News Story

Detroit Soccer Team Turns to Private Investment to Fund New Stadium

Working in Detroit: Private investment fueled by the MILE Act

This article and video is part of a series on Detroit entrepreneurs. See the rest at www.mackinac.org/Detroit.

When Detroit's semipro soccer team needed a bigger stadium to accommodate its growing fan base, it did something unusual. Instead of seeking tax breaks or subsidies to support its ambitions, it turned to private supporters, mostly fans. It did so with the help of the Michigan Invests Locally Exemption or MILE Act.

Detroit City FC raised $741,250 from 527 investors to refurbish Hamtramck’s Keyworth Stadium. The team’s first game at its new home, on May 13, was a sellout with 7,410 tickets sold. That was more than double the 3,500 tickets it was limited to selling when the team played at the stadium at Detroit’s Cass Tech High School.

Keyworth, in Hamtramck, was not exactly in move-in condition. The World War II-era relic could seat 11,000 people but it needed major refurbishment. Its owner, Hamtramck Public Schools, did not have the means to repair it.

The team offered to pay for the work in exchange for a 10-year lease but raising money for such a venture could have been a costly and lengthy process. That’s how the MILE Act was able to help. Michigan passed the legislation in 2013 to make it easier for entrepreneurs to use crowdfunding as a simplified way to raise money in small amounts from many people.

“We’re a small organization, so it would have probably cost more in legal fees to figure out how to offer ownership, if that was even something we were interested in. This offered a very streamlined way for us to solve our problem,” said Alex Wright, one of the team owners.

Under the new law, ventures and investors alike must be in Michigan, and the organizations must raise the money within a year. Detroit City FC raised $741,250 in 11 months from 527 investors. Investors, many of them team supporters, could take part through tiers starting at $250 and going as high as $50,000. They don’t have equity in the team but will earn dividends based on team revenue.

“If the atmosphere wasn’t exciting, the investment wouldn’t have been something I would have been a part of,” said Jeffrey Quesnelle, a team supporter and investor.

Stephanie Jaczkowski was a newcomer to investing. After recently finishing graduate school and landing a full-time job in Detroit, she was thrilled that she could support the team she loves.

“Having an opportunity to invest in something that is right here in the city of Detroit was something I really appreciated,” said Jaczkowski.

Rebecca Green considered it more an investment for her 3-year-old son, who loves going to the games.

“I knew that if we were to make any money back, it would be for his future, but not only that, he loves the team so much. It’s all he talked about all winter, so every day, hearing about DCFC spurred me to invest,” Green said.

Also benefiting from the venture is the Hamtramck school district. The median house value in the city is one-third the state average, and the district had little desire or ability to renovate the stadium.

Giving up 25 Friday nights to a private soccer team for the added improvements made sense to the board.

“What the community is getting back is a beautiful state-of-the-art stadium that will draw families to Hamtramck — the businesses, the restaurants and bars,” said Superintendent Tom Niczay.


Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

Analysis

As Municipal Golf Courses Lose Money, Taxpayers Pick Up the Tab

Lansing subsidizes its course to the tune of $24 per round

In 2015, Lansing’s city government used $555,000 from its general fund to pay for its money-losing municipal golf course. That was not an unusual year; Groesbeck Golf Course has received money from the city’s general fund every year since at least 2005.

In those 11 years, Lansing’s general fund has transferred $5.9 million to the golf course. These transfers compensate for the municipal course’s losses, which annually total of at least $400,000.

Cities get into the golf business believing that they will make money. But a review of public courses in Michigan shows that, in practice, they are big losers for taxpayers. Municipal courses usually do not make profits, so local governments fund them through taxation.

In the meantime, the owners of private golf courses do not have the option to collect a tax if they can’t make the business work. They either improve their services to make profits or go out of business.

Golfers played 22,998 rounds on Groesbeck last year, which means Lansing taxpayers paid a $24 subsidy for each round. While the subsidy benefits the few golfers at the expense of the many taxpayers, including the private owners of golf courses.

Those business owners have to overcome two challenges from taxpayer-funded golf courses. First, they have to subsidize the municipal course through their taxes. Second, they have to compete against the artificially low prices municipal courses offer. Cities exempt municipal golf courses from property taxes and subsidize their losses, a combination which allows them to charge even lower prices than private courses.

Groesbeck is one of many municipal golf courses in Michigan. Auburn Hills’ Fieldstone Golf Club has received over $7.9 million in taxpayer funding since 2006. Midland’s Currie Municipal Golf Course has taken $1.9 million in the past 7 years. Canton’s Pheasant Run Golf Club cost taxpayers $2 million in 2007 and nearly $11.4 million over 12 years.

In these course’s combined 43 years of reporting, their city’s audits showed only two cases where revenue outpaced expenses. Pheasant Run made a profit in 2004 and Currie made money in 2011.

But even when municipal golf courses appear to be profitable, taxpayers are not necessarily off the hook. While a course may turn a profit when only day-to-day expenses are considered, the city may still give it give money for capital expenses. For example, Birmingham’s municipal golf courses, Lincoln Hills and Springdale, earned a meager $202,000 profit since 2005. Nonetheless, Birmingham still granted these courses $1.16 million for course and clubhouse improvements. Other cities also subsidize profitable municipal golf courses to improve the course, clubhouse and equipment conditions.

It’s hard to argue that golf is a core government function. In fact, it diverts money from important services, like public safety. Lansing estimates the value of its public course, Groesbeck, at $2.6 million. When the city has underfunded its pension system by nearly $250 million, it should not be losing money on leisure activities.

The story is the same around the state. Municipal golf courses are nearly always a money-loser and certainly unfair to taxpayers and competing businesses. Cities should sell their courses, and focus on the important services.

Correction: This story was edited after publication to correct the cost to taxpayers.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.