On Valentine’s Day, The Vindicator’s news desk gave Eric Ryan, director of the Covelli Centre, the ultimate heart-shaped gift: It called him “The Million Dollar Man.”
The front page story — a keepsake if ever there was one — complete with a prominent picture of Ryan, was based on a financial analysis of the center for 2009 and a comparison of the bottom line with those of the previous three years.
The gift to the director was tied with this ribbon: “Eric Ryan is credited for the $1 million financial swing — to the better — for the arena.”
At first glance, it was quite an endorsement.
The sports and entertainment facility in downtown Youngstown opened its doors in 2006 and since then has been struggling to make ends meet.
But according to the front page story, last year, the city-owned Covelli posted its first operating surplus — $153,950. And if the $307,000 from a 5.5 percent admission tax on events is added to the surplus (the money goes into city government’s general fund), the financial picture looks even rosier.
Any investor would jump at the opportunity to be part of such a miraculous turnaround. Right?
Well ... but for this nagging problem: An $11.9 million debt.
That’s the amount city government owes on a loan taken out during former Mayor George McKelvey’s tenure for its share of the $45 million construction cost. McKelvey has been gone for four years and the principle amount has not been reduced one dollar.
Thus far, the city is only able to pay the annual interest on the loan — the interest went from $747,386 in 2006 to $802,060 in 2009.
And here’s the reality of the $11 million-plus confronting the city of Youngstown: The loan will never be repaid in our lifetimes.
Thus, when the annual interest rate is figured into the operating budget of the Covelli Centre, which is where it belongs, the 2009 rosy picture suddenly isn’t so attractive. Indeed, the center cost city government $340,410 last year. This, in a community that is losing population, has a shrinking tax base, has the worst academic performing school district in the state and is dealing with a general fund budget that’s dripping red ink.
But we do have the Cadillac of sports/entertainment arenas, don’t we? Come to Youngstown, where government doesn’t have two pennies to rub together, but it does boast a $45 million showcase.
How long can the city continue shelling out money for a top-notch, high-priced complex that does not show any sign of becoming profitable? It’s a serious question that demands serious contemplation.
The answer: Not long.
So what is to be done?
Enter “The Million Dollar Man.” Ryan, who is being credited, along with SMG of Philadelphia, with turning things around. He has hands-on experience and, therefore, would be in the strongest position to take over the facility.
Ryan — in partnership with SMG — could have it for $12 million.
Think about it: Ryan and SMG are being touted as turnaround specialists, but so long as city government has the $11.9 million millstone around its neck, the naysayers will continue to nay say.
In the news story detailing Ryan’s success as the director of the Covelli Centre, there was an observation about sports and entertainment facilities from John Siehl, executive director of the Nutter Center. It’s on the campus of Wright State University in Dayton.
“If you’re proactive and have a decent year, you can break even. On the surface, it looks like Youngstown is doing well. Those sound like good numbers.”
But Siehl also had this to say about the $11.9 million debt: The center will never make enough money to pay off the principal and interest.
“Anybody who thinks they’ll build a building, make a profit and pay off the loan is out in left field.”
So, what’s the answer? A special tax dedicated to the $45 million facility, or a sale.
Given the demographic challenges confronting Youngstown, a city-only tax is a non-starter. So, what about a county-wide tax? The mere mention of such a proposition has suburbanites who simply love the Covelli Centre suddenly tempering that love.
“FOR SALE: A $45 MILLION ARENA. CHEAP.”