The dust has settled on the inaugural Baltimore Grand Prix, an event that I and several others lived and breathed over the past two-plus years. I acknowledge that I am not objective, having invested substantial money, effort and reputation as the "face of the race" since I began working on this challenging project in 2008. Like most of my investor partners, my primary goal was to bring a world-class event to Baltimore in the hope of changing certain perceptions about our city.
Despite the many naysayers, I think it is fair to say that the great majority of the 160,000 people who attended over Labor Day weekend viewed the event as a fantastic success. Cars screamed down Pratt Street at 175 mph as packed grandstands cheered. Visitors from all 50 states and several countries filled downtown hotels on a weekend that is traditionally a "dark" one for Baltimore. National and regional bands played on city streets into the evening. The teams and drivers from the IndyCar and American Le Mans Series and international media had nothing but praise for Baltimore.
Television coverage in 75 countries showed that Baltimore is so much more than the drug-ravaged neighborhoods portrayed in TV shows such as "The Wire" and "Homicide." The value of eight hours of national and international television coverage showing Baltimore to be a beautiful and thriving city is hard to calculate. The economic impact to Baltimore and the region from the event was approximately $47 million, according to Forward Analytics. Those of us who grew up in and around Baltimore felt extremely proud of our city.
However, Baltimore Racing Development, LLC, the group of largely local investors formed to create the Baltimore Grand Prix, came out of the inaugural race with significant debt. There have been serious questions raised about BRD's ability to promote the event in 2012. Many people have asked how an event that was so well attended and well regarded could end up financially distressed. As the former CEO and spokesperson for BRD, I've absorbed my share of criticism — some deserved, some not.
BRD was and is managed by five "manager" partners who are significant investors and make the major decisions for the company. As the CEO, I was tasked with being the spokesperson for the race as well as working with staff and consultants to carry out the managers' directives. Looking back, our organizational structure, wherein major decisions had to be made by three of five managers, wasn't efficient. We also made the mistake of relying upon certain racing "professional" consultants, who led us to believe that revenues from the inaugural event would be millions of dollars higher than they were.
Additionally, certain fees and costs were much greater than anticipated. The race track crossed the heart of downtown Baltimore (as most regular Baltimore commuters are well aware). It was designed to showcase the Inner Harbor, the Baltimore Convention Center and Oriole Park at Camden Yards. However, the very components that made the venue so compelling for spectators, drivers and TV viewers drove up costs considerably. The venue proved to be far more costly than other street events on the IndyCar series. Most of these additional costs came in the form of fees and costs imposed by the city, the Maryland Stadium Authority and the convention center.
Please don't get me wrong. I am extremely grateful for the support of the mayor and City Council for the race. It was invaluable. However, BRD faced financial obstacles from the start that other promoters in other cities do not. Other cities and states — and countries, such as Canada and Brazil — typically provide significant initial concessions/subsidies to race promoters (beyond providing a "race ready track"). These concessions are in the form of investments of cash toward infrastructure (e.g. Toronto, St. Petersburg, San Jose) or provision of free or significantly discounted city services or use of facilities (Long Beach, St. Petersburg, Toronto). These cities have decided that the economic impact and positive international exposure from these events makes such investments worthwhile.
Instead of being offered a subsidy, BRD was charged millions of dollars in fees and rent. 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.
Although it is publicly documented that BRD raised approximately $3 million in private investment to supplement the revenues generated by the event, it hasn't been enough. Thus, the managers of BRD concluded that any future race in Baltimore would require a renegotiation of fees and expenses with our city and state stakeholders.
We were naïve to believe the event would generate enough revenues to shoulder these costs, but I am convinced that the extraordinary turnout and enthusiasm of spectators and television viewers makes a subsidy/offset of fees worthwhile. I recognize that Baltimore's coffers are not full and that the city made a significant contribution to fix its roads and in terms of man-hours leading up to the event. However, I would hate to see this investment wasted when most of the event's problems are easily fixable with a realistic approach to the revenues generated.
I would suggest a waiver of such fees in exchange for a greater participation in profits by the city and other stakeholders when the event becomes profitable. Each year the event is run, expenses decrease and revenues should rise. The Baltimore Grand Prix can become viable annual showcase for Baltimore with the appropriate partnership between the promoter and city and state.
Jay Davidson, former CEO of the Baltimore Grand Prix, is currently an investor in Baltimore Racing Development. His email is email@example.com.Copyright © 2014, The Baltimore Sun