CHICAGO — A $650 million project featuring a new hockey arena and entertainment district in downtown Detroit stepped closer to reality Friday.
The Detroit Downtown Development Authority, which would own the entertainment district, approved a final concession agreement with the owners of the Red Wings hockey team Friday at a special meeting.
The Detroit City Council could vote on the proposal as soon as Tuesday, though the vote may be rescheduled to Friday.
Council members recently said they would not approve the plan unless they saw a detailed agreement. The council is expected to vote on expanding the boundaries of the existing 615-acre development district by another 40 blocks so the project can benefit from the district's tax capture.
If the council approves the plan, it would take effect April 1, 2014, according to local reports.
Officials announced Friday at the meeting that the state would demolish the Joe Louis Arena, where the Detroit Red Wings currently play, if the plan goes forward and the hockey team leaves the facility.
The $650 million sports and entertainment district anchored by a new 18,000-seat arena for the Red Wings with the prospect of up to 50 additional events when the team is not playing. The stadium carries a $450 million price tag. The entertainment district is estimated to cost $200 million.
The city will partner with Olympia Development of Michigan, a real estate company owned by the Illitch family, which owns the Red Wings, baseball's Detroit Tigers, and the Little Caesars pizza chain. The new district would connect a section of the city's downtown with its midtown.
The financing has been months in the making and required state legislation that allows the DDA to use up to $15 million incremental property tax revenue generated in the district.
The Michigan Strategic Fund approved the sale of $450 million of 30-year private activity bonds last July, just days after Detroit filed its historic Chapter 9 bankruptcy petition.
The project is estimated to include $365.5 million of private dollars and $284.5 million of public funds.
The bonds would be backed by a pledge of the downtown development authority to set aside for debt service at least $12.8 million but not more than $15 million a year. The DDA pledged to contribute up to $62 million over 30 years in revenues in addition to those pledged for the bonds to support the additional projects.
The development authority would own the new arena and Olympia would operate it for 35 years, with 12 five-year renewal options.
Wayne County last month approved an agreement with the DDA that sets aside a piece of the county's property tax for bond debt service.
Olympia would also pay $2 million annually into a capital improvement fund, and be responsible for any cost overruns.
The property tax-supported project is coming to fruition during a bankruptcy process in which the city government is seeking to wipe out bond debt backed with a voter-approved property tax levy.
Critics of the hockey/entertainment project say the city should not be tapping already thin property tax dollars to subsidize what will essentially be a private stadium and that sports stadiums typically fail to generate the type of new revenue touted at the outset.
Michigan Gov. Rick Snyder and other supporters say the deal is vital to Detroit's revival and will generate thousands of jobs and new revenue from sports fans and others visiting the entertainment district.