Thursday, August 11, 2016
[Monterey County] Trio of bidder groups in race for Laguna Seca management deal
Blog note: this article references a grand jury report.
SALINAS >> After more than 40 years, the Sports Car Racing Association of the Monterey Peninsula will no longer be the concessionaire at Monterey County’s iconic Mazda Raceway Laguna Seca, even if it is part of the winning bid for a long-term management contract.
According to a proposal offered by a partnership including the raceway founder and longtime manager, the Daytona, Fla.-based International Speedway Corp. would be the concessionaire for Laguna Seca, according to SCRAMP board president Michael Smith.
Smith said SCRAMP would then contract with the giant stock car racing firm for “certain services,” presumably including the day-to-day operation of the raceway built by the local organization in 1957. He said ISC possesses the experience, staffing and financial capacity to “move this (raceway operation) forward” while SCRAMP offers local leadership, management and relationships, as well as a historic and intimate knowledge of the raceway.
“ISC has the financial depth that’s needed for the raceway’s future,” Smith said. “We know all the nuances.”
SCRAMP has held the raceway concession agreement with the county since the site was transferred from the Army in 1974. It has run the track under a month-to-month agreement since early 2014 amid disagreements with the county over its financial practices. That ultimately resulted in an open, competitive management search.
SCRAMP and the county have been at odds over the future of the raceway as recently as a year ago. Last summer the county entered into a due diligence period with ISC. SCRAMP fired back with a public relations blitz aimed at pressuring the county into keeping the local nonprofit in place. ISC and SCRAMP announced their partnership earlier this year amid increasing pressure and criticism of SCRAMP. A civil grand jury report charged the nonprofit with misstating revenue, juggling creditors and falling behind on concession-related payments as it struggled financially starting about a decade ago.
The grand jury found that SCRAMP was losing $250,000 a year on the raceway operation and needed a short-term operating reserve of $1 million to $2 million, while the raceway needed $10 million in capital improvements. It also noted that SCRAMP acknowledged spending Mazda naming rights revenue on operations rather than raceway upgrades as required.
The ISC-SCRAMP partnership and two other bidder groups made presentations to a panel of racing industry and financial experts and other county representatives, including consultant Barrett Sports Group, on July 25 at the Monterey Plaza Hotel & Spa.
The groups all responded to a request for qualifications issued by the county to manage the raceway. Their proposals will be judged by the panel charged with developing a recommendation for the Board of Supervisors by the end of August. The supervisors could decide to immediately begin concession negotiations with the top-rated proposal, or ask for more detailed proposals from one or more of the bidder groups. The board could also decide to simply continue the search process, or take some other course of action.
County officials declined to provide details of the proposals or the identities of the panel members, citing the confidential nature of the process. The three bidder groups, however, all provided some details to The Herald. All three said their proposals envisioned taking over management of the entire Laguna Seca Recreation Area, including the raceway, and upgrading all the amenities and expanding usage while remaining mindful of site constraints including noise, traffic and impacts on neighbors.
In addition to the ISC/SCRAMP group, a group calling itself the World Automotive Championship of California and a nonprofit called Friends of Laguna Seca made bids.
The World Automotive Championship is led by Long Beach Grand Prix founder and longtime racing industry figure Chris Pook and local fast-food establishments owner Landon Hofman of Pebble Beach. Friends of Laguna Seca is led by local racing industry enthusiasts including board president Ross Merrill and board members Bruce Canepa and Gordon McCall, with the guidance of North Carolina-based stock car racing industry veteran general manager Lauri Eberhart.
Hofman, who owns a string of McDonald’s restaurants in the Monterey and Salinas areas, said he watched for years as the Laguna Seca raceway foundered under SCRAMP’s mismanagement, noting the disintegrating relationship between the nonprofit and the racing circuits, vendors and the charitable community, and became concerned about its future. He said the WACC group envisions sinking as much as $20 million into the track and recreation area over time in an effort to remake it as a money-making endeavor.
“My interest in the whole project is to hopefully maintain Laguna Seca as a racetrack — I know how much it means to the local economy,” he said. “It has to be made to pay. That’s where we’re coming from.”
Eberhart, who traveled to Monterey to participate in last week’s presentation, noted Friends of Laguna Seca is the lone independent nonprofit competing for the Laguna Seca concession agreement. She argued nonprofit management is crucial because of the site’s long-term capital needs, which the group estimated at $10 million over the next five years, and would need to be fundraised and invested. A for-profit entity’s investment, she said, would simply be a “gift” to the county.
“The investment challenge is why a nonprofit makes sense,” she said.
The group envisions transforming Laguna Seca into the “Monaco of the West” through a three-pronged approach aimed at making it profitable, Eberhart said, including revitalizing the entire recreation area, reinvesting in the facility, and reinventing it as the host of “niche-marketed lifestyle events.”
Meanwhile, in an open letter to Laguna Seca racing fans, Smith wrote that the SCRAMP/ISC proposal seeks to “expand series and track renter relationships” while investing in the track’s capital needs. He told The Herald the partnership had proposed investing “multiple millions” in Laguna Seca and saw the raceway and recreation area’s other amenities, including campground and firing range, as an “integrated” entity.
August 5, 2016
By Jim Johnson