Is This New Stadium Different?
Can the new DCFC home be a better type of stadium development?
America has always had a bit of the attitude of “out with the old, in with the new”. Barring a few exceptions, we’ve seen this permeate into sports culture and specifically, sports stadiums. While many fans long for the days of their old ballpark or arena, many are willing to put the past behind to have the newest and greatest technology to add to the gameday experience. While the debate, for a long time, was based on history versus modernization, it has transformed into a discussion and debate about financing, wastefulness, and land use.
If you follow Detroit sports or developments, you’ve certainly seen the announcement of the new stadium for Detroit City Football Club, moving from Keyworth Stadium in Hamtramck to a new, purpose-built stadium in Corktown. This announcement has been lauded an incredible win for the team and the city, as it proposes knocking down the blighted Southwest Hospital and repurposing the space. And I don’t really think there’s any doubt that it is a win for them, as well as many others who will benefit from its build and use.
However, when it comes to new stadiums, the narrative has drastically changed over recent years, stemming from debates on funding, ownership, and even tampering amongst leagues to keep their competitive advantage. In a time where it seems like the divide between ownership and fans can be deep, the team that describes itself “grassroots” and has issues public ownership shares, Detroit City FC will need to ensure they can properly balance the need for modern, costly amenities and fielding a winning team, with keeping with their roots and providing an affordable, fan focused environment.
How Will this Stadium Compare to Past Projects?
Whether you follow these types of deals or not, I feel like most people get the general sense that everyone isn’t happy about some of the past or current stadium deals. Whether it’s local or around the County, there’s at least a non-zero percentage of people who get up and arms when new stadiums are announced, and for some valid reasons. This has a lot to do with how the stadiums are funded, how they are owned, and what promises are made by the teams looking to build. We’re no stranger to that here in Detroit, as we’ve gotten all new stadiums in the city limits within the past 25 years and there’s a least some people who think the city and its residents got the raw end of the deal. In order for Detroit City FC to escape the ridicule that these past projects have gotten, they need to get some things right that those before having gotten wrong. If we take a look at these three criteria, we can begin to formulate some important questions that should give us an idea how the DCFC stadium will be perceived.
Fair warning, this post gets a bit into the weeds of past stadium deals in Detroit and around the County, but I think it’s important to understand the context as to why some DCFC supporters may feel conflicted about their desire for a new permanent home, and their disdain for taking advantage of the public purse strings like so many other professional teams and leagues do.
Ownership
Detroit City FC is a privately owned club, whether they want to be perceived that way or not. There are almost zero American professional sports teams that follow a true fan owned model like some do in Europe, like the German Bundesliga and many La Liga clubs in Spain. A few years back, DCFC issues ownership shares that amount to 10% of the club and were bought by thousands of fans. These ownership shares, however, do not entitle the fans a controlling interest in the club and they do not have the ability to do things like fire the president of the club or vote on ticket prices. While I do like the model that DCFC has, it is not a pure fan ownership model that amounts to more than 50% like most German clubs.
Now even if a team is privately owned, it doesn’t necessarily mean the stadium will be. DCFC has leased a publicly owned stadium for years, in Keyworth Stadium in Hamtramck, which is owned but the public school system. Other professional teams have been known to lease from public entities, like the Chicago Bears and Soldier Field which the Park District owns and collects millions in rent from. We also have the local Detroit stadiums, which are technically owned by the “Detroit/Wayne County Stadium Authority”, though the teams would make you think they own them. In the situation of Comerica Park, the Tigers have a lease which requires them to pay $1 per year but they are able to collect all income from the stadium, including the park lots. Additionally, since the Stadium Authority is a public entity, it doesn’t pay any property tax, even though 38% of the stadium was financed through public dollars. Deals like this combine the much of the best of both public and private ownership for the team but leave out much of the benefits that come with some other public ownership models like Soldier Field. With the Tigers and Stadium Authority Model, the Tigers do share some responsibility to repair the stadium and they aren’t allowed to relocate during the terms of the lease, so there are a few benefits to the City and public.
What will DCFC do for an ownership model? I don’t know for sure, but my guess is that they will go completely private, and I feel like that’s the smart choice. Situations like the Tigers, which is essentially copied for the Lions, Red Wings, and Pistons, act as a way for the teams to gain a whole bunch of benefits without bearing much responsibility. It shelters them from taxes and limits their long-term liability for the stadium under a technicality that the public entity owns it. While there are some small benefits to the public, almost all benefits go to the teams that occupy these lease holds. Additionally, it gives the team little incentive to continue to modernize the stadium, as they can simply move on to a new stadium in 20-30 years and leave the city with the bill for tearing down the now unused stadium, a la Joe Louis Arena. Some stadiums around the County that have seen continued upkeep, modernization, and have stood the test of time include completely privately owned venues like Wrigley Field and Fenway Park. Having the club own the new complex outright gives them the most incentive to keep it modern and in good repair, ensuring they can use it for years to come.
Finances
Where rubber really meets the road in stadium plans is the financing mechanism. Save for a few projects here or there, gone are the days where rich owners spend lavishly to have the best and brightest stadium in the league (Steve Ballmer is self-financing the Intuit Dome for the Clippers for $2B, but that’s an anomaly). Now, owners leverage the lover for their teams in getting municipalities and development authorities to help finance their stadiums through special taxes, tax breaks, bond sales, or straight cash infusions. Recently, we’ve seen public funding projects get voted down in Kansas City, which was asking for a sales tax to be utilized for a new $800 million complex for the Royals and renovation of Arrowhead Stadium.
The funding strategy for Detroit's recent stadium developments, particularly Little Caesars Arena, have come under scrutiny for diverting tax dollars from public services such as schools and libraries, leveraging public funds via bonds, and contributing minimally in taxes for the foreseeable future. To add to this, most of the deals were made with the Downtown Development Authority, an entity that the average Detroiter knows little about and whose members are not elected by the public. I’m not even confident I can explain the financing behind Little Ceasars Areana, but it essentially breaks down to bonds that are paid off by DDA tax capture of state school tax, other tax captures, and contributions from Olympia themselves. The original breakdown of the financing entailing 53% of the cost, and Olympia bearing the other 47%, but that has seemed to shift over the years to the public taking on more and more of the total cost. There were also reimbursements that Olympia gained by investing into surrounding projects to the tune of $74 million.
In digging into some of the deals that the DDA has negotiated, there are some favorable terms for the City, but the secrecy behind the deals puts such a bad cloud over them that it’s hard to even find these benefits. The Pistons, for example, were required to invest and refurbish courts in City parks, provide free tickets to Detroit youth, and hold free youth clinics. These are objectively good things that the city likely got in exchange for some of the public financing mechanisms, but they probably don’t outweigh what the city could have done with the money or future tax money themselves. There’s also the valid question of what would the team have done regardless of the city offering up millions in bonds and revenue, and were the incentives, or the level of incentives, even really needed to secure these benefits?
Ultimately, these deals boil down to the city giving money in order to keep the team within the borders and not in a suburb 20 minutes away. The fact that our local governments need to have a race to the bottom against each other and the teams are a happy participant in the middle is messed up in it own right, but that’s a conversation for a different time. The city will say they did what the needed to do to keep the team local and point to cities like Oakland, but others will say to call their bluff and point to cities like Kansas City.
There’s still a lot unknown about how DCFC is going to finance their stadium. What is being speculated now is that they will apply for a Brownfield TIF, or Tax-Incremental Financing, for at least some of the teardown of the existing building and remediation of the site. This is certainly going to raise some red flags amongst the supporters, as this is a form of public financing. Essentially the team would get reimbursed for some of their expenses related to the brownfield out of the increase in tax revenue that would result from the development. I do think Brownfield TIF is a bit different than other types of tax breaks because it is available to everyone, anyone who has an eligible property can apply for brownfield TIF’s, all across the state. It’s not a special tax break that’s being passed for the project like the other stadiums in Detroit. Also, they are really doing a public good by tearing down a blighted and dangerous property in the Southwest Detroit Hospital. There’s also no fronting of costs on the part of the government, all money is reimbursement for eligible expenses by the property owner.
Besides that, it’s unclear what other mechanisms for finance may be in play, but I can speculate that there could be another sale of ownership stake, which raised about $1.5 million. While this certainly wouldn’t cover it all, it could help the ownership group secure more long-term financing for the stadium through more traditional loans. I also suspect there will be some grants at play, potentially from the city or from the state through the Michigan Economic Growth Corporation. As much as people will gripe, this is the kind of thing that could attract some state dollars, especially for cleaning up a derelict site. Ultimately, I think the majority of this project will be funded from the team, whether through debt or equity, or from other private partners. I would be very surprised if any more than 10% of the funding comes from state or local funds and would be very surprised if there are any special deals set up. I think the team owners are savvy enough to take advantage of what’s on the table, but not dumb enough to think their fans will support them taking advantage of any special deals.
Promises
Lastly, I think a key component to any stadium project is ensuring that the team makes and keep promises to the community. Ultimately, while the stadium will probably be privately owned, it is an asset that adds to the community and will be utilized by the community. So often, we see these stadiums that promise they will be used to hold events for the community, but seldom see those benefits come to fruition. Having the largest soccer specific stadium in the area should be a benefit that local college, high school, and youth teams can enjoy. We’ve already seen DCFC’s commitment to the community through their youth soccer programs, many of which are held at their other fieldhouse facility on Lafayette. I have no doubt that DCFC will be one of the most involved teams within the community, partially because they will be depending on local players to fill their roster in the next generation.
Olympia, specially, has gotten a very bad reputation for making grandiose promises without following through. This started back at the turn of the century with the promised developments around Comerica Park that didn’t materialize, made a comeback about 7 years ago with “The District Detroit” that’s remnants can still be seen around LCA, and are making their third go around now with the Related Co’s development plan. What this boils down to, is don’t over promise things if you don’t have a plan to get them done. You’ll look stupid. I do actually think that Olympia wants to develop some of the land around Comerica Park. They realize that the Dan Gilbert model of developing so your other properties become more valuable is a good way to make money. I just really think they are not capable of doing a development the size of which they have proposed, which is why they are now bringing in a partner. Will some of it eventually get done? Probably. Will they ever recover the PR disaster that’s been the past decade? Probably not will a lot of Detroiters.
I can’t imagine DCFC running into this problem, because they know they can’t deliver hundreds of residential units and thousands of square feet of office building. What they can deliver, and have for the past few years, is one of the best fan and game day experiences in the city. There’s already been discussions about placement of fan sections within the stadium, closeness of the fans to the field, and keeping the experience affordable. These are absolutely things DCFC can deliver on, and I expect them to, because without these things, the team begins to lose its luster a bit. People love going to games because it feels like your part of the game, and the team better do everything they can to preserve that in this new stadium.
We’ll have to wait and see what is discussed over the next few months and years with the new stadium. I know ownership is already holding meetings with stakeholders and fans to discuss what they want to see in the stadium, and I think they genuinely want to do right by the fans and community. Unfortunately, there’s little chance that every wish list item will be able to be fulfilled so hopefully we can all look back on the lessons learned from past deals and turn a new leaf in Detroit stadium developments.