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Ilitches say back-taxes will be paid as State House approves arena-funding bill

Updated at 11:07 PM: Olympia Entertainment is now stating that as a leasee, it owes no taxes and has not been given a tax bill by the city.

Now things get a bit...Nuanced, I suppose. The property taxes that Olympia Entertainment and Ilitch Holdings owe they City of Detroit are supposedly unpaid very specifically because the Ilitches have been leasing Joe Louis Arena on an informal basis, as they claim to the Detroit News's Christine Macdonald...

The reason the taxes haven't been paid is because the lease ended in June 2010, according to a Thursday statement by the Detroit Economic Growth Corporation and Olympia Entertainment Inc.

"A new lease is being discussed," the city's economic development arm and the Ilitch Holdings Inc. company said, "and the intent of both parties has been to have the taxes in question reconciled when the new lease is renewed."

The city of Detroit and Olympia Entertainment have been negotiating for more than two years about extending the lease for Joe Louis Arena — where the Detroit Red Wings play — and Cobo Arena. Olympia Entertainment doesn't want a long-term lease because of the plan to build a new arena.

And in Lansing, per the Free Press's Kathleen Gray...

A bill that gives the Ilitch organization a leg up on a proposed sports and entertainment complex in Detroit passed the state House by a 58-49 margin Thursday afternoon.

The bill would allow the Downtown Development Authority to continue to capture funds — about $12 million a year — to help pay for infrastructure needs associated with the proposed $300-million Ilitch project.

The bill now heads to Governor Snyder's desk as the State Senate already approved the legislation.

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Comments

MoreShoot's avatar

Hey Billionaire boy. Pay up.

Posted by MoreShoot on 12/13/12 at 06:45 PM ET

HockeytownOverhaul's avatar

In all fairness MS, they own the ranch, we’re just the cattle.  Money is owned by the ultra-wealthy, we’re just renting it.

So are they saying some of the 12m in tax dollars are going to go towards the reconciled totalled of taxes owed on the current lease now?

Posted by HockeytownOverhaul on 12/13/12 at 07:16 PM ET

Avatar

Nah.  Those taxes will just get washed away as part of the subsidy package, if I had to guess.

Posted by HockeyinHD on 12/13/12 at 11:30 PM ET

OlderThanChelios's avatar

Hey Billionaire boy. Pay up.

That’s right. After all, what has that son of a bitch ever done for Detroit. It’s been nothing but take, take take as far as Mr. I is concerned. He’s just a greedy “rich man” trying to steal the money of the upstanding people of Detroit. That bastard.

[Where’s the sarcasm font when we really need it.]

Posted by OlderThanChelios from Grand Rapids, MI on 12/13/12 at 11:35 PM ET

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He’s just a greedy “rich man” trying to steal the money of the upstanding people of Detroit. That bastard.

You know you’re good when you can make hundreds of millions of dollars in raw profit from a sports team, raising ticket prices pretty much every year, raising concession prices pretty much every year, and fans will still defend you.

Skillz.  With a z.

Posted by HockeyinHD on 12/14/12 at 06:06 AM ET

MsRedWinger's avatar

I’m a few years away from having studied the law, but isn’t it usually the case that if a lessee stays in possession after the expiration of a lease, with the permission of the lessor, the terms of the most recent lease are considered to still be in effect?

I never heard of a tenant who could credibly claim, for example, that rent needn’t be paid because the lease expired… 

That said, the Illitch family has done many great things for the City of Detroit, and I believe they will, in good faith, work this issue out.

Yes, they are very wealthy.  But how many people like them would be willing to invest in downtown Detroit as they have?...

And, they couldn’t raise ticket prices and concession prices if people weren’t ready and willing to pay.

What this latest NHL lockout has forced me to admit is how much of a sucker I have been for years, spending my hard earned money subsidizing millionaires and billionaires.

Posted by MsRedWinger from Flori-duh on 12/14/12 at 08:30 AM ET

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I’m a few years away from having studied the law, but isn’t it usually the case that if a lessee stays in possession after the expiration of a lease, with the permission of the lessor, the terms of the most recent lease are considered to still be in effect?

Depends on what the terms of the lease were.  If the leasee is just cutting a check to the lessor, then it’s the lessor’s responsibility to pay specific invoices.  I mean, when someone rents an apartment they aren’t responsible to pitch in 1/whateverth of the property taxes twice a year, that’s the owners job.

Condo’s, though, are sometimes handled that way… especially if it’s an equity-transfer agreement (glorified rent-to-own) sort of deal.

Posted by HockeyinHD on 12/14/12 at 09:14 AM ET

MsRedWinger's avatar

You’re right.  We’d have to know who was paying the taxes when there was a lease in force.  I assumed it was Illitch paying the tax, as the City was the lessor, right?

Posted by MsRedWinger from Flori-duh on 12/14/12 at 09:26 AM ET

awould's avatar

The article implies that Illitch was on the hook for the taxes under the original lease. Most likely it was a NNN lease where Illitch covered all expenses as though he owned the place. Any high dollar lease agreement like this that were signed today would stipulate to all the details to cover the possibility that the lease expires and the tenant is occupying on month-to-month. I review a lot of leases in my job and I’ve seen tiny strip center tenants with 2 pages covering the eventuality of a month-to-month occupancy, though most just have a paragraph stating that the terms in place as of the expiration carry over.

And if it is silent on the matter, I think MsRedWinger is right, that the law would likely hold that it defaults to the original terms while they still occupied it. Which Illitch probably knows and is just holding the tax money for leverage because he can. Possession is 9/10 of the law - they want the money, sue him. Or just pave the way for his new arena district and he’ll happily cover the back taxes.

Posted by awould on 12/14/12 at 10:50 AM ET

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So let me make sure I understand that an owner that voted not to open the NHL season because there was not a new CBA in place, agreed to keep operating without a new lease in place? I don’t care about the tax liability, but do these two business practices seem to be in opposition to one another? Or are the owners operating in their own self interests whenever they can as much as the players do?

Posted by hockey1919 from mid-atlantic on 12/14/12 at 10:57 AM ET

awould's avatar

Operating without a lease in place at the Joe is probably in Illitch’s best interest. I wouldn’t say these two business practices are opposition to one another because they’re related to completely different parts of the business that have virtually no overlap.

And yes, owners always operate in their own self interests. At what point their self interests become selfish interests is the debate of the day.

Posted by awould on 12/14/12 at 11:09 AM ET

mrfluffy's avatar

Meh. Whatever.

If I did what Ilitch just did I’d be fined and have fees that I couldn’t afford to pay pile up. Because they have the money, they’ll just pay what they owe and move on, no big deal. Must be nice.

And no, I’m not politicizing…

Posted by mrfluffy from A wide spot on I-90 in Montana on 12/14/12 at 11:15 AM ET

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owners always operate in their own self interests

Exactly, and as the players do.

PS
Great avatar.

Posted by hockey1919 from mid-atlantic on 12/14/12 at 11:45 AM ET

HockeytownOverhaul's avatar

It is ironic that you’d agree to continue renting without a lease in good faith, of course because they want a new arena and don’t want locked into the joe for another 20 years.  But they couldn’t agree to play without a new CBA.  If only the owners were as understanding of the symbiotic relationship between them and the players as the city of Detroit is of their relationship with the owners.

Posted by HockeytownOverhaul on 12/14/12 at 12:37 PM ET

HockeytownOverhaul's avatar

not to mention the city that let them skip on signing a new lease on a “gentlemans” agreement will also be footing part of the bill for the new place Illitch wants to build, which is the reason for not signing a new lease to begin with.

Why can’t the NHL and players operate with the same level of, trust, I guess for a lack of a better term.

Posted by HockeytownOverhaul on 12/14/12 at 12:41 PM ET

awould's avatar

The dynamic is different. The owners hold more cards than the players. Illitch holds nearly all the cards with the city, at least as far as the Joe is concerned. It probably helps Illitch’s position with the Joe that the team isn’t actually playing. If they were, the city would have some more leverage.

Overall though, if the city were to evict him, they’d just be losing a lot of rent money and the taxes still wouldn’t be paid, and people would hate them for leaving the Red Wings homeless. What’s odd to me is that the property is taxed at all. I live in AZ and there are no taxes for any real property owned by a municipality. Jobing.com, owned by the city of Glendale as we all know, is assessed $0 in property tax.

Still though, I wish they’d be a bit more trusting and just play the season while the CBA is negotiated. That should be something put into this new CBA, that the season would be played for at least one year while the next CBA is negotiated. Of course, then, they’d just cancel the 2nd season since apparently nothing can get done without holding an anvil over each other’s heads. A**holes, all of them.

Posted by awould on 12/14/12 at 12:49 PM ET

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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.