view raw text
► ; : inglis, MRA Exchange Letters On Proposed Sale of Property j 1 j DETROIT RACE COURSE, Livonia, Mich., June 19. — The following letter from Michigan State racing commissioner James H. Inglis has been delivered to George Hag-garty, executive vice-president of the Michigan Racing Commission: "Because of the interest of the. state in horse racing at the Detroit Race Course, both from a tax and a regulatory aspect, I wish to offer the following comment in respect to the proposed sale of the MRA physical properties. "There are a number of important questions raised by this proposed transaction affecting the future of racing in Michigan which have notoet been answered. "I urge, therefore-, that before this matter is acted upon that the Michigan Racing Association management offer to the public, to the horsemen, to your own employes, and to the racing commission, a complete statement as to the practical effect of this sale on future operations, and particularly on your capital improvement program. "I have read the newspaper accounts of the proposed sale and have reviewed Mr. Shaffers letter on the subject and other material furnished to the stockholders in advance of the special meeting called for Monday. "These are some of the questions that I feel all segments of the racing sport in Michigan are entitled to have answers to: "1. Are there any advantages to the sale that were not mentioned in Mr. Shaffers letter to the stockholders? Preferred Stockholders to Be Paid in Full "The only advantage mentioned in Mr. Shaffers letter to the stockholders was that the preferred shareholders would be paid in full the par value of their shares, plus accrued dividends. "What, if any, are the disadvantages of the plan? "Although my information on the transaction may be incomplete, these are some of the apparent disadvantages as they appear on the basis of information already furnished: "A The present group of MRA investors is composed largely of persons, who are not only successful businessmen, but who also have a genuine interest in breeding or horse racing. "The proposed sale would shift at least 90 per cent of the total investment from this group to another group who have not yet shown any interest in racing as a sport. "B The MRA by obligating itself to an annual fixed charge for rental of the plant of 10,000 per year 10,0000 for the first five years, instead of the present 12,000 annual interest cost on the preferred stock, would be assuming a heavy irrevocable burden that would work to the disadvantage of horsemen, mutuel clerks and. other employes in the event of a. drop in business in future years. "The proposed lease agreement would guarantee to the new owners for a 44-year period a 15 per cent annual return on their investment before taxes. This would not seem to leave any possibility of an equitable sharing of the load in case hard times were encountered. Ability to Make Improvements Decreased "C Both the MRAs inclination and ability to carry out extensive physical improvements would appear to be decreased if the sale takes place. "Is is not likely that as tenant the MRA would be less interested in spending for physical improvements than as the owner of the property? "Under the plan as outlined in Mr. Shaffers letter, approximately ,200,000 of cash on hand would be paid out to preferred stockholders. "According to the last annual report of the MRA, this ,200,000 is composed approximately of 00,000 earned surplus and 00,000 in the depreciation reserve. "No one oould object to the distribution of earned surplus to stockholders, but I seriously question the advisabality of distributing the depreciation reserves to stockholders now, or at any time. "It would seem that good business management calls for the expenditure of depreciation reserves from time to time for physical improvement to keep the plant in top conditic i. "The need for spending some of this depreciation reserve for physical improvements has just been dramatically demonstrated by the recent disastrous fire, which fire, destroyed 44 horses and endangered the lives of many horsemen. This occurred in one of the temporary barns, which were erected under a temporary seven-year building permit, issued by the City of Livonia. "The people of Livonia, as well as the horsemen who race at the MRA, have fivery reason to expect the MRA to replace the approximate 400 temporary stalls with DETROIT RACE COURSE, Livonia, Mich., June 19. — An exchange of letters between Michigan state racing commissioner James H. Inglis, president E. E. Dale Shaffer and executive vice-president George Haggarty, of the Michigan Racing Association, preceded an MRA stockholders meeting, scheduled for Monday, June -21, at the local tracks general offices. The letters, under June 18 dates, refer to a proposed sale of the physcial property, owned by the Michigan Racing Association. Haggartys letter to Inglis follows: Dear. Commissioner Inglis: Because of limitations of time, your lengthy letter of June 17, 1954, which you have released to the press , poses a number of questions which cannot be, answered categorically. "The basic policies of Michigan Racing Association are set forth in president Shafers letter to you dated June 18, which is enclosed herewith, and in substance answers your inquiries. The best answers to your questions, however, lie not in words but in a record of performance. By that test, Michigan Racing Association has proved its good faith and sincere purpose in building one of the finest racing plants in the United States, in continuously improving it, and in bringing fine racing to Michigan. Included in this record is a sound, generous relationship with the horsemen, our labor force, and the Michigan public. Entitled to Confidence of Commission "We know that we have the complete confidence and respect of these groups, and we believe also that we are entitled to yours." Shaffers letter follows: "Dear Commissioner Inglis: "Your letter of June 11, 1954, requesting that a representative of your office be present at a special meeting of the shareholders of Michigan Racing Association to be held Monday, June 21, has been received and carefully considered. "As you know, since its creation, Michigan Racing Association has followed a policy of full disclosure to the racing commissioner and to the state of Michigan of its ownership, management and plans. In fact, we suggested and originated the policy. In keeping therewith, Mr. Haggerty and myself, at different times, have discussed with you generally the purposes and plans for the meeting to the extent they can be defined at this time. To extend that policy to the point of holding open meetings of shareholders would be novel and, in the minds of many of our shareholders whose full consent would be required would be improper, because of which your request cannot be honored. "You are assured, "A That no action is intended or will be taken at the special meeting of the shareholders which will involve a change in the basic policies or operation of Michigan Racing Association at the Detroit Race Course as you have come to know, understand and approve them; fB That, where the jurisdiction and authority of the racing commissioner or the state become involved, no action will be taken prior to consultation with those authorities; "C That at all times we intend, as in the past, to avail ourselves of the assistance and advice of the racing commissioner to the end that racing will be conducted on a high plane in Michigan and for the best interests of the public and the state of Michigan. "Very truly yours, "Michigan Racing Association, Inc. "By E. E. D. Shaffer." modern lire-resistant structures some time within the seven-year period, only four years, of which, still remain. "The question naturally arises as to where the funds for these new barns are to come from, in the event that the proposed sale is completed, and all or most of the depreciation reserve is paid out to stockholders. "According to the lease proposal, the new owners would have no responsibilities for repairs, maintenance or improvements to the property. "The need for new barns is only part of the story. Progressive managements of tracks throughout the country are -moving steadily forward with such important improvements as dormatories for stable personnel, recreational facilities for stable personnel, and the installation of escaltors and other such improvements for the benefit of the patrons. _ , , iV i v « e + * »t "These are some of the points which I feel call ior further explanation."
