The Ilitch organization is set to receive $74 million in additional Detroit taxpayer subsidies for meeting nearly all of its contractual obligations for the new commercial district surrounding Little Caesars Arena, which was recently the subject of a critical HBO report.

That money will be on top of the $324 million public tax contribution toward construction of the arena itself.

Ilitch-owned Olympia Development has made at least $200 million in building investments within the arena district, popularly known as District Detroit. That spending fulfills the organization's minimum legal commitment for so-called "ancillary development" around the new sports venue where the Red Wings and Pistons have played since fall 2017.

The spending goal was spelled out in a 2014 deal between Olympia Development and the public entity that directs tax money for downtown-area development, called the Detroit Downtown Development Authority, or DDA.

The $200 million goal was met by development of two parking decks, the Google office at the south side of the arena and the still-under-construction Little Caesars headquarters on Woodward.

Negotiations for the contract occurred while Detroit was under emergency management and, according to a city spokesman, then-newly elected Mayor Mike Duggan was excluded from participation in those talks.

A development authority spokeswoman confirmed this week that the Ilitch organization has met its $200 million arena district spending obligation, which, under the 4½ -year-old contract, will soon unlock the extra subsidy.

That $74 million bonus, as well as the previously approved $324 million subsidy, are derived from taxes captured by the DDA through a complex arrangement known as tax increment financing. This type of arrangement was used in the past to help finance other big Detroit projects.

The captured taxes are generally paid by property owners within the development authority's zone across downtown.

In 2013, the authority expanded the geographic boundaries of its tax-capture zone to include the future arena and surrounding blocks. At the time, that area was not a popular destination for city visitors and was known for its dive bars.

The public subsidies are not big one-time checks to the Ilitch organization. Rather, the tax money is collected over time and put toward paying off the 30-year bonds that were issued to construct the arena.

The total cost of Little Caesars Arena came to just under $863 million, with Olympia Development covering the portion of costs that weren't publicly financed.

More:Little Caesars Arena: How the cost nearly doubled to $863 million

More:Little Caesars Arena to breathe life into dead zone of Detroit

Donna Fontana, spokeswoman for the development authority, said this week that the bulk of the $74 million arena district bonus would go to Olympia Development once the arena's construction bonds are paid off, likely in the late 2040s.

"Olympia has met their commitment on $200M in ancillary development," Fontana said in an email. "Once those developments are complete, the $74M reimbursement will begin to be paid out over the term of the bonds."

Critical HBO report

The $74 million reward for arena district progress stands in contrast to criticism that led to an HBO report last month that chided the Ilitch organization for the pace of development work within the roughly 50-block District Detroit, which was originally envisioned to feature five new neighborhoods, lots of street-level retail and hundreds of new apartments.

The segment, aired as part of "Real Sports with Bryant Gumbel," quoted local critics and elected officials, including U.S. Rep. Rashida Tlaib, D-Detroit, who generally faulted Olympia Development for not completing the extensive retail, residential, hotel and commercial developments that were featured prominently in early renderings for the district.

Today, much of District Detroit is covered by surface parking lots.

The HBO segment also focused on the arena's public financing, which was approved shortly before Detroit declared Chapter 9 municipal bankruptcy in July 2013.

The Ilitch organization declined participation in the HBO show, but issued statements afterward that blasted it as "a self-interested, sensationalized and inaccurate report designed to attract viewers instead of a balanced report on the rebirth of Detroit and our contributions to city’s turnaround."

Mission accomplished?

In an interview this week, Francis Grunow, chair of the Neighborhood Advisory Committee for the Arena District, said that despite the Ilitch organization hitting its $200 million contractual goal, he does not consider District Detroit as a mission accomplished.

"Redeveloping the area clearly has not happened," Grunow said. "The catalyst idea had so many images and press releases and promises that may not have had contractual obligations, but were still a big part of what sold the public on the district."

Under the terms of its "ancillary development" deal, the Ilitch organization had five years from the first Red Wings home game in Little Caesars Arena — October 2017 — to meet the $200 million spending goal necessary for unlocking the $74 million additional subsidy.

The subsidy was originally set at $62 million, but increased once the Pistons agreed to leave Auburn Hills and join the Red Wings in the new Detroit arena.

"Our commitment to deliver $200 million in ancillary development has been far surpassed and was completed nearly three years ahead of schedule," Olympia Development spokesman Ed Saenz said Friday.

The qualifying arena district investments include:

A seven-story parking deck near the arena on Henry Street with 7,000 square feet of ground-floor commercial space. ($24.4 million estimated investment)

Another seven-story parking deck at Cass and Temple that could accommodate future residential and retail components. ($30 million estimated investment)

A two-story office building attached to the south side of the arena that houses Google and other tenants. ($17.8 million estimated investment)

The new nine-story Little Caesars world headquarters building on Woodward in downtown, which is not yet fully open. ($150 million estimated investment)

Wayne State University's new $59 million Mike Ilitch School of Business next door to the arena was not counted toward the investment goal.

Eddystone not done

One District Detroit development that isn't finished and appears to have barely even started, despite being a contractual obligation for Olympia Development, is redevelopment of the long-abandoned Eddystone Hotel.

The 13-story hotel dates to 1924 and today looms windowless and derelict next to Little Caesars Arena.

It was to be transformed into about 90 apartments, with 20% set aside as affordable units for lower-income residents. Its former neighbor, the old Park Avenue Hotel, was imploded in summer 2015 to make way for the arena.

Under the contract between Olympia Development and the development authority, the Eddystone project was to be completed within a year of the arena getting its temporary certificate of occupancy for the first Red Wings home game. But that deadline came and went last fall.

Detroit-based American Community Developers was brought on by Olympia to redevelop the Eddystone along with four other residential projects in District Detroit — two more historic rehabs, two new constructions — that were to encompass a total of about 550 new residences.

However, the firm and Olympia parted ways in spring 2018, said Michael Essian, vice president for American Community Developers. The reasons included Olympia's decision to do two of the projects, still unbuilt, as office buildings instead of residential, he said.

'They fell short'

Detroit City Councilwoman Raquel Castaneda-Lopez this year asked council's Legislative Policy Division to examine the status of the Ilitch organization's arena district commitments.

“Within the district, I think they fell short in lots of areas," the councilwoman said Thursday.

The policy division issued a report last month that says Olympia Development failed to meet its deal commitments for the Eddystone.

Asked about possible penalties for the stalled Eddystone, a city spokesman on Friday referred comment to the DDA, which says it is in discussions with Olympia and "will be working to ensure the agreement is enforced."

Olympia spokesman Saenz said Friday the Ilitch-owned firm is "fully committed to the redevelopment of the Eddystone and (is) working with the DDA to finalize a construction timeline for this historic property. In addition to having hired a contractor, we have retained an architect and pre-construction activities are underway."

School funding

The HBO segment also highlighted how some of the money collected within the development authority's tax-capture zone would have instead gone toward Detroit schools, if not for being redirected as subsidies to pay off the arena's bonds.

However, the arrangement includes some additional layers of complexity and, according to school officials, is not sapping the district of money.

The Little Caesars Arena deal dates to before the state Legislature restructured Detroit schools into two districts: one to pay down legacy debt, the other to run the schools.

“The abatements do not affect the current day-to-day operations of the district," Chrystal Wilson, an assistant superintendent for Detroit Public Schools Community District, said in a statement.

"The abatements, theoretically, reduce the speed by which (the) legacy debt would be repaid because the additional tax revenue would have paid the debt faster," she said. "However, one could argue that without the abatements, the (arena) would not have been built and the area’s economic improvement would not be occurring. The additional economic improvement increases tax revenue, and therefore the repayment of the legacy debt.”

ContactJC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.