The new Grand Prix contract may be better for taxpayers – as the Rawlings-Blake administration argued yesterday – but it is most certainly better for the promoter.

The city has dropped more than $4 million in fees that it demanded from Baltimore Racing Development, while not requiring the new promoter to pay back any of the terminated group’s debts to the city.

In effect, the city has given Downforce Racing LLC a clean financial slate, even though two of its three partners were involved in BRD, which owes the city $1.7 million.

Felix Dawson invested about $300,000 in BRD, while Dale Dillon worked as the group’s general manager. Dan Reck is the third partner. According to the mayor’s office, Dawson and Dillon were not “managing partners or executives” at BRD, hence are not responsible for its debts.

Downforce Racing was formed last Wednesday by Baltimore attorney James B. Astrachan, according to the Maryland Department of Assessments and Taxation.

Downforce Racing has no website, and there is little public information about the group.

“Best Interests of the City”

Yesterday, Mayor Stephanie Rawlings-Blake praised the new contract as a great opportunity for the city to continue hosting the race without risking taxpayers’ money.

“It’s in the best interest for our local economy and the best interest of the city that we move forward, but not move forward with any risk to taxpayers,” she said in brief remarks after the weekly Board of Estimates meeting.

The Grand Prix is one of the Rawlings-Blake’s signature initiatives as mayor. Following the financial collapse of BRD, she has insisted that the three-day race continue and rejected criticism by City Council President Bernard C. “Jack” Young that the race was a poor use of scarce city resources.

The new contact was hammered out by Deputy Mayor Kaliope Parthemos, who was closely involved in the BRD contract. In both contracts, the city was represented by Mark Pollak, a real estate attorney at Ballard Spahr, as outside counsel.

The new contract bypassed the city’s Request for Proposals process by being designated as a professional service contract. Such contracts need only be listed on the Board of Estimates agenda and considered by the board at its weekly meeting.

Event and Other Fees Waived

The new contract eliminates a number of fees that were required under the BRD contract approved by the Board of Estimates in May 2010.

Specifically, Downforce Racing will not pay an annual $250,000 event fee, a $100,000 community benefits fee, and a (up to) $500,000 yearly fee for the use of city services and manpower.

Over the five-year life of the new contract, these waived fees amount to $4.25 million.

In place of the old fee schedule, the city will place a $3.50 surcharge on each ticket sold to the 2012 race. The surcharge will increase by 25 cents a year to $4.50 in 2016.

The ticket surcharge is designed to cover half of the city’s costs, according to documents released yesterday.

City Services for the Race

This will leave roughly $350,000 a year to be absorbed by the city. These costs mostly involve overtime to be paid to city employees during the three-day race.

The city will provide the following services to Downforce, according to the new contract:

• adequate police security “inside the race track area and outside of the track area to maintain public safety at all times during the event period.”
• “adequate fire and safety personnel and equipment, including EMS personnel, inside the race track area.”
• personnel to handle car traffic to and from the event, which attracted 160,000 visitors last September.
• free delivery and pick up of “an adequate number of roll-on, roll-off dumpsters” as requested by the race promoters.
• three street-sweeping units to clean the race route during the event period.

Another major difference between the two contracts is that the new ticket surcharge will be placed at the time of sale in a “lock-box” escrow account controlled by the city and meant to ensure that the government gets paid.

The escrow account will also hold the city’s 10% admissions and amusement tax revenues.

The prior contract let Baltimore Racing Development collect the admissions tax, with the understanding that the tax would be paid to the city after the event. BRD’s failure to pay the admissions tax – as well as the event and city service fees – led to the city’s decision to terminate its contract on December 29.

Another key proviso would allow Downforce Racing to change up to 50% of its ownership interest without city approval (but not allow a change of the current three participants).

And finally, the contract permits Dale Dillon to receive a yearly salary of up to $600,000 to provide “construction, management and promotional services.”

Only Bidder with “Demonstrated Ability”

The city terminated its agreement with BRD on Dec. 30. Parthemos then began negotiations to find a new promoter in time to prepare for the next race scheduled for Labor Day weekend.

Yesterday, some details of the negotiations were disclosed. The mayor’s office said that in addition to Downforce, it received proposals from O’Neil Motorsports, North American Motorsports Events and City Challenge.

O’Neil Motorsports was organized by Gregory O’Neil and Sharon Grinnell, both certified minority contractors in Maryland. Grinnell was a former official at the Baltimore Development Corp. (BDC), and O’Neil is a demolition contractor who said he was involved in Formula 1 racing.

North American Motorsports was controlled by Geoffrey Whaling, former head of tourism for the city of Toronto, and City Challenge was run by Hartmut Beyer, a German racing entrepreneur.

“None of the proposals demonstrated the ability to secure an IndyCar sanction agreement required for the race,” the city said. As a result, Parthemos and Pollak negotiated exclusively with Downforce.

The city has praised Dale Dillon as a well-regarded and experienced operator who had led Grand Prix races in St. Petersburg and Toronto as well as the first Baltimore Grand Prix. He lives in Indianapolis where he is closely associated with IndyCar races.

Felix Dawson and Dan Reck are founding partners of Baltimore-based Wilkes Lane Capital LLC and are former executives at Constellation Energy.

Incorporated last October, Wilkes Lane Capital focuses on private investing in the energy sector. Its website is under construction, with no information available.

According to the city, the three partners have been vetted and shown to have the financial resources to organize the race.

Waiting for a Sponsor

One of the early warning signs that Baltimore Racing Development was in difficulty last winter was its inability to secure a title sponsor. Yesterday, the city said that Downforce Racing has not yet struck a deal with a lead sponsor.

The city anticipates that a sponsor will be secured after the contract is passed next Wednesday by the Board of Estimates, which must formally approved the agreement.

Mayor Rawlings-Blake sits on the spending board and controls three of the five seats. The other two members are City Council President Young and City Comptroller Joan Pratt.

A spokesman for Young said he would vote “no” on the contract. Pratt has not disclosed her views.

On another matter that caused consternation after the September race, the mayor’s office said it would work with the new promoter and IndyCar to replace the 18 trees that were cut down for the 2011 race and not replaced.

Community activists say about 39 trees were chopped down to permit better viewing from the racing stands.