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Grand Prix won’t fully pay its way; Pratt joins Young in opposing race

The city will foot about $500,000 for police, fire and other overtime pay for the upcoming Grand Prix.

Walter Horton, Foxx, Pratt

City Comptroller Joan Pratt questions a city official today about the Downforce Racing contract. Sitting next to her is Alfred Foxx, director of public works, and, standing, assistant Walter Horton.

Photo by: Mark Reutter

Steve Kraus, Baltimore’s chief of treasury management, told the Board of Estimates today that the 2012 Baltimore Grand Prix is expected to cost taxpayers $800,000, only a portion of which will be covered by a ticket surcharge meant to protect the city from direct losses from the event.

The admission, drawn out in questioning by City Comptroller Joan Pratt, confirmed an analysis by The Brew that the city would be paying more in overtime (for police, fire and sanitation personnel) than it would receive from the so-called “lockbox” surcharge on ticket sales.

If the race attracts last year’s 110,000 paying customers, the city would receive $330,000 from a $3-per-ticket surcharge – leaving taxpayers to foot a bill of about $470,000.

Mayor Stephanie Rawlings-Blake has made continuation of the Grand Prix a priority of her administration, saying it produces tens of millions of dollars of economic benefits as well as highly favorable publicity.

Last year’s organizer left the city with $1.7 million in unpaid taxes and other obligations, which led her office to announce a new race promoter last week.

Board Splits on Pact

Today the spending board approved a five-year contract with Downforce Racing LLC amid an unusual split by the panel’s three elected officials.

The three investors in Downforce Racing at the Board of Estimates today. From left: Dan Reck, Felix Dawson and Dale Dillon. (Photo by Mark Reutter)

The three investors in Downforce Racing. From left: Dan Reck, Felix Dawson and Dale Dillon. (Photo by Mark Reutter)

Rawlings-Blake carried the day 3-2, thanks to the votes of her two appointees, Public Works Director Alfred H. Foxx and City Solicitor George Nilson.

Meanwhile, Pratt sided with City Council President Bernard C. “Jack” Young, who earlier called on the mayor to stop trying to “move heaven and earth” to continue the Grand Prix and concentrate on such matters as funding the city’s recreation centers.

Pratt and Young rarely vote against the administration. They approved the original Grand Prix contract.

New Information on Promoters

The vote came after new information was disclosed about the negotiations by the mayor’s office that resulted in the contract with Downforce Racing, a for-profit group that was incorporated just two weeks ago:

• Downforce never presented a plan to encourage minority and women’s participation in the event, even though the city requires 27% minority and 10% women-owned participation in city contracts.

• Downforce’s three equity partners (Felix Dawson, Dale Dillon and Dan Reck) told the board today that they “don’t need any additional investors,” including minority or women investors.

• Downforce and the IndyCar series that sanctions the race for a fee have not developed a youth outreach program in Baltimore nor considered donating tools and equipment to the automotive training program in city schools.

• the benefits fund for nine Baltimore neighborhoods affected by the race will likely drop to about $55,000 this year, based on a 50 cents-per-ticket surcharge. That’s half of the $100,000 distributed by Baltimore Racing Development last year.

• Downforce is not required to distribute any of the city’s 10% share of profits until the contract ends in November 2016.

Two Narratives

Two competing narratives marked today’s meeting – praise for the event by city and racing officials as a boon to the city and deep skepticism of the race’s benefits by Comptroller Pratt’s office and citizen activist Kim Trueheart.

M.J. “Jay” Brodie, president of the Baltimore Development Corp., presented the administration’s case, describing the three-day race over the Labor Day weekend as a “significant economic development project for the city.”

City Councilman William H. Cole IV, in whose district the race is held, hailed the contract with Downforce as protecting taxpayers’ interests and added, “We have created a sustainable event.”

Sarah Davis, senior director of business affairs for IndyCar, called Baltimore “a highlight of our 2011 season” and said the group, founded by Indianapolis Motor Speedway owner Tony George, has “utmost confidence in Downforce Racing.”

Joan Pratt Channels Hyman Pressman

Comptroller Pratt had a decidedly different take.

She and her aide, Walter Horton, peppered the spending board with a series of questions about profit sharing, minority participation and potential hidden costs.

She complained several times that the mayor’s office did not supply her with a copy of the Downforce contract until last Friday. With Monday a holiday, Pratt said her office did not have enough time to review the material.

Pratt’s persistence – reminiscent of Hyman A. Pressman, who served as City Comptroller and “taxpayer watchdog” for seven terms – clearly annoyed Rawlings-Blake.

At one point, the mayor turned toward Pratt and said, “I’m sure there aren’t commitments [from Downforce] that you’re looking for on the spot.” Their exchange took place in the board room named after Pressman.

Have Not Made Any Decisions

Downforce’s Reck responded to Pratt’s questions by saying, “We have not made any decisions on any vendors.” He said that as Baltimore residents, he and fellow investor Dawson “are very eager to use local people as much as we can.”

Thomas B. Corey, chief of the Minority and Women’s Business Opportunity Office (MWBOO), said he plans to meet next week with Downforce to discuss minority hiring.

Corey pledged to hold the group accountable to the city’s participation goals, which led Pratt to snap back, “The city does not always meet its MBE/WBE standards.”

Kim Trueheart, who lodged a protest against the Downforce contract, called for more transparency and criticized the way the mayor’s office negotiated the deal.

She faulted the mayor for not conducting an assessment of what led to the financial failure of last year’s promoter. “I don’t know if you’ve improved anything in the process,” she concluded.

Race promoters listen during today's meeting to M.J. "Jay" Brodie. City Councilman Bill Cole is looking down and DPW director Foxx is at far left. (Photo by Mark Reutter)

Race promoters are among those listening to M.J. "Jay" Brodie during today's meeting. City Councilman Bill Cole is looking down and DPW director Foxx is partially shown at far left. (Photo by Mark Reutter)

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  • guest

    Thank you again, for your excellent reporting on this issue.  I wish more people would be aware of this, because I am sure they would not stand for it. 

    • Iam Gayle

      It would be interesting to see how other local media is reporting this?  Some of us know first hand what’s what and what goes on downtown at these meetings.  The general public doesn’t usually have a clue.   Are any of the folks who support this connected to the money they received for votes? Keep digging Brew.

  • Ktrueheart

    Gotta send the Board of Estimates members off to learn team building and commuications skills … They desperately need a heavy dose!

    • Iam Gayle

      Actually, what needs to happen is the Board of Estimates members need to be sent down river. Bye. Bye.  How bout they come up with a plan for next years Grand Prix by NOT using tax payer money??

  • Kflannery

    What a mess again…do we never learn..the city can ill afford to foot the bill for this again…makes you wonder who is getting paid….

  • PeterM

    Thanks for the excellent coverage on this abomination.  Hopefully we can get the rest of the city to wise up to what a huge scam this race is.

  • Tom Kiefaber

    This account of today’s BOE meeting is for those tired of the Sun’s amateur-hour City Hall reporting on key issues; a welcome relief from the Sun’s intern-level coverage. Seasoned reporter Mark Reutter, who honed his chops at a prior incarnation of the Sun, gets it right for The Brew. 

    I attended today’s contentious BOE meeting, at which citizen-activist Kim Trueheart stepped-up to represent the taxpayers, raising a slew of pertinent objections to the non-transparent deal which BDC czar M.J. Brodie brokered and shilled for, as yet another cloaked BOE back room maneuver. 

    It’s scandalous that the Sun’s coverage of today’s BOE meeting, doesn’t even mention Ms. Trueheart’s citizen opposition testimony & spot-on objections that compelled a sputtering George Nilson, the city’s stooge solicitor, to squelch her articulate presentation after her objections elicited applause from the audience. 

    The Sun’s BOE coverage isn’t just inept, it’s a corrupted account, complicit with our Mayor’s desperate subterfuge to pass this opaque, pig-in-a poke deal. Shame on the Sun for its disingenuous, white-wash coverage of what actually occurred and bravo Mark Reutter. Your professional, proficient coverage is always appreciated.

    • Gerald Neily

      For the record, today’s Sun put this on its “Around the Region” page 4 wrap-up of small stories accompanied by little numbers keyed to a map to enable readers to see where downtown Baltimore is. The Sun’s story opens by misleadingly calling this “a contract to run a second year” rather than a five year contract. There is no mention of the city’s financial concessions or Kim Trueheart. The story also oddly emphasizes that Council President Young “did not publicly criticize the race Wednesday”, when he had already courageously and loudly been the first member to do so.

      The lesson here is that there is no point in stealing money from the city coffers, as last year’s Grand Prix did, when all you need to do is ask for it – behind closed doors, of course.

  • Scissors

    I wonder if the City has ensured that should the new promoter offer a “weekend superticket”, “3-day pass” or “Saturday & Sunday Combo” ticket, then each event-day of such a ticket sold (or given away) will count as a separate “ticket” for the $3-per-ticket contribution to the City? Last year, all but a few grandstands/sections were sold ONLY as 3-day tickets.

    I also wonder if they still actually believe that there were “110,000″ individual attendees last year – not realizing that at best, 40-45,000 people attended on Saturday and Sunday with a small number on the opening Friday?

  • Talkingdan

    Of course instead of working on real longterm growth, Our city works on THE BIG RACE!
    Because of course its better to do so then to get the murder rate down, to lower crime, to improve schools or bring down taxes! You know things that would really get real folks with real incomes to consider to move here, pay taxes and spend money for years to come! Even if it works out better then before it will never amount to anything close to fixing our other issues. DUMB!

  • Freddie

    What would the economic impact be for the three days? What is a reasonable estimate of what the city would gain in income from hotels, restaurants etc…

    • Anonymous

      From B Brew: here is our analysis of the economic impact of the GPrix: http://www.baltimorebrew.com/2012/01/09/for-economic-returns-and-jobs-tv-zooms-past-the-grand-prix/

      • freddie

        Per the Brew there is roughly a $25 million economic benefit to the city.  So, how does this not address the $500,000 shortfall the race does not cover directly?  

        • Anonymous

          Other businesses (theoretically) pay their taxes and meet the  required regulations even though their economic activity will presumably benefit the city as well.  Why should this race be any different?  Why not exempt all businesses from taxes and regulations if they offer “economic benefit” to the city?  Is that because it’s silly to think that an enterprise like any other that uses public services (and this enterprise even more than the norm) should not have to pay the proper amount for that use, just because some amount of benefit will accrue to the city? 

        • Gerald Neily

          Freddie, the estimated economic benefit of $25M (or whatever) should not be thought of in terms of a return on investment, as if you were putting a specific wad of discretionary cash into the bank or stock market. It’s essentially a slice of the city’s gross domestic product, and even though the city’s economy is very weak, $25M spread around all of the city is a very tiny benefit. And the city government got none of it.

          This is a standard distortion used to sell city decisions. If the investment analogy is to be used, the city’s entire “portfolio” including all its people and land and all the money the city gets from outside should be considered in the basis for measuring rate of return. In those terms, the city has been a very weak investor.

          • http://twitter.com/buzoncrime Jerry Buz Busnuk

            One wonders that with all the lawsuits alleging nonpayment for services, and the city and state getting stiffed for taxes and fees, how this was viewed, somehow, as an economic boom for the city. Many businesses suffered, traffic was tied up for weeks, for the enjoyment of a few tourists who are car fans, many of whom never ventured out of the racetrack bubble and did not stay in the city. The lack of “economic impact” for businesses which didn’t get paid, apparently, didn’t factor in to this calculus.
            Moreover, there are external costs to hosting this event, which aren’t easily measured: complete tone deafness to the crises of obesity, asthma, the harm that has been done to the city by the over-reliance on automobiles, air pollution, global warming, the chasm between the haves and have-nots,  and the continuing lack of jobs, other than the mostly dead-end ones working in the few hotels and restaurants which benefitted. 
            And now the city is essentially subsidizing this event, and assuming part of the risks for its success.
            Wonder how many of those thousands of people who went last year actually bought tickets and paid full freight.
            At least all the city employees got paid for their overtime.

          • Freddie

            So are you saying the city gets no money from this event?  There is increased revenue isn’t there? This does go to the city doesn’t it? How does the city not get any revenue? Please clarify.

          • Gerald Neily

            My mistake, Freddie. I submitted a retraction of that line soon after I wrote it. Yes, the city got parking revenue, piggyback income tax from workers’ paychecks who live in the city, maybe some bottle tax money and whatnot. Sorry about that.

  • number9dream

    Alas, a great example of why my wife and I are leaving the once great city. Instead of addressing more urgent matters, the administration is fixed on frivolity. We will no longer pay property taxes to fund boondoggles while our neighbors get riddled with bullet holes during convenience store robberies. You want to reverse the population outflow? Good luck.

    Next step – leave Maryland.

    • Freddie

      Don’t let the door hit you in the ass on the way out!!

  • Anonymous

    Wouldn’t it be nice if Joan Pratt actually did her job and pulled a “Hyman Pressman” on the other 99.9% of spending issues the Board of Estimates votes on? This is clearly political. If she cared about the overwhelming amount of government waste that the Board of Estimates approves she would have many more “no” votes on her record.

  • Abby

    How much money is the city saving by closing the recreation centers? I believe I read somewhere that it was $400k a year. Yet the Mayor thinks it is a priority to fund a weekend-long race mostly for tourists that will cost us double that while our city youth are given less and less options for positive activity throughout the year.

  • Kramark

    You people only have yourselves to blame. You put these politicians in office so exercise your voting rights and vote them out next election.

    I attended last year’s event over a 5 day period and during that time I paid nearly $400 in taxes for purchases for myself and my son. It’s not my fault your elected politicians don’t spend the tax income wisely, regardless if on a local or state level!

    • Gerald Neily

      Yes, Kramark, the mayor won the election in a landslide, so she is going to keep following her same old policies. And the city charter makes the mayor a virtual dictator. The big problem is that by far the far greater number of people (hundreds of thousands) who disagree with those policies have been “voting with their feet” to get out of this city for decades. As a result, Baltimore has become a bastion of groupthink.

      Freddie (“Don’t let the door hit you in the ass on the way out!!”) wants this trend to continue.

      And by the way, Kramark, if you paid $400 in taxes on purchases over a 5 day period, how much did you spend? At 6%, that’s about $7000. Even at 20% (e.g. the parking tax), it would be $2000. Wow, on behalf of those of us who still live here, thanks. Too bad there aren’t more like you.   

      • http://twitter.com/buzoncrime Jerry Buz Busnuk

        I think he probably meant to say that he bought $400 worth of products while there; if not, we do indeed thank him.
        I voted for the mayor in last election (as did my wife), but we disagree with her on subsidizing this event.This simply exemplifies why people don’t vote, in conjunction with there being no real opposition in most cases: people feel they don’t really have a say. The city decides it’s going to sponsor this/that and subsidize thus, but most folks feel they don’t really have a say. So, “whatever” becomes the thinking. I believe that the support for the Grand Prix has always been very soft in the city as a whole, except for the car buffs, and the young people living for the party in Fed Hill.So, whatever: Her Honor has been sold on this as ………….”a way of putting the city on the Map”, whatever that  means and its “economic impact”–whatever that means.Yes, having tourists and games and professional sports and gambling are nice, I suppose, for some short-term gains, but the results over the years have been meager for the city as a whole, and it continues to lose population.Harborplace, proposed gambling, the 2 stadiums,  the Convention center, and its related hotels are part of an economic development strategy that, along with the Grand Prix,  though useful for some and for the short term, are not a sound basis for a sustainable, livable, city of the future. It sounds as though our poor, beleaguered city is desperate to try anything.We could do better; we’re just chasing the same conventioneers and tourists the other cities are.

  • Bradsfun

    Spend to make. What is the tax base on a $50 million dollar weekend worth of spending. Think about the global marketing that the race brings to Baltimore…

    • Anonymous

      Fair point, but we certainly don’t want to gain the reputation around the world as the town so desperate for attention that we’re willing to do anything for buzz, even if detrimental to the city as a whole.

      • Freddie

        Dertremental for the whole city?

      • Anonymous

        Oh please, you act like Baltimore is the only city that hosts a street race, or the only one that lost money its first year. Long Beach, St Petersburg, Detroit, Edmonton, Sao Paulo, Monaco, Melbourne, Montreal, Valencia, Marina Bay… If it was a bad deal for them, why have some of them been hosting the races for decades? Because a premier street race makes money, and everyone involved feels like Baltimore could be a premier race.

        Nearly every street race loses money its first year, but Dillon has experience taking unprofitable races and turning a profit within one year. What makes you think he won’t do that here like he did with Edmonton?

        • number9dream

           If Dillon et al are such miracle workers why didn’t the city’s illustrious and visionary leadership hire them in the first place?

          • Anonymous

            That’s a really good question, they should have. Last I heard, the mayor wanted it run by locals. Dumb move, street races aren’t easy to pull off without experience, as she found out.

  • Corrinestanley

    I can not see where this G rand prix will be a benifit to Baltimore tax payer,s
    mosy black people are not interested in this form of racing any way

  • Jonathan

    How much were/are the salaries/profits of the principals of Baltimore Racing Development/Downforce? Would be interesting to see, I bet the city’s share is going right into their pockets. 

    • Anonymous

      From B Brew: We reported this last week: “The contract permits Dale Dillon to receive a yearly salary of up to $600,000 to provide ‘construction, management and promotional services.’” Downforce Racing itself is permitted all the profit it can make (after all, it’s not a charity), with 10% to go to the city after various deductions and thresholds. The company is also free to pay itself all sorts of fees and whatnot.

  • Brian

    Still trying together someone to comse up with a realistic number of the economic benefit from all the hotel rooms, meals, booze, shopping associated with the race. Brew editors say impact is
    $25 million but all that doesn’t go to the city. What is a likely “net” amount? M

  • Anonymous

    Why use the 110,000 ticket sale number? BRD was stupid enough to give away 50,000 tickets, which Downforce has called ‘excessive’. I would suspect we see something closer to 150,000 sales this year, if not more due to the overwhelmingly positive response from those who went last year despite all the issues.

  • Theclockstrikes13

    There goes the school money again, and can’t even fix the streets in front of the schools, and yet within the city. Tourism prevails over the citizens of Baltimore.

  • Theclockstrikes13

    The city will foot about $500,000 for police, fire and other overtime pay for the upcoming Grand Prix.

    • Outsider/Race fan

      Just to preface, I’m not a Baltimorean, but I don’t understand this obsession with the $500,000 expenditure. Talk about not seeing the forest for the trees. It’s only a cost if the city doesn’t make its money back. It WILL make its money back PLUS some.

      If we take the Brew’s low estimate of $25M of economic activity, and consider 6% sales tax on that amount (hotels, food, drink, retail, etc), we’re talking $1.5M in tax revenue. So the city will spend almost $500K in order to NET $1M+. That’s $1M MORE than would otherwise be expected.

      The races, as big of a bomb as it was fiscally last year, were AWESOME, and, in me, anyway, has found an attendee for every year that it will take place (for all 3 days). Indeed, the Grand Prix was a success as far as turnout, publicity and participation and has put the Mid-Atlantic region on alert for this year’s events. I’ve got friends who didn’t make it last year, determined to go this year. IT WILL BE BIGGER THIS YEAR, and will be run by those with race-holding experience who know how to turn a profit, therefore bringing more money into the city. So we go from what was a slow Labor Day weekend to a couple mil $ in tax boost, and some extra money in the pockets of temporary workers, who also pay taxes, and Baltimore becomes a Labor Day DESTINATION instead of a place to escape. And there’s a problem with that?

      Now, if the money gets spent unwisely by the city, THAT is an altogether different story.

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