General Motors Co. and other downtown corporations will be the chief funders via their property taxes of the public portion of the $650 million Detroit Red Wings arena and entertainment district under a plan announced last week.
Detroit's Downtown Development Authority intends to use $284.5 million in property taxes captured within its 615-acre downtown district to pay off bonds issued by the state to build the 18,000-seat arena at Woodward Avenue and I-75.
GM has the largest taxable value within that district, and it and other corporations, along with small- and medium-sized property owners, will foot some of the arena's bill through property taxes.
The remainder of the arena costs, or $365.5 million, will be picked up by Olympia Development of Michigan, the property development arm of Mike and Marian Ilitch's $2 billion Detroit business empire that includes the Red Wings, Detroit Tigers and Little Caesars pizza chain.
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Backers explained the bond repayment sources as:
? Approximately $12.8 million annually (not to exceed $15 million) from a special DDA tax capture.
? Approximately $2.15 million in average annual payments made by the DDA from other annual property tax collection.
? $11.5 million annually from Olympia.
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Backers say the project will create new tax revenue for the city and jobs.
They also explained to Crain's that the special tax capture has been in place for more than two decades and legally cannot be used for any purpose other than economic development.
In December, the state Legislature authorized the DDA to use a specific property tax capture to pay off a "catalyst development project" of $300 million or more -- with the hockey arena in mind.
The origin of that capture is thus: The DDA said it issued tax increment bonds in 1989 (and refunded them in 1996) to create a pool of money that would be used to fund downtown projects, including construction of the Millender Center, Riverfront Towers, One Detroit Center and 150 West Jefferson.
