Lawsuit erupts over Chevy Centre

The city plans to file a lawsuit against the Chevy Centre’s management firm.

By DAVID SKOLNICK

CITY HALL REPORTER

YOUNGSTOWN — International Coliseums Co. claims in a federal lawsuit that Youngstown violated its management contract with the company and cost the company money.

Because of those alleged violations of the contract — which deals with management of the Chevy Centre — ICC is refusing to pay $600,000 it had previously guaranteed the city.

ICC, a subsidiary of Global Entertainment Corp. of Phoenix, and Youngstown agreed July 13, 2006, to an amendment to their contract that guaranteed that amount to the city regardless of the center’s finances. Without the guarantee, the city would have fired Global. The original contract was signed May 13, 2004, almost 11⁄2 years before the center opened.

ICC was supposed to pay the $600,000 to the city Sept. 1 but didn’t. The city was going to use the $600,000 to pay part of the $755,650 the city owed to Sky Bank on Sept. 7 for only the interest on the $11.9 million it borrowed in 2005 to fund its share of the center’s $45 million construction cost.

The city used other money to pay that $600,000 portion of the interest. It also filed a claim with a company that is holding the $600,000 Global bond to obtain the money, Mayor Jay Williams said.

In the lawsuit filed Wednesday in U.S. District Court in Youngstown, ICC states it wouldn’t have agreed to the $600,000 guarantee if it had known the city would make changes that hurt the facility’s profitability and breach its contract with the company.

Losses

The city-owned arena has lost more than $55,000 between its opening in late October 2005 through this past June 30.

Global previously estimated the center would lose about $100,000 between July and September, the final quarter of its second fiscal year.

But the company’s financial projections often have been overly optimistic, and city officials expect the final quarter loss to be even greater than Global’s projection.

Based on Global’s estimates, the center should have made about $1.38 million in profits during its first 21 months of operations instead of the deficit it is running.

In the lawsuit, ICC states actions taken by the city and others threatened by the city “seriously and materially affect the abilities of ICC to generate revenues at the facility.”

Williams said he believes ICC filed the lawsuit because the city had made it clear to the company that it was going to file its own lawsuit sometime next week in Mahoning County Common Pleas Court. The city’s lawsuit will contend ICC violated the contract, and include a claim of financial damages for the center’s monetary failures and seek to dissolve the management deal, Williams said.

“This is a defensive move on their part,” he said. “From a public relations standpoint they wanted to beat us to the punch.”

ICC has failed to live up to the terms of the agreement, in particular its failure to turn a profit, said Williams, who declined to give further specifics.

ICC is managing the center for now.

Richard Kozuback, Global’s president and chief executive officer, as well as Shannon J. Polk of Cleveland and Timothy M. Quigley of Phoenix, the company’s attorneys for this lawsuit, couldn’t be reached Thursday to comment.

Tim McGrath, the center’s executive director and a Global employee, said Thursday that he knew nothing about the lawsuit and that he is continuing to run the facility.

Claims

The lawsuit lists some actions taken by the city that ICC contends hurt the center’s bottom line. A number of those actions, though, were approved by ICC, such as a $210,000 annual contract with USA Parking Systems Inc. of Cleveland for off-site parking.

“Their claims are ridiculous,” Williams said.

One item not endorsed by ICC is the city’s decision in June to eliminate $3 to $3.50 parking and facility fees added to most tickets and replace them with a flat 9.5-percent admission tax. The flat tax take effect Oct. 1.

That change means the parking and facility fees will no longer go to the center, but it also removes the USA Parking fee from the arena’s expenses.

City officials estimate the change to a flat admission tax would pay the USA Parking cost and provide the city with an estimated annual profit of $100,000.

The change will “further [reduce] the opportunities for ICC to maximize revenues,” according to the lawsuit.

The ICC case, with a request for a jury trial, was assigned to U.S. District Judge David D. Dowd Jr. and Magistrate Judge James S. Gallas, who both hear cases in federal court in Akron.

The company accuses the city of breach of contract and tortious interference with business relations.

ICC is suing to not pay the $600,000 as well as for compensatory damages, attorney fees and “any other relief the court deems appropriate.”

skolnick@vindy.com