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Pens gone, but Igloo $9.3 million in debt

| Friday, May 14, 2010

Mellon Arena's final puck dropped this week, but paying off the debt on the Hill District landmark will require a few overtimes.

Taxpayers owe $9.3 million on the silver-domed Igloo that was built for $22 million in 1961 as a concert venue for the Civic Light Opera and six years later became the home of the Penguins.

Pittsburgh and Allegheny County taxpayers are responsible for retiring the debt by 2018, almost eight years after the $321 million Consol Energy Center is expected to replace the National Hockey League's oldest venue.

"Ideally, you wouldn't still have debt on it when the new arena opens," said Mary Conturo, executive director of the Sports & Exhibition Authority, the arena's owner. "But it's gone through refinancing and a number of renovations."

The SEA, formerly the Pittsburgh Public Auditorium Authority, was created to build the Civic Arena. It became Mellon Arena in 1999 under an $18 million naming rights deal between Mellon Financial Corp. and the Penguins.

Patching the leaky roof, fixing antiquated ice-making machinery and expanding the arena's capacity in 1993 from 10,500 seats to 17,528 are among the most expensive improvements that extended debt payments on the arena.

"There would be significant capital improvements required to stay in that building," Conturo said.

Making more repairs wouldn't be worth it, said David Donahoe, executive director of the Allegheny Regional Asset District, which distributes part of the extra 1 percent sales tax the county collects.

The group will shoulder about $6.4 million of the remaining debt through yearly payments until 2018. The city and county will split the rest.

"Unlike Three Rivers Stadium, it's not clear that there is much more useful life in the arena. It would have to undergo a major renovation," Donahoe said. "It just got run-down."

Once the debt is paid, RAD does not have plans for the roughly $800,000 a year it is paying.

Three Rivers Stadium was demolished in February 2001 at a cost of $5 million. It had $27.93 million in debt remaining when razed. The debt has been paid off, Conturo said.

It could cost $3.9 million to demolish Mellon Arena, according to one preliminary estimate.

Renovations aren't the only source of the remaining debt, Donahoe said.

In 1999, when the Penguins faced bankruptcy, the SEA refinanced the arena's debt to lower the team's rent, with the hope of encouraging SMG, the leaseholder at the time, and the Penguins to reinvest in the team, Donahoe said.

Penguins co-owners Mario Lemieux and Ron Burkle bought the team out of bankruptcy court that September.

In 2005, the authority again refinanced, to save $700,000. The money helped balance the operating budget of the David L. Lawrence Convention Center, Donahoe said, but that didn't change the term or amount of the debt service.

"I look at the debt as a contribution to the new facility, in a way," Donahoe said. "It has to be done as part of the project. If we weren't doing our part, it would fall completely on the city and county."

Mayor Luke Ravenstahl, Councilman Daniel LaVelle and other public officials have said Mellon Arena should be demolished to make way for retail and housing developments in the lower Hill District. The Penguins own the right to develop the 28-acre site.

The SEA held meetings with neighbors, business owners and others who want to preserve the arena and reuse it as a park, concert venue, hotel or a combination of the three.

Parts of Mellon Arena will be auctioned off, but it is not known how the proceeds will be used or whether they'll go toward paying down the arena's debt.

As of Thursday, there were seven online bids to buy the 60-by-112-foot basketball court floor and two hoops equipped with breakaway rims and shot clocks. The floor was refinished in 2007 at a cost of $35,000. The online auction ends Wednesday.

When pieces of Three Rivers Stadium were auctioned in 2001, sales generated $1.6 million. Some money defrayed the demolition cost, and some went to youth athletic leagues.

Jay Roberts, general manager for SMG, said the plan to auction other items isn't complete. The SEA is seeking a company to handle the auction.

"Anything that doesn't have a specific use in the new arena is going to get sold whether it's the chairs, directional sign or used electrical panels," Roberts said.

Mellon Arena's many makeovers

1961: $15 million debt issued as part of $22 million cost to build the Civic Arena. Adjusted for inflation, building the Igloo would cost roughly $156 million today

1975: $4 million debt assumed to add balcony seating, bathrooms and concession areas

1985: $12 million debt issued to replace bathroom stalls and sinks; remodel concession stands; clean and seal the dome; replace the concert stage; install ice rink refrigeration system; renovate parking lots; replace hockey dashboards

1991: $6.245 million debt assumed to expand press box; upgrade heating and cooling systems; add ramps to Levels B and C; and add steps to upper parking lot

1993-94: $13.5 million to add lighting; sound system; replace escalator; repave lots; and complete seating capacity expansion to the current level of more than 17,000. The arena was built with 10,500 seats

1997: $10.5 million debt paid for club seat and lounge improvements and expansions to concourses and concession stands

Source: Sports & Exhibition Authority, a city-county authority that owns Mellon Arena, Consol Energy Center, PNC Park and Heinz Field

Editor's Note: Dollar figures reflect total debt, not the amounts spent on improvements. Each bond issue cost money to execute. Improvements listed were those planned and might have changed slightly, according to SEA Executive Director Mary Conturo.

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