LOWVILLE — After eight years of wrangling over a $500,000 state grant that was funneled through Lewis County Opportunities to Adirondack International Speedway, the state has thrown up its hands and thrown in the towel.

In a conference call Tuesday among state Supreme Court Judge Michael C. Lynch and attorneys for the state, Lewis County, Opportunities and the racetrack, all agreed that the state’s interest in recovering the money that had not been recovered from the track has expired. Now, the judge is expected to issue an order ending Lewis County’s attempts to regain the grant money on the state’s behalf.

The state comptroller’s office in March 2004 determined that a $500,000 state Department of Transportation grant the county accepted to assist the speedway was improper. Based on a settlement reached with the attorney general’s office later that year, $117,275 that hadn’t been used was returned to the county for road paving projects, and the speedway paid an additional $40,000 to the county. The speedway was not required to pay back the remaining $342,745, but the county was granted a mortgage with a security interest in the track in that amount.

In 2010, the racetrack sued Lewis County to void the mortgage, claiming that it no longer was valid because it had a five-year term that had expired. The county answered that there was no set term on the mortgage.

Lewis County Attorney Richard J. Graham said the mortgage was not dismissed because Paul H. Lyndaker, owner of Adirondack International Speedway, voluntarily suspended his business. That suspension prompted the county to send a letter to Mr. Lyndaker’s counsel saying the money must be paid within 30 days or the county could start foreclosure on the property.

Mr. Lyndaker filed suit as a result of that letter.

In somewhat of a surprise move, the state brought a motion to dismiss the lawsuit.

“We opposed that motion,” Mr. Graham said.

Tuesday’s phone conference was a result of Lewis County’s attempt to come to a resolution in the case. Mr. Graham, Judge Lynch, Dean J. Higgins from the state attorney general’s office, James A. Burrows, representing Lewis County Opportunities, and Steven A. Smith, representing Mr. Lyndaker, participated in the call.

In a letter to Judge Lynch before the conference call, Mr. Graham advised the court he has been in contact with Mr. Lyndaker’s attorney.

The plaintiff has challenged the efficacy of the mortgage and, according to the letter, “the State moves to wash its proverbial hands of the issue.”

Mr. Graham’s correspondence continued, “In light of the State’s present position, my Board of Legislators has difficulty understanding why they should be required to defend and enforce a mortgage that they did not prepare and had no voice in drafting; The 800 pound gorilla in the room is that the grant of these funds has been deemed an unconstitutional gift by the Comptroller; To comply with the Comptroller’s directive to collect the balance of the grant would require foreclosure on the mortgage and putting the facility out of business, which is the exact opposite of the purpose of the grant in the first place.”

Because of these factors, Mr. Graham wrote, “There appears to be little incentive on the part of any of the parties to continue battling over the mortgage. However, the only negotiated outcome that makes sense for the County is either (a) a court order that among other things contains a specific finding that the Legislators are not obligated to defend or enforce the mortgage or (b) the County receives a general release from the State releasing the County from any future liability from the AG, the Comptroller or any other State agency with regards to grant funds.”

The state would like to be removed from the case. The judge, however, has yet to make that decision. Remaining parties to the case will have to agree unanimously to the dismissal of the lawsuit for a settlement to be reached.

Following a tax settlement agreement last month between Mr. Lyndaker and the town of New Bremen, Mr. Lyndaker said he hopes to reopen for business in 2013.

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