Sunday, September 30, 2007
Mayor Jay Williams says city government is prepared to operate and manage the Chevrolet Centre on a short-term basis, if necessary. We would suggest that short-term is the operative phrase for the administration.
City Hall has neither the expertise, nor the financial wherewithal, to run a $45 million facility that has proved to be a challenge even for a multinational corporation that is a leader in the entertainment industry.
Williams’ announcement 10 days ago that the city was severing its ties with International Coliseums Co., the Global Entertainment Corp. subsidiary that has managed the center since it opened in October 2005, was not surprising given the company’s failure to turn a profit, and more significantly, to accurately project quarterly revenues.
But the mayor now faces the daunting task of finding a replacement for Global. He said the city is in talks with other entities and that it is “examining all options,” which is the proper way to proceed. Indeed, a nationwide search is recommended given the difficulties Global has faced in coming up with the right mix of events that would guarantee money-making turnouts. There are 6,000 seats to be filled, which poses a challenge for any region, let alone one where the economy continues to lag behind the rest of the state.
As we have argued in previous editorials, the company operating and managing the center must have a clear understanding of what residents of Mahoning, Trumbull and Columbiana counties want in terms of entertainment, and it must know that city government is in no position to financially prop up the facility.
Losing proposition
Many years ago, during the height of the debate over the advisability of spending a $26.8 million federal grant on a sports/entertainment complex, we pointed out that arenas do not make money, which is why private investors shy away from them. Governments build them, usually in downtown areas, to improve the quality of life of their communities and to generate economic activity in the central business district.
We cautioned then Mayor George McKelvey and city council against borrowing money to help pay for the construction because its share of the revenue generated by the Chevrolet Centre would not cover the principal and interest on the loan.
Today, the city is on the hook for the $11.9 million it secured from Sky Bank and must come up with $755,650 a year for the interest alone.
Global, which had agreed to pay the city $600,000 a year regardless of revenue, has gone to court to set that agreement aside. Thus, on Sept. 7, the administration had to dip into the general fund for the $600,000 in order to make the bank payment.
City government cannot continue this raid on its operating fund indefinitely.
Mayor Williams and his advisers must strike a deal with a management company that, at the very least, guarantees the city payment of $755,650 a year so it can meet its loan obligation.