Arena Number Crunching

Fester started some work on this, and as they don't let people like us look at the nitty-gritty details on Arena financing, we'll have to make due with what the P-G tells us:

The team will no longer have to pay $8.5 million up front. Instead, the state will pay $10.5 million from public development funds.

In addition, the team will only have to commit $2.2 million of its own in annual lease payments, a reduction, but will have to make up the difference by seeking $2 million in naming rights, an increase.

Mr. Rendell said public officials agreed with the team that the previous $270 million construction cost estimate might be too low, and the funding calculations were increased to consider a $290 million pricetag.

The team and the state will split the costs of any increase in construction cost between $290 million and $310 million. The team will cover any cost overrun above $310 million.

The governor said Kansas City had offered a great deal to the team. But what "tipped the balance" toward Pittsburgh was the strong support of the local fans.

And once again, Mr. Rendell said the deal could not have been done without the revenue expected from new slots casinos...

He said the Penguins have been offered a $15 million credit as incentive to spur development around the arena, rather than leaving it as parking. He said officials have set a goal of developing 2.8 acres a year, with the whole area developed in 10 years.

Additionally, PITG (the Don Barden's casino group) will chip in $7.5 million/year over thirty years and the State will match that.

Assuming an interest rate of 5.25% (which also assumes government bonds/municipal insured bonds), we come out with the following values:

Public Development Funds (one time): $10,500,000
Penguins Lease: $32,876,581
Naming rights: $29,887,801
PITG: $112,079,254
State Slots Revenue: $112,079,254
Total: $297,422,891

So, just back of the envelope calculations there, but the deal comes in over the $290M price tag.

HOWEVER, a couple of questions left unanswered:
1) Is Mario's purchase of the former St. Francis Hospital included in the Pen's "credit" even though it is a sunk cost?
2) How are the "development rights" for the Mellon Arena Site to be handled?
3) Are these municipal bonds? State bonds? SEA bonds? If it is the first or last, is it fair to say that "no local money" is being used if it eats into the City's debt?
4) How is the Arena going to support itself over the long run?
5) Where will the cost overrun money come from, really?
6) Is this a wise use of taxpayer ("local" being irrelevant to the conversation) money?
7) What, exactly, do you have to have as an existence value to get the NPV of the project to be positive? A zillion-bagillion dollars?

Most importantly, does the good of a small, vocal minority outweigh the good of the region?

Or is that blasphemy?

More to come, I'm sure...

Tag(s): Arena, Pittsburgh Penguins