Keeping the Penguins in Pittsburgh
November 16, 2006
Zack BaginskiJohn Gross
Gorana SmailagicColby Whitman
Overview
• Our recommendation• Background information• Three different options
– Plan B– Stay in Pittsburgh– Relocate
Our Recommendation
• Plan B– Keep the Penguins in Pittsburgh– Construct new arena– Funding from casino, state, and team
Background
• Founded in 1967• Oldest arena in the country • Some key players:
– Randy Carlyle, Les Binkley, Rick Kehoe, George Sullivan
– Mario Lemieux– Paul Coffey, Kevin Stevens, Rob Brown, and
John Cullen from the minors– Tom Barrasso from the Buffalo Sabres
Background
• 1990s: Drafted Jaromir Jagr• Mark Recchi, Joe Mullen, and Bryan
Trottier signed as free agents• Larry Murphy, Ron Francis, and Ulf
Samuelsson• League's best team
Background
• Formidable team throughout the 1990s
• The stars of the Stanley Cup years were followed by Martin Straka, Petr Nedved, Alexei Kovalev, and Robert Lang, Sergei Zubov, Kevin Hatcher, and Darius Kasparaitis
Background
• Filed for bankruptcy in 1998
• Lemieux bought the team
Background
• Not much has changed over the past 8 years
• The team doesn’t want this to happen again, therefore a new arena is a must
“Plan B” Overview
• Created in case Isle of Capri deal falls through
• Still allows for construction of arena• Relies on bid-winning casino, the
Penguins, and the state
The Arena
• Cost: $225m• 18,000 seats• Lower Hill District
The Arena
The Site
“Plan B” Finances
• Over 30 years…– $7.5m/year from casino– $7m/year from state fund– $2.9m/year from Penguins– $1.2m/year from naming rights– $8.5m upfront from Penguins
• Total of $563.5m
Additional “Plan B” Information
• Majestic Star has already agreed– Plan B payments– $350m to Hill District
• No taxpayer dollars• Generates needed tax revenues• Ed Rendell supports plan
Staying in Pgh: Financials
• Total revenue: $71 million (includes ticket sales, parking)
• Steelers revenue: $187 million• Pirates revenue: $125 million
Staying in Pgh: Financials
• Cheapest Ticket Price: $35• Most expensive Ticket Price: $140• Salary Floor: $21,500,000• $37m Player Expenses• Home Games: 41• Avg Attendance: 15,804 (’05-’06 season) • Sell Out Capacity: 17,537 seats
– 90% attendance
Staying in Pgh: Pros
• Politics– Rendell, County Chief Exec Dan Onorato,
Mayor Ravenstahl, and City Council want to keep Penguins in Pittsburgh
Pros
• 650,000 hockey fans per season• Young, affluent fans
– 57% of fans are 25-34 years old– 1 in 4 attendees have a household income of
at least $100,000– 1/3 of women 35+ are fans– 45% of men 35+ have watched a game
Cons
• Last December, Penguins projected $7 million US loss this season
• That was assuming the team drew near-capacity crowds and advanced to Round 2 of Stanley Cup playoffs
Potential Solutions
• Penguins and the SEA to negotiate a long-term lease for the Mellon Arena for $1 million per year
• Penguins can tap into non-hockey events– Advertising and concessions
• Market the arena for concerts, ice shows and other non-hockey events
Potential Solutions
• Directly appeal to community for money– Winnipeg
• If the Penguins are truly a valuable asset to Pittsburgh, then there must be corporations and individuals who benefit substantially from the presence of the team
Other Teams’ Relocation
• St. Louis Blues and Los Angeles Kings in 1999 reported substantial losses in the last few seasons.
• 2002-2003 NHL season, the Ottawa Senators (Corel Centre built in 1996) and Buffalo Sabres (HSBC Arena, 1996) declared bankruptcy
• Four more teams, none with an arena more than 10 years old, are for sale
Kansas Citymake chart of related teams and avg ticket prices. Hobbies/what people spend $ on• Sprint Center
– Opens Fall 2007• Seating capacity 18,000+
– 72 Luxury Boxes» Average Price of $110,000
• Downtown Construction– $3 billion worth underway– More activity and investment than any other
U.S. city
Kansas City (contd.)
• Metropolitan area population of 1,947,694• Median income (household) of $37,198• Median income (family) of $46,012• 14.30% of population below poverty line
Houston
• No new arena currently under construction– Would use Toyota Center
• Seating capacity of 17,800• 103 Luxury Suites• 2,500 space parking garage connected to arena
• Metropolitan area population of 5,300,000• Median Income (household) of $36,616• Median Income (family) of $40,443• 19% of population below poverty line
Portland
• No new arena currently under construction– Team would use Rose Garden Arena
• Opened in 1995• Also used by Portland Trail Blazers • Seating capacity of 17,544• 70 Luxury Suites
• Metropolitan area population of 2,000,000• Median income (household) of $40,146• Median income (family) of $50,271• 13.10% of population below poverty line
Las Vegas
• No new arena currently under construction– Must use Orleans Arena
• Seating capacity of 9,500
• Las Vegas worries NHL because of sports betting
• Metropolitan area population of 1,700,000• Median income (household) of $44,069• Median income (family) of $50,465• 11.90% of population below poverty line
• Largest city in Canadian province of Manitoba• Population 619,544/ Metro 706,900 • Pop. Growth .05%/year• 2004: 4th highest crime rate among Canadian cities• AHL Team: Manitoba Moose (minor league)• 1996: Winnipeg Jets moved to become the Phoenix
Coyotes (NHL)• Current Arena: MTS Centre (133.5 million, 2004, 15,003
seats, 48 luxury suites)• Median Family Income: $46,698 • 27% of Family’s Incomes < $30,000
Winnipeg, Manitoba (talk about it)
• Population 121,578 / Metro 1,188,241• Median Household Income: $24,820• Median Family Income: $27,051 • Population living in Poverty: 30% (no discretionary income)
• Current Arena: Hartford Civic Center (15,635 seats, 46 luxury suites, 1975, $75 million)
• 1997: Hartford Whalers moved to Raleigh, NC to become Carolina Hurricanes
• Why they left? The primary factors in the Whaler’s departure from Hartford were market size and lack of modern playing facility. In close proximity (2hr. Radius) with 4 other NHL teams
Hartford, Connecticut
• Check and see if crosby is from here• City in province of Ontario, Canada• Population 490,268 / Metro 714,900 • Median Household Income: $47,855• Median Family Income: $58,396 • Current Arena: Victor K. Copps Coliseum (17,500 seats,
0 luxury suites, 1983, $35.8 million)• NHL Lack of Approval: Buffalo Sabres and Toronto
Mapleleafs are located too close; those teams would lose revenue if Hamilton had a NHL franchise.
Hamilton, Ontario
Columbus, Ohio
• Population 711,470 / Metro 1,708,625 • Median Household Income: $37,897 • Median Family Income: $47,391• Current Arena: Nationwide Arena (18,136
seats, 78 luxury suites, 2000, $165 million)• Columbus is considered a "typical"
American city; often used as test market for products
Columbus Arena Financing
• Nationwide Insurance build a privately funded arena for the new team.
• While arena is being built by the insurance company, the county's convention authority invested $11.7 million in buying land for the arena. It will get $150,000 a year back during the arena's first 10 years, $165,000 a year back from year 11 to year 25, then $165,000 plus an inflation adjustment through the arena's 50th year.
• The payments will be made from the $3 million a year the NHL Blue Jackets will pay annually in lease payments. After 10 years, the team's lease grows to $3.3 million and any agreed-upon increases.
• At the end of 50 years, the convention authority owns the arena unless Nationwide exercises an option to buy it.
conclusion
• “several more hockey nights in pittsburgh”• “it’s a great day for hockey” (intro?)