Monday, March 3, 2014

Stadium welfare: Billionare @DetroitRedWings owner gets sweet new stadium deal at same time Detroit can't pay pensions


"The TIF capture will contribute at least $12.8 million annually, though it can't exceed $15 million. The DDA will contribute about $2.15 million in separate tax collections. Olympia will toss in $11.5 million. And, as Crain's Detroit detailed in July, public money will pay for $261.5 million (58 percent) of the construction costs, while Olympia only has to pay $188.4 million (42 percent).

If you're searching for something particularly craven in the complicated financing structure—that is, something other than the careless use of public money itself—look to where, exactly, the tax capture comes from. In December 2012, the Michigan legislature restored Detroit's ability to levy school-tax funds from the downtown district for economic development purposes. If that $12.8 million annual gift weren't going to the Illitch empire, it would go to the state's School Aid Fund.

This is not to say that the arena will take money out of Detroit Public Schools (DPS) general fund. "The state is making up the shortfalls," said Bob Rossbach, spokesperson for the DDA. "So there is no difference to a student in Detroit Public Schools whether this money is refunding bonds or goes directly into the DPS budget." But it is diminishing the state's School Aid Fund by diverting the taxes for "economic development" purposes. Something, somewhere, is taking a hit.

Nonetheless, the Ilitch family—with its estimated $3.2 billion net worth—will get a new stadium, slated to open for the 2016-2017 season, built off the backs of taxpayers.

Not that this is a particularly new tactic. Mr. I, as supporters fondly call him, also owns the Detroit Tigers. When the Tigers, most recently valued at $643 million, wanted a new stadium, Ilitch—who made his fortune off the Little Caesar's pizza chain—went to City Hall, as would any sports owner in the country. And, as lawmakers are wont to do, they obliged, covering $115 million of the $300 million ballpark's costs.

"Few fields of empirical economic research offer virtual unanimity of findings," economist Andrew Zimbalist wrote in 2000. "Yet, independent work on the economic impact of stadiums and arenas has uniformly found there is no statistically positive correlation between sports facility construction and economic development."

In that same paper Zimbalist riffed on years of stadium welfare literature and studies, one of which found "no significant difference in personal income growth from 1958 to 1987 between 36 metropolitan areas that hosted a team in one of the four professional premier sports leagues and 12 otherwise comparable areas that did not." Compare that to the Detroit Lions, whose value skyrocketed from $150 million in 1996 to $839 million in 2006, four years after the franchise moved to its new publicly funded stadium across the street from Comerica Park.

Which is a long way of saying: The franchise owner gets richer, but the city's residents don't. Why hasn't anyone in Washington done anything about it?

"The people who support this stuff have way more power in Congress than the people who oppose it," Neil deMause, whose book Field of Schemes and blog of the same name are the urtext on stadium welfare, told me. "

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