Mayor Sammarone sets strict rules for leasing Covelli Centre
City to begin seeking proposals next week
By David Skolnick
The city will start seeking proposals early next week from companies interested in leasing the Covelli Centre.
But Mayor Charles Sammarone is requiring a lot from potential companies looking to operate the city-owned facility.
During a nearly one-hour interview Thursday on Vindy Radio, hosted by Louie Free, Sammarone said any lease proposal would require:
Paying the city enough money to cover the annual principal and interest expenses, regardless of the amount. The city paid $325,000 last year 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 fees. It paid $275,000 in principal and $579,925 in interest in 2011.
Creating a capital budget for any repairs or improvements needed at the center. The mayor said that figure hasn’t been determined.
Putting up an amount of money in a bond equal to the approximate cost of covering annual principal and interest payments for a 10-year period to lease the facility for a decade. If a company leasing the center would declare bankruptcy or go out of business, the city would be guaranteed the money from the bond, he said.
“That’s pretty strong,” Sammarone said of the requirements. “I don’t know if anyone would do that.”
The time schedule for proposals will be quick. The city will advertise for proposals early next week, give companies about 21 days to respond, and decide a few weeks later.
“If no one responds, then we’ll put it aside and that’s the end of it,” Sammarone said of looking to lease the center.
A $50,000 study of the center by PA Sports & Entertainment, a company hired by the city to evaluate the Covelli Centre, urged public officials not to sell or lease the facility.
All seven council members oppose a sale, and most don’t want to lease it. Sammarone initially had expressed interest in a sale or lease before the study. He’s since backed away from the idea of selling the facility and isn’t as enthusiastic about a lease as he was a few months ago.
Sammarone said Thursday he’s pleased with how JAC Management Group, headed by Eric Ryan, is running the day-to-day operations of the center.
“Is the Covelli Centre run well? Yes, but we had nothing to compare it to,” he said.
JAC’s contract to manage the center expires Dec. 31.
The final 2012 financial figures for the center aren’t done. That should occur in about a week.
But Ryan said the center had its best year with at least a $300,000 operating surplus and $175,000 from a 5.5 percent admission tax on tickets sold for arena events.
Depending on how interest is counted, 2012 could be considered the first year the city turned a profit.
The city borrows money to cover the interest in one year and repays it the following year. If the $113,250 borrowed last year is counted for 2012, then the center made a profit for that year. If the $579,925 the city borrowed in 2011 and paid in 2012 is considered, the center didn’t make a profit last year but would, then, be expected to post a profit in 2013.
JAC’s budget for this year anticipates a $350,000 operating surplus with $225,000 in admission tax.
Sammarone said he wants to see if a company is willing to do better, and won’t know unless proposals are solicited.