Sammarone: Sell 20 Federal, Lease or Sell Arena
YOUNGSTOWN, Ohio – A plan to sell or lease the city-owned Covelli Centre should be completed by January and then placed before City Council, while the landmark 20 Federal Place building should have a "For Sale" sign hanging on its windows within six months, Mayor Charles Sammarone said Thursday.
"We're finishing up the assessment before the end of the year," Sammarone told The Business Journal in reference to the Covelli Centre. "Council will have to make the final decision, but as we've been moving along, I've been talking to council members and they see we have this deficit we have to reduce and eliminate."
The city has contracted with PA Sports & Entertainment Group Inc., a consultant with offices in Cranston, R.I. and Downington, Pa., to help develop a sale or lease schedule for the arena. "It [the plan] could be selling, but definitely leasing," Sammarone said.
The sale or lease of the Covelli Centre was among several recommendations made by The PFM Group, a consultant the city hired earlier this year to develop an efficiency plan to reduce costs and streamline operations in municipal government. The study projected the city faced a $5.5 million deficit by the end of 2013.
Another recommendation was to prepare the city-owned 20 Federal Place for sale.
"We're going to do that," Sammarone said. "PFM recommends that. It's hard for government to run businesses."
He said the landmark downtown building would probably be placed on the market during the first half of next year, after repairs to two elevators and windows are finished. "It'll go up, probably within the next six months, probably to sell."
The building, which once housed the former Strouss' department store and the headquarters for Phar-Mor Inc., now has an array of tenants, including VXI Global Inc., a call center that employs about 900 people.
Repairs to the elevators in the building were part of a contract the city signed to lure VXI to downtown, and those expenses alone amount to more than $1 million, the mayor said.
Sammarone said that it's important that the city divest its interests in enterprises such as 20 Federal and the Covelli Centre because it places a strain on the budget at a time when the municipal tax base is declining.
"As you lose tax money with population, you also lose you’re your power base," he said. "I'm trying to make decisions on not only for now and tomorrow, but also 10, 20, 50 years down the road. Hopefully, we'll still have a great city. That's the bottom line."
The city developed the $45 million arena with the help of a $26 million federal grant secured by then U.S. Rep. James A. Traficant Jr. The city also borrowed nearly $11.9 million to complete construction of the building and had in the past paid about $900,000 a year in debt service on the loan.
The Covelli Centre has posted an operating profit over the last two years, and is expected to do so this year as well. But it doesn't generate enough revenue to cover the principle and interest the city pays each year on the loan, and these expenses need plugged, the mayor reiterated.
But Covelli Centre Exectuvie Director Eric Ryan said that the arena should post an operating profit of about $300,000 this year, and add another $200,000 to city coffers through activities fees and parking the arena collects. Together, he said the revenue is enough to cover the loans since the city refinanced its debt on the building in September.
Sammarone said he would also decide by the "second or third week in January" on whether he'd seek re-election next year. "A lot of people I've worked with – downtown business people and neighborhood people – have liked what I've been doing, so they've asked me to hang around," he said. "It's also going to involve my family."
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Copyright 2012 The Business Journal, Youngstown, Ohio.
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