For more than 60 years, ever since Laguna Seca was first laid out and paved, it was managed by one organization, the Sports Car Racing Association of Monterey County. It is largely thanks to SCRAMP, a non-profit company with a huge volunteer base, that Laguna Seca now has a global reputation as a racing Mecca. But last November, Monterey County — which owns the land the track sits on — fired SCRAMP. The decision sent a shock wave through the auto and motorcycle racing communities.
Dewayne Woods is the Assistant County Administrative Officer in Monterey County. He was the most influential person in the County’s recent decision to remove SCRAMP and install A&D Narigi Consulting, LLC as the new management at Laguna Seca.
That decision’s been controversial, and some people have portrayed Dewayne Woods as a sort of Rasputin to the Monterey County Board of Supervisors. The implicit accusation is that Woods and the Board hand-picked a brand-new company run by a local political fund-raiser, and awarded that company a lucrative contract in an act of political cronyism.
To be honest, that is what I thought I was going to discover when I looked into the story. But now, I think I was wrong. Yes, the awarding of the contract looks like cronyism. But after a half-hour conversation with Mr. Woods, I am now far less worried about the future of Laguna Seca.
This is the transcript of that conversation, lightly edited for clarity
What does the County want from the new management firm, A&D Narigi Consulting, LLC, that it couldn’t get from SCRAMP?
Let me give you a quick background so that you have a good foundation.
In the county I function as the Assistant County Administrative Officer, and I oversee all the finances for the County. Along with that, I end up being involved in many aspects of the County, and especially when there’s a financial issue, I get involved.
In 2015-16, there was conversation between International Speedway Corporation and the County about changing management groups. I was not involved with that. Then, because of all the SCRAMP turmoil and politics, the County decided to go out for RFQ – request for qualifications – and the day they had those qualification meetings the County asked me to get involved.
So after my engagement, what I quickly learned was, there were three respondents. SCRAMP in late 2016- early ‘17, I started to negotiate with one of the groups [The Friends of Laguna Seca – MG] and I quickly learned the SCRAMP was insolvent in 2016. There wasn’t going to be a season in 2017 at all – no motorcycle races, no car races – SCRAMP didn’t have the money to pull it off.
So what I did as an interim, stopgap measure was, I negotiated with the County to assume full business responsibility for all aspects of the raceway. I bought them out, and then turned around and turned them into a management group under a temporary arrangement, which was for three years. It was really only supposed to be a stopgap, until we could get somebody else in there to run it.
[Getting someone else to run it] didn’t pan out, so there I was with SCRAMP and I said, Let’s give SCRAMP a go.
Who was the other group?
That was the Friends of Laguna Seca. The reason it didn’t work out was, they’d proposed to invest $15 million initially, $25 million in first five years. In Day One of negotiations I said, Show me the money. All the way through the negotiations, they couldn’t show me they had the money sequestered for the track.
At the end of the game I told them, If you don’t put $10 million in an escrow account, to show me that you have the wherewithal – and they said, We can’t do that until we have a contract. I said, I can’t give you the contract until you have the money. It was, which came first the chicken or the egg. That’s the reason that one didn’t work out.
I gave it a go with SCRAMP. The County really engaged with the capital improvement program for the first two years of that program. I took a wait-and-see approach and tried to help them develop into a viable, sustainable business.
What I noticed about a year and a half into that was that the leadership of SCRAMP, which was the Board of Governors and the executive leadership weren’t interested in the bottom line. What they were interested in was the sport, and the enjoyment. And there’s nothing wrong with that but if that’s all you are interested in, you should just buy a ticket and come watch the racing.
This is not the volunteers. They come up and do their thing, but you have to structure so much before that in order to have not only a good event but a financially viable event. A year and a half into it I found myself determining – and this will get you to the point of how I got to my recommendation – is that while I have no adverse feelings about anyone at the facility, business is business. What I found was, not even just the accounting and financial management, but contractual issues – they would have races and they’d have safety workers, but there were no contracts in place for the safety workers. If someone were to get hurt, everyone would sue everyone and there’d be no contract to guide it.
I would tell them six months in advance, Get this contract. They wouldn’t do it. So I ended up having to go in and negotiate contracts myself, whether it was with SCCA, or all the other groups, and make sure the insurance was in place, the indemnification language was there. I had to do it all myself.
Lots of times, I didn’t find out until the last hour that they hadn’t done these things. And again, it’s because they just weren’t interested in running the business, the were interested in the race. Whether it was contracts, or a contract we’d negotiated and making sure we held everyone to the terms, making sure we were careful about what we do to ensure that during the event we don’t have revenue of a million but we’d spend two million.
I was making sure they didn’t go off the deep end. They’d say, Well everyone likes this. I understand liking it, but you can’t have an event that leaves you a million in the hole; that’s not sustainable.
What I really learned is why they were insolvent back in 2017. The practices that they’d become accustomed to, they weren’t changing. I communicated very clearly, over about a year and a half with them, prior to this change, all the things they needed to change in order to make this sustainable. They just would not listen, or change. They were more interested in having a good race than a sustainable race.
Those things are not mutually exclusive, but if you don’t have both, you can’t have either. Another piece of it was, they had volunteers handling cash, and it would end up in peoples’ RVs, and they’d say, I’ll bring it over in the morning. That’s not how you handle cash. Even though you should trust them, and I have no indication they’re trying to steal, but you just have cash controls when you run a business.
You also pay your bills. I would start getting calls from vendors, who SCRAMP had not paid. I’d research it, Is it the County’s problem? Because we pay 30 days, net. And what I found is the bills would sit in peoples’ desks over there. They were too busy running the race to process the bills. The bills would be 90 or even 180 days old before they even hit the County for payment. By that time you have small vendors who are saying, Where’s my money? I’m not going to give you any more services. You can’t run a business like that.
The things I experienced were nothing new or different than what had gone on before 2017. The year-and-a-half that I invested in leadership in SCRAMP – and let me tell you, I invested in them and communicated with them – about what they needed to do to be successful, their culture would not allow it; it was just not who they were. They didn’t get the difference between running a sustainable business and being a volunteer.
Volunteerism is wonderful, but you don’t have the responsibilities that you have if you’re running a business. I couldn’t get the leadership to get there. They became resistant, and said, The County’s bad, The County’s making us do all these things. Well no, I’m just trying to run a business here.
That’s what got me to the point where I made a recommendation to say, We need to have someone in this role, in the business role, that can operate the business on the County’s behalf in a very sustainable way.
So I understand the timeline, was it late 2016 when you really stepped in?
Tim McGrane [SCRAMP’s recent CEO] started in July of 2018. By that point I’d realized the sloppy business practices. By that time I was alert to that. I’d hoped that the new CEO would make changes. About four months into his tenure, I realized he wasn’t going to make those changes. He fit into that culture.
We started communicating in a very earnest way in August, 2018. I really put down communication to the executives and Governors of SCRAMP what they needed to do to succeed and advised them that they were under evaluation.
You were saying that in 2016 SCRAMP was insolvent and that in 2017 the County bailed them out. Is that fair?
No. We didn’t bail them out. SCRAMP was a concessionaire; a stand-alone business. In 2017, they went out of business. We didn’t bail them out, we bought the business. We just happened to hire them to manage it going forward. At that point, their role and function changed from what it had been, historically.
So the County made the capital improvements after that?
In 2017, the County had a reserve that had been built up over the years for Laguna Seca, from funds that had been earned by the County at Laguna Seca. So those are the funds that I started investing in the facility.
Would SCRAMP feel that was really them? That that pool of money existed because of what they’d done over the decades? Would they have a sense of ownership over that?
If they did, they’d be misguided. I don’t think they would, because they didn’t even know those funds existed. There are two sides of the facility: there’s the event side, and track rental. The track rental had always been the County’s business. Those funds were earned and received from the track rental program.
By track rental, you don’t mean SCRAMP renting the track to put on events, but rather renting the track out for a driving school, or track day?..
Right. There are only maybe eight event per year, and SCRAMP puts on most of those. By track rental we mean the everyday use of the track the rest of the time when people come out for a school, or to bring a club out.
You’re aware that, especially on the auto racing side, there’s been criticism of the County hiring A&D Narigi Consulting, LLC and there’s no reason to think that this company can administer a race facility. Listening to you, I get that from the County’s perspective, what we need is for someone to operate the business. So are you confident or do you know that all of the technical skills required to put on an event – those people will be hired, from SCRAMP or wherever, to ensure that A&D Narigi has the technical skills to put on these events?
A lot of people have made these blanket statements, but they don’t really understand how the business works. I’ve had three years now to understand the business. When we talk about events, say the IndyCar race which I negotiated myself; I brought them back in.
When you negotiate these contracts, you know what the County is required to provide to these racing entities. What people don’t understand is that when IndyCars come in, we have no control of the track. The race is run by IndyCar. They deal with the sanctioning body, the safety crews, the run group, they deal with everything.
From our perspective, we’re not dealing with the race side, other than interacting with them if they need one of our staff to go out and clean something. We bring in other groups, like SCCA, they do the flagging; the ambulance, all those things are outside of our business.
Everything between the fences is IndyCar, from the fence back is us. We do hospitality, tents, catering, concessions; it’s like any other event. The things that we are really in charge of are synonymous with running an event, not a race.
We’re not in control of the race; the sanctioning bodies are in control of the races. When people say, You don’t know how to run a race... Let me tell you, SCRAMP never ran a race either, it is always the sanctioning bodies. We still have those people. Those people will be ther at all the races. Even the one race we own, which is the Reunion, we contract with a sanctioning body, HMSA, to run that event for us. So not knowing how to run a race is irrelevant. The people who always ran the races are still there and in contract.
When I spoke with Chuck Aksland, he told me that MotoAmerica’s deal was done sort of in-between the SCRAMP period and when the new management came in. Chuck told me that they did a deal with the County itself. Was that with you?
I did that deal. Every deal that’s been done in the last three years has been done with me. The last Dorna deal, I did. SCRAMP hasn’t been doing the deals for three years.
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So, I understand now that Laguna Seca has very limited responsibility for what happens between the fences at events, but what about during a track day or a track school?
That’s a different animal. We have a firm that we contract with, to do the flaggers. We make the track renter pay for the ambulance and fire service, and we have a track manager – as SCRAMP had – on site to manage and make sure that the track renter is safe and following all the rules.
That’s a lot different. The person who used to do that for SCRAMP works for Narigi now.
So that’s an example of a key position that’s just going to transfer over...
It already has.
Can you give me a sense of the ratio of revenue that comes from events, versus track rentals?
Are you talking margins, or gross?
Either. Both.
Track rental on an annual basis, is $4-5 million. We’re about a $20 million organization, so events bring in $14-15 million. That’s not profit, that’s gross.
In terms of margin, are track rentals more profitable then events?
Track rentals are much more profitable.
Would it be fair to say that track rentals subsidize events?
Historically yes. That’s not the way it should be in the future. Each event should, at a minimum, break even. So no one event or activity should subsidize another one. But the way SCRAMP operated, indeed the event side lost money.
Is there anything else you’d care to add?
Two things I want to leave you with are; one, if we run the business in a sustainable way, it will be here for the community and the volunteers for decades to come. And two, all the speculation about the County not being interested in having the racetrack is totally unjustified. This is a big regional economic driver. The County, through SCRAMP, had an economic impact analysis done, and the track brings over $80 million into the County every year. We’re fully invested in its success.