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Beltway Confidential

Detroit bankruptcy not stopping Michigan from spending $284m on sports arena

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How big a hockey fan is Michigan Gov. Rick Snyder? So big he is putting $284 million into a new Detroit Red Wings arena despite the city’s July 18 bankruptcy filing.

Indeed, Snyder — who calls himself “one tough nerd” — argues that this is exactly what the city needs, according to the Associated Press. The new 18,000-seat venue will bring jobs and economic development, Snyder said in an announcement Thursday.

“This is part of investing in Detroit’s future. That’s the message we need to get across. … As we stabilize the city government’s finances, as we address those issues and improve services, Detroit moves from a place where people might have had a negative impression to being a place that will be recognized across the world as a place of great value and a place to invest,” Snyder said.

The project is public/private partnership under the auspices of the Michigan Strategic Fund Board, a state agency. About 60 percent of the arena’s $450 million arena’s cost will come from tax revenues.

Another $200 million  – most of it private funds — is planned for rebuilding adjacent neighborhoods around the project. The state will own it, while Redwing owner Mike Ilitch will have an exclusive lease and naming rights.

As the Washington Examiner’s Shikha Dalmia has noted, though, there is a long history of state and local elected officials backing such economic development projects — none of which have arrested Detroit’s decline:

Every mayor for the last two decades has tried to jump-start Detroit by reviving its crumbling downtown. In the 1990s, Dennis Archer erected stadiums and casinos. His successor, Kwame Kilpatrick (now serving time on federal extortion and racketeering charges) hosted mega-events.

The current mayor, Dave Bing, has been too bogged down in Detroit’s fiscal quagmire to propose anything grand. But a group of rich investors led by Dan Gilbert, owner of Quicken Loans, is spearheading a massive effort to bring businesses, hotels and residents into the city.

Gilbert has pumped close to $1 billion to relocate his headquarters in Detroit and scoop up real estate for stores, hotels and apartment buildings. Whole Foods recently followed suit as did Moosejaw, a retailer for outdoor apparel.

But these ventures have been seduced by massive subsidies. Whole Foods’ local partner received $5.8 million in state and local grants as well as sizable tax credits. Still, the business editor of Forbes declared two years ago that, thanks to Gilbert, green shoots were beginning to sprout in Detroit.

Since then, however, things have only gotten worse as more residents have fled and city services have deteriorated. Why? Because these shoots were Astroturf, not a spontaneous response to actual need. Worse, they were a wealth transfer from the average taxpayers to the rich who patronize these high-end stores.

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