Editor’s note: The following story is a news analysis on the potential costs associated with the current operation and future sale of Utah Motorsports Campus.
The Tooele County Commission announced on Nov. 21 that a $1.55 million settlement had been reached with the company that filed a lawsuit against the county over the sale of the former Miller Motorsports Park.
But other costs incurred while operating the racetrack for the past two years, along with legal fees, brings the current potential total cost to be reimbursed when the facility is eventually sold to more than $10 million.
The county commissioners aren’t talking about the details of the future sale of the facility now known as Utah Motorsports Campus.
They want to make sure their efforts to secure a buyer for the racetrack, who will invest in the county for the long term, will meet legal muster before they discuss any details, according to Tooele County Commissioner Shawn Milne, who has been the point man for the commission on UMC since 2015.
The county commissioners have also declined requests to release financial figures on UMC’s operations, citing the ongoing lawsuit in the past, and now involvement in a real estate transaction, as reasons.
However, some costs incurred by the county since it took ownership of the racetrack in 2015 from Larry H. Miller Group are known and have been reported in the past.
The settlement agreement calls for $1.55 million to be paid to Center Point Management in two installments, one as soon as 3rd District Court Judge Randall Skanchy dismissed the suit, which occurred last week, and the other as soon as the racetrack is sold, or by March 31, 2018, whichever comes first.
The county is in its second year of a management agreement with Utah Motorsports Campus, LLC for the management of the racetrack. The agreement expires at the end of Dec. 2017. The county will ask UMC to renew the management agreement for one more year or until the track is sold, according to Milne.
As soon as the racetrack is sold, or the management agreement expires, Tooele County owes UMC three payments, according to the agreement.
The county must pay UMC 1 percent of the annual gross revenue from the racetrack for the last two years as a management fee. The county must also reimburse UMC for two years of operating losses at the facility, and for any business personal property UMC purchased for the track.
In 2013, the annual lease payment paid to the county by Larry H. Miller Group for Miller Motorsports Park was $337,166, which, according to the lease agreement, was 5 percent of the track’s revenue. That calculates out to approximately $6.7 million in revenue for 2013.
While UMC’s racetrack revenue in 2016 and this year is not publicly known, if it is the same as the Miller Group’s 2013 revenue, the county would owe UMC $134,000 for its management fee at 1 percent of $6.7 million for two years.
It is known that the operating loss for UMC in 2016 was $3.4 million, according to a public comment to the Transcript Bulletin by Milne in Jan. 2017.
The 2017 management agreement with Mitime limits the county’s liability for operating losses to $1.25 million. If the racetrack lost $1.25 million this year, the county’s total potential liability for operating losses in 2016 and 2017 would be $4.65 million.
In 2017, UMC’s management estimated that it spent $400,000 in upfront expenses, plus it estimated another $3 million in other operating assets in 2016.
Examples of operating assets purchased by UMC include office furniture; control panels for lights and sound systems; computers and software for ticket sales; and kitchen equipment for the former clubhouse.
UMC was required to operate the facility according to a budget approved by the county commission, according to the management agreement.
“I review all expenses on a regular basis,” Milne said in March 2016. “All three of us (commissioners) review and approve UMC’s books each month.”
Combining the estimated management fee at $134,866, maximum potential operating losses of $4.65 million, and the estimated asset reimbursement cost of $3.4 million, Tooele County may owe UMC as much as $8.2 million.
In addition, legal costs incurred since 2015 defending the sale to Mitime, will add approximately $300,000 to the county’s tab to be covered from the eventual sale of UMC, according to Tooele County Attorney Scott Broadhead.
That makes the estimated and potential total liability to be paid out of proceeds from the track’s sale at $8.5 million. With the $1.55 million lawsuit settlement with Center Point, the total out-of-pocket expenses to be paid by the county after selling the racetrack may reach $10.05 million.
The county commission has defended the management agreement as being necessary to retain the facility’s economic contribution to the community, including jobs, and to maintain the track’s value as an operating business.
“The value and the sales price would have been reduced by more than $6 million if we had just shut the place down,” said Tooele County Commission Chairman Wade Bitner, following an estimated $6 million liability to the county following the 2016 season at the racetrack. “When you shut a place like a racetrack down, you lose employees, tenants, and events.Then when you open it back up, they all don’t come back.”
Without an operating track, the county would be left with nothing but land and buildings to sell, instead of a functioning business, according to Bitner.
The management agreement with UMC allowed the racetrack to stay open using the cash flow of UMC to pay for operating and capital expenses. The expenses will be paid back from the proceeds of the sale of the track, requiring no money from the county’s budget, including property tax, according to Milne.
But how much is UMC worth today?
Attorneys for Tooele County argued that the racetrack was appraised at only $9 million during a Dec. 2015 court hearing, citing an appraisal by J. Phillip Cook, LLC, a Midvale-based professional appraisal company.
The county had two appraisals of UMC completed in 2016. Van Drimmelen & Associates, Inc. placed the value of the track at $15 million, while Integra Realty Sources placed the value of UMC at $20 million.
Center Point eventually offered the county $28.1 million for UMC. That’s how much the facility is booked for on the county’s tax rolls.
Mitime’s offer was $20 million.
Both of those offers have been withdrawn.
The county hasn’t talked to Mitime officials about another offer on the track, according to Milne. That will wait until after the county meets with its legal team, he said.
Another $20 million deal would leave Tooele County with $9.95 million after paying UMC, covering the settlement agreement with Center Point, and paying outside legal fees incurred as a result of Center Point’s challenge of the 2015 sale to Mitime.
However, the original $20 million offer and appraisal did not include the $3 million of investment in business personal property that presumably would be sold with the track. If those assets retain 100 percent of their value, the potential sale of UMC including the business personal property could be $23 million.
A $23 million sale would net the county $12.95 million after the $10.05 million in estimated expenses accrued against the sale.
“It’s not taxpayers that will be paying for these costs,” Milne said. “When it comes down to it, anything we receive from the sale of UMC is a gift to the county.”