Penguins won't have to pay for land for hotel project
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The Penguins could end up securing public-owned land for a proposed hotel development next to their new arena without paying a dime for it.
That's because they likely will tap a portion of the $15 million in development credits they won as part of the March 2007 deal to keep the team in Pittsburgh.
Under the agreement, the Penguins can use credits to buy Mellon Arena land, which is owned by the city-Allegheny County Sports & Exhibition Authority, or any portion of the former St. Francis Central Hospital site, which is available for development.
Part of the new arena and an adjacent parking garage are being built on the St. Francis site, also owned by the sports authority. The hotel will be located on Centre Avenue, at the eastern edge of the site closest to the Hill District.
Sports Authority Executive Director Mary Conturo said yesterday she expects the team to use development credits to buy the land, about one acre in size, for the hotel. No price has been established; that is being done through an appraisal process.
"Whatever we agree on as a purchase price for that property, it will be the first amount to count toward that [$15 million] credit," she said.
The Penguins declined comment.
The credit ended up being an integral part of the overall arena deal, in part to compensate the Penguins for parking revenue that will be lost as the 28-acre Mellon Arena site is developed after the new arena opens in 2010.
Development credits are not common in arena or stadium deals, said Marc Ganis, president of Sportscorp Ltd., a Chicago-based sports business consultant.
But, he added, in the case of the Penguins, the arena deal as a whole had to be a "bit more creative to make up for some of the limitations in the market and the local tax base."
He noted that arenas typically aren't financed on the public side through gambling revenues, as is the case in Pittsburgh.
Neil deMause, co-author of "Field of Schemes," a book that examines the public financing of stadiums and arenas, said he has never heard of development credits being awarded as part of a deal. He said they definitely qualify as a perk.
"Free land is as good as free money," he said.
Nonetheless, Mr. deMause said, awarding credits encourages the team to redevelop land. Under the arena agreement, if the Penguins don't develop at least 2.8 acres of the Mellon Arena site each year, they forfeit the rights to the land.
The Penguins are working with developer Horizon Properties Group on the proposed seven-story, 132-room hotel. Once it has the land, the team could sell it to the developer, retain it or become part of a joint venture with Horizon.
First Published November 26, 2008 12:00 am
