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Sturgis City Attorney provides explanation of Mecum Auction bike sale

Sturgis City Attorney provides explanation of Mecum Auction bike sale

STURGIS, S.D. – At the Monday, Nov. 6, meeting of the Sturgis City Council, there were some questions asked about the details of the city’s recent sale of a donated motorcycle at the Mecum Auction in Monterey California in August.

City Attorney Mark Marshall, who attended the auction with Mayor Mark Carstensen and Sturgis Police Chief Geody VanDewater, said he would provide a written statement about that trip to the auction.

The statement from Marshall is below:

For years, a part of the profits from the City of Sturgis Motorcycle Rally have been donated to local charities. According to Mayor Mark Carstensen, the City set up the Sturgis Rally Endowment Fund, a part of the Black Hills Community Foundation to ensure that the Rally tradition of charitable giving endures for the benefit of future area residents.

The Fund attracted the attention of generous anonymous donors who agreed to match donations to the fund, including the City’s share of the proceeds from the sale of motorcycles sold at Mecum auctions, with a deferred gift up to $100,000. For 2021 gifts met the maximum amount, and the donors made a deferred gift of $100,000. The donors renewed their pledge for 2022. This year the donors, Roger and Elaine Haydock, allowed the City to identify them and agreed that the sale of the Mayor’s Harley at the 2023 Mecum Monterey auction would count toward the matching contribution for 2022.

The Harley had been donated to the City. The motorcycle, fresh from the 83rd City of Sturgis Motorcycle Rally, was accepted by the Mecum for its event in Monterey, California on August 17-19, 2023. Mecum is recognized as the world’s largest collector car auction. Through the efforts of the City Council, Mecum is also a sponsor of the City of Sturgis Motorcycle Rally.

I trailered the bike to the auction, which the Mayor and the Chief of Police also attended. The Mayor and I set a reserve price for the motorcycle to protect the City from artificially low bids. We received a bid of $18,000 that the Mayor and I rejected. The City’s reserve was over $20,000. Mecum has a program called “The Bid Goes On.” Through that process registered bidders, both in person at the auction, and worldwide through the internet, can continue to submit bids. In “The Bid Goes On” process the City received a second bid of $18,500, which the Mayor and I rejected. That bid was withdrawn. Late in the auction, we received another bid of $15,000, which we again rejected, and which was also withdrawn.

The Mayor and I discussed donating the bike to the local Police Athletic League for use as a raffle bike. We decided against that approach because as a PAL raffle bike, the City would not receive the benefit of a matching donation from the Haydocks. The Mayor and I also considered simply bringing the bike back to Sturgis. That option would have left the City with no matching gift and only the out-of-pocket expenses from the trip to Monterey.

I then considered buying the motorcycle myself. I have participated in other Mecum auctions and am a registered Mecum bidder. Before buying the bike, I solicited offers from Black Hills Harley Davidson, RumbleOn, and Indian Motorcycle Sturgis. The purpose of the solicitation was to determine if I could purchase the bike and resell it to a dealer at no personal loss.

RumbleOn and Black Hills Harley did not submit an offer. Indian offered $21,000. I vetted the idea of bidding that amount with City staff. Indian is not a registered Mecum bidder and did not want to pay the fee to register. Because the purchase was through Mecum at auction, I did not believe South Dakota law prevented me from bidding at the auction.

Before submitting a bid, I negotiated fees with Mecum. Mecum agreed to waive the 10% Seller’s premium but not their 10% Buyer’s premium. Thus, if I was reimbursed for the Buyer’s fee, the premium paid to the auction house by the City would be the same as if any other person won the bid. I then bid $21,000 for the bike and delivered it directly to Indian in Sturgis immediately after the auction. The dealership paid me the same amount that I had bid for the motorcycle at the auction.

At the closing I learned that the sale was subject to a California sales tax of 9.25%. The sale tax is imposed on the purchase price, including the Buyer’s premium. I paid the sale tax in the amount of $2,136.75 out of my own pocket and chose not to ask for reimbursement.

I am aware of expense for the auction of $9,548.16 comprised of $1,932.26 for mileage, meals and fuel for the motorcycle of $121.39, motorcycle repair of $394.51, reimbursement for buyer’s fee of $2,100, and lodging of about $5,000. The City considers these expenses as contributions to the Rally
Endowment Fund.

Viewed in this light the gross benefit to the City from the transaction is twice the auction price, or $42,000. The net benefit to the City is $42,000 minus $9,548.16 or a total of $32,451.84. Either way, the City comes out on top because of this transaction. This analysis excludes Mecum’s sponsorship fee which the City would not have received if it wasn’t for the City’s decision to work with Mecum.

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