Ilitch Announces New Arena Plans
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12-09-2012, 10:47 AM
Join Date: Mar 2009
Location: Ann Arbor
Originally Posted by
It went to the Senate because of Proposal A that Michigan voters passed in 1994. Proposal A forced TIF and TIP districts to only take school tax money to cover existing debt. Any excess money is returned to the state. A new hockey arena is new debt. As a result of this deal, instead of the DDA paying off debt that it owes to the school district, the 10-15 million (varies due to economic conditions) a year will be used for a hockey arena. The bill also exempts a DDA from all taxation on its earnings or property.
DDA's issue tax exempt bonds. In the case of the CoPa, taxpayers lost $36 million after the DDA took out $80 million in those bonds. As of now, Wayne County and Detroit still owe at least $61 million on public debt for Comerica Park. It was re-financed a few months ago to try to save some money as the debt had a 6% interest rate that ran through 2027. The goal was to cut it to 3%.
Ilitch himself has had all kinds of problems trying to pay down CoPa debt. He was rejected by local banks to finance the project from the get go and had to turn to Sumitomo Bank of Japan to get the deal done. In 2000, he attempted to get over $200 million in financing from a group that included Merrill Lynch but was rejected when credit agencies didn't rate the Tigers debt high enough. He tried to refinance his debt in 2001 but was rejected once again. As the Tigers floundered at the gate, he became desperate and borrowed $140 million in 2005 from a group led by Sumitomo to pay off what was $115 million in debt from his original $145 million loan.
In summary, you can see why this is a delicate issue. The public still owes boatloads of money on the CoPa and Ilitich struggled to pay for it since the Tigers were so awful during the first years of its life. OTOH, The Palace was paid for privately as was 90% of Ford Field. If you look at Ilitich's financing struggles at the CoPa, I'm not sure he could get a new arena done on his own.
Thanks for all the info.
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