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?)