Trusting the market

Before the Pittsburgh Penguins captured two championships in a seven-year span, before Sidney Crosby emerged as the league’s premier player, before ground broke on Consol Energy Center, the franchise was skating on thin ice, pinned in an all-too-familiar face-off with uncertainty.

It was 2007, eight years after co-owners Mario Lemieux and Ron Burkle rescued the franchise from bankruptcy. This time the Penguins, amid a 15-year championship drought, were without a home. Their lease with the 46-year-old Civic Arena would expire on June 30.

But a complicated financing deal (Hello, casinos!) brought about Consol Energy Center and locked the team in Pittsburgh through 2040.

“If we wouldn’t have gotten a new arena, Crosby would be somewhere else,” said Penguins CEO David Morehouse. “None of this would have happened. There’d be no revenue to put a team on the ice capable of winning two Stanley Cups.”

But the week before the Penguins announced they would stay in Pittsburgh, Lemieux and Burkle sent a letter to politicians declaring an impasse in the talks and saying they would aggressively explore relocation. Years of meetings and bargaining had ended in dead end after dead end.

At a game in March 2007, a “Save Our Pens” chant echoed throughout Civic Arena from the first minute of play until the final buzzer. Banners read “Deal? Or No Deal?” Four young men each wore a different painted letter to spell out “NO KC.”

Bob Fabrizi, a Penguins fan at that game, told the Post-Gazette he wanted to see the Penguins while he was on a two-week leave from serving with the Army’s 101st Airborne Division in Balad, Iraq.

“In Iraq, I check the Post-Gazette Web every single day for news on the arena,” he said. “To me, it’s very frustrating. I have no idea why they couldn’t have come up with a solution before this. I’m really frustrated at the politicians.”

Soon Kansas City, which had just built the $276 million Sprint Center, sweetened its offer to include free rent and 75 percent of building revenues to the Penguins. The offer was so good that Houston, one of the cities interested in the Penguins, dropped out of the bidding. It would have made sense: the Kansas City Penguins.

Pittsburgh’s hockey team was welcomed with open arms there. Kansas City business and political leaders pledged support in ticket sales and sponsorships. Penguins officials were invited to meet with them.

“We flew down and they had the CEO of every company fighting to get us,” Morehouse says of the visit.

A lifelong Penguins fan and graduate of Duquesne University, Morehouse became a consultant to the Penguins in December 2004 as the team realized it couldn’t compete in the NHL without a salary cap system and a new arena. The team sought Morehouse, who counseled Al Gore’s presidential campaign and worked at the White House, Pentagon and on Capitol Hill. Amid a Stanley Cup drought and less than a decade removed from bankruptcy, the Penguins needed ways to generate enough revenue to remain competitive with other markets.

When Morehouse stepped in, the team analyzed itself and the city. The raw numbers suggested that, no, it’s not viable for Pittsburgh to support three major professional sports teams. But the Penguins dug beyond the raw numbers and considered Pittsburgh’s strong fan base. Backed by loyal fans, the Penguins would sell more tickets and generate more television revenue in Pittsburgh than in Kansas City.

“Pittsburgh plays like a bigger market,” Morehouse said. “We punch over our weight.”

At around the same time, an economic analysis found that the Penguins couldn’t last in Pittsburgh without a new arena. Morehouse said the Penguins leveraged that fact in the negotiations. The oldest venue in the league, Mellon Arena did not have the luxury suites, clubs and amenities that modern facilities have. By playing in the Igloo, the Penguins missed out on these lucrative revenue streams. And built in 1961, the facility had caught up to itself.

“Capital costs for repairs and improvements were through the roof, literally,” Morehouse said.

In February, the Penguins declined a one-year lease extension offer to stay in Pittsburgh. It had to be a new arena or bust, mirroring what has become Penguins’ on-ice motto of Stanley Cup or disappointment.

Talks resumed, as Lemieux and Burkle met with then-Gov. Ed Rendell, then-Allegheny County Chief Executive Don Onorato and then-Pittsburgh Mayor Luke Ravenstahl at a hotel in Voorhees, N.J. Throughout the process until those meetings at an undisclosed hotel, Penguins management made clear it was eager to stay in Pittsburgh.

“The owners didn’t want to look at other cities,” Morehouse says.

They made those trips to bidding cities Kansas City and Las Vegas, anyway, because they could not reach a new arena deal with lawmakers. The Penguins seriously considered relocating, Morehouse said. Those trips were no decoys.

“They were going there to explore their options more than anything else,” said Neil deMause, co-author of “Field of Schemes,” a book about stadium financing controversies. “In sports, a savvy negotiator creates leverage.”

He noted that Chicago White Sox officials, for example, flew to Tampa Bay in the 1980s to consider playing there. He said it’s not uncommon across the Big Four sports.

“It’s just what you do. You fly to the airport and hang out for a while. Whether they’re serious or not, it’s going to throw a scare into local elected officials,” deMause said.

That’s just what it did in Pittsburgh.

On March 13, 2007, the agreement that seemed unattainable only a few days earlier had been reached. The Penguins announced they had reached an agreement with state and local officials for construction on a new $290 million arena that would keep them in Pittsburgh under a 30-year lease effective in 2010.