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Pens, officials strike arena deal to keep team in 'Burgh

Wednesday, March 14, 2007
 

Penguins co-owner Ron Burkle said Tuesday that Kansas City probably offered a better deal, but agreements over cost overruns, redevelopment rights and a heftier price tag for a new arena kept the National Hockey League franchise in Pittsburgh.

Tense negotiations ended last week with handshakes after a secret, four-hour meeting at the Crowne Plaza hotel in Cherry Hill, N.J., arranged by NHL Commissioner Gary Bettman and Gov. Ed Rendell.

The deal, finalized yesterday, concludes 10 weeks of sometimes acrimonious discussions, threats to leave and pleas by distraught fans.

Team and public officials signed a 30-year deal to build a $290 million arena Uptown to replace 46-year-old Mellon Arena, the oldest venue in professional hockey. The two sides hope to reach a lease agreement within 30 days, Rendell said.

"At the end of the day, if you have a good deal and a fair deal, we would rather stay here and be here where the fans are," Burkle said after a news conference.

The negotiations almost collapsed last week over the price tag, cost overruns and development rights, Rendell said. Burkle and co-owner Mario Lemieux announced publicly their plans to look elsewhere because they feared time was running out. The team's lease at Mellon Arena expires June 30.

Burkle, a California billionaire, said team officials had put off serious discussions with other cities until the impasse. They began to worry they had lost a bargaining chip in getting Rendell, county Chief Executive Dan Onorato and Pittsburgh Mayor Luke Ravenstahl to agree on more favorable terms.

That led Burkle to visit Las Vegas and reopen discussions with AEG, the operator of the new Sprint Center in Kansas City.

"Things started dragging out and then we kinda lost faith that we were going to get a deal done because we didn't feel like there was any motivation to get something done," Burkle said. "So we had to face reality.... We had to go out and get busy and figure out what our alternatives were."

The team owners had convinced Rendell to agree on a higher price for the arena -- at least $290 million, and not the $270 million the governor and city-county Sports & Exhibition Authority wanted, Rendell said.

But then the two sides had to find an extra $1.2 million a year in debt payments. The state offered another $500,000 a year, bringing its portion to $7.5 million a year for 30 years from an economic development fund backed with gambling money.

Detroit-based Majestic Star Casino had agreed to add $7.5 million a year for 30 years, and both sides had agreed not to ask owner Don Barden for more money.

The Penguins agreed they could ante up another $200,000 a year after the sports authority demolishes Mellon Arena, turns it into a parking lot and allows the team to collect the revenue. That brought the team's contribution to $3.8 million a year.

When that left the negotiators $500,000 a year short of their goal, Burkle suggested checking whether falling interest rates had lowered the amount needed to make payments.

The rates had fallen, and the numbers worked, Rendell said.

But then the team owners worried that the costs could still come in higher because of rising construction costs.

The two sides agreed to split the difference up to $310 million. The state would contribute its additional money from the Capital Redevelopment Assistance fund, Rendell said.

Beyond that, the Penguins pay for additional cost overruns. That matches the deals offered to the Pirates and Steelers for their new stadiums, the governor said.

Finally, the sports authority and local officials wanted to make sure the Mellon Arena site would be developed once the Penguins move into a new arena for the 2009 season.

The deal calls for the SEA to demolish Mellon Arena as soon as the new building opens. The Penguins will get development rights to the 28-acre parcel, but they have to negotiate with Barden over allowing him to help redevelop the site.

The contract requires the Penguins to develop at least 2.8 acres a year for 10 years or lose the development rights.

In the end, the agreement differs in some details from the so-called Plan B offered by Rendell a year ago. Plan B called for the Penguins to pay $8.5 million up front and $2.9 million a year, while forgoing $1.16 million a year in naming rights. The final deal forgoes the up-front money but requires similar annual payments from the Penguins.

Ultimately, the deal came together over cold cuts Thursday night at the Crowne Plaza -- across the river from Philadelphia city hall, where reporters had gathered.

Sitting down at a square table with the team owners on one side and the public officials on the other, NHL Commissioner Bettman opened with sobering instructions.

"This has been a long process," he said. "Let's look forward and not look back."

Privately, Bettman had confided to fellow NHL officials that he saw his role as a central-line conductor that had to guide two lost trains back toward the tracks. Those tracks, he said, were direct routes to Pittsburgh, not Kansas City.

"We've always felt strongly about this market," Bettman said.

The two sides left that night with a handshake agreement to write up the details and take the next 48 hours to reach a final agreement. One public clue about the impending deal was Burkle's presence in the owner's box during the Penguins game Saturday afternoon against the New York Rangers.

Officials in Kansas City had expected to talk with Burkle in Los Angeles over the weekend. He did not make the trip.

"Tonight, I'm proud to announce that your Pittsburgh Penguins will remain right here in Pittsburgh, right where they belong," Lemieux told cheering fans last night. "Thank you, Pittsburgh. Have a great night."

Asked earlier whether he plans to try again to sell the team, as he nearly did twice last year, Lemieux said, "The team is not on the market, and we don't plan to put the team on the market anytime soon."

The moment capped a roller coaster ride for fans in recent months as the team owners and public officials seemed close to agreements and then further away.

Bringing his 6-year-old son, Austin, to his first game last night, Mike Secrist said he felt relieved about the team's future.

"I understand the political wrangling, but there are a lot of benefits to an arena," said Secrist, 34, an IT programmer from Monroeville. "There's not a whole lot going on Downtown. You want an arena to be around when you have a 6-year-old."

Season-ticket holder Dave Bauer attended the game with his 22-year-old daughter, Katie Bauer. Both wore Penguins jerseys.

"I figured the politicians would find a way to screw it up," said Bauer, 50, of West Mifflin. "I knew it would come down to the Penguins coming up with a serious threat to get the plans moving. I'm just happy they got it done."

Additional Information:

The Deal

Penguins give:

* $4.2 million a year, including $2.2 million a year for a 30-year lease and $2 million anticipated in arena naming rights

* $500,000 a year for a parking garage

* Half the cost of arena construction between $290 million and $310 million

* All arena construction costs above $310 million

Penguins get:

* $15 million a year from slot machine casinos -- half from North Shore's Majestic Star Casino

* $10 million for negotiating delays, property the team purchased near arena and help with marketing

* $8.5 million savings from state's waiver of up-front payment for arena

* Half the cost of arena construction between $290 million and $310 million

* Development rights, including $15 million in credits from redevelopment

* Credit for future increases in the city's amusement tax or comparable taxes on tickets or admissions

Source: Governor's Office, The Associated Press Add Andrew Conte to your Google+ circles.

 

 

 
 


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