City Hall doesn’t understand the entertainment business

November 19, 2007 at 2:00a.m.

As Youngstown conducts a nationwide search to find a new management company to oversee operations at the Chevrolet Centre, a question must be answered: Who is going to decide this time what constitutes a good deal?

City fathers thought they got a good deal with the management company Global Entertainment Corp. Global eventually guaranteed the city $600,000, a relatively meager commitment which the company still tried to get out of.

Global was gone for only a matter of days when the city found what it said was $40,000 a month that Global was raking in through parking, management and commission fees. So that means Global was really risking about $100,000 in making its $600,000 guarantee.

Global got full use of a $40 million facility for a maximum payment to the city of $600,000 a year. That’s a return on investment for the city of at best 1.5 percent. Meanwhile the company claimed a succession of quarterly losses, the most recent being the worst — $220,938 in July through September.

The $600,000 that Global pledged to the city didn’t even cover the city’s annual debt service on the $11.9 million it had to borrow to complete the project. That bill is $755,650 a year.

Not a great investment

What we’re saying is what we have said before in a number of different ways within a number of different contexts. As an investment, the Chevy Centre hasn’t been good for the city’s budget.

The city was ill-advised to go into debt to finish the project. Youngstown had a $26.8 million federal grant for a convocation center, and that’s the convocation center it should have built.

Ideally then-Mayor George McKelvey and city council should have gotten behind an effort spearheaded by this newspaper to have the grant reprogrammed into a downtown project such as a business incubator that could have provided real economic benefit to the city — rather than an entertainment facility that has the potential for becoming a money pit.

But the fact is that the Chevrolet Centre is a reality and given that it was built with two federal grant dollars of every city dollar invested, it may be possible for someone to operate the facility in such a way that the city can cover its out-of-pocket costs.

It is a given that stadiums and arenas and convention centers don’t make money. They are urban amenities. But If any such facility should be able to least break even it is the Chevy, which began life with a $26.8 million gift from former U.S. Rep. James A. Traficant Jr. The Democratic congressman traded a key vote to Republicans in exchange for the convocation center money.

Power grab, money drain

Originally, the center was supposed to be built under the watchful eye of an independent commission. City council could not abide that, and took control of the grant. Incoming city council members should take note of how well that worked out — they have inherited the center’s debt payments. If a contract is not reached that will cover the interest costs and the costs of retiring the principal of that $11.8 million loan, it will be city council’s problem. Every dollar that goes toward that debt is another dollar that council members don’t get to spend in their wards. That’s where city tax money should go, to make life better for their constituents.

It is time for the administration and city council to begin talking about what criteria will be used in evaluating contract proposals and who has the expertise to do the evaluation. Clearly no one in City Hall was capable of crunching the numbers the last time around. Otherwise city officials wouldn’t have been patting themselves on the back for getting a $600,000 guarantee from Global while Global was quietly covering about $500,000 of that with miscellaneous fees.

There’s a lesson in those numbers. Is anyone in the administration or on city council ready to learn that lesson?