Wednesday, June 25, 2003 | 9:45 a.m.
PITTSBURGH -- The Pittsburgh Penguins unveiled plans to pay their share of a new $278.3 million hockey arena on Tuesday with $60 million from a group planning a horse racetrack with slot machines near the city.
Edson "Ted" Arneault, president and CEO of MTR Gaming Group, which owns Mountaineer Race Track & Gaming Resort in Chester, W.Va. and the Speedway Casino in North Las Vegas, and Penguins President Ken Sawyer announced the deal at Mellon Arena, the oldest and second-smallest venue in the National Hockey League.
Arneault pledged the $60 million over 20 years from projected slot machine revenues at Keystone Downs, a thoroughbred racetrack and casino he's planning in Harrison Township, about 20 miles northeast of Pittsburgh.
The Penguins would then contribute $47 million, money the team would raise by selling seat licenses or naming rights to the new arena or through other sources. That means $107 million for the arena would come from private sources, with the rest from state and other public money.
The hockey team balked at a proposal last July by the city-county Sports _& Exhibition Authority that called for the Penguins to cover $108 million of a proposed $270 million facility to replace Mellon Arena.
The Penguins now say the project will cost $8 million more. But Sawyer said the increase can be covered by local sales tax revenue already earmarked for the project because, with interest rates so low, the money will go further than it would have last July.
Arneault said the deal helps him, too.
"It's an incentive for (the state) not just to give us the license, but also for economic development all through Allegheny County," Arneault said.
Arneault's group would get no ownership stake in the hockey team under the deal, although MTR would continue to advertise and cross-market with the team.
The slot revenues would come entirely from a 2-percent cut of the track owners' share of the machine's gross revenues -- which Arneault said is a small price to pay for a better crack at the state license.
Under pending state legislation, track owners would keep 46 percent of the machines' gross revenue. Arneault said MTR would own about 30 percent of the track; he said the group's majority partners will likely be announced as it applies for the state license within two weeks.
Star player and owner Mario Lemieux bought the team out of bankruptcy in 1999. He and Sawyer have said the team can't afford the private funding burden proposed by the sports authority.
Sawyer wouldn't say the arena deal is dead if officials pass on the newest plan, but "I would say it's a very critical juncture."
Sawyer said the team had already sent a copy of the proposal to Steve Leeper, executive director of the Sports & Exhibition Authority, and hopes Leeper will agree to meet soon about it. Mayor Tom Murphy, County Executive Jim Roddey and Gov. Ed Rendell will be contacted soon.
Leeper declined to comment on the proposal until he thoroughly reviews it, a task he called a "high priority." Murphy and Roddey didn't immediately return calls seeking comment. Both have repeatedly said the city and county can't contribute any more money to the deal.
Rendell spokeswoman Kate Philip repeated the governor's position that he won't consider releasing $90 million in state funds earmarked for the project until local officials are on board.
In addition to a license from the Pennsylvania State Horse Racing Commission, Arneault needs the Legislature to approve a pending measure that would legalize slot machines at state racetracks.
At least five other groups who want to build tracks in southwestern Pennsylvania are vying for the same license, plus two other groups with plans to build near Philadelphia. Arneault said he's contacted two of the western Pennsylvania groups to see if they'll drop their efforts to get a license and join his.
"Remember, the Pittsburgh area is competing for that license against Philadelphia," Arneault said.
Gaming analyst Raymond Cheesman of Jefferies & Co. of New York City, said Arneault is smart to tie the Penguins' arena fortunes to his quest for a gaming license.
"If the (arena funding) issue is creative and addresses an issue near and dear to the public heart, I suppose it does give him a leg up," Cheesman said.
Arneault, like Lemieux, a French-Canadian, preferred a hockey metaphor.
"We've got a breakaway and we're ready to score," Arneault said. "But we might have to pull the goalie if we don't score."
Arneault's deal for the Penguins' arena was first reported by the Pittsburgh Post-Gazette.
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