Today, Mayor Stephanie Rawlings-Blake announced the details of a new 5-year agreement with Downforce Racing, a motorsports promoter, to conduct racing events on the streets of downtown Baltimore on Labor Day weekend 2012 through 2016. Following an open public review period with city stakeholders and community groups, the final contract will be presented to the Board of Estimates on February 22, 2012 for a vote.
“Last year’s racing event generated $47 million in economic impact for Baltimore and proved very valuable in terms of positive media exposure for our city. We have worked hard to learn from past experiences to ensure that this new agreement is in the taxpayers’ best interest and will bring a successful, world-class sporting event that Baltimore can be proud of for years to come,” Mayor Rawlings-Blake said.
Downforce Racing is led by three key members with a combination of proven professional street car racing experience and strong financial management. Partner Dale Dillon of Dillon Racing, LLC has over 10 years of experience in the racing industry and has led race operations for the St. Petersburg Grand Prix, Toronto Grand Prix, and last year’s Baltimore Grand Prix. IndyCar has endorsed Dillon Racing, LLC as a capable operator of an IndyCar street race.
Partners Felix Dawson and Dan Reck of Wilkes Lane Capital, LLC are both accomplished financial managers and private investors. Wilkes Lane Capital is a Baltimore-based partnership focused on advisory and private investing in the energy sector. Prior to establishing Wilkes Lane Capital, both held executive positions at Constellation Energy Group in Baltimore. Mr. Reck and Mr. Dawson are both city residents with deep roots in the community.
“Last year’s Grand Prix drew nearly 160,000 fans from around the world to the streets of Baltimore, and the event itself was well-received by Baltimore’s citizens and racing enthusiasts internationally,” said Dale Dillon of Downforce Racing. “With prudent business management, this event will be successful for the City and State, and we look forward to working with the people of Baltimore to host a great sporting event that benefits the city and the local economy this year and in the years ahead.”
Key Contract Provisions:
- Contract Term—The agreement provides that the race will be conducted annually for an initial five-year term, beginning in September 2012 and concluding in September 2016. The agreement may be extended for an additional five-year period.
- Amusement Tax Lock Box—Each ticket sold will include a 10% admission and amusement tax which will be collected at the point of sale and placed into an lock box escrow account held by a City-appointed trustee. The City anticipates $550,000 in direct amusement tax revenue in year one.
- Ticket Surcharge Lock Box—A $3.00 surcharge will be added to the sale of each ticket. The proceeds of the surcharge fee will be collected and held by the City to offset the costs of City services provided. The anticipated 2012 Racing Event Fee revenue, based on 100,000 ticket sales, is estimated to be $300,000. The fee will increase $0.25 each year of the agreement.
- Community Impact Fee—$0.50 per ticket sale per year will be paid to the surrounding impacted communities for neighborhood improvements. The anticipated 2012 Impacted Communities Fee, based on 100,000 ticket sales, is estimated to be $50,000.
- City Revenue Sharing—The city will receive ten percent of any distributed cash in excess of a base return of $1 Million for each year of the 5 year agreement.
- Audit Rights—The city may review and audit Downforce Racing’s records at any time, to the extent necessary to ensure compliance with the agreement.
- Previous Vendors—In accordance with the contract,Downforce Racing pledges to work with vendors of the 2011 race, recognizing that these vendors made a significant contribution to make last year’s event successful. However, Downforce Racing reserves its right to make prudent business decisions that will ensure a successful event going forward.
- MBE Participation—Downforce Racing must comply with all City laws regarding contracting with minority- and women-owned businesses to make best efforts to reach goals set by the City. In addition, Downforce Racing will use commercially reasonable efforts to award at least 25% of the contracts under its control to Baltimore-based and qualified business enterprises. Downforce Racing must also comply with the Mayor’s Employ Baltimore Executive Order by using reasonable efforts to hire at least 35% of its local labor force for the Race and Race Events from qualified individual residents of Baltimore City.
- Event Management—Downforce Racing will prepare an Event Management Plan for City approval, consisting, at minimum, of the following components: Event Improvements Plan, Safety and Security Plan, Traffic and Parking Management Plan, and Event Impact Plan.
The 2011 Baltimore Grand Prix generated an economic impact of $47 million, according to an independent study by Pittsburgh-based Forward Analytics, an economic consulting firm. Last year, the City received over $1 million in hotel taxes, parking taxes, community mitigation funds, and fees. The State of Maryland generated over $2 million in sales tax from the Grand Prix. In addition, the City was showcased to an estimated 2.7 million US viewers and an international audience comprised of 75 different countries. Races were televised on notable networks, including ABC and the NBC Sports Network (formerly Versus).
Under the terms of the new agreement, and based on the City tax revenue collected from hotels and parking facilities during last year’s event, the City expects to generate in excess of $1.7 million in direct revenue. As part of the new agreement, 50 cents from each ticket sale will be provided to impacted communities for event mitigation funds.
Anticipated 2012 City Revenue:
Racing Event Fee: $350,000* (based on 100,000 ticket sales)
A&A Tax: $550,000 (based on 2011 anticipated revenue)
Hotel Tax: $535,000 (based on 2011 figures)
Parking Tax: $350,000 (based on 2011 figures, includes PABC direct revenue)
(*includes $50,000 Community Impact Funds)
Local Economic Impact:
- The 2011 Baltimore Grand Prix had a direct economic impact on the City of Baltimore business volume of $27.62 million and a further $19.33 million in indirect impact. The total business volume impact of the 2011 Grand Prix was $46.95 million, according to an independent economic analysis.
- The Baltimore Grand Prix attracted an estimated 160,000 attendees. The racing event attracted local residents, as well as national and international visitors. Nearly 75,000 spectators traveled from outside of the Baltimore Metropolitan Area to attend the Grand Prix. And 41% of spectators visited from outside of the state of Maryland.
- Grand Prix spectators spent $7.12 million at local hotels. Hotel expenditures generated an estimated $533,733 in tax revenues for the City of Baltimore. An additional $426,986 in tax revenues was gained by the State of Maryland.
- The State of Maryland received an estimated $2.08 million in sales tax revenues from the direct economic activity of Grand Prix spectators, vendors, and event organizers.
- For the majority of spectators (76.5%), the Baltimore Grand Prix was their first Grand Prix event attended. Eight-nine percent of survey respondents had a very positive or positive overall experience at the 2011 race. That said; 88 percent are very likely or likely to attend next year’s Baltimore Grand Prix.
Public Review and Comment:
The final contract will be presented to the Board of Estimates on February 22, 2012 for a vote, following a seven day, open and transparent public review period with city stakeholders and community groups.
Mayor Rawlings-Blake welcomes citizen input on the proposed agreement. Comments should be sent to email@example.com with “Grand Prix Contract” in the subject line.
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