Public Dollars Help Big Projects Happen

YOUNGSTOWN, Ohio – Following the twin announcements in early 2017 that both Sears and Macy’s were leaving the Shenango Valley Mall, officials in Hermitage, Pa., were aware that redevelopment would require substantial help.

The decisions to close the anchor stores were made at the corporate level and among several the retail chains announced, says Gary Gulla, Hermitage assistant city manager.

In 2019, Hermitage officials began to apply for resources that would entice a developer to take on redevelopment of the property, eventually securing $3.5 million in Redevelopment Assistance Capital Program funds.

The officials spoke with no fewer than five developers before Butterfli Holdings 011 LLC, an affiliate of Flicore LLC, bought the mall property in August 2022 for $7.1 million.

“I think they did that knowing that we would have some funds that were targeted for making the site ready for redevelopment,” Gulla says.

Adds Mark Longietti, Hermitage director of business and community development, “We think this year is going to be the year where the property starts to be redeveloped.” 

Flicore’s project is poised to begin sometime after JCPenney vacates the property in May and follows resolution of litigation over its lease.

The redevelopment project represents one example of the role federal and state funds can play in driving private investment. Across the region, businesses can take advantage of an array of grant and loan programs that help to support private investment.

Turning No to Yes

Valley Partners in Liberty Township has been “extremely successful” at using federal and state programs to launch business projects that otherwise wouldn’t get off the ground, says its executive director, Teresa Miller. Last year, the agency partnered with 21 financial institutions on deals and another 24 in which banks couldn’t participate but Valley Partners provided funding, according to Miller. 

“Over the last two years, we’ve been able to use a lot of pandemic dollars to do stand-alone loans without that additional third party. And that has helped a huge number of small businesses that got a no from a financial institution and turned it into a yes,” Miller says.

Since its earliest days, Valley Partners, based in Liberty Township, has tapped U.S. Economic Development Administration funding to help small businesses, Miller says.

“The way we leverage federal dollars that are awarded to us is we have third-party lenders participate,” she says.

In the case of a small business looking to buy a new building for $500,000, a bank would finance half of the project, or $250,000, Valley Partners would fund 40% and the business would contribute the remaining 10%. Valley Partners also has offered the state 166 Loan program for several years, which it recently used to help Valley Foods in Youngstown with an expansion project.

As a community development financial institution, Valley Partners recently got access to the State Small Business Credit Initiative, a loan fund that uses federal dollars awarded Ohio to lend funds at low interest rates. Rather than borrow from a bank at 8%, a small business can borrow a portion of what it might need at 3%, Miller says.

“If a bank is unable to do that whole project on its own and we come in and take a portion of it in a secondary position, it helps entice that private financing to come in and still do the project instead of just saying no,” Miller says. 

The Community Development Financial Institutions revolving loan fund operated by Valley Partners allows it to lend money at rates below prime. While the agency is able to do some stand-alone financing using the program, because of the small amount currently available to lend, it is “looking more strongly for those bank partners to come in and help,” Miller says.

Preparing Sites

In Ohio, the application portal recently opened for the new All Ohio Future Fund, which will provide $750 million to help communities create project-ready economic development sites.

“That’s the kind of thing that these programs do,” says Anthony Trevena, executive director of the Western Reserve Port Authority.

Site readiness is “a good example” of the use of these federal and state resources, he says. The port authority, which acquired the former Republic Steel property in Trumbull County about two years ago, is in the process of seeking cleanup funds for about 200 acres at the 1,000-acre site. The other 800 acres previously received a not-to-sue covenant under the Ohio Environmental Protection Agency Voluntary Action Program.

In December, the port authority sold a 560-acre section of the property to consumer products giant Kimberly-Clark Corp.

“You would never have had a Kimberly-Clark [project] if you had told them, ‘Oh, by the way, that needs cleaned up and remediated.’ If it weren’t for federal programs, that would not have happened,” Trevena says.

He also points to Wean Park, Covelli Centre and Youngstown Foundation Amphitheater as examples of projects that would not have come about without funds to address environmental and other site issues.

Additionally, remediation of the city’s 20 Federal Place is underway using a $6.9 million brownfield remediation grant, Trevena says.

Public Dollars for Projects

The redeveloped Shenango Valley Mall will be at the heart of a “vibrant city center” concept in Hermitage, part of the Mercer County city’s comprehensive plan.

The Pennsylvania Department of Transportation invested more than $4 million to reconfigure the intersection of U.S. Route 62 and East State Street as a roundabout near what will be the main entrance to the property.

Other funds were used to convert a private drive leading to a school to a public street and renovate a nearby trail.

“You need some public dollars invested in the project to make that happen,” Longietti says. Absent such dollars, it’s hard to redevelop these kinds of properties, particularly in a way that the community wants.

“It’s a challenge,” Gulla says. The Shenango Valley and greater Mahoning Valley area aren’t a “major metropolitan market.” So, were redevelopment to happen, the community “needed to have some resources at the table,” he continues.

Hermitage also helped to secure $2.7 million for infrastructure improvements to support a $40 million expansion at Joy Cone. “That’s another example where we try to be a partner with the businesses,” Gulla says.

Catalyst for Development

For most of the projects that Penn-Northwest Development Corp. works on, grant dollars typically represent 5% or less of a project, according to Rod Wilt, executive director. Most of the programs that Penn-Northwest administers supply “a small amount of grant or a subsidized loan” well below 50% of the value of a project.

“We look at these funds as not the reason that projects get done but just as a catalyst to reduce the overall cost of the project,” he says. “Very rarely is a project contingent upon the amount of state or federal support that is given.”

During his time at the helm of Penn-Northwest, Wilt says the agency has received federal funds to perform environmental assessments. Such grants typically are less than $50,000. But they are significant because up front they reduce due diligence costs for a project. Larger projects supported by such funds include Cooper Commons in Grove City and the former Sharon Tube complex.

“We’ve found those to be very useful for a company that’s looking to either acquire a site or expand their existing building onto another piece of property that has not been environmentally assessed,” Wilt says.

Other examples of federal assistance include $1.15 million from the Appalachian Regional Commission for the Pennsylvania Cybersecurity Center in Hermitage.

Pennsylvania’s Regional Asset Capital Program, a grant program that can be used to subsidize the cost of developing commercial or industrial real estate, has been employed “very effectively in Mercer County,” Wilt adds. Beneficiaries of program funds include a multimillion-dollar distillery project in Grove City, JCL Energy in Sharon and the Hope Center for Arts & Technology in Sharon, 

In addition, the Pennsylvania Industrial Development Authority offers low-interest loans to subsidize projects that might not qualify for a grant.

Using the Pennsylvania Department of Transportation’s rail freight assistance program, Penn-Northwest “just closed out a large rail freight assistance project to expand the track and improve the track all through the NLMK facility in Sharon,” Wilt says.

Pictured at top: Site development grants led to private-sector interest in the Shenango Mall site.