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Pens get ballpark figure for arena

Penguins/NHL Videos

Thursday, Dec. 28, 2006

There's no such thing as a free lunch -- or a free arena.

But the deal Pittsburgh and Allegheny County are offering the Penguins would give them a new arena with team contributions similar to those made by the Steelers and Pirates for their North Shore stadiums.

Unlike those outdoor venues, an Uptown arena could make money for its operator throughout the year.

"I don't know why (the Penguins) are fussing so much about $3 million a year, if they can get the rental agreement the Steelers and Pirates have," said Jake Haulk, president of the Allegheny Institute for Public Policy, a Castle Shannon think tank. "A lot of this is just posturing."

Gov. Ed Rendell and local leaders have proposed the Penguins pay $8.5 million upfront and $2.9 million a year for 30 years, while forgoing $1.16 million a year in naming rights. The state would pay $7 million a year for 30 years from gambling money, and Majestic Star Casino would pay $7.5 million a year for 30 years.

A Penguins spokesman declined to comment. Team officials plan to talk with local leaders about building an arena, but said they will shop the team to other cities.

Pittsburgh needs the Penguins to stay in order for a new arena to work, said Megan Dardanell, spokeswoman for Allegheny County Chief Executive Dan Onorato. City and county leaders are working to set up a meeting with the team, she said.

"We need to have an anchor tenant, and we want that to be the Penguins," Dardanell said.

Political leaders are willing to negotiate such things as the rights to concessions, parking and advertising, Onorato has said.

The football and baseball teams helped pay for their stadiums, mostly by setting aside money they expected to make from the buildings.

That's common for sports construction, said Marc Ganis, president of Sportscorp Ltd. in Chicago, which served as a consultant for Allegheny County on the stadium deals.

A professional hockey team does not make as much television money as a football or baseball team, and the Penguins have to compete for local sponsors and luxury seat holders with the stadiums and the University of Pittsburgh's Petersen Events Center in Oakland.

But an arena could make more money from non-sporting events.

"It's a matter of how much, and it all comes down to a negotiation," Ganis said.

With cost overruns, the Steelers contributed more than $100 million to the $280.8 million cost of Heinz Field. The team paid $8.8 million in cash, and then raised $39.52 million from selling seat licenses, and more money from a ticket surcharge.

The Steelers made back $57 million in naming rights for Heinz Field.

Rendell based the Penguins arena offer on a deal the Pirates had for PNC Park. The baseball team kicked in about $50 million with cost overruns, including $8.5 million in cash and $2.9 million a year for 29.5 years.

The Pirates offset the annual payments with a ticket surcharge and a naming rights agreement that pays $30 million over 20 years.

On the public side, the state paid $75 million for each of the stadiums, and the Allegheny County Regional Asset District borrowed $173 million to retire the debt on Three Rivers Stadium and help pay for the new venues.

Collecting a 1 percent sales tax in the county, the district agreed to pay $13.4 million a year for 30 years to pay off the loans.

The district has not been asked to help pay for an arena, and Onorato has said RAD money should not be used. But the fund continues to help the Penguins anyway.

The district agreed to pay Mellon Arena's debts through 2018. The payments started out at $3.2 million a year and dropped to $2.4 million in 2006. They'll fall to $1 million next year, and smaller amounts in the future.

"The public sector regularly comes to the aid of the hockey team," said David Donahoe, RAD's executive director.

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