Thursday, November 13, 2008

And From the "Who Didn't See That One Coming" File

Looks like Mario Lemieux and Mary Conturo are going to be passing around the hat:

The city-Allegheny County Sports & Exhibition Authority Board came together Thursday to agree on a final cost for the new Penguins arena and settled on a figure $31 million higher than previously estimated.

The original budget for the project was $290 million, a 2005 estimate. On Thursday, the Authority board, the Commonwealth and the Penguins approved spending $321 million to open the venue for the 2010-11 hockey season.

The additional funding will be split between the Penguins’ $15.5 million contribution, the state’s $10 million kick-in and $5.5 million from the sports authority.
Some of you may remember from back in March of '07 when the P-G nicely laid out how cost overruns were going to work:
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.
So, I'm confused: The Penguins are to pay anything over $310 million, which would come up to $11 million, plus they're kicking in an additional $4.5 million, which leaves $15.5 to be paid for by the Public bodies. That doesn't seem very well "split" to me. Perhaps it's a philosophical thing, but I think I would have liked to see the Penguins share in the marginal cost increases until they got up to the $310 million mark.

Be that as it may, however, it should come as no shock that the budget for this project is all messed up. What with increased fuel surcharges, a financial sector in the crapper, and an economy that is generally going all Tom Joad on us, the Arena project is in dire straits.*

The SEA is saying, apparently, that part of the sports authority’s contribution, due in 2010, may come in the form of two equal-part loans from the Urban Redevelopment Authority and the county’s Redevelopment Authority. Which is fine, except that with the stifled economy, you sort of wonder where these organizations are going to get the borrowing capacity to make these kinds of loans.

And the project still has a negative return on investment... that is, unless the Penguins win about ten Stanley Cups in a row.

* Strike that. "Money for Nothing" is the absolute opposite of the Arena situation.**
** Or is it?

No comments: