Wings winners in Joe Louis deal
Coleman Young's '70s agreement to keep team in Detroit is the most lucrative in the NHL.
David Josar / The Detroit News
DETROIT -- In the mid-1970s, then-Red Wings owner Bruce Norris threatened to move the team to Pontiac. To get them to stay, then-mayor Coleman A. Young put together an incentive-laden contact that would guarantee the team remain in the Motor City until 2008.
The agreement is considered the most lucrative in the NHL and is a prime reason the team has increased in value from the $8 million Mike Ilitch paid for it in 1982 to an estimated $288 million today, according to Forbes magazine.
The lease not only covers Joe Louis, but also the 12,191-seat Cobo Arena and a 500-space parking lot. Next year, it will automatically renew for 20 years at generally the same generous terms -- and for another 10 years after that unless Olympia Arenas, a company controlled by Mike and Marian Ilitch, decides to nix the arrangement.
Highlights of the deal:
- The city has no say in whether the contract will be extended. The decision is made unilaterally by the Red Wings, which can keep terms that will only grow more financially favorable for the team.
- The city of Detroit will provide free police protection for the games at Joe Louis and Cobo Arena. In addition, the city provides landscaping and snow removal. Mayor Kwame Kilpatrick has said he would try to get the Lions, Red Wings and the Ilitch-owned Tigers, to pay something toward offsetting the cost of providing officers but has been unsuccessful. Meanwhile, the city is charging nonprofit community festivals, such as the Detroit Festival of the Arts and Comerica Tastefest, for police services.
- The Ilitches pay $25,000 a month to rent Joe Louis -- built in 1979 for $30 million -- and $12,500 a month for Cobo Arena.
- The city collects a 10 percent surcharge on tickets at Joe Louis and 7.5 percent for Cobo Arena. It also gets a 10 percent cut of all concession sales and about 7 percent of the luxury suite fees. For the past five years, those fees and rent have given the city about $5 million a year in revenue.
- The city provides up to $500,000 a year for capital improvements to Joe Louis.
- Olympia gets 50 parking spaces for its own use in the Joe Louis lot.
- A hefty property tax break is included in the agreement. Like many lease agreements, the Ilitches are responsible for the property taxes. However, a clause caps the Ilitches' property tax liability at $252,000. By comparison, the owner of a $30 million building in Detroit -- the construction cost of Joe Louis nearly 30 years ago -- pays roughly $1 million a year.
- If the Red Wings decide to extend the lease, the city would no longer be able to tack on up to a 10 percent surcharge on tickets to games and events that accounted for $2.7 million in revenue in the 2006-07 fiscal year. And in five years, Detroit would no longer get a cut of concessions and suite rentals. Olympia Entertainment would lose its property tax break, however, and would be liable for about $1 million annually.
You can reach David Josar at (313) 222-2073 or djosar@detnews.com
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070618/SPORTS0103/706180377
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