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Forum: Don't skate on this thin ice / Local government should not support the construction of a new hockey arena for the Penguins

Sunday, April 14, 2002

By Bob Cranmer

I was one of the architects of the project to build sports stadiums and expand the convention center, which came to be known as "Plan B." Many will call me a hypocrite for not supporting an extension of that plan for the Pittsburgh Penguins. Even though the construction of a new hockey arena would seem to be a carbon copy, it is certainly very different when one looks at the facts.

I maintain that there are four primary reasons why the proposed new hockey arena should not be built.

The Penguins cannot be accurately compared as a business to the Steelers or even to the Pirates. Even though the Pirates have struggled in recent years, the business plan they submitted requesting a new facility made projections that could be checked and verified. The Steelers plan was also well-organized and rock-solid. Both teams are sound franchises playing universally popular national sports.

On the other hand, the Penguins, driven by Howard Baldwin, went into bankruptcy and continue to be a very questionable profit-making venture. It was said that Mario Lemieux took on the challenge of ownership to save hockey in Pittsburgh. The fact that the team owed him millions also played a significant role in the scenario.

The team's management recently admitted that it expects to lose money this year. In addition to the particular problems surrounding the Penguins, major-league hockey is struggling to be a financially viable sport. The lack of significant revenue from television broadcasts makes it difficult to pay star players the huge sums of money commensurate with their counterparts in baseball and football. Hockey simply can't keep pace. The Steelers and the Pirates also provided significant sums of money for the cost of construction; the Penguins will be hard-pressed to do the same.

There was no promise to provide the Penguins with a financing package, and more importantly, there is no money available to do so anyway. The original draft agreement between the Sports & Exhibition Authority and the team did in fact provide the promise being trumpeted now by the Penguins management. But I remember very clearly reviewing the dictionary definition of the word "endeavor" and insisting that it be inserted into the contract language.

The addition of this one key word changed the scope of the agreement from one that stated "we will" to "we'll look at it." My reason for doing so was twofold. I knew that all available funds from Regional Asset District and the hotel/motel tax had been committed to Plan B. There would be no money available to put together a financing deal, for we had used it all. Currently, hotel/motel tax money has declined and the RAD fund recorded negative growth for the first time since its creation. This is not the time to take on additional funding commitments, especially when organizations like the Pittsburgh Film Office were cut from the funding list.

In addition, I would not bind a new county government to a questionable financing plan that was certain to be extremely controversial. If the new government officials wanted to support the Penguins, they could make that decision and find the money to do so on their own. Add to this the recent development that the state government is now running large operating deficits, and the picture becomes even bleaker.

I didn't trust the Penguins negotiating team. In 1997, we were approached very aggressively by the Penguins ownership and convinced that the Civic Arena should be updated with newer seating features and club facilities. We were guaranteed that if these improvements were made, the required revenue would be attained to keep the team liquid. In fact, the team was already deep in debt and on the verge of bankruptcy. The amount of $10.5 million was provided to install 1,666 new club seats, two club lounges, expanded concourses, a team store and "platinum suites." All of this was done at the request of the Penguins. In less than two years, they were bankrupt.

My fear is that if a new arena is built, as with the 1997 upgrades, the impact on the Penguins' bottom line will be the same -- little to none. As the saying goes: "Fool me once, shame on you; fool me twice, shame on me."

The Mellon (Civic) Arena is an architectural masterpiece. As the largest opening dome structure in the world, it has come to be a trademark for Pittsburgh. As a facility, it is in good repair and serves all of its many purposes well. Unlike Three Rivers Stadium, it is not just a large piece of concrete, but an intricately designed mechanical wonder. It should never see the wrecking ball. It should still be in use 100 years from now. To demolish this facility to provide a financially unstable hockey team with a few more luxury boxes would be an unparalleled loss for the city.

I am not anti-Penguins or anti-Mario. I simply see that very little progress has been made since the team's stint in bankruptcy court. Mario has proven his renowned ability to fill the house, and he's done well as a business manager in an extremely difficult situation. In spite of this, the team is still struggling financially. Looming even more ominously is the fact that Mario's playing days are numbered.

Two primary questions loom for the Penguins as a business. Can the team make money without Mario on the ice? This is unlikely. Will a new arena make the team profitable? This also is unlikely. Ticket prices are already extremely high and a new arena will not add much more revenue than Mellon Arena already provides. This is a case of grasping at straws to stay afloat in a sport where it is difficult to succeed. Even if the team comes by another franchise player to replace Mario, he would demand a salary that the team more than likely wouldn't be able to pay.

I recently asked the head of a large development firm if he was considering building the proposed new arena. He laughed and kept walking. If this were a good investment, developers would be standing in line to build the Penguins their new hockey home. They're not, and the county and state governments shouldn't be either.

Don't be fooled by a savvy public relations campaign. This deal should not be considered.

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