There’s no point in revisiting the troubled history of the Covelli Centre other than to note that the warnings about Youngstown city government taking a huge risk in building a $45 million facility have come true. Seven years after the sports and entertainment complex in downtown Youngstown opened its doors, the financial picture is anything but bright. Despite announcements of operating surpluses, the reality is one that has preoccupied Mayor Charles Sammarone since he took office in August.
In 2005, the city borrowed $11.9 million to make the $45 million facility a reality. The largest infusion of funds was $26 million from the federal government in a grant secured by then- Congressman James A. Traficant Jr. For the first five years of the loan, only the interest was paid. Last year, a state law kicked in that required a payment toward the principal by Sept. 2. The total amount was $970,000.
This year, the city will pay $920,000 in principal and interest, which the mayor contends is much more than what the Covelli Centre is generating in operating surpluses and revenue from a 5.5 percent admission tax on tickets.
Faced with a future that’s bleak at best, Sammarone announced last week that he is exploring various options, foremost of which is the sale of the arena to a private firm. What forced the mayor’s hand was a notice from the Ohio Department of Taxation that the city’s long-standing request for tax-exempt status for the center had been denied. As a result, the department is seeking $4.7 million in delinquent taxes and penalties. The city would be in dire straits if it were forced to pay the bill.
Area state legislators are attempting to secure the exemption through legislation. A mid-budget review bill passed by the House contains a provision that forgives the $4.7 million debt and makes the Covelli Centre tax-exempt. The bill now goes to the Senate. But even if it passes, Gov. John Kasich may veto the bill because of some other provisions he finds objectionable.
LONG-TERM FINANCIAL PESSIMISM
Sammarone is looking down the road, and city government’s long-term financial condition does not inspire confidence. He correctly notes that while the almost $1 billion V&M Star projects are generating a sizable amount of money through income taxes paid by construction workers, once the plants are operating, employment numbers and tax revenue will drop.
There also is the very real possibility that the U.S. Postal Service’s collection and distribution center in Youngstown will close, costing the city $500,000 in income-tax revenue.
In explaining his decision to meet with SMG, the Covelli Centre’s national consultant, to discuss a possible sale, the mayor put the cards on the table:
“We still haven’t made enough money to make up the debt. We’re lucky that the debt hasn’t cost us police and other basic services.”
What if a private entity agreed to buy the center for the amount the city borrowed? The administration would have to review the federal government’s grant agreement to determine if such a transaction is permitted.
The reality of Youngstown, like many urban communities, is that the population is declining, the tax base is stagnant and the demand for basic services, especially police and fire, is growing.
Sammarone threw out the idea of using Covelli as a casino if the state constitution can be amended to add Youngstown to the list of cities that allow Las Vegas-style casinos. It’s a long shot.
The bottom line is that Youngstown city government, with all its problems of crime, deteriorating neighborhoods and population loss, is on the hook for millions of dollars.