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Crown getting royal deal on cooling bill

September 20, 2018

JOHNSTOWN — Arena management in Johnstown is giving a 71 percent bill reduction to a company operated by the Cambria County War Memorial Authority’s new interim chairman.

Records from 1st Summit Arena @ Cambria County War Memorial show that Crown American Hotels President Michael Barletta inked an air conditioning agreement contract for $50 per hour with General Manager Steve St. John of SMG Entertainment, the arena’s third-party management company, in April 2016. Chilled water from the county-owned arena is used in the air-conditioning system at the Frank J. Pasquerilla Conference Center — which the city owns but allows Crown to use rent-free — located across Napoleon Street from the historic hockey venue.

The $50-per-hour rate is just 29 percent of $175 per hour, which is what a partner with CJL Engineering in Johnstown advised arena management to charge Crown for the service in 2014. Our Town, the Daily American’s sister publication, estimates that this move has allowed Crown American to save approximately $81,020 for air conditioning service over the past two years.

In his emailed response to questions, St. John did not comment on why he agreed to a rate with Crown that’s less than half of what the CJL partner recommended.

“Further, SMG has no obligation to communicate with you or anyone not a party to the agreement,” St. John wrote.

Barletta — who recently moved from vice chairman to interim chairman following the resignation of former Chairman Dean Gindlesperger, the subject of a State Ethics Commission investigation into self-dealing at the arena — did not return a phone call or an email asking how the reduced rate was determined.

At issue with Crown’s air conditioning deal is a study conducted by engineer Jim Vizzini in 2014. Vizzini is a partner at CJL Engineering, which designed and installed the system in the early 2000s when the Frank J. Pasquerilla Conference Center was built.

“For the most part, the War Memorial never turns the air conditioning on unless its for the Showcase for Commerce,” Vizzini told Our Town. “It’s really only serving the conference center for a large chunk of the year.”

The equipment purchased at the arena for air conditioning, Vizzini said, was originally designed to serve an entire downtown entertainment district that was to include a 10-screen theater complex proposed by City Hall and the Johnstown Redevelopment Authority in 2000. But the project ultimately fell through.

“They ended up with a plant that, on paper, is bigger than it needs to be,” Vizzini said.

Vizzini conducted the study in 2014 at the request of former arena General Manager Tom Grenell. He said Grenell provided, for the first time, several years’ worth of utility bills. Factors in his calculations included the cost of utilities such as electricity and water, as well as wear-and-tear on the equipment.

“(I looked at), ‘What’s the most fair way to establish a value for how much they use?’” he said.

Informed that St. John agreed to a rate that is just 29 percent of what the engineering report recommended, Vizzini said he doesn’t know how that could be an accurate assessment of Crown’s usage.

“It sounds like a legitimate concern,” Vizzini said. “Things haven’t gone down in price.”

According to Grenell — who was removed from his position by SMG in 2015 — the arena did not have an accurate way of billing Crown prior to Vizzini’s report because the metering setup in place calculated “flow” to the conference center without taking into account the idling electric costs and required maintenance of the system.

“During the summer months the arena staff was making a collective effort to reduce electric costs by turning off or limiting the use of electric devices. In spite of the best efforts, the electric bills for the summer months still seemed high,” Grenell said.

“I asked Jim Vizzini from CJL Engineering, whose company designed and installed the air-conditioning equipment, to review what we were doing and advise us as to how this affected our monthly bills and make best-practice recommendations. CJL Engineering had the expertise to produce a plan of action to operate the arena efficiently with regards to our utility costs.”

Though other Cambria County War Memorial Authority board members did not respond to requests for comment on the rate change, their minutes show that they voted to write off more than $20,000 that Grenell billed Crown on behalf of SMG in 2015.

Authority solicitor Michael J. Parrish Jr. confirmed that no engineering studies have since been conducted to justify the price reduction.

“The Board did not vote to approve any agreement between SMG and Crown American, as the same is with province of SMG in its position as the Manager of the Arena,” the partner with Spence, Custer, Saylor, Wolfe & Rose in Westmont wrote in an email response to inquiries. He recently replaced James Walsh, of the same law firm, in this role.

“The rate to be charged for the current Agreement was determined by Steve St. John in his position as General Manager. Mike Barletta signed the Agreement in his capacity as President of Crown American Hotels.”

The county has sent more than $719,000 to the arena authority since St. John was named general manager in late 2015 — a substantial increase over the average of $119,000 per year that the authority received during the four previous years.

Cambria County Controller Ed Cernic Jr. disagreed with the position of St. John and the authority board regarding the Crown billing change. He wrote in an email that he was unaware of Crown’s reduced rate and that it was “wrong” for this to be changed without a public vote from the board.

“The new rate, if approved, would only take effect after the vote and the date that it is established,” Cernic wrote.

Barletta recently stepped into the chief leadership role for Gindlesperger, who resigned Aug. 15 at the request of two of the three Cambria County commissioners. Tom Chernisky and B.J. Smith, the Democratic members of the three-man commissioners board, accused Gindlesperger of abusing his power after Our Town found that contracts and other financial benefits were steered toward business interests owned by Gindlesperger and his son, Ryan.

County solicitor William Gleason Barbin also confirmed last month that the arena has been subject to an ongoing State Ethics Commission investigation.

In light of the substantial price break given to Barletta’s company, all three commissioners, including Republican Mark Wissinger, were asked if they would like to comment. They did not respond.

To figure out approximately how much Crown has been saving at the county-owned arena’s expense, Our Town first determined the number of hours the company would be using the system by dividing the budgeted revenue figure for air conditioning reimbursement in the arena management’s books by 50, which is the contracted hourly rate. This came to 360 hours for the 2016-17 year and 288 for the 2017-18 year.

These hours were then multiplied by 175, representative of the rate Vizzini gauged as being most accurate. This came to $113,400. Then $32,380 — what Crown actually paid — was subtracted from $113,400 to show that the company had saved approximately $81,020 over the last two fiscal years.

Using these same metrics for the 2018-19 fiscal year, Our Town estimates that Crown is on pace to save an additional $35,000 by July.

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