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Join Date: Oct 2004
Penguins souring on Plan B
Governor calls deal hard to beat, but team balks at splitting development rights, parking
Gov. Ed Rendell yesterday said the arena deal being offered the Penguins is better than others struck recently in the National Hockey League, but the team has balked at a proposal to share development rights and parking revenues with Pittsburgh casino backer Don Barden.
Another issue that has come up in the talks is $10 million the Penguins may owe Isle of Capri Casinos Inc., which lost to Mr. Barden in the bidding for the city's casino license.
According to Mr. Rendell, the Penguins agreed to pay that amount if Isle of Capri failed to win the casino license but the team still secured a new arena in Pittsburgh.
During an interview yesterday, Mr. Rendell, coming off a late-night round of negotiations with the team Thursday, said the Penguins' share of the arena financing would be a "fraction" of what Pennsylvania's other professional sports franchises -- the Steelers, Pirates, Flyers, Eagles, and Phillies -- contributed toward their new homes.
"I believe the offer we put before the Penguins is the best of any offer that's been made to any NHL team for a new [arena] in recent times and it's also by far the best of any offer made to any Pennsylvania professional sports team for a new stadium," he said.
Mr. Rendell added that the Penguins' share under a sweetened Plan B funding formula would be "significantly below" the 18 percent the Pirates paid toward the construction of the $260 million PNC Park.
The Steelers paid about 44 percent of the $281 million cost of Heinz Field. Under Plan B, the Penguins initially would have paid about 20.7 percent toward a $290 million arena.
An October Post-Gazette survey found that since 2000, NHL teams have contributed anywhere from nothing to 30 percent of the cost of building new arenas.
While the governor touted the proposed Plan B deal as hard to beat, the Penguins apparently felt otherwise during a 90-minute meeting Thursday that broke off without an agreement.
According to sources, team representatives, including co-owner Ron Burkle, were stunned when state and local officials proposed that the Penguins share development rights and parking revenues with Mr. Barden, who was a surprise visitor to the negotiations.
The team saw the proposal as a worse deal than it would get under an extension available next year at Mellon Arena, one that would allow rent-free use of the building and give the franchise control over all building revenues, including parking.
In addition to sharing parking revenues and development rights, the state, city and county also want the team to pay rent at the new arena, in excess of the roughly $2 million a year it pays SMG at Mellon Arena, sources said.
Team officials saw the latest proposal as a setback after a "very positive" Jan. 4 meeting, they said. They were surprised to see Mr. Barden, who was invited by Mr. Rendell, and the proposals for sharing development rights and parking revenues. They also felt the overall plan represented a retreat from the previous session.
Mr. Barden has committed to providing $7.5 million a year for 30 years toward a new arena under the Rendell-crafted Plan B, which also calls for contributions from the Penguins and a slots-financed state economic development fund.
The casino operator said Thursday night he joined the talks to "observe and see if I can be helpful. I want to do everything I can to see that the Penguins stay in Pittsburgh."
The Penguins declined comment on all aspects of the talks yesterday, saying in a statement that "we'll continue to explore all of our options."
One of those options is Kansas City, where the $276 million Sprint Center will open this fall. The Penguins are being offered a deal that includes free rent and a share of building revenues. It's likely that the team will explore that option more seriously in the wake of Thursday's meeting. The Penguins' Mellon Arena lease expires at the end of June.
Mr. Rendell said the proposal to share development rights is a result of a city-Allegheny County Sports & Exhibition Authority resolution passed in 2005 offering such rights to any casino operator or private investor who commits to building a new arena.
The rights would extend to authority-owned property that now includes Mellon Arena, which would be demolished if a new facility is built across the street. Since neither Mr. Barden nor the Penguins would fully fund a new arena, the authority is talking to them jointly, Mr. Rendell said.
"The way the revenue streams are, neither one is solely responsible [for funding an arena], so together they would probably qualify under the [authority] recommendations," he said.
Asked about the sharing of parking revenues, Mr. Rendell replied, "Parking is on the table for discussion."
Despite the objections by the Penguins, Mr. Rendell believes Plan B is still better than what Kansas City is offering because the team would have to share building revenues there. In Pittsburgh, they would get virtually all such revenues from hockey and non-hockey events, excluding the parking.
The governor said the $10 million payment to Isle of Capri has come up in the talks as a cost the Penguins would have to bear if they stayed in Pittsburgh as opposed to moving to Kansas City.
Isle of Capri spokeswoman Jill Haynes said the company "does not comment on alleged content of confidential business agreements." The team also said it would not comment "on private business deals."
In the aftermath of Thursday's session, it is clear that whatever optimism preceded it now has dissipated. The governor conceded the results of the meeting were mixed.
"We made progress on some things and went back on others and that's very common in negotiations," he said.
Asked where they had fallen back, he replied, "some of the requests for relief from the Penguins."
While the governor had hoped for more progress, he said he still thought an agreement was possible.
"I'm still hopeful but there's a lot of posturing that goes on. That's true in these types of negotiations. That's true in business negotiations. It's true in labor negotiations."
No new talks have been scheduled, but Mr. Rendell said he hoped for another meeting soon.