City council will consider legislation Wednesday to sign a 99-year contract with V&M Star to lease land for its $1.1 billion expansion project that calls for the company to pay $8,573,805 to the municipality during the first three years of the deal.
The city and company spent nearly two years negotiating the deal that repays most of the approximately $12 million spent by Youngstown on water and wastewater lines, a new road and a water tower near the V&M site that also benefits nearby neighborhoods and commercial businesses, said city Finance Director David Bozanich.
Of that $12 million, about $2 million came from state and federal funds, he said.
The tentative deal calls for V&M to pay $2,857,935 a year for the first three years of the contract. Also, V&M would pay $100,000 annually to the city for the remaining 96 years of the contract.
“It’s not [an unexpected] windfall, but it will help when putting the city’s budget in place,” Bozanich said. “V&M has been very fair in terms of how they’ve dealt with the city.”
For example, V&M has reimbursed every dollar spent by the city for the property being leased to the company, he said. That amount is about $5.8 million, he said.
“This is a significant investment by V&M, so it was worth our investment,” Bozanich said. “The value to the city for V&M’s long-term investment is important. Also, the infrastructure work creates an environment for” other companies to open and expand nearby.
V&M’s facility, which produces pipes for the gas and oil industry, started operating Oct. 26 and is scheduled to begin sales at the expansion site next year.
“The 99-year term of the lease reflects V&M Star’s long-term commitment to the city of Youngstown and confidence in our company’s long-term future,” said Vince Bevacqua, a spokesman for the company.
The influx of $2,857,935 annually from V&M into the city’s budget, along with spending cuts and an early-retirement incentive, will significantly help Youngstown avoid a potential deficit, said Mayor Charles Sammarone.
It has other benefits, he said.
Whatever isn’t needed to balance the budget will go toward demolishing dilapidated houses in the city, Sammarone said.
The mayor said he doesn’t know what that figure is because next year’s budget isn’t prepared.
The city is spending $1 million from its general fund, $1 million from an attorney-general program and $475,000 in community-development agency money to take down vacant structures in its neighborhoods.
Those funds will allow the city to demolish about 325 to 400 houses next year.
Sammarone’s goal is to take down 1,000 vacant houses in 2013.
“I set high goals,” he said.
About 250 have been demolished so far this year.
There are about 1,070 dilapidated houses that need to be demolished and a total of about 4,000 vacant structures in the city, Sammarone said.
With the money from V&M, the city can take its time looking at a plan to solicit offers from companies to lease city-owned land for gas and oil drilling, Sammarone said. The plan is to use money from fracking for neighborhood improvement efforts, primarily demolitions.
On Oct. 17, city council gave the board of control approval to move ahead with that plan over the objections of those who oppose fracking. At the time, city officials said it would take about six to eight months before it could start the process of finding a company interested in the leasing rights.
The V&M money “gives us time to look longer at fracking,” Sammarone said.