Aussie GP faces fight to avoid chequered flag

Organisers of Australia`s F1 Grand Prix are likely to be among Mark Webber`s biggest cheer-leaders at Albert Park on Sunday.

Last Updated: Mar 22, 2011, 15:49 PM IST

Melbourne: Embattled organisers of Australia`s loss-making F1 Grand Prix are likely to be among Mark Webber`s biggest cheer-leaders at Albert Park on Sunday, hoping a win for the local favourite offers a welcome distraction from growing acrimony over the race`s cost to taxpayers.

Webber`s breakthrough third season with Red Bull helped draw more than 300,000 to the Melbourne street circuit last year, the race`s biggest crowd in years.
In the end, local fans, Webber and government officials were all disappointed. Webber crashed to ninth and the race posted a AUD 49.2 million (USD 49.5 million) loss, up AUD 9 million on the previous year and the highest in the Melbourne race`s history.

Unlike the 34-year-old Australian driver`s chances, few hold any hope of a better financial result in the Grand Prix`s 16th year in Melbourne, which remains yoked to Formula One until the current lease expires in 2015.

"When the loss is now AUD 50 million and talk of it going to AUD 70 million, people are paying more attention and obviously it`s providing a bit more ammunition for those who have long opposed the event," said Geoffrey Harris, a journalist and former media manager for the Australian Grand Prix Corporation (AGPC), the race`s organisers.

"While I am sure they are doing all they can to contain cost increases, the revenues certainly haven`t been going up," Harris told reporters.

"So if you didn`t have a government standing behind it, you certainly wouldn`t be able to maintain a business on that footing."

Melbourne`s Grand Prix has accumulated more than AUD 250 million in losses since its 1996 debut, and revenues have slumped by more than a third in the past five years as costs have risen.

The growing fiscal black hole has prompted politicians to question the race`s value to the city and its home state of Victoria, where successive governments have made securing major events central to policy.
The city`s Lord Mayor Robert Doyle called time on the race in an editorial in a local tabloid in January, while Michael Danby, a federal lawmaker whose district incorporates the Albert Park circuit, told parliament last month his constituents were overwhelmingly against the race continuing.

Victoria`s newly elected Liberal Party-led government has put much of the blame on the previous Labor leadership, for agreeing to pay steep license fees to Bernie Ecclestone`s Formula One management company to secure the race in Melbourne.

"We`ve inherited a contract that Labor`s signed up to, and I just have to deal with it, so my opinion of what might be an acceptable loss is irrelevant because the event is contracted until 2015, so what we`re trying to do is manage what we`ve inherited," Louise Asher, Victoria`s minister for major events and tourism, told reporters in an interview.

Harris, who resigned from the AGPC in 2005, said accountability should rather remain with the organisers` board for negotiating the license fees, which local media estimate at up to A$25 million per year.
"The chief executives have changed and there`s been turnover in staff over the years, but certainly there`s only been one chairman throughout the duration," said Harris, referring to 81-year-old local businessman Ron Walker, a former mayor of Melbourne and Liberal party luminary.

"There`s been one chairman in the middle who I would have thought was acting for Victoria, whatever the persuasion of the government."

"Clearly the government don`t know too much the nature of this business anyway ... If it were a public company, it would have been hard to imagine there wouldn`t have been a lot more scrutiny."

Walker, a long-time friend of Ecclestone, told local media last week the "wretched" license fees could see Melbourne forced to give up the race.

"Revenue has started to fall for reasons we never ever worked out," Walker was quoted as saying.

The state government has placed pressure on the AGPC to cut costs, leading to the abandonment of big international music acts for entertainment and more competitive tendering, according to CEO Andrew Westacott.

Despite a positive outlook for corporate sales and sponsorship, Westacott was not confident of an improvement on last year`s result -- even with favourable weather and a bumper crowd.
"I wouldn`t go as specific as that. I`m confident of delivering a result that will be seen as very good value from a government investment point of view," he told reporters.

Successive governments have sought to justify the soaring tab on the "branding" effect of the race and flow-on benefits to the local tourism industry.

Asher, like previous politicians before her, cites a 2005 report commissioned by the AGPC by a private consultancy that claimed the race generated an extra AUD 175 million in GDP to the state`s economy.

A report released two years later by the Auditor-General, a government watchdog, disputed the rosy economic effect, saying the same race actually delivered a net loss.

"People who run sporting events are prone to the wildest exaggerations," said David Rowe, a sports and media researcher at the University of Western Sydney.

"The economics are so slippery. It`s easy to work out the costs but the benefits are pretty much extended to almost everything."

"There`s always some kind of multiplier, there`s always the line -- `if you had to buy that kind of publicity, how much would it cost?`"

Doubts over the economics extend to Formula One`s figures on television viewers which officials have long cited to support the race, while critics have called into question the AGPC`s reported crowd numbers and full disclosure of race costs.

"The total costs aren`t taken into account," said Peter Logan, media spokesman for Save Albert Park, a community-based group that wants the race moved elsewhere.

Logan cited favourable terms given by local authorities to organisers to rent the sprawling public-use park near Melbourne`s CBD, large parts of which become fenced off for several weeks a year due to the race.

"There are many more government subsidies," added Logan.

"The Grand Prix gets a free ride."

Despite the mounting criticism, Asher said her government intended to extend the contract and would negotiate for a better deal on licensing fees with Formula One management.

Doyle, the Lord Mayor, who initially intended to decline his official invitation to the race, announced last week he would attend after being pressured by local business.

While getting slammed for throwing their weight behind a loss-making major event, officials would potentially face an even bigger backlash were they to lose the race -- or worse, lose it to a rival Australian city like Sydney, Rowe said.

"The loss of a mega-event instantly turns your government into a feeble, impotent entity that can`t cut it against its rivals in other parts of the country and the region," he said.

"The only thing that`s going to stop it is a politician or a party with a lot of courage. You have to build a coalition of forces in order to shut something down. Not easy to do."

Bureau Report