PITTSBURGH — The Pittsburgh Penguins are making this pitch to state politicians: Pull the right lever, get a new arena for free.

A gambling company has reached an agreement with the Penguins to build a $290 million arena for free if it is awarded the license to build a new slot machine parlor in the city. The deal also calls for retail and residential development on land where Mellon Arena now sits, with a total project cost of about $1 billion.

Under the agreement announced Wednesday, Isle of Capri Casinos, Inc. would build the arena, then turn it over to the city-county agency that operates 44-year-old Mellon Arena, where the Penguins have played since 1967.

The new arena would be constructed on a former hospital site across the street from Mellon Arena on land owned by the Penguins, who unveiled sketches of the proposed 18,500-seat building last year. Nationwide Realty Investors, which financed the Columbus Blue Jackets' arena, would then develop the Mellon Arena site with retail stores, office space and residential property.

The partnership represents a change of course for the Penguins, who previously planned to pursue the slots license on their own. Instead, Isle of Capri will seek the license, and the Penguins would receive only a new arena in the deal and no gaming revenues.

"We have done this in the backdrop of knowing and hearing that no one has any money from the public sector for an arena," Penguins president Ken Sawyer said. "That is no small challenge. But we have come up with a way to pay for the entire cost of building a new arena with not a nickel of taxpayer money."

The slots parlor would be one of five to be built in non-racetrack locations in Pennsylvania following approval last year by the state Legislature. Proposals for the slot licenses must be filed by next week, with the licenses to be awarded sometime next year.

The Penguins' announcement comes as city and Allegheny County officials try to find a way to build a new arena without using public money. Penguins owner Mario Lemieux said earlier this month that there was a "slim chance" that the team would stay past the 2006-07 season without the new arena agreement he has sought since acquiring the team in 1999.

"It would be pretty hard to question 'Why not do this?'" Sawyer said. "It's a great opportunity to get a new arena. ... We don't need state money. They can put the state money to other uses. We're offering to build the arena at no cost."

Lemieux's ominous statement appears to have had the desired effect by stirring up movement among politicians, some of whom have been reluctant to endorse an arena deal.

After Lemieux's remarks, Allegheny County Chief Executive Dan Onorato and Pittsburgh Mayor-Elect Bob O'Connor began developing two plans for a new arena, one that would use slots revenue and another that would not. Onorato said it is his intention to keep the team in Pittsburgh even if the team does not receive an arena funded by slots money.

While there is expected to be strong competition for the Pittsburgh casino license, there appears to be growing sentiment among city and county leaders to require whatever company that lands the license to build an arena as part of the project.

Unlike PNC Park, where the Pirates play, and Heinz Field, the Steelers' home, the arena would be used year-around for nonsporting events such as concerts, touring shows, circuses and conventions. The Penguins argue that many who would attend events at the new arena would also stay in town to go to the slots parlor.

The Penguins' partnership has long been expected since there seemed to be little chance that any agency would award such a potentially lucrative slots license to a pro sports team, even one that has struggled financially as the Penguins have with two bankruptcies in their 38-year existence.

The team announced a similar development project for the Mellon Arena site about 18 months ago, when it planned to seek the slots license on its own.

Under the new plan, first disclosed in Wednesday's editions of a Pittsburgh, the gambling company would apply for the slots license that is to be awarded in the city and would pledge the money to build the new arena in return.

The arena and casino would cost an estimated $600 million to $700 million. Another $400 million worth of office, retail and residential space would be part of the development on the current arena site.

Also Wednesday, the city-county Sports and Exhibition Authority board voted unanimously to allow the Penguins to extend their Mellon Arena lease for one year to June 2008. Previously, the team had an option to renew the lease for five years.

Even if the Penguins reach an agreement to build a new arena within the next year, the building would not be ready for the 2007-08 season.

Isle of Capri, founded in 1992, owns and operates 15 riverboat, dockside and land-based casinos at 13 locations, most in the South, as well as the Pompano Park harness track in Florida. Other locations are in the Bahamas, Florida, Iowa, Louisiana, Mississippi and Missouri.