'Mishandled' sale of raceway cost Tooele County millions, audit says

'Mishandled' sale of raceway cost Tooele County millions, audit says

(Scott G Winterton, KSL, File)

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ERDA, Tooele County — Tooele County "mishandled" the sale of the Utah Motorsports Campus by not following best practices for selling public property — leading to the loss of millions of dollars, legislative auditors concluded in a scathing audit report released Tuesday.

Because the county did not follow commonly used best practices — including not documenting the decision-making process made behind closed doors — auditors determined the county would have been able to better defend itself against a court challenge, which eventually cost the county more than $1.5 million to settle.

As a result, the county received millions less than it could have from the sale of the raceway, auditors concluded.

"We cannot say with certainty the extent to which the county losses can be attributed directly to the mishandled sale of the raceway," auditors wrote in the report. But what "is clear," auditors wrote, "is a well-executed sale" could have allowed Tooele County's original, $20 million sale to their first chosen buyer, Mitime, to successfully stand against a legal challenge.

"Due to several missteps by the county, and other events that were out of its control, the final sale was delayed," auditors wrote. "The county then suffered several years of operating losses and litigation expenses which greatly reduced the proceeds from the final raceway sale in 2018."

Auditors deducted $9.36 million in operating losses and $1.8 million in litigation costs to determine the raceway only produced a $7.36 million gain for Tooele County.

State leaders on the Legislative Audit Subcommittee reviewed the audit on Tuesday. House Speaker Brad Wilson in a prepared statement credited Rep. Doug Sagers, R-Tooele, for "being a watchdog for the taxpayers" of Tooele County and for expressing concerns and calling for the audit.

"I think that everyone agrees that what was discovered, related to how Tooele County handled the sale of the Utah Motorsports Campus, should never happen again," Wilson said. "However, our auditors have also provided some good recommendations on how Tooele County can improve in the future, and I trust they will take the proper steps to implement them."

Tooele County first gained ownership of the raceway in 2015, after the Larry H. Miller Group — the racetrack's builder and original owner — decided against renewing the facility's lease after years of operating losses. As the owner of the land, Tooele County then took ownership of the buildings, racetrack and other facilities. County leaders, lacking the expertise to operate a raceway, decided to sell the property.

However, concerns arose when county officials passed over an offer from the company Center Point for $22.5 million and instead accepted a $20 million bid from Mitime — a company that created a subsidiary to run the raceway. Some questioned whether county officials had conflicts of interest or were biased in favor of the company that submitted the lower bid.

A consultant who reviewed the bids advised Tooele County to chose Mitime, noting it was "unclear whether Center Point had sufficient financial backing to follow through" and "there was no evidence that Center Point knew how to operate a racetrack business."

One month after the sale, Center Point brought a court challenge against the county. In December 2015, a judge ruled in favor of Center Point’s claim and invalidated the sale to Mitime.

In the meantime, the Tooele County Commission decided to keep the raceway operating in order to retain its value and address tenants' needs.

After the original sale was overturned, county leaders were told they could overcome some of the legal barriers to its sale by classifying the raceway as a redevelopment project and by selling it through the county redevelopment agency. But Center Point also challenged that sale in court.

Months later, Center Point agreed to drop its claims after the county agreed to pay a $1.55 million settlement.

In April of last year, Tooele County leaders then announced a third attempt to sell the property. It got one offer — a bid from Mitime for $18.55 million, which the county accepted.

Due to several missteps by the county, and other events that were out of its control, the final sale was delayed. The county then suffered several years of operating losses and litigation expenses which greatly reduced the proceeds from the final raceway sale in 2018.

–legislative auditors in an audit report

To address concerns of conflict of interests or bias, Tooele County leaders asked the Utah legislative auditor general to review the county's sale of the raceway and the county commissioners' oversight of the park during the three years of the dispute. Tuesday's report details auditor's findings.

Auditors didn't find any conflicts of interest but recommended the Tooele County Commission improve its transparency by clarifying its ordinances regarding land sales, records retention and open meetings as well as adopt a policy regarding the closure of administrative meetings.

Many of the commission's decisions regarding the sale of the property appear to have been addressed during its closed executive sessions, auditors wrote.

"It is debatable whether decisions regarding the sale of the raceway are legislative or administrative matters," auditors wrote, noting that it could be argued that the county code does not fully address decisions involved in selling a property "with such large economic impact on the county." For that reason, the sale could be considered subject to Utah's open meetings law.

Auditors also concluded the county's oversight of the raceway was "inadequate" and the county "did not fulfill its responsibility" to oversee the raceway's finances.

Auditors reported Tooele County had "misleading" financial reporting, noting financial statements did not disclose raceway liabilities and overstated raceway sale proceeds. The commission also did not provide adequate budgetary oversight and "the county's budget practices in general need to improve," auditors wrote.

In a written response to the audit, Tooele County Commission Chairman Tom Tripp said county officials agreed with the recommendations and "will use (our) best efforts to implement those recommendations in the coming months."

Tripp, in a news release issued after the audit was released, said the county is developing more "robust" policies related to Utah's open meetings laws, record retention and competitive bidding and has hired an "independent auditing firm" to assess management practices.

That independent auditing firm, Ulrich & Associates, PC, is costing Tooele County about $30,000 a year, Tripp told the Deseret News after Tuesday's meeting.

“Tooele County strives to be a trusted steward of public resources and welcomes the audit recommendations as a means of improving our operations,” Tripp said. “Even before the audit process began, the county had recently taken steps to conduct our work with more openness and transparency, but we acknowledge that we can always do better.”

Trip added it was a strange situation for Tooele County.

"Folks should keep in mind the unprecedented nature of the situation," Tripp said. “Never in state history had a city or county — let alone a small rural county like ours — been asked to take over the operations of a complex, globally recognized racetrack virtually overnight.”

During the three years the county owned the property, county officials said they "significantly reduced the annual losses the racetrack had been experiencing, protected taxpayers from incurring any potential future losses," and contracted with Mitime, which "agreed to invest millions of the company’s own resources into necessary upgrades so that important tenants like Ford would not leave."

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