In April, the Pinnacle Race Course, a 1-mile oval track located just south of Detroit Metropolitan Airport, was expected to host the second running of the Michigan Derby, a prep race for the Kentucky Derby — the first leg of the Triple Crown.
The problem is, the track in Huron Township is shuttered. No horses will run this year. The facility, which opened in July 2008 with tens of millions of dollars of public investment, was to be a hub of bustling activity with spinoff job creation and a lasting economic impact on the region — but it never was able to remain viable. And it closed in November 2010.
Ambitious horse track owner and former Ann Arbor banker Jerry Campbell, and a hard-driving Wayne County appointee, Turkia Mullin, touted the project as an economic juggernaut. The facility was to include a 200,000-square-foot retail center, luxury boxes, and a large family picnic area. Campbell and Mullin predicted as many as 1,300 jobs would be created to support the venture. The complex, they said, would quickly become a destination attraction for businesses, trade, and tourism. Instead, the project’s long and complicated path to failure has left the property in a condition that may not be economically viable any time soon.
By most accounts, the track should never have been built. Horse racing, once a popular pastime, fell out of favor years ago as new casinos — along with stiffer competition from professional sports teams and other forms of entertainment — drew younger fans away from the track. And because its patrons are aging, the horse racing industry had already begun to experience an overall downturn. Reflective of the trend, Ladbroke Detroit Race Course in Livonia — one of the state’s top tourist attractions when it opened in 1950 — closed in 1998, due to declining revenue. Great Lakes Downs in Muskegon, the state’s lone remaining thoroughbred-racing facility (formerly owned by Campbell), closed in 2007.
So how was it that the Pinnacle Race Course was approved and built using millions of dollars in taxpayer money? Mulugetta Birru, Wayne County’s economic developer at the time the track was proposed, says he opposed the project. He recommended to his boss, Wayne County Executive Robert Ficano, that the development be located elsewhere. “The horse track was never part of my master plan to draw logistics businesses to that area of the county,” Birru says. “But my advice, based on years of working in economic development, was ignored. Following my objections, I quickly found out a group below me was pushing for the project. I was eventually let go, and Mullin stepped into my position.”
In 1999, under the Ed McNamara administration, Wayne County made the first payment on what would ultimately become a $50-million, 320-acre land purchase in rural Huron Township. The county, under the direction of then-economic developer Dewey Henry, envisioned a multifaceted development that would include hotels, office buildings, research centers, light manufacturing facilities (particularly for companies that rely on just-in-time delivery schedules), and a golf course.
It was all part of Henry’s master plan to transform vacant land near Detroit Metro and Willow Run Airport in Ypsilanti into the kind of bustling economic hotspot that surrounds other prosperous airports nationwide. Although the direction of the project changed some in the ensuing years, when Ficano succeeded McNamara as county executive, the basic idea remained for the creation of a new airport-city, or aerotropolis.
Thirteen years after the first property acquisition, the disposition of the land could not be more different — or less prosperous. In 2008, the county sold the bulk of the land to Campbell’s Jackson-based Post It Stables Inc. for $1. Shortly thereafter, the company sold a portion of the property to an Indian tribe seeking to build a casino.
The now-shuttered track (it surrendered its license to the state in May 2011) is a casualty of an industry long recognized to be in steep decline, and it could be years until the planned casino — like other Indian gaming proposals — is approved by the federal government.
As it stands, the land acquisition was not the extent of the county’s costs. It also issued $26 million in bonds to finance road and sewer improvements for the site, hoping to facilitate what Campbell and Mullin projected would be the catalyst for more jobs. The amortization schedule for the bonds shows that the county’s total payout for the improvements will be more than $75 million.
Place Your Bets
The failure of the Pinnacle Race Course was the result of a project that happened too quickly, on the promise of major new employment and spinoff development.
At the time of the proposal, Campbell vowed a total investment of $142 million would be made at Pinnacle Race Course. Campbell said the project would keep the continuity of thoroughbred racing in the state. He promised there would be 1,300 employees at the track, plus 1,740 retail jobs, and he said an estimated 20,000 trickle-down jobs would be created with the development. He predicted the facility would yield an estimated $1.5 billion in annual economic benefits.
At Pinnacle’s opening in July 2008, Ficano touted the influence the project would have on the region. “(The development) ties into what we call an aerotropolis concept, and that’s simply turning the airport into an economic engine. … In actuality you can turn (the aerotropolis) into a lot of economics. And that’s what we want to do. This helps kick-start that (project) in that direction.”
In the failed racetrack’s aftermath, Wayne County’s auditor general issued a scathing report in July 2011 that asserted sound business practices had been ignored at almost every step of the process. The one Wayne County Commissioner (out of 15) who opposed the project at the time says its failure was preordained.
But that’s all in hindsight. In October 2007, when the commission was asked to provide expedited approval of the deal, they gave it.
At the center of the plan was Campbell, an investor and chairman of Post It Stables. Campbell’s experience in the racing field included the operation of Great Lakes Downs, the Muskegon-based track that had closed in 2007 due to declining business. With the support of Mullin, then-director of the Wayne County Land Bank, Campbell informed the Wayne County Commission that he had an opportunity to develop a first-rate horse track in Huron Township.
But there was a condition: If Campbell did not receive county approval within 30 days, he would lose his option to obtain a license that would allow patrons to bet on the horses, as well as place wagers on other races around the country.
It was an unusually quick timeline for such a complex project — especially considering that the county had already spent so much money acquiring the land. Now it would have to spend considerably more on infrastructure improvements. Commissioners were asked to gather and approve the deal quickly — much faster than typical proceedings under the Commission’s rules.
Campbell’s proposal called for acquiring the land from Wayne County for $1. In return, he would commit to a development he said would create 1,100 temporary construction jobs and the aforementioned 1,300 long-term operational jobs. But even after selling the land, Wayne County did not place any restrictions on Campbell’s ability to turn around and sell parts of the acreage — a circumstance Campbell took advantage of when he sold seven acres of the property to the Sault Ste. Marie Tribe of Chippewa Indians for $179,000.
State Rep. Phil Cavanagh, D-Redford Township, who was a member of the Wayne County Commission when the Pinnacle project was brought to the body for approval, was the lone dissenter.
“I really liked the idea of the aerotropolis,” Cavanagh recalls. “The county assembled this land and I wanted to make sure that when we kick-started it, it was the right project to really send the message that we intended to reinvest in that area and draw interest from companies that rely on air freight to move global cargo and goods. But it had to be the right project. How does a race track between two airports kick-start anything?”
Cavanagh says he was troubled by the fast pace of the approval process, especially as Campbell and Mullin asked commissioners to provide authorization within a month’s time to obtain the betting license. “The land bank worked at lightning speed, and this thing went from soup-to-nuts in 30 days,” Cavanagh says. “And they dropped it on us, and said we had to vote.”
In retrospect, Cavanagh believes his colleagues backed the project because the promise of so many jobs was too compelling to pass up. In 2008, with the economy beginning to teeter, anyone promising to create 1,300 jobs was likely to get the attention of public policymakers.
Cavanagh, who owns a law firm and a business-consulting group (he doesn’t run the companies while in office), thought the job-creation promise was illusionary. He believes county officials simply acquiesced, rather than scrutinize job-creation claims for a racetrack and an otherwise undefined array of spinoff developments.
“I was amazed at the (number of) jobs that had to be created over a six-year span, and yet the land was signed over for $1,” Cavanagh says. “How do you prove there will be 1,300 ongoing, sustainable jobs?”
To meet those projections, the developers counted a large number of jobs with connections to the racetrack that were indirect at best, including UPS drivers and Home Depot cashiers who would theoretically find employment opportunities from new business generated by the racetrack. The nearest Home Depot, at I-75 and Eureka Road, is eight miles away.
“Anybody who touched this project in the most existential way was counted in the job projections,” Cavanagh says. “That could be the horse breeder down in Kentucky, and that’s admitted in some of the memos. And for the administration to sign off and say that’s fine? The administration should have been fighting for the taxpayers. When you step back and look at the whole deal, the county gambled more than $125 million on infrastructure improvements, bonds, and land conveyance — all of it taxpayer money.”
The county’s agreement to convey the land to Campbell carried a caveat which required him to pay back portions of the land’s value in proportion to whatever number of the 1,300 (later reduced to 1,080) jobs he failed to create. But the county gave away its chance to recoup that money, Cavanagh says, by declaring in early 2008 that the jobs requirement had been met in full.
The Pinnacle project also came under scrutiny because of the actions of Jack Krasula, a Post It Stables investor. Last year, at the direction of the Wayne County Airport Authority, he conducted a national search for an airport director at Detroit Metropolitan Airport. In short order, the Authority hired Mullin for what turned out to be a controversial stint as CEO. Krasula, founder of the Southfield-based executive search firm Trustinus, became Pinnacle’s sole owner later in 2011, when he paid off Post It’s bank note on the property.
Mullin subsequently came under fire for accepting a $200,000 severance from Wayne County upon leaving her position as economic development director. She eventually returned the severance, but was fired by the Authority from her job as CEO at the airport in late October. The Authority said Mullin was terminated for violating her employment agreement; an exact reason was never specified.
Neither Campbell nor Krasula returned phone calls seeking comment for this story. However, Mullin issued a statement through her attorney, Raymond J. Sterling, responding to critics of the development.
“Pinnacle was a unique opportunity to turn an illegal waste dumping ground into a profitable business,” Mullin’s statement said. “Every business opportunity has risks, and the risks and potential rewards here were well-known but worth it to everyone who agreed to the deal, including the Wayne County commissioners, the Wayne County executive, and even the investor who pumped $30 million of his own money into the project.”
At the time of the initial proposal, Mullin also touted other benefits of the project. “The infrastructure improvements made to the property positively impacted (the value of the land) and enabled hundreds of other adjacent acres to benefit (from the development),” she said. However, an aerial review of land surrounding the racetrack shows an abundance of farms, with only a handful of industrial parks to the west along I-275. And those businesses aren’t new; they were built years ago.
Mullin also faulted the state of Michigan for cutting live racing days in half shortly after the track opened, which she said undermined the ability of operators to run the racetrack. The Michigan Gaming Board, meanwhile, began charging Campbell for a handful of state gaming inspectors who were required to be on site for each live race day. The cost of paying the state inspectors was $5,900 per day.
Then-county economic developer Birru, meanwhile, says he was opposed to the project’s location, believing that if a racetrack was to be developed, it should be built in Romulus. He also adamantly opposed selling the land to Campbell for $1.
“I put my objections to the county executive, saying this will mess up my master plan,” Birru says. “I’d been working on my master plan for a while, trying to put in the water lines — there was no water service to the site — and the other streets.”
Once he made his position known, Birru says, he realized he was being shut out of the process. Ficano allowed Mullin to be the project’s champion within the county, Birru says. There was little he could do when the county made what he believed was its biggest mistake, which was to sell the land outright to Campbell, regardless of the purchase price.
“In all the years I’ve worked in economic development, you don’t sell land,” Birru says. “You give an option to a developer. The way I would structure it is that you may have an option for 100 acres, and the developer may take three to five acres, and he has to show us evidence he has the financing to build on that three to five acres. Then, the only thing you would convey would be the three to five acres. If he doesn’t build within three to five years, he loses the option on the rest.”
When the Pinnacle deal was completed, Birru says, Mullin was operating as the county’s de facto economic development chief.
“Really, there was a shadow economic development department, put it that way,” Birru says. “I created the Land Bank. I was the one who came up with the idea to create the Land Bank. As soon as I got it approved, I was told Turkia (Mullin) was running it. I had spent years convincing Washtenaw County to be part of it, convincing Detroit Renaissance (now Business Leaders for Michigan) to make it one of its priorities, and then I convinced Detroit Renaissance to pitch in money. When it started to become real, it was completely taken away from me. It was evident I was being pushed out, and of course, (Mullin) finally got the job.”
Down and Out
The decline of the horse racing industry was a widely known fact by 2007, when the Pinnacle project was brought before the Wayne County Commission.
According to the Jockey Club, a group that compiles data on the horse racing industry, thoroughbred racing in the United States has experienced a pronounced decline in the past two decades. In 1989, there were 74,071 total races throughout the nation. By 2010, the industry conducted 46,379 races. During the same period, the number of races involving 2-year-olds fell from 14,907 to 10,322.
Christopher N. Scherf, executive vice president of the Thoroughbred Racing Association, says the decline of horse racing revenue coincided with the end of the industry’s near-monopoly on gambling. “In the ’70s and ’80s, you pretty much had a monopoly on legalized gambling in this country,” Scherf says. “Then, in the ’70s, you started with state lotteries, and the state became your competitor with huge marketing budgets. You went into the late ’80s and suddenly you had our Native American gaming legalized by Congress, and the proliferation of those casinos.”
While a successful new horse track is not unheardof in the U.S. — Presque Isle Downs and Casino in Erie, Pa., is doing well — Scherf says a new track’s chance of success depends almost entirely on its ability to make money from other gaming offerings. “They’re able, because of the slots, to attract horses and give out purses that far exceed what they even handle (in dollars bet on races),” Scherf says.
Information showing the struggles of the horse racing industry was available at the time the Pinnacle project was approved, Scherf says, and few familiar with the industry would have believed the project could flourish solely as a horse track.
“It’s a near-impossibility to succeed without casino revenue,” Scherf says. “That alone won’t guarantee you success, but trying to open a new track now, without that added revenue, you’re behind the eight ball before you start — especially if you’re in a competitive market that has casino gaming.”
It is likely that Campbell understood this at the time. The massive parking lot at Pinnacle Race Course indicates that Campbell anticipated additional gaming options as part of the longer-term plan for the development. While those plans were never realized, the notion of a horse track and a casino was a far cry from the community’s preferred vision for the land.
Huron Township Supervisor Elke Doom, who was elected in November 2008, was serving on the township’s Local Development Finance Authority Board when Wayne County approved the racetrack project. Like most members of the Authority, Doom was not happy with the county’s decision to give the go-ahead to the racetrack, as she and others envisioned the land being developed for high-tech research centers and other related business uses.
Despite some reservations, the Huron Township Planning Commission recommended rezoning of the land for the racetrack, which the Township Board of Trustees affirmed. “The locals were looking at it from a local point of view,” Doom says. “It isn’t something we see people really attending regularly, to make this a viable business. But I also believe it wasn’t Mr. Campbell’s intention to cater to the local people. There was talk of having shuttles go to the airport, and people being brought back and forth.”
While Pinnacle Race Track’s future is clouded with doubt at best, Wayne County has not given up on the land as an economic development target. The county is going ahead this spring on a $6.8 million road and sewer project — using a combination of federal funds and leftover bond money — that will extend from Pennsylvania Avenue to Sibley Road.
Ray Byers, Wayne County’s director of economic development, said in March the state gave the county approval to mitigate wetlands in the area at the same time the improvements are being made, rather than having to go back and do the mitigation first as would normally be the case.
He says the completion of the roads that feeds into the freeway is essential to attracting research and development firms, as well as shopping and recreational businesses, to realize the vision for the aerotropolis. “We have had people express interest in some of that property and are very interested if we’re going to mitigate the wetlands, and we’re going to do that,” Byers says.
So what does the future hold for the shuttered Pinnacle Race Course?
Last summer, Doom says Larry Julian, a Flint-area business consultant and former state representative, approached her with terms for reopening Pinnacle. At one time, Campbell had approached Julian, a longtime advocate for thoroughbred racing in Michigan, about securing additional gaming opportunities for the track.
According to Julian, his answer to Campbell was: “Why don’t you lease me the track and let me and my new company apply for race dates in 2012? Let’s get you out of here because there are some bad debts here.”
Campbell was amenable to the idea, Julian says, but the Gaming Control Board told Julian he could only reopen the track if he could come up with the money to settle all of Campbell’s debts.
And the debts have been adding up says Linda Spangle, Huron Township treasurer. She says Post It Stables owes $2.5 million in real estate taxes to the Wayne County Land Bank and the Wayne County Brownfield Authority for 2009-2011. The owners also owe $150,000 in personal property taxes relative to Pinnacle Race Course and the Pavilion Sports Bar. In addition, Post It Stables owes the township $29,000 in water bills, $137,000 for police services, and $600 to the department of public works.
These days, Julian is trying to work with the Snyder administration and state Attorney General Bill Schuette to change the laws, making it easier for racetracks to add slot machines and other revenue-generating forms of gaming. Even without slots, Julian believes Pinnacle could make a profit by adding various forms of pari-mutuel gaming. At the present time, however, there is no agreement from the state.
“We could have had poker rooms, instant racing games, putting money in a pot and splitting the pot,” Julian says. “The issue is, what can we get approved by the attorney general, the governor’s office, and the Gaming Control Board that falls within Proposal 1, which says that it cannot be a new form of gaming? We’ve said that because pari-mutuel gaming is not a new form of gaming, we should be able to do it. They don’t agree.”
If the operators and the state could agree on those issues, Julian says he would lease and operate Pinnacle “in a heartbeat.” However, without other forms of gaming, he believes the track is doomed. “If the only thing we’re going to offer at Pinnacle is thoroughbred racing for 40 days a year, we’re going to go broke,” he says. “You can’t sustain that.”
The original developers probably understood that, too, Julian says — but people in the gaming business tend to be more willing than the average person to take a chance on a long shot, especially in a county amenable to investing millions of dollars of taxpayer money despite substantial risks. db