Detroit Pistons move to downtown nears, but is it a done deal?

Katrease Stafford, Vince Ellis, Brian McCollum and 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.

At least one Detroit City Council member is planning to vote no Tuesday on a package of key agreements needed to propel the Detroit Pistons' move downtown to the new Little Caesars Arena, less than five months before the start of the NBA season.

Councilwoman Raquel Castañeda-López said she still has a number of unanswered questions and concerns, such as a desire to see an agreement on the number of Detroiters who will be employed at the arena, as well as clearly outlined youth and community opportunities. The arena is in her district.

"I think everyone in general is really excited and very happy about the Pistons coming back to the City of Detroit," Castañeda-López told the Free Press. "... But it’s been inaccurately portrayed as being a done deal.

"There were many, many other steps to go through. I definitely have concerns about the deal and what they’re getting out of it and what we’re getting out of it as a city. ... At this point it would be difficult for me to support the lack of commitment around community benefits that would directly impact Detroiters."

And beyond City Council's anticipated vote, there could be other potential hurdles to clear before the deal is finalized, with important dates just ahead: About three months remain until Little Caesars Arena's scheduled opening on Sept. 12, the start of a six-night Kid Rock stand.

No lease yet

Since the move from Auburn Hills was announced with great fanfare at a November news conference, the Pistons have yet to complete a lease agreement to join the Detroit Red Wings in Little Caesars Arena this fall.

But the Free Press spoke with several people close to the talks this week, and all said an agreement is near.

All parties touted the sense of cooperation that has emerged between the two companies: Palace Sports & Entertainment on the Pistons' side and Olympia Entertainment for the Red Wings.

“My sense is, it’s days now, not weeks,” lead negotiator and PS&E Vice Chairman Arn Tellem told the Free Press on Thursday when he was asked for a timetable on the lease agreement. The lease agreement deal would put even more of an air of finality to the Pistons’ nearly 30-year residency at the Palace of Auburn Hills in northern Oakland County.

“We’re very close to a lease agreement and I expect that will be done. It’s imminent now," Tellem said. "It’s a complicated deal. There’s a lot of aspects to it and a lot has happened along the way that’s been out of the control of both sides that’s caused it to maybe go a little bit longer than both sides would have liked.”

Still to be hammered out is the planned merger of the Olympia and Palace entertainment operations, longtime competitors in the metro Detroit concert game. The combined entity would oversee hundreds of events annually while controlling most of the area’s big-name venues, including the new arena, DTE Energy Music Theatre, Michigan Lottery Amphitheatre at Freedom Hill and the Fox Theatre.

October has long been the target date for that merger, multiple sources told the Free Press, and the deal would stipulate that no further events can be booked at the Palace — officially ending its three-decade reign as the region's leading concert arena.

As it stands, Bob Seger’s Sept. 23 show would be the final concert at the Auburn Hills venue. But it has not yet been advertised as such, and sources said they can’t rule out the possibility of an event after Seger.

Meanwhile, the concert schedule has begun filling up at Little Caesars Arena. Along with Kid Rock’s opening run, announced performers in early weeks include Ed Sheeran, Paul McCartney, Janet Jackson, Guns N’ Roses and Lady Gaga.

Not so fast

When Mayor Mike Duggan stood up at the November announcement and spoke optimistically of having everything wrapped up by March, it led some to believe that everything would be finalized in a rather short time.

But that hasn’t been the case.

The city’s approval hasn’t occurred and the NBA still has to give the move its OK.

Tellem said he thought March was a very optimistic timetable.

An early memorandum of understanding between the Downtown Development Authority, the public entity that owns the arena, and the Olympia Entertainment Events Center outlined a number of soft deadlines both parties hoped to reach in March.

When asked about the project's timeline Thursday, Duggan told the Free Press that he was "not aware of any missed deadline."

"They came out of City Council committee meeting last week and it’s scheduled for full council by June 6," Duggan said, adding that he had just had dinner with Tellem to discuss the project.

But a point of contention for some community members and officials has been the amount of public financing that would be tied to the project.

The DDA has amended its district boundaries several times, most recently in 2013, to accommodate the catalyst development project and district, which covers a nearly 45-block area from Grand Circus Park to Charlotte between Woodward and Grand River.

The DDA, which was created in 1978, issued two series of 30-year bonds totaling $450 million in 2014.

A new DDA amendment proposal that council is to vote on Tuesday would issue an additional $34.5 million in bonds to support the Pistons' relocation. Since the 2013 plan amendments, 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.

The DDA is expected to capture $726 million in school property tax revenue through 2051. The money will be used to pay off the public investments — including bonds and interest — in the $862-million arena and the surrounding development district.

Detroit Public Schools Community District spokeswoman Chrystal Wilson said that the new school district does not levy taxes and receives full funding from the state. The capture would impact the former DPS district, which is millions of dollars in debt.

"DPS pays operating and capital debt and will not be able to collect taxes in the arena area (Catalyst Project) until the bonds issued for the project are paid in full," Wilson said in an e-mail.

Through a brownfield redevelopment plan that is also slated to go before council Tuesday, the DDA will also capture about $1.5 million in taxes from the Detroit Public Library, according to a legislative policy report given to City Council, and more than $1 million will be captured from Wayne County Community College District. In total, more than $24 million in local and school taxes is set to be collected via the Brownfield plan to reimburse PS&E.

Library and WCCCD officials could not be reached for comment.

Council members Castañeda-López and Mary Sheffield both questioned the project's funding in a planning and economic committee meeting nearly two weeks ago.

"I think the main thing for me is having an understanding of the public contribution versus the private contribution of the project and making sure I have a clear understanding of if the schools would be impacted," Sheffield said, adding that she's planning to vote in favor of the project after receiving clarifications.

"Because the headquarters are going to be in District 5, the community benefits process was really important to me because that will be the impacted area. I have been somewhat pleased as far as the numbers that have been presented in terms of the economic impact on Detroit," Sheffield said.

Revenue questions

According to the policy report, ticket sales — including all luxury products — from the Pistons' games and entertainment revenue are expected to generate at least $90 million annually in new spending in downtown Detroit. But the legislative policy division contends that much of the additional spending would likely be captured in the form of concession revenue by PS&E.

Castañeda-López said she wants to see the project have more of a defined community benefits plan and investment in the city's youth.

Detroit voters chose a community benefits ordinance in November backed by top city and business leaders over a grassroots competitor plan.

Proposal A would have required a community benefits agreement for projects worth at least $15 million seeking tax breaks or a land transfer of at least $300,000.

The winning Proposal B will apply to fewer development projects because its thresholds to trigger community involvement are higher. Proposal B will affect projects with an investment of at least $75 million seeking city subsidies worth at least $1 million.

Over the course of the past several months, Pistons officials have met with City Council members, but Castañeda-López said talks to strengthen the community benefits tied to the project were limited by the memorandum of understanding.

The Pistons released a 10-point community benefits plan in November that officials touted as a jobs creator and something that would "bring millions of dollars of investment into Detroit neighborhoods."

Some of the proposed community benefits attached to the Pistons building a practice facility included:

Investing $2.5 million over six years into more than 60 basketball courts throughout the city.

Ensuring that at least 51% of the people employed during the construction of the practice facility are Detroit residents.

And awarding at least 30% of the value of all construction contracts related to the practice facility to Detroit-based companies.

But Castañeda-López said one question remained: Would Detroiters be included post-construction? She said she has yet to receive a solid answer.

"It seemed like there was very little flexibility for the community as well as the council to really negotiate anything in addition to that," Castañeda-López said. "The approach in general is that you should be so happy that we're coming here and I find that pretty offensive.

"So while we’re happy you're coming here, it doesn’t mean that we should sell the city short or the residents short so in that regard I think where it may be a better deal than some of the other deals negotiated with sports teams, it doesn’t make it a strong deal for the City of Detroit."

Suite sales

Olympia President and CEO Tom Wilson announced in November 2015 that all 62 of the arena’s full-size entertainment suites had been sold.

The suite arrangement included all Red Wings games, events and concerts.

Initial negotiations with the Pistons began early in 2016. Now that the Pistons and Red Wings are about to become arena mates, it's unclear what will happen with the suite arrangements.

Will the packages now include the Pistons?

Will they charge the clients more because of the Pistons’ inclusion and if so, how is the suite revenue shared?

Tellem didn’t offer details on how that will be resolved, but said it’s just another issue on a list of many.

Even a seemingly simple detail such as the height of an elevator has to be revisited to accommodate basketball players who are often more than 7 feet tall.

A Thursday tour of the arena gave a glimpse into the Wings' 20,000-plus square-foot locker area that already has a clearly discernible entrance point, coaches' office, and a room where some lockers already had been lined up along a wall, while other lockers were standing in the middle of the room.

But the Pistons' 10,000 square-foot area, on the other hand, was little more than a room itself, with air vents hanging from the ceiling.

A person with firsthand knowledge of the Pistons-Wings talks told the Free Press that the February death of longtime Red Wings and Detroit Tigers owner Mike Ilitch stopped talks for around “three to four weeks” with everyone giving the Ilitch family space to grieve.

“When you do a deal, in the beginning, you don’t anticipate every little issue that comes up and as you put it to paper,” Tellem said. “They are taking on a huge responsibility building an arena that we are modifying. There’s the practice facility (in New Center). There’s NBA issues, city issues, there’s all these issues that are circulating around there, but we’ve walked through these issues together. We’re now at the point that it’s imminent it’s going to be signed very shortly.”

Steady progress

The Pistons are in the midst of a full-blown marketing campaign to trumpet their arrival downtown.

Regular viewers of sports channels see commercials starting Pistons center Andre Drummond and coach and president Stan Van Gundy touting the move.

As part of a social media blitz, the organization reached out to Erik Olson, the owner of Thomas Magee’s, a sports bar in Eastern Market.

Olson, donned in a Pistons cap, was streamed on Pistons social media channels speaking of his Pistons love while seated in his bar.

“As a lifelong Detroiter and a business owner in the city I couldn't be happier for them to come back,” Olson wrote the Free Press in a text.

“I spent many years watching the 'Bad Boys' and 'Going to Work Pistons,' wishing they didn’t play so far from home. “Even after I opened my business a few years ago, we still did bus trips to the Palace, I didn't want to make that drive.”

Tellem cited many other examples of the Pistons’ progress toward downtown, including PS&E working with Olympia to submit dates to the NBA for next season’s schedule, which is released at some point in August.

A person with firsthand knowledge of the process said the hope is to have everything concluded by the time of the NBA’s annual July board of governors meeting in Las Vegas.

The entirety of the deal — along with the lease agreement — would be presented there.

The person also acknowledged there are contingency plans that will need formal league approval after the July meeting — if needed.

Tellem doesn’t think it will be.

“Our hope is and our belief is that it will be wrapped up before the board of governors meeting,” he said.

Any chance an unforeseen snag could force a return to the Palace?

“There’s no chance of that happening,” he said. “Zero.”

Everyone agrees that the process may have taken a bit longer than expected by the public.

But Tellem thinks the focus should be on the partnership forged.

“For everyone, on both sides, our relationship has grown together,” Tellem said. “From not knowing each other or just knowing each other a little bit, we really have developed a relationship based on trust and mutual respect. This is going to serve us well as we work together moving forward after the deal is consummated.”

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

Contact Vince Ellis: vellis@freepress.com. Follow him on Twitter @vincent_ellis56.

Contact Brian McCollum: 313-223-4450 or bmccollum@freepress.com.

Staff writers Helene St. James, Lori Higgins and Rochelle Riley contributed to this report.