Penguins, city reach agreement on Civic Arena site

garage to be built at the site, according to Travis Williams, the team’s chief operating officer.

Mr. Peduto said the new agreement, reached after weeks of negotiation, takes the city off the hook for potentially owing the Penguins millions of dollars in credits when their development rights expire. As long as the credits were in place, it served as a disincentive to development, he argued.

“If you think about it, if you have this [old] deal, it was like being handed an ATM. Every single day, 2,400 cars pulling in, and you’re getting all that money. Every night and every event — you’re getting all that money,” he said.

“And on top of that, if you do absolutely nothing, the pot of gold at the end of the rainbow in 2028 is $15 million. That is a conflicting interest [instead of] pursuing the development of the site. It was always something that would be in the back of anybody’s mind. Now that has been taken off the table.”

Mr. Peduto said the credits also created problems in trying to get the land appraised for purchase by the Penguins, as the old deal required.

The city tried to maximize the value to force the team to exhaust its credits, while the team’s incentive “was to drive it down,” said the mayor’s chief of staff, Kevin Acklin.

“We got into mortal combat fights about land valuation,” Mr. Acklin said.

Without a new deal, the Penguins would have been required to forfeit a 2.1-acre parcel of their choosing after exhausting two years’ worth of extensions, the maximum allowed. Mr. Acklin said the 6.45 acres the Penguins now must develop by 2020 is the same as it would have been under the old agreement over the same time.

By forcing the team to give up parking revenue should it fall behind in developing the land, it is a “much more meaningful concession by which they’re putting their money where their mouth is,” he said.

Still, with the new deal, many of the tighter deadlines that the team was slated to hit have been replaced with broader targets for development. For instance, other than the 2020 deadline, the only other requirement is that the Penguins have the rest of the development done by 2028.

But Mr. Acklin said the parties are still trying to negotiate a second “check-in date” later in the option period because of concerns raised by URA board members R. Daniel Lavelle and Cheryl Hall-Russell.

In the new agreement, the team will provide a parcel to the Pittsburgh-Allegheny County Sports & Exhibition Authority and the city Urban Redevelopment Authority to build a publicly funded parking garage of up to 1,000 spaces to support the development and the arena.

The public will retain title to the land for the garage, revenue from its net operations, and air rights to construct additional development on the first floor and on top. Furthermore, up to 10 percent of parking taxes generated by the garage will be contributed to the fund for redeveloping the Hill.

Under the deal, the Penguins can win credits back — $3 million, for instance, if the garage is not built on a timely basis — and another $3 million if other public commitments to help on environmental, infrastructure and affordable housing issues are not met.

Mr. Williams said the deal should help to get development rolling by removing impediments that have hampered it in the past.

“We’re at the cusp of moving this forward. This deal allows us to do that,” he said.

Under the Penguins’ current plan, the development is set to include more than 1,000 residential units, with 20 percent affordable to households at 60 percent or below the area median income for 35 years; 500,000 square feet of office space; and 250,000 square feet of entertainment and retail.

Assuming lower-income housing tax credits are approved for the development, the affordable housing component is better than that in a deal negotiated with Hill leaders calling for units affordable for households at 80 percent of the area median for eight years.

As part of the community benefits, a Local Economic Revitalization Tax Assistance program is expected to generate more than $25 million from the development to be reinvested in other parts of the Hill. Mr. Peduto said the Penguins also have agreed to contribute to funding for a deck over the Crosstown Expressway and the Curtain Call project outside the arena.

The agreement still must be approved by the boards of the SEA and URA, both of which own parts of the site.

No development has started at the site to date. The Penguins had a deal with U.S. Steel to build a new headquarters there, but that fell through because of the Pittsburgh steel company’s financial woes.

The team is working with St. Louis developer McCormack Baron Salazar to start the first phase of the residential development near Crawford Square. That originally was supposed to start early next year, but Mr. Williams said that is now targeted for the latter part of 2018.

He also said the Penguins are working with an unnamed developer on a destination entertainment project for the site and hope to submit a letter of intent by early next year. Work could start by the end of 2018.