JOHN SULLIVAN
Plans call for the new Red Wings arena to be built in this
largely vacant area north of downtown and bracketed by Woodward Avenue
(left), Cass Avenue (right) and Temple Street (foreground).
Property taxes would pay for $261.5 million (58 percent) of the building's construction cost while the team's ownership would provide $188.4 million (42 percent), according to details provided by the state.
Those are July 2013 dollars based on bonds with a 5.91 percent interest rate.
Those are some of the details that emerged Wednesday during a presentation provided to the Michigan Strategic Fund board, which approved the sale of $450 million in 30-year tax-exempt private activity bonds for the project.
Olympia Development of Michigan gave the fund board data that showed a breakdown of the project's costs.
Olympia, which will operate the arena under a 35-year concession agreement with Detroit's Downtown Development Authority, is the property development arm of Mike and Marian Ilitch's $2 billion Detroit business empire that includes the Red Wings, Detroit Tigers and the Little Caesars pizza chain.
The hockey arena, which would be finished by 2017 and replace city-owned Joe Louis Arena, is part of a wider $650 million plan to create a 45-acre district that includes retail, residential, office and restaurant space on the venue site, located west of Woodward Avenue and I-75.
The 18,000-seat arena would have 1,200 premium seats, an attached 500-space parking garage and 10,000 square feet of retail space anchored by a Red Wings merchandise store, restaurants and other retail, according to the project plan.
Possible ancillary developments and infrastructure work the DDA and Olympia said are possible on the site include:
• An elevated pedestrian bridge over the Fisher Freeway, at Park or Clifford avenues.
• Widening the Woodward Avenue bridge over the Fisher Freeway.
• A 140,000-square-foot office and retail development at Woodward Avenue and Sproat Street.
• 25,000-square-foot office and retail project along Woodward.
• A hotel with 20,000 square feet of retail space.
• Several parking structures that would have ground-floor retail space.
• Renovation of the Detroit Life Building, Blenheim Building and 1922 Cass for retail, residential and office space.
• Surface parking lots.
• Streetscape projects.
Bond repayment sources
The DDA intends to use $284.5 million in property taxes already
captured within its 615-acre downtown district to pay off the bonds
issued by the state to build the arena. The remainder of the district
costs, or $365.5 million, will be picked up by Olympia.The DDA district will be expanded under the proposal to encompass the arena and additional adjacent land.
A nonbinding memorandum of understanding involving the DDA, Olympia and Wayne County that outlines the entire project and its financing was approved in a unanimous voice vote by the DDA board in June.
Approvals still are needed from the Detroit City Council, Wayne County Commission, Detroit Economic Growth Corp. and Olympia's board. The DDA must also approve expansion of its tax-capture district.
The planned bond repayment sources are:
• Approximately $12.8 million annually (not to exceed $15 million) from the DDA's property tax capture.
• Approximately $2.15 million in average annual payments made by the DDA from other annual property tax collection, including Wayne County's property taxes within the expanded DDA district.
• $11.5 million annually from Olympia.
The Ilitches and private entities are estimated to pay $177 million for the ancillary development, with another $23 million coming from property taxes in the DDA district or other public funds, according to the plans.
Under the deal, Olympia keeps all revenue generated by the arena, including concessions and parking, and all money from any naming rights deal. There will be 12 five-year renewal options for its 35-year management deal.
In its presentation, Olympia told the Strategic Fund that the number of jobs at the new arena will reach 1,100 versus the 660 now at Joe Louis.
The organization also said the annual economic impact of the venue will be $210 million compared to $125 million for Joe Louis, but it did not provide the formula used to arrive at those figures.
Stadium Authority could own arena
Olympia touted sports venue projects in Los Angeles, San Diego,
Indianapolis and Columbus as examples of public-private spending that
rehabilitated blighted or downtrodden city areas.The new hockey arena would be owned by the DDA, but if Wayne County contributes money toward the project, it would be instead owned by the Detroit-Wayne County Stadium Authority, according to a July 11 letter from Brian Holdwick, executive vice president of business development of the DEGC (which staffs the DDA for the city under a contract), to Michael Finney, who heads the Michigan Strategic Fund in his role as CEO of the Michigan Economic Development Corp.
"In the event that Wayne County provides a funding commitment for the construction of the Events Center, subject to the approval of the Board of Directors of the Authority, the Authority may transfer its ownership interest in all or a part of the Events Center to the Detroit/Wayne County Stadium Authority or other building authority formed under Act 31 of 1948, or other public entity, as determined by the Authority," Holdwick's letter states.
However, it doesn't appear Wayne County plans to attribute any money beyond the $4.75 million from county property taxes captured in the expanded DDA district.
"That would be the county's only commitment," said Ray Byers, Wayne County's chief development officer.
Wayne County Executive Robert Ficano has previously told Crain's he's had talks with Olympia about financially aiding the stadium project, but no details had ever been disclosed.
Unnecessary subsidies?
Critics have blasted the arena deal as unnecessary subsidies for a
billionaire pro sports team owner in a city in municipal bankruptcy.Detroit's state-appointed emergency manager, Kevyn Orr, has said the city's recent Chapter 9 bankruptcy protection filing won't affect the arena project.
He has said the city's long-term debt is as much as $20 billion, and he's halted all debt service payments on city liabilities not secured by dedicated revenue sources.
Backers say the project will create new tax revenue for the city and jobs, and it won't use general fund tax dollars or create any new taxes.
Ballparks' financing
Comerica Park and Ford Field are owned by the six-member stadium
authority and subleased to the DDA, which in turn has operating
contracts with the teams to run the ballparks.The Detroit Lions paid $420 million of Ford Field's $500 million cost, with the rest coming from the city, Wayne County, DDA and the Michigan Strategic Fund.
Comerica Park, built for $310.3 million, involved the stadium authority issuing $85.8 million in 30-year tax-exempt bonds issued in 1997 to pay for a portion of construction.
Instead of general fund tax dollars, the stadium bonds are paid off by a 2 percent rental car tax and 1 percent hotel room tax approved by Wayne County voters for the stadium in 1996.
Tigers owner Mike Ilitch financed $145 million for his portion of the ballpark's construction, and some of the cost was shared with adjacent Ford Field's price.
Future of Joe Louis
No decision has been made on the fate of Joe Louis Arena.It was built by the city for $30.3 million in 1979 and financed with municipal bonds. The team, then owned by Bruce Norris, signed a deal in 1979 to move into brand-new Joe Louis that season, leaving behind Olympia Stadium, its home since 1927. Norris also owned Olympia.
Mike and Marian Ilitch bought the Wings from Norris for $8 million in 1982.
Joe Louis falls under the Detroit Building Authority, specifically the authority's Municipal Parking Department.
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