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Arena's price tag jumps by $31 million

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Friday, Nov. 14, 2008

Rising steel, insurance and construction costs threatened to push the price tag on Pittsburgh's new multipurpose arena even higher than the $321 million that Penguins officials announced Thursday.

"We worked like heck to make sure this was the right building, one we're going to be proud of it, and to make sure we didn't spend a nickel more than we had to," said team President Ken Sawyer.

The Uptown arena will cost $31 million more to build than the original projection of $290 million.

The Penguins will pay $15.5 million of the increase, the state $10 million, and the city-county Sports & Exhibition Authority about $5.5 million, under a deal the SEA's five-member board unanimously approved yesterday.

"It's a very small number on a big project," Sawyer said. "Clearly, there was inflation; steel prices were going up constantly, as were all other material costs, so that was a factor, and the site was a little more complicated."

If the price rises again, the team will cover the overrun under terms of its 2007 agreement with the SEA. The authority is building and will own the arena when it opens in summer 2010.

State Sen. Sean Logan, D-Monroeville, an SEA board member, said he anticipated the increase because the cost was based on 2005 construction prices.

"This locks in the price now, and we're going to have a first-class facility ... that keeps the Penguins here indefinitely," Logan said.

The yet-to-be-named arena will replace 47-year-old Mellon Arena, the oldest venue in the National Hockey League.

Much of the funding is coming from taxes on gambling: Pittsburgh's North Shore casino will contribute $7.5 million a year for 30 years.

The state will match that amount. The Penguins will pay $4.2 million a year for 30 years, in addition to the $15.5 million the team committed to arena's higher cost.

The financially strapped SEA will tap three sources to pay its $5.5 million share, due in 2010, said Executive Director Mary Conturo:

• A ticket surcharge fund, or any amount higher than $2 million a year it generates. The fund produced about $2.7 million last year, when the Penguins made it to the Stanley Cup final.

"The Penguins are telling me I should be comfortable that we can count on two years of playoffs, but we realize this money isn't guaranteed," Conturo said.

• Savings the authority can squeeze from building a parking garage near the arena.

• Possible loans from the city's Urban Redevelopment Authority and the Redevelopment Authority of Allegheny County. The loans would be repaid with money from selling about 650,000 square feet of land under and around Mellon Arena, which will be demolished.

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