Building Blocks
By Bob Grove

The off-season deadline that has commanded the most attention among Pittsburgh hockey fans is July 1, the date on which center Robert Lang will become an unrestricted free agent and any National Hockey League team can change the landscape of the Penguins' roster with a lucrative contract offer.

A deadline of far greater importance to the team, however, falls one day earlier on June 30. That is the date by which the Sports & Exhibition Authority is expected to deliver a funding plan for the construction of a new arena that Mario Lemieux's ownership group believes is essential for the Penguins' long-term survival.

That plan will be subject to change, but its details should provide a glimpse of just how difficult it will be for the Penguins—who play in the NHL's oldest venue, 41-year-old Mellon Arena—to successfully complete their vision of a $225 million facility across Centre Avenue from their current home.

Already there has begun a replay of the debate which preceded the formation of Plan B, the public funding vehicle which provided 68 percent of the $541 million needed to build PNC Park for the Pirates and Heinz Field for the Steelers. The local team has made it clear it cannot build a new facility alone, while those who oppose the use of tax dollars for such projects believe a new arena should be privately financed.

There has been no shortage of writing on the subject of public subsidies for the construction of sports facilities. All the academicians and economists thus engaged come to the same conclusion: the decades-old argument that such buildings serve as significant economic generators is indefensible.

"The overriding conclusion of this discussion is that the economic case for publicly financed stadiums cannot credibly rest on the benefits to local business, as measured by jobs, income, and investment," write Roger G. Noll and Andrew Zimbalist in "Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums."

The Penguins, to their credit, have not tried to portray their new arena as an economic engine for the city or the county, although there is little doubt it dovetails nicely with Mayor Tom Murphy's evolving plans for the Fifth-Forbes corridor. But there is much to like about the plan they made public in March, including the potential economic benefit to the city and county made possible by the team's abandonment of the 28 acres of public land on which Mellon Arena currently sits.

As keys to urban redevelopment, sports facilities across the nation have had a spotty record. But many new NHL buildings, including the American Airlines Arena in Dallas, Nationwide Arena in Columbus and the future home of the Phoenix Coyotes, have been planned and constructed as part of larger city developments that hold great promise. The opportunity to develop such a large parcel of real estate so close to the central business district is a rare one.

"It is one of the greatest development sites not only in Pittsburgh but in the U.S.," says Don Carter, a Pittsburgh native whose local firm, Urban Design Associates, is recognized as a national leader in its field.

Although the Penguins would play no role in developing the Arena site, they hired Carter to formulate his own vision of what that parcel could become, and his mixed-use plan includes residential, retail and office space that he believes could attract $480 million in mostly private investment over a period of 12 to 15 years. Such a development would generate significant tax dollars, likely far more than can be expected from the development being planned for the land between PNC Park and Heinz Field.

Such development would also re-establish a link between downtown Pittsburgh and the lower Hill District, where thousands of residents were forced from their homes to make way for the construction of the Arena in the late 1950s. "It's an opportunity to restore a piece of the city that went away," says Carter.

Any discussion of public funding for the Penguins' arena must consider those benefits to the city and county. It must also weigh carefully these realities:

• Those opposed to the public funding of a new arena maintain that such a facility is more easily privately financed because of the variety of events it stages. This is true only in larger markets where arenas typically host two professional sports teams and use a larger base of potential customers to attract more events. "In L.A., Philadelphia and New York, they're large enough markets so that (arenas) can be operated at a profit. In a city like Pittsburgh, the number of events and the profits earned by them is much, much less," says Mark Rosentraub, Dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University and the author of "Major League Losers: The Real Costs of Sports and Who's Paying For It." Alas, there is no private money pounding down the Penguins' door to construct a new arena for them. Says Ken Sawyer, president of Lemieux Group LP, "You cannot finance these things privately in markets this size with one tenant. I always use the example that Bruce Springsteen comes here for two nights and goes to Philadelphia for seven. The circus may be here for a week, but it's not really a money generator. It's more a public service—having a product and a price point for everybody."

• A funding analysis of the NHL's 30 current venues finds that only 11 were privately financed, and that 15 of the remaining 19 facilities were built with at least 40 percent public funding. While this list does include all of the league's older facilities, it also includes newer buildings in Nashville (100 percent), Anaheim (100 percent), Raleigh (84 percent), San Jose (82 percent), Minnesota (74 percent), Tampa Bay (66 percent), Florida (66 percent), Dallas (50 percent), St. Louis (46 percent) and Buffalo (43 percent). It is thus unrealistic to hold the Penguins to a funding formula that is typical neither for their league nor for markets their size.

The controversy over public funding for the Pirates and Steelers led to the defeat of a referendum that would have increased taxes to construct their new facilities, but both teams were successful in emphasizing their importance as regional assets. That in turn made it easier politically for the formulation of Plan B: $75 million from the state for each facility, and a bond issue backed by the county's Regional Asset District (RAD) funds. The Pirates provided just $48 million of the $260 million cost of PNC Park (18 percent), while the Steelers funded $123 million (44 percent) of the $281 million cost of Heinz Field.

"The question becomes, 'What are the intangible benefits of having a team and what are they worth?' That's the question the people in Pittsburgh have to answer," says Rosentraub. "The team shouldn't expect an arena to be completely publicly financed, and if the public believes there's an intangible benefit to having the team, then it's equally implausible to take the position that the public should play no role (in funding)."

The truth is that hockey has never been more popular in the Pittsburgh area than it is today. The growth in the construction of local rinks in western Pennsylvania over the last 15 years is likely unrivaled by any other U.S. metropolitan area, and no one can dispute that today's squirt player will probably become tomorrow's ticket buyer. The Penguins have drawn consistently strong crowds and superb local television ratings in that same time span, and the game now appeals to a broader demographic that at any time since the team began play in 1967.

RAD revenues took a slight dip this year due to the sluggish economy after September 11, but the fund has grown by 28 percent since its inception and may yet play a role in funding a new arena. "We think the fact that they (SEA) have found a formula for the other two stadiums will hopefully short-circuit the time it takes to come up with a method to finance this," says Sawyer.

At any rate, the Penguins will have their hands full battling critics as they attempt to acquire state funding (a $60 million line item exists, its future likely tied to this fall's gubernatorial election) and local funding after not only the Pirates and Steelers but the University of Pittsburgh, whose $82 million Petersen Events Center may include as much as $63 million from Harrisburg.

The Pittsburgh Tribune-Review has already decried the use of any public money to build a new arena, and the Pittsburgh Post-Gazette recently published an op-ed piece by former county commissioner Bob Cranmer in which he defended public financing for the Pirates based on business projections "that could be checked and verified." He must mean the projection whereby the Pirates set a franchise record for attendance at 2.4 million fans, collect $26.2 million in national TV revenue and revenue sharing and then lose $1.2 million. That's what happened in 2001.

The Penguins should contribute their fair share to the construction of a new arena, a facility that, unlike PNC Park and Heinz Field, will be used for a variety of events that appeal to a broader segment of residents. But just like the Pirates and Steelers, and most of their peers in the NHL, the Penguins also need public funding to make the project a reality. Developing a workable funding plan may not be easy, but it should include no less an effort than the one which produced Plan B.