March 23, 2009
The Detroit Red Wings obviously have bigger fish to fry these days, but Crain's has some great coverage today of a potentially franchise-altering decision looming this summer for the Wings ownership regarding Joe Louis Arena: Mike Ilitch has "until June 30 to tell Detroit if he will modernize the 30-year-old, city-owned arena or construct a new venue that likely would cost $200 million to $300 million."
Yes, in an economy where everyone but the pawn shops needs a bailout and even NFL teams could be bleeding dollars in the coming years.
The Joe Louis lease expires July 1, 2010, but the Ilitch family has to declare its intentions this summer. Their decision is one steeped in the political mess that is Detroit, which the Crain's story spells out better than we ever could.
But the two most intriguing factors at play in potentially leaving the Joe: What the city gains and loses if the Wings move to a new arena, and how the Ilitch family would finance such a venture when it's hard to borrow money to buy a Mazda let alone an 18,000 seat hockey arena.
On the financing front, the current economic climate makes the credit needed for an arena project tough to come by. The Wings could ask for an extension on their decision; or they could do this, according to Crain's:
One of them is financing a new stadium through a combination of private money from the Ilitches and taxpayer money through an extension of local hotel and car-rental taxes - the formula that financed Comerica Park [where the Detroit Tigers play].
A new stadium offers the team more revenue from additional suites and corporate sponsorships. Debt financing by the team is iffy at best and has hampered stadium projects elsewhere in the country.
As popular as the Wings are, the use of any tax money -- sales or otherwise -- on a stadium project in stimulus times is going to be a tough sell.
What about a new lease for a new stadium? As Crain's points, out, Detroit could start charging for police and landscaping services (currently provided for free), and could collect property taxes beyond the current cap of $252,000 annually. But the city would risk losing ticket, concession and suites surcharges depending on where the financing comes from.
Then again, if the Red Wings renew the lease and renovate the Joe, according to Crain's "the city immediately loses the ticket taxes and in five years loses the surcharge on concessions and suites." So maybe a new arena would be in Detroit's best interest.
For example: Would there be a chance in hell this year that Prudential Financial Inc., would but the naming rights to the New Jersey Devils' arena for $105.3 million over 20 years?
Speaking of the Devils, a question for the Wings fans who read the blog. The contention in Jersey was always that an antiquated arena contributed to the team's inconsistent (and usually underwhelming) attendance.
While most of the talk about empty seats in Detroit comes back to "it's the economy, stupid," would a new, state-of-the-art arena have an impact? In other words: Does the Joe contribute, at all, to some of the team's attendance issues?