State approves $10M loan for Joe Louis Arena demolition
The Michigan Economic Development Corp.’s Michigan Strategic Fund board voted Tuesday to approve a $10 million loan for the demolition of the vacant Joe Louis Arena site in Detroit for future development.
The board also approved the Detroit Brownfield Redevelopment Authority’s request for a Brownfield Act 381 Work Plan that would capture local and school taxes to repay the loan.
“We know redevelopment of the site will be coming in the near future just because it’s such a high-profile site in the city of Detroit,” said Greg Tedder, chief community development and marketing officer for the MEDC.
According to a briefing memo from the MEDC, the city of Detroit will use the funds from the low-interest, performance-based loan as well as other sources to pay for the demolition, which is estimated to cost about $13 million. The project includes environmental work including asbestos abatement and site preparation.
The brownfield work plan will allow the city to be reimbursed for those costs through tax increment revenues generated from whatever future development sits on that site.
The $10 million loan was the maximum available to the city for the project, $2 million less than officials initially said they would request.
"That should fit our budget," said John Naglick, Detroit's chief deputy chief financial officer and finance director. "Now that we have this loan in place, we're able to do the remediation and prepare it for the development that will follow."
This latest loan, as well as the $250 million in tax-exempt bonds the fund board granted to the city in 2014 to build the Little Caesars Arena, was integral in moving toward the redevelopment of the Joe Louis Arena site, Naglick said.
"Both of those required support from the Michigan Strategic Fund," he said. "We’re very thankful for it."
City officials have said that demolition preparation for the arena would begin early next year and could take up to two months. A teardown of the building was projected to begin in June.
Joe Louis Arena was a city-owned facility that was a concert venue and former home of the Detroit Red Wings. The venue closed in the summer of 2017. The Wings moved to Little Caesars Arena on Woodward that fall.
The arena and its adjacent parking garage were given to bond insurer Financial Guaranty Insurance Co. under an agreement struck in Detroit's Chapter 9 bankruptcy case. The New York firm was a major creditor that lost $1.1 billion in the bankruptcy.
FGIC seeks to recoup its money by developing the arena land after the venue is demolished. Under the deal, Detroit is required to facilitate the arena's razing.
Under a mediation settlement reached in the bankruptcy court, FGIC was granted an extension for its development plan until Jan. 15, 2020.
Neither FGIC nor the company it set up to develop the site, Gotham Motown Recovery, returned messages seeking comment Tuesday.
From that date, the bond insurer has 12 months after acceptance of the development plan to close on the property. The company then has 12 months to begin construction and 36 months to complete the project.
It's proposed that a revenue-generating project would be developed on the site by 2024, according to Detroit Councilwoman Janee Ayers.
Currently, the city is paying $600,000 annually in holding costs for the arena site to cover security and utilities.