Agency to mull lien on building
The city and a downtown agency are owed $821,000, but trying to collect could scare away a buyer.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- For years, auditors for the downtown redevelopment agency listed as uncollectible a debt now totaling $400,000.
The money that auditors say is owed the Youngstown Central Area Community Improvement Corp. concerns the Erie Terminal on Commerce Street.
Now, with the chance the building may be sold, CIC is deciding whether to make its claim.
That might not be a good idea, said John Ficarro, senior vice president of the Phar-Mor drugstore chain. Phar-Mor owns 90 percent of Strouss Building Associates. Strouss, a separate company from Phar-Mor, controls the Erie Terminal and the building's debt.
Here's the concern: A CIC lien to get the money likely would scare away the prospective private buyer, Ficarro said. No buyer would assume the $400,000 debt, he said, or an additional $421,000 also owed to the city.
CIC lawyer Ed Romero is exploring what to do next, said Alden Chevlen, the agency's executive director. Romero could not be reached to comment.
CIC renewed interest in the money when word emerged that Erie Terminal might be sold. The possibility of a sale was raised at a recent CIC board meeting.
The issue dates to 1989. That's when CIC and Strouss reached a joint ownership deal to redevelop the Erie Terminal as offices. The Mahoning County Child Support Enforcement Agency occupies the building. Strouss managed the building.
It's generally held, under the joint ownership deal, that Strouss was to pay CIC $50,000 a year, although dispute remains over that item. The company made just one payment, in the deal's first year.
That tab now adds up to $400,000. The balance was thought to be uncollectible because of Strouss' continued financial condition.
In 1991, the city gave Strouss a $400,000 Urban Development Action Grant, according to city finance department records. The last payment was made in December 1993 and the balance stands at $421,000.
That leaves the total owed the city and CIC (the city's downtown agency) at $821,000.
What happened: In 1995, Phar-Mor bought its stake in Strouss as part of restructuring when the chain emerged from bankruptcy. Phar-Mor remains separate from Strouss and not liable for any debt in the Erie Terminal project, Ficarro said. The deal was part of keeping Phar-Mor's headquarters downtown.
If CIC seeks the money from Strouss, two things could happen. Neither would be good for CIC or downtown, Ficarro argues.
First, CIC could end up owning the building instead of getting cash. The building is the only available asset because Strouss has no money, Ficarro said.
CIC's auditors back up Strouss' position. Financial statements as of June 30, 2000, "raise substantial doubt" about Strouss' ability to stay in business, auditors from Packer Thomas say. The audit shows an $862,000 deficit and expenses outstripping revenue by $21,300 a year.
A private owner is best for the city and downtown, Ficarro said.
Second, the buyer likely would balk at picking up Strouss' liabilities. The buyer would want the city and CIC to waive those claims, he said.
If the buyer declines to follow though, the city could end up with an empty Erie Terminal and lose the chance to keep the building in private hands, Ficarro said.
Mahoning County is considering moving the child support office and consolidating offices. The county's lease expires in the fall. Everyone involved is aware of the money situation dating to 1995, Ficarro said.