City OKs $2M loan for SteelHounds

The interest-free, no-risk note is meant to attract business to the city.
By DAVID SKOLNICK
CITY HALL REPORTER
YOUNGSTOWN -- The city's board of control approved a $2 million no-interest loan to the parent company of the Youngstown SteelHounds hockey team.
The money can be used to help the Central Hockey League team with any operating expenses, said city Finance Director David Bozanich, a member of the city's board of control.
The board approved the loan agreement Thursday.
CHL officials say this is the first no-interest loan given to one of their hockey teams.
Known as a float loan, Blue Line Hockey LLC, the parent company of the SteelHounds, wouldn't have to pay interest for up to 18 months.
To obtain a float loan, a company needs an irrevocable letter of credit from a bank. The city is reimbursed the full amount of the loan by the company, or by the bank that issued the letter if the company defaults, Bozanich said, so there is no risk to the city.
Blue Line has an irrevocable letter of credit from Key Bank.
The city can request the $2 million back from Blue Line at any time during the next 18 months, he said.
Attempts to reach Herb Washington, Blue Line's president, for comment were unsuccessful.
The SteelHounds' home arena is the city's convocation center. The team, which has its home opener Friday, is the main tenant.
Sources of the funds
The float loan is interest-free, but the recipient has to pay an amount equal to about 2 percent interest for certain closing costs and processing fees.
The money for float loans comes from 50 to 60 nontax city revenue sources including court fines, parking meter fees, investment income, park and recreation fees and rent from buildings owned by the city. Those nontax revenue sources raise about $6 million to $7 million annually for the city.
The city has awarded $10 million worth of float loans to six companies over the past two years, said T. Sharon Woodberry, development officer for the city's economic development office. The maximum amount a company can borrow through the program is $2 million, she said.
Some city officials, including the mayor, were angered by newspaper accounts of the Blue Line float loan in June.
At the time, Mayor George M. McKelvey said float loans are an economic tool offered by the city to attract business, and there was nothing out of the ordinary about offering one to Blue Line to operate the minor league hockey team.
McKelvey also said in June that it was possible that Blue Line wouldn't need the money.
To join the CHL, Blue Line had to pay a $1 million entry fee to the league. The league is owned by Global Entertainment, the Phoenix company working in conjunction with Compass Facility Management of Ames, Iowa, as the operators of the Youngstown Convocation Center.
Other approved revenue
Also at Thursday's meeting, the board approved $212,144 worth of change orders for the convocation center. During the past two months, the board has approved $519,884 worth of change orders for the center.
An issue over the hiring of minorities and women the city had with Cimco Refrigeration, the Toronto-based company that installed the center's ice rink, is essentially resolved, said William Carter, the city's Human Relations Commission executive director.
The city stopped payment to the company last month when Carter said there was no evidence of minorities or women working on the local job. Failure to have minorities and women working on the job would violate the company's contract with the city.
Carter said the company provided him with evidence of having minorities and women working on the project, but one payroll list showed they were paid below the prevailing wage. Carter is waiting for canceled checks from Cimco to refute that.
The city agreed to pay Cimco's contract, worth more than $765,000, but is withholding $25,000 of it until the canceled checks are provided, Carter said.