Lawsuit seeking to block Little Caesars Arena public funding moves forward

Kat Stafford , Joe Guillen | Detroit Free Press

Show Caption Hide Caption Cost for Little Caesars Arena increases to $862 million The cost to build the arena has risen.

A federal lawsuit seeking to block public funding of the Little Caesars Arena and a new Pistons headquarters has moved forward after an emergency hearing was held Tuesday following a Detroit City Council vote to provide millions of dollars in tax incentives for part of the project.

Government transparency advocate Robert Davis, who filed the lawsuit along with Detroit City Clerk candidate D. Etta Wilcoxon, said the hearing, which was before Judge Mark Goldsmith, set a hearing date for June19, one day before the city council is expected to vote on an additional $34.5 million in public funding tied to the arena project.

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"(The judge) was wondering what actions council took today and he asked specific questions about when the taxes were going to be captured because he wanted to make a decision prior to that issue," Davis told the Free Press.

The pair initially filed the lawsuit Thursday, claiming state law prohibits spending school property tax revenues on the projects as planned because the schools millage voters approved in 2012 was to be used exclusively for Detroit Public Schools' operating expenses.

The lawsuit seeks to block public funding without a vote of Detroit residents.

The Detroit Downtown Development Authority, the public entity that owns the arena, is expected to collect $726 million in school property tax revenues through 2051. The money will be used to pay off $363 million in public investments in the $862-million arena and the surrounding development district. The DDA and Brownfield Redevelopment Authority were named in the initial suit.

Late Monday night, Davis filed an emergency injunction motion to block the funding.

"It would only enjoin them from capturing the revenue," Davis said. " ...They would have to foot the bill and not the taxpayers until a vote occurred."

The Detroit City Council was also added to the lawsuit Tuesday.

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The move follows an email Davis sent to council and Detroit Economic Growth Corporation representatives Monday morning, alleging that the DDA failed to properly notify the taxing jurisdictions affected by the DDA's proposed amendments of its tax increment financing and develop plans.

The Detroit Economic Growth Corporation staffs the DDA.

"It's very important because you (the DDA) are using the tax dollars of the residents of the city of Detroit and the county of Wayne to finance two billionaires' projects and you're taking money from institutions that are in dire need of these resources," Davis said. "That simply does not make sense."

DDA spokesman Bob Rossbach said in a text to the Free Press that the DEGC doesn't typically comment on any potential or pending litigation.

But Rossbach said that "under DEGC administration, the DDA and other public authorities have a well-established track record of operating within applicable legal guidelines."

Attorneys representing the DDA and Brownfield Redevelopment Authority responded Tuesday, calling it a "haphazard, scattershot motion."

"Plaintiffs have made it difficult, if not impossible, for defendants to respond to this motion by being completely unspecific as to what relief they seek," the attorneys wrote. "They have not attached a proposed temporary restraining order or preliminary injunction. It is completely unclear as to what relief they seek from this court and as to whom."

The city council overwhelmingly approved a handful of agreements and exemptions tied to the practice facility and headquarters Tuesday, including a nearly $20 million brownfield tax incentive.

A new DDA amendment proposal that council is to vote on June 20 would issue an additional $34.5 million in bonds to support the Pistons' relocation. The estimated cost of the project has increased from $450 million to $862 million. The project is anticipated to be 62% privately funded and 38% publicly funded.

David Whitaker, director of the council's Legislative Policy Division, briefly addressed Davis' concerns at the Tuesday meeting and said he doesn't believe the lawsuit would have an actual impact on council's vote.

"We looked at it," Whitaker said. "We didn't find any merit in what he was claiming. We don't see any reason why council can't take up these matters."

Davis said he obtained documents under the Michigan's Freedom of Information Act that show the DDA failed to properly provide notice of a May 25 public hearing about the plan amendments to the governing bodies of the taxing jurisdictions, in accordance with the Downtown Development Authority Act.

According to the DDA Act, before council can vote on the amendments, notices should have been sent to all property taxpayers of record in the downtown district no less than 20 days before the May 25 hearing.

In his letter, Davis said he received copies of certified mail receipts from the DDA, proving that notices were improperly sent.

"... Upon a close examination of the certified mail receipts, it is clear that the notices were not properly sent to the governing bodies of the taxing jurisdictions as the statute requires," Davis wrote. "Rather, the notices were sent to individuals other than the governing bodies of the taxing jurisdictions."

As an example, Davis said, the DDA sent a notice to Curtis Ivory, the chancellor of Wayne County Community College District, but Ivory isn't the governing body or a member of the governing body of WCCCD. The notice should have gone to the elected Board of Trustees, Davis said.

He said the DDA also sent notices of the May 25 hearing to department heads of the City of Detroit, but did not send a formal notice by certified mail to the Detroit City Council, the governing body of the City of Detroit.

"The only governing body the DDA purportedly properly sent notice of the May 25, 2017 public hearing to was the Wayne County Board of Commissioners, which was sent to the attention of its Chairman, Gary Woronchak," Davis wrote.

Davis is arguing that because the notices weren't properly mailed, the city council cannot move forward with approving the proposed DDA amendments.

Contact Katrease Stafford: kstafford@freepress.com or 313-223-4759.