Detroit City Council Approves Next Piece of Arena Deal

February 4, 2014
By
The Erma Henderson Auditorium was packed Tuesday, Feb. 4 for a City Council hearing on the proposed Detroit Red Wings arena.

The Erma Henderson Auditorium was packed Tuesday, Feb. 4 for a City Council hearing on the proposed Detroit Red Wings arena.

The idea was that by waiting, a better deal would come.

Former Councilmember JoAnn Watson and others felt it was prudent to delay a vote in December on the transfer of 39 parcels of land to the Downtown Development Authority, a move required to advance a proposed new Detroit Red Wings arena in downtown. Under Public Act 436, the state law which authorized the appointment of Detroit Emergency Manager Kevyn Orr, Detroit City Council has limited authority; so, a delay, the thinking went, was how councilmembers could gain leverage in the policy-making surrounding the deal.

But if that was the point — to meditate on what Olympia Development CEO Tom Wilson glibly called a “once-in-a-generation” deal — some left City Hall Tuesday puzzled after the council approved the transfer of city-owned land to the Downtown Development Authority at the cost of $1. City Council President Brenda Jones, Councilman James Tate and Councilwoman Raquel Castaneda-Lopez voted against the swap.

The decision moves forward pizza mogul Mike Ilitch’s proposed “catalyst development,” a $650 million arena and entertainment district just north of I-75, west of Woodward. The land Detroit officials turned over Tuesday has an assessed value of $2.9 million, according to city records.

Some local developers and Ilitch employees offered plenty of audible support for the project, but critics said the deal gave too much to Olympia Development, with not enough in return for the community.

Joel Landy, a local developer who owns dozens of properties in the vicinity, told councilmembers, “We’ve been trying to complete this area for quite some time and I think this project has a wonderful chance for success.”

Red Wings General Manager Ken Holland told City Council during a public hearing last month that the team needed a “competitive” arena in order to recruit the best talent.

“It’s important that we have a competitive facility in order to compete in the National Hockey League,” Holland told councilmembers at the hearing.

(If the Red Wings recruiters make note of a minor league hockey player who balks at the chance to go pro because of Joe Louis Arena’s infrastructure, please, drop us a line. We have it on good authority to assume this is a stretch of Mr. Holland’s imagination.)

But a number of residents and activists say a crucial element is missing from the deal. Francis Grunow, a member of the Corridors Alliance, a group of stakeholders who live in the project’s footprint, says a community benefits agreement would allow Olympia’s employment commitments to be monitored. What Olympia agreed to — the creation of a Neighborhood Advisory Committee — offers just that: advice.

Jerry Belanger, who owns the buildings that house Cliff Bell’s and the Park Bar, says the deal taxes him and his wife “to buy [Ilitch] bars and restaurants that will be my competitor.”

And the blight that would be removed in the area? Blame Ilitch for the dilapidated landscape, Belanger says.

“The blight [they’re] talking about — it’s owned by the Ilitch family,” he said, before shooting down the financing of the project.

The funding for the project is constructed through a rather complex, slick deal. The project will be paid through a mix of private funds (42 percent) and public funds (58 percent).

The arena itself is an estimated $450 million. Olympia has said it will lure private developers to construct an additional $200 million of ancillary mixed-use investment. George Jackson, outgoing president of the Detroit Economic Growth Corporation, told City Council last week that could mean retail, housing, office space, hotels, restaurants — anything, really. We’ll call it unknown.

The public funding of the deal stems from Tax Increment Financing. Taxes from properties located in the Downtown Development Authority are captured and poured back into the authority’s footprint. City Council approved the expansion of the DDA’s district in December to include the new hockey arena and entertainment district.

The Michigan Strategic Fund’s board approved the sale of up to $450 million in 30-year tax-exempt bonds to finance the project. Those bonds will be secured through annual payments by Ilitch and Olympia ($11.5 million), the DDA ($2.5 million), and the TIF capture (about $13 million).

Councilwoman Saunteel Jenkins says the original proposal offered no job guarantees for Detroit residents or the creation of a neighborhood advisory council. So, the pre-construction job guarantees now in writing were an improvement, she says.

“Is this a perfect agreement? Absolutely not,” Jenkins says. “… We didn’t reach perfection, but I think we did work very hard.

“It’s much better than what we had originally.”

According to city records, Olympia and the DDA say 51 percent of the jobs hired for the arena’s construction will be for Detroiters. But without a community-benefits agreement in place, that’ll be difficult to monitor, Grunow says.

And, City Council staff noted Tuesday, there’s no job guarantees for Detroit residents post-construction.

Olympia projects the arena will create 5,500 construction jobs, with 1,100 permanent jobs once the Red Wings move into their new home.

Councilman Tate says he’s “wholeheartedly” behind the project, but had a problem with no “clear-cut number of jobs” being earmarked for Detroit residents post-construction.

“That’s extremely important to me,” Tate told the council.

To his knowledge, Tate says Detroit residents typically represent 26 percent of the workforce for Ilitch projects.

“Why couldn’t we at least get that in this agreement?” Tate says. “… I’m not in support of (the land transfer swap), and it’s unfortunate because that’s all it takes.”

Others also took aim at how revenue generated by the new project would be handled: Olympia keeps the entire loot under the deal, Crain’s Detroit Business reported last summer. Concessions, parking, ticket sales, naming rights of the arena — everything.

John Telford, a native Detroiter and former interim superintendent of Detroit Public Schools, says he commends Ilitch for the arena plan, but told the council, “I don’t want you to give away that land.

“Let Mr. Ilitch purchase the land for a fair price — he’s a billionaire — and build his stadium.”

To end his remarks Tuesday, Belanger — along with a number of other critics — took issue with the public financing Tuesday, a tool Ilitch used to piece together Comerica Park for his Detroit Tigers.

“He can’t go toe-to-toe with me on a fair playing field,” Belanger says, “because he can’t win without public money.”

  • Peter Comstock Riley

    Why do we allow the same people to get away with the same stuff over and over again. I have a question if the ILITCH empire is really so great then why doesn’t the City of Farmington miss them maybe so reporter should ask maybe they are glad they left doesn’t seem like they are missed. We cant seem to avoid them but we don’t have to applaud =(