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Keeping the Penguins in Pittsburgh

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  1. Keeping the Penguins in Pittsburgh November 16, 2006 Zack Baginski John Gross Gorana Smailagic Colby Whitman

  2. Overview • Our recommendation • Background information • Three different options • Plan B • Stay in Pittsburgh • Relocate

  3. Our Recommendation • Plan B • Keep the Penguins in Pittsburgh • Construct new arena • Funding from casino, state, and team

  4. 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

  5. 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

  6. 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

  7. Background • Filed for bankruptcy in 1998 • Lemieux bought the team

  8. 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

  9. “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

  10. The Arena • Cost: $225m • 18,000 seats • Lower Hill District

  11. The Arena

  12. The Site

  13. “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

  14. 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

  15. Staying in Pgh: Financials • Total revenue: $71 million (includes ticket sales, parking) • Steelers revenue: $187 million • Pirates revenue: $125 million

  16. 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

  17. Staying in Pgh: Pros • Politics • Rendell, County Chief Exec Dan Onorato, Mayor Ravenstahl, and City Council want to keep Penguins in Pittsburgh

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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

  28. Winnipeg, Manitoba (talk about it) • 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

  29. Hartford, Connecticut • 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

  30. Hamilton, Ontario • 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.

  31. 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

  32. 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.

  33. conclusion • “several more hockey nights in pittsburgh” • “it’s a great day for hockey” (intro?)