With V&M Star ready to begin production in its new, state-of-the-art steel pipe-making plant on Route 422, and with the future of the U.S. Post Office in downtown Youngstown hanging in a balance, Mayor Charles Sammarone must face a harsh truth: Income tax revenue is going to decline, which means tough times ahead.
While the launching of the V&M facility is cause for celebration — the company is also building a $50 million pipe finishing mill — city government will feel the effects of the end of construction. That’s because the total number of employees at the plants will be lower than the total number of construction workers.
While the tax revenue numbers are still being crunched, Sammarone is already proceeding with cost-cutting measures in city government.
Since he took office in August 2011, the mayor has spent a lot of time analyzing the budget and has concluded that major changes must be made in the way the city operates. If the Post Office is closed, the city will lose $500,000 in income tax.
Hence, Sammarone’s plan to either sell or lease the Covelli Centre, which is a $900,000 drain on the public treasury each year. That figure represents the principle and interest on the $11.9 million Youngstown government borrowed to help pay for the $45 million sports and entertainment complex on the east side of downtown. The seven-year-old building — it was made possible by a $26 million federal grant secured by former Congressman James A. Traficant Jr. — does not generate enough revenue to cover the operation and maintenance costs and to pay the annual debt service.
While it is true that the Covelli Centre has been showing an operating surplus since 2009, there still isn’t enough money to pay the annual interest on the loan and reduce the principle. That means the city must dip into the already strained general fund.
The mayor, who has vast experience with city finances having served as a councilman, water commissioner and president of council, insists the current set up cannot be sustained. That’s why he wants to cut the Covelli Centre loose.
On Friday, the board of control, made up of the mayor and the finance and law directors, hired PA Sports and Entertainment of Downingtown, Pa., and Cranston, R.I., to review the center’s operation and evaluate the facilities. Sammarone says it is important to get an independent evaluation because he wants to know what to expect when he puts out a request for proposals.
Given the mayor’s willingness to consider any offer that would enable the city to pay off its loan and perhaps have a little extra money to dedicate to the demolition program, the city should be able to find a buyer or a lessee.
Indeed, the consultant, PA Sports, has told Sammarone that while selling the $45 million complex may be a challenge, leasing it will be much easier. There could be national entertainment companies interested, and a local group of investors may emerge to put in a bid.
Regardless, Sammarone is unwavering in his contention that the city of Youngstown, which is losing population, has a stagnant tax base and must deal with an intractable crime problem with a reduced police force, cannot afford to indefinitely prop up the Covelli Centre.
As we argued from the outset, sports and entertainment complexes do not make money, which is why the private sector steers clear of them. It is mostly governments — with taxpayer dollars — that own the facilities.
The decision to build a $45 million complex was ill-advised, and now it’s time for the city to cut its losses if it can.