Y’town has a chance to go for gold with arena

By Bertram de Souza

Mayor Jay Williams is justifiably pleased with the initial presentations from three nationally renowned companies interested in running the Chevrolet Centre, but here’s a piece of advice for Hizzoner: Now that you have them in your grasp, squeeze hard.

Williams and his brain trust will be meeting in private with officials of Global Spectrum of Philadelphia, The Cavaliers Operating Co. of Cleveland/International Facilities Group of Chicago, and SMG of Philadelphia to follow up on their public presentations.

That offers a golden opportunity to talk specifically about the $11.9 million of debt the city is carrying. It borrowed the money to fill the financing gap in the $45 million arena project. It costs the public treasury $755,650 a year just to cover the interest on the loan.

From what has been revealed in the public presentations, it does not appear that any of the companies is willing to commit to an annual payment of $755,650, and that begs the question, “Can’t the city do better?”

Perhaps it can — but not in the way we’ve all come to expect.

Remember that Global Entertainment Corp. of Arizona, which managed the Chevrolet Centre from the time of its opening in October 2005 to October 2007, when the Williams administration gave the company the boot, did attempt to make the city whole.

Unacceptable pact

When the mayor took office in January 2007, he let it be known that the agreement under which Global had been operating — it had been negotiated by his predecessor, George M. McKelvey — was unacceptable because it did not provide the city with enough money.

The contract was renegotiated, resulting in Global’s guaranteeing $600,000 a year payment to the city. It meant the General Fund would only have to be tapped for $155,650 a year.

Things were going along swimmingly, until Global began to balk about the $600,000. It could be speculated that the company’s change of heart came when the higher ups in Arizona realized that they had committed to paying the city a ton of money for a losing proposition.

The Chevrolet Centre has not turned a profit in the two fiscal years it has been in operation.

And it could be cynically suggested that Global officials were glad when Mayor Williams announced that he was severing ties with the company. After all, they washed their hands off an expensive dud.

Thus, when the administration announced it was seeking proposals nationally from companies in the entertainment/sports business, the concern on the part of the taxpayers who have refused to become cheerleaders for an expensive facility of low return on the public dollar was the $11.9 million loan.

Global Spectrum’s annual profit estimate of between $241,986 and $297,611 is not encouraging. It remains to be seen whether the other two companies are painting a brighter financial picture.

But before Mayor Williams strikes a deal, he may want to consider another option: offering an ownership stake in the arena in return for paying the city $11.9 million, which would enable it to payoff its debt.

A straight transaction would mean a 26 percent stake in the Chevrolet Centre, but the city could make the deal even more attractive by agreeing to give the potential partner a 40 percent share.

Majority owner

It would still leave the city the majority owner, thereby addressing any concerns the federal government might have, given the $26.8 million grant that was funneled to the project through the efforts of former Congressman James A. Traficant Jr.

Such a stake would also serve as an incentive for the operator of the arena to ensure that it makes money.

One of the problems with the deal that the city entered into with Global Entertainment was the absence of any penalties linked to failure.

It’s not enough for a company to come in and promise the moon, only to shrug when it is unable to deliver. Taxpayers have a right to expect a respectable return on their dollars. After all, that was the argument put forth by the proponents of the sports/entertainment complex.

The time has come to make good on the promises.

The city of Youngstown needs a partner with an incentive to make money.

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