The Malik Report
by George Malik on 01/28/13 at 04:41 PM ET
As noted yesterday evening, Crain's Detroit Business's Bill Shea has revealed that Ilitch Holdings and Olympia Entertainment have at least proposed that the Wings' parent company could end up leasing Joe Louis Arena's follow-on rink from the State of Michigan's "Michigan Strategic Fund," which would limit the taxes owed to the City of Detroit, Wayne County and the State of Michigan by the organization.
It must be noted that Comerica Park and Ford Field have similar arrangements--and it's worth noting that the Ilitches have always leased Joe Louis Arena from the City of Detroit.
This afternoon, Shea follows up his article with a Q and A that helps explain the reasons that the Ilitches made the proposal while the follow-on rink remains an exploratory and theoretical entity as opposed to a specific structure that's going to be built at parcel X, paid for by fund Y and built starting in year Z:
Would the state pay to build a new arena? Ownership doesn't mean the state pays for it. Taxpayers at the local, county and/or state level could fund some, most or none of the project. It's much too soon to say. No details about financing have been disclosed, and it's doubtful if the Ilitches have anything lined up except for some ideas on paper. However, we do know that the state Legislature last month approved shifting $12.8 million in from a specific Detroit Economic Development Corp. fund from paying down Detroit Public Schools debt (since paid off) to being earmarked for bond retirement on the arena project. The money could potentially go toward MSF bonds issued on behalf of the Ilitches to pay for the arena's construction.
Why would the Ilitches not want to own their own arena? The simplest is answer is taxes. If the state owns the arena, they won't be on the hook for property taxes. That could mean $1 million or more yearly the Ilitches won't have to pay (and that local government won't get). That said, they will likely have lease payments, or some type of rental agreement. Again, sports arena financing deals are complex and no two are alike, so we have no idea yet how the deal will play out. Another reason to not own the arena is that they won't be stuck with it years down the road when it comes time for another building.
Shea goes on to talk about the increased revenues which make spending $300-400 million on a new rink worthwhile, and what fate awaits Joe Louis Arena when all is said and done six to ten years from now (and it's not good news for those of us who love the dilapidated Joe).
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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.