinancing publicly funding bonds the city sold in 2014 to finance the construction of the arena.
However, it won’t use dollars from Detroit’s general fund. The Detroit Downtown Development Authority will use money generated by refinancing bonds it sold in 2014 to originally finance the construction of Little Caesar’s Arena. Duggan says the $34.5 million will be generated by extending the term of the bonds an additional three years. Palace Sports and Entertainment and Olympia, the parent companies of the Pistons and Red Wings respectively, are reportedly responsible if the project goes over budget further.
The Pistons have agreed to build a $50 million practice facility in Detroit and also relocate their corporate offices downtown in 2018. The deal may include additional $55 million in bonds to be repaid by the Pistons for the practice facility. Tom Gores’ Palace Sports and Entertainment will contribute $2.5 million to restoring over 60 public basketball courts in Detroit, as part of the agreement, and promise that 51% of construction jobs for the practice facility will hire residents of Detroit. The deal must be approved by the Detroit Downtown Development Authority and the National Basketball Association.
The arena bonds are to be paid off using property tax collections the Detroit Downtown Development Authority captures for economic development in a designated downtown area. The total projected cost of Little Caesar’s Arena is $732 million, which climbed up from $450 million in 2012.
The Detroit Downtown Development Authority has also agreed to spend $284.5 million tax dollars that were previously dedicated to the Detroit Public Schools to defray the bond costs. Back in 2012, Senate Minority Leader Gretchen Whitmer (D) said when the bill approving the project was passed, “Now they’re swooping in on school taxes to help pay for a hockey arena in Detroit.”