City officials have terminated the contract of the troubled company that organized the inaugural Baltimore Grand Prix and are seeking a new group to run the racing festival in the coming year, the mayor's office announced Friday.
The city ended Baltimore Racing Development's five-year contract after the company failed to meet the terms of the agreement, officials said. The racing group owes the city more than $1.5 million in taxes and fees — a fraction of the company's $12 million in debts.
"BRD hasn't come up with a plan to demonstrate that they have the capacity to have a successful event next year," said Kaliope Parthemos, the deputy mayor for economic development. "They haven't come up with a plan to reorganize. They haven't come up with a plan to pay their debts."
Parthemos said city officials hope to find another group to organize the three-day festival. IndyCar officials have included the race, slated for Labor Day weekend, on their 2012 schedule.
About 110,000 tickets were sold for this year's event, and a report commissioned by the city found that the race generated $47 million in economic impact through hotel stays, restaurant meals and other purchases by racegoers.
"This event had a great economic impact on the city, and it was an event the citizens of Baltimore were excited about," Parthemos said. "It should continue."
Racing analysts say about two months remain for the city to pull together plans for a September race. The new team must sell tickets, seek sponsors, purchase goods and services — and create a new image for the event after BRD's financial missteps.
The city's decision comes as the racing group's managers, after much wrangling, signed off on a deal that would award control of the company to Felix J. Dawson, a former Constellation Energy executive, according to sources close to the racing group. But city officials said the change in leadership was too little, too late.
The racing group has been the target of at least a half-dozen lawsuits filed by investors and vendors demanding payment. The state comptroller's office has placed liens against the homes of the group's five managers and two executives in an effort to collect back taxes.
Neither Baltimore Racing Development officials nor Dawson returned calls seeking comment Friday. It is unclear whether the racing group will declare bankruptcy and whether it will be able to pay vendors, the state and city.
Parthemos issued an ultimatum to the group nearly two months ago, demanding new leadership and a plan to pay the debts to the city by Dec. 31.
The company owes about $488,000 in taxes to the city, a $250,000 racing fee and $750,000 to pay fire, police and other municipal employees who worked at the race, among other fees, Parthemos said. She said officials were determining how to collect the funds and were considering asking the new racing group to repay the debts over time.
Parthemos said officials have been approached by "two or three" groups that are interested in organizing the event and have the money and background to plan a major race. She stressed that the city is interested only in hearing from parties qualified to organize such an event.
"The circle of people who have the expertise and experience is very small, and we will only be having discussions with that group of people," Parthemos said.
Sources close to the discussions say one of those groups is headed by Dale Dillon, an Indiana-based construction company owner who became BRD's general manager weeks before the race.
City officials credit Dillon, who has helped organize IndyCar races in St. Petersburg, Fla., and Toronto and is seeking to run one in Fort Lauderdale, with pulling together Baltimore's event. Dillon would have continued to manage the race under a proposal put forth by Dawson, the former Constellation Energy executive who had hoped to take over BRD.
Dillon declined to comment when reached by phone Friday.
Parthemos said the city would be able to avoid the time-consuming process of seeking bidders because the contract is for a "professional service," but said any agreement would need the approval of the city's five-member Board of Estimates.
Mayor Stephanie Rawlings-Blake has been a strong proponent of the race, which was run about a week before the mayoral primary. The city paid nearly $7 million to prepare roads around the Inner Harbor for the race, during which cars hurtled along a two-mile course at speeds approaching 200 miles per hour.
In a statement, the mayor expressed regret that Baltimore Racing Development had been unable to fulfill its contract, but cited the benefits of continuing the race.
"The Grand Prix generated $47 million in economic impact and proved valuable in terms of positive media exposure and civic pride for Baltimore's residents. The event, if conducted responsibly, has significant economic value to potential investors and the city this year and in future years," she said.
A new group would need the approval of both the city and IndyCar to proceed. IndyCar executives were not available for comment Friday.
Baltimore Racing Development was beset by financial difficulties long before the race. The leadership team failed to secure a title sponsor to contribute more than $1 million dollars in exchange for naming rights. The group missed payments to the Maryland Stadium Authority for a $2 million project to turn a Camden Yards parking lot into a pit lane last year and later fulfilled a payment plan only after an unprecedented 11th-hour loan from a state agency.
The racing group took out a high-interest $1.1 million loan in July from an investor with ties to one of the group's five managers. Former executives and city officials have complained that the group's leadership structure was unwieldy and the managers were often at odds.
Most recently, the group has failed to pay several vendors, including companies that installed fences and grandstands.
The news was disheartening for the management of Sunrise Safety Services in Glen Burnie, which did sign work, set up barriers and performed roadwork for the race.
"If the city can't get their money, what would make us think that we can get ours?" said Janet Groncki, the company's president. "We're not thinking we're going to get it either."
Groncki said Baltimore Racing Development owes her company about $220,000. Sunrise Safety Services, which employs more than 70 people, plans to file a lawsuit Tuesday against the Grand Prix organizers. Employee bonuses were limited at the end of the year because of BRD's failure to pay, Groncki said.
"We're going to file just to be on the record," she said. "That's a lot of money to us. We're a small business."
John W. "Bill" Bunting's Upper Marlboro grandstand company, B&K Rentals, was awarded $284,000 in a Prince George's County court last week because of Baltimore Racing Development's failure to pay for services.
Bunting said he doesn't know whether his company will ever see that money but that he would consider working on a Baltimore IndyCar race next year if a new group takes over.
"Baltimore was a great venue," Bunting said. "The race definitely has a future."
He lamented the "lack of financial planning" by this year's organizers. "It's a shame to see it go that way," he said.
Baltimore Sun reporter Steve Kilar contributed to this article.