The Penguins have declared an impasse in negotiations with government officials over construction of a new arena and will aggressively explore relocating the team to a new city.
Penguins co-owners Mario Lemieux and Ron Burkle notified Gov. Ed Rendell, Allegheny County Chief Executive Dan Onorato and Pittsburgh Mayor Luke Ravenstahl about their decision in a letter today.
The team is declaring an impasse even though it has agreed to pay $3.6 million a year in rent, plus another $400,000 a year in capital expenses, for an annual contribution of $4 million, for a new arena.
They also have agreed to pay $500,000 for a parking garage to be built as part of the arena complex.
Despite that, the parties have been unable to reach an agreement.
"Unfortunately, we still don't have a deal and are faced with mounting uncertainty that an agreement can be reached in a time frame that is realistic for our organization," the letter states. "Therefore, we have no choice but to declare an impasse and to notify NHL Commissioner Gary Bettman that we will aggressively explore relocation."
Mr. Onorato today expressed surprise over the letter.
He said he still thinks the parties are close to terms and said he would do what he can to salvage the talks, including bringing together all the parties.
The team owners also said in the letter that Friday's appeals on the Pittsburgh slots license "cause us great concern." Don Barden, the winning casino bidder, has pledged $7.5 million a year from slots proceeds toward an arena. But with appeals filed against the award, construction of the casino could be delayed and it is not clear when arena payments could begin.
"A project of this scope, with so many complex issues, can ill afford further delays that add more risk and more uncertainty," the letter continues. "The risk has been magnified by what we perceive as a lack of collaboration from the public sector in the negotiations."
One of the last straws came Friday when public officials refused to share interest rate information with the team regarding the state's financial assumptions, according to sources close to the Penguins.
The Penguins have increased their contribution from $2.86 million per year, which was part of the original offer that was presented by state and local leaders at a meeting Jan. 4.
The team now is expected to be more aggressive in bargaining with Kansas City, which has a nearly finished new arena but no hockey team.
The declaration of an impasse doesn't mean the Penguins have definitely decided to leave, but at this point there is no indication they intend to talk any more with local officials.
The team said it had already extended its original deadline of early February because it was interested in staying in Pittsburgh.
"Our good faith efforts have not produced a deal, however, and have only added more anxiety to what we thought at best was a risky proposition for us moving forward."
More details in tomorrow's Pittsburgh Post-Gazette.