From left, Allegheny County Chief Executive Dan Onorato, NHL commissioner Gary Bettman, Penguins co-owner Mario Lemieux, Pittsburgh Mayor Luke Ravenstahl and Gov. Ed Rendell conduct a press conference at which the team, state and local leaders announced they have formally signed off on a deal to build a $290 million arena that will keep the Penguins in Pittsburgh for at least the next 30 years. The event was at the John Heinz Pittsburgh Regional History Center.
Big win for Penguins
Wednesday, March 14, 2007
By Mark Belko, Pittsburgh Post-Gazette
It took him eight years, but Mario Lemieux finally has his new arena. And it took a secret trip to south Jersey to get it.
Only eight days after the Penguins threatened to relocate, Mr. Lemieux, co-owner Ron Burkle and state and local leaders formally signed off on a deal to build a $290 million arena that will keep the Penguins in Pittsburgh for at least the next 30 years.
It was yet another big win for Mr. Lemieux in a career filled with them. But this one proved to be as tough as any of them, with the fate of the franchise hanging in the balance, until a clandestine meeting last Thursday at a hotel in New Jersey produced the breakthrough.
Yesterday, in the afterglow of a deal he had fought years to complete, Mr. Lemieux said he was glad to get it behind him, describing the process as long and "draining."
"I've said many times that my goal was to keep the Penguins here forever and eventually win the Stanley Cup. We have one out of the two. It's a good start," he said during a news conference at the Senator John Heinz Pittsburgh Regional History Center to announce the agreement.
With an arena deal nailed down, Mr. Lemieux said he and Mr. Burkle have no intention of selling the team.
"We went through a lot the last few years and we see that the team is turning around and we want to be part of it," he said. "Ron wants to be part of it, the ownership group wants to be part of it, and I want to be part of it."
Yesterday's announcement at the Heinz Center had a celebration feel to it. National Hockey League Commissioner Gary Bettman attended, along with Gov. Ed Rendell, Allegheny County Chief Executive Dan Onorato and Mayor Luke Ravenstahl, all principals in the talks.
While the key elements of the deal finally fell into place during last week's meeting in south Jersey -- reporters were told the talks would be in Philadelphia -- the governor said a big assist goes to the Penguins fans who have sold out and rocked Mellon Arena and rallied behind a young team with a promising future.
Mr. Rendell said the fanatical support gave state and local leaders some leverage in the negotiations, even as Kansas City tantalized the Penguins with a sweetheart deal that included no rent or construction costs and 75 percent of the revenues at the new $276 million Sprint Center.
"In the last analysis, Kansas City and other cities might have given the Penguins better financial deals, but no one could guarantee the Penguins the strength, the loyalty and support Pittsburgh fans have offered them over the years," he said.
Mr. Lemieux announced the agreement to fans attending last night's game at Mellon Arena, saying to cheers that the Penguins are staying "right here in Pittsburgh where they belong."
The agreement to build the new arena, to be ready before or during the 2009 season, came after Mr. Lemieux and Mr. Burkle declared an impasse in the talks and said they would "aggressively explore" relocation. The team then took a trip to Las Vegas and received the sweetened offer from Kansas City.
Asked if he were prepared to move the team, Mr. Lemieux replied, "My goal was always to keep it here. Of course, we had to go out and look at other options when the negotiations weren't going so well, but at the end of the day, I think we all agreed this team really belongs in Pittsburgh."
Robert Healy, III, of Brookline, holds a sign as he enters Mellon Arena with Nicole Vamos to attend last night's Penguins/Sabers game.
The arena will be financed through a $290 million state bond issue. The Penguins will supply $4.2 million a year for 30 years toward repayment, with $400,000 annually generated through a parking surcharge once the new arena opens.
Another $15 million a year for 30 years will come from two gambling-related pots -- $7.5 million annually from Pittsburgh casino winner Don Barden and $7.5 million a year from a slots-financed state economic development fund.
The Penguins' total is $200,000 more than Mr. Rendell originally proposed last year in his Plan B funding formula. The $7.5 million from the state fund is $500,000 more than initially offered.
Mr. Rendell said the state also would kick in another $10.5 million in recognition of delays the team suffered while it was negotiating for a new arena. Of that, $8.5 million will go toward construction and $2 million for marketing.
The Penguins also will receive $8.5 million for the sale of the team-owned former St. Francis Central Hospital to the Allegheny County-city Sports & Exhibition Authority, which is part of the site needed for the arena. The team bought the property for $8 million.
The agreement that ended Mr. Lemieux's long quest for an arena finally came together last Thursday, during a crucial round of talks mediated by Mr. Bettman, who won praise from both sides for his role.
Mr. Rendell said two key sticking points going into the make-or-break session were how to find the last $1.2 million a year needed for debt service payments on a $290 million bond issue and development rights to Mellon Arena property once the building is demolished.
The state had added $500,000 from the state economic development fund to help close the gap.
The other $700,000 fell into place Thursday. The team agreed to pay $200,000 a year under an arrangement with the Sports & Exhibition Authority. In return for those payments, the Penguins will be able to use the Mellon Arena site for parking and future development.
Mr. Burkle, a California billionaire, was instrumental in finding the rest, suggesting that falling interest rates could close the remaining $500,000 gap, a point that proved to be true.
Because of that, "It is important to lock in this deal as quickly as possible," Mr. Rendell said, adding the team had balked at a proposed $1 ticket surcharge for non-hockey events to raise more money.
And when the two sides agreed on language regarding development rights for the Mellon Arena property, a roadblock throughout the talks, the deal was all but done.
The language was important because team officials were worried about committing $4.2 million a year toward an arena if there were no guarantees they would get money back from building revenues, parking, and development.
Adding to the complexity was that as the Mellon Arena site and a parking lot above were developed, the Penguins would lose parking spaces and the lucrative revenue that goes with it.
Pittsburgh Penguins owner, Mario Lemieux sits under a projected image of the planned new facility during a news conference where government officials and the Penguins announced they reached an agreement on plans to finance and build a new arena, keeping the Penguins in Pittsburgh.
One way the two sides found resolution was by allowing for a $15 million credit to the Penguins through the SEA. The credit can be applied against land costs and to make up for some of the lost parking revenue.
Under the deal, the Penguins will control development rights to the arena land, although they may still offer casino winner Don Barden a chance to participate. Originally, state and local leaders wanted the team and Mr. Barden to share those rights.
The Penguins also will get all parking revenue; Mr. Barden will not share in that, as initially proposed. They also can recoup some lost parking revenue if they follow through with plans for a parking garage next to the new arena. The team has pledged $500,000 a year toward the garage.
The team also will receive all revenues from the new arena, a lucrative pot of money that could be worth tens of millions of dollars a year. Mr. Lemieux said the access to such revenue would allow the team to compete and retain much of its young talent.
As part of the agreement on development rights, the Penguins must redevelop 2.8 acres of the 28-acre Mellon Arena site each year. Whatever they do not develop will be forfeited to the SEA, which then would have the right to seek other developers.
In his appearances yesterday, Mr. Rendell credited anticipated revenue from the state's casinos for keeping the Penguins in Pittsburgh.
"Make no mistake about it. Without expanded gaming in Pennsylvania, the Penguins would be gone. The first puck would have dropped next year in Kansas City," he said.
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(Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262. )
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