Paying for Youngstown arena is now a matter of ‘principal’

The decision by Youngstown city government to borrow $11.9 million for its share of the construction cost of the $45 million sports/entertainment center has been discussed ad nauseum. The “long-term debt be damned, full speed ahead” crowd won the day. This newspaper and others advising caution were ignored.

Now, it’s time for another discussion: This one about how a city with a declining population and a shrinking tax base will operate for at least the next 20 years with a debt obligation of many millions of dollars. There are some basic truths that must be considered as the discussion is joined.

First, for the past five years, city government has had to borrow money to pay the annual interest on the $11.9 million. In other words, there isn’t enough general fund revenue being generated to pay the annual interest, let alone anything toward the principal.

Second, it is expected to take between 20 and 25 years to repay the principal and interest on the city’s share of the construction cost. This, after the previous administration, led by Mayor George M. McKelvey, publicly pledged that not one dime of the city’s general fund would be used for the arena.

Third, the Covelli Centre, formerly the Chevrolet Centre, hasn’t had a profitable year since it opened in October 2005. If the city’s annual debt obligation is included in the accounting, the financial picture is even bleaker. However, officials in City Hall have chosen to keep the two accounts separate, even though the city owns the facility and is ultimately responsible for it.

Fourth, none of the surrounding communities that benefit from having such a facility in downtown Youngstown will step forward to help the city pay off its debt.

State funds?

And finally, the prospects of the state of Ohio coming up with any money to lessen the financial burden are slim to none.

With those facts on the table, the discussion should be about the future. These questions could serve as a starting point: How long can the city of Youngstown, with its declining population and shrinking tax base, keep ownership of the Covelli Centre? And, if city officials refuse to even contemplate giving up ownership, where will government get the money to pay for major repairs and upgrades that will become necessary?

To understand why talking about the future is important, city officials and residents should look up the records pertaining to what ultimately came to be known as the “White Elephant,” the city parking deck on the east end of downtown.

The deck was built as part of a major development project that included a privately constructed office highrise. And even though the deck was fully occupied during work hours, the city soon found that the expenses were greater than the revenue from parking and the office space on the ground floor.

Year after year, the deck drained general revenue funds, until the decision was made to cut the city’s losses. The facility was sold for much less than was invested.

That history might guide the current administration as it debates the future of the Covelli Centre.