Cities can lose during race cars’ fast visits

August 31, 2009 6:02 PM

A cautionary tale lies just 36 miles down the freeway from downtown Baltimore’s proposed Indy Car race along city streets. After fronting the $5.1 million to build a racetrack in the parking lot of RFK Baltimore Racing Development would reimburse Baltimore up to $500,000 for the city’s expenses in holding the proposed race on its streets, says COO Jay Davidson.Stadium, the Cadillac Grand Prix of Washington, D.C., came in 2002 — and never returned.

But race promoters, including the ones trying to bring an Indy Car race to Baltimore in 2011, say Washington was an unusual case and most cities that host races on their streets have limited financial exposure today.

In Washington, setting up the American Le Mans Series race ran nearly $2 million over budget and the event drew complaints from the neighborhoods surrounding the track. Although the race promoter was to pay back half the city’s costs over 10 years, the political controversy made it a one-and-done event.

“It ended up costing a fair amount of money and the return was not what we hoped it would be,” said William Hall, an attorney who was a D.C. Sports & Entertainment Commission board member at the time. That, “combined with the noise issue” not being resolved with nearby residents, quashed the event, he said.

But RFK’s track was essentially built from scratch and that drove up the cost. That would not be the case in Baltimore, according to the city Department of Transportation.

With Indy Racing League events, cities are typically responsible for bringing the streets up to league standards while the race promoter—in this case Baltimore Racing Development—is responsible for paying for track equipment such as concrete barriers, sound and safety walls and grandstands.

Although an official study by BRD is still being compiled, the roads that would constitute the track (Light, Conway, Camden, Russell and Pratt streets) may require comparatively minor work such as repaving and leveling in areas of disrepair, altering some roadway medians and repairing some slabs to sustain speeds of up to 185 mph on straightaways and 60 mph on turns.

“We think most of the ones [BRD has] picked are in pretty good shape,” Frank Murphy, acting deputy director for the Department of Transportation, said of the streets. “We are guardedly optimistic it is not going to be a big cost for the city.”

The road repair study on the approximately 2.4 miles of city streets will not be ready until early fall. The cost could range from several hundred thousand dollars to seven figures—and the city isn’t ready to shy away from any number until more definitive economic impact numbers are available, Murphy said.

“Saying we know what we have to play with right now is probably premature,” he said. “But we’re of the mind to say this is an investment and this is something we want to get multiple years out of.”

In Las Vegas, which paid about $500,000 to repave about 2.7 miles of its city streets for a Grand Prix race in 2007, approximately 130,000 people attended, although the estimated spending of $70 million was not later verified by the city, according to reports at the time.

St. Petersburg, Fla., paid about $150,000 to bring its street track, a portion of which is on an airport runway, up to standards when it began hosting a race in 2003, according to reports. The event, an Indy Racing League-sanctioned race since 2005, drew about 130,000 people this year, according to the race’s general manager.

That city does not measure the event’s economic impact but it has estimated that the television exposure on ESPN and ABC alone is worth $1.4 million.

BRD estimates an event in Baltimore would draw 150,000 people and generate between $60 million and $100 million in spending.

However, James Michaelian, president and CEO of the Grand Prix Association of Long Beach, noted that no two races are the same and that initial investment and maintenance costs can vary widely.

“There is no formula that says, ‘Here’s a list of things, you do this and put in this much money and here’s your event,’” said Michaelian, whose company ran the St. Petersburg grand prix race in 2003. “It all depends on the condition of the circuit and the [financial] position of the city.”

But while there may not be a formula, it’s common in many cases today for the host city to be reimbursed for its expenses up to a certain amount.

“It’s a lot easier working with a city when you’re basically providing the capital from a private source,” he said. “That takes a lot of the political burden off the city.”

To that end, BRD is proposing to reimburse Baltimore up to $500,000 for expenses the city incurs related to the event, according to Jay Davidson, the company’s chief operating officer.

“We’re asking the city to pay for capital improvements to the track, for road improvements, and that’s all we’re asking from the city,” said Davidson.

Annual costs for Indy Racing League events in other cities vary. St. Petersburg is reimbursed up to $150,000 for what it spends on the race, which is mainly on track maintenance and fire and emergency services personnel.

Long Beach, Calif., is reimbursed for all its expenses related to its grand prix, which has a 35-year history there.

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