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Interest rate declines on Covelli money
YOUNGSTOWN
The interest rate on the money the city owes for its share of constructing the Covelli Centre is less than last year.
The rate declined from 1.4 percent last year to 1.15 percent this year, said Finance Director David Bozanich.
Also, this year the city, which owns the center, is making its largest annual payment toward the principal of that $11.9 million construction loan.
“We’re very pleased with the rate,” he said. “The center is showing an actual positive ending balance, which helps with the rate.”
The annual operating surplus, food-and-beverage revenue and a 5.5 percent admission tax the city charges on tickets sold at the facility have offset the city’s debt on the center the past two years, and is on pace to do the same this year.
The city paid a 1 percent interest rate in 2012 from Key Bank after seeking proposals for the loan through competitive bidding.
The city received proposals this year from three lending institutions with Key Bank offering the lowest interest rate, Bozanich said.
Before 2012, the interest rate on the $11.9 million — borrowed by the city in 2005 to pay its portion of constructing the $45 million center — ranged from 4.98 percent to 6.88 percent.
The city made no payments on the principal until 2010.
The city is paying $350,000 toward the principal and $122,590 in interest this year for a total amount of $472,590. The remaining principal is $10.66 million.
In 2013, the city paid $315,000 in principal and $154,140 in interest for a total of $469,140. That’s less than this year, overall, but the city is putting $35,000 more toward its principal payment this year than in 2013.
“The most-important thing is this is the largest principal payment we’ve made,” said Mayor John A. McNally. “I’d like to get that over the $1 million threshold at some point in time. That will depend on the city’s finances and the continued success of the center. We’re looking to keep increasing that principal payment each year.”
Rather than a long-term bond, the city is paying yearly notes because it’s been cheaper to do so the past three years, Bozanich said. The interest rate on a long-term bond is about 4.5 percent to 5 percent, he said.
As it did last year, the city also included money it still owes for road construction at two business parks in the loan with the 1.15 percent interest rate, Bozanich said. The city borrowed $1.75 million in 1997 for improvement work at the Salt Springs and Performance Place business parks. It paid $200,000 toward the principal last year, and still owes $600,000, he said.