Why Have We Decided That A Guy Who Became A Billionaire Selling Us Cheap Pizza Is God

[Wesley Mouch]

It is incorrect to say that there is no outlay of of city funds or that the money can't be used for anything else without the arena.

Tax Increment Financing [[TIF) is a popular method of financing the public costs associated with development and redevelopment projects. TIF occurs when a local government freezes the tax base within a specific development district and uses the revenues generated by reassessment or new development to finance selected improvements within the district. The term “tax increment” refers to the additional taxes that will result from private development. This “increment” is earmarked or “captured” for the TIF or to other taxing units that otherwise would receive revenues. Public improvements can be financed one of two ways in a TIF plan:
- Improvements may be finances on a pay-as-you-go basis from annual tax increment revenues.
- The municipality may issue tax increment bonds to finance public improvements and use the annual tax increment revenues to retire the bonds.

While it is true that these funds are earmarked for development financing, and thus not part of the city's general fund, it is not correct to say that they cannot be used for any other purpose. These funds are available to subsidize almost any development within the defined district.

The underlying concept of TIF financing is that the diverted tax revenues will be offset by an increase in tax revenues.

The new hockey arena puts the DDA on the hook for at least $14.8 million per year, while Ilitch is only required to pay $11.5 million per year until the arena is paid for, and they get to keep all revenues from the arena and associated operations. On top of that, the arena is exempt from property taxes.

Due to the fact that the arena property itself will generate zero property taxes, the city must see a tax collection increase of at least $15 million per year just from the spinoff development that happens as a result of the new arena.

Considering the poor track record of sports arenas creating significant spin off developments, it is highly unlikely that the increased property values and economic activity around the new hockey arena will create anywhere near the additional $15 million per year needed just to cover the public payments on the debt.

How much spin of development have we seen from Comerica Park and Ford Field? A few bars and restaurants, and shitloads of surface parking lots. Certainly not enough to generate an additional $15 million a year in tax revenues...

So then show us the Comerica figures. Show us where the cities tax money is being diverted to pay for Comerica.

[rb336]

erikd, you fundamentally misunderstand the issue

[ghettopalmetto]

erikd, you fundamentally misunderstand the issue

Where's the misunderstanding? The State of Michigan uses its bonding capacity [[something available to EVERY business owner, right?) to help build a profit center for Mike Ilitch.

Tax Increment Financing. You have a building that 1) is publicly owned, and thus not taxable property and 2) all the operating revenue goes to Mike Ilitch. WHERE IS THE INCREMENT? That just leaves you with Tax Financing. Which sounds a hell of a lot like public subsidy to me.

Oh, I know: Spinoff and Synergy, or Something. Maybe another coney joint will open. Is that going to be enough increase in taxable property value to pay back the bond investors?

Rb, I know you know what opportunity cost is. The city is indefinitely relinquishing future taxes on this property to build another cash vacuum for Mike Ilitch. So where's the gain for the City?

I personally wouldn't spend $200 without questioning the return on investment. To blindly spend $200 MILLION and *hope* you get something in return some day...that's just idiocy.

[Wesley Mouch]

...snip...
I personally wouldn't spend $200 without questioning the return on investment. To blindly spend $200 MILLION and *hope* you get something in return some day...that's just idiocy.

You have an in-service example of the benefits. Look at the Detroit Tigers. If you don't think Detroit gets $200 a hour in incremental 'spin off' true incremental income for residents and the city coffers both, then you're eyes are closed because of your love for Mike Ilitch.

Now $200 million in incremental revenues? Now we can debate. But as I said earlier, what evidence is there that the hundreds of million in Comerica bonding is coming from taxpayers pockets?

All we have to do is look at Comerica to see what JLA2 is likely to 'spin off'.

I detest sports -- but when stuck in ballpark traffic, I look around me and see money-spending fools. IN DETROIT!

[ghettopalmetto]

You have an in-service example of the benefits. Look at the Detroit Tigers. If you don't think Detroit gets $200 a hour in incremental 'spin off' true incremental income for residents and the city coffers both, then you're eyes are closed ...

Where's the economic analysis that shows the Return on Investment to the City of Detroit coffers? That's right--there isn't one.

Now $200 million in incremental revenues? Now we can debate. But as I said earlier, what evidence is there that the hundreds of million in Comerica bonding is coming from taxpayers pockets?

You do know what government-backed bonds are, right?

All we have to do is look at Comerica to see what JLA2 is likely to 'spin off'.

Parking lots. Maybe a bar?

I detest sports -- but when stuck in ballpark traffic, I look around me and see money-spending fools. IN DETROIT!

Socialize the expenses and privatize the profits. I can't think of a single smarter strategy.

Looks like this is all-but-a-done-deal, though. So maybe it's time to start thinking of the next publicly-financed multi-hundreds-of-millions-of-dollars boondoggle that will "create spinoff".

[rb336]

Please, if you can't add anything besides your own lack of knowledge about TIFs, etc. or the economic impact, just STFU. There hasn't been anything new or useful in this thread for ages

[canuck]

Please, if you can't add anything besides your own lack of knowledge about TIFs, etc. or the economic impact, just STFU. There hasn't been anything new or useful in this thread for ages

"I like this thread just fine the way it is, thank you very much." [[declaimed in a sing-song kind of way.)

[Wesley Mouch]

...Parking lots. Maybe a bar?...

Yeah, that's it. Empty parking lots and perhaps one bar.

[emu steve]

This is a FWIW comment:

Since there is so much uproar over building facilities for privately owned teams, it might be noted that the Green Bay Packers are a publicly owned team. They raised money [[by stock sale) to expand and improve Lambeau Field.

"The Packers are the only non-profit, community-owned major league professional sports team in the United States." [[Wikipedia)

My [[provocative?) question is:

IF the Red Wings, Tigers, etc. were non-profit, community-owned teams, would folks still object to [[partial) public financing of new stadiums/arenas?

What if the taxpayers had to foot the entire bill?

[canuck]

My [[provocative?) question is:

IF the Red Wings, Tigers, etc. were non-profit, community-owned teams, would folks still object to [[partial) public financing of new stadiums/arenas?

What if the taxpayers had to foot the entire bill?

Good point!

Another example of publically funded equipment it is Cobo Hall. It exists as a temple to commerce built and paid by the public purse and used by any number of commercial exploitants to exhibit their wares and services to a paying public.

[ghettopalmetto]

Please, if you can't add anything besides your own lack of knowledge about TIFs, etc. or the economic impact, just STFU. There hasn't been anything new or useful in this thread for ages

My layman's understanding of TIFs is that they are a bet against expected future revenues. They work like this:

1. Government body provides funding for a project.
2. Property values within a defined geographic area are expected to increase as a result of said project.
3. Due to increased property values, the property taxes increase.
4. The increased property taxes [[the "increment") are used to pay off the debt incurred.

Did I get any of that wrong? Or should I just STFU anyway?

The problem is, when the single largest component of the project is nontaxable [[the arena), there IS no increment. It's just a bet--a HOPE that property values *near* the arena increase. And the properties that will need to be taxed to pay for Ilitch's arena will be any restaurants and bars that open in the designated district.

Ilitch is worth multi billions of dollars. So why does he need to use the credit of the State of Michigan to float government bonds? He's taking a fraction of the risk, and reaping all of the rewards.

It might be different if the City and State structured a deal that guarantees the revenue needed to pay off the bonds. But we all know that bankrupt Detroit can't resist throwing cash money at every bad Ilitch idea, hoping that he creates a few more beer-slinging jobs.

If Comerica Park and Ford Field had created tons of Spinoff, I might think differently about this raw deal. But I suppose the third time is the charm, huh? Synergy, or something.

[rb336]

The problem is, when the single largest component of the project is nontaxable [[the arena), there IS no increment.

The fact that the arena isn't taxable is the first salient point made in a while. however, the arena's tax status does not mean there is no increment. There is $200 million in ancillary development as well.

[ghettopalmetto]

The fact that the arena isn't taxable is the first salient point made in a while. however, the arena's tax status does not mean there is no increment. There is $200 million in ancillary development as well.

Is that $200 million ancillary development guaranteed? Or did DEGC allow Ilitch to wiggle an "escape clause" into the funding agreement? What are the projected property tax revenues from the ancillary development, and do they even begin to cover the costs of Ilitch's Free Money? These are questions I think should have been asked from the beginning. But if we scare Ole Mike, he might take the Red Wings and move to Dubuque!
Better give him the ransom he demands and be safe.

I think it's incredibly sad--comical, really--that what was once one of the great cities of the world has shelled out hundreds of millions of dollars to demolish its history and replace it with a copy of Ye Olde Shoppes at Partridge Creeke.

Now, I'd like to see a small business owner approach DEGC and ask for the same sweetheart deal. Hint: They're going to tell you to get bent.

[jimmyr]

Two guys that made their billions selling $5 boxes of diabetes and junk mortgages to people, respectively, run the show in Detroit. That's reality. When nobody else in the nation wants to invest in Detroit, that's what you're stuck with. Both Dan and Mike take complete advantage of the situation and exploit the fact that they're Detroit's only big money players.

[rex]

those little caeser pizzas are ok with mushrooms.

[Honky Tonk]

those little caeser pizzas are ok with mushrooms.

They're not bad with cannibas either

[Hermod]

You know, Navin Field/Briggs Stadium/Tiger Stadium existed fopr years and years and the area around it was mostly old houses who rented out their yards for parking and Detroit's very own skid row. I went to a lot of Tiger and Lion games in the fifties and don't remember the area around the stadium being anything special.

[rb336]

Two guys that made their billions selling $5 boxes of diabetes and junk mortgages to people, respectively, run the show in Detroit. That's reality.

No, that is just showing your sour grapes. What, exactly, have YOU done to benefit Detroit? Both men would be just fine if they kept their companies in the burbs. They earn no more by having moved to Detroit - and they pay city income tax. probably more each year than you or I would in a lifetime.

[ghettopalmetto]

No, that is just showing your sour grapes. What, exactly, have YOU done to benefit Detroit? Both men would be just fine if they kept their companies in the burbs. They earn no more by having moved to Detroit - and they pay city income tax. probably more each year than you or I would in a lifetime.

I'm personally not against a new hockey arena, or new development in general. In fact, I strongly advocate new development.

What I do have a problem with--and I suspect that many feel the same--is that Detroit and Michigan can't find money to plow snow in the winter, but every time billionaire Mike Ilitch needs a handout, DEGC comes running. Every time someone wants to start a new business, there comes a new story of Strangulation by Red Tape. But the City of Detroit has a fleet of bulldozers at Mike Ilitch's beck-and-call. Hey, while we're at it, let's just hand him some free City-owned lots, so he can charge $20 a car for parking. That'll [[somehow) help the tax base, right?

Couple that with the questionable [[at best) results of development-through-stadiums, and I just think there are more cost-effective investments that could be made with the limited public funds available.

[Detroitnerd]

There is no penalty to Mike Ilitch if the $200 million in ancillary development does not materialize. If by some miracle it does [[stadia aren't great at creating spinoff development, and Ilitch's vertically integrated arena plans don't bode well for creating any more spinoff than usual), Ilitch gets a bonus of more than $60 million. This for the development of a neighborhood between two parts of town that are exploding with economic activity -- and are a dead zone because their primary landholder is slumlord Ilitch himself.

Sleazy, sleazy dealings are being cemented here that will likely retard development in this are for decades to come. But go ahead, rb336, guzzle that Ilitch-Ade.

[Honky Tonk]

There is no penalty to Mike Ilitch if the $200 million in ancillary development does not materialize. If by some miracle it does [[stadia aren't great at creating spinoff development, and Ilitch's vertically integrated arena plans don't bode well for creating any more spinoff than usual), Ilitch gets a bonus of more than $60 million. This for the development of a neighborhood between two parts of town that are exploding with economic activity -- and are a dead zone because their primary landholder is slumlord Ilitch himself.

Sleazy, sleazy dealings are being cemented here that will likely retard development in this are for decades to come. But go ahead, rb336, guzzle that Ilitch-Ade.

Where is that bonus coming from? [[It's a serious question)

[Detroitnerd]

Where is that bonus coming from? [[It's a serious question)

The DDA, given the way the deal is structured now.

[Honky Tonk]

The DDA, given the way the deal is structured now.

According to their write-up "Funding for DDA programs comes from a number of sources including grants, contracts, interest on loans and captured tax increments - increases in property taxes that result from new investments - on approved developments. Property owners within the DDA district pay a 1 mill property tax to fund the basic operation of the DDA." It sounds like a win-win situation for the DDA, and members. Ilitch is going to contribute his "new" taxes to pay himself. That, coupled with the usual business write-offs, people of that caliber receive, I think it'll be a cold day in Hades before the taxpayers see their investment yield a return.

http://www.degc.org/about-degc/city-...ment-authority

[Detroitnerd]

It sounds like a win-win situation for the DDA, and members. Ilitch is going to contribute his "new" taxes to pay himself. That, coupled with the usual business write-offs, people of that caliber receive, I think it'll be a cold day in Hades before the taxpayers see their investment yield a return.

I'm afraid, I think, that that's the whole idea ...

[canuck]

If the onus was on the prime developer to push for so-called ancillary development in the vicinity of major projects, making deals to support new retail and services; the city might benefit greatly.

As it stands, it seems like the major players are interested in their end of the deal; not so preoccupied with enhancing the public space with small-fry competition on the ground, so to speak.

Duggan should prepare a set of rules for further development that would include criteria that forces promoters to be creative in their use of public and commercial space. Surface parking lots need to be phased out, small business reinjected in restored buildings close to a new arena, for instance.

So, the operative sentence would be; "force them to be creative". Detroit is not in a position to be less-demanding. It needs to avoid all the pitfalls of the past.