How much will Detroit get from new Detroit Red Wings arena? Nothing.

Mar 3, 2014

We still don’t know how Detroit’s bankruptcy is going to play out. We don’t know how much pensions will finally be cut. We don’t know whether the state will kick in the funds needed to save the collections of the Detroit Institute of Arts.

But we do know two things.

In the end, a lot of people – pensioners – who don’t have much money now will have even less.

And we also know this: Bankrupt, poor Detroit and the state are going to spend more than $250 million to build a new hockey and entertainment arena for Mike Ilitch, who owns the Detroit Red Wings.

That’s more than half the entire cost of the project.

This is the second arena the city has helped build for the Red Wings. The team now plays in Joe Louis Arena, which was built 35 years ago.

They give a small cut of their proceeds to the city – about $7 million a year for Detroit, but once the new arena is finished, know how much the taxpayers will get? Nothing.

Olympia Development, the Ilitch family holding company, gets everything. Money from ticket sales, money from concessions, money from parking.

Detroit gets nothing.

To my utter bafflement, this deal sailed through Detroit City Council, the same body that didn’t want to let the state fix up Belle Isle.

Why would anybody agree to this?

Well, for two reasons: first, the threat that the Red Wings would leave town, and then there is the will-o’-the wisp that cities never seem to tire of chasing, no matter how often they are disappointed, the hope that a new sports arena will revitalize the area around it.

Indeed, there was a story in yesterday’s Detroit Free Press that said as a result of this deal, “the city gets to keep the economic benefits from (the) projected job growth at the new arena.”

That sort of baffled me. I thought the same ushers who now work at the Joe would just drive over to this stadium instead. There’s no doubt the new stadium is going into a formerly rundown area.

But except for perhaps a new sports bar, there aren’t going to be any neighborhood economic benefits. Allen Sanderson, an economist at the University of Chicago, did a study a few years ago of the impact of sports arenas on cities. His conclusion: “If you want to inject money into the local economy, it would be better to drop it from a helicopter.”

To add to the absurdity, only a tiny fraction of those who attend hockey games actually live in Detroit. We know that’s the case for Ilitch’s other major league team, the Detroit Tigers. Red Wings tickets tend to be even more expensive, and only about three percent of National Hockey League players are black.

Regardless, the bottom line is this: In a city that doesn’t have enough cops, ambulances or street lights, the development authorities think it is a good idea to spend more than a quarter of a billion dollars to build an entertainment complex for a family worth more $3 billion. A deal from which the city will get nothing back.

I would like to know why this is not insane.