The city of Topeka since July has had a binding agreement with the National Hot Rod Association that requires the city offset profit shortfalls and pay advertising fees for the annual event at Heartland Park.
In part, the contract calls on the city to pay half of the shortfall if the event doesn’t make $1,831,000 and finance at least $340,000 a year for advertising.
That runs contrary to statements from city leaders, including city manager Jim Colson, who repeatedly have told the public the city won’t invest more money into the troubled racetrack after $5 million in Sales Tax Revenue bonds are issued and a new owner is selected from among four prospective bidders.
However, city attorney Chad Sublet said, every part of the contract can be renegotiated by the city or by whichever operator it selects. He also said the contract wouldn’t go into effect until the city is granted STAR bonds.
“The city and NHRA aren’t tied into that contract until and unless the STAR bond deal goes through,” Sublet said.
The contract states it is contingent upon the city acquiring full ownership of the track, a scenario that relies on the issuance of new STAR bonds, a move currently in jeopardy from an ongoing appeal and a Legislative Post Audit investigation.
Staff was expected to present to the Topeka City Council on Jan. 6 its recommendation for a new owner from among the four prospective bidders. However, city leaders weren’t sure a vote would be held that night.
If the city doesn’t have the rights to the track by Jan. 15, 2015, NHRA has the right, in its sole discretion, to terminate the agreement, according to the contract.
This was the 26th year the NHRA Kansas Nationals took place at Heartland Park, which typically happens in the last weekend in May.
The NHRA agreement briefly was posted on the city’s website as part of the request for proposal package. It was removed, however, because it contains a confidentiality clause and “should not have been posted online,” communications and marketing director Suzie Gilbert explained.
Topekan Leo Hafner at the Dec. 16 council meeting was critical of the city’s decision to pull the contract from public view, noting it came down after he inquired into it.
“To me, that smells a little bit,” he said, describing some of the provisions as shocking. “I mean, it sounds like we’re trying to hide something here. I just wanted everyone to be aware of that and I wanted it to be on the record, because I don’t think that has a sense of fair play. And I think the citizenry are starting to get a little suspicious of this government and what’s going on here.”
As a result of the confidentiality clauses, Sublet said, the city doesn’t definitively know whether the contract is similar to others across the country.
“We requested that, but because of that clause, it couldn’t be provided,” he said.
However, Sublet said, it was his understanding that Topeka’s contract is similar to others.
An NHRA spokesman declined to comment on the contract, noting a confidentiality clause included in it and its other contracts.
The 70-page contract holds the city and whichever operator it selects — with NHRA approval — “jointly and severally liable” on a number of provisions, including the profit guarantee.
Put another way: If the operator can’t make up the diffence, the city will have to come up with the cash.
However, Sublet said, the agreement only obligates the city/operator to half of the difference. If the weekend generated $1.5 million, for example, the city/operator and NHRA would split the $300,000 shortfall.
The contract doesn’t expressly say that, only that the city/operator will pay NHRA “one hundred percent of the difference between $1,831,000 and the actual total of shared” admissions, parking and title rights revenues.
The $1.8 million figure, Sublet said, is based on what the event historically has generated in Topeka.
He said his understanding is that the revenue guarantee is standard with NHRA contracts and the amount varies by racetrack.
Although the NHRA has exclusive responsibility for advertising and promotions, the funding for that campaign will come from the city/operator. The contract holds that amount to $340,000 each year, naming Visit Topeka Inc. and transient guest tax dollars as potential sources.
That paragraph needs to be read closely, Sublet said, because it only commits the city to “adequately support advertising and marketing.”
The contract language said the city/operator shall secure “sufficient” funds to promote the event, “which are expected to be in the amount of approximately $340,000.”
“Visit Topeka will make determinations about allocations,” Sublet said.
Visit Topeka historically has provided Heartland Park funding from transient guest tax dollars.
The phrase “sole and absolute discretion” — or something like it — comes up several times in the agreement, giving the NHRA great leeway in many decisions, all “in deference to NHRA’s expertise.”
For example, the NHRA has to approve whichever operator the city wants to select to operate the track, “provided the NHRA will disapprove an operator in good faith,” according to the contract.
The NHRA also has “sole discretion” to determine whether updates are needed at the track. If they are, the city/operator has to make the changes within the next 60 days, if that is reasonable.
Other provisions of the contract include that:
■ Heartland Park must retain, at minimum, all of the structure, fixtures, facilities and other items as they were for the 2014 event.
■ If the city/operator takes any action that prevents NHRA from conducting its annual event, the city/operator would have to pay for the damages to NHRA.
“(I)t would be reasonable to award, and NHRA shall be entitled to, the sum of Five Million Dollars ($5,000,000),” the contract reads.
■ Commit Heartland Park to give the NHRA “exclusive use and control” of the racetrack for 20 days surrounding the event.
■ NHRA will have rights to audit all books and records related to its event.
■ All proceeds owed from the event determined by the preliminary settlement have to be made within 48 hours. If not, the party owing funds will be liable for a $200 daily administrative fee.
■ Obligate the city/operator to 26 responsibilities and expenses, including ticket personnel, Internet services and corporate hospitality expenses. The NHRA, meanwhile, is responsible for 14 items, including key personnel for race operations, three ambulances and securing
credentials.
