Thursday, July 28, 2016

[Monterey County] Grand jury: Laguna Seca needs better management, oversight

Laguna Seca >> Laguna Seca’s iconic raceway must be more professionally managed and proactively overseen than has occurred under Monterey County parks and the Sports Car Racing Association of the Monterey Peninsula for nearly a decade, according to a 2015-16 civil grand jury report.
The report, “Monterey County Parks and SCRAMP: Uncertainties and Instabilities,” released earlier this week offers an overview of the struggles the county and the nonprofit raceway manager have experienced in recent years. It places the blame squarely on the absence of sound business practices by SCRAMP and inadequate county oversight. It recommends a series of improvements aimed at improving operations at the county-owned raceway under a long-term management agreement.
According to the report, SCRAMP has not been a “financially fit concessionaire since 2008,” largely due to its inability to manage its financial obligations. While the report acknowledged the challenges of operating in an economic downturn, it also criticized the longtime raceway manager for resorting to unsound business practices such as late payments to the county and raceway vendors and civic groups that damaged its relationships with the county, and the business and nonprofit community.
At the same time, the report criticized the county for failing to “confront” SCRAMP with “a direct communication that (the organization’s actions) jeopardized its contractual agreement” with the county until 2014. That’s when the Board of Supervisors declined to extend SCRAMP’s contract and began exploring alternative management options. That resulted in last year’s controversial and contentious due diligence period with the Daytona, Florida-based stock car racing giant International Speedway Corp.
The report recommends the county assign sufficient staff with both managerial and financial expertise to oversee the raceway operation and require closer review of ongoing fiscal management. It also acknowledged the inherent challenges of the raceway including noise, traffic and environmental constraints, and deferred maintenance and capital improvement needs. It said any long-term raceway manager should demonstrate “organizational adaptability,” including potential new revenue opportunities beyond racing.
The report comes in the midst of the county’s search for a long-term manager for the raceway, and perhaps the entire Laguna Seca Recreation Area. The county parks department is also undergoing another in a series of management changes that could end up absorbing the department into the county’s Resource Management Agency.
County parks director Mark Mariscal is leaving his post after delivering a report on the raceway management search to the supervisors on Tuesday. He said he agrees with the grand jury’s conclusion the raceway is not currently a “cash cow” and needs a long-term manager with the wherewithal to address the raceway’s needs and develop a plan to boost revenue.
SCRAMP board president Michael Smith said organization officials agreed with some of the grand jury report, disagreed with others and would need clarification on several points. Smith said SCRAMP’s financial challenges go back even longer than the report suggested, largely because of an increasingly complex racing industry. He said the nonprofit had been proposing new revenue ideas for years, but its efforts were difficult to communicate with a parks department in the midst of constant management turnover.
At the same time, Smith acknowledged SCRAMP’s limitations and pointed to the partnership with a well-heeled ISC as evidence it was seeking improvement. He admitted SCRAMP could have been more open to ISC during last year’s due diligence period, but said the organization felt threatened by the sudden emergence of the corporation.
Mariscal, the fourth parks director in the last few years, has played a key role in the raceway management search, which has apparently resulted in at least two responses to a request for qualifications due July 1. Smith confirmed that SCRAMP had submitted a response in partnership with ISC and a new nonprofit organization calling itself Friends of Laguna Seca announced last week it had also submitted a response.
According to Tuesday’s report to the board, the responses will be evaluated over the next several weeks, with a recommendation to the board expected in late August. The board could either choose to begin contract negotiations with one of the respondents, or request a formal management proposal.
With Mariscal’s impending departure, RMA director Carl Holm will be appointed interim parks director starting Wednesday while county officials consider a potential “integration” into the agency, including elimination of the parks director position. Retired police chief Cam Sanchez will serve as a temporary management specialist starting Sept. 19. He will be charged with day-to-day management of the parks system and advise county officials on best options for merging parks into the agency.
Meanwhile, the raceway management search and contract negotiation process will be administered by the County Administrative Office, which will also take over negotiating a new South County lakes resort management agreement, until a new permanent organizational structure is finished.
According to the grand jury report, SCRAMP is facing an estimated $250,000 annual operating shortfall, and needs a short-term operating reserve of between $1 million and $2 million.
The report also indicated the raceway needs about $10 million in basic capital improvements over the next five years, but SCRAMP had diverted most of the $2.4 million in Mazda raceway sponsorship funds designated for those improvements to cover operating costs. While SCRAMP officials indicated the nonprofit planned to borrow and cover its capital obligations by the 2017 deadline, the county has conducted an outside compliance audit to determine if the Mazda funds have been properly handled.
In addition, the report notes SCRAMP’s failure to produce a contractually obligated certified audit of its 2014 financials, although an audit has since been submitted to the county.
July 16, 2016
Monterey County Herald
By Jim Johnson

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