Global works out payment deal

Global will guarantee $600,000 annually to the city after this fiscal year.
By DAVID SKOLNICK
CITY HALL REPORTER
YOUNGSTOWN -- The company managing the Chevrolet Centre reached an agreement in principle to make substantial financial payments if the facility continues to struggle financially.
Terms of the tentative deal were announced Friday by city officials and Matt Hufnagel, the center's general manager.
The deal between the city and Global Entertainment Corp., the Phoenix company managing the city-owned facility, should be signed in July and would take effect Sept. 30, the last day of the center's fiscal year, said city Finance Director David Bozanich.
Contract terms
The key terms of the tentative contract are:
Global will pay half of the city's debt service for the center during this fiscal year. The city's debt service for the center's first year is about $767,000. The city had to borrow $11.9 million to help fund the center's construction.
Should the center lose money in the first fiscal year or subsequent years, Global will pay the shortfall.
Global will guarantee $600,000 annually to the city after the first fiscal year. Global officials expect the center will earn at least that amount in annual profit beginning next fiscal year. If that amount isn't reached, Global will pay the city whatever it takes to hit the $600,000 mark.
The two sides agreed to a new distribution formula in which the city would receive 60 percent of any profits over $600,000 annually with Global getting 40 percent.
It would replace the current formula that calls for the first $300,000 in profit to go into a reserve fund for the center's capital needs and expenditures. The current formula then had any money over $300,000 going toward the payment of debt service. After debt service is satisfied, the city was to get 80 percent of any leftover profit with Global getting 20 percent.
That contract was written last summer when Global officials estimated the center's profit for 2006 at $1.15 million.
Updated budget
Global updated its budget in January and projected a $645,221 profit for the center between October 2005 and this September. But during its first six months, the center made $220,819.
Global projects only a $12,611 profit for the final six months of its fiscal year. Mayor Jay Williams said the facility could see no profit or even a loss in its first year.
Because of that, the city negotiated last week with Global officials to change the provisions of the center's contract.
"This helps us secure the long-term sustainability of the center," Williams said.
The revised deal shows Global's commitment to the city and the Chevrolet Centre, Hufnagel said.
"We see a long-term benefit to make this work," he said. "If Global didn't see potential and viability in this facility, we wouldn't be here."
Global's commission
A Global subsidiary received $750,000 to oversee the construction of the facility. Global gets 15 percent commissions on the sale of luxury suites, club seats, sponsorships and other items. The company has received about $125,000 so far and is expected to receive about $200,000 for the fiscal year. But the company must pay the city if the center ends the fiscal year in the red as well as half of the debt service.
Global is supposed to receive 4 percent of event operating income as a management fee but isn't expected to receive that money this fiscal year because of the center's financial problems.
Also, the city is looking at options to reduce the $767,000 annual debt service to about $600,000, Bozanich said.
The 6.5-percent interest rate on the $11.9 million could be lowered, he said. The city owns about seven to eight acres near the center that could be developed to generate money and could also use revenue from other economic development projects and the sale of city-owned land to offset the city's debt, he said.
The city and Global plan to meet with its sponsors, advertisers and tenants to discuss contracts, Williams said.
Discussing restructure
The city also wants to talk with Herb Washington, who owns the Youngstown SteelHounds minor league hockey team that plays its home games at the center, to restructure his deal. The hockey team's contract does not include a provision to charge a $1.50 parking fee on its tickets. The city estimates it has lost at least $168,000 because the parking fee wasn't included in the SteelHounds' contract.
The city and Global signed a 10-year contract in October 2005 to pay $210,000 annually to USA Parking Systems to use more than 2,000 parking spaces, and expected to generate $284,950 in gross revenue annually. Parking revenue in the first six months was $17,247.
The state is committed to giving $2 million to Youngstown in its 2007 capital budget and $1 million from its 2009 capital budget to help with the center's construction costs, Bozanich said. The facility cost about $45 million.
"There will be future challenges to the facility and future challenges to the city," Williams said. "This doesn't fix all the problems, but we're off to a good start."
skolnick@vindy.com