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Eye on the News

Scott Beyer
Déjà Vu Detroit
Ignoring history, the city moves to subsidize yet another sports arena.
22 August 2013

To those who viewed Detroit’s decline as an inevitable result of longtime Democratic rule, the city’s bankruptcy filing last month came as welcome news. Finally, they figured, here was a chance to force prudent reforms on the terminally mismanaged Motor City. But at least one recent decision makes clear that Detroit won’t be rethinking its failed strategies for economic growth.

Just a week after the city declared bankruptcy, a state board approved a $450 million bond issue for a new Red Wings hockey arena near downtown. To help finance it, Detroit would pay $284.5 million in subsidies and an additional $12.8 million annually on bond interest. In return, Red Wings owner Mike Ilitch, who also owns the Detroit Tigers, MotorCity Casino Hotel, and Little Caeser’s pizza, would chip in $365.5 million for the arena and several mixed-use projects. The new complex would represent an upgrade from the dated Joe Louis Arena, where the Red Wings play now, and—boosters say—would potentially revitalize the Midtown area, which is already gentrifying somewhat. The Detroit Development Authority would fund and operate the arena with downtown property taxes. In other words, revenue traditionally used for schools and basic services would instead subsidize a billionaire.

Such deals have a long history in Detroit. At best, the city’s numerous publicly subsidized projects have become boondoggles; at worst, they have destroyed whole neighborhoods. Such projects, writes MIT’s Robert Goodspeed, were envisioned as early as the 1920s, when Detroit’s growing economic muscle made it a hotbed for progressive planners. Their ideas didn’t see fruition until after World War II, when Mayor Albert Cobo used eminent domain to make way for new highways, hospitals, private developments, and the expansion of Wayne State University. The city’s planning department earned a sterling national reputation, but the developments—which entailed mass demolitions and extensive relocation of residents—proved ruinous for the communities. In the 1960s, the heyday of urban renewal, Detroit became a testing ground for President Lyndon B. Johnson’s “Model Cities” program, which sought to micromanage the economic development of struggling neighborhoods.

Since then, the city has never stopped banking on grand schemes to reverse its steady decline. The publicly operated Cobo Convention Center opened in 1960 and began losing money immediately, running annual deficits reaching tens of millions. In 1977, the Ford Motor Company financed the gargantuan, $350 million Renaissance Center; two decades later, Ford sold the complex for just $76 million to rival GM. The city connected the two facilities in 1987 with a much-ridiculed, $200 million People Mover. The monorail never came close to covering its upfront costs and still operates with annual losses around $10 million, while doing basically nothing to address transportation needs. Detroit continued to wield its eminent domain power, with attempted or successful takings to accommodate the city’s two remaining auto plants, a private bridge, a business park, a major housing complex, a waterfront casino district, and two relatively new stadiums—Comerica Park and Ford Field.

Comerica and Ford shed some light on the planned arena’s prospects. Both opened in the early 2000s and cost taxpayers $115 and $155 million, respectively, plus tens of millions in future payments. As with similar projects, city officials touted them for the redevelopment they would supposedly spur, especially since the two structures were built side-by-side. This has proved to be wishful thinking. Today, the area around the stadiums includes a handful of functioning blocks, which quickly devolve into characteristic Detroit wasteland. (The Red Wings’ arena would be separated from both stadiums by what is now four blocks of mostly abandoned buildings and lots.)

Officials might have foreseen this had they acknowledged the economic consensus about the futility of subsidizing stadiums. According to a 2012 Colgate University study, “only 8 of 55 stadiums that are currently in-use and were constructed with at least 25% public funding have succeeded in spurring economic development in their surrounding area.” The successful ones have generally been in cities already experiencing downtown booms, like Denver and San Francisco. None of this has persuaded Detroit to change its approach. Along with the arena, city officials and state authorities are planning a $528 million light rail project on lightly trafficked Woodward Avenue, with $500 million more for rapid bus lines (one of which, oddly enough, will also go down Woodward).

What part should government play in planning a city’s economic growth? Conservatives generally argue that the role should be minimal, since market insights are often lost on public officials. For liberals, a strong government role is instrumental in determining a city’s broader vision. Debating the merits of these opposing viewpoints may be healthy for cities at the forefront of global competition. But it’s an irrelevant discussion in a bankrupt city that can’t even keep its street lights on or control its feral dogs.

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