The Malik Report
Red Wings overnight report: regional economic issues mean JLA’s successor will be difficult to build
by George Malik on 08/15/11 at 06:40 AM ET
My goal as a Red Wings blogger is usually pretty simple: I try to post as much Wings-related news as I’m able to find, suggest that you read the entire story for yourself and turn the discussion over to the more qualified people (i.e. my readers), and not that difficult to summarize an article’s thrust 99% of the time because it’s available for your perusal.
This morning I’m in a bit of a pickle as Crain’s Detroit Business’s Bill Shea displays astute timing (as Ilitch Charities’ golf classic takes place today, yielding a summit of “movers and shakers” in the business sense of the term) in discussing the Ilitches and Olympia Entertainment’s discussions with the City of Detroit regarding a short-term lease on Joe Louis Arena and the construction of its follow-on facility…
But the article’s not only a subscriber-only one, but also a paid-subscriber-only article, so it’s hard to summarize its incredibly thorough analysis of the Wings’ current and future dealings with the City of Detroit without resorting to out-and-out plagiarism.
So here’s the deal, in short: The Wings are currently staying at Joe Louis Arena without a formal lease on the facility, in no small part due to the fact that Olympia Entertainment/Ilitch Holdings’ decision to decline renewing said lease allowed the City to take control of Cobo Arena as part of its serious-ass renovations of Cobo Hall. At present, the Wings are paying $25,000 per month to lease the Joe, but in exchange for giving the City significant percentages (anywhere from 7-10%) of its ticket sales, suite rentals, parking and concessions, the Wings get free upkeep of the exterior of the Joe from the City and a relatively cheap police presence, as well as a big break on their property taxes (though not as significant as it was under the old lease).
As such, Shea says that the Joe’s pumping about $2 million into the City of Detroit’s coffers, which is hugely important as the City’s earning $2 million per year (after expenses, no less) from the Wings to use as it wishes, and given that the city’s nearing a budget deficit in the quarter-billion range, that money’s incredibly helpful for the present moment…
And as the State of Michigan, Wayne County and the City of Detroit are all in the red, fiscally speaking, any short-term lease that Olympia/Ilitch Holdings negotiates with the City will have to somehow maintain the Wings’ de-facto benefits-for-the-sake-of-giving-the-city-a-chunk-of-change status, the Wings don’t really need to cut the City a favorable deal, even for an easy “out” when the Wings eventually build a follow-on-facility.
This is a booger as the Wings’ status as a client of the City’s property services instead of a partner in a regional stadium authority means they’re the only sports team that’s giving the City money in return for any investments in the facility, and that explains, at least to some extent, why the lease is so hard to renew, especially as the Wings would probably take increases on property taxes and having to do things like pay for police security and snow plowing to be able to no longer give the City a big chunk of their ticket, suite and concessions sales, especially if the City’s too broke to sell bonds or otherwise help fund a new rink.
“The city is working to maintain operations and expectations in accordance with the expired agreement,” Dan Lijana, communications manager for Mayor Dave Bing’s office, said via email.
The Ilitches issued a blanket statement when asked about the current operating agreement with the city.
“We’re in discussions with the city on a new agreement for JLA. It really doesn’t benefit either party to publicly discuss the details of those discussions. Agreements of this type have many considerations, and we are working to finalize an agreement that makes sense for both parties,” Karen Cullen, vice president of corporate relations for Ilitch Holdings Inc., said via email.
Going forward, the stadium authorities which the Tigers and Lions lease their facilities under send the checks the teams cash toward Wayne County and not the City of Detroit, and if you know anything about the City of Detroit’s politics, they don’t play well with others, but Olympia/Ilitch Holdings would obviously have to work with more than the City—as in the State of Michigan, Wayne County and possibly several counties in Southeastern Michigan should they want to fund their rink/practice facility/whatever via a tax on hotels stays or car rentals (which have been employed in the past)—to build a new rink…
But as Shea suggested in his article which revealed that the Ilitch-backed M1 Rail line has asked for a rail stop at a vacant plot of land just north of I-75 and east of the Masonic Temple (that article’s a paid-subscriber-only one, too) which might be the Ilitches’ preferred locale for a new rink, the Ilitches don’t necessarily need to ask anyone to fund their new rink, which would cost a significant chunk of change but would be immensely profitable:
A new hockey venue is expected to cost $300 million to $400 million. The family has discussed potential public financing with the city and with Wayne County.
The Ilitches are believed to be looking to build on land they own in one of three locations: the Foxtown area; between Grand River and Cass avenues south of I-75; or west of Woodward Avenue north of I-75.
They want a new arena because its luxury boxes and amenities would boost the Red Wings’ revenue, which was estimated in December at $119 million by Forbes.com. That was sixth-best in the 30-team NHL during the 2009-10 season. A new arena could generate $5 million to $8 million annually in additional team revenue, Fort said.
In theory, anyway, the Ilitches could tap into either their revenues from Little Caesars, their Blueline Foodservice distribution business or the MotorCity Casino’s revenues should they wish to fund the rink themselves. It’d take a few years’ worth of saving their pennies to foot the bill, but it’s entirely within the realm of possibility, if not probability, that they could build a rink on their own and keep the sports-related and entertainment-related revenues (let’s face it: any new rink would become a direct competitor to the Palace of Auburn Hills for concerts and other events) in their pockets instead of giving some of it to the City of Detroit, Wayne County or anyone else.
Very long story short, and mostly thanks to Shea’s reporting and the fact that I’ve been following his articles about Olympia/Ilitch Holdings’ negotiations with the City regarding their new lease and their plans regarding their follow-on rink over the past three or four years, well…
Regardless of their future plans, the Ilitches and the Wings want to ensure that they don’t get screwed over by the City on their new lease for the Joe as they eventually plan on moving elsewhere—though between construction timelines and the fact that the economy still sucks in Michigan and everywhere else right now, it’s not likely that the Wings would complete construction on a new rink and move there for at least half a decade, if not longer—but neither side necessarily has any incentive to “play nice” with each other going forward, and as the City doesn’t want to lose control of anything they can get their fingers on, it’s not hard to believe that these negotiations have been contentious.
And as we all know, again, the fact that Detroit’s former mayor just finished a jail term and that a prominent former member of the City Council is serving a jail sentence right now hasn’t changed the fact that the mayor and City Council remain locked in a power struggle which tends to slow political progress to a snail’s pace as the latter party remains mostly committed to lining its pockets and increasing its members’ spheres of power and influence.
In other words, the city’s government (and the county’s to some extent) remains an entity of ponderous bulk and some very real corruption, so if the Olympia Entertainment/Ilitch Holdings entity doesn’t essentially perform a few backflips’ worth of miracle-making, the City’s politicians are more than petty enough to stare its nearly quarter-billion-dollar budget deficit in the face and do nothing but toss up roadblock after roadblock in front of any Ilitch attempts to build a rink which keeps $2 million, $6 million, $8 million or whatever the city’s both receiving in revenues right now and could receive a cut of in the future out of its coffers.
If the City Council’s reaction to Shea’s report about the rail stop—a suggestion that the Pistons should move down to the City despite the fact that leaving the Palace would be insane at this point—is any indication of the kinds of political largesse and grandiosity (if not greed) that Olympia Entertainment, Ilitch Holdings and the Wings are dealing with, it’s no wonder that they haven’t been able to negotiate a new lease with the City for over a year now is indicative of how hard it is to perform such a task, never mind trying to not step on toes while possibly privatizing their operations going forward.
I suppose I should also state that all of these opinions are my own, they don’t reflect the positions of any of the parties involved, and they aren’t meant to damage the Wings’ attempts to secure a new lease or build a follow-on rink (trust me, in this line of work it’s necessary to mention this). In my perfect world, the Wings get a “sweetheart” deal on their short-term lease, build a new rink rather painlessly and make lots and lots of money. I’m just a Wings fan and I want my team to be as successful as possible both on and off the ice because that means happy players, a happy owner and paying customers who receive maximum bang for their buck.
In other news, we talked quite a bit about Valtteri Filppula‘s status as a potential difference-maker for the Wings last week, and today DetroitRedWings.com’s Dave Burke takes a look at Filppula’s statistical accomplishments during the 2010-2011 season:
5: The number of game-winning goals scored: Oct. 19 at Chicago; Nov. 5 at Edmonton; Nov. 26 at Columbus; Nov. 28 vs. Columbus; and Jan. 26 vs. New Jersey.
300: Played in his 300th career regular-season game at Calgary Nov. 3. The Wings pulled out a 2-1 win, and Filppula had a plus-2 rating.
13.9: His 13.9 shooting percentage was third best among regulars on the Red Wings only behind Pavel Datsyuk (16.8) and Tomas Holmstrom (14.4).
50: Filppula has quickly become known around the league as a very deft defensive forward and showed it once again with 50 takeaways for the Red Wings, third only to Zetterberg (54) and Datsyuk (71).
If you get the NHL Network on your cable or satellite system, they’ll air Game 5 from the 2002 Stanley Cup Final today at 12 PM;
Kukla’s Korner’s Doug Miller revealed that Chris Chelios will be featured as a “legend” in EA Sports’ NHL 12 game, but the Detroit Free Press’s sports staff don’t dig the fact that he’s featured as a Blackhawk:
Chris Chelios spent 10 seasons and won two Stanley Cups with the Red Wings. He now works for the Red Wings’ organization.
Yet, in EA Sports’ “NHL 12” video game, Chelios will be sporting a Chicago Blackhawks jersey.
He is one of the “legends” featured in the game, along with Wayne Gretzky and Ray Bourque. Six other legends will be announced later.
Chelios was a defenseman for the Blackhawks in 1990-99. He played for the Red Wings in 1999-2009 and ended his playing career with the Atlanta Thrashers in 2010.
The new modes in the game allow players to relive the legend’s career or add him to any current team. Which means Red Wings fans can have Chelios play for Detroit.
This isn’t big news the tremendous content foreign-language news sources have provided over the past few days (most years, by August they’re the only Wings news around, and Sunday’s Nicklas Lidstrom interview was very cool), but NT.se’s Christer Gustafson reveals that Henrik Zetterberg and the rest of the Wings are kept abreast of Jonathan Ericsson’s alma mater, Swedish third division team Vita Hasten, by Ericsson himself during the season, and while Ericsson and his brother Jimmie (who plays for AIK Skelleftea) have moved on, their father, Sven, is the team’s coach…
And I continue to hate to do so, but here’s the Paypal button. The prospect tournament and training camp are two weeks long, and while I know I’ve probably exhausted your charity to fund heading to the summer development camp, I can’t afford to spend 15 days in Traverse City on my own, so any penny you can spare helps, big time:
Again, you’ll have to use my email address, rtxg at yahoo dot com, to donate…please and thank you and this makes me feel really uncomfortable, still.
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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.