MMP / Tooele County Situation Analysis

A summary of the situation facing the Tooele County Commissioners and Residents with regard to the sale of the former Miller Motorsports Park.

The following is a detailed summary of the situation facing the Tooele County Commissioners with regard to the sale of the former Miller Motorsports Park property to a potential new buyer/operator, as of December 22, 2015.

In view the significant number of comments made on social media in the last few days, we suggest that anyone who wants to make further comments on the situation review this document carefully before arriving at conclusions, making further comments or arriving at judgements regarding this very complex situation.

The Court’s ruling on Thursday afternoon December 17, 2015, invalidated Tooele County’s two month old agreement to sell the Miller Motorsports Park venue to Mitime Utah Investment, LLC. Mitime planned to operate it as the Utah Motorsports Campus.

It is important to understand the background that led to the County’s decision to sell the venue to Mitime. The following is a summary of the events that led up to this point in time, December 22, 2015.

Tooele County leased the ground on which the Motorsports Park was built to the Miller Group in mid-2005, for 99 years. Larry Miller, the owner, chose to build a modern, very expensive race facility on the land. His goals were complex, but essentially he wanted to provide the community with an international standard race facility and to host major events for the Salt Lake market.

Mr. Miller was fully aware of the financial consequences of his plans, which did not project profitability in the short term, nor did he ever expect to recover his significant investment. His strategy was to invest heavily in major events, in the quality of his staff, in the activities that he wanted to take place at the Motorsports Park, and over time to increase spectator attendance and the financial viability of the facility. At the time of his passing, in 2009, the Motorsports Park was ranked amongst the top race facilities in the world and was highly respected by North American competitors, sanctioning groups, media and fans.

During each year of its operations, the Motorsports Park generated significant economic benefits to the Tooele County and its community, including contributing approximately 11% to the annual County property tax revenues. And it provided 90 fulltime jobs. Its boon to Tooele County’s economic welfare, also included employment opportunities for part-time work, associated businesses operating at the park (such as garage tenants who operated businesses allied with the Motorsports Park), as well as other ancillary businesses, such as the hotel industry. The Motorsports Park generated significant sales taxes, filled local hotels to capacity most weekends during the race season and brought visitors from not only the Salt Lake Region, but from countries around the world. This all occurred despite the Miller Group’s significant annual operating losses.

Mr. Miller’s untimely passing brought an end to his dreams for the Motorsports Park, and more importantly, to his organization’s commitment to meet his long range aspiration, including his willingness to suffer significant annual operating losses that would be required to achieve them.

Once the Miller Group took full control of management of the Motorsports Park after Mr. Miller’s passing, it reduced the level of financial support for events, marketing and development, and changed the focus of the facility from a major event strategy to one of regional level participation and minor event stature. The Miller Group tried to eliminate, or at least significantly reduce, annual losses and accordingly implemented significant cost control measures. But this policy also failed to stem the losses, so, in May 2015 the Miller Group advised Tooele County that the Miller Group no longer intended to lease the facility, ending at a date previously specified in their contract, being February 29, 2016.

On receipt of the Miller Group’s notice, Tooele County Commissioners appointed Commissioner Shawn Milne to oversee the sale of the Motorsports Park. The goal was to maintain the venue as a viable motor sports facility and generate revenue for the Tooele community. The Commissioners were fully aware of the financial constraints with which they had to operate the facility and the County’s inability to shoulder the costs that might arise if a suitable buyer or operator for Motorsports Park could not be found. The cost of maintaining a shuttered facility is likely beyond the limitations of the County’s budget.

Paramount among the Commissioners’ goals was to ensure that the facility would operate to its potential during the coming 2016 season. Commissioner Milne quickly learned that the motor sports industry typically sets its events during the third quarter of a previous season. He had just two or three months in which to find a buyer capable of operating the facility at full capacity and closing the sale, while meeting all applicable County and State legal procedures.

From May to July, Commissioner Milne expended considerable time and energy educating himself about the Motorsports Park, meeting with many people who are knowledgeable about its operation, and reaching out to potential buyers and lessees.

During this period Commissioner Milne received offers to purchase the Motorsports Park from a various parties, most of whom offered very low purchase prices (some in the range of $3 to $5 million), while others offered to lease the Park at low rates. Very soon, the County Commissioners determined that in order to secure an orderly transition for the facility a sale rather than a lease would be in the best interests of the County, and they narrowed their search to a small handful of potential buyers.

Ultimately, after holding a number of meetings, including public hearings with people whose employment, livelihood and sporting interests are tied to the Motorsports Park remaining in full operation, the Commissioners narrowed their focus on two potential buyers. From mid-July, Commissioner Milne and County attorneys began to spend many hours in discussions and negotiations with representatives of Mitime and the Center Point Group.

The two groups offered widely differing proposals, both of which have since become public knowledge and are available from the County and through Court records. Center Point and Mitime’s proposals are now public documents and should be studied before any comments or opinions are made about their relative value to the County. These were reviewed and considered by the Commissioners before arriving at their decision.

The County Commissioners reviewed both proposals and came to the unanimous conclusion that the Mitime proposal met its goals for the continuation of Motorsports Park as a viable and sustainable motor sports facility. The County considered Mitime’s significant operating expertise and major investment plans. In addition, as was their responsibility to the County, the Commissioners evaluated the relevant companies, their history, size, financial ability to carry out their proposals and their strategies for maintaining and developing the business of the park, and their future long term business plans.

The Commissioner’s decision to select Mitime was announced to the Tooele County public on August 13, following the County’s official notification and adherence to all appropriate legal requirements and protocols. In early September, Center Point filed a lawsuit suit against Tooele County and Mitime to set aside the sale, on the ground that the amount Mitime agreed to pay, $20,000,000, was not the fair market value of the Motorsports Park.

On December 17 the Court:

  • Set aside the sale of the Motorsports Park to Mitime, on the grounds that the County should have sold the property at a price that was well above the appraised value that was presented to the Court.

  • Refused to allow a condition of the sale that would allow Mitime to lease the property under the same conditions at which it was previously leased to the Miller Group, with its associated option to purchase at a later date.

But the Court did not:

  • Rule that the County must sell the Motorsports Park to Center Point;

  • Provide a new value or amount at which the Motorsports Park should be sold; or

  • Prevent the County from selling the property to Mitime under other circumstances.

There are many very significant consequences of the Court’s ruling. For example, regardless of any appeal, if there were an attempt to sell the property the potential buyer must start the entire sale process again, from the very first step. This procedure will take, at the very least, several months, during which period the County will either have to close the Motorsports Park, operate it itself, or find someone to operate it until a new sale can be completed. Note that the County does not have the financial ability, management knowledge or expertise to operate the facility, in either the short or the long term.

The most basic effect of the Court ruling, in real terms therefore, is that the consequential delays to establish a new sale, with all its inherent legal procedures, will mean that most of the plans already in place to operate the Motorsports Park for the 2016 season, including those for hosting the Ford Performance School, Lucas Oil Off Road Racing Series, World Challenge, Moto-America, NASA, USBA, UKC, WERA, AHRMA, PCA and other events, will likely have to be dropped. It also means that all arrangements in place to lease premises to garage tenants, employ staff and contract with other facility users or lessees may not be renewed.

In short, the Court ruling effectively closes the facility for several months, at the very least, and severely impacts the County’s ability to operate the Motorsports Park in any meaningful way during 2016. This will eliminate significant tax and other economic benefits to the Community and most of all, may significantly reduce the value of the property to a potential future purchaser as he will, in effect, have to completely restore the operations of the facility at an enormous expense.

The Court’s ruling therefore effectively means that, because of the delay or failure to operate the business immediately, the County may never be able to sell the site anywhere near the $20,000,000 offered by Mitime.

Even if the County could sell the property to Center Point today, the time that has to be taken to process the sale will end any ability for the facility to operate effectively in 2016 and 2017. This leaves Tooele County Commissioners with a very serious challenge to meet their responsibility to make the best decision for the benefit of their community. The Court’s ruling leaves hundreds of direct and indirect employees of the Motorsports Park community at significant risk of losing their jobs; leaves hotels in Tooele with empty rooms during the racing season; and will result on no property tax revenue from the Motorsports Park.

So what options are open to the Commissioners, who now have to find a way to resolve these issues while abiding by the Courts rulings?

The Commissioners could sell the property to Mitime if it were to increase its offer to meet the Court’s ruling. But this option is not immediately possible because the Court did not set a value for the property; rather, it simply stated that the Motorsports Park is worth more than the $20,000,000. Moreover, the Court invalidated the lease and option provisions of Mitime’s agreement with the County. And any attempt by Mitime or any other purchaser to buy the Motorsports Park would require the same extended legal procedures as with any other new buyer and the appellate process.

The County’s only valid solution is to find someone willing, available and able to operate the facility, under a formal management contract. The entity must have qualified staff, experience and expertise; the financial ability to restart operations of a site that has been essentially stripped by its previous operators of almost all ability to operate and have the immediate ability to secure all the events, race series, garage tenant leases and other income generating customers needed to return the facility to full operation.

Does such a management ready company exist?

The Miller Group obviously won’t do it. It has terminated its lease to the Motorsports Park, and therefore will not continue to operate the Motorsports Park.

The County has no such expertise.

And Center Point admitted at trial that its representative had no expertise with operating race tracks.

The only viable alternative is Mitime.

In the few months since being awarded the sale, and throughout the period during the Court proceedings, Mitime, at its risk but in the full expectation of closing the purchase of the site, entered into agreements with major race sanctioning groups and negotiated the rental of almost 80% of available track rental dates for 2016. Mitime hired more than 35 former staff of Miller Group with a commitment for their employment to begin on January 1, 2016, with further staff planned to take positions in March 2016, eventually increasing employment to more than 80 in total. Mitime agreed to continue rental of facilities to garage tenants; reached a contractual agreement with Ford Performance School to operate at the site; has already spent in excess of half a million dollars setting up the necessary operating systems (accounting, HR, logistics, and others); has set aside significant, multi-million dollar budgets with which to buy all the operating equipment, vehicles and services needed to restart business operations at the site; and has begun designing a new hotel and small oval to be added to the facility. Mitime has also started planning very important safety upgrades to the track which have to be undertaken before March, 2016 if the track is to be available for use at the start of the season; adding new paved areas for the off-road paddock; has purchased a fleet of open wheel race cars for a new school; committed to purchase a large fleet of new karts to replace the worn out existing fleet; and has budgeted to undertake several other expensive projects.

In essence, Mitime is ready to start operations, as owner of the property, as was always envisioned, on January 1, 2016.

But this has been thwarted by the Court’s ruling.

Mitime is now faced with three options.

  • It can appeal the Court’s ruling.

  • It can walk away from the project; accept its very significant losses; and invest in another race facility in the USA around which to develop its multiple million dollar master race track and operations plans for the USA and China. Mitime can simply leave Tooele County and allow the Motorsports Park to sit idle while it is redeveloped into a housing estate. (Note that the Center Point’s written proposal shows 200 expensive houses.)

  • Mitime can also choose to stay with its goals and commitments to the community and submit a new purchase proposal to the County.

  • Mitime could make its staff, resources, existing agreements, investment plans and financial commitments available to the County, as a facility management company, while the current, very difficult situation facing the County is resolved. To do so, however, Mitime will need to carry huge financial burdens, risks and the possibility that, when the entire sale procedure is completed, that it may not be chosen to buy the property should an appeal be denied.

Mitime faces a difficult decision.

This is the position facing Tooele County, Mitime, Center Point, and the whole Tooele and regional motorsports community today.

Does the Motorsports Park close down, or can it be revived and enhanced?

Anyone who plans to comment, criticize, compliment or otherwise judge the Tooele County Commissioners, the Court, Mitime, or Center Point should at the very least consider the implications of the overall situation, as outlined above.