YOUNGSTOWN, Ohio -- The city plans to chip away at the debt it incurred in building the Covelli Centre and reduce the principal by $350,000 this year, the Youngstown finance director said Monday.
"We're going to reduce the debt this year from about $11 million down to $10,650,000," David Bozanich said after the finance committee of City Council met. "We've probably paid about $1 million of principal down to date. We're going to continue to bite away at that number as the years go on."
In 2005, the city issued $11.9 million in bonds to help finance construction of the $45 million arena, then named the Chevrolet Centre.
City Council approved refinancing $10,660,000 worth of bonds during a special session Monday afternoon. The city has refinanced its debt obligations annually because short-term interest rates are much more favorable now than financing with long-term bonds.
Bozanich said the city has saved considerable money over the last several years because it’s been able to refinance its debt at an interest rate of about 1.25% rather than lock in long-term rates that fluctuate between 4% and 5%.
"If the market starts moving against us, we'll flip that and go to the long-term bond market as fast as we can," he said.
Several factors help the city to refinance at a lower rate. "We're getting state audit reports out on a quicker basis,” Bozanich said. “We had the decision of it being real estate tax-exempt. You combine all those things, along with the improving city's finances, it gives us the ability to refinance that debt at a lower rate."
The finance director estimates the city has saved about $1 million in interest by refinancing through the short-term market over the years.
The city hasn't paid the debt down more aggressively, Bozanich said, because of the economic development projects and opportunities that the city underwrites, and these take priority over debt obligations.
"It's not that we haven't had the resources to pay it down in the past," Bozanich said. "It's a matter of what the priorities are when you're choosing projects that maybe help the economy and create jobs or pay down debt in a relatively low-interest-rate market now."
Bozanich said the Covelli Centre now earns enough money to cover the city's annual debt service on the building and remain profitable, a situation helped by lower interest rates.
Through the first half of this year, the Covelli Centre posted an operating surplus of $382,593. That excludes the 5.5% admissions tax the city collects on each ticket sold. Through the first half of 2014, the city has collected $132,937 in admission taxes.
"It's both profitable and cash-flow positive to the city," Bozanich said. "We're pretty excited about it. The future's pretty good."
Council also approved a $10,000 in sponsorship funding to support the City Maker Initiative, which kicks off Thursday.
Mike Hripko of America Makes, the National Additive Manufacturing Innovation Institute, told the finance committee that the money would be used to offset the costs of bringing 40 judges from Make magazine in California to Youngstown for the event.
The judges and Make will be in town to host a 3-D printer "shootout," an event likely to give Youngstown and America Makes positive international exposure, Hripko said.
America Makes is the first of President Obama's advanced manufacturing hubs and devotes its resources to facilitating research and the development of additive manufacturing, also known as 3-D printing.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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