The city may borrow up to $15.5 million from two banks.
By DAVID SKOLNICK
CITY HALL REPORTER
YOUNGSTOWN -- City council approved a plan for the convocation center to allow the city flexibility in how it will make up a projected funding gap of $12 million to $12.5 million for the facility.
The plan would allow the city to borrow up to $12 million through a one-year note from Sky Bank, which would be converted later to a 20-year bond, and up to $3.5 million to lease equipment for the facility for up to five years through National City Bank, said city Finance Director David Bozanich.
Negotiations with the banks -- including interest rates that would be between 6 percent and 7 percent -- are progressing well, and the rates would be locked sometime in September, he said.
Bozanich said the city has no intention of borrowing the maximum $15.5 million that would be available from the banks for the project.
Bozanich said about a month ago that the city would borrow up to $12.1 million, in a worst-case scenario, to make up the financial gap between the cost of the arena, projected at $45.38 million, and funding it has for the facility.
Thursday he said the city would borrow no more than $12.5 million.
The city obtained a $26.8 million federal grant for the facility, a $2 million commitment from the state, a $550,000 energy grant from Ohio Edison and used about $4 million in water and sewer work paid through those departments' funds.
The city is expecting $3 million more from the state for the facility, which would reduce any debt the city may incur on the project. At least $2 million would come to the city in 2007, Bozanich said. The city would get the remaining $1 million from the state in either 2007 or 2009, he said.
The center is expected to net $1.15 million in its first year, based on projections by the facility's manager. Any profits from the arena first go to pay off the city's debt.
The city would use the arena as collateral for the Sky Bank loan and the equipment it would be leasing as collateral for the National City loan, Bozanich said.
Council approved the financial plan for the convocation center at a special meeting Thursday.
Also Thursday, the board of control hired Cohen and Co., a certified public accounting firm with an office in Youngstown, for $17,500 to conduct an outside audit of the city's expenditures for the convocation center.
The Cohen audit, expected to start shortly, is in addition to audits being done by the city, the state auditor's office, and the U.S. Department of Housing and Urban Development -- the federal agency that gave the federal grant to Youngstown.
City officials say the audits will verify they are properly spending money on the convocation center project.