Penguins-plank-AI

==Cross-Checking the Penguins==
=== June 12, 2003 from Allegheny Institute for Public Policy===
Suppose your ne'er-do-well uncle took money surreptitiously
from neighbors and gave it to your two older siblings.
Would you demand that he "find' more money and give it to
you? That is essentially the moral analogy to the Penguins'
argument that since the Pirates and Steelers got new
stadiums, it is the politicians' moral obligation to ante up
funds for a new arena for the Penguins. Do the Penguins
need to be reminded that voters overwhelmingly rejected tax
dollars for new stadiums only to have the Mayor and state
politicians go behind their backs and allocate taxpayer
money for the facilities? Where was the morality in breaking
faith and trust with the taxpayers and voters?
Let's get past this specious moral claim on tax dollars.
The real issue that needs to be addressed is the team's
finances. The Penguins like a great many professional
sports franchises, lost money last year and are expecting to
lose money next year. They argue that a new arena is they
only way to secure greater revenues.
But a quick glance around the National Hockey League
indicates that a new arena is not necessarily the tonic that
cures financial woes. During the 2002-2003 NHL season the
Ottawa Senators (Corel Centre built in 1996) and Buffalo
Sabres (HSBC Arena-1996) declared bankruptcy while the St.
Louis Blues (Savvis Center-1994) and Los Angeles Kings
(Staples Center-1999) reported substantial losses in the
last few seasons. Four more teams, none with an arena more
than 10 years old, are for sale.
The new arena is a diversionary issue. Mellon Arena has not
been declared unfit to host events, it is structurally sound
and fits the purpose of hosting hockey and non-hockey
events. It is true that team finances are hurt by
unfavorable contracts at the Mellon Arena, leapfrogging
player salaries, a general lack of fan support and tiny
revenues from television. 
Moreover, they receive little or
no revenues from non-hockey events and concession sales.
Presumably, a new arena with better contracts could allow
the team to gain more control over revenue streams from both
hockey and non-hockey events.
What the Penguins actually want is for taxpayers to
subsidize their ability to increase revenues. Under a plan
offered by the Allegheny Institute, the Sports and
Exhibition Authority could borrow enough money to construct
a new facility by setting aside some of the anticipated
revenues from streams such as permanent seat licenses,
naming rights, advertising, and luxury box sales. 
This plan allows for minimal risk to the taxpayers while providing the
team increased revenues. A subsequent plan from the SEA
also called for the use of revenue bonds in arena
construction. The team has dismissed both plans on the
grounds that it calls on the team to put forward substantial
amounts of money either upfront or through diversion of
arena revenues to retire debt.
Here are a couple of solutions that address the team's
revenue problems that do not require a new arena. First, the
Penguins and the SEA should negotiate a long-term lease for
the Mellon Arena for one dollar per year. This would allow
the team to increase revenues by tapping into non-hockey
events and increasing their take of advertising and
concessions. It would also provide the team with the
incentive to market the arena more aggressively for
concerts, ice shows, and other non-hockey events.
Second, if the Penguins are truly a valuable asset for the
Pittsburgh area then there must be corporations and
individuals who benefit substantially from the presence of
the team. The Penguins should take advantage of the value
they provide by offering non-voting shares to the public at
$50 per share (perhaps a minimum 10 shares for individuals,
1000 share for corporations.) Those shares could be redeemed
at market value if the team is sold and moved out of
Pittsburgh.
It is time for those who benefit from the presence of sports
franchises to ante up to show their support for the team
through purchases of ownership shares. It is not the
responsibility of taxpayers to subsidize private, profit
seeking sports franchises. Our previous mistakes in
double-crossing taxpayers do not constitute a case for doing
it again.
 Policy Briefs may be reprinted as long as proper attribution is given.
www.alleghenyinstitute.org
==Links==
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