Should There Be Controversy over Detroit Red Wings Building a New Stadium?

PJ Sapienza@@pjsapiContributor IIIAugust 21, 2013

Apr 14, 2013; Nashville, TN, USA; A Detroit Red Wings fans holds up a flag during the first period of the game against the Nashville Predators at Bridgestone Arena. Mandatory Credit: Randy Sartin-USA TODAY Sports
Randy Sartin-USA TODAY Sports

The Detroit Red Wings have announced plans to build a new stadium.  Their current home, Joe Louis Arena, was built in 1979 and is very outdated by today’s arena standards.

While many agree that a new arena for the team is warranted, there is a growing debate over how to pay for it.  Under the plan, taxpayers will pay about 60 percent of the $450 million deal.  While public funding for such projects raises questions in many cities, the debate could get louder in Detroit.

The City of Detroit has recently filed for bankruptcy.  While city services are being slashed and pensions for retired workers are in jeopardy, is now the right time for the city to be helping a billionaire build yet another stadium in Detroit?

Red Wings' owner Mike Ilitch also owns the Detroit Tigers.  The Tigers are currently playing in Comerica Park which opened in 2000 and also received substantial public funding.  Should the city really be helping a man, who according to Forbes, is worth $2.7 billion?  To make matters worse, he has been in debt to the city as they have spent months battling over a disputed tax bill for almost $2 million. 

There is much debate as to whether sports arenas and stadiums actually provide as big of a boost to the local economy as supporters claim.  They claim that new jobs will come and that the area around the arena will grow.

One benefit to the Red Wings moving will be freeing space near their current home.  The Joe Louis Arena has blocked any growth of Cobo Center, which is the convention center for the city.  In order for the city to attract larger, national shows and conventions the city will need to expand Cobo.  A larger Cobo could directly help the city by bringing out of town visitors in to fill up hotels and restaurants.

The proposal does plan to build more than just an arena. Hotel, retail, office and residential spaces will also be part of the project.  The hope is that these areas will spur economic growth in the area and perhaps get somewhere close to the 8,300 jobs mentioned in the proposal.

There would obviously be construction jobs as the arena is being built.  However, those are only temporary jobs and there is no guarantee that those jobs would go to the citizens of Detroit or Wayne County.  Of course measures can be put in place to force companies to hire workers from those areas, but those tend to backfire.

In reality, there really would be not a large influx of new, long-term jobs with the arena.  Current employees at the Joe Louis Arena would be making the trip to the new location.  This means that there would be no increase in jobs, just a transfer down the road a few miles.  Supporters will claim these jobs as part of their grand total but, with little to no net gain in jobs, it does not benefit the city.

Supporters will point out that the public funds will be coming from the Downtown Development Authority and not the general fund.  The taxes are collected from a special district with the intent on using it to spur more economic growth.  While true, it is still tax money that is collected and could be much better spent if redirected to more useful projects.

Even worse, the city will not receive any money from the stadium once it is complete. It basically comes down to donating this building to a billionaire with some misguided hope that other businesses will emerge.  The question needs to be asked: How many businesses, jobs and new residents would it take to make up for the price that Detroit is going to pay to build this?

A report (h/t The Lakewood Times) by Robert A. Baade and Victor Matheson from the College of the Holy Cross shows the following:

Researchers who have gone back and looked at economic data for localities that have hosted mega-events, attracted new franchises, or built new sports facilities have almost invariably found little or no economic benefits from spectator sports. Typically, ex post studies of the economic impact of sports have focused on employment, personal income, personal income per capita, taxable sales or tourist arrivals. These studies and a multitude of others generally find that the actual economic impact of sports teams or events is a fraction of that claimed by the boosters, and in some cases actually show a reduction in economic activity due to sports.

There is a petition on urging people to speak out against the use of public funds.  The petition hopes to halt using tax money to fund the project.  As the bankruptcy proceedings continue, protest such as this are bound to be more common. 

In the end, it just is not right to build stadiums and arenas for billionaire sports owners with public funds.  Ideally, the federal government would make it illegal but that is unlikely to happen.  There are only so many cities with enough population to support a pro franchise.  The ones that can need to show restraint and make teams build their own homes.  The only people that make any real money off of the stadium are the owners, so they are the ones who need to pay for them.

Detroit needs to focus its limited resources on meeting their current commitments and trying to build real economic growth and opportunities in the city.