Report praises operations of Covelli Centre

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A $50,000 study from PA Sports & Entertainment, a Downingtown, Pa., consulting firm, recommends options to Youngstown to improve operations at the city-owned Covelli Centre. Key proposals include: don't sell or lease the facility, review the Phantoms hockey team's use of its rink, negotiate a long-term naming rights contract and study whether to build a summer amphitheater

RELATED: Study: Youngstown could make more money without Phantoms



A city-commissioned report urges Youngstown not to sell or lease its Covelli Centre.

Also, the $50,000 study from PA Sports & Entertainment praised JAC Management Group, which runs the day-to-day operations of the center, for providing “the city with a qualified industry firm with local management experience that minimized costs and improved revenue” at the facility.

The $50,000-study originated last April when Mayor Charles Sammarone said the city should consider finding a buyer for the center, and that an examination of the facility was needed before putting it on the market.

Since then, Sammarone essentially has ruled out a sale. Also, no one on city council favors a sale, and most members are lukewarm, at best, to a lease.

Despite the study’s recommendations, Sammarone said there is no harm in seeking proposals to lease the center, with a process in place to start next month that would be finished about April to see if someone is interested in leasing.

“There’s always been a concern from day one for the center to cover costs,” he said. “The concern isn’t so much now. It’s about the future. The Covelli Centre is good for the next one to two years, but 10 years from now, if you don’t have the money, you don’t want to lay off [police and fire personnel] to pay to keep the center running.”

If the city doesn’t receive any responses for leasing or doesn’t get any with favorable benefits to Youngstown, Sammarone said the focus will be on locking up JAC as the center’s management company through a long-term contract.

JAC’s existing five-year contract to manage the center expires Dec. 31.

The mayor added he is very satisfied with JAC managing the center, and would have to be overwhelmed by a lease offer to not stay with JAC. He added that council also has to agree on who will manage the center.

Eric Ryan, JAC’s owner and the center’s executive director, said he has “no issue” with the city seeking lease proposals.

However, “We hope to negotiate a long-term contract,” he said. “This is a dream job to work in this industry in our hometown. We want to continue to help our community.”

The city hired PA Sports & Entertainment, a Downingtown, Pa., consulting firm, to conduct an operational assessment of the city-owned center.

The report states Ryan “has an excellent industry reputation,” but his efforts are “continually challenged” by the current economic times, competition with nearby bigger markets, and “recent media coverage of the facility’s future ‘uncertainty.’”

PA’s study also states the rest of the JAC staff does a good job, even though the number of full-time workers there is “lean” compared with other facilities of its size.

“Eric is doing a good job there,” Sammarone said.

The concerns about a sale or lease, according to PA’s report, include: risking the city’s tax-exempt status on the building and handling the outstanding debt owed by the city for the center.

Ryan said he’s “pleased with the report,” and is “looking forward to meeting with the city to implement the recommendations it supports.”

The 2012 financial report for the center will be done in a few weeks, but Ryan said it will be the facility’s best year with at least a $300,000 operating surplus and $175,000 from a 5.5 percent admission tax on tickets sold at the arena.

That is about twice as much as the center’s best year.

Depending on how money is counted, 2012 could also be considered the first year the center turned a profit.

In 2012, the city paid $325,000 toward the $11.9 million it borrowed in 2005 for its share of building the $45 million facility.

It also borrowed $113,250 last year to cover interest on the money it still owes on the principal. That amount will be paid back this year. The city paid $579,925 last year for interest on the principal it borrowed in 2011.

If you count the interest borrowed in 2012, there would be a profit. If you count the interest paid in 2012, there wouldn’t be a profit.

The facility is expected to make $350,000 in operating surplus this year and $225,000 in admission taxes, the report states based on JAC’s budget for the center.

The study recommends the city take out a long-term bond to pay the remaining $11.3 million the city owes for the center. [It paid $275,000 in principal in 2011.]

But city Finance Director David Bozanich said borrowing annually for at least the next few years will mean a lower interest rate — it was 1 percent in 2012 —than a 15-to-20-year bond with a projected interest rate in the high 2-percent range.

“The issue is that debt,” Sammarone said. “We have to reduce it.”

The report also recommends negotiating a 15-to-20-year naming rights agreement with a “significant up-front payment” to pay more of the principal on the construction loan.

The city is in a holding pattern on long-term naming rights because of the possibility of leasing the center.

PA also suggests a 25-cent-fee on every ticket sold for events at the center to create a capital improvement fund that would generate about $35,000 annually.

Sammarone said he likes the idea and is considering a larger fee for that purpose.

The study also recommends studying the construction of an amphitheater for outdoor events. Ryan has suggested this for the past few years, but the city doesn’t have the money for such a project.

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