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Mayor mulls selling Covelli Centre

Published: Fri, April 27, 2012 @ 12:10 a.m.



By David Skolnick



Because the Covelli Centre has never made enough money to cover the debt owed by the city to build it, Mayor Charles Sammarone said he’s considering selling the facility.

But Sammarone said Thursday at a meeting of the city council finance committee that he isn’t sure the city could find a buyer.

And Eric Ryan, the center’s executive director, said, “I know of very few privately-owned arenas, and most of those are smaller than ours. Most [arenas] are owned by cities.”

The center produces an operating surplus — $126,314 last year and $59,024 for the first three months of this year — and the city receives money from a 5.5 percent admission tax on tickets sold at the facility — $215,578 in 2011 and $37,017 for the first three months of 2012. Before 2009, the first full year Ryan’s company managed the center, it had six-figure operating deficits.

The problem, Sammarone said, is those two revenue streams aren’t enough to offset the principal and interest owed on the $11.9 million the city borrowed in 2005 to help fund the center’s $45 million construction cost.

The city will pay $920,000 this year for the center, $335,000 toward the loan principal and about $585,000 in interest. The city started paying principal last year with $275,000.

“We still haven’t made enough money to make up the debt,” Sammarone said. “We’re lucky that the debt hasn’t cost us police and other basic services.”

But paying the debt could be a drain on the city’s finances in two to three years, he said.

“It will be a problem for the future,” Sammarone said. “I want to tackle it now. The debt is more than we can afford.”

When improvements that will need to be made to the center in the future are added to the equation, the city could find itself spending a lot more, he said.

More than 99 percent of entertainment-and-sports facilities throughout the country don’t make enough money to cover all expenses, the mayor said.

Sammarone said he plans to ask SMG, the center’s national consultant, if any company would be interested in buying the arena.

Another problem for a potential buyer, Sammarone said, is property taxes.


But the city received good news about its effort to overturn a recent Ohio Department of Taxation decision denying Youngstown’s long-standing request for tax-exempt status for the center. The department is asking for $4.75 million in delinquent taxes and penalties from Youngstown.

On Wednesday, the Ohio House approved a mid-budget review bill that includes a provision that forgives the delinquent taxes and penalties and gives tax-exempt status to the city-owned arena.

The House Ways and Means Committee approved including that provision into the budget bill by an 8-7 vote Tuesday, and the full House approved the budget bill, with the amendment, a day later.

“We’re very grateful to the Republican majority [in the state House] for helping Youngstown,” said state Rep. Ronald V. Gerberry of Austintown, D-59th. “This is a big deal for [Youngstown]. It’s really, really important.”

It goes to the state Senate with a vote expected in late May or early June.

Without the provision, the $4.75 million would put a “big, big, big strain on our finances,” Sammarone said. “Hopefully, it will end up in the governor’s budget.”

Throwing out another idea, Sammarone said getting a Las Vegas-style casino to locate near the center “might be a better idea.” Efforts by state legislators from the area to include a casino in the Mahoning Valley on a ballot issue and in gambling-related bills have failed.

The mayor said he was throwing out other ideas for the center, including turning it into “a big Internet [caf ] palace,” he said.

In addition to looking for a company to buy the arena, Sammarone said the city also wants to sell 20 Federal Place, a downtown office building, to a private business.

Information provided by Ryan on Thursday showed the Covelli Centre made a $59,144 operating surplus during the first three months of the year. It was projected to make $51,024.

The biggest success was a sold-out Miranda Lambert concert Feb. 18, attended by about 6,000 people.

Other successful events between January and March were two weekends of amateur wrestling and Ringling Bros. and Barnum & Bailey Circus had four of nine dates in late March, Ryan said. The five other circus dates were earlier this month.

The $59,144 operating surplus for January to March is the third strongest first quarter since the center opened in October 2005. The operating surplus last year was $89,529.

The best year was 2008 with a $242,340 operating surplus, largely because of a Kelly Pavlik middleweight boxing match.


1chuck_carney(499 comments)posted 3 years, 7 months ago

Selling the Covelli Center would be like selling the Ohio turnpike?

Wonder if the city and it's lender would be willing to take a loss to dump the CC. Would Ryan be willing to rework his deals?

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2glbtactivist(299 comments)posted 3 years, 7 months ago

It's about time someone talked reality. Sure having a center is great. But I am tired of paying a million dollars a year out of city tax dollars for that white elephant. Hire ten cops instead.

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3PhilKidd(187 comments)posted 3 years, 7 months ago

Here's the problem: no one is likely to buy it.

Convention centers - by and large - are not (significant) profit generators. This why they are publicly owned. The city screwed up royally when it borrowed more money then it was allocated to complete the project as well as the corruption that ensued when City Council took a payoff to move the facility from the west end of Federal to its current location while also giving city control of overseeing management.

However, those days are behind us. The decision was made. The facility is here and most would agree it's been a value add to the community. If we want to keep it open, the community at-large is going to have to determine its fate.

A ticket or county entertainment tax is likely the only way pay down the $900K interest / principle as well as reserve funds for inevitable improvement. Otherwise, the city is going to eventually default and the center will sit vacant.

I say put it on the ballot for a one-time, 4 year special entertainment tax to pay off the principle. Let the people of Mahoning County decide its fate.

P.S. By the way: this was discussed at a Finance Committee meeting in the AFTERNOON. Why are these committee meetings not being posted on the city's website or in the Vindicator? Why are they being held during the day when (the majority) of the public can't attend? This happens often and it's wrong, City Council.

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4PhilKidd(187 comments)posted 3 years, 7 months ago

No one is going to buy a convention center that makes a $100K profit a year. Fact. The city can't pay $900K interest & principle. Two things are going to happen: the city will pull from the General Fund to cover the payments (which means less money for demolition, cops, streets, etc)...or the city will eventually default and the Covelli will sit vacant.

The center caters to the REGION, not just city residents. Therefore, after 7 years, I think the voters of Mahoning County should be allowed to determine its fate. If they vote down a one-time tax to pay off the principle and let it die on the vine, so be it. But I think it's a valid option.

By the way FLICK: The WRTA is an asset for many (especially in this economy). It's ridership is at an all-time high (over 1 million riders last year alone). Mill Creek Park is most certainly an asset. The airport is doing exceedingly well with is current Florida detestation packages. And with as much economic development that is taking place in this area (natural gas & oil; GM; downtown technology), the airport will serve as very vital role for business travel (at minimum).

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5keepingitreal(25 comments)posted 3 years, 7 months ago

All great posts.

The tax would stand no chance of passing, so forget that.

Eric Ryan is doing a super job of running the Covelli, so there is no fault there.

Let's face it, in 10 years it will most likely be the Covelli Casino.

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6DwightK(1458 comments)posted 3 years, 7 months ago

Phil, is their any way to reorganize the loan? 900k per year in interest is ridiculous. The lender should see the writing on the wall and work with the city.

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7keepingitreal(25 comments)posted 3 years, 7 months ago

Youngstown fire dept is grossly overstaffed and bloated. Less buildings, less residents and new buildings have sprinkler systems.

I drove by a kitchen fire last month and they had 5 big fire trucks and 3 Suburban SUVs with fire dept emblazoned across the sides. Ridiculous.

Cut 2 million per year from fire dept and put that towards the debt.

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8Peregrine(47 comments)posted 3 years, 7 months ago

I don't know how to solve the payment problem, but I do know that the Covelli Center is the most positive thing to happen to the Mahoning Valley in a very long time. It elevates the area from backwater status to a place worth visiting. The facility is first rate and there is not a bad seat in the house. I agree that as a county resident, I'd like to have a say in what happens to it. Aren't there enough creative brains in the area to come up with a workable solution or is it doomed by city politics?

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9HaydenThomas(208 comments)posted 3 years, 7 months ago

As with anything initiated by government in this God forsaken area, the few make out while those stuck with the bill get the shaft. Keep voting in the same idiots and expect different results.

Nobody out there with a scintilla of common sense would buy this white elephant.

It's time the public sector focus on important things and quit with the feel good things like arenas and airports.

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