Economic Development

Humphries, Dutton Spar Over RGB Building Contract

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WARREN, Ohio – The Community Improvement Corp. of Warren and Trumbull County will issue requests for proposals for management of its properties and the entity itself in light of losing $121,000 last year.

The CIC board of directors approved – with two votes against and one abstention – to seek the proposals following a lengthy – and occasionally contentious – discussion among its members. Discussion of the CIC’s contract with the Youngstown Warren Regional Chamber consumed most of the 1½-hour meeting.

Much of the sparring was between new board member Paul Dutton, an attorney with Harrington Hoppe & Mitchell Ltd., and Tom Humphries, president and CEO of the regional chamber, over the fees the chamber is paid for its services.

In 2016, the chamber was paid $46,750. Of that, $36,000 represented the $3,000 monthly fee the chamber received to market and manage the former RG Steel building.

In late 2014, BDM Steel Holdings donated the building to the Tech Belt Energy Innovation Center, which has tax-exempt status the CIC lacks. TBEIC leases the building and property adjacent to the CIC, which has an option to buy the building for $1 at the end of the year.

The balance of the fee is paid the chamber to manage the CIC itself and provide miscellaneous services, including accounting.

Another $40,000 of the CIC’s deficit is from property taxes on the RG Steel building, a portion of which the CIC leases for $25,000 annually to BDM. BDM is developing the adjacent former steel mill property. The CIC has applied to the state of Ohio for a property tax exemption on the building.

“I look at this financial statement and we’re bleeding money,” Dutton stated.

The attorney repeatedly pressed Humphries on what the CIC is receiving in return for the fees paid to the chamber. He pointed to his past real estate and development expertise, including with Strouss Building Associates, which redeveloped the former downtown Youngstown department store as an office building, today known as 20 Federal Place.

Dutton also questioned whether the chamber is “set up” to be in the business of managing properties.

The chamber, which also has a management contract with the Youngstown Central Area Community Improvement Corp., provides property management services for that CIC’s properties, including the George V. Voinovich Government Center, Mahoning County Children Services building and Ohio 7th District Court of Appeals courthouse.

“When we set this up, there were a lot of things that had to be done,” Humphries said.

During the first year the chamber managed the property, for example, it earned its fee in savings on electricity when it uncovered an issue in how it was being billed. “We found we were paying for services across the street that had nothing to do with this building,” Humphries said. Much of the work over the past year “clean[ed] up” such matters, he said. In addition, the chamber, under the contract, oversaw cleanup of the building and property.

The chamber is marketing the property, particularly to the call center industry. One prospective tenant could sign in the next six months, Humphries said.

“We agree there should be healthy discussions,” Humphries said. When the contract was written, the chamber and CIC were “up against the wall” because they had to respond to the donation of the building. Now that a new board is in place at the CIC – which had been dormant for years before that – board members can discuss what direction the CIC should take.

The chamber president also defended his organization’s efforts and the fees it receives, such as Dutton’s question about why the chamber charges the CIC to market the property. Dutton contended that such service is part of the chamber’s mission to promote economic development.

As part of its focus on the RG Steel building, the chamber has retained a company with which it works to interest call centers in the property.

“If you look at the depth and scope of our work compared to other chambers, there’s a fee structure that has to pay for that work,” Humphries said. “We hosted 13 site locators here last year. It cost $400,000 to do that.”

Although he supports maintaining a relationship with the chamber, Dutton characterized the financial arrangement as “unsustainable” and argued for a lower rate. He speculated that other entities could provide services for far less.

“We want to make sure that we give people the opportunity. I don’t know that anybody has better skills than the chamber to do this,” said board member Mike Keys, director of Warren’s community development department.

“I don’t think anybody’s saying anything other than let’s be open,” Keys added.

As directed by the board, Humphries will outline the duties the chamber performs as property manager and administrator and send that information to Phil O’Hara, senior director with HBK and CIC chairman, by mid-February. With input from the full board, O’Hara and the rest of the CIC’s officers will write RFPs to send to qualified entities that might be interested in providing the services.

Those proposals should go out by the end of February and the board likely would consider responses at its March meeting, O’Hara said. In addition, he will reach out to accounting firms to provide pro bono or discounted accounting services.

The board also approved paying $2,800 monthly to the chamber – a $200 reduction to which Humphries agreed on the chamber’s behalf – to continue providing property management services for the next two months.

Only Dutton and Keys voted against the motion to put out the RFP’s and hire the chamber for the two months. Robin Patton, external affairs manager with FirstEnergy’s economic development support office, abstained because she also serves on the regional chamber’s board of directors.

Dutton declined to comment on his vote and cited the media policy adopted at the meeting, which designates the chairman and other officers as official spokesmen. “I’m not the spokesperson for the organization,” he said.

Keys said he had an issue only with the length of time involved.

Although somewhat surprised that the discussion became as animated as it occasionally did, the contract issue “definitely was something that needed to be discussed,” O’Hara said.

“We certainly had some good suggestions and good dialogue regarding that,” he added.

Published by The Business Journal, Youngstown, Ohio.