This is believed to be the first no-interest loan to a CHL team.
By DAVID SKOLNICK
VINDICATOR STAFF WRITER
YOUNGSTOWN -- City council will vote today on allowing the board of control to give the Youngstown SteelHounds a no-interest loan up to $2 million to assist the minor league hockey team with operating expenses.
It is believed to be the first no-interest loan given to a Central Hockey League team, even though the SteelHounds' general manager says this is standard operating procedure for CHL teams and their home cities.
Known as a float loan, Blue Line Hockey LLC, the parent company of the SteelHounds, wouldn't have to pay interest for up to 18 months.
The money for float loans comes from 50 to 60 nontax city revenue sources including court fines, parking meter fees, investment income, park and recreation fees, and rent from buildings owned by the city, said Jeffrey Chagnot, the city's economic development director. Those nontax revenue sources raise about $6 million to $7 million annually for the city, he said.
Also at today's meeting, council will consider a similar ordinance to loan as much as $250,000 with no interest for up to 18 months to Ansaso Inc., which recently opened the Santisi Wholesale Foods facility on Mahoning Avenue.
To obtain a float loan, a company needs an irrevocable letter of credit from a bank. After the 18 months, the city is reimbursed the full amount of the loan by the bank, Chagnot said. If the company goes out of business during those 18 months, the city gets all of its money from the bank so there is no risk involved, he said.
Businesses want the city float loan because it is significantly cheaper than a conventional bank loan, Chagnot said. Although the float loan is interest-free, those obtaining the loan have to pay an amount equal to about 2 percent interest for certain closing costs and processing fees, he said. The city has given float loans to companies since 1992, Chagnot said.
George Manias, the SteelHounds general manager, said this is a standard government agreement for many minor league hockey teams.
Manias deferred further comment on the loan to Herb Washington, Blue Line Hockey LLC's president. Washington, the owner of 21 McDonald's restaurants in the area, couldn't be reached Tuesday to comment.
While Manias said the deal is a standard government agreement, it is believed to be the first of its kind with a CHL team.
The CHL has been active since 1991, and is owned by Global Entertainment, the Phoenix company working in conjunction with Compass Facility Management of Ames, Iowa, as the operators of the Youngstown Convocation Center.
CHL President Brad Treliving said cities and other government entities have paid money to improve facilities for hockey teams in the league. However, he can't point to any team that received no-interest loans from a government entity.
When the league started in 1991 with six teams, they played in former rodeo facilities, and cities and counties paid to have those buildings improved to house hockey, Treliving said. Building improvements were made to other buildings as the league expanded, he added.
Xochitl Mora, spokeswoman for the city of Laredo, Texas, the home of the CHL's Bucks, said Laredo did not give financial help to the hockey team's operating budget.
Treliving said Washington is current on his schedule to pay the CHL a $1 million entry fee. The league doesn't discuss its payment plans, but Treliving said there are no problems at all with Washington's entry fee.
"It's never been an issue," he said. "The SteelHounds are in full compliance with the league."
The SteelHounds home opener is scheduled for Nov. 4. It is the first event scheduled for the downtown Youngstown arena. The arena, currently under construction, is expected to cost about $41 million to build. The team will play 32 home games at the facility. The team will spend the first two weeks of the season on the road.