By DAVID SKOLNICK

Staff writer

YOUNGSTOWN — An option for downtown Youngstown businesses to get off SOBE Thermal Energy System LLC’s steam heat system involving a state treasurer program, a credit union and a contracting firm is in its preliminary phase, but a resolution could be forthcoming.

Various state officials met Tuesday with some SOBE customers and others to discuss the proposal.

State Sen. Al Cutrona, R-Canfield, who organized the meeting, said: “This is a really great outside-the-box approach to solve a tremendous issue impacting downtown Youngstown. A finished product is needed rather than a Band-Aid. It’s in the early stages, but it’s coming together.”

The proposal would use the state treasurer office’s Buckeye Business Advantage linked deposit program with the 7 17 Credit Union loaning the money needed to Brewer-Garrett Co. for five years at ideally no interest, Cutrona said.

Some SOBE customers also could choose to work directly with 7 17 Credit Union through this program, Cutrona said. Brewer-Garrett is a facility solution and mechanical contracting firm in Middleburg Heights.

For those going with Brewer-Garrett, the company would install heating systems in any of the 23 buildings on the SOBE system, which is most of downtown Youngstown, with the cost paid over a period of 20 years, through an additional heating rate — around 10% — or a separate service fee to pay the cost of new systems for each customer, Cutrona said.

Some of the money paid to Brewer-Garrett would go into escrow to come up with a long-term strategy for heat downtown, according to those who attended Tuesday’s meeting.

After those 20 years — or earlier if a building owner decides to pay it off sooner — Brewer-Garrett would sell the individual heating systems at an amortized rate to customers.

“It’s a good long-term solution,” Cutrona said. “It’s the first viable solution. No one is being forced to do this. They can use their own company, but from a practical standpoint, this will be a good option. I encourage everyone to do their due diligence.”

The treasurer’s Buckeye Business Advantage program isn’t available to nonprofits or government agencies.

By having Brewer-Garrett borrow the money, rather than the customers, those that fall into either of those two unavailable categories could receive funding for their own boilers, Cutrona said.

The city is the only government agency on the SOBE system for city hall and its attached police station. While city officials declined Tuesday to comment, it is likely the city would pay for its own heating system rather than go through Brewer-Garrett.

Zach Prouty, Treasurer Robert Sprague’s deputy chief of staff, said about Tuesday’s meeting: “It seemed like an information gathering/sharing meeting. We were asked to explain our link deposit program. Brewer-Garrett is presenting a solution. It doesn’t have to be the solution. As long as you check the boxes, you can use our program. I don’t know how many of the buildings will use Brewer-Garrett. We’re waiting to see how many are interested first. Maybe other buildings will come to us individually.”

Prouty said Brewer-Garrett and 7 17 have done extensive work on this effort.

“We’re waiting to hear back from Brewer-Garrett or the business owners as to who’s interested and the dollar amounts,” Prouty said. “Then, we’d move forward.”

The Vindicator first reported June 17 about the possibility of existing SOBE customers using the state treasurer and 7 17 for their own heat.

Prouty said Tuesday: “We’re no further ahead than last week, but customers are aware of what the program is and their options.”

Guy Coviello, Youngstown/Warren Regional Chamber president and CEO, said: “It sounds like we are moving closer to everyone getting their own system as early as the end of the year.”

Barb Ewing, CEO of the Youngstown Business Incubator, a SOBE customer, said it was a “productive meeting. A solution is on the table. We’re still trying to work through the details and the best possible solution. It will solve a downtown issue, at least partially. The devil’s in the details.”

Ewing added: “The customers need to work through their own solutions and which path they need to pursue. But there are still the nuances of the deal before anyone can decide. It’s a lot of moving parts. We have to look at this from all angles.”

With YBI being a nonprofit, Ewing said the Brewer-Garrett proposal with a loan guarantee is “very attractive.”

Ryan Kelly, a co-owner of the Ohio One building, a SOBE customer, said he appreciates Brewer-Garrett, 7 17 and the state treasurer’s office stepping up to assist downtown.

Kelly said: “I’ll review it with my partners over the next week and the next step is to do preliminary engineering and is this solution applicable and viable to our building? I think it is. It feels like we’re getting close to a solution hopefully. Time dictates that we have to make a decision. Brewer-Garrett is a proven, reputable company that can and has done this.”

RATE INCREASE

With SOBE close to insolvency, the Public Utilities Commission of Ohio voted June 24 to increase the monthly rate for most of its customers by 93%, effective June 30, with an additional 162% increase for most from November to April, when steam heat is primarily used.

SOBE’s customers are trying to get off of the struggling utility system that proved unreliable this past January and February, the coldest months of the year.

“I can’t imagine anyone has the choice to stay on the (SOBE) system” after the increase, Coviello said.

He said there is a request with state officials for funding to SOBE customers between what they were paying before the rate increases and after until the end of the year to help them as they transfer to their own system.

“The big hurdle is to fill the delta until the end of the year for the downtown buildings,” Coviello said. “Not everyone can get off the system on the same day.”

The Buckeye Business Advantage 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.

Dominic Marchionda, whose companies own Erie Terminal Place and Wick Tower, which are SOBE customers, said: “I am hopeful that a solution can be put together for the sake of our city. We need one if we are going to recapture the momentum we once had in downtown Youngstown.”

Marchionda said: “Building owners are going to need guidance and support moving forward. I simply do not see tenants being able to absorb the rate increases that would be required to keep SOBE financially solvent under the current model.”

Before the rate increase, SOBE’s monthly income was about $130,000 while its monthly expenses were about $220,000.

SOBE is leasing three boilers, using a $750,000 payment from Enbridge Gas Co., to pay for two of them as part of Enbridge’s $1 million settlement with the PUCO on the Realty Tower explosion. That money would have run out in September or October without the rate increases, said John C. Collins, SOBE’s receiver since Feb. 17.

For 13 of the SOBE’s 23 customers, the increase, effective June 30, is 93% with two at 92%, one at 91% and two at 36%. The five other customers will pay between 64% and 80% more.

That is for the non-heating season between May and October.

Between November and April, the rate will increase by another 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%.

PLANT ISSUES

It would cost about $13 million to build back SOBE’s plant, Collins said Tuesday.

To replace SOBE’s underground distribution pipes would cost about $17 million, but Collins said he, the PUCO and others don’t believe “that is necessary. The underground distribution system is in good working order. If there’s repairs of pipes, that is something that is the cost of doing business.”

SOBE’s plant was gutted in 2022 when David Ferro, the company’s CEO, razed the boiler house and sold the three boilers for scrap. Ferro then had the company lease a boiler, but stopped paying the monthly rental fee with it possessed on Sept. 30. He abandoned the Youngstown plant with a judge appointing Reg Martin on Sept. 26 as SOBE receiver. Collins replaced Martin, who faced criticism and scrutiny from SOBE customers, as receiver.

Ferro wanted the Youngstown facility to use pyrolysis, which converts rubber chips into synthetic gas. That received significant pushback from residents and three one-year moratoriums by Youngstown City Council on the use of the process in the city. The Ohio Environmental Protection Agency issued a permit on Feb. 14, 2024, for SOBE to move ahead with its plans.

Collins asked the Ohio EPA on June 19 to revoke the permit, saying the process wasn’t feasible or of interest to anyone interested in taking over SOBE’s operations.

Ohio EPA Director John Logue revoked the permit on June 24. On that same day, Ferro appealed the decision.

Michael J. Moran, Collins’ court-appointed attorney for SOBE, asked a Mahoning County Common Pleas Court judge on June 30 to permit his client “to take action to strike or otherwise cause the dismissal of such permit revocation appeal and to issue sanctions against David Ferro for the costs involved in this motion to effectuate the termination of the appeal of the revocation.”

No action has been taken by the judge as of Tuesday.

The city had filed an appeal with the Ohio Environmental Review Appeals Commission to revoke SOBE’s pyrolysis permit. On Tuesday, it filed a motion to dismiss the appeal because of Collins’ action and Logue revoking the permit.

Marchionda said: “While it’s too late to change the past, I believe the decision to use tire-derived fuel ultimately became a significant factor in SOBE’s decline. Whether the technology itself was sound or not, I don’t believe there was enough education, communication or public understanding of the process to gain the confidence of the community. Once that confidence was lost, it became increasingly difficult to overcome.”