Gov. Ed Rendell would like to announce a deal this week that would keep the Penguins in town in a new arena.
"They're getting closer and closer to some conclusion," said state Sen. Wayne Fontana, a member of the city-county Sports & Exhibition Authority, which would own the venue.
Negotiations focus on redevelopment rights in the Lower Hill District, the timeline for construction of a $290 million building, and parking and naming rights, Fontana said Tuesday.
SEA member Edie Shapira, who said she has not been briefed on the latest offer, believes officials are doing their best to keep the Penguins here.
"I was optimistic that (the team owners) were trying and that it might be in their real interest to work this out," Shapira said.
Rendell returns to Pittsburgh later this week and hopes to meet a second time with Penguins co-owners Mario Lemieux and billionaire Ron Burkle. Joining the governor would be Allegheny County Chief Executive Dan Onorato and Pittsburgh Mayor Luke Ravenstahl.
The Penguins have threatened to move unless they get a satisfactory deal to replace the aging Mellon Arena, the oldest rink in the National Hockey League. The lease expires in June.
With the team getting a large amount of revenues from a new arena, Pittsburgh should be more attractive than a new hometown such as Kansas City, some experts said.
"The deal in Kansas City had several limitations, because that market has several limitations. That's not the case in Pittsburgh," said sports consultant Marc Ganis, who in the late-1990s advised Pittsburgh officials on details of the "Plan B" that helped secure North Shore stadiums for the Steelers and Pirates.
Kansas City wants an anchor tenant for the Sprint Center, which opens this fall. Officials there have offered the Penguins free rent, but only a share of non-hockey revenues.
Rendell has said he would sweeten his original arena proposal, also called Plan B. That offer included $14.5 million a year for 30 years in gambling money, and contributions from the team. The Penguins would pay $8.5 million up front, $2.9 million a year and forgo $1.16 million a year in naming rights.
The offer now could include the Sports & Exhibition Authority paying Lemieux's development group $8.5 million for the former St. Francis Central Hospital site, Uptown. Onorato has hinted the deal could include dropping the naming rights provision.
With those kinds of changes to reduce the team's costs, the offer should make business sense to the Penguins, especially given how much money they could make at a new arena, said Jake Haulk, president of the Allegheny Institute for Public Policy, a Castle Shannon think tank. He estimated the team could make $20 million a year or more from concessions, luxury boxes, advertising and non-hockey events.
"There's a lot of money to be made over there," Haulk said.
Darren Rovell, a sports business analyst for CNBC, said the deal in Pittsburgh would better favor the Penguins' long-term future.
"The sweetheart deal of 'no rent' goes out the window once you say that you're not giving enough of the non-hockey revenue -- that's why the Pittsburgh deal seems better," Rovell said. "That $2.9 million is a standard lease that is very typical. The percentage of non-hockey revenue would be better than average."
Ganis said the proposed Penguins deal here is structured much like one Newark, N.J., gave to the Devils for the $375 million Prudential Center, a 17,000-plus seat facility scheduled to open this fall.
The Prudential Center originally was to cost $310 million, but cost overruns pushed that figure to $375 million. The Devils, who agreed to a 30-year lease, will cover costs above a $210 million public contribution. Earlier this month, the Devils and Prudential reached terms on naming rights, netting the team $105.3 million over 20 years.
"If you consider the contribution toward Pittsburgh's proposed new arena from (gambling) money, the general structure of this deal is on a path for success and is fairly consistent with the most recent hockey-only building in Newark," Ganis said.
"This ought to be a roadmap to success in Pittsburgh."
The Penguins had no comment.
"If the Penguins turned this deal down, the local leaders could hold their heads up and say they really did step up to the plate and make the best attempt to keep this team," Ganis said.
One question will be how long it takes to get the Penguins into an arena. Under the latest proposal, the authority would open the arena for the 2009 season.
In the short term, the Penguins could make about $2 million a year by staying at Mellon Arena until a new building opens, experts said. The team would become the lead tenant on the arena lease, rather than operating company SMG, which would continue to manage Mellon Arena and then a new arena through 2012.
"It's more imperative than ever that teams control the management of the facilities," said Len Komoroski, president of the Cleveland Cavaliers and Quicken Loans Arena. "Especially if you are in a smaller market, like Pittsburgh, it's even more important because that is how you keep your team viable."
Including exhibition games, the Penguins play 43 home games a season, and Mellon Arena hosted 85 non-hockey events in 2006.
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