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Roddey, Onorato oppose raising asset district stake

Friday, July 18, 2003

By Milan Simonich, Post-Gazette Staff Writer

The Penguins say they have accepted a government plan for a new $270 million arena in Pittsburgh, but two of Allegheny County's most prominent politicians promise to block the deal.

County Chief Executive Jim Roddey and the man who wants his job, County Controller Dan Onorato, say they will not agree to the arena plan put forward by the city-county Sports & Exhibition Authority. Both consider it unfair to taxpayers and nonprofit organizations that rely on government funding.

	Online Graphic: Money for a new arena

The heart of their concern is that the new arena would consume as much as $5.7 million a year that is generated by the 1 percent sales tax in Allegheny County. Debt payments on the new arena are projected to last for 31 years, from approximately 2006 through 2036. The public money would rise incrementally from $3.2 million annually to the peak of $5.7 million.

Allegheny County's share of the construction cost has been estimated at $63 million, although the total money that would be paid out over time is much higher, factoring in interest payments and other costs.

In addition to money from the Allegheny Regional Asset District, which disburses county sales tax revenue, the arena funding plan calls for another $90 million to be supplied by state taxpayers.

Currently, Mellon Arena, the 42-year-old building that the Penguins say is substandard for a National Hockey League team, receives $3.2 million annually from the asset district.

Neither Republican Roddey nor Democrat Onorato favors increasing the amount of asset district money for an arena. Whoever is county chief executive makes four appointments to the seven-member asset district board.

Pittsburgh Mayor Tom Murphy, who makes two of the other appointments, said he would support using more public money for a new arena.

"That's why RAD was created, for civic projects," he said.

Penguins President Ken Sawyer said a new arena is mandatory if the team is to remain in Pittsburgh. Plus, he said, Mellon Arena already consumes almost as much yearly funding from county taxpayers as a new arena would.

In addition to the $3.2 million that Mellon Arena receives from the asset district, it gets another $1.6 million from the city and county governments.

"The aggregate in tax money already is $4.8 million a year," Sawyer said. "We're just talking about shifting money around under the new plan."

Actually, the amount of locally generated tax money for the new arena would eventually climb by $900,000 a year -- to $5.7 million -- starting in 2014.

The upside of the higher expense, Sawyer said, is that the Penguins would remain in Pittsburgh and their fans would have a more enjoyable experience at the games.

"Anybody who goes to a new hockey venue knows it's a much greater environment than what we have," he said.

Rob Baade, an economics professor at Lake Forest College in Illinois who specializes in the business of pro sports, said a new arena built mostly with public money could create "an equity problem" for the citizenry.

"How can you rationalize a facility that's taking more of taxpayers' dollars but is accessible to fewer people because prices are higher?" he asked.

Mellon Arena, he added, should not be condemned by the Penguins because it is the oldest venue in the NHL.

"In the Alice in Wonderland world that pro sports teams live in, everybody expects a new building," Baade said. "But Wrigley Field and Fenway Park are very, very competitive stadiums. That's because they're old and they're valued. History and tradition count there, even though they're not filled with luxury boxes."

Still, not only the Penguins believe a new arena is mandatory in Pittsburgh. So does Steve Leeper, executive director of the Sports & Exhibition Authority, the agency that oversees the city's stadiums and convention center.

Leeper says Mellon Arena's time has come and gone. When the Penguins' lease there expires in 2007, the arena will be 46 -- ancient, he says, for an indoor pro sports venue.

The arena funding plan created by Leeper's agency is regarded as a "working document," subject to change.

Sawyer, though, said the Penguins essentially are satisfied with the plan and have accepted it. In addition to the public funding, the proposal calls for the team to raise $108 million toward a new building, mostly through the sale of arena naming rights and higher ticket charges passed on to fans.

Leeper said he expects to formally respond to the Penguins ideas for arena funding by the end of July.

There are some differences to be worked out. For instance, the Penguins have estimated the cost of a new arena at $278 million, or about $8 million more than Leeper's proposal.

Other elements of the plan could change if bills to legalize slot machines receive legislative approval and some of the proceeds are set aside for the arena.

None of those possibilities impresses Onorato. He said that until the Penguins have state and private money solidly in place, he will not even talk about devoting local tax dollars for a new arena.

"I'm reading about racetracks and slot machines to raise money for an arena, but it's all speculative," he said.

Likewise, Roddey said he would not support spending more money from the Regional Asset District for a new arena. His position is that the $3.2 million spent annually to subsidize Mellon Arena must not be increased.

Leeper estimated that about $16 million in debt remains on Mellon Arena, which has undergone numerous upgrades over the years, many at the insistence of Penguins management.

Debt on Pittsburgh's two newer sports stadiums, PNC Park and Heinz Field, consumes another $13.4 million a year of taxes collected by the Regional Asset District. No city or county operating money is being spent on those stadiums.

Roddey's opposition to allocating more public money for an arena is shared by Allegheny County's most prominent charitable foundations.

The Benedum Foundation, Heinz Endowments, Hillman Foundation, McCune Foundation, Pittsburgh Foundation and Richard King Mellon Foundation all are on record against any plan that would siphon more Regional Asset District money for an arena.

The organizations said they oppose "further incursions into a fund that was never intended or established by legislative act to be a mortgage bank for large-scale public works projects."

Leeper said he realizes that Roddey and others disagree with his idea of building an arena by relying more heavily on money from the Regional Asset District.

"There needs to be some give and take" if the project is to be built, Leeper said.

Economists who specialize in the business of sports say the two primary beneficiaries of a new arena would be the Penguins ownership and fans who spend their discretionary income to follow the team.

A new building would increase the market value of the Penguins, if the team were ever put up for sale.

As for the fans, they would benefit because a new arena would contractually bind the Penguins to Pittsburgh for another three decades.

But Phil Porter, director of the Center for Economic Policy Analysis at the University of South Florida, said millions spent on an arena would do little for the Pittsburgh economy and in fact may hurt it by reducing the money available for other projects. An NHL hockey team, he said, is roughly equivalent to one grocery in terms of the economic activity it generates.

Baade sizes up the Pittsburgh project as one with an especially limited economic scope.

"In the Penguins case, you would simply change the locus of play -- moving them across the parking lot to a new building -- so it's hard to imagine that the city will get anything in terms of spillover benefits."