YOUNGSTOWN — An effort failed to get loan guarantees from the U.S. Department of Energy to help downtown Youngstown businesses get off of SOBE Thermal Energy System LLC’s steam heat system, so an option with a local lending institution and the state treasurer is possible.

Zach Prouty, Treasurer Robert Sprague’s deputy chief of staff, said Thursday the Buckeye Business Advantage-linked deposit program is being considered in conjunction with a lending institution that would offer reduced interest rates for loans for downtown businesses to purchase their own heating systems.

Prouty said, “We are hopeful that Buckeye Business Advantage can help many or most of the businesses in need” in downtown Youngstown.

The program isn’t available to nonprofits or government agencies, Prouty said.

There are 23 downtown buildings on the SOBE steam heat and hot water system. That is a majority of downtown. City Hall and the attached police station are among SOBE’s largest customers.

“The caveat is the state cannot make a direct loan to a business,” Prouty said.

The program permits small businesses to work with a participating bank or credit union to apply for a loan, with the treasurer’s office determining if the businesses are eligible. Upon approval, the treasurer’s office would deposit funds with the financial institution at a below-market interest rate. The financial institution would reduce the interest rate on the small businesses’ loans in conjunction with the offsetting deposit by the treasurer’s office.

“They can save tens of thousands of dollars in interest,” Prouty said.

The treasurer’s office, along with state Sen. Al Cutrona, R-Canfield; Guy Coviello, president and CEO of the Youngstown / Warren Regional Chamber; downtown building owners and others from the Youngstown area will meet next week to discuss the program, Prouty said.

The local lending institution in this scenario would be 7 17 Credit Union.

Coviello said several entities have “come together to find a creative way to give all the building owners a reasonable path to get off the system and have their own respective systems. Those conversations are continuing.”

Coviello said, “The treasurer’s office might have some tools, such as its linked deposit program, that could be used, but it has to be vetted. There’s still a lot of ifs. We’d like to see all the paths pursued until it’s finished. Hopefully, the city and building owners continue down those paths until there’s a final solution. Everybody getting on their own system is the goal.”

With SOBE’s financial situation in dire straits, the Public Utilities Commission of Ohio voted June 24 to increase the monthly rate for most of its customers by 93%, with an additional 162% increase for most from November to April, when steam heat is primarily used.

Coviello said he is working with the governor’s office to provide state funding for SOBE customers to pay the difference between what they were paying before the rate increase went into effect through the end of the year.

Coviello said he is optimistic a resolution can be worked out by November to get SOBE customers off the old system.

“We’re hopeful this is the solution, but there’s a long way to go,” Coviello said. “But we’ve come a long way in a short amount of time.”

Dan Tierney, Gov. Mike DeWine’s spokesman, said Thursday he was not aware of that request. DeWine’s office previously rejected requests from the city to provide funding from the capital budget and the state’s rainy day fund to help fund SOBE.

“We continue to monitor the situation,” Tierney said.

Dominic Marchionda, whose companies own Wick Tower and Erie Terminal Place — both SOBE customers — said, “I honestly have not heard anything about this as of yet.”

Barb Ewing, CEO of the Youngstown Business Incubator, another SOBE customer, said, “It sounds promising, but I don’t know the complexities of the deal from proper use of state funding to restrictions on credit unions. I’m an interested spectator.”

DOE IS DOA

U.S. Sen. Bernie Moreno said during a June 30 visit to the area that he spoke to Chris Wright, the U.S. secretary of energy, about a possible way to obtain federal loan guarantees to help SOBE customers get their energy elsewhere.

Moreno said June 30, “Maybe there’s some federal loan guarantees that can help pay for individual buildings to get their own power generation facility. The savings in costs would pay that loan because those individual building owners may not have the capacity to get that loan. That’s what we’re working towards getting done.”

Coviello said Thursday that the DOE has a minimum $250 million requirement for loan guarantees “so it doesn’t work for us to get the loans. It’s way more than what we’re looking at so we’re not eligible.”

Reagan McCarthy, Moreno’s spokeswoman, said, “Sen. Moreno has been committed to finding a solution for his constituents in Youngstown. He will exhaust all possible options and won’t rest until this issue is solved.”

The Public Utilities Commission of Ohio on June 24 approved significant rate increases for the 23 downtown buildings on the SOBE system.

For 13 of the customers, the immediate increase is 93%, with two at 92%, one at 91% and two at 36%. The five other customers are paying between 64% and 80% more.

That is for the nonheating season between May and October.

Between November and April, the rate will increase by 162% for 14 of SOBE’s 23 customers. One will pay 163% more during those six months, with two paying 85% more. The six others will pay increases between 123% and 159%.

Without the increases, SOBE would no longer be able to afford to rent three boilers used to heat downtown by September or October, according to John C. Collins, the utility’s court-appointed receiver since Feb. 17.

Because of the large rate increases, some of SOBE’s customers are looking to get off the system.

SOBE was put into court-ordered receivership Sept. 26 after the PUCO determined the utility company could no longer provide services to its customers.

A rented 800-horsepower boiler was repossessed Sept. 30 from SOBE because the company defaulted on paying for the equipment that provided heat and hot water to its 23 downtown Youngstown customers. That resulted in SOBE abandoning the city, with Reg Martin appointed receiver at the request of the PUCO.

But with SOBE customers complaining about service failing a number of times during January and February, the PUCO had Martin removed as receiver, with Collins replacing him Feb. 17.