Thursday, March 30, 2006

Penguins New Arena News

First off, here are the links to the stories that have been printed (that I found upon doing a quick search):
Pittsburgh Tribune-Review
WPXI Television
WTAE Television
KDKA had nothing as of 1:00 pm...

It's really interesting if you read all of the articles to see what they choose to highlight. WTAE, for instance, when talking about Lynn Swann's endorsement of Pittsburgh First (and thus, Isle of Capri), seems to equate Swann's opinion with that of Franco Harris, who is simply involved as a financial participant in the Harrahs / Forest City plan (the Station Square group). I'm not sure those two opinions carry the same weight or objectiveness.

Anyway, here are the highlights, as best I can put them together:
The Governor's plan funds the new arena (in the same amount of $290 million) with a 30-year tax exempt bond. The bond would be repaid with annual debt payments in the amount of $18.56 million. That breaks down into the following annual amounts (and bear with me, this is where the numbers get a little fuzzy):
  • $7.5 million annual VOLUNTARY payment from the winner of the slots license
  • $7 million annual payment from the Gaming Economic Development and Tourism Fund (their money is raised from the 5% tax on slots revenue that will go to the state - Allegheny County's share is expected to be $100-$150 million, but the money was supposedly already allocated elsewhere)
  • $2.9 million annual lease payment from the Penguins
  • $1.1 million annual revenue from naming rights to the arena along with beverage sale profits
So that's the general idea. There are a few other things involved in terms of start-up costs (a one time payment of $8.5 million from the Penguins is required), a reserve fund and bond insurance are involved, but nothing earth-shattering.

What blows me away is that the Governor is proposing to take on 30 years worth of debt, with the total amount being repaid equaling $556.8 million dollars. Why on earth would you want to nearly double the amount of money you'd want to spend on this? I think this only strengthens the case for the Penguins, since this is Plan B. If someone else were to win the license, the state would have a tremendous amount of debt to look forward to!

Additionally, the key word on the contribution from the slots licensee is VOLUNTARY (I capitalized it earlier too). This debt payment is over 30 years!! What happens if things change in 5 or 10 years? What happens if slots peter out in that amount of time? What happens of they don't want to make the payments 15 years down the road? This means that the taxpayers will be stuck with the debt. Supposedly, Dan Onorato has met with the other two slots competitors, and they've VERBALLY agreed to a VOLUNTARY payment. Does this seem like a situation rife for abuse to anyone else?

Furthermore, what about using that slots revenue that was already earmarked for other things? Isn't that really just using public money?

In short, I can't see how this could really be considered an option when Isle of Capri is saying "Here's $290 million. We'll put it in an escrow account just as soon as we get the slots license." There's no timing issues... no voluntary payments... no diverting of slots revenue... if the slots license board sees what s**t will be hitting the fan as a direct result of choosing a slots group other than IOC, I can't imagine them thinking it will be what is best for the city, region and state.

The Penguins will respond today at 2:00. More to follow...

1 comment:

ees said...

Ed Rendell’s proposal--AKA--Political grandstanding