UPDATE, Friday 2:30 p.m.: The Ilitch organization, which won state legislative approval for tax breaks for a $650-million new arena and entertainment district in downtown Detroit late Thursday, owes the city $1.5 million in back property taxes on its lease of the city-owned Joe Louis arena, where the Red Wings hockey team has played for decades, Mayor Dave Bing’s administration confirmed today.
Cheryl Johnson, the city’s treasurer and director of its financedivision, said she went through the terms of Olympia’s long-term lease of the riverfront arena, city tax records and state law to confirm the issue. Her verdict: Since the end of the lease in June 2010 – the city and the Ilitches have been negotiating a renewal option for several years – Olympia owes the city about $1.5 million in property taxes, a figure that includes about $42,000 for the current winter property tax bill due on Jan. 15.
According to an earlier Detroit Free Press report, Mike Ilitch’s business empire owes the city of Detroit at least $2 million in back property taxes.
Freep: The state House approved legislation Thursday that could allow a tax break to help build the proposed Red Wings arena and entertainment district the Ilitch organization is eying for downtown Detroit, even as questions emerged about $2 million or more in unpaid property taxes the Ilitches’ Olympia Entertainment may owe the city.
Olympia Entertainment leases Joe Louis Arena from the city, but it wasn’t immediately clear which portions of Cobo are referred to in the tax bill. That lease is set to expire soon.
The allegations emerge as the state legislature is debating bills that would allow Detroit’s Downtown Development Authority to direct city tax revenue toward Ilitch’s proposed hockey arena and surrounding development. A statement from Ilitch’s Olympia Entertainment released last month claims the development will cost $650 million.
UPDATE: The Detroit News has extracted an explanation, such as it is, from Ilitch.
Detroit News: The reason the taxes haven't been paid is because the lease ended in June 2010, according to a Thursday statement by the Detroit Economic Growth Corporation and Olympia Entertainment Inc.
"A new lease is being discussed," the city's economic development arm and the Ilitch Holdings Inc. company said, "and the intent of both parties has been to have the taxes in question reconciled when the new lease is renewed."
MORAL HAZARD!
Why in God's name would Team Ilitch negotiate a new lease at the Joe while they're planning to move into a new building? There's no advantage to it. They can just say with this tax-free month-to-month deal as they play out the string at Joe Louis Arena. It's not like the city will kick them to the curb.
Still, this is a lesson for renters everywhere. Let the lease run out and tell your landlord you're going month-to-month while you "negotiate" a new lease. Add that you won't pay the electric bill until a new lease is reached, then it'll be "reconciled." Six months later just move out. Free electricity! -- JTW
