With a 5-4 vote, the Detroit City Council has narrowly approved a controversial lease deal for the Detroit Red Wings at Joe Louis Arena.
The lease is retroactive to 2010, and runs through 2015. It has five one-year extension options.
The deal will cover the Wings’ remaining playing days at the Joe. The city has already cleared the way for the team’s owners to build a new, $450-million arena complex elsewhere in Detroit.
A City Council analysis found the deal will net Detroit a little more than $17 million over the term of the lease – about $3 million less than if the city had extended the prior lease arrangement. It includes money to “settle all claims” against lessee Olympia Development, including a dispute over unpaid cable revenues.
But Ilitch Holdings Vice President Mike McLaughlin, representing Red Wings’ owners Mike and Marian Ilitch, told Council the new lease terms are fair.
“There are a lot of issues that have been addressed since it was renegotiated,” McLaughlin said. “Frankly, we felt we went above and beyond our obligations.”
Some Council members and residents disagreed, arguing the deal is so one-sided in Olympia's favor it appears the city barely negotiated at all.
The Red Wings will likely keep playing at Joe Louis until 2017, when the new arena is scheduled for completion. The lease has a provision that the arena be demolished “promptly” once the team leaves.
But if that doesn’t happen, the deal also has a controversial non-compete clause – meaning the city can’t hold any revenue-generating events in a building it owns.
The Michigan Strategic Fund has already set aside $6 million to finance demolition costs. But the city will have to come up with a $24 million development proposal for the site, and pay the state back from new tax revenues.
City Council member Scott Benson said that’s why he voted against the deal.
“I would like to have seen no risk to the city when it comes to the demolition of Joe Louis Arena,” Benson said. “$24 million deals don’t just fall out of the sky.”
Detroit Economic Growth Corporation officials assured Benson that with the site’s riverfront location and growing redevelopment prospects, “the risk is minimal” that demolition financing will fall through.