Detroit, Rick Snyder — July 26, 2013 at 7:07 am

New Red Wings stadium in Detroit will be built using $285 million in public funds


Republicans hate picking winners and losers except when they don’t

Amid all the drama surrounding Detroit’s bankruptcy this past week, there was a supremely ironic announcement made that came the same day a federal bankruptcy court judge cleared the way for Emergency Manager Kevyn Orr to proceed with the Chapter 9 filing. Plans for new sports complex, centered around a new Red Wings hockey arena, were revealed. The complex will cost $650 million of which $285 million will come from tax dollars. The arena itself will cost $450 million and 58% of that cost, $261.5 million, will be paid for by tax revenues.

The bonds are being issued by the state in part under a tax-increment-financing, or TIF, plan. Under a TIF arrangement, “future gains in taxes [are used] to subsidize current improvements, which are projected to create the conditions for said gains.” In other words, the project will essentially pay for itself by increasing property values and tax revenues in the future after it is built.

Here’s more:

Backers explained the bond repayment sources as:

• Approximately $12.8 million annually (not to exceed $15 million) from a special DDA tax capture.

• Approximately $2.15 million in average annual payments made by the DDA from other annual property tax collection.

• $11.5 million annually from Olympia [Development of Michigan].

Critics have blasted the arena deal as unnecessary subsidies for a billionaire pro sports team owner in a city on the precipice of municipal bankruptcy.

A couple of things here. First, I’m not against the government subsidizing investments that will benefit us in the future. This process, what Republicans typically call “picking winners and losers” is what I call “investment in the future”. In this case, it’s clear that the investments in the area where Tiger Stadium, Ford Field, and the Fox Theater are is a nucleus of positive development that will have a positive impact on Detroit as it moves forward. A new hockey arena in a city that calls itself Hockey Town is a natural addition.

But where is the hue and cry and utter outrage from Republicans on this? Where are the condemnations about “picking winners and losers”?

It is absent and the reason is because they are complete hypocrites. The only time you hear “picking winners and losers” rhetoric is when Democrats are proposing investing in the future. When Republicans are involved, it’s “investment”.

And, sure enough, here’s Republican Governor Snyder on the new complex:

When I asked Orr and Gov. Rick Snyder on Friday if they felt awkward about backing a new downtown sports emporium while so many people in Detroit’s neighborhoods are struggling amid poor city services, they said no.

“It’s a public-private partnership that will lead to a number of construction jobs and more tax revenue,” Snyder said. “Let’s try to do as much as possible to grow the city.”

On the other hand, here’s the good governor in an interview a couple of years ago with the National Federation of Independent Business:

One of the problems with the tax credit world is that you’re picking winners and losers, and government is not really competent to do that. I was a venture capitalist. I know how hard it is to pick winners and losers, let alone [saying] government can do it.

So, yeah, hypocrisy much?

Second, there are roughly 90,000 small businesses in Detroit that have only one employee, according to Rev. David Bullock. There are undoubtedly tens of thousands of more with just a small handful of employees. Imagine the potential that could be unleashed if the business world and even our [gasp!] state government were to start investing in that pool of entrepreneurship? Sadly, because it doesn’t involve wealthy business owners — the pals of Governor Snyder and his cohort — that would just be “picking winners and losers”.

I think the new arena complex is a good idea and believe it will help stimulate growth in Detroit. But the rank hypocrisy is galling and the lack of investment in small businesses in Detroit is just one more bit of evidence proving that the end game for Detroit involves a whole lot of already wealthy men and women getting even wealthier while the citizens of Detroit will be left with crumbs and expected to thank them for turning on the streetlights.

Adding… Frank Beckman, someone with whom I rarely agree, explains the hideous optics of Wednesday’s announcement pretty well:

On the same day — Detroit’s 312th birthday — the city defended its filing for Chapter 9 bankruptcy due to years of fiscal mismanagement, the state of Michigan announced a whopping $450 million bond project to build a new hockey arena for Detroit Red Wings owner Mike Ilitch. Another $200 million will be used to develop the area around the new arena for housing and retail projects.

As optics go, the arena funding press conference couldn’t have come at a worse time and was a grievous blunder by the Snyder administration and Detroit economic development officials.

Public funding of arenas is a contentious issue to begin with. While Gov. Rick Snyder said the project “should increase the tax base of the city longer term and should increase the employment opportunities for Detroiters,” numerous studies have shown that the benefit of publicly funded projects like this are minimal at best, and economic losers at worst. […]

Comerica Park and Ford Field were similarly built through the partial use of public funding power and so far there’s been no sign that taxpayers will be failed by the issuance of those bonds, which are being repaid through taxes being collected in Wayne County on car rentals and hotel rooms.

The hockey arena will use a different economic model using the parking and concessions dollars to repay the bonds, so there should be no jeopardy to taxpayers and private backers so long as fans keep showing up in large numbers for Red Wings games.

Let’s just hope the people who came up with the idea for the timing of the announcement weren’t the same ones doing the cost-benefit analysis of the project.