$290M in funding tight, but doable, for arena

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A $290 million investment is about the minimum needed to get Pittsburgh a quality National Hockey League arena if construction starts soon, say developers of such facilities, but overall costs connected to it also could end up well above $300 million.

Pittsburgh Penguins officials since Christmas have trumpeted their agreement with Isle of Capri Casinos Inc. through which the gambling operator would provide $290 million up-front for an arena -- if it wins Pittsburgh's one slots license. The team has not provided specifics, however, about just what the $290 million would cover and what features the new facility would include.

Gov. Ed Rendell has offered a $315 million Plan B that accepts the $290 million estimate for construction-related costs and includes additional funds for long-term financing expenses, which the Penguins say can be avoided if Isle of Capri wins the license and writes out a check for the arena.

Under either scenario, the Rendell administration has committed to have the state cover $26.5 million in additional real estate acquisition and site preparation costs for the new Uptown arena. Either funding scenario also could face higher-than-expected inflation or other unanticipated costs.

Several analysts uninvolved in the Pittsburgh discussions view $290 million as a fair starting point for construction-related costs, if the arena is not intended to be among the league's largest, and if it doesn't necessarily include the most luxurious amenities.

"I think that could be achievable," said Michael Fratianni, executive vice president of Hunt Construction Group, a leading sports arena construction firm nationally.

"I would say that in Pittsburgh, you could be all in for anywhere from $275 million to $300 million," said Mr. Fratianni, who managed the construction of Heinz Field, which cost $281 million. "What it would take with that dollar amount is the right people -- the architect, owner and construction manager sitting down and working through a program that can reflect that cost."

If questions arise about sufficient funding, it could factor into such decisions as whether to include a gourmet restaurant or provide premium-seat buyers their own separate viewing level and entrance, according to those familiar with new arenas.

"Everything affects cost, right down to the dessert carts that visit each suite every game," said Michael Roth, vice president of communications for AEG, which will manage the new, $276 million Sprint Center in Kansas City. "The escalators, the elevators, every amenity of fan convenience adds to the cost."

Brian Parker, project manager for Conventions, Sports & Leisure International, a consulting firm, said minimum cost for an NHL facility would be "at least $250 million, and that's probably a smaller building with smaller square footage and not all of the amenities. ... That's if construction started today, opening three years from now."

Mr. Parker's firm recently advised the Connecticut Development Authority, which has mulled construction of a new arena in Hartford but has no specific plans, that it should assume costs would be in the $300 million to $400 million range, rather than the $250 million to $270 million it was seeking.

He and others said project estimates are affected by start dates and, in the case of population centers between Washington, D.C., and Boston, higher costs for labor, materials and property. Pittsburgh costs would be more in line with national averages.

The only NHL arena currently under construction, to open in 2007 in Newark for the New Jersey Devils, carries a price tag of $310 million. It will contain 18,000 seats, 78 luxury suites, 150 food and retail areas, a gourmet restaurant, 750 television monitors and 12 escalators.

Any future metropolitan Downtown arena could cost at least $300 million, said Jon Niemuth, design principal in the Ellerbe Becket architectural firm, based on Kansas City's 18,500-seat Sprint Center, which is also to open in fall of 2007. It has no major professional sports tenant, and Kansas City officials are hoping the arena will encourage relocation of an existing franchise, such as the Penguins, if the team's ownership is dissatisfied with local arena options.

The Penguins favored suitor, Samuel Fingold of Hartford, has indicated he plans for the team to stay in Pittsburgh.

Penguins spokesman Tom McMillan said that while the organization's officials have no specific design plan, "the $290 million figure is a result of our work with contractors who have built arenas, and the cost of arenas built in the United States in recent years."

In the loosest of terms, Penguins officials have described wanting about 1,000 more seats than the 16,940 they have for hockey; more and better luxury suites than the 53 for which corporations pay $85,000 to $105,000 annually; and wider concourses that allow for more comfortable access throughout the building and more plentiful concession stands and retail stores.

A spate of construction brought 19 new facilities into the NHL from 1993 to 1999 with many of the features deemed lacking in 45-year-old Mellon Arena. Four more have opened since 2000.

Mellon is seven years older than Madison Square Garden, the New York Rangers' home and the second-oldest facility in the league. Mr. McMillan said Pittsburgh sports fans -- from top businesses to average citizens -- also compare Mellon's amenities to what they've enjoyed at PNC Park and Heinz Field since 2001.

Many around the NHL, including Penguins officials, have pointed to the Xcel Energy Center in St. Paul, Minn., as a model for new arena development. The facility, which has sold out its 18,064 seats for every game since opening in 2000, was built using $180 million in public-private financing plus $45 million in add-ons the club ownership paid for to upgrade scoreboard, suite and electronic advertising features, among other items.

The "X" is known for its broad concourses that allow fans to see the action while in concession lines. At the same time, it has 72 luxury suites costing $75,000 to $150,000 to lease. It and other new arenas feature separate access and fine dining options for club-seat holders.

The quality and choices of seating arrangements, restaurants and technology -- among other factors -- all factor into what Mr. Neimuth, an arena architect, described as the difference between a "three-star versus a five-star arena." Many of those decisions will be affected by a team's market, he said, and the goal isn't necessarily to build the biggest possible facility.

While some arenas have gone above 20,000 in seating, which maximizes revenue for the most popular events, he said "18,000 seems like a sweet spot most buildings can fill, and if it works right, it drives up demand because more people want in."

He said an annual inflation rate of 5 to 8 percent should be built into construction estimates, based on recent industry trends.

When replacement of Mellon Arena was last under serious discussion by the Penguins and the city-county Sports & Exhibition Authority in 2002, local officials estimated the project cost at between $270 million and $278 million, including the cost of land acquisition and site clearance across Centre Avenue from the existing arena.

The Penguins have committed that if the Isle of Capri plan is accepted, they will cover any cost overruns above the $290 million.

The team, the SEA and the governor's office have yet to iron out details of Plan B, such as dealing with cost overruns and operation of the new arena, because the Penguins are counting on the Isle of Capri plan, although the license decision may not come until next year.

The governor has laid out Plan B as a financial alternative relying on $7.5 million a year for 30 years from the slots licensee, $7 million a year from a state development fund covered by slots revenue, and an annual Penguins contribution that includes a $2.9 million payment and giving up $1.2 million in naming rights that would be directed toward the arena cost. Also, the Pens would be expected to pay $8.5 million up front, as team officials indicated in the past they would be willing to do.

Those contributions would fund an annual $18.6 million debt payment for 30 years on a bond issue to fund arena construction, based on the $290 million estimate. Rendell administration officials said they trust that the Penguins and Isle of Capri negotiated that amount as what was necessary to get a quality arena, as the casino company wouldn't want to donate more than was needed.

"We respect that estimate," said Kate Philips, the governor's spokeswoman. "Things can increase, depending on when you finally break ground, but that aside, we think it's a responsible estimate."

Mr. Fratianni, of Hunt Construction, said design work on an arena typically takes about eight to 10 months, and the construction itself 27 to 29 months, with some overlap possible to reduce the time. The Pens would like to be in a new arena by 2009, which he said "could be achieved, but certainly some things would have to move right off the bat."

How fast things can move is up in the air, at present, because the Penguins have been focused on only Isle of Capri's funding plan and negotiating sale of the team to a new owner, who would inherit that agreement.

Gary Rotstein can be reached at grotstein@post-gazette.com or 412-263-1255.


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