Indy: False Start
[UPDATE: This post was written when it looked like the deal had fallen through. It has since been revived for 2011-2013, a decision I did not support.]
I think the race falling through is a good thing on the whole. Council took a gamble on Indy in late 2007, and it didn’t pay off.
The idea was if we could bail out the flagging Champ Car race, then perhaps under new management we could make it work. At the time we were told that for a million or two in the first year, and maybe a million more in the second, we could put it on stable footing and maybe even make money. So Council unanimously supported taking the chance, myself included. I learned a valuable lesson about rosy projections, and my vote on this matter was a mistake I am not eager to repeat.
Shortly afterward, Champ Car and Indy merged and suddenly we had an Indy race, which changed the scale of things. The projections turned out to be optimistic, to put it kindly, especially with the onset of the recession: we’ve spent $9.2 million in cash on the three year deal, plus more in in-kind sponsorship (special event transit service, extra policing, etc). [11:20am Correction: it’s on the order of $12 million in cash including 2010, the $9.2 million was just for the first two years.]
After getting the news about the second big loss in 2009, the debate turned to whether we should pay the cancellation fee or eat the operating loss for the third year of the contract. They were both in the $3 million range so we thought, why not run the race? But my message was clear at the time: if it can’t break even for 2011 I’m not interested.
So this past summer Council was faced with the question of whether to renew the agreement for another three years at a proposed cost of $5.5 million. It was a very close vote, and I was on the minority side in voting to not continue with the race.
As I understand it, the City and Octane Racing out of Montreal (the promoter who was in talks to partner with the City) could not come to terms on costs related to the track, semi-permanent grandstands, etc. The city’s statement on the matter is here.
Much will be made of the relationship with the runway closure at the airport, which I understand did complicate the negotiations, but there was more to it. In any case, this was always about money: I never thought carrying on with Indy was a good idea, so while I’m disappointed at how this has unfolded, I do think it’s for the best.
This is an opportunity to get focused again on the festivals and other events that create unique experiences in our city at far lower cost.
Update [further thoughts November 8 at 4:45 pm]: A key point I failed to mention is that this event failed to secure partnership from all orders of government. Much of the case in the comments below for spending further public money on this relates to the economic impact of the race. It bears mentioning that very little of this show up in the property taxes or user fees the city collects – as such there is a poor direct return on investment. Communities still host these events all over the world because they do have some value, but usually the state/provincial and national governments chip in. Remember that our superior orders of government failed to do so in a meaningful way, at least measured against the benchmarks in Montreal and Toronto. So one of my main hesitations last summer about spending any more City money is that your city has the least out of all orders of government – five cents out of the average personal tax dollar. I should note that the business community came on board, but you need cooperation from private and all orders of public to make these events work. Mind you there is risk there that funding from other orders of government, which is not endless either, may support Indy but there may be a zero-sum issue in that other worthy events might get blocked from the pool of limited public funds to support events.
13 thoughts on “Indy: False Start”
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“This is an opportunity to get focused again on the festivals and other events that create unique experiences in our city at far lower cost.”
Indeed! That amount of money would be a godsend to ANY festival or arts organization in the city.
For those who say good riddance I may remind you that a city is made up of people with diverse interests. I do not attend many things my tax dollars pay for yet if others in Edmonton appreciate it I consider it an addition to quality of life here. I don’t ride transit yet I support it 100% and don’t mind my tax dollars going toward it. It takes a rounded community with a variety of events many that have gov’t support to make a community. What if your favorite facility or event was shut down? Much of what you like to do is supported by people you will never know or meet.
I am disappointed that the Indy won’t be returning as I attended each and every year. I also upped my participation each year by purchasing more expensive seats and upgrades. The event is one that I will surely miss.
However, I understand that the City must ensure that it spends its money wisely. A business case should be made for any investment – no matter the size of the event. If the City can’t make a decent rate of return, then it shouldn’t participate. But, rate of return for the City should be measured as more than just the dollars it brings in. The Indy was televised to a worldwide audience each year. That kind of exposure came relatively cheap when you think about it.
There are smaller events that cost less from a City perspective, but that doesn’t mean they bring in a value commensurate with that expense. The Indy may have cost a bit more, but the value was huge.
We also need to remember that we are a large city with a total budget nearing $2 billion. In those terms $10 million isn’t a lot of money.
Thanks for explaining why you voted as you did. If only all elected officials were as open.
You could create one new full time position for every theatre company in Edmonton over the next five years with the IndyCar money.
If money is the issue, why not roll the race infrastructure upgrade as a line item, a cost for de-commissioning the airport?
Recognize the investment. How much was recovered due to increased economic activity? Understand hotels were full last summer.
What’s the value of the exposure, in relation to the investment?
Understand there are potentially lower cost event alternatives. Suspect they will be more local in nature, unlikely to appeal to in bound tourists.
Was there any consideration given to innovation? What about connecting automobile design and systems testing, with new fuels? Could the Indy have been a laboratory for such? Could Edmonton have been a leader, in linking a sports event to a larger societal benefit.
There’s significant bio-fuels research underway. Could the Indy have been a platform to introduce and commercialize it?
We like to perceive ourselves as innovative. For this opportunity we needed a new box.
Agreed – There are many more thoughtful ways that this money can be used. It was hard to see the ‘multiplier’ effects of the Indy race that one sees from other events in our city.
The economic case to cancel it on its own holds water. Nuff said as the Griffins say. Keep in mind that Culture-wise, this city is as blue collar as it is academic/civil servants, and it’s important to have cultural events for everybody-the economics are similar for most cultural-esque events and that’s legit in it’s own right. (for the record I’d never go to Indy but can hear what a lot of folks would say outside of the mature neighborhoods) only my 2 cents.
Don,
I think this incredibly short sighted move by our council. How many events can Edmonton be involved in that put us on the world stage?
The gravity of how much reach the Indy has, occurred to me when I was in Shanghai for the 2008 Olympics and the first English TV channel I found was broadcasting the race and blasted me with “Live from Edmonton.” (a strangely proud moment for me as an Edmontonian)
Event opportunities like Indy don’t come around very often. As for comparing it to ‘festivals and other events that create unique experiences in our city at far lower cost.’ I think you’re comparing apples to oranges.
While our many festivals ARE world class (and I’m proud of the festival city title), they don’t offer the same reach in global prestige positioning Edmonton as a global metropolitan city. Being an Indy city is a pretty exclusive club.
The coverage not only from the live broadcast but also the subsequent media coverage (particularly with the controversy of the last race) had Edmonton Indy mentioned on EVERY sports broadcast in North America.
The economic development benefits of the race should FAR overshadow the investment required to solve this.
Take the money out of the “de-commissioning the airport bucket” and keep Edmonton on the global stage for this event.
It always comes down to “arts” we have to support the “arts” well we have, we do well enough and we will continue. You can appreciate the arts and have other interests but that doesn’t seem to occur to anyone in the “arts”.
I have to agree with earlier comments that this event is not comparable with some of the other arts and sporting events in this city. I have season tix to the ballet, attend folk fest and try to make it out to other live performances throughout the year. But they don’t have the international attention of the Indy. I’m sure there are competing economic analyses out there. Some will say that the revenue brought to the city far outweighed the cost to the city and others saying the opposite. Regardless, it was a unique opportunity to showcase the city and the province. I just read Dan Barnes’ article on this issue and if his reporting is accurate then council should be ashamed of leaving such a major issue to be decided by a public servant. It sounds like there was significant debate around whether to front additional funds when Octane came on board. I suspect that views on the Indy were polarized within council. Yet no requirement for the CFO to return to council? Perception isn’t good: looks like a decision that council was afraid to make or afraid to take “credit” for. I credit you for standing by your earlier vote – but you and your colleagues should have voted on this too.
I added some additional thoughts at the end of the post.
Wait, now that the city’s Expo 2017 bid is dead (thank you, PM Harper!), mayor Mandel has said he is re-opening negotiations to host the Indy. I thought the Indy was a bad, money-losing idea. Why the change of heart?