Trib story on the arena negotiations.
Penguins, officials haggle over arena cost
By Andrew Conte
Friday, February 16, 2007
The Penguins and public officials are trying to determine how much a new Uptown arena will cost and how to make up the difference if the total comes in higher than expected, Gov. Ed Rendell said Thursday.
"The problem is, what happens if construction costs go up over the contemplated amount," Rendell said before attending a luncheon with a German delegation at the Duquesne Club, Downtown. "The contingencies are what happens if it goes over. That's a problem."
Rendell said construction of the arena should cost $270 million, while Penguins officials have estimated it will cost $290 million.
A team spokesman declined to comment.
Rendell said he spoke with a Penguins official yesterday morning and hopes to announce an agreement within two weeks.
None of the remaining issues are insurmountable, said Mayor Luke Ravenstahl.
"We are competitive," he said. "We do have a good deal on the table, and we'll continue to negotiate with them to fine tune and address any issues or concerns they might have."
The remaining issues include development rights for the Mellon Arena site, parking revenues at a new arena and the arena cost, Rendell said.
Like the Pirates and Steelers, the Penguins would have to pay for cost overruns at a new venue. But the city-county Sports & Exhibition Authority will not have a good estimate for the total projected construction costs until the arena designs are completed.
The sports authority could drive down costs by designing a less-expensive building and reaching labor agreements with unions, Rendell said.
"There are so many nuances to this, it is amazing," he said. "Each time we solve three or four of the problems, one or two more crop up."
Rendell ruled out asking for more money from Detroit casino developer Don Barden, who plans to build a Majestic Star Casino on the North Shore. Barden has agreed to pay $7.5 million a year for 30 years toward an arena.
Questions over costs at this late point in the negotiations could become a problem, said Marc Ganis, president of Chicago-based consulting firm Sportscorp.
"Cost overrun responsibility ... can be a deal breaker," said Ganis, who advised public officials on the North Shore stadium deals. "There are many ways to handle it, though. Sometimes it requires creativity, but it can be done."
One way to bridge a gap for cost overruns could be through naming rights, which public officials have said likely will be given back to the Penguins under a revised financing plan.
In Newark, N.J., where the $370 million Prudential Center is scheduled to open this fall, the Devils hockey team is on the hook for cost overruns. The multipurpose facility originally was estimated to cost $310 million.
Earlier this year, the Devils and Prudential Financial reached terms on a 20-year naming rights agreement for $120 million -- double the $60 million in expected additional costs.