Editorial: Lawsuit against Pistons deal raises an important question

Detroit Free Press Editorial Board | Detroit Free Press

Show Caption Hide Caption Inside Little Caesars Arena as it nears completion Check out the Little Caesars Arena construction as of mid-June 2017 prior to its September opening.

A lawsuit seeking to halt a public subsidy for the Detroit Pistons' move downtown is on the verge of tanking the deal, the basketball team's execs say, imperiling the Pistons' plan to play downtown for the first time in nearly 40 years. Lawyers for the team and for the Detroit City Council have asked a federal court to toss the suit, saying it's frivolous, with the potential to wreak economic harm on the entire state of Michigan.

And while we'd like to see the Pistons play downtown (Deeeetroit BASKETball!) this lawsuit asks a question we're even more eager to see answered: Is the premise on which publicly funded downtown development has rested -- that it's OK to bargain away future tax dollars in a city that desperately needs funds -- legal?

Maybe -- just maybe -- this is something we need to figure out.

Gadfly activist Robert Davis, who has abused the legal system with nuisance filings for years, and Detroit City Clerk candidate D. Etta Wilcoxon's lawsuit, filed June 5 in U.S. District Court, say the move to divert incremental property taxes associated with schools and parks millages isn't legal. Detroiters, the pair allege, must vote to approve such a transfer of funds. And in this case, as in other large developments with generous taxpayer support, that hasn't happened. Davis and Wilcoxon have asked a U.S. District Court judge to enjoin the Detroit City Council from transferring funds to the Pistons.

The Pistons are preparing to move into the under-construction Red Wings Little Caesars Arena; that project is receiving $363 million in public funding through a mechanism called a Tax Increment Finance Authority (more on that later) that's expected to collect $726 million through 2051. The Pistons are also receiving public support for a planned practice facility.

TIFs have been de rigeur in downtown development for decades; the premise is that big developments just won't happen without substantial public subsidy.

It's a premise taken for granted by the folks who cut deals for big developments, and it's one community activists -- like the folks who pushed last year's unsuccessful community benefits agreement ballot initiative -- have challenged.

Because new development will cause a spike in taxes, the theory goes, the TIF authority can capture some or all of those increased taxes, borrowing an equivalent amount to offer to the developer, and paying down the debt over years as the anticipated taxes roll in.

That's the justification for almost all tax credits and economic development incentives that siphon off tax dollars: The city wouldn't have this increased tax collection if it weren't for the development, so what's it to you?

For a city to forgo collecting new tax dollars is a net neutral, advocates of such incentives say, and new developments enhance a community in other ways -- more folks on the streets, utilizing the new development, spending money at bars and restaurants and nearby businesses, and the added benefit of payroll taxes from workers hired to fill newly created jobs.

But it's hard to quantify those presumed gains, much less whether the community actually benefits.

And what, we've asked again and again, is the point of development that does not benefit the community?

The Pistons are playing hardball with this deal, saying the NBA could put the kibosh on the move if everything isn't ready to go by the association's July meeting.

We're underwhelmed. A sports team with Detroit appended to its name should have some care for the city it left, and in which it wants to make its home.

Private developers who operate with private funds are welcome to build when, how and what they'd like, city zoning rules notwithstanding. But developers who seek public dollars -- as did the billionaire Ilitch family's misguided Red Wings arena deal -- have an obligation to ensure that what they're doing benefits the public.

Otherwise, we're mortgaging the city's future growth to support the business interests of a few fabulously wealthy business people.

So yes -- this is one we should figure out.