Youngstown officials pleased with arena project

August 4, 2005
As construction on an arena in Youngstown, Ohio, nears completion, city officials there said Wednesday the project – similar to one proposed for Lebanon – appears unlikely to threaten governmental coffers.
The Youngstown Convocation Center will be managed by Phoenix-based Global Entertainment Corporation (GEC), the same company eyeing Lebanon for the development of a 5,500-seat arena.
And while a financial strategy for the proposed Lebanon facility has yet to emerge, Youngstown Mayor George McKelvey described the scenario through which his city intends to pay for the $42 million events center.
McKelvey explained Youngstown officials set $42 million as the "gross maximum price" for the facility. Any costs beyond that amount would be absorbed by GEC, he noted.
"That's the facility price," McKelvey said. "Beyond that, we had other costs … not included in the (gross maximum price) because we had incurred them before that was established, things like the purchase of the property."
The City of Youngstown received a $26.8 million federal grant, a $2 million commitment from the State of Ohio and a $550,000 energy grant from Ohio Edison – a local credit union. The city also used approximately $4 million available in water and sewer funds.
Youngstown also anticipates obtaining $3 million from the State of Ohio. However, those funds will not be available for two to three years, meaning the city will be required to borrow money until the state can provide it, according to a July 21 article published in Youngstown's local newspaper, The Vindicator.
Totaling $36.35 million, those funds still left the city roughly $9 million short of the amount needed to complete the arena's construction.
The City of Youngstown had approached their county government to seek $4.5 million, but county officials chose not to participate in the project.
McKelvey said the city may ultimately be able to cover the "funding gap" through additional federal grants.
"It's not a shortfall at all. It's gap financing," McKelvey said. "But, you can't determine what your gap is going to be until you see what your bids come in at. You can't predict to the number … that's why you want to have a gross maximum price established.
"That's an insurance policy because if you go over the (gross maximum price) that is Global's cost. They're just acting as a construction agent for us."
Noting Youngstown will ultimately own the arena and GEC will serve as the management entity, McKelvey added it was in GEC's best interest to operate the facility efficiently and profitably.
Under an agreement with GEC, the City of Youngstown will collect 93 cents of every dollar generated by the facility. Youngstown's mayor said a "conservative projection" suggested the city will collect roughly $1.4 million during the arena's first year in operation.
"Right now, we're looking at a facility that's going to be 75 percent equity and 25 percent debt," McKelvey said.
Youngstown City Councilor Artis Gillam Sr., whose district includes the downtown arena, conceded he has been concerned with cost overruns related to the project. He estimated the current price for the facility is closer to $44 million.
Though he said he was uncertain why the cost had risen, Gillam noted the roof of the Youngstown facility had to be built stronger than other GEC facilities because of winter weather conditions.
"The bottom line is I feel Global does a very good job," Gillam said. "Once you do this, I think you say to Global or any other company that's going to build that you want X number of seats and how much can they build it for. Once they commit themselves for that amount, then that's what you go forward with."
He added Youngstown could have requested GEC help cover the construction costs but elected not to do so. Echoing comments made by McKelvey, Gillam said he would recommend GEC to other municipalities – as long as the cities were certain an arena is needed.
"I think you should get the understanding of what you're doing before you do it," Gillam said.
"There are a number of ways to do it. In a growing community like yours, it will become a real, real focal point. It just brings people downtown," McKelvey said. "In building this, the first thing you have to do is know what you don't know.
"There aren't many cities that know anything about building a convocation center or arena. Our goal was to just go out and hire the best in the business. We're happy with Global. We're impressed with Global at this point in time."
Lebanon and Wilson County officials will likely meet with McKelvey and Gillam, as they plan to visit the construction site and discuss the project with Youngstown officials next week.
Staff Writer Brian Harville can be reached at 444-3952 ext. 16 or by e-mail at brian.harville@lebanondemocrat.com.