Detroit Emergency Manager Approves Go-Ahead on New $450 Million Sports [Arena]

[ProSense]

Detroit Emergency Manager Approves Go-Ahead on New $450 Million Sports (Arena)

by bink

More evidence that the effort to bankrupt Detroit is ideologically, rather than fiscally driven:

New $444 Million Hockey Arena Is Still a Go in Detroit.

We're told that Detroit can't afford to take care of its employees and its residents anymore. It can't afford to take care of its cultural and artistic heritage.

Detroit's broke!

It can't afford the people who live there anymore.

It can't afford public pensions.

It can't afford lazy black people.

But it can afford a new sports complex that will cost hundreds of millions of dollars -- ultimately, I speculate, over half a billion dollars when all is said and done -- that will really only provide economic benefits to the professional sports team owners and a few cronies.

What a laugh.

No schools, no roads, no utilities, no services, no pensions for Detroit.

But hockey, anyone?

http://www.dailykos.com/story/2013/07/26/1226791/-Detroit-Emergency-Manager-Approves-Go-Ahead-on-New-450-Million-Sports-Area

WTF?

Report: Michigan Judge Orders Detroit Bankruptcy Filing Withdrawn
http://www.democraticunderground.com/10023297417

[Just Saying]

1. Wow.

So police and fireman who served the city for decades will be destitute in their old age but at least there's a new hockey facility?

[Crepuscular]

2. More than just a sports stadium

it's part of a $650 million dollar development that includes housing and retail space. Much of the funding will be private, the City of Detroit is not going to be contributing $440 million out of it's empty coffers. I think you would be pretty hard pressed to argue that Comerica Park and Ford Field have had negative impacts on the viability of Detroit's downtown and a new stadium for the Red Wings is not any different. And I say that as someone that doe snot watch hockey and could give a damn about a new stadium but one who recognizes that re-vitalizing the downtown area will play a crucial part in resurrecting the city of Detroit from the ashes.

http://www.freep.com/article/20130619/BUSINESS06/306190099

[bahrbearian]

3. Even if it takes peoples Pensions?

[Crepuscular]

6. except that it doesn't

take peoples pensions.

[GiaGiovanni]

4. "Much" of the funding will be private? How much will be public?

Let's start there.

[Crepuscular]

5. How much?

Approx. $370 million in private contributions and $280 million in public financing. The public contribution does not come from existing city funds, though, so money that could be used to pay pensioners or other debt would not be used. The public funding comes from bonds that are repayed by TIF funds. TIF funds are generated by a portion of the increased tax revenue that results from the improvement of a development like this arena project. If the arena project does not happen, there is not going to be any increase in tax revenues, so again, it's not like this funding is taking money that would normally be redirected to paying the cities debts, this is not general fund or pension fund money being spent.

Here is a rough an dirty analogy. Say I own a vacant lot but don't have the money to build a house on it and I'm having trouble paying the taxes on it. The guy next door offers to build a house on it if I pay for half and as part of the agreement we agree to rent the house for ten years and split the proceeds of the rental income. Because I will have a source of income, a bank agrees to loan me half of the money needed to build the house. The bank gives me the money, we build the house, we rent it and I use my proceeds from the rental income to pay off the bank loan. At the end of the ten year period I have a tangible asset that is owned free and clear. That is essentially what TIF financing accomplishes, it's a joint venture between private and public entities that benefits both parties. The income generated by using the house as a rental would not have been there had it simply remained a vacant lot, the only way the income is produced is if the project goes forward and the property is improved. If this arena project does not go forward, it's not like the city is going to have an extra $280 million sitting around that they can then use to pay pensioners and bond holders, that money does not presently exist and will only exist if the proposed development happens.

[GiaGiovanni]

8. $280 million in public financing through bonds, which puts taxpayers at risk

The public funding comes from bonds that are repayed by TIF funds. TIF funds are generated by a portion of the increased tax revenue that results from the improvement of a development like this arena project.

Where does the rest of the tax revenue go?

This is assuming that the project generates enough profit that the portion of the taxes taken in that are TIF funds is enough to pay back the bonds. If the project, being built in a busted city, also goes bust, the taxpayers on are the hook for $280 million. (Or the bank will just own the project and whatever other city funds it can sue for.)

If the arena project does not happen, there is not going to be any increase in tax revenues, so again, it's not like this funding is taking money that would normally be redirected to paying the cities debts, this is not general fund or pension fund money being spent.

No, but it does require the borrowing of money that puts a bankrupt public sector at risk for $280 million (or some portion of it) if the big plans for big tax revenue don't work out. It is a risk that no bankrupt city should be taking.

If the arena project does not happen, the city won't be on the hook

But if the arena project happens and is a bust, the city is very much on the hook.

Here is a rough an dirty analogy. Say I own a vacant lot but don't have the money to build a house on it and I'm having trouble paying the taxes on it. The guy next door offers to build a house on it if I pay for half and as part of the agreement we agree to rent the house for ten years and split the proceeds of the rental income. Because I will have a source of income, a bank agrees to loan me half of the money needed to build the house. The bank gives me the money, we build the house, we rent it and I use my proceeds from the rental income to pay off the bank loan. At the end of the ten year period I have a tangible asset that is owned free and clear. That is essentially what TIF financing accomplishes, it's a joint venture between private and public entities that benefits both parties. The income generated by using the house as a rental would not have been there had it simply remained a vacant lot, the only way the income is produced is if the project goes forward and the property is improved. If this arena project does not go forward, it's not like the city is going to have an extra $280 million sitting around that they can then use to pay pensioners and bond holders, that money does not presently exist and will only exist if the proposed development happens.

Neither you nor the guy next door is a public sector entity responsible for the lives of citizens. If you and your neighbor, as private citizens, go bust, there is still a police force and still trash collection. When a bankrupt public sector entity is put at risk, all public services--including whatever is left of the police--are at risk.

A BANKRUPT city should not be playing with financial risk.

[Crepuscular]

9. your opinion.

the fact is the city is already at risk, hell, it's been going down the tubes for the last 20 years. It can continue to go down the drain or it can try and re-invent itself as some other cities that have faced similar circumstances have done. Whether you like it or not, professional sports bring a lot of revenue into the city. Ask the merchants in Greektown if they would like to see the Lions and the Tigers move to the burbs as the Pistons did. Absent sports and casinos, the downtown area in Detroit would be as dead as most of the residential areas are. Not sure how $280 million in TIF funding is going to add much risk to a city that already has $18 billion in unfunded liabilities and debt. But hey, if you want to continue the status quo, more power too you.

[GiaGiovanni]

11. No, the logical outcome if the project doesn't make the money they think it will

This is a risk for the city, which could normally be absorbed. But when a city is bankrupt, it should not be taking on ANY risk, especially not for a project which could, due to the decline of the city, take in a great deal less tax money than expected, leaving the taxpayers on the hook.

[Bunnahabhain]

7. Blame Canada!

[SalviaBlue]

10. WTF?

is right!