Edmonton Indy loses $5.3M UPDATE Critics who are upset over Rexall Edmonton Indy's $5.3- million loss need to fill up their half-empty glasses, says Mayor Stephen Mandel.
"The event is important enough to the city to try to retain it and I would think we shouldn't lose sight of that," Mandel said yesterday.
"This was an anomaly in a year that shouldn't have happened, but hopefully in coming years, there will be less of an impact on the city.
|Rexall Edmonton pit lane |
"Take a look at the glass half-full: It's a successful event. It had broadcasting out to hundreds of millions of people. There were thousands of people who enjoyed it. It did cost more than we wanted it to, but we will get it under control."
City council committed to a three-year contract with Northlands, the new organizers of the racing event, to cover a deficit or share a profit in a bid to keep it in the city.
Initially, the city expected it would have to foot around $1 million in losses. A report from Northlands Wednesday, however, revealed that it will cost $5.3 million to cover last year's loss.
In response to throngs of angry phone calls from Edmontonians, Coun. Ron Hayter said he wants the city auditor to crunch numbers and lay out the details of the losses. "It was such a shocking thing to find out there was such a major deficit," Hayter said. "I think it's vitally important from the public perspective that it be reviewed. Hopefully the auditor will be able to go over the situation and identify the areas where the deficit really stood out."
The point is not to lay blame, he added, but rather learn from mistakes so that losses aren't so great in following years.
Northlands has said the event wasn't as profitable as anticipated because an agreement to switch the event from Champ Car to the Indy Racing League wasn't finalized until May, allowing little time to promote the event.
It also pointed to a rescheduling of dates to Thursday through Saturday from the preferred Friday-Sunday .
Northlands estimated the event brought in more than $80 million in spinoffs.
But Scott Hennig, the Alberta director of the Canadian Taxpayers Federation, is not buying that number. He said he has asked Northlands to reveal the report that contains that estimate, but Northlands won't return his calls.
"For the most part, everyone is questioning Northlands' number of $80 million," he said. "I think they have a huge credibility issue ... Even if we want to say there was some economic benefit, that's fine and well. But the city could generate economic activities other ways as well. The best way is not to be bailing out car races, but lowering the cost of property taxes for businesses."
Hennig said he vehemently opposes the city writing a "blank check" to Northlands in the first place.
News of the $5.3 million bailout comes just weeks after council approved a 2009 property tax hike of 7.3%. The city is also looking at a deficit of nearly $30 million for 2008. Edmonton Sun01/21/09 The 2008 Rexall Edmonton Indy was a hit with fans and race car drivers, but it was a financial wreck.
The July 26 race, which marked the Edmonton debut of the Indy Racing League, lost a whopping $5.3 million according to an event summary released Wednesday by Edmonton Northlands, the event operator.
The report said the City of Edmonton has committed to “financially backstop the Rexall Edmonton Indy for three years and offset any losses from the race (or share in any profits).”
Northlands GM Ken Knowles said the 2009 budget is being finalized and he would not comment on its bottom line. However, a racing source said there is no chance the race will make a profit this year, but it is highly unlikely the race will come close to losing what it did in 2008.
“Obviously, we hope to make a significant improvement in that,” said Northlands president Jerry Bouma. “We were really behind the eight-ball last year. First of all, the event changed from Champ Car to the IRL. It was a bigger, more expensive event.”
After running races in Edmonton for three years, Champ Car merged with the IRL in early 2008, but the Edmonton race wasn’t officially an IRL event until May 25. That’s the day a three-year deal between Northlands and the IRL was signed at the Indianapolis 500.
Northlands was therefore at a serious disadvantage in terms of selling tickets and gathering corporate sponsorship. The time constraint would explain, at least in part, the $3 million revenue shortfall detailed in the event summary. It also listed a further $1 million in added expenditures relating to increased television broadcast fees and costs. The original budget called for a $1.3 million operating deficit.
“I like to think of it as an investment of $5.3 million,” said Knowles. “The exposure that the city got and the race got, how do you quantify that?”
In an economic-impact study commissioned by Northlands, it was determined that the race had an impact of more than $80 million in Alberta and the Edmonton area.
“The real issue here is this is an event that can take Edmonton to the next level,” said Bouma. “It’s going to take time and investment to build it, but this has real stature to it. We’ve had one year at it. Let’s let it grow.” Edmonton Journal