DOWNTOWN CONVOCATION CENTER County ponders loan to city Lower interest rate would mean substantial savings
The city expects to pay back the county through arena-generated revenue.
By DAVID SKOLNICK
VINDICATOR POLITICS WRITER
YOUNGSTOWN -- Mahoning County is giving strong consideration to allowing the city of Youngstown to borrow $4.5 million to help defray the cost of building its downtown convocation center.
County Treasurer John Reardon said a decision on buying a one-year city note for $4.5 million could be made as soon as next week. The actual purchase would likely occur in mid-August, he said.
As the county's investor, the decision to lend the money to the city rests entirely with Reardon. However, the county's three commissioners support the plan.
The money would be part of the county's securities investment portfolio, worth about $60 million.
State law doesn't permit the county, which has struggled financially for years, to use its investment portfolio for general fund expenses, Reardon said. However, the interest collected on the portfolio, which is about $6 million annually, goes into the county's general fund, he said.
Repaying the loan
The city expects to pay back the county from revenue it obtains from the arena, said Youngstown Mayor George M. McKelvey.
There are safeguards in place if that doesn't happen.
If the city couldn't pay the county for the loan through arena revenue, it would tap into its nontax revenue, which generates about $9 million annually through items such as court fines, parking revenues, parking ticket revenues and license plate fees.
Also, the county would be the first lien on the convocation center, Reardon said.
"We'd be doubly secured through the combination of these items," he said.
The city approached county officials a few weeks ago about buying the notes, Reardon said. The county has purchased municipal notes in the past, he said.
The note by the county comes with 4 percent interest. If the city sought to borrow the money on the open market, it would come with an interest rate as high as 5 percent, Reardon said. This process would save the city about $75,000, Reardon said.
Also, a comparable one-year investment by the county purchased at this time carries an interest rate of 3.8 percent, he said, so the county will also see a better return on investment.
The convocation center, slated to open Nov. 4, is expected to cost about $45 million.
The city received a $26.8 million federal grant for the facility, a $2 million commitment from the state and a $550,000 energy grant from Ohio Edison. The city also anticipates obtaining an additional $3 million from the state.
If the county buys the $4.5 million city note, Youngstown would be about $8.15 million short on the cost of the facility, said city Finance Director David Bozanich.
The city is in discussions with a number of banks about loans to fund the rest of the project, Bozanich said.
"We have good credit," he said. "It's not going to be a problem for the city to have a bank lend us the money."
Although the original development agreement in 2004 didn't call for the city to borrow any money for the project, the city was forced to terminate the deal with that developer because of a lack of performance, Bozanich said.
Bozanich and Reardon called the proposal a "win-win situation" for the city and the county.