Youngstown must find a way of making the arena pay off

Given the caliber of the companies that have expressed an interest in operating the city-owned Chevrolet Centre in downtown Youngstown, there’s reason to be guardedly optimistic about the future of the $45 million facility.

However, the same cannot be said about city government’s ability to come up with $755,650 a year — without raiding the general fund — to pay even the interest on the $11.5 million it borrowed as its share of the center’s construction cost.

While the details of the proposals from Golden Spectrum of Philadelphia, SMG of Philadelphia and a partnership between Cavaliers Operating Co. of Cleveland and International Facilities Group of Chicago have yet to be submitted, it appears the city won’t be getting an annual check for $755,650.

Golden Spectrum did provide a preliminary proposal which showed an estimated $270,000 a year being paid to the city. The $500,000 balance would come out of government’s treasury.

It is worth repeating that we’re talking about only the interest on the $11.5 million loan.

Mayor Williams’ negotiating skills will be put to the test as he and members of his administration try to get the best deal possible. Williams’ predecessor, George M. McKelvey, decided to borrow the money on the assumption that state government and profits from the Chevrolet Centre’s operation would cover the city’s financial burden.

Wrong assumptions

McKelvey’s assumptions were wrong. The state came up with some money, but it wasn’t about to pay off the $11.5 million debt.

The revenue and profit projections by Global Entertainment Corp., which was hired by the city to operate and manage the sports/entertainment arena from day one, were wrong. After two years of posting losses, Global Entertainment was canned by Mayor Williams.

Given Global Entertainment’s rosy scenarios, McKelvey, Finance Director David Bozanich (he retained the position after Williams took office in January 2006) and members of council were quick to berate anyone who didn’t join them in singing the praises of the company and the project.

But those advising caution had one indisputable fact on their side: Sports and entertainment arenas do not make money, which is why they are built with public dollars — and are supported with so-called sin taxes or other such revenue producing measures.

City leaders ignored the warnings from this newspaper and others and today there is a $45 million facility (all public dollars) that is struggling to make ends meet, let alone turn a profit.

The mayor is justified in talking about the caliber of the companies interested in operating the Chevrolet Centre, but his bottom line must be the repayment of the $11.5 million loan. To that end, Williams should let it be known to each of the companies that the city’s $755,650 annual obligation is a major negotiating item.