YOUNGSTOWN — With SOBE Thermal Energy Systems LLC, which is responsible for providing steam heat for a majority of downtown Youngstown “in the midst of a financial crisis,” city council will consider legislation Wednesday to pay up to $130,000 to a law firm to determine the long-term viability of the company.

Mayor Derrick McDowell said at Monday’s council public utilities committee meeting that the work to be done by Roetzel & Andress needs to start right away.

With John C. Collins, SOBE’s receiver, writing in a court document last Wednesday that “the company is in the midst of a financial crisis” and will no longer be able to pay for three rented boilers it uses to provide steam heat to much of downtown by September or October, time is of the essence for the study.

Collins wrote in that report that SOBE’s monthly income is about $130,000 while its monthly expenses are about $220,000.

Also, SOBE is looking for a rate increase to keep operating.

McDowell said SOBE’s request to the Public Utilities Commission of Ohio is to more than double the rate its customers are currently paying.

McDowell said: “We’re concerned about the death spiral that can occur if users remove themselves because of this doubling or more than doubling of the tariff increase.”

McDowell pulled the Roetzel legislation from council’s May 20 meeting in order to first discuss it in committee, which occurred Monday.

Roetzel helped resolve larger steam heat issues in Akron and Cleveland, get them out of debt and have close ties to state officials, which may be able to provide funding to help bail out SOBE through the capital budget or the state’s emergency fund, McDowell said.

McDowell said Gov. Mike DeWine told him in February he wanted to see the city seek money through the capital budget from the executive branch.

McDowell said Monday getting funding through the legislative branch’s part of the capital budget isn’t viable based on conversations he’s had with state Rep. Lauren McNally, D-Youngstown. The state Senate on Monday introduced its version of the capital budget without any funding for SOBE included.

McDowell also said it would cost about $30 million — $13 million for SOBE’s system and $17 million for the delivery end, including pipes — to get the company self-sufficient.

There is no way the city is going to spend $30 million to save SOBE, McDowell said.

Among the options that exist — with McDowell saying he is concerned about the viability of all of them — include the city taking over SOBE, a sale to an outside entity or having the SOBE customers run the utility.

“I don’t believe (any) are viable options,” McDowell said.

McDowell also said David Ferro, SOBE’s CEO, who abandoned the utility as it was about to go out of business “has indicated he wants his system back.”

McDowell said one option may be to scale back some of SOBE’s operations with the company providing heat to fewer downtown businesses and reducing the amount of pipes it uses.

Councilman Mike Ray, D-4th Ward and public utilities committee chairman, said helping to bail out SOBE isn’t the city’s responsibility, but there is little choice but to help.

“We’re fixing the problem dumped on us because the PUCO lost sight of it,” Ray said.

Collins painted a bleak picture of SOBE’s finances in last Wednesday’s court filing, his first since his Feb. 17 appointment as receiver.

Collins said SOBE’s monthly income is about $130,000 while its monthly expenses are about $220,000.

Its regular expenses for payroll and materials is about $80,000; rent for three boilers to provide heat to its customers paid to Power Mechanical Inc. of Newport News, Virginia, is $58,200; and “anticipated monthly payments” to Enbridge Gas Co. for gas is $80,000, Collins wrote.

The Enbridge monthly bills haven’t been paid in months — Collins didn’t give a specific date except that it was prior to the court case filed in September by the PUCO against SOBE — and could be as much as $1,999,656.95 and growing.

Collins wrote he filed a complaint with the PUCO against Enbridge questioning the accuracy of “an unprecedented spike in service charges for the month of January compared to previous months,” and asked the PUCO to prohibit Enbridge from terminating its natural gas service prior to the resolution of the dispute.

In the report, Collins wrote that at a May 20 status hearing in front of a PUCO administrative law judge, an agreement was reached with “Enbridge significantly reducing the amount it is claiming as an arrearage and also would include the possibility of (SOBE) paying the arrearage, which will still be in excess of $500,000, over an 18-month period.”

City Law Director Adam Buente said Ferro wasn’t paying the Enbridge gas bill so the company increased the rate “tenfold.”

Collins wrote Ferro decided in 2022 to scrap three coal-fired and one gas-fired boiler at the Youngstown location, 205 North Ave., and raze the boiler house “leaving in its place a massive hole in the ground, and he took no steps to remediate this potential nuisance.”

In 2019, Ferro, who has since walked away from SOBE, entered into a lease agreement with Wabash Power Equipment Co. of Wheeling, Illinois, for an 800-horsepower boiler to provide heat to customers. After months of SOBE not paying for the boiler — and owing $383,214 in back payments — Wabash repossessed the boiler on Sept. 30, leaving SOBE without any way to provide steam heat to most of downtown.

With the company owing about $4 million to creditors, Ferro abandoned the company’s Youngstown facility.

Reg Martin was appointed SOBE receiver and Kenneth R. Goldberg as his legal counsel on Sept. 26 at the request of the PUCO as the company was insolvent and unable to provide heat to its customers.

Martin rented three boilers from Power Mechanical at a monthly cost of $58,200. But numerous problems with the boilers caused them to not provide heat during periods in January and February, when temperatures were below zero.

Martin used $750,000 he received from Enbridge as part of that company’s settlement of the 2024 Realty Tower explosion to rent two of the boilers.

Collins, who replaced Martin, wrote in his report that there is only enough money left in that fund to pay the rental fees to Power Mechanical until September or October.

Collins wrote that a number of SOBE’s customers are delinquent with their bills.

Collins spent $39,364.60 for new meters at four businesses to get a more accurate reading of their heat usage as the current meters are old and likely inaccurate with no meters at all for some customers. McDowell said Monday SOBE has four customers without meters.

Collins wrote: “What is absolutely required in order to give SOBE Thermal an opportunity to become a viable business entity is a complete reconstruction of the entire steam plant, including the acquisition of permanent boilers.”

Collins wrote, “Unless the receiver is provided funds earmarked for operating expenses by the early fall, the company will not be able to continue to provide services to the customers of downtown Youngstown. If the state of Ohio would consider funding the steam reconstruction, the receiver would hope that that grant of funding includes monthly operating expenses sufficient to continue to operate the business until the reconstruction is complete.”