No Runny Eggs

In case you haven’t noticed, I am a race fan. That is why it saddens me to have to tell you that the Milwaukee Journal Sentinel has reported that Milwaukee Mile promoter-to-be Historic Mile LLC has pulled out after failing to get enough financing to pay NASCAR for the 2009 races put on by previous promoter Wisconsin Motorsports, an amount previously reported to be $1.8 million.

However, the news isn’t quite completely hopeless. Despite that collapse, Dave Kallman reports that NASCAR has not yet pulled the scheduled 2010 dates, the same weekend as the Sprint Cup race in Sonoma, California, partly because nobody else wants those dates, and partly because there’s still hope that a group headed by former promoter Frank Giuffre and including enough money to make that payment will get the rights to the track.

A bit of history of recent promoters and the State Fair Park board is in order, with a lot of help on the numbers from the various reports on State Fair operations between 2002 and 2009 from the Legislative Audit Bureau and drawing on the Milwaukee Journal Sentinel for recent events:

• In 1992, CART car owner Carl Haas took over race promotions at the Mile from Frank and Dominic Giuffre, who had been bought out by the board. In exchange for exclusive promotion rights (with one guaranteed major race required, CART’s June race usually held the weekend after the Indy 500, and an effort to secure a second), access to the board’s bonding authority, and most of the revenues generated by the track, Haas Racing Inc. would pay a guaranteed rent of $300,000 and service any track-improvement debt financed through said bonding authority. By 2001, that debt service had become over $375,000 per year.
• In 1995, Haas Racing had secured that second major race, with NASCAR coming back with the Busch Series after a 2-year run in the 1980s and the then-new Craftsman Truck Series.
• After Haas Racing lost $1 million in both 2000 and 2001, due in large part to the failing condition of CART in its losing war against the Indy Racing League, they and the board agreed to finally replace the crumbling 1930s WPA-built grandstand and somewhat-newer bleachers to the tune of $20 million, with the bleachers replaced in time for the 2002 racing season and the grandstand replaced in time for the 2003 racing season to help alleviate that. Of note, while Haas Racing lost $1 million in 2001, the State Fair made $395,000 off that agreement.
• An estimate done by a private company in 2000, specifically the same one that did an analysis of the effects of building what became the very-troubled Expo Center (that story is for another post), claimed that, after a 1st-year loss of about $200,000, the new grandstand and the additional dates and revenues it would allow would let Haas make a profit of between $360,000 and $720,000.
• As part of that construction, the board and Haas Racing restructured their deal in 2002 to eliminate the minimum guaranteed rental, change the debt-service requirement to be in effect only if Haas turned a profit, create a hard 50% profit-sharing agreement, give the board veto rights over Haas Racing’s track operating budget, and give the board several new termination rights.
• In November 2002, Jim Doyle (D) won the gubernatorial election over Scott McCallum (R), who took over the governor’s office in 2001 when Tommy Thompson left to become HHS Secretary. That began to shift the makeup of the board as two members of the cabinet (the secretary of tourism and the secretary of agriculture, trade and consumer protection) are automatically members, and the 7 other members not tied to the Legislature (each house has a majority and a minority member) are appointed by the governor to 5-year terms.
• In May 2003, citing a loss to the Fair Park of $341,743 due entirely to $376,000 in debt-service payments Haas Racing did not make as they did not make a profit in 2002 (thanks also in part to the bleacher-only nature of the track in 2002 as the new grandstand was not complete), the board bought out the contract for $250,000 two days before the CART racing weekend and took over operations. That grandstand had been greatly scaled back to reduce its cost, which also had the effect of reducing its money-generating potential.
• Despite getting IRL to come to the Mile in 2004, the board lost $693,600 on track operations in 2003 (including the $250,000 buyout of Haas Racing), $3.6 million in 2004, and $2.9 million in 2005. Debt service increased to $1.8-$1.9 million in the latter two years as the full effect of the new grandstand and other track improvements mandated by the various series took effect. Of note, the 2004 LRB report made the claim that the 2000 study was grossly optimistic, but failed to note that the scope of the grandstand rebuild was cut.
• The board attempted to get an unnamed promoter to assume operation of the track beginning in late 2004, with requirements that the promoter pay off the entire remaining debt service through the license fee, secure a letter of credit to ensure that 2 years’ of payment would be made, and pay for all maintenance and future improvements to the track outside the board’s bonding authority, but that initial attempt fell through in April 2005.
• Doyle was the grand marshal for the NASCAR Busch Series race in June 2005, and he was roundly booed (I remember because I was at that race).
• In August 2005, with Doyle appointees, cabinet members and the Democrats now in the majority, Milwaukee Mile Holdings LLC, a brand-new entity with no prior experience at track promotion, was announced as the new promoter, and they took over in 2006, with an average license fee of $1.8 million. The board did give MMH parking revenues for the 134 days per year it had control over the track (something not originally envisioned, and something that Haas Racing did not enjoy), secured the first year of the $3.6 million line of credit for MMH (with a requirement that MMH renew it annually), and knocked $1.5 million off the 2006 fee. MMH also acquired a 4-year right to buy a park-surrounded property owned by a gas company and give it to the board after remediation in exchange for board-owned property between the track (still owned by the board) and Greenfield Ave to the south.
• With ChampCar (nee CART) departing the Mile after the 2006 season, MMH was once again reduced to two major series weekends, with the IRL assuming the CART/ChampCar weekend-after-Indy date in 2007.
• In April 2007, MMH assigned its right to buy that gas tank farm to the board (which then bought the land from the gas company) and agreed to pay the board for that transaction if it decided to acquire the land south of the track (never acquired), while the board agreed to defer $722,000 of the $1.8 million payment from June 2007 to December 2007 and agreed that the license agreement could be reopened after the 2007 racing season.
• In December 2007, MMH filed notice of claim against the board seeking $6.4 million and a release from the license agreement claiming, among other things, a loss of a track sponsor due to the board’s actions and a misreprentation of revenues in the 2005 negotiations.
• In February 2008, MMH and the board agreed on modifications, including a reduction and further deferral of that $722,000 down to $400,000, a reduction in the license fee to $1 million (with a sliding-scale deferral of those payments to 2017-2023), a reduction in the number of days MMH had control of the track to 75, and a change in the land swap from ownership to ground-lease rights on a smaller parcel. It also required MMH to secure a fresh letter of credit that included all the defered payments by March 2008.
• MMH failed to do so by either March 2008 or its original annual renewal date of August 31, 2008. They claimed to have sustained $5.1 million in losses since 2006, and wanted to get rid of the license fee entirely before providing an updated letter of credit. The 2009 LAB memo on State Fair operations is unclear whether one was produced for 2009.
• MMH ultimately provided a 2-year notice of termination in December 2008, stating at that time it could not pay the IRL or NASCAR fees, and giving the board permission to get another promoter. The board and the Department of Justice responded in February 2009 by terminating the license agreement due to a lack of a letter of credit, deemed by the DOJ as an act of default. The 2009 LAB report indicates that the DOJ plans on suing MMH for $2.7 million in damages.
• MMH then-President of Operations Charles Napier formed Wisconsin Motorsports LLC to assume racing operations, which then entered into a 10-year agreement with the board – $180,000 in license fees plus 10% of gross monthly revenue (less only directly-related sales costs and NASCAR/IRL sanctioning fees). That revenue-sharing was to be capped at $300,000 in 2009, $350,000 in 2010, $400,000 in 2011, and $450,000 in 2012.
• Meanwhile, three things severely hampered Wisconsin Motorsports’ ability to make a go of it in 2009, even if they had money and not just a couple people who worked for MMH:
  • The economy continued to crater.
  • Wisconsin Motorsports decided to honor $1 million in tickets sold by MMH even though MMH did not turn over the money. Related to that, MMH owed vendors between $500,000 and $800,000 as of May 2009.
  • NASCAR implemented a ban on unsanctioned testing at all tracks where it runs a race at any level. In previous years, since the Winston/Nextel/Sprint Cup Series did not have a race at the Mile, Cup teams could test here, usually in preparation for the races at New Hampshire.
• Unfortunately, Wisconsin Motorsports did not have the money. They owe IRL about $200,000 in unpaid sanctioning fees, and despite NASCAR taking all the vendor money directly during their weekend here, they owe NASCAR $1.8 million in unpaid sanctioning fees.
• In July 2009, Wisconsin Motorsports went under, and cancelled the Wisconsin All-Star Weekend scheduled for the end of August. Limited minor events, such as an SCCA event, did go on, while the board searched for a new promoter. The board declared that it would not be responsible for the overdue sanctioning fees.
• In August 2009, Historic Mile LLC, comprised of Tony Machi, Jim Beaudoin, and Wisconsin Motorsports GM/COO Steve Jones (who left the group later in the month), was announced as the intended promoter for 2010. That was dependent on them getting committments from IRL (which had already released its 2010 schedule without the Mile on it) and NASCAR. They were chosen over several other groups, including one featuring the Giuffre brothers and reportedly including long-time CART/IRL team owner and owner of the Menard’s home improvement store chain John Menard (later confirmed to be part of the group).
• In mid-September 2009, NASCAR announced that the Mile would have both Camping World Truck and Nationwide Series dates on the same weekend as the Sprint Cup race in Sonoma, just as in recent years.
• Despite a disagreement between Historic Mile and the Giuffres on whether the Giuffres would provide Historic Mile a loan, as well as a lack of disclosure from Historic Mile who beyond Machi and Beaudoin was involved in that venture, the board and Historic Mile signed a 10-year agreemnent-in-principle at the end of September 2009. At the time, Machi claimed that Historic Mile made NASCAR “happy” (since disproven).
• Simultaneously, while Dominic Giuffre said he was no longer interested in running the Mile, Frank said he was, and listed his other partners as Menard, fellow track promoter John Kaishian, and the Deckers that put on Eagle River’s World Championship Snowmobile Derby.