A lawsuit filed today in federal court seeks to block public funding of Little Caesars Arena and a new Pistons headquarters without a vote of Detroit residents.
The lawsuit claims state law prohibits spending school property tax revenues on the economic development projects as planned because the schools millage voters approved in 2012 was to be used exclusively for Detroit Public Schools’ operating expenses.
The Detroit Downtown Development Authority, the public entity that owns the arena and is responsible for its public funding, is expected to collect $726 million in school property tax revenues through 2051. The money will be used to pay off $363 million in public investments in the $862-million arena and the surrounding development district.
If the lawsuit is successful, it could threaten a significant pot of public money vital to construction of Little Caesars Arena and the new Pistons headquarters in New Center.
Government transparency advocate Robert Davis and D. Etta Wilcoxon, who is running for Detroit City Clerk, filed the lawsuit today in U.S. District Court.
They claim their constitutional right to vote has been violated because they should be able to vote against spending tax money on the arena and Pistons headquarters.
“The officials at the DDA and the Brownfield Authority should not have proceeded with these projects until they received all the necessary approvals that were required under the appropriate statutes,” Davis said. “How all of those high-priced lawyers missed that, I don’t know.”
The lawsuit also names as a defendant the Detroit Brownfield Redevelopment Authority, which is involved in a tax-incentive plan that would provide the Pistons with about $20 million in publicly funded reimbursements for its $83-million practice facility and corporate headquarters. The tax-incentive plan still must be approved by the Detroit City Council.
Of the $20 million in proposed reimbursements to the Pistons, $7.9 million would come from the schools’ operating fund, according to a report prepared for the Detroit City Council.
Bob Rossbach, a spokesman for the DDA, said he was not yet aware of the lawsuit.
“Obviously we will review its claims and will respond accordingly,” Rossbach said, declining to comment further. According to the lawsuit, the state’s general property tax act requires voter approval to spend money differently than voters originally approved.
The arena is expected to open in September. Work on the Pistons’ facility could start this summer.
Since Little Caesars Arena was announced, the DDA has taken the position that the project does not negatively impact local schools because ultimately they do not lose any operating revenue. Rossbach did not provide any further explanation to that rationale today when asked in an e-mail.