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City Puts Out RFP for Lease, Sale of Covelli Centre
YOUNGSTOWN, Ohio – The future of the Covelli Centre should be clearer after April 5. That is the deadline set by the city of Youngstown, which owns the arena, for responses to the request for proposals for the lease and management or sale of the building.
Requirements include a minimum lease payment of $700,000 per year with two years of advanced payments guaranteed through a surety bond or letter of credit and annual capital improvement fund payment of $75,000, according to the RFP released to reporters following Thursday’s Board of Control meeting. Prospective lessees must have at least five years of experience in the management and administration of a similar type of facility, which could be accomplished through a contract with a facility management company, and term of the lease will be five years, with a five-year option.
According to the document, the city would consider selling the 5,750-seat facility on an as-is basis for no less than $15 million. The city spent $45 million to build the facility in 2005, including a $26.8 million federal grant secured by former U.S. Rep. James A. Traficant Jr., and $11.9 million the city borrowed to complete the project.
“It’s been a good asset for the city of Youngstown but if there’s a way we can help the bottom line, we’ve got to find it and use it,” said Mayor Charles Sammarone. The mayor advocated selling or leasing the building last year, one of the recommendations of a city government efficiency study by the PFM Group.
A more recent assessment of the Covelli Centre’s operations prepared by PA Sports & Entertainment Group Inc., which the city hired to prepare bid documents and specifications for a potential sale or lease, found the arena to be “performing well” on the city’s behalf.
The PA Sports & Entertainment Study “had nothing to do with the finances of the city. The PFM report dealt with the finances of the city, which is what we’re interested in,” Sammarone said. “We’re all concerned about [the finances of the Covelli Centre] but ultimately we’re concerned about the finances of the city.”
Several issues would be involved with any potential lease or sale deal, including the real estate tax, which is abated under city ownership but “would be put back in play if somebody were to purchase it” or in the case of a longer term lease, said David Bozanich, city finance director. There is also the matter of the city’s ticket tax.
“However, if there ainterested in doing this and they think they can get around some of these issues, then we’re willing to listen and that’s what this document accomplishes,” Bozanich said. “It accomplishes our ability to put it into play and see if there’s interest.”
While there has been “a little” interest expressed informally, Bozanich believes that has been without looking at the financial numbers involved. “This will give them the opportunity because we’re providing them the most current financial data we have,” he said.
JAC Management Group and its president, Eric Ryan, who serves as executive director of the Covelli Centre, “have been doing a great job, Bozanich noted. "We think it's supporting a lot of downtown business.”
Once any proposals are submitted, Sammarone said he wants to “move quickly” on evaluating them. “I’m running out my term and there are other issues that I want to deal with.”
“Should we not end up with the type of proposal that the city’s looking for, then we will be looking at extending long-term contracts in order to provide for the long-term stability of the facility. That needs to happen,” Sammarone said.
Those long-term contracts include naming rights and management agreements that expire this year. A one-year extension of Covelli Enterprises’ initial three-year contract for naming rights comes up in May, and the management agreement with JAC Management and Ryan expires later this year. Both parties have expressed interest in continuing their relationships with the arena.
Ryan has served as manager of the building since the fall 2007, when the city severed its ties with Global Entertainment Group. Since then, Ryan has reversed what had been a trend of operating losses for the arena and booked top acts including Elton John, Bob Dylan and Barry Manilow.
“We think the sky’s the limit with JAC and our business model and what we’ve done here, and certainly want to continue” Ryan said. “I think our track record speaks for itself, so we’ll see how it all plays out. We certainly want to stay.”
Regarding the RFP, Ryan stated, “We’re just going to see how it pans out. Our job is to operate this center as efficiently and bring in as much revenue as possible, and that’s what we’ll continue to do.”
A spokesman for Covelli Enterprises said the company would “absolutely be interested” in a longer-term agreement if the city doesn’t sell or lease the building, and if it keeps the current management in place.
“The progress and success [Eric Ryan] has had and the Covelli Centre has had since he took over the arena by all accounts is unbelievable to a certain extent,” said Allen Ryan, Covelli’s director of corporate affairs. Ryan, who is not related to the arena manager, said as long as Eric Ryan continues to be a part of the Covelli Centre and operations continue as they are, his company is “very comfortable in continuing to put our name on the building.”
Covelli Enterprises, which also consults on food and beverage operations under a separate agreement, for which it is not paid, is now offering certain products from the menu of its O’Charley’s restaurants at the Covelli Centre’s concessions stands.
“When we took over food and beverage operations in April, the one thing we wanted to do was improve the fan experience, and we think we’ve done that with Covelli Enterprises,” Eric Ryan said. “Now that we’re offering a lot of the O’Charley’s favorites, people can have better food with better quality than we were offering before.”
The arena gets the products from Covelli Enterprises’ distributor, and cooks at the Covelli Centre have been trained at O’Charley’s restaurants to prepare the food.
“Covelli Enterprises rolled it out for us to be able to do this,” the Covelli Centre’s Ryan said. “Covelli Enterprises is not making one cent off this.”
“When we signed the [naming rights] agreement, [owner Sam] Covelli said anything he can do to be helpful and improve the quality of the experience for the people that go watch shows he would be happy to do, and this is an extension of that,” Covelli Enterprises’ Ryan added.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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