The city of Youngstown can no longer put off paying the principal on the $11.9 million loan it secured in 2005 toward construction of the $45 million sports and entertainment complex, now called the Covelli Centre. Thus, the administration of Mayor Jay Williams must come up with $300,000 by Sept. 2 — in addition to the $670,000 it was prepared to pay this year in interest.
A million here, a million there and soon the revenue-challenged, shrinking urban city is talking real money — money that must come out of the general fund. That’s because the Covelli Centre, which the city owns, will never generate the revenue needed to make it truly self-supporting. While the facility, which opened for business in 2006, has shown operating surpluses in four of the last six years, the accounting has not taken into consideration the $11.9 million loan.
If Youngstown didn’t have the long-term debt obligation, the $1 million each year could pay for demolition of dilapidated structures, crime-fighting, or even job-creation initiatives. Instead, the 800-pound financial gorilla will be at the table every time there is a discussion about the city’s finances. That reality should force the mayor, his financial team and members of city council to take a long, hard look at government’s revenues and expenditures.
Dealing with debt
Until this year, Youngstown got away with paying the interest only — it ranged from $600,000 to $800,000 a year — and ignored the principal. But state law requires a payment toward the principal by Sept. 2.
The city must now try to sell 20- to 30-year bonds in the open market, or seek to refinance the loan. A lot depends on the interest rate the city would have to pay.
Regardless of the option chosen, Youngstown will have an annual payment on top of fiscal uncertainties brought on by the loss of population, the decline in income tax revenue and the expected reduction in state and federal funding.
We are pleased that the mayor has acceded to council’s demand that the administration seek proposals for the food-and-beverage contract at the Covelli Centre. The current provider, Centerplate, is willing to walk away from its contract for the $467,762 it would be owed.
Council has also adopted the proper stance on the proposed amphitheater that would be built adjacent to the arena. Youngstown cannot afford to take on another financial obligation. If Covelli Centre Director Eric Ryan believes the project would be an economic boon, he should seek financing outside City Hall.