Baltimore GP in jeopardy
“When things don’t go as everyone would like, it tarnishes the IndyCar brand," Terry Angstadt, president of the Indy Racing League’s commercial division said. “We take that very seriously."
11/08/11 Mayor Stephanie Rawlings-Blake’s office declined to say on Tuesday whether it would search for new promoters of the Baltimore Grand Prix if current organizers don’t meet a deadline to pay its debts.
If Baltimore Racing Development can’t pay off more than $1.5 million in debt owed to the city by Dec. 31, city officials said Monday they would terminate a five-year deal with the group to operate the open-wheel street race.
“We are not going to get into hypotheticals," Ryan O’Doherty, a spokesman for Mayor Stephanie Rawlings-Blake, said in an email when asked if the city would look for someone new to run the race. O’Doherty said the mayor’s office had no additional comment beyond its statement issued Monday.
In the statement, Deputy Mayor Kaliope Parthemos said Baltimore Racing Development has not honored the terms of its contract with the city and “must immediately restructure and recapitalize or sell itself to investors in order to make the event profitable in the future."
City Councilman William H. Cole IV, a major proponent of the inaugural Grand Prix that attracted an estimated 150,000 fans, left open the option of another group coming into the run event in 2012 if Baltimore Racing’s deal with the city is terminated.
“The only way I could see it happening is if someone came in and bought the whole thing, including the debt," Cole said. “They have to reorganize and refinance, or sell."
Cole said it’s too early to rule out Baltimore Racing Development as the Grand Prix’s promoter, however.
The is requesting more than $1.5 million in missed payments from promoters. On top of that, a stack of lawsuits from vendors and lenders continues to stare organizers down, but they do have time to figure it out. The mayor’s office set a Dec. 31 deadline for Baltimore Racing Development to pay off its debt to the city.
Grand Prix organizers could not be reached for comment on Tuesday.
Former Baltimore Racing Development CEO Jay Davidson told the Business Journal on Friday he expects ticket, sponsorship and hospitality sales in the next few months to help dig the IndyCar race’s organizers out of debt.
Organizers are currently interviewing candidates to fill Davidson’s former role as CEO.
Cole said there’s no denying the event was a success, but two months after the inaugural open-wheel street race he’d like to see more progress on the organizers’ end.
“The reality is there is a valuable asset here. They had a successful event," Cole said. “[But] they need to be further along than where they are right now. We don’t have many options at this point other than to notify them that they have to get their house in order."
A report released last week said Baltimore Grand Prix’s economic impact fell short of projections in the event’s first year, contributing $47 million in spending to the region — $23 million less than what had been expected. Baltimore Business Journal
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| Mayor Stephanie Rawlings-Blake |
11/07/11 Mayor Stephanie Rawlings-Blake’s administration said Monday it would terminate its contract with Baltimore Grand Prix organizers if more than $1.5 million in missed payments is not made to the city and state by Dec. 31.
The announcement from the city ends days of silence from Rawlings-Blake’s office regarding the future of the event following news that the Grand Prix was late on making multiple payments to vendors following the inaugural event on Sept. 2-4.
In a statement, Deputy Mayor Kaliope Parthemos said Baltimore Racing Development has not honored the terms of its contract with the city and “must immediately restructure and recapitalize or sell itself to investors in order to make the event profitable in the future."
Jay Davidson told the Business Journal on Friday he has stepped down as CEO of Baltimore Racing Development. A replacement has not been named.
Davidson said he expects ticket, sponsorship and hospitality sales in the next few months to help dig the IndyCar race’s organizers out of debt.
Baltimore Racing Development has a five-year deal with the city to operate the event.
Parthemos added the group must “aggressively work to repay any debts to vendors, and present a restructured company and management team, or the city will terminate its contract."
Parthemos said Baltimore Racing officials have been notified of the terms. Officials with the event could not be reached for immediate comment.
Here is a breakdown of what the city says it is owed:
- $750,000 in city services fees: The fee cap in the contract is set at $500,000 for year one, but the city is requesting an additional $250,000 because it says services that were to be provided Baltimore Racing Development in an event management plan were not provided by the group to the extent planned for and required;
- $487,971 in missed admissions and amusement tax: The city says Baltimore Racing has begun conversations with the Maryland Comptroller’s Office, which is responsible for collecting the tax on behalf of local jurisdictions to ensure the tax is paid properly and in full. Baltimore Racing has requested a payment plan, consistent with state law, which would include penalties and interest. No tax abatements will be made;
- Race event fee: The Mayor’s Office of Economic and Neighborhood Development received a check for $250,000 on Sept. 4, but held it with the understanding Baltimore Racing needed to restructure its cash reserves. Baltimore Racing failed to address this issue and, to date, payment has not been made, the city says; and,
- $50,862 to the city parking authority.
A report released Friday said Baltimore Grand Prix’s economic impact fell short of projections in the event’s first year, contributing $47 million in spending to the region — $23 million less than what had been expected. Baltimore Business Journal
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| Even huge attendance could not prevent losses for the inaugural Baltimore GP |
11/07/11 City officials threatened Monday to end its contract with the group that staged the inaugural Baltimore Grand Prix race, saying the group owed the city more than $1.5 million.
Deputy Mayor Kaliope Parthemos said in a statement that Baltimore Racing Development "has not honored the terms of its contract with the city" and that the company must "restructure and recapitalize or sell itself to investors in order to make the event profitable in the future."
Baltimore officials, which had inked a five-year agreement with Baltimore Racing Development, invested more than $6.5 million in public funds in preparing roads near the Inner Harbor for the three-day racing festival, held over Labor Day weekend. IndyCar officials announced in September that the Baltimore race would be part of its 2012 schedule.
The event generated about $47 million in economic impact, according to a city-commissioned study released last week, but organizers have struggled to pay bills to contractors.
Six lawsuits have been filed against Baltimore Racing Development in recent months, and plaintiffs claim the racing group owes them about $1.6 million.
The racing group owes the city $750,000 for services, $488,000 in Admissions and Amusement tax and owes $50,000 to the city parking authority. The city has not yet cashed a check for $250,000 for the race event fee, required as part of the contract. The money was held "with the understanding BRD needed to restructure its cash reserves," according to the statement. Baltimore Sun
11/03/11 The IndyCar racing organization joined city officials on Thursday in calling for change at the financially embattled company that runs the Baltimore Grand Prix, characterizing it as disorganized and saying it needs restructuring as it addresses unpaid debt.
Pete Collier, chief operating officer at Baltimore Racing Development, said that next year's race, also scheduled for Labor Day, is still on track and that the company will be in better financial standing by then.
"We have people who owe money to. We're not going to deny that," Collier said. "It was a huge, huge enormous task. Everything's going to be paid back."
Terry Angstadt, president of IndyCar's commercial division, expressed confidence Thursday that Baltimore Racing Development would be able to put on the Grand Prix again. He also said the company needs to be restructured but added that he knows changes are forthcoming, if not public yet.
IndyCar has already announced that it plans to return to Baltimore next year. Angstadt said that while Baltimore Racing Development has endured its set of challenges, it put on a "world-class" event this year.
"I don't want to suggest this is a rose garden," Angstadt said of the company. "I'm pretty optimistic they're going to right their ship and we're going to have a race there next year."
The Baltimore Grand Prix sold 110,000 tickets and was hailed as a success by city officials and organizers, who said the event not only boosted tourism on a typically sleepy holiday weekend but also shed a positive light on Baltimore.
"If the Grand Prix is so cash-strapped that they can't pay back the CEO's father-in-law for $50,000, I think there's a legitimate question about whether they are going to be able to meet those obligations," said David C. Troy, a software developer from Bolton Hill who filed a lawsuit but failed to get an injunction to protect the trees.
"There's nothing wrong with having the truth out there," Collier said. "We're asking people to give us a chance. Give us one more chance at least." Baltimore Sun
11/03/11 Organizers of the Baltimore Grand Prix are grappling with mounting financial problems, including a missed loan payment to the state and lawsuits alleging nearly $1.6 million in unpaid bills — raising questions about their ability to host next year's car-racing event.
The Baltimore Grand Prix thrilled spectators with a downtown race that sold 110,000 tickets and drew throngs to the Inner Harbor on Labor Day weekend. Mayor Stephanie Rawlings-Blake and other city officials hailed it a success.
But two months after the race's end, Baltimore Racing Development acknowledges financial missteps, such as failure to pay the vendor that erected the grandstands. The racing company, which has said the inaugural event was a money loser, also faces other accusations, including that it did not repay a $50,000 loan from the CEO's father-in-law.
Now city and state officials are questioning whether the company will be able to overcome the setbacks. IndyCar officials have already announced that they have added Baltimore to the racing schedule.
"They've got to figure out a way to make this thing work," said City Councilman William H. Cole IV, one of the staunchest supporters of the event. "They've been struggling mightily coming out of the first year to keep everything together. I'm hoping they find a way to weather the storm."
Pete Collier, chief operating officer at Baltimore Racing Development, the company formed to run the Grand Prix, acknowledged that it has missed payments to vendors and lenders but vowed to settle all debts and regain a financial footing to be able to run the IndyCar race again.
"There are vendors that we owe. Many of them are personal friends," Collier said in an interview on Wednesday. "We are going to make the payments. We're going through some issues, and I'm trying like hell to get out in front of it."
Officials from the Maryland Stadium Authority, which lent the company $2 million for road improvements and other infrastructure projects needed to put on the race, said they are meeting Friday with Baltimore Racing Development representatives. Michael J. Frenz, executive director of the stadium authority, said he plans to "delve deeper" into the company's financial problems, after it failed to make a $470,000 payment on the loan.
Frenz said the stadium authority, a quasi-public agency, had to dip into the company's escrow account to cover its loan payment.
"They've been very up front that they lost money," Frenz said. "They have cash flow problems. … We're trying to protect the investment made with taxpayers' money. We're hoping for the best but preparing for the worst."
Collier said that the withdrawal from escrow counted as paying on the loan. "We've made our payments on time," he said.
Baltimore Racing Development also is faces civil actions from a vendor and other lenders demanding payment. The company has been sued over allegedly unpaid bills six times since August, including twice in the past month.
John W. Bunting, owner of Upper Marlboro company, B & K Rentals, which delivers bleachers to major events, filed suit against the company last week in Prince George's County Circuit Court, alleging he's owed $350,000. Bunting's company set up grandstands and private suites around the Grand Prix racecourse.
"I question how they're going to keep this race going if they can't pay their vendors," Bunting said. "This was a great event for the city of Baltimore, but we want to get paid."
Collier said Bunting is "completely right" about their failure to pay and said he would "make it right." He called Bunting "one of my favorite vendors" and said, "I can't wait to shake his hand when the final payment is in."
Meanwhile, Edie Brown, a spokeswoman for Baltimore Racing Development, said Wednesday that Chief Executive Jay Davidson, who often served as the face of the event, will be "changing roles." Collier said that Davidson would stay on as CEO but that his duties may change.
Another lawsuit was filed last month by a Towson man, Robert Roman, who sued Baltimore Racing Development in Baltimore City Circuit Court over a $50,000 loan he says he made to Davidson that is now past due. Roman is seeking payment of $57,000, including interest on the loan. Collier said Roman is Davidson's father-in-law and referred questions about the suit to Davidson.
Davidson and Roman did not return phone calls seeking comment, nor did a lawyer who represents the company.
Baltimore Racing Development also faces a suit in Baltimore City Circuit Court from its former lawyer, Hilary Schultz, who alleges she is owed $275,000 in legal fees. The company has filed a counter-claim against Schultz, saying she overcharged and did not act in the best interest of her clients.
Two others lawsuits against the company have been dismissed by Baltimore City Circuit Judge John Miller on technical grounds.
One of the lawsuits, filed by Steven C. Wehner, who created Baltimore Racing Development in his mother's Rodgers Forge basement five years ago, says the company owes him $575,000 in exchange for his 10.2 percent stake. Another early investor, Sean Conley, filed suit alleging he wasn't paid $320,000 for selling his shares to the company.
Attorney David Shapiro, who represents Wehner and Conley, said he plans to refile the lawsuits.
"BRD has significant financial issues," Shapiro said. "After we see discovery, it will be very clear whether they were doing fiscally sound management or whether these were people in over their heads trying to pull this off."
Baltimore Racing Development also got an unprecedented $500,000 loan last year from the Maryland Economic Development Corp., another quasi-public agency. Executive Director Robert C. Brennan said Wednesday that the race organizers are up to date on their payments on that loan.
Frenz, of the stadium authority, also noted that the company, a tenant in that agency's building, is current on its rent payments.
A spokesman for Rawlings-Blake didn't respond to requests for comment.
Cole said he viewed the Baltimore Grand Prix as "incredibly successful." The city is expected to release an economic impact report. Organizers had projected the event would generate about $70 million in spending, though a study from two professors recently estimated that attendees only spent as much as $25 million.
"It's frustrating," Cole said of the race's financial situation. "This is a private company. There's not a lot I can do at this point. There's no reason somebody can't make it work if this group can't" Baltimore Sun