The Detroit Hockey Arena: Stimulus or Boondoggle?

In September 2017, the new Detroit Redwings Stadium will open in downtown Detroit near Ford Field and Comerica Park. Although the official name of the stadium is still currently unreleased, its development, as well as the development of the immediate surrounding area, has already begun. In 2014, the city struck a $650 million deal with wealthy sports-team owner and entrepreneur Mike Ilitch. $250 million of this deal is to be paid by the taxpayers using revenue bonds. The development project hopes to encourage investment in the city and create a downtown environment that is vibrant, and permanent. Bringing in more residents, visitors, and businesses creates tax revenue for the government and encourages investors to build in the city. The hope is that this turns into a positive feedback loop, spurring more growth and more revenue as time goes on.

This new project linking downtown and midtown obviously has a lot of local residents and business-owners excited for Detroit’s future. I interviewed Father Kelly, a pastor at a local Church just across the street from Comerica Park. He told me all about Olympia Development’s plan to build a parking garage on the church’s former parking lot he’s leasing to them. Father Kelly also told me about Olympia's plan to stimulate economic activity in the 45-block area, and what that might mean for his church.

“At first, I wasn’t completely sold on the idea, but when they showed me the plan I realized how great this could be for both the neighborhood and the church. They have about 300 apartments, a 300-room hotel (all with first-floor retail), a beautiful ice rink nearby, and parking garages on the periphery to encourage foot traffic to local businesses. The church would greatly benefit from having all of these new residents around, as would many of the businesses in the neighborhood.” Surely, there had to be a catch. The Detroit government could never pull off something so flawless and straightforward. I then asked if he had any concerns about the development, like, for example, the increased traffic.

He replied, “I don’t have much concern about traffic because the M1 Rail should be completed around the same time which should ease any congestion. Also, the area is built with pedestrians in mind. The idea is that most people will just park in the garages and walk from there. The construction might cause problems in the meantime, though. I can see people being apprehensive about going downtown; not knowing which streets are closed and which are open. It’s going to be tough to navigate for the next year or two, but I think the arena is a very positive development here in Detroit.” With this, I concluded there is no doubt that the area itself will benefit from this development, but will the rest of Detroit benefit along with it?

Reading the articles opposing the deal, it seems many believe that cronyism plays a part in this and many similar projects in other cities. Businessmen work with politicians, use legal loopholes to lower their risks and liabilities, and make large profits at the expense of the city. Many believe this to be true for the development and claim Ilitch is using taxpayers’ hard-earned money for his own gain. On top of this, some argue that the cost isn’t even worth the gain. The $250 million price tag is relatively hefty for a city that just recently filed for the largest municipal bankruptcy of all time. It seems absurd that a city with such a small tax base would prioritize renovating the growing “hipster” districts, rather than providing basic services for the poor of Detroit. These people would much rather have Ilitch pay for the whole arena alone.

Assuming Detroit is getting the short-end of the deal, I would invoke the writings of the great enlightenment thinker, Jean-Jaques Rousseau to describe why this might occur. In his work, On Social Contract, Rousseau differentiates two democratic concepts by saying, “the general will… [and] the will of all… the latter looks only to the common interest; the former looks only to the private interest…”(pg.100). In this context, he was referring to how voters make decisions in a direct democracy. When you apply these concepts to representative democracy, issues often arise. The people’s common interests must be separated from both their own private interests, as well as the private interests of their representatives.

The “will of all” in Detroit primarily points toward renewal, change, and hope for a grand comeback. They want the exodus of the population, the violence, and the lawlessness to come to an end. The difference between this and the “general will” is small, but it’s enough to allow for all sorts of irresponsible behavior. The “general will” does not necessitate a balanced budget, a cost-benefit analysis, nor an evaluation of the programs that work. Instead, because of the principal-agent problem in political science, all it requires is that the public image reflect the “will of all”. When a billionaire offers a massive development plan to the city council, it’s not surprising that the politicians jump on the opportunity. Even if the plan has no chance of ever making a return in the long run, it looks good for both the council and the city, and it does the businessman (who provides thousands of jobs for the city) a favor. The private interests of the politicians are fulfilled, giving the people their grand comeback plan. Although I’m stretching Rousseau’s theory, I believe it to be applicable to not only the people but also the representatives. For I believe it to be descriptive of what goes on in many cities across America. In my next post, I will dive deeper into this argument, and analyse the data behind these claims.