An arena of false profits and false prophets

By Bertram de Souza

The headline on the front page of Tuesday’s Vindicator screamed — OK, perhaps not screamed, but certainly shouted — the good news: The Messiah has returned. Oops, wrong miracle.

“$11K profit buoys Covelli” in 66 point Interstate Black Compressed type certainly is an attention grabber.

“Covelli,” of course, is the Covelli Centre, the former Chevrolet Centre, the $45 million taxpayer-funded, sheet metal-clad sports and entertainment facility in downtown Youngstown.

Happy days are here again.

So, take that you nattering nabob of negativism, you long-time critic of the greatest thing that has happened to the Mahoning Valley since the Mahoning River was dug, you cynical columnist who refuses to walk on the sunny side of the street.

The headline proclaiming the miracle of the profit — it was revealed by one of the prophets of the House of Joy — was bolstered by this subhead: “The city’s operating profit for the arena is $253,423 for this first six months of the year.”

According to the story, the Covelli Centre made $11,087 for the April-to-June quarter, the first time it has done so for this period since the facility opened to much fanfare and self-congratulations (city officials patting themselves on the back) four years ago.

Given that most arenas like the one in Youngstown don’t make money when the mercury rises, the profit that was announced certainly justified the publicity.

Indeed, in 2006, ’07 and ’08, there were huge losses.

But as in all things public, there is a reality check that serves to temper the celebration of the “profit.” Putting the word in quotations is justified given how the $11,087 came about.

Actual revenue

In developing the annual budget for the facility, manager Eric Ryan and city government officials pegged the operating revenue for the April-June quarter at $508,518. However, the actual revenue was $410,524. In other words, the arena lost $97,994.

So how does a loss become a profit? By cutting expenses. Ryan laid off a secretary and the head of security, reduced the number of part-time workers and had the building’s engineer take a temporary leave of absence through the summer.

He also reduced the arena’s utility costs — by turning off the air conditioning and reducing other utilities when there were no events.

Such cost-cutting measures are to be applauded — but they do not mask the fact that the Covelli Centre didn’t really make a profit. It was just able to show one on the books because operating costs were slashed.

In other words, every quarter can show a profit if Ryan’s formula is followed.

As for the overall operating profit of $253,423 as of June 30, that figure also is not an accurate depiction of the financial health of the facility.

Not only was the arena built with taxpayer dollars, the city of Youngstown borrowed $12 million for its share of the construction cost. The annual interest payment alone on the $12 million is more than $600,000. That money comes out of the general fund, which means government cannot meet the demands of residents for more police and fire protection, for example.

So, the $253,423 profit as of June 30 is actually a loss of $46,577 loss — if half the annual interest payment is applied to the operating cost of the Covelli Centre.

There are those prophets of the miracle on the river who contend that it is not reasonable to include the money the city borrowed in the arena’s operating budget (it would show up as an expense) because it was an investment in the community’s quality of life. Of course, they conveniently forget that when the decision was made to go forward with the arena project, city officials at the time promised that not one dime from the general fund would used to finance or support the facility.

Broken promises

It was presented to the taxpayers as a project that would pay for itself. It hasn’t — as this writer and other critics had predicted. If it was pointed out once, it was pointed out a dozen times: Sports/entertainment complexes do not make money, which is why private sector developers do not build them.

In most places, there is a special tax dedicated to the facility, but not in Mahoning County.

If Ryan et al. want to tout success, they (the prophets) should make sure they (the profits) aren’t false.

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