Thursday, August 26, 2004
Now that he no longer promotes motorcycle racing at Laguna Seca, Dan Murphy plans to relax and spend some time in the very near future “counting Ben Franklins on a beach in Mexico.”
Murphy’s company, Race Promotions Management (RPM), has put on the annual Superbike motorcycle races at the Laguna Seca racetrack since 1995. But in a few summer weeks of behind-the-scenes maneuvering, Laguna Seca went from having Dan Murphy as a race promoter to Murphy as a mortgage-holder for its expensive $7.5 million new paddock area, to watching Murphy walk away from the track a few million dollars richer—while leaving a more prestigious motorcycle race in his tracks.
“Laguna Seca decided they wanted to promote motorcycle racing on their own and not have us promote motorcycle racing,” he says. “We’re disappointed with that decision and we don’t think it’s in the best interest of SCRAMP (Sports Car Racing Association of the Monterey Peninsula).”
Although the track is continually in use by driving schools, there are five major races a year at Laguna Seca. Two are (or were) promoted by outside interests. One was Murphy’s and the other event is the recent historic race weekend promoted by General Racing LTD of Buellton, Calif. SCRAMP promotes the other three: Bridgestone Champ Car World Series, the American LeMans Series, and the Road & Track Sportscar Invitational.
Murphy’s five-year contract was expiring this year. As race promoter, his company paid roughly $500,000 to rent the track for the event, assuming all other risks and rewards. This summer, when it came time to renew, he says he was not welcomed back.
Last year the track finished a new multi-million dollar upgrade to the pit area. According to several sources, the loan financing the paddock was “high-risk” and the bank no longer wanted it. Murphy stepped in and bought up the debt at what he and others say was a steep discount. Although he wouldn’t say exactly, it’s believed he paid about $2.5 million for a bank note with a face value of nearly $5 million, making him a mortgager for an organization that no longer wanted him around.
“When they told us they wouldn’t extend our deal, we went down and bought the bank note to protect our assets and to allow Laguna Seca to move forward,” he says.
With Murphy now holding the note, the track would have to make payments to him.
As one race official characterized it, he held the track “to ransom.” He says he wanted the terms of the loan work so he could continue holding races at Laguna Seca.
“We thought that was a good win-win,” he says.
But in the course of a few days last week, an unnamed third party—said to be two local race enthusiasts—came in and bought up the note at a substantial profit to Murphy, according to several sources.
“They found someone that was willing to buy the note back at face value,” he says.
The individuals remain unidentified but have formed a business interest called LSR Monterey LLC. (LSR stands for Laguna Seca Racetrack.)
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With local enthusiasts financing the recent track improvements, maybe it does turn out to be a win-win. Not only does the track get out of a possible financial bind or “ransom,” but in place of RPM’s World Superbike races held in July every year, a higher class of competition, known as the MotoGP World Championship, will hold its event at Laguna Seca in July 2005.
All the recent moves at Laguna Seca come at a time of financial trouble in the motorsports industry. Although NASCAR racing has seen enviable success in recent years, other motor sports, such as the type of open-wheel auto racing held at Laguna Seca, have had financial problems.
The class of cars known as CART (Championship Auto Racing Teams)—a class raced at Laguna Seca—filed for bankruptcy in December 2003. The open-wheel class is now known, under restructuring, as Champ Car World Series.
The fact that racing has hit a slick patch in the last few years is one that track officials do not hide.
SCRAMP, the overseeing body that runs Laguna Seca, is a nonprofit that pays out large sums to local charities. It relies on a small staff and hundreds of volunteers. Proceeds from the races are plowed back into the community, and since it was started 44 years ago, it’s given away some $10 million.
In 2002, SCRAMP donated $371,873 to local charities who helped volunteer at events. Last year however, it did not, according to Gill Campbell, general manager of Mazda Raceway Laguna Seca.
“We did not make a profit in 2003,” she says. “A lot of it had to do with the economy. We got hit hard like a lot of people did.”
This week though, Campbell has good things to say about both the re-financing and the new motorcycle event.
“This is really good,” she says. “These [investors] have come in with the best interests of the race track at heart. It certainly is not like ‘add water and everything will be peachy,’ but this gets us on the right path. It allows SCRAMP to control its own destiny, and we haven’t been able to do that for some time. It will take us a few months to get back on course, but at least we’re getting back on course.”
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The recent downturn came at a bad time for SCRAMP. The track had just invested $7.5 million in the new garages and executive suites over the pit area. As a nonprofit renter, SCRAMP has to pay the County (which owns Laguna Seca, and also has to pay back the loan on the pit area improvements. One source says SCRAMP teetered on the edge of bankruptcy. Still, they were able to pay the County.
As county parks superintendent, John Pinio deals directly with SCRAMP, which pays $375,000 a year. On top of that, the track pays four percent of its gross from concessions profit, although Pinio says that has not been a factor lately. Economic malaise has been blamed for sagging tourism and Pinio says it’s been apparent at Laguna Seca.
“The attendance at some races has been less than desirable,” he says.
As for paying the rent, however, Pinio has no complaints.
“They’re right up to date. They haven’t missed a payment,” he says. “We have no problems with SCRAMP.”
With RPM gone, the popular historic races are now the only independently promoted race event at Mazda Laguna Seca. Held recently over the August 14 weekend in conjunction with several high-end car events in Monterey, Carmel Valley and Pebble Beach, the historic races add up to local traffic jams of Ferraris and other fancy cars.
Steve Earle, president of General Racing LTD and founder of the historic races in 1974, says that a few years ago, the track wanted to take over promotion of his event too, which is now officially called the Rolex Monterey Historic Automobile Races presented by Chrysler.
The notion that the track would take over the event came and went.
“As far as I know, yes, I have a contract with SCRAMP to continue doing the event and, as far as I know, that is in play and will stay in play,” he says.
But Earle says that the newest development at the track, the addition of the MotoGP World Championship race in July, will mean increased international attention at Laguna Seca next year. He compares it to having a race at the level of the Indy 500 here.
“This could be a major, major event for the area,” he says.
Murphy, for his part, has no hard feelings about being out of business at Laguna Seca. He made a tidy profit off the transfer of the bank note and says he will go back as a fan instead of a promoter. He believes that years of running increasingly popular motorcycle races there laid a solid foundation for the future.
“The table is set for them,” he says. “They’ll do a good job.”