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Penguins, Pittsburgh officials reach tentative deal on arena site

Bob Bauder
| Monday, Nov. 6, 2017, 5:06 p.m.
The former site of the Civic Arena in Pittsburgh's Lower Hill District is seen from the 20th floor of the Marriott City Center.
Andrew Russell | Tribune-Review
The former site of the Civic Arena in Pittsburgh's Lower Hill District is seen from the 20th floor of the Marriott City Center.

The Pittsburgh Penguins and city officials finalized a new development agreement for the former Civic Arena property that eliminates a $15 million credit available for the team to purchase the 28 acres.

In return, the Penguins get the property for free and must develop at least 6.45 acres by 2020 or risk forfeiting one-third of total parking revenue from lots on the former arena property in the Lower Hill District. Forfeited revenue would be deposited into a fund for Hill District improvements. Development of the entire site must be finished by 2025.

City officials said one of the biggest problems in reaching an agreement was the $15 million credit. The current agreement required the city to pay the Penguins any money left over after the entire site is developed.

“Under the old agreement the Penguins could wait all the way up until 2028, receive all the parking revenue for 2,400 spots every day of the week, every evening concert, every evening hockey game, events, everything else, and then at the end of that period after they developed absolutely nothing, the public would be required to pay them $15 million,” Mayor Bill Peduto said. “That's no longer an option.”

Kevin Acklin, Peduto's chief of staff, said the Penguins are “pretty close” to being ready for construction.

“This agreement will pave the way for $750 million in private investment that will be truly transformative for Pittsburgh, creating a dynamic development that the region can be proud of — in addition to jobs, small business opportunities, affordable housing and community programs,” Penguins President and CEO David Morehouse said in a statement.

The agreement, which is subject to a Thursday vote by Pittsburgh Urban Redevelopment Authority and city-county Sports and Exhibition Authority boards, would give the Penguins an option to delay development for up to two years through the purchase of extensions, but it drastically increases the purchase price.

Under the existing agreement, the Penguins were required to purchase 2.1 acres each year. The team could purchase up to four six-month extensions on each deadline by relinquishing $75,000 in credits per extension from the $15 million total.

The new agreement sets the number of total acres available for development at 18. The team would pay $6,000 per month for each of the 18 acres that remains undeveloped, according Acklin. It means the team would pay $108,000 per month if it seeks an immediate extension.

“They now own the risk of delivering that development,” Acklin said. “They're taking market risk on this development now and not the shared risk. The public really owned that risk by having to backstop it with $15 million.”

The new agreement requires the Penguins to contribute $900,000 for building a cap over the Crosstown Expressway and $500,000 for a public art display known as the Curtain Call along Centre Avenue. A park is slated for the cap linking the Hill District with Downtown.

It also would transfer one parcel to the URA and SEA for construction of a parking garage featuring up to 1,000 spaces. Garage revenue would go to the authorities. Up to 10 percent of parking taxes would go to the Hill District fund.

The agreement requires the city to help find funding sources for any environmental problems on the property and to finance additional infrastructure improvements and housing that is affordable to low-income residents. Up to 20 percent of housing would be available at discounted rates.

Peduto leveled heavy criticism in recent weeks at the team for failing to begin development. He said the Penguins had incentive not to develop because the team was receiving millions of dollars in parking revenue.

Last year, Councilman Daniel Lavelle, who represents the Hill District and is a member of the URA's board, estimated the Penguins had collected $30 million in gross revenue from parking fees.

“It was like being handed an ATM,” Peduto said.

The Penguins and St. Louis-based developer McCormack Baron Salazar earlier this year submitted a letter of intent to begin the first phase of a 1,000-unit residential project. The team has also retained Clayco Inc. for development of office space and is negotiating with a developer for entertainment venues.

Bob Bauder is a Tribune-Review staff writer. Reach him at 412-765-2312, or @bobbauder.

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