Spending on Detroit's New Arena District Tops $1B

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Spending on Little Caesars Arena and the surrounding 50-block District Detroit is expected to have topped $1 billion when Kid Rock performs the opening concert Tuesday inside the new home of the Detroit Red Wings and Detroit Pistons.

The Ilitch family's Olympia Development of Michigan had paid out $926 million through July 31 in construction costs for Little Caesars Arena and its pizza chain's new world headquarters within The District Detroit, according to a consultant's report.

"We can make a safe assumption now that we're crossing a billion - and then some - by the time Kid Rock takes stage," said Mark Rosentraub, director of the Center for Sport & Policy at the University of Michigan.

Rosentraub's center has a contract with Olympia Development to receive the company's monthly accounts paid ledger over the past three years and track spending on the arena project and District Detroit and its economic impact.

About $90 million of the $926 million spent - or 9.7 percent - went to businesses with ZIP codes outside of Michigan, Rosentraub said.

Total spending in The District Detroit is expected to top $1.2 billion after the completion of the new $150 million Little Caesars Pizza headquarters next to the Fox Theatre and construction of six residential projects that will add 686 units at a cost of $160 million, Rosentraub said.

"Clearly it's on track right now to meet that expectation," Rosentraub said. "And it's going to go over."

The long-term economic impact of the $863 million arena, parking garges and adjacent commercial buildings flanking the arena along Woodward Avenue and Henry Street remains a hot topic of debate among sports economists.

The biggest skepticism of the project being a catalyst for long-term economic growth centers on the fact that it received $324 million in public financing, including $294.5 million in taxpayer-supported bonds issued by the Detroit Downtown Development Authority.

"I don't think it's likely that another business would get one-third of their building cost paid for by the city," said David Berri, a sports economics professor at Southern Utah University.

The bonds are being paid for by growth in property taxes on downtown properties such as DTE Energy Co., General Motors Corp. and Quicken Loans Inc.

"You're far better off building better roads and schools - things that are linked to good economic activity - than building giant, empty buildings," Berri said of sports arenas in general. "It doesn't create the economic growth they talk about."

But unlike Ford Field, where the Lions play 10 preseason and regular season games a year and the main arena goes largely unused for most of the year, Little Caesars Arena will have at least 41 Red Wings games and 41 Pistons games between October and April each year.

The new arena's usage could extend well into late spring if either team can make a deep run in their respective league's playoffs.

Olympia Entertainment has started to fill the arena's schedule with a steady stream of concerts, starting with Kid Rock's six shows over eight days in mid-September. The Red Wings' preseason home opener is Sept. 23 against the Boston Bruins. The Pistons begin playing at Little Caesars Arena on Oct. 4, with a preseason opener against the Charlotte Hornets.

The Pistons' owner, Palace Sports & Entertainment, will effectively shift its concert business to Little Caesars Arena after Bob Seger & The Silver Bullet Band play a 17th and final concert on Sept. 23 at the 29-year-old Palace of Auburn Hills.

Andrew Zimbalist, a professor of economics at Smith College in Northampton, Mass., said the Detroit Pistons' return to the city will just redirect entertainment spending in Auburn Hills to Detroit.

"More than likely the vast bulk of expenditures are entertainment dollars that are spent at the new arena than elsewhere," said Zimbalist, an author of several sports finance books. "To the extent that that's the case, you're not promoting development - you're just shifting around funds."

Because of the shift to Detroit, there likely won't be a post-construction boost to overall economic activity in Southeast Michigan, said Allen Sanderson, a sports economist at the University of Chicago.

"All you're really doing is redistributing spending in a metro area," Sanderson said. "If my wife and I spend $200 in an arena, that's $200 we're not spending in an entertainment venue or a mall."

But Olympia's paid economic consultant argues that his colleagues in the sports economics business ignore the context of filling a long-vacant hole in downtown Detroit between burgeoning Midtown development and billionaire businessman Dan Gilbert's purchase and renovations of dozens of downtown properties.

"Downtown Detroit will now be the region's center of entertainment," said Rosentraub, a sports management and urban planning professor at U-M. "From Wayne State down to everything Dan Gilbert has done, downtown and Midtown Detroit has been rebuilt. Now, how do we leverage that?"

One key to building out the entertainment and commercial-focused 50-block District Detroit around the arena will be creating an atmosphere that gets sports fans and concertgoers to say in Midtown and downtown to eat, drink and shop, Sanderson said.

"In theory, if done well, it can if not revitalize at least goose up the area and becomes a net benefit," Sanderson said. "But it's tricky and it's not a slam dunk. It may work and it may not."

Twitter: @ChadLivengood

Total spending in The District Detroit is expected to top $1.2 billion after the completion of the new $150 million Little Caesars Pizza headquarters next to the Fox Theatre and construction of six residential projects that will add 686 units at a cost of $160 million...
September 14, 2017


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