Thursday, June 20, 2013

Olympia Arena Proposal

I mean, these people somehow delude themselves into thinking it might [work], but... but it might work for us.

Ilitch and the Red Wings have announced plans to build a new $650MM arena in the sports and entertainment district. Over half would be privately funded, but a staggering $283MM would come from public funds.

The arguments for building the arena covered the usual areas: 
  1. 8,300 new jobs
  2. economic growth of $1B to $1.8B
  3. no new taxes
Forgetting for a moment that the state's outstanding debt actually increased over the last year and there isn't $283MM sitting around, let's dig a little deeper.


Jobs are very important; particularly in a place that has had an unemployment rate over the national average for more than the past decade. When you start throwing around 8,300 jobs in an environment like this, people are going to listen. Unfortunately, finding how anyone came to that number is a well-hidden secret.

The broader question is how do you rebuild an economy? Is it through temporary construction jobs? Is it through the retail jobs this space will provide? Or is it through creating the kind of export-worthy products and services that this kind of development could only potentially fuel through its office space?

Economic Growth

Stadiums have been built before. Lots of them. They don't perform well:

So, building a new arena doesn't seem to have any effect on a city's employment, per capita income, hotel occupancy rates, [or] taxable sales.
— Armina Ligaya quoting Victor Matheson, CBC News 

Glendale [Arizona] is...on the hook for...a $12 million annual debt payment for construction of its arena.
— Pat Garofalo and Travis Waldron, The Atlantic

Evidence that publicly financed stadiums generate significant economic development is shaky, particularly when the stadium houses an existing team rather than one new to the city.

If the state is really struggling to figure out how to spend $283MM, perhaps they should look to Chile's successful startup program. Investing $100,000 each, the state could fund a staggering 2,830 startups. Many would fail, but some businesses would be creating those export-worthy products and services that grow an economy.

The Joe

So, what then, becomes of Joe Louis? The Detroit News says its fate is unclear. Frightening words for anyone who remembers what became of the Silverdome.

The Silverdome was constructed for $238MM in 2013 dollars in 1975. Its most important tenant, the Detroit Lions, left in 2006. After the Lions departure, it cost the city of Pontiac $1.5MM in annual upkeep. The Silverdome was finally unloaded in 2010 for the rock bottom price of $583,000.


Hockey fans were excited Wednesday by what they feel is a long-overdue improvement.
— Louis Aguilar, The Detroit News

If the fans are excited, and it's actually a profitable venture, there should be plenty of private-sector financing for arena-building. As a fan who goes back to the Wings-Avs rivalry, I might even be willing to chip in. I'd do 50% over market for two tickets to a game any time in the first year.

But who knows? It didn't work for Montreal, Glendale, Bridgeview, Cincinnatti, Miami, and more, but it might work for Detroit.

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