By Arthur Hirsch and Julie Scharper, The Baltimore Sun
10:08 PM EST, December 5, 2011
With the company that put on Baltimore's inaugural Grand Prix struggling to pay its debts, a disagreement is revving up over whether the city did enough to ensure the race's financial viability.
Jay Davidson, an investor in the race's operator, Baltimore Racing Development, suggested in an op-ed article in The Baltimore Sun that the city should have offered more subsidies to race promoters for the Labor Day weekend event. The company "faced financial obstacles from the start" that promoters of similar events in other cities don't confront, he said.
Mayor Stephanie Rawlings-Blake on Monday dismissed as "nonsense" the idea that the city should have done more to support the Grand Prix.
"He knows better," Rawlings-Blake said of Davidson. "If I could have subsidized anything, it would be his business acumen."
The Baltimore Grand Prix attracted about 160,000 spectators to watch cars roaring through streets around the Inner Harbor but left a trail of public and private debt, including about $1.5 million owed to the city in taxes and service fees. Critics have said Baltimore Racing Development was disorganized and lacked clear leadership — a point that Davidson addresses, saying in retrospect that the organizational structure "wasn't efficient."
Davidson contends that the city — which has threatened to break its five-year contract with Baltimore Racing Development, or BRD, if the debts are not paid by Dec. 31 — compounded the promoter's financial problems.
"Instead of being offered a subsidy, BRD was charged millions of dollars in fees and rent," he wrote in The Sun. "When these costs are added to another $2 million in sanction fees, as well as the significant expenditures necessary to erect 4.2 miles of concrete barriers, purchase an equivalent amount of safety fence and construct 30,000 grandstand seats, etc., the burden of debt for the inaugural event became overwhelming."
In an interview, Davidson said he was "disappointed that the mayor would choose to attack me personally."
Rawlings-Blake insisted the city did its part to support the event. The city invested nearly $7 million in roadwork and other construction for the race, and spent more than $750,000 on police, firefighters and other labor costs.
The mayor said she planned to wait until the year-end deadline set by her administration before taking any legal action against Baltimore Racing Development.
Along with the sum owed to the city, Baltimore Racing Development owes $470,000 to the company's escrow account to cover an amount drawn from the account by the Maryland Stadium Authority to cover a payment on a $2 million loan.
The promoters also face a number of debts claimed by private parties. Among them are a $350,000 bill from the company that put up the grandstands, $200,000 owed to the company that provided concrete barriers and signs, and a $50,000 loan from Davidson's father-in-law.
A study commissioned by the city found that the Grand Prix generated about $47 million in economic impact, which fell short of promoters' original forecasts. Race organizers first claimed the event would generate $70 million in spending for a total economic impact of $120 million.
Davidson stepped down as CEO after the race but remains a Baltimore Racing Development employee.
Davidson and Chief Operating Officer Peter Collier said Monday that the company continues to be in discussions with financier Felix J. Dawson, whom they hope to hire as chief executive officer. Dawson, a former Constellation Energy Group executive, is an investor in Baltimore Racing Development.
Claims against Baltimore Racing Development, according to what's been made public in filings by city and state officials and vendors:
•$1.6 million by plaintiffs who have filed lawsuits alleging unpaid bills
•$1.5 million by the city for taxes and service fees
•$470,000 for the company's escrow account to cover an amount drawn by the Maryland Stadium Authority to cover a payment
•$200,000 by the company that provided concrete barriers and signs
•$20,000 by a company that performed an environmental impact study
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