The Malik Report
by George Malik on 01/27/13 at 09:41 PM ET
Crain's Detroit Business's Bill Shea promised a blockbuster on Sunday evening, and he's delivered. According to Shea, Ilitch Holdings and Olympia Entertainment, who do not own but instead lease Joe Louis Arena from the City of Detroit, are proposing that that their follow-on rink be owned by and leased from the State of Michigan:
The Ilitch family, which owns the Detroit Red Wings, has privately floated the idea that the state of Michigan own a new downtown hockey arena proposed for the National Hockey League franchise.
The suggestion to possibly use the Michigan Strategic Fund as the venue's owner was discussed in a November meeting between state economic development executives and representatives of the Ilitch family, according to copies of emails obtained from the Michigan Economic Development Corp. by Crain's through a Freedom of Information Act request.
Details of that meeting have not been disclosed, but a source familiar with the situation, who spoke on condition of anonymity, confirmed to Crain's that the Ilitch organization was suggesting state ownership as part of the preliminary brainstorming for the new venue.
The fund, which can sell low-interest bonds for projects, is an autonomous board within the quasi-public MEDC and was created in 1984 to promote economic development. The fund owns the Cadillac Place office building in Detroit's New Center area and the Michigan House of Representatives Building (Anderson Office Building) in downtown Lansing, the MEDC said.
This is just an idea at present, but why would the Ilitches propose leasing their stadium in a similar manner to their leasing of Comerica Park from the Downtown Development Authority? Shea goes into that subject at significant length, but the bottom line involves taxes and liability (and those of you who are familiar with the Ilitches' way of doing business know that the bigger business empire consists of hundreds of Limited Liability Companies):
Property taxes are a major reason for the Ilitches to not want to own a new arena, said Neil deMause, a New York-based journalist and co-author of the book Field of Schemes, which took a critical look at public funding for professional sports stadiums.
"If the state owns the building, presumably you don't have to pay property taxes. That's huge. That's why a vast number of authorities are owned by public entities even if the teams are paying for the construction costs," he said.
News reports emerged late last year that the Ilitches were delinquent on city property taxes on their properties, including Joe Louis, but Detroit acknowledged confusion over record keeping, and it's unknown if any back taxes actually are owed. The Joe Louis lease between the city and Olympia calls for the Ilitches to rent the building for $25,000 a month in lieu of taxes.
Not owning a new arena also aids the Ilitches in the long term, deMause said.
"If you don't own the building, you're not stuck with it down the road," he said. "What you want to own is the revenue for the building. Actually owning the building means you're in a situation in which you want to move down the road, the property is yours and you have to figure out what to do with it."
Continued, and Shea's article is more than worth your time.
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The Malik Report is a destination for all things Red Wings-related. I offer biased, perhaps unprofessional-at-times and verbose coverage of my favorite team, their prospects and developmental affiliates. I've joined the Kukla's Korner family with five years of blogging under my belt, and I hope you'll find almost everything you need to follow your Red Wings at a place where all opinions are created equal and we're all friends, talking about hockey and the team we love to follow.