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Thursday, August 01, 2002

By Tom Barnes, Post-Gazette Staff Writer

The city-county Sports & Exhibition Authority yesterday proposed a plan for a new, $270 million Penguins arena that would be paid for with $108 million from the sale of naming rights, ticket surcharges and other "private" funds, $90 million from the state, $53 million from Allegheny County's 1 percent sales tax, and the remainder from federal and other sources.

	An artist's rendition of the proposed Penguins arena. Epiphany Church in Uptown is shown to the left of the arena. (Drawing by Park Studio Inc. for the Sports & Exhibition Authority )

The new cost estimate is higher than the $225 million given by Penguins' owner Mario Lemieux in March. But Stephen Leeper, executive director of the authority, said the new figure includes many more costs, including site preparation work, demolition of the existing Mellon Arena, relocation of businesses between Centre and Fifth avenues, architectural and legal fees, and construction of new roads, sewers and water lines.

Leeper's plan calls for the new arena to be ready for play by fall 2006, but it is far from going ahead. It's still subject to close scrutiny by the Penguins, Mayor Tom Murphy, county Chief Executive Jim Roddey, state legislators and the governor.

And the early reviews from Roddey, at least, weren't positive. In a statement, Roddey said he was "troubled" because the plan calls for more state funds than previously discussed -- $90 million vs. the $60 million that state Sen. Jack Wagner, D-Beechview, had tentatively included in the state capital budget.

Roddey also was disturbed by Leeper's call for additional funding from the Regional Asset District, which spends $75 million a year from the county's 1 percent sales tax. Most of that goes to county and city libraries and parks, some 100 small arts groups, and regional attractions such as the zoo.

"I do not believe the Regional Asset District can afford to contribute more money to a new arena than [the $3.2 million a year] it is already contributing to the existing Mellon Arena," said Roddey, who left Tuesday on a county business trip to Europe.

That stance could doom the plan, because Roddey names four of the seven board members. He insists, however, that he doesn't tell his appointees how to vote.

Leeper noted that his plan is just "a beginning" and expects much public discussion over the coming months.

Murphy issued a more positive statement than Roddey, calling it "a smart plan that does not include any city funds." He said it's "a good beginning plan for the potential financing of a new arena."

Ken Sawyer, president of the Lemieux group, said he still needs to study the proposal but likes the fact that Leeper agreed with the idea that the city needs a new arena.

"They like our [proposed] site and see a need for significant public funding" for an arena, he said. "But whether this proposal works, it's too early to tell. We need to roll up our sleeves and look at it."

Under the plan, the Penguins would be a tenant in the sports authority-owned arena and would pay $3 million a year in rent. The authority would hire a private management firm to run the arena -- a situation that differs from the two new stadiums, where the Pirates and Steelers run their own facilities.

Leeper's plan calls for a cleared site between Centre and Fifth avenues, just south of the Mellon Arena, to be delivered to the Penguins by 2004, so construction can begin and the new arena go into use for the 2006-07 hockey season.

Lemieux had originally hoped to have the arena ready in October 2005. He said he needs a new arena with more luxury suites and club seats to provide more revenue so he can compete with other teams for good players.

Besides funding from the asset district, state and private sources, Leeper's plan includes $11.5 million from federal sources, $3.4 million from the city's water and sewer authority and $3.2 million in interest earnings on bonds.

	Online Chart: A summary of arena project costs and funding sources

Leeper's plan doesn't call for any significant out-of-pocket costs by Lemieux and his investors. Their contribution would be the $11 million they've already borrowed and spent to buy the former St. Francis Central Hospital, on the Uptown site where the new arena would go.

But Leeper said his plan calls for certain new revenue streams -- such as surcharges on tickets, parking and luxury boxes -- that would be used to pay off $50 million in bonds that would be sold for the arena.

The $108 million in "private" funding includes that $50 million in bonds, plus money from the sale of naming rights, the sale of personal seat licenses and the $11 million already spent by the Penguins to buy the land.

Leeper didn't have an estimate on the money that could be raised from selling the naming rights, but the Pirates collected $30 million from PNC Financial Group for PNC Park and the Steelers got $57 million from H.J. Heinz Co. for Heinz Field.

The Penguins now have a 10-year, $18 million naming rights deal with Mellon Financial for Mellon Arena, but that expires in 2007. Leeper said Mellon would have the "right of first refusal" to name the new arena.

In 1999, the sate provided $75 million each for PNC Park and Heinz Field, which amounted to about one-third of those facilities' costs. He said that given the five-year time lag involved before the state would provide any money for a new arena, the requested $90 million would be about a third of the arena's cost, or the same percentage as what the state gave for each stadium.

Leeper proposed a complicated formula for using money from the Regional Asset District, which is already providing $3.2 million a year to pay off the costs of renovations to Mellon Arena. That bond issue extends until 2018, but the annual amount decreases starting in 2007.

Leeper wants to increase the RAD allotment by $1.5 million for 2007 and 2008 -- to a total of $4.7 million -- and then make additional increases from RAD in 2009 and again in 2014, raising the RAD contribution to $5.7 million a year.

The RAD funds would finance a 31-year bond issue that would provide $53.4 million to the $270 million financing plan.

Leeper said the SEA should run the new arena because it could host up to 128 revenue-generating events each year. In addition to 40-some Penguins games, there could be circuses, concerts and other events from which the SEA would get revenue, he said. That differs from the two stadiums, where the use is pretty much limited to baseball and football games.