The real cost of the Grand Prix

Issue 

By Tully Bates and Felicity Whitworth

MELBOURNE — The Victorian government has invested over $1 million in an advertising campaign which promotes the economic and social benefits of a Grand Prix in Albert Park. This amounts to a campaign of gross misinformation, given the lack of an independent economic cost-benefit analysis or an environmental impact statement.

Overseas experience indicates that, contrary to the Albert Park proposal, the most cost effective circuits are purpose-built permanent circuits or circuits built on abandoned, unused and degraded sites where the circuit increases the real net value of the site.

Of the alternative sites suggested for the Grand Prix, Sandown race track falls into the former, and the Docklands into the latter, category. Total costs over five years (including track and infrastructure costs and annual set-up costs) were estimated as $27.5 million for Sandown, $90 million for Docklands and $120 million for Albert Park.

Conversion of Albert Park to a race track will involve the construction of a new 5.26 kilometre circuit to replace existing park roads, extensive modifications to the park, such as the felling of more than 1000 trees and the reorganisation of sports fields and facilities.

By March, the Victorian government had already committed $45 million of public funds for race infrastructure and park modifications. It is believed that this amount does not cover the cost of the new permanent pit building or costs incurred by water, gas and electrical authorities.

A relatively long circuit for temporary use within a public park will involve high safety barrier and spectator fencing costs, and high annual erection, dismantling and surface restoration costs — estimated by the motor sport industry to be $12-15 million.

There has been no independent analysis to show that the Grand Prix will be a bonanza for tourism, jobs or local business.

A Price Waterhouse examination of the 1992 Adelaide event found that the race directly generated the equivalent of only 96 full-time jobs, attracted only 2100 international visitors who otherwise would not have visited Adelaide and provided immediate positive effects to only 16% of Adelaide businesses. The SA government gained only an estimated $1 million extra in taxation revenue while subsidising the race to the tune of over $5 million.

Economic benefits to the state depend on additional expenditure by out-of-state visitors and corporations. However, Melbourne cannot expect as many interstate visitors as Adelaide because a high percentage of interstate visitors to the Adelaide Grand Prix (53% in 1992) came from Victoria. It is unlikely that SA, with a population less than one-third of Victoria's, will supply an equivalent number of visitors to a Melbourne Grand Prix.

While the Melbourne race may attract more patrons, 70-80% are expected to be Victorians, whose expenditure is not a net benefit to the state economy. Melbourne cannot assume that the same proportion of revenue from sponsorship, naming rights and corporate package sales will come from out-of-state companies, or be expenditure that would not have otherwise occurred in Victoria.

The SA taxpayer has subsidised losses totalling possibly as much as $25 million over the last four races alone. The Indy car race has cost the Queensland taxpayer $70 million in its first four years. The Eastern Creek Raceway has cost the NSW government over $88 million.

Among the eight Formula One Grand Prix circuits established since 1985, only two countries — Hungary and Australia — have chosen to do this solely with taxpayers' money. All others have used private investment and private promoters.

The above does not even begin to address the environmental and social costs of a Grand Prix sited in a city park. These include noise, traffic congestion, pollution, loss of public space and facilities traditionally used for sport and recreation, and the removal of 1000 trees to allow for the construction of a permanent track and pit building which will physically and visually carve the major area of parkland in half.
[Information for this article was obtained from the Save Albert Park community campaign fact sheets].