Troubles for Track Were Known to State Before It Granted Special Tax Deal
Before the state's flagship economic development agency approved a $48 million special deal for a now troubled racetrack, documents show that the track may not have been as financially viable as the Michigan Economic Development Corporation claimed.
In 2008, the MEDC approved up to $48 million in tax incentives over 30 years for Pinnacle Race Course in Huron Township. Two years later, Pinnacle Race Course hasn't paid its 2009 property taxes and is late on its summer 2010 property taxes, according to Huron Township officials. Wayne County officials say the property has liens against it. Gary Tinkle, executive director of the Michigan Horsemen's Benevolent & Protective Association, said his organization has given the track more than $1 million to keep it operating.
The MEDC operates in relative obscurity. It issues press releases boasting of jobs to be created when it approves deals for tax breaks for companies, but there is little follow up regarding what becomes of those deals years later. The MEDC claims that the actual jobs that are created by the companies it subsidizes is private information, or that it cannot be found.
The quality of the reviews of the businesses it deals with was called into question after a company run by a convicted embezzler was awarded a tax credit of $9.1 million. The embezzler then spent the next day in jail. Richard Short was the CEO of Renewable and Sustainable Companies (RASCO) and his deal led to a Senate hearing over the handling of the deal by the MEDC.
The more than 500 pages of documents in the Freedom of Information Act request on Post It Stables and Pinnacle Race Course give a rare insight into how deals are brokered between companies and the MEDC.
The track first made news this year after the owner - Post-It Stables, Inc. - bought 240 acres of land for $1 from Wayne County in 2008 and then turned around and sold a seven-acre parcel for $179,000 to an Indian tribe this summer. Land owned by the tribe comes off the property tax rolls. An attorney for Post-It Stables said there are plans to sell at least five more parcels.
Although the race track has struggled to pay its bills, the MEDC painted a different picture in its analysis of the project.
A Sept. 23, 2008 memo from Val Hoag and Amy Deprez, respectively the director and project manager of the MEDC's Portfolio Management & Packaging, reads: "A financial review was conducted by staff and confirms that this company has the financial wherewithal to take on this project and that the project is economically sound."
But there were signs before it was approved that the track's success was largely dependent upon getting the tax credits to complete the project. Other red flags were raised.
On May 16, 2008, the president of the race track sent a letter to Azzam Elder, Deputy CEO of Wayne County, outlining that tax credit was "critical" to complete the project.
"...we continue to face an extremely difficult lending environment and believe that the infusion of the requested brownfield MBT tax credit is essential," wrote Michael McInerney, President of Post It Stables, Inc., which owns Pinnacle Race Course.
McInerney also wrote that the track didn't expect to break-even until 2014 and that even then would "achieve very small returns on our investment."
"Without the requested credit, financing and equity for Phase 2 may be impossible and we would be faced with an end product that is inferior to, and less jobs than, what Wayne County, the State of Michigan, Huron Township and we want to see result from this promising project."
On Sept. 12, 2008, Claire McKenna, corporate counsel for the MEDC, sent an e-mail to Peter Anastor, manager of community and urban development for the MEDC, advising that Post It Stables, Inc. had not filed its 2008 annual report with the Michigan Department of Labor and Economic Growth.
"... they are supposed to rep to us that they are in 'good standing' which they probably aren't if they are late on their filing ..." McKenna wrote.
A spokesman for the race track said the track's future is uncertain and was hurt by the national economic collapse in the fall of 2008.
"Part of what happened was the financial meltdown," said Carl Herstein, an attorney who represents Post It Stables, Inc. "It was the worst possible time to be financing a new development. ... Who could have predicted what happened?"
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.