YOUNGSTOWN — Ohio Gov. Mike DeWine will not bail out the beleaguered downtown Youngstown utility company on the brink of financial collapse with funding from the state’s capital budget or its rainy day fund, his spokesman said.

Dan Tierney, DeWine’s spokesman, said while the governor is monitoring the situation with SOBE Thermal Energy Systems LLC, which is responsible for providing steam heat for most of downtown, neither the capital budget nor the state’s Budget Stabilization Fund, referred to as the rainy day fund, are options to help the struggling company.

Both were referenced as possible funding sources by Mayor Derrick McDowell during a June 1 city council public utilities committee meeting.

The state House and Senate approved the $3.7 billion capital budget without any money for SOBE or Youngstown. DeWine needs to sign it into law.

Tierney said the capital budget is funded through state bond dollars and money from it isn’t used to help private utility companies, such as SOBE.

“There are restrictions on what you can spend it on and this isn’t an option,” Tierney said. “I’m not expecting anything in the capital budget” for SOBE.

Tierney said the rainy day fund isn’t an option for SOBE either.

The fund has at least $3.5 billion in it.

Tierney said of the fund: “It’s primarily for the shortfall of tax receipts in an economic downturn when there is higher unemployment and fewer payroll and income taxes. We’ve been around long enough to get many requests with a lot of people saying it should be used for this or for that. But it’s for budget stabilization.”

Asked if that’s a no for SOBE for rainy day funds, Tierney said: “At this time, it’s no.”

McDowell said at the June 1 meeting the rainy day fund was an option and that DeWine told him in February to apply for state capital budget funding to help bail out SOBE, “but we did not have the hard numbers to provide to them at the time.”

McDowell said at the June 1 meeting that 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.

McDowell said June 1 that seeking the funding through the executive branch side of the capital budget could be an option as doing it through the legislative branch was not possible.

McDowell said: “We had to push and push and push to work through what it would cost to rebuild the system on site. We had to go back after that, requesting what it looked like to rebuild the delivery system as well. As that time passed and we learned that the legislative side of the state’s capital budget wasn’t a clear pathway forward, we’re still waiting to reengage with the governor’s side to say, ‘Is this going to be an executive (capital budget allocation) or is this going to be an emergency, rainy day?'”

Tierney made it clear it’s going to be neither.

Tierney said: “The governor will continue to get briefings. We want this to stay open. The receiver was changed in part because of the feedback from Youngstown. It’s an evolving situation. We’ll continue to monitor it.”

John C. Collins, SOBE’s receiver since Feb. 17, and Michael Moran, his court-appointed attorney for the utility, said Wednesday they were disappointed to hear from a Vindicator reporter about not getting rainy day fund money.

“We heard it was not going to be in the capital budget, but we haven’t heard about the rainy day fund,” Moran said. “I’m sorry to hear that. That is disappointing. We will continue to strive to figure out a solution.”

Collins said: “We’re searching diligently for all answers. We were holding out hope it would come from the rainy day fund so we’d be able to buy boilers. It was news to us and it’s terrible news.”

In a May 27 court filing, Collins wrote SOBE’s monthly income is about $130,000 while its monthly expenses are about $220,000 and is “in the midst of a financial crisis,” unable to pay for three rented boilers it uses to provide steam heat and hot water by September or October.

Collins said Wednesday: “If we don’t receive some kind of money, yes, we’ll be out of business. We don’t see paying the bills past October.”

Collins wrote May 27: “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.”

That hasn’t changed, Collins said Wednesday.

Tierney said: “It would be very bad if a utility covering significant portions of one of Ohio’s major city’s downtowns goes out of business. It’s on the governor’s radar. But this is a private entity. This is not a public entity. It’s not a state entity. There are no statutes to cover this. We don’t want to downplay it. This utility ceasing operations is a serious concern. It’s not an acceptable outcome. We don’t have an answer or an outcome on it. But the governor is monitoring it.”

Tierney said the state’s role is for the Public Utilities Commission of Ohio to appoint a receiver to keep SOBE operational.

That first happened Sept. 26 when the PUCO appointed Reg Martin as SOBE’s receiver after David Ferro, the company’s CEO, walked away from the Youngstown location with the business on the brink of financial collapse, owing about $4 million to creditors.

Collins replaced Martin on Feb. 17 after numerous complaints about service failures in January and February, during the coldest part of the year, including a period when it was below zero degrees.

COUNCIL PROPOSALS

McDowell continues to ask city council to approve legislation to pay up to $130,000 to Roetzel & Andress, a law firm, to find long-term solutions for SOBE, saying an expert strategy is needed.

Council will consider the legislation at its June 17 meeting as well as a resolution declaring the “existence of a local energy and public utility emergency arising from the financial crisis” of SOBE and “urging immediate intervention and assistance by the state of Ohio.”

The resolution seeks the intervention of DeWine, the PUCO, the General Assembly, the Ohio Department of Development “and all appropriate state agencies (to) immediately evaluate and implement all available emergency measures, funding opportunities, grants, loans, infrastructure programs and other resources necessary to preserve utility service to downtown Youngstown.”

The resolution states city council “requests that state officials treat the circumstances described herein as a matter of urgent statewide concern due to the risk posed to public utility service, economic development, housing and governmental operations within” Youngstown.

On June 3, council gave a first reading to the Roetzel proposal for the study with members saying they wanted to meet with Roetzel officials to find out exactly what the study would show before approving the payment.

McDowell pulled the legislation from council’s May 20 meeting in order to discuss it in committee. That committee meeting occurred June 1, but council wants even more information.

Also at a June 3 council finance committee meeting, right before council met, Water Commissioner Harry L. Johnson III said that nearly all of the work for the study would be done by Marc Divis, president of Akron Energy Systems, who was largely responsible for bailing out steam heat issues in Akron and Cleveland. Johnson said Davis has worked with Roetzel and specifically requested the contract go through the law firm even though he will do virtually all of the work.

McDowell said at the June 1 meeting: “Akron Energy Systems, they have those relationships. I don’t want to misquote, but I believe one of the folks who works with the experts lives near the governor, and so they have his ear. They’ve worked with him through Cleveland, through Akron, so that’s what we’re banking on in this relationship as well.”